Foster Innovation to Drive Digital Transformation

"Our growth opportunities will be fueled by technology improvements, innovation and advanced data analytics...[and] online remains a key engine of growth for the company. We have trained over 2,500 people in digital this past year across the company," says the online-division president of a global cosmetics company. This is digitalization in action — a top business priority that demands new talent strategies from human resources (HR) leaders.

But while HR is working hard to reskill employees for the digital age, and find and recruit talent, it’s critical to remember the ultimate goal is to better position the organization to pursue its digital ambitions successfully — and that also requires innovation.

“ When HR can improve the innovative effectiveness of the organization, annual revenue can increase by as much as $8,800 per employee”

“When it comes to how HR reinvents itself in the digital age, HR’s job is not simply to recruit, retain and develop digital talent but also to support their CEO's priorities,” says Brian Kropp, Group Vice President, Gartner. “CEOs want to know how to improve the innovative effectiveness of their organizations. And CEOs are right to want this outcome. When HR can improve the innovative effectiveness of the organization, annual revenue can increase by as much as $8,800 per employee.”

Why foster innovation?

Business has long championed the need to “be innovative,” but in the digital age, innovation is critical to competitive positioning (and perhaps survival), must be faster and more disruptive than ever, and must occur at scale. The Gartner 2018 Strategy in the Digital Era Survey of nearly 7,000 business leaders, confirms there are two key ways organizations are innovating to remain competitive:

1. Improve existing products and services. Nearly 90% of organizations have digital initiatives focused on improving current products and services.
2. Create new products and services. Over 80% of organizations have digital initiatives focused on creating new products and services.  

The success of such transformation efforts depends on the degree to which an organization is effective at identifying new opportunities, determining which opportunities to pursue, and adjusting business processes to act on those opportunities. This is what we call their “innovation effectiveness.”

Where innovation effectiveness counts

Organizations with a high degree of innovation effectiveness outperform at two things:

• Sensing. “As an organization, we are effective at identifying and evaluating a wide range of new opportunities and deciding where to make investments.”
• Seizing. “As an organization, we are effective at making decisions quickly on how to allocate resources, develop ideas, and ultimately integrate and scale innovative ideas in the core of the business.”

Better business outcomes

Compared to organizations with low levels of innovation effectiveness, those with a high level are more likely to:

• Be ahead of peers in using data and technology
• Have successful digital transformation efforts
• Meet their employee performance goals
• Meet their customer satisfaction goals
• Meet their profit goals

Building innovation effectiveness at scale takes deliberate effort — connecting employees with a network of innovators, engaging them in the choice of innovative ideas, and equipping leaders to share responsibility for the risks.

This article has been updated from the original, published on November 29, 2018, to reflect new events, conditions or research.