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Top 10 Human-Centered Change & Innovation Articles of December 2024

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Top 10 Human-Centered Change & Innovation Articles of December 2024Drum roll please…

At the beginning of each month, we will profile the ten articles from the previous month that generated the most traffic to Human-Centered Change & Innovation. Did your favorite make the cut?

But enough delay, here are December’s ten most popular innovation posts:

  1. Top Six Trends for Innovation Management in 2025 — by Jesse Nieminen
  2. Best Team Building Exercise Around — by David Burkus
  3. You Are Doing Strategic Planning Wrong (According to Seth Godin) — by Robyn Bolton
  4. Why Annual Employee Experience Audits Are Important — by Braden Kelley and Art Inteligencia
  5. Don’t ‘Follow the Science’, Follow the Scientific Method — by Pete Foley
  6. Artificial Innovation — by Braden Kelley
  7. Dynamic Thinking — by Mike Shipulski
  8. The State of Customer Experience and the Contact Center — by Shep Hyken
  9. The Duality of High-Performing Teams — by David Burkus
  10. Uber Economy is Killing Innovation, Prosperity and Entrepreneurship — by Greg Satell

BONUS – Here are five more strong articles published in November that continue to resonate with people:

If you’re not familiar with Human-Centered Change & Innovation, we publish 4-7 new articles every week built around innovation and transformation insights from our roster of contributing authors and ad hoc submissions from community members. Get the articles right in your Facebook, Twitter or Linkedin feeds too!

SPECIAL BONUS: While supplies last, you can get the hardcover version of my first bestselling book Stoking Your Innovation Bonfire for 44% OFF until Amazon runs out of stock or changes the price. This deal won’t last long, so grab your copy while it lasts!

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Human-Centered Change & Innovation is open to contributions from any and all innovation and transformation professionals out there (practitioners, professors, researchers, consultants, authors, etc.) who have valuable human-centered change and innovation insights to share with everyone for the greater good. If you’d like to contribute, please contact me.

P.S. Here are our Top 40 Innovation Bloggers lists from the last four years:

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Why CIOs Should Co-Lead Customer Experience

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https://www.forrester.com/report/The-ROI-Of-CX-Transformation/RES136233

GUEST POST from Howard Tiersky

Forrester recently gathered top Customer Experience (CX) professionals from around the world for the Forrester CX Forum in New York. For the uninitiated, CX is the discipline of defining the step-by-step customer journey from marketing through sales and service. It defines the key capabilities, content, and interfaces that need to be present at each customer touchpoint and how those touchpoints work together to form a cohesive experience.

At the conference, extensive data was presented to support the argument that delivering a seamless customer experience is more important than ever. In fact, it’s the primary way digital disruptors, like Uber and Amazon, are taking share from more traditional brands.

Forrester found that from 2011 to 2015, revenues for companies that scored near the top of the Forrester CX Index™ outgrew that from a group of companies who scored poorly (CX laggards in Forrester’s terminology) by more than five to one.

But who is actually in charge of CX, and who should be? Many CIOs classically would respond that these types of matters―the design of the website, its features, and generally how we interact with the customer―is the responsibility of marketing or other areas of “the business.” Once “business” decides what they want, IT will build and support it – that’s the breakdown of responsibilities. For the CIO, this may seem to be the most efficient arrangement, as they have plenty to worry about and sometimes it’s nice to be able to identify something they don’t have to focus on.

But in testing this classic mindset through conversations with many of the CX experts at the Forrester Summit, I heard a strong, unanimous dissent with this traditional view. The view of the CX community is that to deliver great results in customer experience, senior IT leadership must be intensively involved in the full CX lifecycle, not merely a recipient of requirements when it’s time to write some code, and not merely kept apprised in an “FYI” type fashion. For example, Ori Soen, General Manager of Medallia Digital, a leading provider of CX software, offered, “We clearly see that when CIOs and their IT teams are customer-centric and focused on CX, the organization is able to generate much better business outcomes from its CX investment.”

These experts point to successful CX companies, such as Google, Facebook, and Airbnb, where the development teams and business teams are working as one unit, making decisions about the experience, and implementing it together.

As Daniel Davenport, Managing Director of Liquid Hub, an agency that focuses on customer engagement, articulated, “I think it is important for the CIO to have a voice at the table and co-create the ultimate solution.”

But as busy as enterprise CIOs and their key lieutenants are, I pressed the CX experts at the Forrester Forum as to exactly why it’s truly essential that the CIO be so aggressively involved in CX and what the specific areas of value are. After speaking with some CX professionals, I derived five key areas of significant value that are derived from CIO involvement in the CX process.

1. Art of the Possible

CX innovation sits at the intersection of customer need and the ever-changing landscape of what is technically possible. It’s too abstract for CX professionals to define requirements and ask IT to figure out how to make them work if the CX teams don’t have a good sense of what they have to work with. New technologies from Artificial Intelligence (AI) to Virtual Reality to In-memory computing make it possible to do things today that were impractical just a year or two ago. But IT can’t be expected to “brief” CX professionals on every technology in the world. Instead, the process needs to be a collaboration of those studying what customers need and those studying what technology is newly enabling so that they can pool their knowledge and find new intersections where value can be created for the customer and the company. That only happens when IT is intimately involved in the ongoing process of considering the next generation CX.

