External Networks as Key to Advanced Digital Innovation

CAMBRIDGE, Mass., —As digitally-maturing companies invest more in innovation, they are achieving transformation at a faster pace than early-stage companies, according to a study released today by MIT Sloan Management Review (MIT SMR) and Deloitte. The eighth annual study, in its fifth year focusing on digital business, found that 80% of respondents from digitally-maturing companies say their organizations cultivate partnerships with other organizations to facilitate digital innovation. Meanwhile, at developing companies, the number drops to 59%, and at early-stage companies, only slightly more than one-third (33%) do the same.

“This year’s study shows more reflection by business leaders on what innovation means and how to best achieve it,” said Deloitte Digital's Doug Palmer, an author of the report and principal at Deloitte Consulting LLP. “Digitally-maturing and early-stage companies alike recognize the importance of innovation. However, this year’s study shows more concrete guardrails are needed to support long-lasting models for innovation through collaboration, experimentation and ethical considerations.”

Based on a survey of more than 4,800 managers, executives and analysts from global organizations, digitally maturing companies are not only innovating more, they’re innovating differently. This group is increasingly driving innovation through collaborations — established externally through digital ecosystems and internally through cross-functional teams — for greater agility. According to the study, 83% of digitally-maturing companies use cross-functional teams to innovate, compared with 55% of early-stage companies.

“We see that digitally maturing companies increasingly innovate with cross-functional teams. They’re more likely to have an agile, fail-fast, learn-fast mentality,” said Gerald (Jerry) Kane, guest editor at MIT SMR; professor of information systems at the Carroll School of Management, Boston College; and an author of the report. “All organizations should be careful, though, to consider the ethical implications of their work — on business and society. We found a company’s digital innovation sometimes outpaces its governance.”

This increased agility doesn’t come without risk. Innovation through collaboration can encourage companies to move faster than governance allows. As innovation continues to accelerate, digitally mature companies are considering both the social and the ethical implications of digital transformation. The study found that with greater flexibility in company structure and employee roles and responsibilities comes the need for ethical standards — something companies are increasingly considering, but not as swiftly as they evolve:

• Company policies increasingly reflect ethical considerations regarding digital innovation. Digitally-maturing companies are more likely to have adopted these policies with 76% of them implementing, compared with 62% of developing organizations and 43% of those in the early stage.

• Despite a recognition of ethics’ role in digital innovation, companies may not be doing enough. Only 35% of respondents across maturity levels say their companies are talking enough about the ethical implications of digital business or communicating the impact of their digital initiatives on society. Not even half (46%) of CEOs say their companies are spending enough time on ethical matters.

“This year’s study shines a light on companies across all levels of digital maturity that are starting to reflect on the big-picture impact of innovation,” said David Kiron, executive editor of MIT SMR and an author of the report. “More leaders are thinking deeply about the influence of new innovation models on their business operations and society at large.”