There is no longer a question about whether organizations need to transform. Companies, both big and small, understand that becoming digitally relevant is the only way to ensure growth and survival. The question many executives ask is how?
Transformation is not a one-time solution, but a constant state of adaptation that adjusts course to meet the needs of ever-changing consumer expectations. Organizations need to rework how they operate, and there are two potential approaches that are most effective at creating actionable strategies that truly move the needle while keeping their company’s unique potential and goals at the forefront: incubation and inoculation.
Understanding the different strategies
Companies that incubate are looking for ways to come up with a new product or business model outside of existing legacy mindsets. Rather than changing the core, incubation allows you to learn outside-in, start something new and overcome cumbersome processes and hierarchies. This strategy often involves the creation of a new entity or standalone company. A good example of incubation done right is Bank Leumi. To appeal to a millennial market, they decided to create Pepper, an entirely new mobile bank and brand free from legacy technology and systems.
Choosing to inoculate, on the other hand, allows organizations to focus on transformation at the core, which works best for companies who are looking for ways to build on the existing product or brand, and whose senior leadership is committed to a long-term transformation for the organization and its technology platform. Most often, inoculation allows an existing team or project group to work with more autonomy, but doesn’t take the form of a new, high profile innovation unit or entity. Capital One, for example, is transforming its core by re-organizing around customer journeys.
Sometimes, the right approach for a company is to start with incubate and later move to inoculate. Incubation engenders a learning mindset that enables the build out of necessary capabilities which can then be scaled to transform the core. Indeed, this is the combined approach Wipro used when tackling its own transformation. Wipro Digital was launched to incubate Wipro’s digital transformation. With its success, Wipro has begun to systematically adopt the new way of working across the core business thereby, changing, inoculating and scaling its digital initiatives.
Identifying the Right Approach: Ask yourself…
- Is your leadership team and culture hungry for change? If the current conditions of change are questionable and the existing culture is tied to the status quo, lacking velocity, agility or courage, then starting fresh through incubation is the best approach.
- How much time do you have? Inoculation can take longer, as you are transforming an entire organization from the core, as opposed to hitting the ground running with a new initiative born out of incubation.
- Are you going to leverage your existing brand and is there a risk of cannibalizing it? You have to be humble enough to learn what best serves your evolving customer’s needs. If you must build on the existing product and want to leverage a powerful or known brand, inoculation is the best approach, avoiding the risk of unhealthy competition between products, channels or brands.
Ensuring Success: To activate effectively…
- Leadership commitment: Ownership, vision, and direction for transformation must come from the very top. Board members and the CEO need to be convinced and have a point of view on incubation and inoculation. And most importantly, they need to be able to deliver the narrative convincingly to all stakeholders, inside and outside the organization.
- All-in approach: If you transform only a small part of your enterprise, it might be counterproductive. You might end up with one fast, high-profile section with little impact on business performance. A broader end-to-end transformation will most likely have significantly higher benefit.
- Fresh thinking: In addition to tapping your existing employee pool and committed leadership, you must introduce talent from the outside who can bring a fresh perspective and diverse thinking to the project. They won’t be tied to legacy mindsets and systems and can provide unique ideas that motivates and inspires an organization to go new places.
Executive sponsorship, long-term commitment and patience are the foundation for any successful transformation approach, and it is up to its leaders to determine how best to balance incubation and inoculation to enable organizations to continuously deliver digital products and services and make enterprise-wide transformation happen.