2. Understanding Level of Effort and Dependencies for Prioritization and Planning

In an enterprise, there are typically many systems and many simultaneous programs going on that impact what can be implemented, when it can be implemented and with what level of effort. CX teams need to be constantly considering how their visions intersect with the technical reality of enterprise IT to develop CX roadmaps that aggressively bring new capabilities to market, but don’t crash headlong into other initiatives, system upgrades, or compliance issues.

Furthermore, CX design requires the continuous balancing of the customer’s optimal experience and various business considerations, including the cost of implementing new capabilities and the cost of supporting them. A significant component of these cost factors is IT. Therefore, there is a constant and ongoing need to both understand from IT what the level of effort might be for any given enhancement, and perhaps even more importantly, IT should be a creative collaborator in thinking about how to optimize technical approaches so that great CX ideas can be implemented with a sensible value equation. To do this effectively, IT can’t just “cost out” requirements provided by the business, but needs to be “on the inside” to understand what is really trying to be accomplished. Sometimes the answer that works economically relies on a different set of requirements than that which was initially envisioned, and an engaged senior IT partner can get creative with their colleagues to search for the best value equation.

3. Measuring CX

Measurement is a huge component of CX. The goal of CX is to move the customer through a journey from awareness to consideration to purchase to advocacy and loyalty. Many discreet components make up this journey across various touchpoints: the emails sent to customers, individual features of an app, the information available to call center representatives, and the way returns are handled. The constant obsession of CX professionals is, “How do we make this process better so the customer is more delighted and the business outcome is even more robust?” But to do so, it is essential to constantly measure the impact of each individual component of the customer’s mindset and behavior. Measuring these many interactions is often complex because it requires collecting data across many different touchpoints and then being able to correlate it so as to figure out the puzzle of causality. That requires understanding enterprise data and how to connect it across very diverse systems ― an expertise that IT needs to bring to the table.

In addition to the enterprise systems themselves, there are many excellent and deeply technical tools that support the CX measurement process. CIOs need to be deeply involved in these systems just as they would in finance or HR systems. I spoke with David McBride, a CX expert and Director of Product Management at IBM who argued, “CIOs have long been focused on creating technology to help businesses operate; when they participate in the CX process, they get to see data or even videos of customers and how they may be struggling to move through the current customer journey.” IBM’s Behavioral Analytics tool (formerly known as Tealeaf), for example, offers tools that record user sessions for analytical purposes. McBride notes, “There is nothing like seeing a session replayed to illustrate the extent of a particular struggle.”

4. True End-to-End Perspective

Lastly, in enterprises very often there isn’t just one CX initiative, but many, focused on different products, channels, touchpoints, or customer segments. The office of the CIO can often make sure that the ultimate customer experience is achieved by making sure that there is cohesion to both the technology and also the management of data across these different initiatives.

I spoke with Angela Wells, Senior Director, CX at Oracle about this, “At Oracle, what we have seen is that the CIO can and should be essential to CX decisions. What has happened at a lot of bigger companies is that they have made many ‘one-off’ decisions about what they thought were best-in-breed solutions in separate [areas of the business], and then the data didn’t talk to each other. It all got pretty sporadic and expensive, and it didn’t really deliver the customer experience [desired]. So, what we have found is that CIOs have become a centralized source for thinking about what’s going to happen to that data. They are thinking more of an umbrella; what’s best for the whole company, not just what’s best for my little niche?”

As small steps in customer experience grow into a larger program, you run the risk of chaos if there isn’t someone with the broader perspective. Dimitry Grenader, VP Product Marketing at Luminoso, a leading player in the AI arena, expressed this passionately, “In this day and age, CX should not just be left to marketers. Software is eating the world, and being able to put together the right platform will ultimately determine the success or failure of the efforts. Everything in today’s world starts as a feature, then becomes a product, which in turn becomes a platform, and finally becomes the operating system. If you don’t have the right operating system, you are building a castle on the sand.”

“I believe that a CIO must at the very least be a strong stakeholder, if not the driver of the CX process.”

Oracle’s Wells summed up this shift in terms of the evolving role of the CIO in our new digitally transformed world, “If you are thinking of the CIO as that straight tech-minded person, you are going to miss out on that more modern CIO that is a Chief Innovation Officer who takes responsibility to figure out how we make the most of what we are spending on technology to deliver the best customer experience.”

5. Changing the Way IT Operates

Finally, the level of transformation required to enable enterprises to deliver on their customer’s digital expectations may require a significant transformation in many facets of how IT operates, so it’s important for the CIO to deeply understand this difference.

As Forrester Vice President and Research Group Director Sharyn Leaver summed it up, “Compelling experiences, delivered digitally, separate CX winners from laggards. Firms that lead their industries to customer experience aggressively embrace business technologies to help win, serve, and retain customers — and they do so at rapid pace. This requires intense involvement from CIOs and their teams. Not at an arm’s length. But through ongoing collaboration and innovation.

“CX brings new prominence to technology’s role, but also new pressures on CIOs. The pervasive need for digital experiences exposes old systems, static organizations, and especially outmoded cultures that cannot deliver at the speed of the customer. For the CIO, this is much more daunting than merely spinning up a digital or mobile team. For many, success will require an overhaul of their organization – the people, processes, governance, and technology itself.”

This article originally appeared on the Howard Tiersky blog

Image Credits: Unsplash

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The Two Main Opponents of Digital Success

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The Two Main Opponents of Digital Success

GUEST POST from Howard Tiersky

I have written before about the importance of the role that emotion plays in driving your customer’s or audience’s behavior in digital channels.

