Managing Innovation in the Digital Economy
With the rapid acceleration of the digital economy, business processes and models need to innovate ever more quickly in order to stay competitive. The challenge of innovation has also been significantly impacted by the ongoing pandemic, spurring underlying threats.
The Business Partnerships unit, part of SMU’s Lee Kong Chian School of Business organised a webinar, “Managing Innovation in the Digital Economy” on 22 June which was attended by industry partners, students and faculty. Sharing his insights was Professor Arnoud De Meyer, formerly SMU President and now Professor Emeritus of Operations Management. An internationally recognised researcher in the areas of R&D and Innovation Management, Manufacturing Strategy and International Management, he has published more than 100 academic articles and 12 books to date.
In the talk, Professor De Meyer observes that trade friction around the world, such as the United States’ requirement of country of origin has resulted in ‘Slowbalisation’. This has caused increasing complexities of logistics globally. Conversely, the introduction of data analytics, blockchain, AI, robotization has created rapid digitisation.
In this context, the challenge in this new world is to be able to be the first to scale, versus being first to market. He cited successes like Uber and AirBnB, who offered services that were not particularly innovative, but were first to digitalise to take advantage of scale. To scale up quickly, companies need partners not in the sense of joint ventures or alliances, but perhaps in loosely coupled networks akin to natural ecosystems.
Professor De Meyer highlighted eight basic principles that companies need to apply to be able to create and capture value in the digital economy:
1. Listening to the needs of the user (vs the customer/buyer) and putting it into design thinking.
2. Leadership – Having a clear vision, combined with clear communication to avoid distractions in strategy.
3. Calculated risk taking – If a risk is low, it is not exactly innovation. Taking safe roads are routine processes and may not add to value creation.
4. Imagination and Creativity – Encourage out-of-the-blue ideas.
5. Integrated Approach – User needs may not be defined by organisational structure. Strategic, cross functional, inter-temporal and environmental integration should be ensured.
6. Excellence in project execution – Innovation is 5% imagination and 95% perspiration. Efficient project management entails hard work.
7. Knowledge Management is crucial – Failures should be documented to avoid repeat mistakes.
8. IP Policies - Results of creative effort need to be protected through an IP policy.
The importance of business ecosystems was further emphasised by Professor De Meyer during the session. Networks of organisations and individuals allow value creation that cannot be achieved singly and allows learning from each other. Other benefits include the opportunity to co-evolve capabilities, roles, and aligning investments to create more value and efficiency. It allows for flexibility to adjust activities quickly, and rapid scaling up.
The challenge is how to optimise the use of ecosystems to innovate and create and deliver value in face of increasing volatility and uncertainty. On monetising the value of ecosystems, strategies should ensure that the ecosystem delivers more value to end users. Keystones or elements of the ecosystem that can be controlled should be identified, with the right toll gates set up to collect a share of the created customer value.
The session ended with an engaging Q&A session, where Professor De Meyer lent further insight on factors individuals must possess to create value for their organisations, the need to have a deeper understanding of how digital technology can help us, and how countries can ensure the sustainability of innovation without creating an over reliance on government support.