Balancing discovery with execution is the key to successful digital innovation.
How does an appetite for innovation correlate with digital maturity? One might expect digitally mature organizations to be more experimental than others, but surprisingly the gap between the most and least mature companies is not nearly as large as one might expect. Our data shows that companies across maturity levels experiment in digital business. A far bigger differentiator, however, is what companies do with the results of those experiments. Mature companies are far more likely to scale them to drive change across the enterprise.
The process of scaling digital innovation – a change effort – isn’t easy. For large, established organizations, it may require a fundamental transformation. These businesses need to find a balance between exploiting current business models and exploring new opportunities, an often strategically and culturally complex task. Dr. John Halamka, CIO of Beth Israel Deaconess Medical Center, equates this work with trying to change a plane in midflight, as leaders balance the need to experiment while still keeping the core business running.
Many companies try to emulate startups to accomplish this goal. Yet, many also mistakenly think that the value of startups lies in their ability to generate new ideas. The key factor is actually the discipline to balance both discovery and execution in a disciplined and rigorous way.
To get better insight on how large, established organizations scale experiments, I spoke with Greg Baxter, chief digital officer of MetLife, who has considerable experience using experimentation to drive innovative change across the enterprise.
A Three-Stage Approach to Scaling
Baxter views scaling as a three-stage process. Although the criteria for moving ideas to subsequent development phases may differ across stages, the process involves continually asking three critical questions:
- Is there a fundamental need for this idea in the market?
- Can we make this idea work economically?
- Are we the right company to do it, and does it involve our core competency?
Only ideas that continue to meet these three standards continue in the process, as outlined below:
- Ideation. Consistent with the idea that “those with the best ideas win,” the first stage involves generating new ideas in a changing digital environment. To develop these ideas, MetLife relies on internal innovation as well as external partnerships or relationships with venture capital firms and research universities. Baxter is quite clear, however, that despite the formation of external partnerships to develop new ideas, digital innovation is and needs to be a core competency of the organization; it simply cannot be outsourced. Interactions with partnerships, however, tend to bring the company’s employees and leaders along by exposing them to new experiences through new projects, new teams, and new challenges.
- Incubation. The next stage addresses what companies do with those ideas once they’re formed. Many companies engage in what Baxter calls “premature scaling,” which involves trying to drive new concepts across the organization before they are ready. Instead, the incubation stage involves generating minimum viable products, iterating, and getting the company and market to determine whether the idea is worthy of scaling. To support this incubation stage, MetLife has partnered with Techstars to develop an accelerator that identifies and mentors internal and external startups around the globe that are developing industry-disrupting technologies in the insurance space.
- Implementation. In this final stage, the company scales its innovation pilots. Significant financial investment is made, and risks become most acute. To meet this implementation challenge, organizations should allocate funds to invest – both internally and externally – in the ideas they believe are most promising. To fund such efforts, MetLife established MetLife Digital Ventures to directly invest in startups that are developing capabilities strategically aligned to MetLife’s. In addition, the organization scales internal growth and innovation opportunities by reinvesting savings generated from previous digital innovation projects.
Digital Transformation Beyond the Enterprise
Baxter also looks beyond the enterprise when it comes to digital transformation to consider the implications of those transformations on society as a whole. He says, “Digital transformation is a real responsibility. We must think through ‘How do we reinvent our company to be a leader in a digital world?’ while also being the standard bearer as to the way that these technologies benefit the people we serve, the communities we’re in, and the employees we have.”
Baxter is contemplating how to use digital innovation to provide cost-effective services to historically underserved populations globally, for example, by partnering with IBM to develop a new, first-of-its-kind digital benefits platform for U.S.-based small businesses that will lower costs while expanding access to products. As the gig economy continues to grow, MetLife is also working to make its products portable for when employees leave a company or change their status from permanent to part-time. In Latin America, the company is using social media channels to provide applications and claims-status updates to reach workers who cannot be serviced face-to-face.
Baxter believes that digital transformation is far more than just getting cybersecurity, robotic automation, or data analytics right. “There’s a bigger agenda there for us. People are going to look increasingly for purpose in their work, and customers are going to look for companies they trust and who integrate into their lives. I suspect that the market is going to eventually reward the companies that get this right, and, as we have seen for many decades, companies that don’t get it right will disappear off the market list reasonably quickly.”
Indeed, it is likely not enough simply to engage in digital transformation without also engaging in a critical reflection on what the organization is transforming into, as well as any implications for the constellation of various stakeholders and the environments in which they live and work.
About the Author
Gerald C. Kane is the MIT Sloan Management Review guest editor for the Digital Business Initiative and a professor of information systems at the Carroll School of Management at Boston College. He tweets @profkane.
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