When creating digital touch points, it is natural to focus on the capabilities and content that we believe customers will want, need, and hopefully love. This is essential as your digital touchpoint must have a strong core value proposition to the visitor in order to be viable.

However, it’s important to be aware of a psychological factor called Negativity Bias. What Negativity Bias says is basically that our negative emotions are more powerful in our psyche than our positive emotions. We might be excited about going on vacation, but if we are worried it might rain, those negative feelings can outweigh the positive ones.

At FROM we spend a lot of time testing websites, mobile apps and other digital experiences with real end-users and we get to observe their emotional reactions first-hand. After watching hundreds of these tests, I would have to say that our research confirms this idea of negativity bias. Simply put, no matter how promising or worthwhile a site is when it starts to trigger negative reactions in users, they usually abandon it quickly, no matter how initially interested they may have been. Note there is an exception to this rule which we call the Bruce Springsteen Rule – perhaps showing our age. For many years the TicketMaster site was quite terrible and yet when the moment came that a new Bruce Springsteen concert opened up for sale, tens of thousands of people would flock to the site and frankly just suffer through the purchase experience in order to get those tickets. So if your site experience is the digital equivalent of a Bruce Springsteen ticket (Millennials, please substitute Justin Bieber), then you may have found a way to neutralize negativity bias. Otherwise, read on.

So what are these negative reactions we get from users? There are a variety of possibilities, but there are two primary emotional villains that lead the pack: confusion and frustration.

Confusion is usually the first emotion we see. A user begins perhaps looking for a product or researching a topic, but he/she doesn’t fully understand the interface, the results they are getting or the labeling or language used. They start to feel confused. Confusion is a harmful emotion because it tends to make people feel that they are at fault. They are perhaps too stupid to figure out how to use the site or app. You might think,” Well that’s better than them blaming us!” but in fact, it’s not. They say the best thing you can do to have a great first date with someone is to leave them feeling great about themselves, and so it goes with digital experiences. If a user feels they aren’t smart enough to figure out your site or app, they may not blame you, but they leave nevertheless, so the outcome is basically the same.

And by the way they may in fact subconsciously blame you for making them feel dumb.

So how to avoid confusion? Study users’ paths through the site via task analysis, as we do here at FROM. Anytime we test a site, even a very successful one, we always find many points of confusion. It’s a matter of basic hygiene: sites are constantly changing, and it’s hard to make sure that every tweak is totally clear to everyone. Doing quarterly or at least annual user tests to make sure you are aware of any confusion “bombs” that may have been planted on your site is just good business. Furthermore, confusion-related problems are often inexpensive to fix. Sometimes it’s simply about rewording a button or moving a call to action. Sometimes it’s about just removing a feature that’s causing more confusion than benefit.

The second emotional villain is frustration. When you are frustrated you aren’t feeling at all confused — generally, you know exactly what the site is supposed to do; it just isn’t doing it! Frustration can be triggered by site defects, slow performance, check out process that are more steps than the user feels they “should be,” policies that don’t give the user the outcome they want, or missing features that the user perceives “everybody else has” which may actually just mean that Uber and Amazon have them. It’s quite easy to frustrate users today as their expectations are so incredibly high. Creating frustration in digital users is super-damaging to your brand because many users create a meaning around the frustration which is that the brand just doesn’t care. Users believe that brands should know what they expect and that if they aren’t providing it, there can be only reason: they just aren’t bothering. This, of course, may be a completely erroneous conclusion… in our experience very often clients don’t realize the points in their customer experience that are creating frustration until we conduct the user tests that reveal these problems.

Frustration problems are often easy to fix, but sometimes they can be very challenging because they may stem from underlying technology issues that are expensive to remediate. Nevertheless, it’s essential to understand where these problems exist and gauge the impact they are having on your business results, so that you can make an informed decision about whether or when to invest in addressing them.

In our experience, sites that offer something of value and manage to avoid creating confusion or frustration for their visitors are winners. The first step to getting there is a user-research focused assessment so that you can face the reality of the emotional reactions you are creating. Once that is understood, a roadmap to improvement can be developed and results measured along the way.

This article originally appeared on the Howard Tiersky blog

Image Credits: Pixabay

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Eliminating Customer Anxiety

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Eliminating Customer Anxiety

GUEST POST from Shep Hyken

If you have been to a Disney theme park, you know about standing in long lines. There are also signs that tell you how long your wait will be. Guests like this.

When you use Uber or Lyft for transportation, they not only tell you how long before your driver arrives, they also show you a map where you can track how close (or far) the driver is from where you are waiting.

When you order anything from Amazon, you receive at least three emails. The moment you place an order, you receive an email confirmation. Another email shows up in your inbox to let you know your order has shipped. And then, another email is sent once the order arrives, sometimes with a picture of the box sitting on your porch. This is one of the reasons customers love Amazon.

Let’s stick with Amazon for a bit longer. It’s not really the multiple emails that customers love. It’s the information. And why is this information important? There are two (at least) byproducts from these emails that can’t be ignored.

  • The first is confidence. Without confidence, why would a customer want to do business with a company again? Confidence also comes from a predictable experience.
  • The second is eliminating – or at least reducing – anxiety. This takes confidence to a higher level. The sharing of information gives customers a sense of control.

In all three examples – Disney, Uber and Amazon – there is communication. Even if it’s over-communication, customers are drawn to companies that provide information that reduces their anxiety, whether they know it or not. And once a customer experiences the pleasure of an anxiety-free experience, again, whether they know it or not, they may question why they would consider doing business with a competitor.

