You have probably often heard the terms innovation and digital transformation. You may have read articles clarifying their differences such as “Innovation Vs. Transformation: The Difference In A Digital World” by Daniel Newman or associating them with the idea of disruption as the article “What is digital transformation: A necessary disruption” by Clint Boulton or reporting on the effect of organization’s approaches to them in the Deloitte article “Accelerating Digital Innovation Inside and Out” or the Gartner article highlighting tips from the human resources perspective.
Along the way, you may have discovered that innovation and digital transformation refer to some overlapping or intertwined concepts and applications. However, some overall approaches to integrating both concepts in a practical way may still be missing.
To address that gap, this article introduces a simple matrix, named the Hero’s Matrix™, which goal is to help leaders and managers make sense of the practical relationship between innovation and digital transformation. More precisely, the aim is to provide a high-level framework that can guide the thought process when considering the applying of those concepts in strategic decision making in organizations.
Let’s start with innovation. The Oxford Learner’s Dictionary defines innovation as “the introduction of new things, ideas or ways of doing something”. In contrast, the Cambridge Dictionary defines it as “a new idea or method, or the use of new ideas and methods”. Anyway, we’ve got a general principle.
When applied to organizational management, innovation most often relates to the creation of new products or services, or, the modification of existing products or services. In other words, when a new product or service is created or modified, something of its resulting features or delivery is somewhat different from otherwise similar products or services.
In essence, this differentiation relates to a value proposition which is more or less different than competing products or services. So we could say that innovation spans from the smallest modification of an existing value proposition to the release of a completely new value proposition.
Figure 1: the innovation continuum
Figure 2: the digital transformation continuum
Let’s continue with digital transformation. With a couple of words to consider, it is a little more tricky. For the Cambridge Dictionary, the word digital may relate to computer technology, especially the internet. As for the word transformation, the Oxford Learner’s Dictionary mentions a total change in something . So, beyond any hype, digital transformation would refer to the complete change in something within an organization by using computer technology, especially the internet.
When applied to organizational management, digital transformation may relate to a wide variety of scopes, starting from the part of a product or service which is completely changed by using computer technology, through a function or department which could be enhanced or optimized by using computer technology, to the very business approach of the organization which could be completely overhauled.
We could once again relate this term to the concept of value proposition, since any digital transformation would aim to create, sustain, or improve a value proposition. However, it seems even more relevant to link it to the concept of business model, which refers to how different parts of an organization work together successfully. In other words, digital transformation can be seen as a continuum which spans from an impact on a fraction of an organization to an impact on an overall organizational model.
Now, if we merge the proposed innovation and digital transformation continuums into a single chart, the result is a matrix, for example, with innovation being positioned vertically and digital transformation being positioned horizontally.
Interestingly, this newly formed matrix can help us reflect on those concepts and guide our thoughts towards practical matters.
Figure 3: integrating the innovation and digital transformation continuums
Figure 4: the novelty and the strengthening dilemmas
From the point of view of innovation, the top half of the matrix represents The Novelty Dilemma. Here the focus is on releasing a completely new value proposition. In contrast, the lower half of the matrix represents The Strengthening Dilemma. Here, the focus is on slightly modifying an existing value proposition.
If we consider those two dilemmas from a digital transformation perspective, three questions emerge:
Continuing with the point of view of digital transformation, the left side of the matrix represents The Stability Dilemma. Here the focus is on a minimal change in the organizational model while using computer technology. In contrast, the right side of the matrix represents The Overhauling Dilemma. Here the focus is on totally changing the business model by using computer technology.
Figure 5: the stability and the overhauling dilemmas
If we consider those two dilemmas from an innovation perspective, three questions emerge:
Those above-mentioned questions cannot be answered without carefully considering strategic, tactical and operational plans, existing and future capability, the capacity to adapt, the readiness level, the market positioning, any potential risks and foreseeable issues, and many other points of views. Exploring those aspects in this innovation and digital transformation context is critical, but beyond the scope of this article, which objective is to provide high-level guidance.
Nonetheless, another use of the matrix is that it could quickly inform us of where to focus more of our attention between the strategic and the operational aspects of the organization. This is the transversal or diagonal view of the matrix.
The top right part of the matrix groups the two ends of the continuums, which are focused on releasing a completely new value proposition and a new overhaul business model. Therefore, there is a primary focus on big and bold moves, which could be seen as more strategic.
By contrast, the bottom-left part of the matrix groups the two ends of the continuums, which are focused on releasing a limited modification to an existing value proposition and a limited change in the business model. Therefore, there is a primary focus on small and modest moves, which could be seen as more operational.
Figure 6: more strategic versus more operational sides
This informs us that organizations should carefully consider the following questions when dealing with innovation and digital transformation:
Managers and leaders love to use symbols, signs, acronyms and labels to summarize a concept, an idea or a thought. Although these obviously have their limitations and even dangers, such a practice is nonetheless appropriate for easily carrying complex meaning, which would otherwise require many words and possibly long explanations.
With this in mind, I would like to introduce the Hero’s Matrix™, which contains four quadrants. Each one is labelled with a keyword representing the unique aspect of the underlying relationship between innovation and digital transformation:
Figure 7: the Hero’s Matrix™
Given these keywords, leaders and managers could ask the following questions about their organizations:
Organizations need to innovate to survive, probably nowadays more than ever. Embarking into digital transformation may be part of that requirement to evolve, here based on using computer technology. However, such an endeavour is not static, and any strategic plan should reflect the same. Furthermore, strategic plans themselves evolve, even if slowly.
Therefore, organizations should consider the potential dynamics involved when considering the linkages between innovation and digital transformation. Assuming that an organization intends to move towards, to gain or to maintain market dominance, we can ascertain that the ultimate goal is to become a hero, the one who is admired for outstanding achievements, which is a compelling and sustainable marketing advantage.
Figure 8: the hero’s journey
Looking more closely at the Hero’s Matrix™, we can see that there are three routes to reach the status of hero:
The key question is: What is the best sequencing for the release of some new value proposition as a foundation to prepare the overhauling of the business model?
The business model renewal route: from the Renovator through the Explorer to the Hero.
An overall strategy for following this route would prioritize launching the overhauling of the business model as a foundation to prepare the future release of some brand new value proposition.
This would involve carefully planning the new business model in such a way that this new value proposition could later emerge, impose itself and be sustained. Here, the timing of the launch of the new business model would be critical.
The key question is: What is the best timing for the launch of the new business model as a foundation for the future release of some brand new value proposition?
This article introduced the Hero’s Matrix™, a new approach to leveraging the combination of innovation and digital transformation at the same time. Along the way, some dilemmas, trigger questions, as well as strategic and operational points of view have been considered. Then, a symbolic labelling was applied to help leaders and managers deal more easily with the implied meaning of integrating innovation and digital transformation in their strategic thinking. Finally, an outline of the main possible strategic moves was presented.
I hope that this article and the Hero’s Matrix™ will invite you to revisit innovation and digital transformation with a fresh pair of eyes and that the new avenues opening up before you will help you and your organization become… a hero!
Guest Blog Post by Jacques Bernizan, Professor at AUS