Innovate or die is the message on the BBC News online as of the 5th September 2014, it was written by journalist Matthew Wall, who discusses the whole idea of digital business disruption and business transformation. He makes the very valid point that innovation is the cornerstone of business survival. We think he is missing the broader picture, that innovation is but one component, and business transformation is actually the requirement of businesses.

Inside the article Wall talks about companies like Blockbuster, Altavista and Kodak who were steamrollered out of business by agile innovative companies who moved into their space and stole their market share. Their lack of innovation or even the awareness of the digital disruption about to enter their space, meant they were completely unprepared. They simply did not have the speed of adoption required to transform their businesses, or tackle these highly innovative companies.

Agile Acceleration

Wall discusses how Barclays bank have created an accelerator centre in Whitechapel, to accelerate their cycles of innovation. They have taken innovation outside their mainstream business and created the innovation centre in partnership with Techstars, the start-up investment and mentoring company. The accelerator centre is coming up with products much faster than when it was kept inside the business. One innovation that has stemmed from this is ‘ Ping it’. Ping it is a very simple to use mobile app that allows people who are members of Barclays bank to be able to transfer money to others who may or may not be Barclays customers. The sentiment of Barclays customers on social media, shows that their customers love it. So the innovation in this case is actually helping them, but is the innovation in the right direction? In the article Derek White, the bank’s chief design officer is quoted as saying “We now have an engine for capturing technology, implementing and promoting it. This is about inventing the future of financial services.” Barclays are doing innovation the right way – they are co-collaborating, creating agile business units that can create new products. They test and learn, and when the data is reviewed they can choose to pivot if required. But is an app the solution to the future of financial services for Barclays? In the US, Bank of Internet, USA are rising to prominence. Their team of a few hundred people are now handling multi-million dollar transactions. A huge contrast to the 140 thousand staff at Barclays. Is Bank of Internet where the real threat is going to come from? Will apps like Ping it be enough to save Barclays? We don’t know yet. But what we do know is that Barclays have to transform beyond just the technology. They need to seek alignment within their business.

We’ve got an app! But is it an innovation?

Further down the article Wall talks about British Gas and their ‘Hive’ product. Again, the Hive product is a simple mobile application that allows you to control the central heating system in your home. It sounds like a useful app but when we look at the Hive website we find that the app costs £199 which is out of the price range of a huge amount of British Gas customers who struggle with their gas bills on a daily basis. Looking at the customer and their sentiment towards British Gas, they seem to have a very different opinion as to how British Gas treat them than those of Barclays. It would not be unfair to say that the vast majority of all commentary is negative towards British Gas. This poses a problem. The more negative sentiment they have, it can be judged that the relationship with the customer is cold. The colder the relationship that the business has, the less likely the customer is to perceive the innovation as something of benefit to them. In fact, quite often they can see through it as gimmickry. We may be led to think that British Gas is involved in more smoke and mirrors than true innovation. If we take a look at a recent article on I-Global Intelligence for the CIO, it is clear to see that Clare Simons is now holding British Gas on a pedestal, mentioning that they have written a digital disruption playbook. Digital Disruption can be better defined by Professor Clayton Christian of Harvard Business School, author of ‘The Innovators Dilemna’, and the world authority in Digital Disruption. He notes that to be truly disruptive, the technology must be affordable, effective and convenient making it widely accessible and resulting in mass adoption of the technology. Hive may be effective and convenient but it does not tick the box of affordability. Therefore, in Christian’s definition this does not fit the mould of a digital disruption. 80,000 British Gas customers have purchased the service representing only 1.3% of the 6 million + customers of British Gas. It may be digital, but but disruptive it is not. Reading the content of this article, we see British Gas are being aligned with brands like Apple and Beats. The reason these brands are now seen together is because their apps are available for download in the iTunes store and on Google Play. This is not alignment with these brands, this is simply participation in the field. The article goes on to proclaim that British Gas are a venerable company, meaning that they are well respected. But again, customer alignment is not there. British Gas have a serious problem in servicing their customers base needs. What we find is that if you haven’t serviced the base needs of the customer, they reject innovation. The business must transform.

Innovate or die? Transform or fail!

The base level requirement for digital business transformation is that there must be a strategy in place. The strategy can be created using the 7 Principles of Digital Business Strategy. We must then look at the needs of the individuals within the organisation. They have a hierarchy of needs, much the same as the customer does. If our technology doesn’t come after the hierarchy of needs of the customer and internal staff, it tends to get rejected. Culture, engagement and alignment with strategy, are the base elements needed. Innovation can only be tackled when all of these things come to align. Transformation is the result of a strategy being successfully implemented for the businesses to grow and prosper. Attempts to pin transformation purely on innovation are on false ground. The innovation will fall through, the customers won’t grab it and competitors can steal the march. The key message here is not “innovate or die” it’s that businesses need to understand where innovation fits in the hierachy of the transformation process or their innovative efforts will be fruitless. Watch the video here

Read Matthew Wall’s article on BBC news online here