Digital Innovation Leadership, Types and Success Criteria
Published: 01 July, 2021
Digital innovation is aimed to make companies more competitive. Without digital innovations, companies lose market share drastically and miss the boat in competition.
Well-designed digital innovations are designed to make companies faster, more economical, and more sustainable.
Innovation companies take the leading role in the market and are experts in their respective market segments. The degree of innovation of a digital innovation determines the degree of impact that new products and services achieve. The innovation architect designs digital products that are relevant to the target group. Together with the company management they develop and push a digital strategy that is optimally aligned to the company. In the process, all company divisions are analyzed and consistently optimized in the direction of digital processes.
The digital revolution has long since begun: With modern innovation management, you actively take responsibility for your company with the further development of existing processes. Optimally align customer dialog with digital media. Does your company have sufficient expertise in the competence fields of eCommerce and digital marketing?
Systematically design new digital business areas and develop them in a targeted manner. With consistent digital innovation, new customers can be won sustainably, and regular customers can be tied to the brand and the company.
Digital innovation starts with cultural change. The UNITE Culture Canvas summarizes the most important factors that contribute to an organization’s culture. Its simple format allows a team to immediately see the most important aspects of culture and understand how they interact. The UNITE Innovation & Transformation Models help you understand the paradigm shift in organization and leadership to keep up with accelerating technological change.
Much more about the digital innovation process you will find in our brand-new FREE book “HOW TO CREATE INNOVATION”. It incorporates comprehensive approaches with mindsets, structures, and strategies to innovate in less time, with fewer resources and more success. Register for the download now!
Different Types of Digital Innovation
In our article innovation vs. invention, we described the difference between the terms. Innovation differs from improvement and transformation in that sense that the focus is not doing something you are already doing better, but rather on doing something completely different from what you are already doing.
This digital innovation can also be the implementation of new business ideas through the development of completely new markets and business models. The term “creative destruction” developed by Joseph Alois Schumpeter (1883-1950), the “father” of innovation research, is still valid in today’s VUCA world. The general definition that innovation is the successful implementation of ideas is also still valid. But as early as the 1980s, long before digitization and the era of rapid change, it became clear that a uniform definition of the term innovation beyond this is difficult.
In a model, U.S. scientist Donald F. Heany showed as early as 1983 different entrepreneurial requirements that entail different degrees of innovation. For example, an innovation that Heany assigns to the “style change” degree of innovation results in only minor requirements to deviate from routine: The market for the product is established, the company serves the market, customers know the functions, the effort for product design is low, and a new process does not need to be established.
In the case of an innovation that he assigns to the “Major Innovation” level of innovation, the market is not established, the company does not yet serve the market, customers do not know the functions, there is a high need for development at both the product and process levels. Although the model is older, it shows why many companies find it difficult to implement digital innovations. Digital innovations often radically change markets and can thus be assigned to the “major innovation” level of innovation. For understanding innovation from the beginning, read our article on the Innovation Lifecycle.
Innovation Culture as the Basis for Digital Innovation
Digital innovation is not only promoted by processes but above all by a company’s innovation culture, which has a significant influence on a company’s ability to innovate. Companies can only bring innovation to the market sustainably and quickly if they establish a culture of creativity and innovation that focuses equally on generating and implementing ideas.
A corporate culture that is hostile to digital innovation reduces the likelihood that teams will be creative and drive innovation projects. But what does this mean? A corporate culture that encourages innovation means that the entire system of organizational functions (e.g., who is hired, how they are compensated, how the organization is structured, what processes are prioritized, and what resources are made available) is set up to emphasize digital innovation.
In innovation research, there are differing views on where culture plays a role in the innovation process. For the scientist B.S. Cumming, for example, a culture that fosters a creative environment is only important in the “Invention Stage” phase. Important in this stage, he says, is the freedom of employees to act on their own ideas, encouragement to take risks, uncritical acceptance of mistakes, and diverse access to stimuli and ideas. In the following phase, when a new concept is modified to meet the needs of customers, the emphasis is on granting resources, strong support and leadership from the company, use of appropriate external expertise, good team cooperation, and close contact, he said. Other scholars, such as Tudor Rickards, argue: A culture of innovation must support creativity at all stages of the process.
