Digital Transformation - Digital Transformation

Open Innovation: Strategic collaboration for digital transformation

01/07/202412/10/2023 by DX Talk

Open Innovation: Strategic Collaboration for Digital Transformation. The fifth part of Transforming Organizational Culture for Digital Transformation Success explores the importance of open innovation to support digital transformation (DT, DX, Digital Transformation). Learn strategies for evolving R&D and expanding your global business through partnerships and collaboration.

Open innovation: the new power of DX

One methodology we hear a lot about in the DX space is open innovation. Open innovation, a concept first proposed by Professor Henry W. Chesbrough of the University of California, Berkeley, refers to the use of external resources to solve the technologies and ideas needed for corporate innovation.

This may make you wonder how it differs from outsourcing, but from an R&D perspective, open innovation is not simply outsourcing, but rather a way for a company to focus on its own capabilities in the areas it focuses on, while at the same time utilizing external technologies to reduce the burden of overall R&D and maximize its performance. In other words, it is a way to reduce the burden of development and increase the speed by actively utilizing the technologies of external partners in areas that are partially necessary or already mature in R&D projects.

오픈 이노베이션: 디지털 트랜스포메이션을 위한 전략적 협업 — Open Innovation: Strategic collaboration for digital transformation

Scaling R&D and the evolution of open innovation

In the early 2000s, when open innovation emerged, it was focused exclusively on R&D. However, since the mid-2000s, the concept has expanded to cover all areas of the enterprise, including production and services. In the case of DX projects, with the continuous emergence of new technologies such as artificial intelligence, big data, and the cloud, there are limits to doing everything alone, and it is necessary to secure not only technical expertise but also to discover ideas for products and services.

Open innovation is becoming increasingly important not only in terms of securing technical expertise but also in terms of discovering ideas for products and services. Customers’ needs are becoming more and more diverse, and responses to them need to be fast, so companies are developing new products and launching services faster and faster, and the demand for open innovation is getting higher and higher.

Finally, there is the expanding opportunity to do business globally. In the case of domestic business, it was not difficult to build the entire value chain within one company because all areas were familiar. However, for a global business, it is difficult to do everything by yourself. In this case, it is important to choose an open innovation strategy with partners who can complement it.

How to practice open innovation: Partnerships and collaboration

Open innovation is sometimes understood as simply collaborating with external partners, but it can also refer to strong collaborations that are not just a memorandum of understanding (MOU), but have strong legal rights and obligations, such as mergers and acquisitions of companies with lesser capabilities. In partnerships, there are various categories of collaboration, such as technology, production, and sales, and it is possible to jointly develop technology licenses and supply some parts, or to produce OEM products and create co-branded products and sell them to each other.

In other words, there are various forms of alliances, including equity investment, strengthening the relationship between each company through the exchange of minority stakes, or establishing a new entity in the form of a joint venture (JV) and investing in each other, all of which can be called open innovation. And when establishing a JV, it can be a technology-based JV or a sales-oriented JV. This is also a form of open innovation.

What are some examples of open innovation success stories? One example of a business success is P&G’s open innovation program, Connect and Development (C&D). CEO Alan George Lafley, who led P&G until 2015, set a goal for the company to get 50% of its innovation from outside sources, and broke down the boundaries between the internal 7,500 R&D people and the external 1.5 million R&D people by giving them access to each other as if they were part of the internal R&D organization.

As a result, a wide variety of products were brought to market under the actual P&G brand, and some were quite successful. Tide (detergent), Pampers (disposable diapers), Oral-B (toothbrushes), Gillette (razors), Duracell (batteries), Crest (toothpaste), and Pringles (snacks) are all products that came out of this open innovation program. What’s more, in 2000, when P&G began implementing its C&D program, only 15% of its new products were created externally; by 2007, that number had grown to more than 50%.

As you can see, open innovation is being recognized as a solution to the problem of sustained growth for established companies. This is especially true in Silicon Valley in the United States. Big tech companies like Google and Amazon have their core business, but they are constantly making acquisitions and testing new business models to prepare for the future. An example of this is AlphaGo, which acquired DeepMind.

