It is now possible to digitize almost anything, many things are worth doing and will bring value, but in reality we have capacity to manage only so much without dropping the business as usual ball or changing at a pace that our organisation and clients can’t absorb………with this backdrop to the digital opportunity that businesses are faced with, prioritising where and how to use finite skill and time resources to innovate is a critical science that business leaders need to spend time mastering.
The likes of avatar based virtual reality conferencing, drone delivered distribution, artificial intelligence based production and logistics planning, dynamic customer profiling, chat-bot’s and robotic process automation, block chain governed financial and regulatory processes, 3D component and end product printing at point of sale or point of consumption as just a few examples it’s clear that the possibilities to leverage digital innovation to bring exponential value to your organisation is endless.
Good economic theory teaches us that in a world of unlimited ‘wants’ and limited ‘resources’, we are inevitably faced with choice. These choices need to be weighed up against one another in terms of opportunity cost. Benefits of any purchase have been weighed up for centuries of decision making in the form of business casing a purchase based on the potential savings they will create, increased revenue, improved customer service driving better market share or less churn, better efficiency to mention a few. It is imperative that businesses apply stringent, consistent methodology and well-researched information to understanding the value of doing something – because there are so many things that are worth doing. The term ‘no brainer’ often comes to mind when looking at innovative ideas but sadly the brain is very much needed to commit time, effort and spend to something that could have been directed to something even more critical or of greater value.
The key to getting this right is to have a strategic framework against which to evaluate innovative ideas (this should be consistent with your overall company strategy) – not new or different, just business strategy. What is new is the volume of ideas and innovative opportunities available to accelerate that strategy. Businesses therefore need to absorb, process and evaluate these ideas and opportunities faster and better. To do this, businesses should establish a wide and transparent open community (a net) to capture good ideas from many areas. Filter them quickly through a regular transparent process against the strategic framework into things that are worth evaluating in detail. Then allocate a small resource pool to collect feasibility information, run further due diligence against the framework and the predicted cost.
The trouble with agile digital innovation initiatives is we often don’t know with any great accuracy what they will cost because they are new – initially anyway. However there is some methodology to apply some tested assumptions to understand broad cost parameters – some examples without going into detail are:
- What the human aspect being replaced or accelerated is:
Data capture vs data validation, action trigger vs process flow, decision based on data vs decision based on judgement, decision based on judgement from experience vs decision based on judgement from intuition (creative design). All these elements contribute to the complexity of programmatic code and the requirement for machine learning and AI or not.
- Scale, throughput and volume of data in any innovative initiative
How much data, how quickly? While Moore’s law of technology has delivered on its prediction to exponentially drive down costs of computer processing while doubling its performance, large processing power and big data collection and storage is obviously still more expensive then less processing power and less storage. Knowing your imagined or predicted scale volume and throughput requirements to digitally solve a business problem or run a process is a good indicator of the cost of the ultimate solution to implement, run and maintain – cloud providers now give us a great pricing yardstick to understand this infrastructural cost element, while also making the ultimate access to the solution’s infrastructure quickly accessible.
- Sensitivity and security of information that’s needed to build an innovation
As data and information increasingly become the new currency in the Digital world – like anything with value – it needs to be treated carefully and kept secure. The more valuable (to the organization or the individual) the more securely it needs to be kept and the more carefully it needs to be distributed. There are strict laws that govern and direct this – but understanding the type of data involved will help to better predict the related costs involved in securing it in an innovative solution.
- Target audience of a digital innovation
Who will be accessing the information and working on the solution or ‘app’, where and on what devise will drive cost elements in terms of scale, richness, look and feel, detail, adaptability of form. Many users or few will indicate information distribution scale. Customers or staff, will indicate a rich interactive consumer look and feel vs a leaner more basic look and feel? Executives or specific management – detail information presentation vs summary view? At desks or out in the field, desktop or mobile app?
- Time to come up with an innovation
Underpinning many of the principles of Agile and Lean is the notion of fail fast, learn and pivot. It’s hard to know at the outset of an idea how much road you will have to travel to get to a value creating ‘minimum viable product’ – but there would at least be a sense. How many sprints do we think we need to get to something? How many are we prepared to do? The longer any technology project takes, the more it costs…….irrespective of fixed price vendor agreements….time is valuable for all stakeholders and no-where is opportunity cost more tangible than peoples time. Businesses need to be realistic at estimating their pace of innovation and how much they can achieve within a time frame, balancing the need for sustained focused attention with the business as usual responsibilities and cost in measures to ensure success.
With the flood of opportunity that digital brings to transform what businesses do, innovation and transformation should be a given for any business today – and leveraging digital should be a key pillar of any business strategy. However, the innovation challenge is no longer whether something is possible or not, it’s more about understanding how important is it to us in terms of value and how much it might cost verses the endless list of other things we need to be doing to transform and innovate. Applying well established sound economic principles and good digital methodology to this innovation opportunity cost process will guide businesses to spending their innovation dollars and effort wisely – securing their future relevance and prosperity.
Rogan Moore – Digital Director