Accelerating digital innovation inside and out
Agile teams, ecosystems, and ethics
The fifth annual MIT SMR and Deloitte study of digital business reveals digitally mature organisations don't just innovate more, they innovate differently—leveraging ecosystems and cross-functional teams that play critical roles.
The past five years, MIT Sloan Management Review and Deloitte have investigated digital maturity, focusing on the organisational aspects of digital disruption rather than the technological ones. We’ve examined companies at the early, developing, and maturing stages of digital transformation and have seen increasing signs of separation between more and less mature organisations. This year’s research finds that the gaps can often be explained by a company’s approach to innovation: Digitally maturing companies are not only innovating more, they’re innovating differently.
This innovation is driven in large part by the collaborations established externally through digital ecosystems and internally through cross-functional teams. Both ecosystems and cross-functional teams increase organisational agility. The risk of this increased agility, however, is that it can lead a company’s innovation efforts to outpace its governance policies. It is particularly important, then, that these organisations have strong policies in place regarding the ethics of digital business.
MIT Sloan Management Review and Deloitte’s fifth annual study of digital business is based on a global survey of more than 4,800 managers, executives, and analysts and 14 interviews with executives and thought leaders. The report presents the following findings:
- Digitally maturing companies innovate at far higher rates than their less mature counterparts. Eighty-one percent of respondents from these companies cite innovation as a strength of the organisation, compared with only 10% from early-stage companies. Maturing organisations invest more in innovation and constantly drive toward digital improvement in ways that less mature companies do not. Notably, innovation happens throughout digitally maturing enterprises; it isn’t caged in labs or R&D departments. Digitally maturing companies are more likely to participate in digital ecosystems, and their employees are often organised in cross-functional teams.
- Employees of digitally maturing organisations have more latitude to innovate in their jobs — regardless of what those jobs may be. Nearly five times as many survey respondents from maturing companies as from early-stage companies report that their organisations provide them sufficient resources to innovate. This year’s research also finds a strong relationship between a company’s rate of digital innovation and its staffers’ confidence that the organisation will be stronger in the future, thanks to digital trends.
- Digitally maturing companies are far more likely than their less mature counterparts to collaborate with external partners. While 80% say their organisations cultivate partnerships with other organisations to facilitate digital innovation, only one-third of early-stage companies do the same. The nature of collaboration also differs depending on maturity level. Digitally maturing organisations tend to form alliances that involve less formal, controlled relationships; they rely more on relational governance and less on detailed contracts. Formal partnerships can still serve a vital role in collaboration and often exist as part of larger business ecosystems.
- Cross-functional teams are another important source of digital innovation. Not only are digitally maturing companies more likely to use cross-functional teams, those teams generally function differently in more mature organisations than in less mature organisations. They’re given greater autonomy, and their members are often evaluated as a unit. Participants on these teams are also more likely to say that their cross-functional work is supported by senior management. For more advanced companies, the organizing principle behind cross-functional teams is shifting from projects toward products.
- Digitally maturing companies are more agile and innovative, but as a result they require greater governance. Organisations need policies that create sturdy guardrails around the increased autonomy their networking strength allows. Digitally maturing companies are more likely to have ethics policies in place to govern digital business. Policies alone, however, are not sufficient. Only 35% of respondents across maturity levels say their company is talking enough about the social and ethical implications of digital business.
- When asked to predict whether their company will be stronger or weaker moving forward, respondents from digitally maturing and early-stage companies show striking differences. The former believe their organisations have the power to adapt to changes wrought by digital disruption and expand their capabilities, while the latter see disruption as a result of market forces they cannot control.