Shep Hyken Customer Anxiety Cartoon

Not all customers will realize this right away, unless you tell them. Consider making it part of your value proposition. Nordstrom did this with their extremely liberal and hassle-free return policy. Lifetime warranties on products give customers confidence and reduce anxiety because they know will be taken care of if there is a problem.

For my entire career I’ve preached that good customer service and customer experience sets you apart from the competition. Customer Experience (CX) is table stakes. Customers want to do business with nice, knowledgeable people. Take that to the next level by being easy and convenient to work with, in essence, eliminating friction. And now I want you to consider the next step. Find ways to reduce and eliminate anxiety. When you put all three of these together – great service, convenience and low or no anxiety – you have a CX triple threat!

Image Credits: Pexels

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Uber Economy is Killing Innovation, Prosperity and Entrepreneurship

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Uber Economy is Killing Innovation, Prosperity and Entrepreneurship

GUEST POST from Greg Satell

Today, it seems that almost everyone wants to be the “Uber” of something, and why not? With very little capital investment, the company has completely disrupted the taxicab industry and attained a market value of over $100 billion. In an earlier era, it would have taken decades to have created that kind of impact on a global scale.

Still, we’re not exactly talking about Henry Ford and his Model T here. Or even the Boeing 707 or the IBM 360. Like Uber, those innovations quickly grew to dominance, but also unleashed incredible productivity. Uber, on the other hand, gushed red ink for more than a decade despite $25 billion invested. In 2021 it lost more than $6 billion, the company made progress in 2022 but still lost money, and it was only in 2023 that they finally made a profit.

The truth is that we have a major problem and, while Uber didn’t cause it, the company is emblematic of it. Put simply, a market economy runs on innovation. It is only through consistent gains in productivity that we can create real prosperity. The data and evidence strongly suggests that we have failed to do that for the past 50 years. We need to do better.

The Productivity Paradox Writ Large

The 20th century was, for the most part, an era of unprecedented prosperity. The emergence of electricity and internal combustion kicked off a 50-year productivity boom between 1920 and 1970. Yet after that, gains in productivity mysteriously disappeared even as business investment in computing technology increased, causing economist Robert Solow to observe that “You can see the computer age everywhere but in the productivity statistics.”

When the internet emerged in the mid-90’s things improved and everybody assumed that the mystery of the productivity paradox had been resolved. However, after 2004 productivity growth disappeared once again. Today, despite the hype surrounding things such as Web 2.0, the mobile Internet and, most recently, artificial intelligence, productivity continues to slump.

Take a closer look at Uber and you can begin to see why. Compare the $25 billion invested in the ride-sharing company with the $5 billion (worth about $45 billion today) IBM invested to build its System 360 in the early 1960s. The System 360 was considered revolutionary, changed computing forever and dominated the industry for decades.

Uber, on the other hand, launched with no hardware or software that was particularly new or revolutionary. In fact, the company used fairly ordinary technology to dis-intermediate relatively low-paid taxi dispatchers. The money invested was largely used to fend off would-be competitors through promoting the service and discounting rides.

Maybe the “productivity paradox” isn’t so mysterious after all.

Two Paths To Profitability

Anybody who’s ever taken an Economics 101 course knows that, under conditions of perfect competition, the forces of supply and demand are supposed to drive markets toward equilibrium. It is at this magical point that prices are high enough to attract supply sufficient to satisfy demand, but not any higher.

Unfortunately for anyone running a business, that equilibrium point is the same point at which economic profit disappears. So to make a profit over the long-term, managers need to alter market dynamics either through limiting competition, often through strategies such as rent seeking and regulatory capture, or by creating new markets through innovation.

As should be clear by now, the digital revolution has been relatively ineffective at creating meaningful innovation. Economists Daron Acemoglu and Pascual Restrepo refer to technologies like Uber, as well as things like automated customer service, as “so-so technologies,” because they displace workers without significantly increasing productivity.

Joseph Schumpeter pointed out long ago, market economies need innovation to fuel prosperity. Without meaningful innovation, managers are left with only strategies that limit innovation, undermine markets and impoverish society, which is what largely seems to have happened over the past few decades.

The Silicon Valley Doomsday Machine

The arrogance of Silicon Valley entrepreneurs seems so outrageous—and so childishly naive— that it is scarcely hard to believe. How could an industry that has produced so little in terms of productivity seem so sure that they’ve been “changing the world” for the better. And how have they made so much money?

The answer lies in something called increasing returns. As it turns out, under certain conditions, namely high up-front investment, negligible marginal costs, network effects and “winner-take-all markets,” the normal laws of economics can be somewhat suspended. In these conditions, it makes sense to pump as much money as possible into an early Amazon, Google or Facebook.

However this seemingly happy story has a few important downsides. First, to a large extent these technologies do not create new markets as much as they disrupt or displace old ones, which is one reason why productivity gains are so meager. Second, the conditions apply to a small set of products, namely software and consumer gadgets, which makes the Silicon Valley model a bad fit for many groundbreaking technologies.

Still, if the perception is that you can make a business viable by pumping a lot of cash into it, you can actually crowd-out a lot of good businesses with bad, albeit well-funded ones. In fact, there is increasing evidence that is exactly what is happening. Rather than an engine of prosperity, Silicon Valley is increasingly looking like a doomsday machine.