Even though Google has a high level of technology in artificial intelligence, the fact that it found a technology in an area that it did not have early on and acquired a company that had only been established for about four years by investing 700 billion won is very meaningful from an open innovation perspective. Of course, this is not to say that all companies in Korea should aim for the same type of operation as P&G and big tech companies. However, if you are setting DX as an important direction in the future and want to establish it as a sustainable innovation tool within your organization, it is something you should definitely think about.

Open innovation for global business expansion

While many organizations will leverage outsourcing when executing DX, it’s important to start with a clear idea of what you’re looking for in a partner and how you want to work with them. In the previous section, we focused on the extent to which DX should be outsourced. Once you have a clear idea of who you want to partner with for open innovation and how you want to leverage their capabilities, new solutions can emerge, such as equity investments in the partner company or joint ventures.

The DX journey is not a one-man show. Furthermore, unless the DNA of an existing company is IT, it will be at a significant disadvantage compared to an IT company, even if it has the capital. To compete with them, it is very important to collaborate with partners who have capabilities that I do not have.

Digital transformation: A transformational approach that starts at the source

01/07/202412/10/2023 by DX Talk

Digital transformation: a transformational approach from the ground up. The fourth in our series on transforming organizational culture for digital transformation success explores the importance of a revolutionary approach, new organizational structures, and the right office location for digital transformation (DT, DX, digital transformation) success. Explore strategies for successfully driving DX with innovative thinking.

The beginning of digital transformation, a revolutionary approach and new thinking

One of my personal favorite words in the English language is “Revolution”. It means revolution or transformation. One of the contrasting words is ‘Evolution’. Evolution means gradual development. The difference between the English spelling of the word with and without an R is huge. I have a personal favorite writing book. It’s called “Write from the Bone Up“. When it comes to the desire and attitude of change in DX practice, it should be the same as the word “revolution” and the title “Write it down to the bone”.

The importance of creating a new organization to execute DX

I mentioned earlier that if you want to change a process in your organization, you have to start all the way back at square one. The same approach is needed when creating a new business model through DX, which means that for any “transformation” process, it’s important to have an objective view of your organization from the beginning. To ensure this objectivity, he recommends bringing in outside experts, preferably members of the executing organization.

This unfamiliarity allows you to look at everything from the ground up. The newer they are to the organization, the more objectively they can talk about the organization, the processes, and the company’s core business, without taking into account how it compares and contrasts with their previous experience, or the culture or politics of the organization.

It’s easy for anyone to come up with 100 reasons why something shouldn’t work. There is no such thing as a problem-free organization or a problem-free project. Innovation is virtually impossible in an atmosphere where people are only looking for reasons not to do something. So it’s better to find at least one reason why something works than why it doesn’t.

If DX is led by people who know the internal strengths and weaknesses too well and are familiar with the organization, it will be an evolution, not a revolution. For existing leaders and members of the organization, this evolutionary model offers a great deal of comfort, but we have to acknowledge that it’s not really what we’re trying to do. It’s important to recognize that the old way of doing things will never work.

Start working in a new environment, a foundation for innovation

In some cases, the same task can be split into two organizations and run in parallel to increase the probability of success. One organization is made up of internal people and the other is made up of completely external people, and they are given the same mission and goals to execute. This approach is used by some global companies, but it’s not easy for small and medium-sized businesses. Alternatively, as mentioned earlier, you can acquire an executing organization externally or create a new company. This isn’t easy either, which is why the best solution, if possible, is to form a new organization and bring in new people to run it. It bears repeating.

And to add one more tip, consider starting your DX efforts in a new space, not in the same office as your existing departments, but in a space that is intentionally separate. This is especially true when you’re newly organized, exploring challenges, and strategizing. It’s a period of about six months to a year that gives you a chance to step back and look at the organization and see the problems objectively. Earlier, I suggested putting the DX and business organizations in the same room.

This is based on when DX is past its infancy and entering its stabilization phase, which means that separation is beneficial during the initial setup process because it requires independent eyes and minds, and working together in the same room is better once the challenges are clear and the process of execution and collaboration has begun.

