66 MIT SLOAN MANAGEMENT REVIEW FALL 2019 SLOANREVIEW.MIT.EDU
INNOVATION
No company has unlimited capacity for experiments,
but conducting more experiments generally leads to
more learning.
Toyota Motor North America (TMNA) has fos-
tered such experimentation in a variety of ways.^2
When Zack Hicks, now the company’s chief digital
officer, was CIO, he launched an innovation fair at
which employees shared their ideas with others in
the company and competed for funding and the
opportunity to move their ideas forward. Losing
teams could still apply for funding from other
sources. This concept has been replicated in global
innovation fairs at Toyota Motor Corp.
But that’s only the start. TMNA’s IT department
developed a Kickstarter-type application where indi-
viduals can post ideas for innovations and receive
feedback. This app is particularly good for ideas that
are creative but too raw for testing: Participants can
respond with a thumbs-up or thumbs-down and with
suggestions that might help advance the concept.
Members of Toyota iCouncil who have director-level
business positions (and budgets) help people who
have ideas develop a business case, authorize funding,
and team up innovators with IT people. TMNA
provides up to 30 hours of IT developer time and
equipment (such as server space), circumventing the
typical processes for securing those resources so
that innovators can more easily create prototypes to
demonstrate their concepts’ viability. Promising
ideas can be shopped around to specific business
units or entered into the innovation fair.
Most of the experiments that emerge from
TMNA’s initiatives target the customer experience.
Some are relatively simple and quickly developed,
such as an app that allows customers to interact effi-
ciently with dealers after they have started to configure
their preferred vehicle online. Others have led to
changes in products, such as improvements in the ap-
plication of telecommunications and satellite systems
for in-car safety, GPS, and entertainment services.
Some have kicked off entirely new digital offerings.
Like TMNA, Singapore-based DBS Bank has dis-
persed digital innovation and idea testing
throughout the company.^3 DBS is the biggest bank in
Southeast Asia in terms of assets under management
and provides a full range of financial services to
9 million customers in 18 markets. In 2015, DBS’s
22,000 employees were concurrently running 1,000
small experiments. Some of these experiments were
quickly abandoned, while others evolved into new
digital offerings or features for customers.
A major source of ideas worth testing at DBS is
customer journey mapping, an examination of the
full experience of customers as they interact with the
company. Designers attempt to feel like the customer
at key moments in the journey — for instance, decid-
ing whether to sign up for a credit card or a mortgage.
They sometimes create a pretend customer, giving
the person a name, an age, and an occupation, and
take this customer through, say, an application pro-
cess. They consider what the customer is thinking,
what emotions the customer is experiencing, and
what his or her concerns are. Those insights inspire
experiments they can test with real customers.
DBS’s pursuit of customer insights through a
constant flow of experiments appears to be paying
off: In 2016 and again in 2018, DBS was named the
World’s Best Digital Bank by Euromoney. In 2018,
Global Finance magazine also named DBS Best
Bank in the World.^4Cocreation With Customers
Companies that don’t identify new business possibil-
ities will find themselves playing catch-up to some
collection of startups, digital giants, savvy competi-
tors, and aggressive outsiders that will redefine their
industries. But every company, feeling that pressure
to lead the way, has made false assumptions about
what customers might want. A number of business
leaders in our research (particularly in B2B contexts)
noted that customers were slow to warm up to what
the companies had assumed would be compelling
value propositions. Companies that coinnovate with
key customers to build customer insights can quickly
identify and correct those false assumptions.
In B2C settings, customer cocreation often in-
volves launching a minimum viable product online
and analyzing in detail how thousands of custom-
ers react. In B2B settings, individual customers can
be engaged to identify pain points and assess the
potential value of a solution.
That’s been the experience at Royal Philips, a di-
versified Dutch technology company previously
known for its lighting and audio products. Five
years ago, it sold many of those businesses to focus
on its health care products, such as X-ray machines,The authors reviewed
the digital efforts of nearly
200 established companies
from 2014 to 2019.They conducted interviews
at 40 large companies and,
with Boston Consulting
Group (BCG), did mini case
studies of 27 companies,
drawing from three
interviews at each
company (usually with
senior business or
IT executives or
employees engaged
in implementing
digital strategy).They also surveyed
171 business leaders
in 2016 and 150 senior
executives at large,
established companies
in 2018.THE
RESEARCH