Returning To An Innovation Economy

Clearly, we cannot continue “Ubering” ourselves to death. We must return to an economy fueled by innovation, rather than disruption, which produces the kind of prosperity that lifts all boats, rather than outsized profits for a meager few. It is clearly in our power to do that, but we must begin to make better choices.

First, we need to recognize that innovation is something that people do, but instead of investing in human capital, we are actively undermining it. In the US, food insecurity has become an epidemic on college campuses. To make matters worse, the cost of college has created a student debt crisis, essentially condemning our best and brightest to decades of indentured servitude. To add insult to injury, healthcare costs continue to soar. Should we be at all surprised that entrepreneurship is in decline?

Second, we need to rebuild scientific capital. As Vannevar Bush once put it, “There must be a stream of new scientific knowledge to turn the wheels of private and public enterprise.” To take just one example, it is estimated that the $3.8 billion invested in the Human Genome Project generated nearly $800 billion of economic activity as of 2011. Clearly, we need to renew our commitment to basic research.

Finally, we need to rededicate ourselves to free and fair markets. In the United States, by almost every metric imaginable, whether it is industry concentration, occupational licensing, higher prices, lower wages or whatever else you want to look at capitalism has been weakened by poor regulation and oversight. Not surprisingly, innovation has suffered.

Perhaps most importantly, we need to shift our focus from disrupting markets to creating them, from “The Hacker Way”, to tackling grand challenges and from a reductionist approach to an economy based on dignity and well being. Make no mistake: The “Uber Economy” is not the solution, it’s the problem.

— Article courtesy of the Digital Tonto blog
— Image credits: Pixabay

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What is Digital Transformation anyway?

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Digital Transformation is the third wave of digital evolution.

What is Digital Transformation anyway?

GUEST POST from Howard Tiersky

The first wave was brochureware. Enterprises created websites that communicated their story. As simple as this idea is, it was revolutionary. The business value of providing instant sales and marketing material at the click of a mouse is hugely valuable.

The second wave was eCommerce. Enterprises connected customer-facing digital front-ends to their back-end systems, so that customers could engage in transactions directly via their browser or mobile device. This wave generated much more value than brochureware, because it reduced the cost of customer interaction, and removed friction from the user experience. Businesses who have mastered eCommerce have been able to trump former market leaders. In today’s world, if you can’t provide elegant digital options for the customer throughout their entire journey, you’re toast.

Now we find ourselves in the third wave: Digital Transformation. eCommerce added new pathways for pre-existing offerings, but companies going through digital transformation need to reinvent themselves for a digital age. Netflix made the transition from being a mail-order company to a streaming company. Though they still focus on their core value proposition of providing extended choices and increased convenience, their entire solution offering had to shift, along with their customer experience, pricing, contracts with suppliers, marketing, and more. Furthermore, given new methods of interacting with the consumer, it became practical for them to focus serious resources on content creation, as well. While the Netflix DVD-by-mail service was definitely eCommerce enabled (i.e. you could order DVDs via their web site), their digitally transformed value proposition is fundamentally impossible without digital.

Uber is doing the same thing for transportation. While plenty of taxi and limousine companies have apps that allow you to order their vehicles, Uber created a business model that was completely digitally focused. This meant that they didn’t need to own any vehicles or hire any drivers to become the largest ground transportation company in the world. It’s worth noting that Uber didn’t really go through a digital transformation, it was born digital. Digital Transformation is what pre-digital companies must undertake to compete in the newest wave of the digital age.

But even those companies that are “born digital” will need to focus on ongoing transformation. There are multiple examples of early digital successes, companies like Yahoo and MySpace, that failed to continue to transform.

Digital Transformation also requires a different mindset around where digital “lives” within the organization. You can visualize the way digital transformation works in the enterprises like this:

  • Wave 1 – Brochureware: Digital was part of marketing.
  • Wave 2 – eCommerce: Digital is a support service, creating digital pathways to pre-existing services like ordering, customer support, and billing.
  • Wave 3 – Digital Transformation: Digital reimagines the entire value proposition and business model of the company.

The goal of Digital in Wave 2 is to support the strategy and operations of the company by augmenting non-digital channels with more efficient and elegant digital alternatives. But in Wave 3, digital is driving the bus. The entire company — its value proposition and business model — is reimagined with digital at the center. This requires some substantial shifts in organizational structure, roles, and mindset; these shifts make companies hesitant to move towards true digital transformation. They engage in what is sometimes called Digital Decoration, that makes them seem progressive while protecting the “integrity” of their legacy business structures.

This is a losing strategy. There’s a long history of companies who decided to protect their existing models over supporting new ones. Kodak suffocated its early digital camera products; Blockbuster resisted focusing on digital delivery of entertainment. Western Union scoffed at the telephone.

In fact, here’s an example of an internal memo sent at Western Union:

“Why would any person want to use this ungainly and impractical device [a telephone] when he can send a messenger to the telegraph office and have a clear written message sent to any large city in the United States?”

Western Union opted out of the “digital transformation” of its era and I predict the same outcome for pre-digital companies who take a similar approach.

This article originally appeared on the Howard Tiersky blog
Image Credit: Pexels

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What Disruptive Innovation Really Is

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What Disruptive Innovation Really Is

GUEST POST from Geoffrey A. Moore

I recently read an article in ZDnet by Sherin Shibu discussing disruptive innovation, primarily through the lens of Clay Christensen’s work at the Harvard Business School. The article itself is very sound, and yet I found myself disagreeing with it on a number of points. In this blog, I want to interleave what Shibu says (presented in standard font) with my own commentary (inserted in italics) so that readers can develop their own point of view from the interaction.

