​Innovation

Major disruptive trends are impacting organizations, industries and markets on a global scale. These trends include economic, regulatory, demographic and other factors that are forcing organizations to innovate more rapidly in order to remain competitive.

One of the biggest impacts is from digital disruption. Digital technologies and digital business models are radically changing the way people access once inaccessible products, blurring the boundaries between industries, altering the way organizations operate, and driving greater disruptive innovation from sometimes unexpected or even unknown sources.

In this environment, an organization can be global from day one, access infrastructure that was once unaffordable, software that was once "closed," and market itself efficiently with a range of digital marketing tools and channels, including social media. New innovations are also surfacing around the way organizations employ and engage with people on and off "balance sheet" with the emergence of much more flexible and innovative workforce arrangements. Common themes are also emerging around organizations that are looking at ways to better commercialize their data, alternative product and service bundling and pricing models, and the organization's alliances and role in a broader ecosystem. This last point cannot be understated; in a world where the velocity of change and specialization is increasing, so, too, is the need for organizations to work with others in a broader ecosystem rather than going at it alone.

Many of the most innovative organizations are also making a concerted effort not just where they innovate, but how. The best are not just encouraging innovation within their own organizations involving their own people, but are combining this knowledge and experience with experts, entrepreneurs and others from outside their organization. Open source innovation, much like open source software, benefits from the simple concept that a greater cross section of thinkers from inside and outside an organization coming together around a common problem or opportunity will have a much better chance of seeing things differently and identifying disruptive opportunities, which can then be validated in the market and scaled.

Many of these more forward thinking organizations are also going further and approaching innovation much like classic venture capitalists. They are empowering external entrepreneurs by providing them with access to one or more privileged assets – for example, the logistics or supply chain data of an organization – to help them better understand their organization and its operations so they can create new innovations. To further incentivize the external entrepreneurs, the organizations often agree to fund and support the best ideas as external ventures, allowing the entrepreneurs to largely own the new idea they develop and to operate it on behalf of the funding organization. While there are risks to sharing privileged assets with people outside the organization and enabling them to own the ideas whose development the organization has funded, these leading-edge organizations believe the opportunities far outweigh those risks. The process alone also provides them a unique source of ideas and intelligence that better enables them to sense the trends relevant to their industry and more easily connect with non-employee talent.

Boards should inquire about their organization's innovation culture and infrastructure, looking at who the innovation champions are in the organization, what innovation strategies they are pursuing, and how they support and nurture innovative ideas. Boards should also ask management to report on the way digital disruption is affecting their organization and its industry, and how they are responding to threats while also tapping and maximizing the many opportunities presented by this change.


Thought leadership