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Former Member

As part of our 2016 kickoff activities, I recently completed a little tour around the globe. Travel always provides new perspectives, but on this trip I was especially taken by the many examples I saw of business disruption caused by digitization – and the innovation that’s emerging as a result of this change.

Disruption is everywhere. From new digital business models and hyperconnectivity to the sharing economy, almost every industry is experiencing radical change. In the past, organizations could adapt fast enough to stay ahead of disruption. With digitization, however, the rate of change has accelerated beyond the ability of traditional companies to adjust.

Keeping pace with disruption requires rapid innovation, as well as the agility to understand in real time what’s working and what’s not. When you can innovate effectively, you can reimagine everything. And many companies are successfully innovating right now.

Disruption paves the way for change

Think about today’s technology platforms – such as Facebook, WhatsApp, and Amazon – where people often initiate contact and platforms respond. These platforms are attracting large, vibrant communities that generate tremendous value for participants and platform owners alike. "Network of network" communities are emerging as well. These networks are digitally connecting multiple companies across different industries to build new value scenarios. Connected cars send driver behavior data to insurance companies, for example. Both industries leverage the same technology platform to provide unique but differentiated services.

Devices and people are also increasingly connected by sensors and shared data. The Internet of Things, often viewed as futuristic, is already enabling rapid increases in productivity, efficiency, and commercially viable new business models. Tesla vehicles regularly receive over-the-air software updates that add new features and functionality. We’re seeing some cars that can park themselves. And driverless, autonomous cars may become a reality before my children are old enough to drive. It’s now possible to consider an environment in which accidents no longer happen. What will be the impact on the automobile or the insurance industries as we know them today?

The concept of networks is poised to become networks of networks. Social and collaborative commerce is becoming the new norm, and with it, the world seems to be smaller than ever before. Companies like Uber and Airbnb are thriving as their business models redefine the concept of what a network is and who is a part of it. And with these changes come new and refined customer expectations about what a business should deliver.

Building the right culture for innovation

This rapid disruption demands innovative new approaches from businesses that want to stay relevant. While technology can support innovation, it is company culture that acts as the true catalyst to enable it – or alternatively, to thwart it.

According to recent research from McKinsey & Co., 84 percent of business leaders understand that innovation is critical for their business. Yet they often fall short in executing on their plans, with only 6 percent satisfied with the innovation performance of their enterprises. Few of these companies can readily understand where the problem is or how to improve their innovation cycles.

Business leaders must do more than simply support the idea of innovation. They must drive initiatives and stay involved from early concepts through execution and analysis. Taking steps to understand how leading companies or new incumbents are executing their digital transformation is important. But business leaders must recognize that most successful enterprises build their own unique path to digital transformation.

For example, everyone is familiar with the concept of "segment of one" in marketing. What if a life sciences company uses that idea to build medical solutions for a "patient of one?" Instead of innovating based on computer code, firms could deliver a personalized solution for each patient based on genetic code. Personalized services are poised to break out on a massive scale.

That type of innovation requires technology solutions with high-speed, in-memory processing power, and real-time analytics. Using a network of networks encompassing cutting-edge academic research, clinical insight, pharmaceuticals R&D, and anonymized patient data from insurance companies, innovative healthcare businesses could deliver precisely the right combination of treatments and medicines based on a patient’s particular genetic code. The technology needed to enable that innovation is already available today. Collaborative networks and platforms are in place. It’s only a matter of time until innovation-seeking businesses take full advantage.

Digital transformation can be confusing and intimidating. But disruption also presents a world of new opportunity to reimagine everything. Companies that are willing to think big, start small, and move fast will be best prepared to innovate, get closer to their customers, and outrun the competition. Will your company culture help – or hinder – true innovation?

Pat Bakey is president, Industry Cloud, at SAP.

follow Pat on twitter @pbakey

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