How digitalization may impact innovation

Digitalization is one of the technological mega-trends in business. Humanity has not only moved into the innovation age, but more and more modern innovations include digital elements that allow for a better, more meaningful user experience. Digitalization is said to bring massive changes to business, and to discuss these fully would go beyond the scope of this article. However, what we can do here is to discuss how digitalization may change the ways we innovate.

What is digitalization?

To get started, let’s establish a common understanding of what digitization means. In a technical sense, digitization is the process of converting information into a digital (i.e. computer- readable) format, resulting in the creation of a digital representation of an object, image, sound, document or signal.

In business terms, however, the concept goes far beyond this technical frame of digitization. Digitalization includes integrating digital elements into existing products and services to ensure a more seamless and better user experience. It also encompasses the digitalization of reimagined business processes (both internal and external). This allows companies to cut the number of process steps, reduce the scope of documentation, include automated decision making, and offer frictionless payment solutions while at the same time addressing regulatory and fraud issues.

Done well, digitalization can lead to much improved user experiences, lower costs and therefore reduced prices, faster decision-making and turnaround times, reduced documentation coupled with increased security and safety.

How may digitalization affect innovation?

Digitalization is an emerging mega-trend in business, and predicting how much impact it will have is like looking into a crystal ball…. In essence, when predicting the future, we tend to make assumptions on how the future might turn out. An assumption is a supposition, an unwarrantable claim without having proof what is really going to happen. It is said that “to ass-u-me is to make an ass of you and me“— but it’s the best we can do here. So, keep a critical mind while reading my 10 assumptions on the supposed impact of digitalization on innovation.

Bear in mind that when you review a list of assumptions in hindsight, half of them typically have turned out as truths, while the other half proved to be half-truths or even turned out as falsehood or complete nonsense.

After this word of warning, what 10 predictions about the impact of digitalization on innovation do I envisage?

  1. Innovative products and services will increasingly have digital components and elements. For example, you may control a product remotely via a smart phone app, or track the delivery status of grocery items that you shopped by scanning code from a retail market billboard while waiting in the subway. Digital components are likely to also extend to solutions (e.g., getting online health consultations from an AI-powered avatar doctor) and even customer experiences (think AR- and VR-powered excursions à la Westworld, hopefully without a bald gunslinger dressed in black).
  2. More and more companies will create digital platforms to globally distribute their digitally-empowered value offerings via the Internet. Such digital platforms add value to customers by reducing frictions in the delivery and payment process; and they add value to the company by giving them increased control over their intellectual property (e.g. through digital rights management solutions) and by allowing them to mine big data for surprising new customer insights.
  3. On the process side of innovation, imagine doing an innovation project with a core group of innovators in a real workshop, who are joined through virtual reality technology by fellow-participants from different offices around the world to work in an innovation team together. A top innovation facilitator from the other side of the world may also guide the teams through the innovation case using a sophisticated innovation process method and tools animated by VR technologies, apps and remotely shared presentation screens. At the front end of the innovation process (e.g. Stage X-Xploration in Thinkergy’s X-IDEA method), companies can use big data mining to arrive at deeper market-, technology- and customer-specific insights that allow them to better frame the real innovation challenge and the teams to develop idea concepts that cater to important insights.
  4. On the systems side of innovation, digitalization is likely to further amplify the value of innovation management systems. These are used to virtually pose an innovation challenge, collect ideas from internal and external collaborators, evaluate the submitted ideas (e.g. by creating a virtual idea stock exchange), and to manage the innovation pipeline of top ideas that are going through a real-world implementation process.
    Some of these systemic solutions exist already today, however, I expect future innovation management systems to become more integrated, immersive and entertaining. Moreover, I predict them to get linked to social networks to invite engage external participants to join internal innovation projects. Provided that these systems share incentives to take part in an innovation challenge in mutually beneficial ways, these external customers, suppliers, distributors and top influencers may not only help companies to create more meaningful innovations, but also to diffuse them faster.
  5. On the people side of innovation, I can see the emergence of cognitive profiling tools based on MRI-scans of the brain (think getting assigned a TIPS profile not by answering a set of questions, but getting your brain scanned or traced at the same time).
  6. On the cultural side of innovation, I anticipate the emergence of online ratings and rankings of company cultures by former current and former employees that will determine whether a firm will be able to hire and retain top creative talents. Changes in these rankings may over time become one factor impacting a company’s stock price and market valuation.
  7. On the individual creativity side, I can see more apps providing creative tools and instant inspirations (e.g. simply shake your phone to receive a fresh, creativity-inducing stimulus). VR may even create digital avatars of famous creative leaders who act as mentors for executives eager to evolve into authentic creative leaders for the innovation economy.

 

What are possible downsides of digitalization?

Digitalization seems to promise us a brave new world, doesn’t it? However, I also presuppose three problems related to it:

  • As more and more innovative digital products get developed that digitally communicate with their users and —thanks to the Internet of Things (IoT)— with each other, we will see the emergence a giant digital ecosystem with over 75 billion connected devices by 2025. From systems theory, it is well known that the more variables a complex system has, the more likely errors will occur. So, predicting, preventing, controlling and fixing such system bugs will offer opportunities for new innovative digital solutions.
  • All new innovative digital solutions (websites, apps, etc.) need to be programmed to work across a range of different devices and software technologies. These programs also need to be maintained and regularly updated to keep up with the latest technological advances. As more and more companies are “going digital”, I predict that there will be a scarcity of excellent programmers. The top of the crop will either work for big bucks at “blue chip” old economy companies, or work as a partner in one of the many new creative ventures that will mushroom in line with the shift from a managerial to an entrepreneurial society. This means that the majority of corporations and SMEs will be left with average to mediocre developers. These tend to program average to mediocre digital programs that suffer from bugs and compatibility issues and impair a seamless user experience. Do you still recall my last point made above, the unexpected behaviors of a complex adaptive system? They may be caused by a poorly programmed app that interacts with other devices in totally unexpected ways.
  • Looking ahead, ever more computers increasingly amplified by artificial intelligence will allow for better intelligence and insights on markets, trends customer wants, needs and behaviors (thanks to big data and weak signals analysis). I foresee that at least for the next 2-3 decades, however, humans and not machines will still rule in breakthrough creativity. I predict that while artificial intelligence will be able to produce ideas using basic creative thinking strategies (such as combination, division, addition, elimination, adoption, adaption, alteration, etc.), machines may still need more time to master advanced creative thinking strategies that often trigger revolutionary innovations or scientific breakthroughs.
    Let’s pray that my prediction proves to be right here. Otherwise, the singularity challenge may threaten the existence of humanity: Before the majority of people realizes, creative super computers and hyper-intelligent machines may start making creations on their own that are good for the new species of intelligent machines, but not necessarily for humanity. And according to evolution theory, once a species rises to the top of the evolutionary pyramid, it begins to rule over less evolved species…

 

How soon are these predicted changes going to occur (if at all)? Let me answer this question with the words of the famous US futurist John Naisbitt: “Things that we expect to happen always happen more slowly” — but eventually, most of them do happen.

What are your views on how digitalization may affect innovation? Do my predictions make sense to you or sound non-sensical?

Contact me to share your views.