Nearly all executives have acknowledged the relevance of digitization and related trends, such as the Internet of Things, connectivity, and industry 4.0. However, the full impact of digitization has usually not been understood in detail. Moreover, most firms struggle to implement digitization initiatives successfully.

Therefore, ILI CONSULTING AG conducted the ’Digital Innovation Compass 2016’ study, built on three complementary pillars: over 100 interviews of experts, project expertise from more than 150 innovation projects and 57 digitization projects.

The findings of the study underscore the importance of innovation for the success of digitization. Starting a digitization initiative is an important initial step, but focusing purely on efficiency drastically limits the potential benefits. The innovation dimension is neglected too often.

In nearly all firms, there are major opportunities to develop new solutions based on digital innovation. Multiple technologies converge to provide industry-specific market applications. Executives need to take the first step in designing business models for their integrated solutions. These integrated bundles often combine lock-in solutions and add-on services with established and new products in an intelligent way.

Only in the second step should digitization be about developing IT solutions and selecting IT suppliers. The disruptive nature of digitization makes it inappropriate to start directly with the IT solution – this is precisely the wrong approach taken by the digitization initiatives at many firms!

Digitization is not new, but dramatically important now.

Other than focusing excessively on IT, many companies are characterized by a ‘wait and see’ attitude. In this regard, there is clear potential for improvement in nearly all firms. In order to further strengthen the digital innovation capacity, digitization initiatives need to be promoted from the top of the organization.

Senior executives need to use budgets to actively shape the focus and content of their digitization initiatives – with particular emphasis on disruptive business models that require a completely new understanding of value chains and revenue models. As such, this study emphasizes the potential risks for the medium to long-term competitiveness of established corporations.

Many established companies have no option other than to remain innovative, because competing purely on prices against firms with superior digital solutions is usually not an option in the long run. The ten action items that are recommended by this study have proven their respective importance in many digitization projects conducted by ILI CONSULTING AG.

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About the authors

ILI CONSULTING AG is an effective advisor on innovation and growth to many international corporations worldwide. Many of them now manage their innovation and digitization activities in a highly professional manner, resulting in higher profitability and organic growth. Yet, companies should not start to proficiently manage innovation, just because they have become less successful. We have clearly demonstrated, through extensive projects, that enterprises that are successful in the long run consider innovation management as a top strategic priority.