There’s no slowing the speed of innovation, but not every company will keep up in the future. In particular, those still laboring under an antiquated development process will increasingly find it difficult to compete.
That’s one of the findings from the MIT Sloan School of Management’s Center for Information Systems Research, which reviewed the digital efforts of nearly 200 established companies from 2014 to 2019.
Much of the results will be published in an upcoming book, Designed for Digital: How to Architect Your Business for Sustained Success, and were previewed in a recent MIT Sloan Management Review article by the authors, Jeanne W. Ross, Cynthia M. Beath, and Martin Mocker.
One of the key takeaways revealed so far from the research is that breaking new ground in innovation requires a dedication to experimentation, particularly with software — which lends itself to quick cycles of trial and error.
We’ve previously written extensively about how much software is becoming integrated with hardware, and the challenges many companies face merging these two forms, but the research from MIT broadens that lens.
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Product Development Companies Must Adapt
Many of today’s large, established companies are not equipped to constantly release an ever-evolving set of digital products and services, because that was never the intention. And, therefore, development processes at these organizations aren’t yet nimble enough to lean into a steady amount of experimentation to uncover the possibilities of their business and products.
“Their internal processes limit their ability to continually experiment with, learn from, discard, enhance, reconfigure, and scale up new ideas to provide new value propositions,” write the authors in the MIT Sloan Management Review article. “Because developing that competence is difficult, it has become a differentiator for companies that figure it out.”
Those companies that aren’t intentionally and proactively trying to discover new potential for their business will likely be disrupted by other organizations — such as startups and well-funded goliaths — who have made those investments, the authors write.
As examples, MIT offers up companies that are encouraging a range of experimentations and resulting feedback in attempts to find a path to something new and interesting. Examples of such cultures of experimentation include internal hackathon events and dedicated innovation centers. Toyota Motor North America is named in the article as a company facilitating this kind of approach to product development, as is DBS Bank — one of the biggest banks in Southeast Asia, which was recently named the World’s Best Digital Bank by Euromoney.
MIT’s Media Lab is one of the most well-known incubators of product development experiments, as showcased in a 2018 profile by “60 Minutes.”
The Dangers of Internal Development Silos
One other area where relying on an outdated development process hurts companies is internal collaboration.
“Many ideas fail because product development teams follow traditional routines,” the authors write, “relying on their own perspectives, data, and insights to create the best product and then expecting salespeople to pursue customers and counting on support teams to keep them.”
Those companies finding success in this area abandon the silo-approach to product development. Instead, they assemble cross-functional teams — made up of design, product management, technology, sales, and service experts — and leverage the collective knowledge of the group. This helps them better anticipate the needs of the customer, and ultimately deliver better solutions.
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Cocreating with Customers
MIT notes that many companies are locked in a constant guessing game about what customers actually want from their products. One potential remedy is what the authors describe as entering into a “coinnovation” with customers. In this case, companies work with their key customers to identify pain points and gauge the value of potential solutions.
An example given by the authors is Royal Philips, a Dutch company which focuses on health care products, and launched customer cocreation workshops. Given the complexity of health care, the workshops bring together a range of perspectives — providers, payers, and patients — from a single medical group, for instance, to discuss their needs. This strategy helps yield a broader set of ideas that will potentially prove useful to a wider range of customers.
The French company Schneider Electric, which creates, among other things, smart energy management solutions, was another organization named by the authors as excelling at product development. Schneider leverages experimentation, co-creation with customers, and cross-functional development teams, and then shares customer insights drawn from those activities. Among the results, Schneider Electic has reportedly shaved one-to-two years from its product development cycles, and it wouldn’t have been possible had the organization not transitioned from legacy IT methodologies and pre-digital R&D practices, the authors write.
We’re looking forward to reviewing the full results of the MIT research soon. Until then, the authors make a great analogy about the benefits companies can experience when experimenting with digital products.
“Conducting digital experiments is like betting a tiny amount on all the horses in a race and then having the option to increase any bet at various points during the race,” they write. “There is no need to make a big bet until the winner is almost certain.”
Companies looking to shed legacy software and modernize their product development process have many options for new solutions. See how Jama Connect stacks up to the competition with our eBook, “Selecting the Right Product Development Platform.”