At first glance, different management concepts are at odds here: one in which creativity plays a role only at the beginning of innovation and one in which creativity is required throughout the innovation process. This apparent contradiction can be resolved to the effect that different characteristics of innovation cultures each promote a particular type of innovation – incremental or radical, for example. A digital innovation culture is designed to promote the development of digital innovations.
Accordingly, the implementation of different types of innovation requires different corporate structures and other characteristics of an innovation culture. Companies that want to successfully implement digital innovation in dynamic market environments should have the ability to create organizational units that exhibit a corresponding innovation culture.
Beyond that, in our article Innovation in China, we noted how the innovation culture there is different from the European one.
In our article “The Lack of Innovative Technology in Europe – a Risk to Our Wealth?” we describe the overall social impact of a lack of digital innovation culture.
Digital Innovation Management
Different types of corporate cultures exist, all of which promote innovation. These can be broken down into 4 main types. Each type allows for the implementation of different degrees of digital innovation to a greater or lesser extent.
Companies that proactively drive innovation openly communicate their innovation strategy goals and set employees specific innovation targets against which they are later measured. Teams pursue these goals with a high level of enthusiasm for digital innovation. They receive internal support and can cooperate with experts from outside if necessary. Successful innovation projects have a positive impact on individuals; bad ideas are accepted as part of the creative process.
These companies thus set high incentives with which they incentivize innovative behavior. Proactive innovators allow employees time for creative thinking and invest unbureaucratically in good ideas. Employees can learn more about innovation tools. Divisional boundaries in companies classified as proactive innovators are easy to overcome compared to all other innovation types. The creative exchange takes place in many ways:
There are numerous internal networks, creative meeting culture, and external relationships through which inspiration regularly enters the company. In the environment, employees experience that risks are taken for digital innovation. Numerous unofficial projects are proactively launched, and a culture of doing prevails.
Within a certain framework, mistakes are allowed; there is a high willingness to learn from mistakes. Proactive innovators clearly differentiate in the quality of mistakes. The work climate is highly motivated and highly dynamic. Problems and possible solutions are seen as positive, ideas are received openly.
In the operational innovator innovation type, it can be seen that managers promote innovation at a similarly high level to innovative optimizers, but the visionary orientation is lacking: the company is more focused on operations than on innovation.
Strategic Innovators promote digital innovation and creativity at varying levels. Strategic goals and values, management styles, and team composition are among the drivers of innovation, but at a lower level than proactive innovators.
Digital innovation is driven primarily by leadership at the strategic and management levels, as well as at the team level. The other categories – such as resources, incentives, communication, risk culture, and work climate – play a lesser role. This type of innovator is very effective at implementing digital innovation as a fast-follower strategy – innovations where risk is relatively low. However, strategic innovators have disadvantages compared to proactive innovators: due to the potentially higher number of idea generators and the higher number of innovation projects, proactive innovators are more likely to innovate outside a context set by top management. This is more difficult for strategic innovators.
The company promotes creativity and innovation across all ten categories at a significantly lower level than proactive and strategic innovation types. The company’s focus on digital innovation and creativity is detectable, but weaker compared to the previous two innovation types. Digital innovation is primarily promoted at the level of a manager but without any pronounced use of resources.
Incentives for creative thinking can be identified, but at a lower level than for proactive innovators, for example. There are no pronounced innovation-promoting communication structures; the company is characterized by risk aversion and a low innovation-promoting work climate. Due to the existing processes, innovative optimizers are often able to develop products further and further over a long period of time through incremental innovations and achieve very high quality in the process. Disruptive innovation or the implementation of innovative digital business models is difficult for them.
By establishing proactive innovators, companies can favor the development of digital innovations with a higher – even radical – degree of innovation. They can also implement more incremental innovation projects at a higher speed. Strategic innovators can implement digital innovations with a more radical character as well as incremental innovations with a higher speed. The degree of innovation does not reach the radicalness of proactive innovators,
due to the rigid hierarchies and processes compared to the first type, strategic innovators lose speed. The innovative optimizer innovation type is largely limited to developing incremental innovations, although the pace of innovation can be increased by accelerating processes. Operational innovators tend to favor the development of incremental innovations, and the speed of implementation tends to be below.