What is disruptive innovation?

Disruptive innovation theory is a cautionary concept for large, established companies: There’s danger in becoming too good at what you do best. Delivering to the mainstream market is good and all, but a disruptor could target a market underserved by your current product with a new business model.

For me, disruptive innovation has a much bigger footprint because it also underlies virtually all venture capital investment. Its fundamental promise is to release an enormous amount of trapped value by reengineering an established system or process. The reason it is a cautionary concept for large established companies is that they are the custodians of the legacy systems and processes that are trapping the value. Yes, they can reduce the overhead by optimizing what they have, but no, they cannot compete with a categorically better way of doing things.

Harvard Business School professor Clayton Christensen developed the concept of disruptive innovation in the 1990s with his groundbreaking book The Innovator’s Dilemma, and the theory became wildly popular in the decades to follow. But in some respects it has become a victim of its own success: “Despite broad dissemination, the theory’s core concepts have been widely misunderstood and its basic tenets frequently misapplied,” notes The Harvard Business Review.

Disruptive innovation is a process by which entrepreneurs break into a low-end or new market and create business models that are different from existing ones in those markets. Disruption has occurred when their business model becomes mainstream.

So, a new company targets an overlooked customer base — and manages to deliver a better product at a lower price point. At first, the incumbents don’t take the threat seriously, which allows the potential disruptors to gain a foothold. Then the disruptors target the incumbents’ mainstream customers. If the potential disruptors create something that the mainstream adopts in volume, they have successfully disrupted the market.

I think this reading of the model overemphasizes the need to attack the low end of the market. Yes, that is a proven path, but it is not the only one. The iPhone disrupted from the high end, for example, as has Tesla.

What is disruptive innovation not?

Defining disruptive innovation isn’t easy and not everyone is going to agree on every example. Classic disruptive innovation should not simply describe just any situation of upheaval. If a new company shakes things up a bit for incumbent competitors, that scene is not necessarily one of disruptive innovation — that could simply be a breakthrough. In order for this theory to have power and be used as an analytical and predictive model, it needs to be precisely defined.

My definition of disruptive innovation is one that overthrows and is incompatible with the existing business model or operating model of an industry. In the case of the iPhone, it was Apple’s ability to go over the top of the carrier to provide products and services directly to the consumer. In the case of Tesla, it is its ability to bypass the dealership model not only in sales but in services as well.

Christensen, for example, argued that Uber is not a disruptive innovator according to his definition. It fails to meet two requirements, in that it did not start in a low-end or new market. Instead, it built a name for itself in a mainstream market and then started drawing unserved customers with less expensive solutions. And being less expensive or creating an app to hail rides sustains the existing model rather than disrupts.

This is just wrong and shows the limitations of the “start at the low end” concept. Uber reengineered both the operating model and the business model of on-demand car transportation, allowing consumers to call a taxi to themselves, and allowing Uber to build a fleet of cars and drivers at no capital expense.

Not everyone thinks that’s the case and other perspectives can be found that argue Uber actually is a disruptive innovator. From this perspective, Uber started with a low-market foothold by offering on-demand black car services. It was only when the startup introduced UberX, a low-end market offering, that it was able to move into the mainstream.

What counts as disruption is up for debate, especially as Christensen’s theory is applied to shifting contexts.

In the case of Uber, focusing on the low end simply misses the point.

Why is it important to define disruptive innovation?

Disruption isn’t a fixed point; it’s the evolution of a product or service from the fringes of customers to the mainstream. It’s important to define it this way because then it becomes more about the experimental nature of the process than about the output. See, disruptive innovations don’t always succeed and not every successful company is a disruptor. The process is about building new business models previously unseen in the target industry and appealing to a more niche customer base at first.

In my view, disruptive innovation is a function of a breakthrough technology intersecting with a pool of trapped value, enabling the reengineering of a system or process that eliminates one or more whole categories of spend in its value chain. It is a categorical innovation as opposed to a product or marketing innovation.

Is disruptive innovation the primary way innovation operates?

No, it is not the primary factor of innovation. According to HBR, “disruption theory does not, and never will, explain everything about innovation specifically or business success generally.” It does, however, help predict which businesses will succeed and it provides a solid foundation for further research – it’s captured academic attention for 27 years.

I agree with the point that disruptive innovation is not the primary type. Most innovation is sustaining, meaning that it improves an existing system rather than overthrowing it—evolution, not revolution. What I disagree with wholeheartedly, on the other hand, is the notion that the theory helps predict which businesses will succeed. Historically, the advantage has gone to start-ups because they are unconflicted in their commitment to the new way. Established enterprises, however, have learned that they can neutralize start-ups if they are willing to be fast followers. Microsoft’s Azure is a superb example of a company that has done this. Disney’s response to Netflix is another good example, and it appears as if General Motors is on a comparable path toward neutralizing Tesla.

What is an example of disruptive innovation?

Netflix was around since 1997, and at first, it didn’t appeal to Blockbuster’s core clientele. Renting movies usually happened in person, and Netflix was all online. Plus, Netflix took a few days to deliver movies because selections came through the mail. Blockbuster could easily ignore Netflix because it didn’t have the brick-and-mortar infrastructure needed to dominate the market at that time.

