Innovation: Becoming a business priority
Innovation is instrumental in creating long-term customer value. But an innovative organization needs a safe environment to allow employees to take risks, train its employees to innovate with AI, and engage the right managers to balance competing interests. Host David Carmona is joined by industry experts to discuss how organizations can prioritize AI innovation.
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David Carmona: In 1939, World War II erupted with invasion of Poland. Within weeks, the Nazi Germany invaded entire country and destroyed the capitol city Warsaw. A new kind of war started, a war where technology played a horrible role. At the same time, the U.S. Military, led by generals who saw no need to change their methods, was preparing to bring a metaphoric knife to a gunfight. President Franklin D. Roosevelt knew this. He could see that his country stood to lose everything. He called in Vannevar Bush, a Scientist and Naval Reservist who was at that time second in command at MIT. Bush knew firsthand the frustrations of convincing military brass of the need to adopt new technologies. His experience, however, had given him the tools to speak the language of scientists and the language of generals and bring them together to spark massive change. This story is masterly told by author Safi Bahcall in his book, “Loonshots: How to Nurture the Crazy Ideas That Win Wars, Cure Diseases, and Transform Industries”. As the book will tell you, that decision from President FDR dramatically changed the course of the war. The ability of Bush to bring scientific innovation, such as the radar, to the allied troops ultimately turned the tide of the war.
Welcome to the AI Business School Podcast from Microsoft. I’m David Carmona. In previous episodes, we talked about moonshots, or as Safi Bahcall would call them, going even farther, loonshots. We discuss the innovation strategy and culture you need to foster those crazy ideas that will redefine your business in the future.
In this episode, we are going to discuss how to bring those moonshots to life. We’ll see how they must overcome the hurdles of technology, funding, and even the lack of perceived value because they have a different approach. Just like in World War II when Bush had to convince U.S. generals to change their established military, innovation in your company will compete with established revenue streams. So, how do we approach that tension?
Mohanbir Sawhney: Innovation is the application of technologies, tools, platforms, and data in order to create superior customer value. So, that is my touchstone. That is my north star. That it my benchmark is at the end of the day, did we create customer value? Did we create competitive advantage?
David: That was Mohan Sawhney, Professor of Technology and Marketing at Northwestern University’s Kellogg School of Management. He’s touching on a very interesting point, which is the importance of balancing the awe-inspired vision of an innovator with the down-to-earth considerations of customer value and widescale adoption. Finding this balance is not just important for tech giants with big R&D departments. But we see this conversation also taking place at companies all over the world. Here’s what Deb Cupp says about what she’s observing. She’s the Corporate Vice President of Microsoft’s Commercial Enterprise business.
Deb Cupp: We’re seeing more connection to the actual specifics of a strategic priority. So, what I mean by that is they’re mapping it into the strategic priorities for the organization. So when they do that, we see much better uptake and consistency around how they’re executing versus those that are doing it how I would describe almost one-off.
David: In Deb’s view, this different way of innovating means using an insight or actual market observations to make changes that are really impactful to how the business succeeds. Going back to that innovation story from World War II, Roosevelt gave a one-word approval to launch Bush’s initiative, OK. And with that OK, he also blessed Bush with a safe haven, a place where his scientists could experiment before turning over the technology to the military. Bush used his [MUSIC] own experience with both sides to prove that the innovators could have value for the military and vice versa. But Bush got a lot of pushback. Innovators will always, always have naysayers. Change is hard. They need empowerment from the leadership to have a chance to succeed. How many times have you heard a leader talking about existing business units as those who pay the bills? How many times have you seen innovation being deprioritized because they have any conflict with an existing revenue stream? As a leader, you have to love both motions equally. Innovation has to come from the very top of the organization. This is something that Bertrand Bodson, Chief Digital Officer for Novartis, has experienced as the business has moved rapidly to use data and AI to develop its drug therapies.
Bertrand Bodson: We have made something we call going big on data and digital one of our top five priorities. We call it focusing on innovative medicine powered by data science and AI, so it’s really up there. It’s one that is owned by the executive committee jointly, including in all objectives, and it’s something we view as essential as when you look at the next three to five years ahead.
David: Novartis has baked innovation, prioritized by their leadership, into its strategic plans.
Bertrand: You see, the commercial teams and some of our launches, especially COVID times, have been really accelerated and becoming very innovative and using very different channels where healthcare practitioners and patients were naturally gravitating.
David: Let’s keep in mind as well that product innovation is different from strategic innovation. Perhaps innovation is coming from how the business operates. That’s the case of Novartis. When we think about a pharmaceutical company, using AI to speed up trials to help avoid dead ends, that can save money to the tune of billions of dollars, but it also can save lives.
Bertrand: How can we cut by two plus years the time to get our drugs to market? How can we reach twice as many patients twice faster, which we convert into specific bottom line impact or top line impact? And how can we remove one to two billion of cost of the business? Not just for the cost but also for simplifying a lot of our models to be much more nimble and to be able to re-ingest that into the investment that we need it on for some of our key launches and some of the research and development investments that we had.
David: These are all important questions. At Microsoft, we actually use a horizon-based framework to evaluate and prioritize our AI investments. Projects are grouped into three horizons. Horizon 1 represents initiatives that are optimizing existing business functions or products today. Horizon 2 initiatives are taking advantage of emerging opportunities that we use to improve or expand existing businesses or products. And lastly, Horizon 3 involves disruptive and innovative new business models. How can you balance your efforts across all three horizons? And how does this all fit into your business strategy? Professor Sawhney has some answers here.
Mohanbir: What that means is that your AI strategy has to begin with an understanding and analysis of your customers, the customer journey, the customer pain points. What are the flaws and problems that customers face today? And how can we address those? How can we improve their experience? So, if you keep yourself anchored to that, I think innovation will be relevant because otherwise what you can end up happening, seeing is innovation for innovation’s sake. So, a lot of heat being generated but not a lot of light.