Optimizing Innovation in the Age of Digital Technologies: Put People Before Machines

How are digital technologies changing the business landscape? Are new business models disrupting our industry? How can we innovate faster and better? These are questions with which business leaders have wrestled since the world has gone digital. And rightly so.

Tech disruption puts many companies in danger of extinction. A study from the John M. Olin School of Business at Washington University estimates that 40 percent of today’s companies on the S&P 500 will be gone in the next 10 years. And so will many jobs.

Darden Professor Edward D. Hess believes that in order to survive and thrive in the digital age, both organizations and individuals need to transform. As Hess put it, “Transformation will mean embracing new ways of working, new structures, new mindsets, new behaviors, new ways of making decisions and faster, data-driven adaptation, innovation and resilience.”

Hess recently led a discussion on “Optimizing Innovation in the Age of Digital Technologies” at the spring 2017 gathering of the Global Innovators’ Roundtable. The roundtable, hosted by Darden’s Batten Institute for Entrepreneurship and Innovation at Sands Capital in Arlington, Virginia, brought together senior leaders from Capital One, Celgene, Corning, EnPro Industries, IBM, Marriott International and Siemens. The participants focused on the challenges and opportunities of leading digital transformation in their organizations and explored ways to increase the speed and quality of their innovation efforts.

The following are highlights of the discussion.

Embrace Digital

We are on the cusp of what the World Economic Forum calls the “fourth industrial revolution.” Digital technologies — such as cognitive computing, robotics, the Industrial Internet of Things and the explosion of data — drastically transform how companies operate, engage customers and innovate.

To compete today, business leaders must integrate the new, increasingly smart technologies and data analytics into every part of their businesses or risk losing out to more nimble and adaptable competitors.

Foster a Collaborative Culture of Innovation

By now, most executives have gotten used to disruption. In industry after industry, they have seen the new digitally driven business models displace the old ones. As the digital revolution advances — reducing costs and improving efficiency on a massive scale — the rate of disruption will only increase.

Therefore, innovating faster and better has never been more critical to organizational survival.

The ability to digitally reimagine your business and innovate with digital technologies requires the right culture. Senior leaders who excel at fostering such a culture have not only high IQ but are also highly self-aware and emotionally intelligent. They know how to create an environment in which employees feel psychologically safe to explore new ideas, pursue challenging goals and learn iteratively. “It’s our job as leaders,” said one senior executive, “to show them that it’s okay to take risks and fail.”

It goes without saying that rapid innovation is more effective when it’s done by empowered teams, so fostering collaborative behaviors is critical. Successful innovation also requires conditions in which everyone on the team performs at their highest level.

Research shows that trust, respect for one another, constructive conflict and a sense of belonging are necessary conditions for peak performance. Those who achieve it also describe a sense of excitement and challenge as well as a feeling that they are doing something that matters and makes a difference. “At work,” said one senior executive, “people want to feel that they belong and that they can change the world.”

On an individual level, rapidly changing technology requires flexibility, adaptability and the ability to continuously learn. So, in order to succeed in a digitally driven world, individuals need to adapt to a work environment in which they increasingly collaborate not only with one another but also with smart machines to improve their performance and learn new skills.

As one participant noted, “Embracing digital requires a new mindset.” However, he added, “The ability to adopt a new mindset and change the ways of operating is excruciating for many people.”

Tell a Compelling Story

This is where senior leaders have a crucial role to play. “To get people to think differently,” said one executive, “we need to help them see the possibilities, show them that they’ll be able to do things they were never able to do before.”

To capture the hearts and minds of the workforce and gain broad buy-in for digital transformation, senior executives increasingly turn to storytelling. “Great leaders,” said one participant, “create a completing vision of the future and use the power of stories to get people on board.”

Explaining why stories are often more effective than PowerPoint decks full of charts and graphs, one roundtable participant quoted Brené Brown, a professor at the University of Houston, who studies vulnerability, courage and shame. As Brown said in one of her TED talks, stories are “data with a soul.”

A word of caution. “Stories and practices create the mood in an organization,” said one roundtable participant. “The mood helps create results. However, if you tell compelling stories as a leader but your practices don’t reflect that, you’re going to fail.”

Become a Leader for the Digital Age

No matter the industry, senior leaders driving digital transformation need to raise the technological acumen in their companies by hiring the right talent. They also need to constantly challenge themselves to gain insights into data and automation technologies on the horizon. And they have to understand how to capture value from those technologies. But becoming digitally fluent is hardly enough to thrive in the age of artificial intelligence and increasingly smart machines.

Senior leaders need to become smarter at leading.

First, they should let go of the old, hierarchical model of leadership. “Many organizations still follow the military paradigm of the 19th century, where there was one person at the top,” said one senior executive. “This is no longer the right approach.” He used a soccer example to emphasize the importance of collaboration and teamwork in the age of digital technologies. “In the time of Pelé and Beckenbauer, there was one star in the field. Today, the team is the star. The players have different levels of visibility, but they are all important.”

Similarly, in today’s workplace, the team is the star. “That’s why treating people with respect and trust is becoming more important than ever,” added the executive. “If we don’t have respect for the people who execute and are responsible for the cash flow, we won’t exist in the future.”

Enable Human Flourishing

As quantum computers and powerful robots penetrate the workplace, it’s easy to fall into the trap of putting machines before people. Senior leaders at the world’s most innovative companies, however, do the opposite. They understand that investing in human development is critical to their organizations’ effectiveness and act accordingly, creating an environment in which employees can reach their full potential. As one executive put it, “Human beings are not just human resources. When we reinvented our learning and development group, we inserted the language ‘full human development.’ People are very adaptable when you appeal to their higher selves.”

One company represented at the roundtable runs a program, taught by the CEO, to help its employees achieve a state of “deep awakening” so that they can find their “noble goal and purpose.” “We call it ‘flourishing,’” said one of the company’s senior leaders. “As an organization, we need to continually feed the growth of a person, but we also need to mature the organization that allows that person to flourish.”

Final Thoughts

The stakes of this new digital world cannot be overestimated. Senior leaders in the most innovative companies know that. While they invest in technology to drive digital transformation, they also invest time and resources in helping their employees reach their full potential.

Technology can certainly increase the speed and quality of innovation. However, it’s important to remember that, ultimately, it is human talent, motivation, passion, insight and creativity that are key drivers of success.

More discussion highlights from the Global Innovators’ Roundtable in Arlington, Virginia, will be available in the forthcoming Batten Briefing.

Gosia Glinska is associate director at Darden’s Batten Institute for Entrepreneurship and Innovation.