Digital Transformation and Innovation leverage during COVID Pandemic
The path to digital transformation is complex and multivariate. The COVID pandemic has had profound effect on organizations, agencies and companies. Largely because of differences with innovation leverage for companies and government organizations. For some, innovation leverage during the pandemic contributed to more desired outcomes, mission outcomes, customer loyalty, citizen care, and much more. For others, not so much!
Industry research studies from Gartner to Forbes show that about 70% of business leaders say the COVID pandemic has accelerated their digital transformation. Neither the arrival nor acceleration of digital transformation warrants further examination here. Instead, we focus our attention on two areas required for innovation leverage.
Primo, intangible assets are better than tangible assets: It turns out that every organization, agency and company is made up of only two asset classes. The tangible asset like equipment, machinery, factory, buildings, land, vehicles etc and the intangibles, like intellectual property, patent, brand, licenses, algorithms, data insights, artificial intelligence, meta-data, software, application code etc. You might already see it - things like buildings, equipment, etc have 'fixed' costs/form/function that can't easily 'scale' up or down. They steadily depreciate overtime from wear-and-tear and have an easily agreed upon monetary value - e.g. the cost of building, equipment or vehicle. So when the COVID pandemic forced lockdowns, organizations overly dependent on tangible assets like a physical building or space to transact and engaged customers & citizens, suffered tremendous losses and disruption. Restaurants, retail, banking, healthcare, and public services like schools pivoted to their intangible assets like software, artificial intelligence, data insights, meta-data etc for remote-everything. During 2020 pandemic, we observed how software reimaged (innovation leverage) the delivery of good and services from online doctor visits, office work, retail online shopping to the fitness industry.
Secondo, cost matters - there is always cost of business: The cost of operating any business, company or government agency fluctuates but invariably, includes a combination of a) fixed, b) semi-fixed and c) variable cost. Using technology to apply innovation leverage creates the right mix 'costs' and financial agility. For example, minimizing large fixed cost (capital expenditure) in favor of variable cost (operational expense) matches changing customer demands and provides more financial agility. A quick look back at previous memo "Application Innovation for the Chief Financial Officer" has more on financial agility. To be clear, organizations with the right practices (and culture) can increase their intellectual outputs (think number of ideas, features, creative experiments, application code, data-insights, artificial intelligence etc) and further extend their innovation leverage. By so doing, desired outcome is achieved with out a proportional increase in cost. It is not more expensive when employees come up with more creative ideas, customer insights or solution features. We call that productivity. On the other hand, it is immediately more expensive to come up with more physical hardware, equipment and other tangible assets. Improving outcomes shouldn't be about acquiring indiscriminate assets - cost matters.
In closing: Digital transformation and Innovation leverage is about enabling the right mix of assets. Unarguably, people talent is the most valuable asset in any organization. People are priceless and they create the ultimate competitive advantage and economic moat. Intangible assets like intellectual property, patents, brand, licenses, algorithms, data insights, artificial intelligence, software, application code etc are created by valued people on borrowed time.
Memo: Digital Transformation and Innovation leverage. June 14th, 2021