This glosses over what was the initial disruptive innovation that Netflix provided with its home delivery model based on DVDs. The key differentiator at the beginning was designing out late fees.

Over time though, as streaming technology developed, Blockbuster’s target clients were drawn toward Netflix. The same impulsiveness that made renting a movie right away more desirable than getting a movie a few days later translated into wanting to watch movies with a click of a mouse instead of going to a physical location to rent a DVD. Disruptive innovation technology, in this case, streaming, goes hand in hand with implementing innovation.

There is another story playing out in Netflix’s transition from DVD shipping to streaming. It required the company to disrupt itself. This is an extraordinary ask, as most successful disruptive innovations attack someone else’s profit pool, not one’s own. Reed Hastings deserves enormous credit for leading the company through this change, and I would encourage the academy to focus its research lens on how in the world he was able to do so when so many CEOs have fallen short.

Are there any disruptive innovation technologies to keep an eye on?

Online learning is a technology to watch because it’s reaching a population that in-person learning can’t reach at a lower price point.

The main technologies to keep an eye on are the ones that tackle an underserved market and have the potential to expand their offerings to appeal to the mainstream.

Something like autonomous vehicles, for example, can seem innovative, but they aren’t disruptive according to the theory because they’ll be quickly absorbed into existing industries. The incumbent advantage is strong.

The important thing to remember is that innovation does not always lead to disruption.

I strongly support the idea that online education delivery has the power to disrupt the education market—again, a breakthrough technology intersecting with a boatload of trapped value. I think the point about autonomous vehicles is interesting as well because I agree they will be absorbed into the existing industries. But while they may not disrupt the automotive industry, I do think they can reengineer transportation and logistics.

Overall, I support Shibu’s main thesis which is that we have come to take disruptive innovation for granted and have become careless with how we apply the term. And while we part ways on how best to apply it, I still endorse Clay’s breakthrough insights in The Innovator’s Dilemma, which had a huge impact on a whole generation of companies in Silicon Valley.

That’s what I think. What do you think?

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Tapping into the Sharing Economy

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How Collaborative Consumption Drives Sustainability

Tapping into the Sharing Economy: How Collaborative Consumption Drives Sustainability

GUEST POST from Art Inteligencia

In recent years, the concept of the sharing economy has gained significant traction, with many individuals and businesses embracing the idea of collaborative consumption. This shift towards sharing resources, goods, and services is not only changing the way we consume, but also driving sustainability efforts across various industries. By redefining traditional notions of ownership and promoting a culture of sharing, collaborative consumption is proving to be a key driver in the fight against environmental degradation and resource depletion.

Case Study 1: Uber and Lyft

One of the most well-known examples of collaborative consumption is the rise of ride-sharing platforms such as Uber and Lyft. These services have revolutionized the way people commute in urban areas, providing a more efficient and cost-effective alternative to traditional taxi services. By connecting riders with drivers who are already heading in the same direction, ride-sharing platforms reduce the number of cars on the road, leading to decreased congestion and lower carbon emissions. In addition, the sharing of rides helps to optimize the use of existing resources, making transportation more sustainable in the long run.

Case Study 2: Airbnb

Another compelling case study of collaborative consumption driving sustainability is Airbnb, the popular accommodation-sharing platform. By enabling individuals to rent out their spare rooms or entire homes to travelers, Airbnb promotes the efficient use of existing housing stock and reduces the need for new hotel developments. This not only benefits hosts financially but also helps to alleviate the strain on local infrastructure and resources. Additionally, Airbnb encourages a more personal and authentic travel experience, fostering connections between hosts and guests and promoting cultural exchange.

Conclusion

Overall, the sharing economy presents a promising avenue for promoting sustainability and reducing the environmental impact of our consumption habits. By embracing the principles of collaborative consumption, individuals and businesses can contribute to a more sustainable future while also benefiting from increased efficiency and cost savings. As we navigate the challenges of climate change and resource scarcity, tapping into the sharing economy may just be the key to creating a more resilient and equitable society for generations to come.

Bottom line: Futurology is not fortune telling. Futurists use a scientific approach to create their deliverables, but a methodology and tools like those in FutureHacking™ can empower anyone to engage in futurology themselves.

Image credit: Pixabay

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Why Empathy is Key to Human-Centered Design Success

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Why Empathy is Key to Human-Centered Design Success

GUEST POST from Art Inteligencia

In today’s fast-paced, technologically driven world, there’s one ingredient that brings us back to our roots, keeping us human and connected – empathy. Empathy allows us to understand and share the feelings of others. In the sphere of design, this ability to place oneself in another’s shoes is not just beneficial, but pivotal for success, especially in achieving Human-Centered Design (HCD).

HCD, at its core, revolves around the users and their needs, requiring designers to claw out of their expertise, immerse themselves into the users’ world, and observe, adapt and innovate solutions that are appropriate, manageable, and desirable. This tight-knit relationship between empathy and HCD can be better unfolded through two enticing case studies – one, an iconic product, and the other, a service that transformed an industry.

Case Study 1: Apple’s iPod

It was empathy that set the foundations of the fascinating success story of Apple’s iPod. The marketplace was riddled with generic MP3 players, many with superior technology or features, yet the iPod rose from obscurity to become a household name.

Apple, under the leadership of Steve Jobs, didn’t simply see consumers needing a device to play music on the go. They saw users battling complex user interfaces, struggling with cumbersome file transfers, and yearning for a simpler, more immersive experience. This empathetic realization was leveraged by Apple. They designed a product with an easy-to-use navigation wheel and a seamless integration system through iTunes making music management effortless for users.

