Back to the 2010s
Looking back, time has told, and - perhaps in line with expectations - not 50% of the Fortune 500 companies came to perish. There were definitely winners and losers in the digital innovation and transformation game. From my own experience, It is clear to me that corporate innovation programs especially had a lot of challenges in the Horizon 2* innovations: introducing new business models (see point three below). There were organizations that did good (enough), they nailed these three segments:
Innovation strategy
- How to design a winning innovation strategy? It starts with a good understanding of what topics/directions need to be Explored and which things need to be Exploited.
Based on ‘The Explore to Exploit Continuum’ by Alexander Osterwalder
Execution & results
- How will we execute and who does the work? Externals are expensive, open innovation has many IP related issues and working with startups is difficult. Do we hire our own innovation teams?
Based on Running Lean by Ash Maurya in combination with Portfolio management theory by Alexander Osterwalder
Budgets en allocation
- How do we allocate budget? The organization needs to optimise, innovate and improve the current business model (horizon 1). But we also need to be aware of disruptive new business models (horizon 2). As stated by McKinsey: ~70% of the time and budget should go to horizon 1 and 30% to horizon 2.
Three horizons model by McKinsey
As a consultant I was involved in over 100 corporate innovation projects and I think it safe to say that when we said “you need to do experiments, and it is OK to fail”, we didn’t want to see so many innovation projects fail. But they did. In the meantime, entire innovation labs of almost every big corporation like ING, ASR to Unilever reorganized or changed their perspective on how corporate innovation functions best.
Ironically, the same stress and FOMO is happening all over again. 15 years ago organizations needed to figure out how to build a working innovation funnel. And now they need to re-invent the funnel so it is adapted to the AI wave. This time, I expect it to go a lot faster and that it actually delivers visible and impactful results. Especially on horizon 1 innovations.
The fact of the matter is: at least 50%, but more likely over 90% of the innovation ideas for an average company will have something to do with AI. Consider improving the core business - Horizon 1 innovation. It is highly likely that this revolves around automation and thus AI. And in new business model innovation - Horizon 2 innovations - it is highly likely it has something to do with software and thus AI.
My innovation peers and I are looking for ways to foresee where this is going. Every consultancy agency, product studio and what not, is turning themselves into an AI first organisation - as does Eli5 :) For good reason. This field is going to see significant growth. I can see a few things happening:
- In 2025 innovation actually means AI innovation. It is going to take a lot of effort for the average (corporate innovation) employee to understand what is happening and to keep up-to-date.
- Someone within the organization needs to oversee all the tech-driven projects. Who is actually going to understand and run the digital transformation show at an organization? Introducing the AI officer. More about this in a next blog.
- The strategic roadmap needs a well defined direction, but also has to be very flexible. As it is very hard to see which possibilities will be unlocked with new tech.
- The comeback of proper Innovation Portfolio management. Faster innovation and experimentation, means more data and more results. Tracking progress by connecting the right tools and data points.
- AI to AI via API: data will be all over the place. Data security and privacy is a must, but it is also a hurdle. The ease of connecting databases (through zapier or N8N for example) versus the sheer complexity of good data security is going to generate a lot of trouble.
Coming back to the start: what does disruptive really mean? Should we view the AI innovation wave as an opportunity to increase organizational productivity or is it really a threat with a few winners and a long tail of marginal companies. Obviously like in the 2010s, fear sells best.
