Digital Transformation: Innovation through Experimentation

In digital age, innovation has rapidly become understood as one of the critical business processes. Try and find a company vision, mission statement or strategy on a page –document without it having word innovation on it and you would probably fail.

Unsplash / Khara Woods

Businesses from every industry have already long ago understood that the world is changing and they must change with it, by innovating new products, services or processes to satisfy their ever-growing customer needs. Innovation, the term itself being rather vague, has been repeated so many times that it has become one of those overused terms which is rapidly losing meaning since in reality, it rarely means anything to the vast majority of a company’s personnel. The more traditional view is that if there is any innovation going on, it’s the job or responsibility of the R&D department. And this approach or interpretation of innovation process, would be the biggest waste of anything that a company could do.

Innovation might be found on every top management agenda but not many management teams have been given the tools to achieve these objectives. Overbuilt expectations of coming up with disruptive innovations can in worst case scenarios become paralyzing. In reality, innovation should be simply understood as any change to a business product, service, or process that adds value or in other words, anything new that has an impact to the customer.

What digitalization has changed, compared to the analogue age, is the way how innovation is perceived and acted upon. If we think about innovation in the era before digital tools, innovation focused primarily on the finished product. Without digital tools, testing ideas was expensive, slow and difficult as you pretty much had to build the product first before being able to test it with actual customers and markets to see how they responded. Of course, you would conduct all kinds of market studies, analysis, interviews and such to help the decision making but ultimately the decision to go one way or another was based on intuition or seniority of the management. Since the cost of innovation was steep, failure was to be avoided at any cost.

Digitalization has changed almost all aspects of innovation as it enables faster and easier way to test ideas with the public, faster feedback loops and iteration of minimum viable prototypes in all stages of product development. At each stage, assumptions are being tested and validated by customer and market responses. More importantly, the focus of innovation has shifted from finding a right solution to solving actually the right problem.

“More importantly, the focus of innovation has shifted from finding a right solution to solving actually the right problem.”

This new way of innovation process is called innovation through rapid experimentation. Experimentation, in turn, can be defined as an iterative process of learning what does or doesn’t work. The actual goal of a business experiment is not the product or right solution but learning – learning anything about the customer, market or your possibilities that will eventually help you to solve the right problem for your customer.

As the focus is learning, the more you are able to produce promising ideas which you can then quickly and cheaply test, the better. There is no avoiding mistakes or wrong ideas but that’s the whole idea of rapid experimentation, ideating and experimenting with rough ideas, getting fast feedback, being able to change the course or toss the idea altogether and thus in the long run, saving costs considerably. It does not need to be a prototype or working software solution when you first bring your idea to the customer. It can be a simple drawing on a piece of paper.

Majority of companies haven’t yet fully adopted the idea of co-creation where you bring in the idea to solve a specific customer problem to the table, but on that table instead of working with your own R&D personnel only, you are developing and creating new solutions together with your customers or other trusted partners within your business ecosystem.

Innovation should also be regarded as activity for all levels of the business. Show me a company with 800 employees and I will show you 800 brilliant minds ready to generate ideas! The real waste happens if you do not leverage the capacity of those you employ to their full extent. Sure, you need to develop support systems for innovation as people and teams do not automatically know how to go and be innovative. They need training on how to produce ideas, how to harness everything that people learn on their day-to-day activities with their customers, they need coaching and leadership and especially when it comes down to how to learn from failure, they need understanding and confirmation that this is what the company expects them to do.

Probably the hardest shift from analogue to digital innovation process is changing your mindset regarding failure. Try and tell for a member of senior management who have been taught to avoid failure at any cost for all their working lives to suddenly embrace experimentation and celebrate failure. Chances are that learning away from old patterns and past behavior is way more difficult than learning new ways of the digital age.

Yet one of the most important lessons of experimentation process is to learn that even if initiatives flop, they can still provide real value to your organization – that is if you take the time to examine the failure carefully and capture the critical lessons to be shared within your organization. Failure becomes much more tolerable if you are able to extract maximum value from it. If you choose to bury a failure fast and the messenger of the bad news with it, chances are that you will not find many volunteers in your company to take on more risk or innovate anything. Embedding “fail fast, fail smart” -mindset might take time but it is essential if you wish to create truly innovation fostering organization culture.

“Probably the hardest shift from analogue to digital innovation process is changing your mindset regarding failure.”

In my next blog posts I will be sharing more insights regarding experimentation and how organizations can grow their tolerance for failure thus allowing organizational culture to become genuinely innovation-infused.