Research and Innovation

Need for Speed in Business Model Innovation

 
May 9, 2018

There is considerable untapped value in the emerging connected ecosystems for automobiles, airlines, cities, and homes. A wide variety of industry players can offer new value to these ecosystems by leveraging data innovation, thanks to rapid advances in artificial intelligence, cognitive technologies, self-healing automation, software defined technologies for networks, machines, and systems, and the internet of things (IoT).

Innovations in these fields have enabled an unprecedented level of visibility into operations and systems, making it easier to conduct what-if scenarios, predict faults, and understand customer and system behavior. With such changing dynamics, multiple players are scrambling to innovate to offer the same value, causing disintermediation and putting the longevity of existing business models across industries at risk. There is, thus, an urgent need to innovate with speed; the opportunities are endless.

For example:

  • Retailers can provide location-based, preference-based, and contextual offers
  • Communication service providers can cross-sell value-added services
  • Insurance companies can develop usage-based and risk-based insurance models
  • OEMs can offer proactive maintenance service and package new experiences
  • Suppliers can get feedback on their products and services in near real time
  • Fleet operators, governments, and public utilities can provide better citizen services, such as scheduling parking and toll automation

Rough Road Ahead

However, organizations face certain challenges to innovation agility, beginning with a lack of digital skills in emerging technologies and leadership. The rapid pace of evolution of technologies is causing skill gaps in emerging technologies, especially on the supply side (academia). This makes it difficult for enterprises to respond to new opportunity with speed. Therefore, many firms have embarked on digital re-skilling programs for their employees, or set up advanced/emerging technology centers.

Also, organizing for innovation is equally difficult. Corporate silos or value engines that work well for established business lines have served well for existing business. However, consider an initiative like a connected car, which impacts product engineering, supply chain, marketing, and offers companies a strategic-level open opportunity to take leadership in the connected car ecosystem. This would require a new structure that cuts across multiple departments and functions.

The next challenge is ecosystem complexity. New, combinatorial value equations cause some enterprises to wait and watch, while others take riskier bets by partnering with some of the players in the ecosystem and alienating others. This, in turn, causes others in the ecosystem to react and build their own partnerships and platforms.

We are already seeing this in the cars, smart homes, and airlines ecosystems, where there are overlapping platforms, products, and interests. Leadership in such an ecosystem requires complex relationships to be built and sustained, and there is a need for partners in the ecosystem to embrace open platforms and innovations.

Innovation Pioneers

In such a complex scenario, start-ups and corporate incubators have been the ones to show the path to agility, cut across silos, and reach out externally to partners in the ecosystem. For example, start-ups have been at the forefront in terms of monetizing data from connected cars for the larger ecosystem. What works in their favor is agility, the ability to build new relationships and deploy new business models, and technology skills in emerging technologies such as data privacy, data engineering, IoT, and security.

Learning from start-ups, a way for enterprises to address the velocity of innovation is to tap into the abundant entrepreneurship talent within the enterprise, and offer them the kind of innovation environment that is found in successful incubators and start-up accelerators. This will allow the intrapreneurs to cut across organizational silos, build or source the right technology skills, and lead experimentation in the ecosystem with a rapid innovation cycle.

In addition, it is important for the intrapreneurs to incorporate the principles of lean start-ups, design thinking, and agile development in their work, and develop capabilities rapidly. It is better to take risks, fail fast based on market feedback, and pivot or course-correct, than spend too much time or resources on creating products and services that no one wants.

Anil Sharma has been with Tata Consultancy Services (TCS) for more than 21 years, and currently heads the Entrepreneurship Program at TCS. This program runs incubators for internal start-ups that have big-bet potential, and is currently supporting start-ups focused on drones, IoT, devops, and cognitive transformation. In his previous role with TCS Incubation, Sharma played a key role in incubating the digital marketing and IoT business.