The iPod’s success hasn’t been around the ‘what’, but the ‘how’ and the ‘why’. Apple did not invent the MP3 player, they reinvented it by truly understanding the journey, emotions, and needs of the user.

Case Study 2: Uber

Uber has disrupted the traditional taxi industry by applying HCD extensively, underpinned by empathy. They didn’t just see the act of hailing a taxi as a mere logistical necessity, but as an emotional rollercoaster ridden with uncertainty, anxiety, and frustration.

Uber, with its service, brought transparency, reliability, and convenience. GPS integration gave customers real-time visibility about driver location, removing the uncertainty. Exact fare estimates made payment experiences much more predictable, lowering anxiety levels. The door to door service convenience made users feel cared for and valued, elevating customer satisfaction.

Uber didn’t invent taxi services; they redefined the taxi experience by empathetically understanding and solving customer pain points.

Conclusion

In both case studies, empathy was the driving force behind creating solutions that reshaped industries and defined a generation. Empathy directed the designers to uncover unmet needs, understand latent desires, and design solutions that weren’t just functionally superior, but emotionally resonant.

Empathy in HCD encourages us to see not just the personas or demographics, but the humans behind them – their emotions, their journeys, their stories, and their dreams. It is empathy that allows us to shift our design thinking from problem-focused to people-focused, from technology-centered to human-centered. And it is this shift that paves the way for more sustainable, thoughtful, and successful designs.

In the end, the surest route to design success isn’t a path lined with advanced technology or complex analytics, but with empathy – the fundamentally human ability to truly see, hear, and feel the people who will use the solutions we design.

Bottom line: Futurology is not fortune telling. Futurists use a scientific approach to create their deliverables, but a methodology and tools like those in FutureHacking™ can empower anyone to engage in futurology themselves.

Image credit: Pixabay

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Disruptive Innovation vs. Sustaining Innovation

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Understanding the Difference

Disruptive Innovation vs. Sustaining Innovation

GUEST POST from Chateau G Pato

In today’s rapidly evolving business landscape, innovation is often seen as the key to success. Companies are constantly seeking ways to gain a competitive advantage and stay ahead of the curve. Two concepts that often come up in discussions about innovation are disruptive innovation and sustaining innovation. Understanding the difference between these two types of innovation is crucial for companies looking to navigate the ever-changing marketplace effectively. In this article, we will explore the distinctions between disruptive and sustaining innovation and provide two real-world case studies to illustrate their practical applications.

Disruptive Innovation

Disruptive innovation refers to the introduction of a new product, service, or business model that fundamentally changes the existing market dynamics. It often disrupts traditional industries, displacing established products or services. Disruptive innovations usually start by serving niche markets or addressing the needs of under-served customers, eventually gaining traction and undermining existing market leaders. They often offer unique value propositions or bring significant cost advantages, enabling them to capture previously overlooked customer segments.

One prominent case study of disruptive innovation is Uber. Before Uber entered the transportation industry, traditional taxi services dominated the market. However, Uber brought a revolutionary business model by leveraging technology to connect passengers directly with drivers using their own vehicles. This disruptive approach offered several advantages like lower fares, real-time tracking, and cashless payments, giving it a competitive edge over traditional taxi services. This innovation not only transformed the ride-hailing industry but also revolutionized urban transportation around the world.

Sustaining Innovation

In contrast to disruptive innovation, sustaining innovation refers to incremental improvements made to existing products, services, or business models. It focuses on enhancing features, quality, or performance, helping companies improve their current market position or maintain a competitive advantage. Sustaining innovation allows companies to meet customer demands, keep up with changing market trends, and strengthen their market share by appealing to existing customers.

Apple’s evolution in the smartphone industry provides a compelling case study for sustaining innovation. When the first iPhone was introduced in 2007, it completely transformed the mobile phone landscape. However, instead of betting everything on a single disruptive innovation, Apple consistently pursued sustaining innovation by releasing new iterations of the iPhone each year. These subsequent models offered incremental improvements like faster processors, better cameras, and enhanced user experiences. By continually enhancing their product, Apple was able to maintain its market dominance and keep customers engaged, despite fierce competition from rival smartphone manufacturers.

Understanding the Difference

Differentiating between disruptive and sustaining innovation is crucial for businesses looking to adapt and thrive in today’s dynamic market environment. Disruptive innovation represents breakthrough changes that challenge existing norms, while sustaining innovation represents iterative enhancements aimed at maintaining market leadership.

By understanding the difference between these two forms of innovation, companies can make informed decisions about their strategic direction. They can identify opportunities for disruptive innovation to explore new markets, attract under-served customers, and potentially disrupt established industries. Simultaneously, they can also focus on sustaining innovation to enhance their existing products or services, ensuring they stay relevant and competitive.

Conclusion

Disruptive innovation and sustaining innovation play distinct roles in driving business success. While disruptive innovation can revolutionize industries and create new markets, sustaining innovation is essential for maintaining market dominance and satisfying current customer demands. Striking the right balance between these two forms of innovation can shape a company’s growth and longevity in an ever-evolving market.

Bottom line: Futurology is not fortune telling. Futurists use a scientific approach to create their deliverables, but a methodology and tools like those in FutureHacking™ can empower anyone to engage in futurology themselves.

Image credit: Pexels

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