Twenty years ago, having a website was the extent of digitization most companies needed. Today, this is the lowest bar. As digitization accelerates across industries, government, and society, companies find themselves faced with increasingly complex challenges.
Exponential technology advances, increased competition from traditional and non-traditional sources and greater consumer power are pushing old companies out of business while establishing bold startups as the new kings of the hill.
To survive this tectonic shift, companies must first understand how the digitization of everything is impacting various industries, and then use these insights to digitally transform into a company of the future.
Silicon Valley is the epicenter of digitization. The best-of-the-best tech startups converge here to compete for venture capital, partnerships and talent in a bid to not only upend existing industries but to create new ones.
Silicon Valley Innovation Center’s Leading Digital Transformation executive immersion program is a front row seat to the tremendous strides these startups are making as they push the limits of digitization.
On the third day of the Leading Digital Transformation program, we explore the trends, insights, and lessons presented by representatives from companies like Slack, IBM, and 500 Startups.
Investing in Early-stage Startups
Corporations stand to benefit hugely from partnering with Silicon Valley startups was the core message in a talk delivered in this session. The session was led by a Silicon Valley venture capital specialist from 500 Startups who is also a co-founder of Upside Partners, two companies that deal extensively with Silicon Valley startups.
To start the talk, he posed the question, ‘Why do corporations need to partner with Silicon Valley startups?’ The answer lies in what he calls startup DNA. Startups, by definition, have certain characteristics or DNA that make them agile, innovative, and disruptive, all of which almost always result in exponential growth.
“Corporations need this startup DNA if they are to get the same characteristics that make startups so disruptive,” said the speaker.
To introduce startup DNA into a corporation, the speaker identified four key areas senior executives must focus on:
- Funding dynamics – Partnering with Silicon Valley startups involves multiple dynamics that affect funding. These include synergies with the startup, leadership style, corporate culture, strategic focus, among others.
- Entrepreneurial reasoning – To fully benefit from partnering with Silicon Valley startups, corporations must be willing to adopt this mode of thinking.
- Capital-efficient learning and experimentation – Most corporate experiments take months and often cost millions of dollars. Startup DNA allows a corporation to run rapid, cost-efficient experiments that introduce useful data into the decision-making process.
- Startup sourcing and evaluation – Not all startups will be a good fit for a corporation. The process of identifying ideal candidates must be thorough yet fast, to avoid missed opportunities.
Improving Collaboration and Efficiency through Lean Process Workflows
Next, participants visited Slack, a breakthrough office communications startup on a mission to disrupt email and other traditional corporate communication channels. In the talk, a Slack representative took attendants through the benefits of using lean process workflows.
What is a lean process workflow? The concept of lean was first popularized by Toyota Motor Company utilizing the kaizen philosophy. By constantly fine-tuning processes to eliminate wastage, boost efficiency and increase quality, lean processes helped Toyota increase throughput while keeping costs down.
Digital technology is well-suited to help companies integrate lean processes into their workflow. Take Slack, for instance. By reducing the total footprint of an entire enterprise’s communications to a single app, Slack creates efficiencies that result in faster task completion rates, fewer in-person meetings, and increased control for employees.
Third-party apps that integrate with Slack go a step further by enabling enhanced capabilities within Slack. For example, Yodel allows a Slack user to answer phone calls from within Slack and loop in team members using a shared link.
As customers, employees, suppliers, and other stakeholders increasingly demand digitized experiences, digital lean process workflows help deliver streamlined experiences at a fraction of the cost of doing so through traditional ERP solutions.
From Prototype to Product: Insourcing vs. Outsourcing vs. Multisourcing
Accelerating digitization is putting pressure on companies to innovate now. While innovation for startups is often easy due to fluid structures, it is harder for established companies. Such companies, to stay apace with market trends, must choose between insourcing, outsourcing or multisourcing innovation.
In the third talk of the day, a director of business development at Whipsaw offered some insights on which direction to take; “Which approach a company takes depends on the innovation it is working on and the level of skills it has in-house to support that push.”
Companies looking at launching a new digital product line can gain most from outsourcing, as such an effort is separate from the core operations of the company. However, a company that’s looking to overhaul its core systems must either insource or multisource with the intention of insourcing.
In this latter case, building in-house capabilities to deploy and support the innovation or transformation better aligns with long-term strategic objectives. One challenge a company must be aware of is the tradeoff with each approach.
For instance, outsourcing can increase the speed of innovation but slow down the emergence of an in-house innovation culture. The opposite is true, that insourcing can slow down innovation but speed up the formation of an in-house innovation culture.
Integrating New Technologies in Mature Companies
Successful mature companies struggle with digital transformation for one clear reason: existing structures are hard and risky to change. In such a case, the integration of new technologies must be approached as more about future-proofing the business than it is about affecting operations in the present.
But what is the best way to approach this Herculean task? In the last talk of the day, a director of innovation and corporate acceleration at SVIC was on hand to answer this question. “The first step to successfully integrating new technologies into a mature company is identifying the risks and benefits of doing so,” he said.
Successful mature companies are often at the highest risk of disruption because they usually have structures that work well, something that makes it difficult to see the coming wave of disruption.
However, mature companies must be careful not to integrate new technology at the expense of their current business. If, for example, a company’s manufacturing process is highly integrated with the entire supply chain, overhauling it may introduce bottlenecks. The key to successful integration is to utilize a process and integration approach.
That is, companies need to map out their processes and identify areas where new technology can be successfully deployed. If not overhauling processes, then integration opportunities must be sought as these can offer quick returns at a lower cost as compared to overhauling a process.
Day 3 Conclusion
At the end of Day 3 of the Leading Digital Transformation program, participants gained insights:
- How partnering with startups fits into a corporate innovation strategy.
- How utilizing lean methodologies can lead to better innovation outcomes.
- How to choose between insourcing, outsourcing, and multisourcing.
- How to integrate new technologies in mature companies.