Choosing the right office location to drive DX

When you start working in a new office space, you’re starting from scratch in many ways. You’ll be using an external internet network, like the one you use at home, instead of the company’s own network, and you’ll be able to see the inconveniences and problems you’re experiencing. As a result, you can see what you need to change for work efficiency. In addition, you can focus on execution, free from unnecessary interference from the existing organization, and create an optimal situation to work towards a single goal. Collaboration with external partners becomes easier.

These days, the environment for starting work in external spaces, including coworking spaces, is well established. By the time you’ve built your DX organization internally, agreed on what you’re going to do with your existing organization, and are in the process of executing DX in earnest, the decision about where to locate your office space should be based on the above advantages.

Effective reporting culture for digital transformation

01/07/202412/10/2023 by DX Talk

Effective reporting culture for digital transformation. The third in our series on transforming organizational culture for digital transformation success explores how to improve existing complex reporting cultures and engage executives to make them more effective in digital transformation (DT, DX, digital transformation).

Traditional reporting culture needs to change

He called DX a business transformation process based on digital capabilities. And the fastest thing to try is to create a digital environment. At this time, the digital environment does not end with the introduction of digital tools, but must be transformed into actual work to build a company’s digital capability. Therefore, it is important to check all the data uploaded by executives and workers, make decisions based on it, and convince internal stakeholders. There are many examples of building a digital environment at the workplace level, but in this article, I’d like to talk a little bit about reporting to executives.

People in white-collar jobs in our country write tons of reports every day. In some cases, reporting to executives or management is quite frequent. It’s not an exaggeration to say that we work to report. This reporting culture can become quite complex and time-consuming to prepare and present, especially the higher up the organization you’re reporting to.

In startups, it’s not uncommon for founders and directors to discuss and make decisions based on actual development screens or operational metrics rather than separate reports, but as the organization grows and the complexity of the work increases, it’s not always easy to make decisions through meetings and discussions alone. And the larger the organization, the more executives want to cut to the chase, and this culture isn’t going away anytime soon.

Increase efficiency by improving your reporting culture

For example, Hyundai Card is famous for its CEO’s declaration of zero PPTs and the elimination of report-based reporting formats. While many media outlets introduce this as an innovation, it’s more about focusing on the business rather than improving the reporting culture, which means not wasting time thinking about the business by decorating the report. There are many foreign companies that emphasize storytelling over PowerPoint-centric reporting. At Amazon, there’s a culture of creating a one-page virtual press release and discussing it before launching a new service. It’s about focusing on how we’re going to do business, how our business is going to be beneficial from a customer perspective, and just creating that content.

A new approach to digital transformation leadership: leverage real-time dashboards and collaboration tools

In this context, executives and leaders responsible for DX need to think differently about their reporting and meeting culture. If you have a culture of regular reports, reduce the frequency and have a dashboard with real-time status and check in or receive reports on an occasional basis. In other words, put the digital tools you are using in the field directly on the screen and discuss them right away.

Typically, DXers are used to working in the IT industry and are more comfortable writing in a collaborative document like a wiki than in a separate document. If management follows suit, it can save a lot of time, from creating documents to scheduling reports to waiting on hold. If you’re already using collaboration and communication tools like Google Workspace, Slack, or Microsoft Teams to do most of your work, you can continue to use these channels.

If you’ve launched a mobile service or implemented an IT system, you probably have dashboards that your staff utilize. These dashboards are organized so that you can see at a glance the metrics that are important to your service or business. You can drill down to specific data and even current status if you need to. This could be something like server operations in the public cloud, or it could be revenue or key metrics for your core business. These dashboards can be used across all DX-related activities, collaborations with other organizations, and organizing data to pull out key metrics.

Accelerate DX execution with executive engagement

An executive might make the following request to the DX organization Create a dashboard that executives can access and view directly. You can even go a step further and put it on a monitor in the office to see the initiation of different changes in real time. It’s a great way to accelerate your DX efforts.