Anyone rummaging around in search of innovation in the annals of economics will inevitably end up running into Joseph Schumpeter. The political economist was already aware of the fact that innovation is the critical dimension of success more than 100 years ago (1).
But although it appears straightforward on the surface, it isn’t. Scratch the surface and you will always encounter the ‘creative destruction’ he popularized back then: Companies need to constantly innovate and incessantly question their existence to maintain their position on the market.
Do you notice a pattern?
Exactly. The imagery of scratching past a surface is by no means obsolete. Especially for anyone involved in today’s digital transformation. The central issues are clear: products, processes, the organization, customer service, communication, and even the company culture. They all need to be carefully scrutinized. However, what has changed? Competitive pressure has snowballed and the development cycles have greatly intensified compared to the past. Creative destruction – disruptive innovation (2): two terms, one concept. The process is all around us.
And this process also entails failure. “If you want to innovate (…), you have to embrace risk,” stated Michael Dell at last year’s ‘The Next Now!,’ the impulse summit hosted by Dell EMC in Berlin. He continued, “It would be wishful thinking to believe that everything always works right from the start.” And that’s how it is: Companies need to learn how to deal with making mistakes.
The issue is too intricate and for many, they simply procrastinate. And it’s not a prudent approach. Nearly one-half of all companies fear becoming obsolete in the mid-term, and a similar number of companies isn’t sure what the industry will even look like in the mid-term. But the working motto should actually be: Use innovation to shape the market, instead of playing the catch-up game all the time.
How can innovation, the main component in the digital transformation, be pushed forward?
The path begins with the realization that innovation cannot just happen as an aside, but rather it needs to infiltrate every fiber, all hierarchal levels, and each department of a company. It needs to become an integral part of the corporate DNA (and its partner network). The best case scenario is when upper management exemplifies to the rest of the company what innovation is; for this reason, I have often proposed having the Chief Innovation Officer be responsible for ensuring a company-wide change in culture. However, it goes without saying that innovation is not only a concern for a company’s IT. It doesn’t need to be limited to products and companies specifically. It can also act as an example for the external image. For example, it can help eliminate production grievances in countries with low wages, deal with topics of environmental concern, or address other CRS issues. Companies that define innovation in this manner are particularly appealing to markets in the future.
Dell EMC is hosting The Next Now! again. This year it will be held in Munich, Germany, on 10 April. There will be talks, presentations, and panel discussions by numerous high-caliber speakers from industry, media, and culture on topics such as the connection between innovation and digital transformation, the underlying technology, and the impact on the economy and society. And who knows? Maybe Michael Dell will be in attendance this year, too.
(1) That was the year 1912. By the way, Schumpeter looked at entrepreneurs as if they were heroes. He considered them responsible for the prosperity of the masses. One of his more relevant examples: Companies made sure that not only the Queen could afford silk stockings, but that they were in reach of factory workers, as well. The process of capitalism would gradually increase the standard of life for the masses, and innovation (just like monopolies) are at the center of this development.
(2) ‘Innovation’ comes from the Latin meaning ‘to renew, restore; to change.’ The term was first mentioned in Duden, the authoritative dictionary of the German language, in 1915, which was published only shortly after Schumpeter published his theory. A coincidence?