Tech companies innovate at the edge. Previous companies are also possible. | So Good News
Technologies such as 5G, artificial intelligence, and low-code and no-code software design tools are changing how companies approach innovation. In particular, they look at the edge of the organization, where the business interacts with customers, suppliers, and other stakeholders, and where small innovations occur. Companies should adopt three practices: 1) freeing up small teams to act on their own, 2) providing these teams with the systems, resources, and tools they need, and 3) bringing the best innovations back through the company.
In the next few years, new and advanced technologies will change the business landscape at an unprecedented pace and scale. Consider the impact of several key trends. 5G is expected to deliver network speeds around 10 times faster than those offered by 4G LTE networks, with significantly higher speeds on the horizon. Artificial intelligence-based speech, written word, or computer vision algorithms are predicted to increase 50% of user touch by 2024. Global data generation will nearly triple between 2020 and 2025. And the low-code development platform market—those that can write powerful software that’s changing—is projected to grow at a CAGR of about 30 percent through 2030.
The result of these trends is an explosion in computing power, massive expansion of data sets, and massive improvements in the way users access technology. This means new innovations will be cheaper and easier to develop, launch and scale, leading to a much faster pace of innovation.
Although many business leaders are widely aware of these trends, they are not ready to use the resulting innovations. Doing so is ultimately a matter of scale and skill, and traditional top-down strategies and mechanisms (e.g., corporate venture capital funds) struggle to keep up with opportunities—and many lack the expertise to evaluate those opportunities, even if they can keep up. up. Instead, companies should look to the edge of the organization, where the business interacts with customers, suppliers, and other stakeholders, and where small innovations occur.
Specifically, these “edge” workforce companies have two groups: 1) experienced experts—engineers, chemists, product developers, and scientists—who work on the most complex problems for the business, and 2) low-code/no-code tools to act as “citizen developers.” and non-technical workers who can use SaaS products and services.
The challenge for businesses today, then, is how to empower these fringe workers to act as innovators and incorporate the best of what they develop so that the entire organization benefits. It is not a question of providing enough seed capital to future entrepreneurs. Instead, companies should invest in an innovative model. Tech companies have been developing the muscle to innovate for years, and larger incumbents can borrow a page or two from their book. Companies that do this well have adopted three common practices:
Free small teams to work independently.
To empower the “edge” workers in your organization, create portfolios of small teams and give them the freedom to work independently with clear goals and responsibilities. This means, for example, that if the business doesn’t have people with the skills it needs, the team can go out and hire them directly. They can spend their allocated budget as they see fit, experiment and fail with impunity (within limits), and decide on technologies to achieve their goals (within restrictive guidelines).
Some of the companies McKinsey has worked with are taking this approach. Haier, the home appliance and consumer electronics company, has 4,000 “micro-enterprises” (as they call these teams) with 10-15 employees each. These teams have the freedom to self-organize to address a specific opportunity identified by someone. Teams need to convince people to join and then demonstrate customer adoption to get funding. To enable this system, Haier has reduced the middleware control to give the teams the freedom they need to work.
Itaú, a Brazilian financial services company, follows a similar principle. They have created about 70 groups that correspond to specific products and services. Each operates as a “small company” empowered to develop its own solutions to achieve specific goals provided by leadership. These teams have ample opportunities to stimulate innovation. For example, instead of focusing on mortgages, the relevant team is tasked with focusing on housing needs.
One product manager is responsible for each group, but critically, IT and the business sponsor have shared responsibility and share the same KPIs. Each team has separate functions (design, data science, automation, policy, etc.) that work in two-week sprints to track progress and impact. There are no “manager” positions in each team to reduce bureaucratic overhead. This approach has led to significant improvements. For example, one resident the home-related business line has grown almost 60 percent in less than a year thanks to new product lines and accelerated innovation by teams.
Provide these teams with the necessary systems, resources and tools.
Freedom without structure often leads to chaos. To keep teams working toward mutual goals and not wasting effort on non-value-added work, leading companies are investing in tools, infrastructure, and processes that enable teams to work quickly and efficiently, such as creating an easy-to-use system. Any team can find people in the business based on skills and availability.
Itaú’s technology-focused teams focused on automating as many processes as possible, for example, allowing teams to set up new environments in the cloud or review code without asking IT. Teams also set up data “cockpits” that teams can use to perform data queries without needing to involve data engineers.
When it comes to securing resources, leading companies avoid the often debilitating and time-consuming approval and allocation process. At the beginning of the year, Itaú management provides each group with sufficient funding and mission-based staffing, with a long enough runway to run their programs.
For tools, IT is given the role of providing support services to these teams, rather than managing a large IT infrastructure. Think of it as democratized IT, where anyone can access the tools, code, and infrastructure, not just the data they need. In this case, IT is responsible for creating useful blocks of code that can be reused – sometimes packaged into specific products – and made available through a user-friendly cataloging system so that the business can create the products it needs. It offers API libraries, data and analytics products, and a range of microservices that can be accessed by teams at the edge.
Bring the best innovations back across the company.
Individual developers or small teams working quickly don’t naturally think about how to scale an application. This problem may be exacerbated as non-technical users working in pockets across organizations use click-and-click or drop-down menu interfaces as low-code/no-code (LC/NC) applications to develop and build. This is where IT can play a critical role in building the ability to scale to make innovation work for the business.
One way to successfully use this is to create dedicated scaling teams to produce innovation. At Vistra Corp., the largest energy supplier in the US, a dedicated team of software and machine learning engineers takes proven AI models (such as those that make recommendations on the most efficient generator settings to generate power) and reprocesses them. can be easily updated and improved when applied to different power plants.
Google has established a number of practices for disseminating the best ideas that have helped the company become a leading innovator:
- Determination of winners. Each product manager across the business must report the percentage of user growth for their specific product every Friday. This made it easier to monitor progress. Underdeveloped initiatives were quickly funded. Those that did well attracted more resources.
- Spreading innovation through people. An extensive employee rotation program allowed innovations to be transferred to other parts of the business. For example, an engineer who helped develop a distributed file system was seconded to the HR team and implemented it into their systems.
- Create a standard path. Google has developed a uniform build system (a set of tools and practices around CI/CD) that every product team can use, as well as shared and massively scalable infrastructure resources that support the common needs of products and businesses. This approach made authentication, for example, much simpler and faster. Since all the code follows this template, it is easier to distribute it throughout the organization. According to one estimate, this approach resulted in the reuse of the vast majority of all code at Google. With growth and increasing business diversity, teams are extending and adopting this tool to meet the needs of new domains or build new capabilities in core layers.
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Given the accelerating pace of technological change, current models of innovation deployment are inadequate. It’s a good idea to foster a spirit of innovation in everyone in your organization. But it will not be easy. Getting there requires building support mechanisms for experienced experts and scaling up winning innovations to keep pace.