Accelerating Digital Innovation Inside and Out

Agile Teams, Ecosystems, and Ethics

by: Gerald C. Kane, Doug Palmer, Anh Nguyen Phillips, David Kiron, and Natasha Buckley

For the past five years, MIT Sloan Management Review and Deloitte1 have investigated digital maturity, focusing on the organizational aspects of digital disruption rather than the technological ones. We’ve examined companies at the early, developing, and maturing stages of digital transformation and have seen increasing signs of separation between more and less mature organizations. This year’s research finds that the gaps can often be explained by a company’s approach to innovation: Digitally maturing companies are not only innovating more, they’re innovating differently.

This innovation is driven in large part by the collaborations established externally through digital ecosystems and internally through cross-functional teams. Both ecosystems and cross-functional teams increase organizational agility. The risk of this increased agility, however, is that it can lead a company’s innovation efforts to outpace its governance policies. It is particularly important, then, that these organizations have strong policies in place regarding the ethics of digital business.

MIT Sloan Management Review and Deloitte’s fifth annual study of digital business is based on a global survey of more than 4,800 managers, executives, and analysts and 14 interviews with executives and thought leaders. The report presents the following findings:

  1. Digitally maturing companies innovate at far higher rates than their less mature counterparts. Eighty-one percent of respondents from these companies cite innovation as a strength of the organization, compared with only 10% from early-stage companies. Maturing organizations invest more in innovation and constantly drive toward digital improvement in ways that less mature companies do not. Notably, innovation happens throughout digitally maturing enterprises; it isn’t caged in labs or R&D departments. Digitally maturing companies are more likely to participate in digital ecosystems, and their employees are often organized in cross-functional teams.
  2. Employees of digitally maturing organizations have more latitude to innovate in their jobs — regardless of what those jobs may be. Nearly five times as many survey respondents from maturing companies as from early-stage companies report that their organizations provide them sufficient resources to innovate. This year’s research also finds a strong relationship between a company’s rate of digital innovation and its staffers’ confidence that the organization will be stronger in the future, thanks to digital trends.

About the Authors

Gerald C. Kane is the MIT Sloan Management Review guest editor for the Digital Business Initiative and a professor of information systems at the Carroll School of Management at Boston College.

Doug Palmer is a principal in the Digital Business and Strategy practice of Deloitte Digital.

Anh Nguyen Phillips is a senior manager within Deloitte Services LP, where she leads research on digital transformation and other strategic initiatives.

David Kiron is the executive editor of MIT Sloan Management Review, which brings ideas from the world of thinkers to the executives and managers who use them.

Natasha Buckley is a senior manager within Deloitte Services LP, where she researches emerging topics in the business technology market.

Contributors

Desiree Barry, Mark Cotteleer, Deb Gallagher, Swati Garg, Carolyn Ann Geason, Nidal Haddad, Daniel Han, Saurabh Rijhwani, Negina Rood, Lauren Rosano, Allison Ryder, and Karina van Berkum.

Acknowledgments

Michael Arena, former chief talent officer, General Motors

Johnny Ayers, cofounder and senior vice president, Socure

Greg Baxter, chief digital officer, MetLife

John Bungert, assistant vice president, innovation, MetLife

Tony Colon, former senior vice president, success cloud product management and innovation, Salesforce

Max Kelly, senior vice president, strategy, Techstars

Mark Lee, cofounder and CEO, Enroll Hero

Shamim Mohammad, chief information and technology officer and senior vice president, CarMax

Dave Otten, CEO and founder, JW Player

Geoffrey Parker, professor, Dartmouth College; visiting scholar, MIT Sloan School of Management; research fellow, MIT Initiative on the Digital Economy

Michael Santoro, professor, Santa Clara University

Matt Schuyler, chief human resources officer, Hilton

Amy Smith, senior vice president, product, Techstars

Youngjin Yoo, Elizabeth M. and William C. Treuhaft Professor of Entrepreneurship, professor of information systems, Case Western Reserve University

MIT Sloan Management Review

MIT Sloan Management Review leads the discourse among academic researchers, business executives, and other influential thought leaders about advances in management practice that are transforming how people lead and innovate. MIT SMR disseminates new management research and innovative ideas so that thoughtful executives can capitalize on the opportunities generated by rapid organizational, technological, and societal change.

Deloitte

This publication contains general information only and is based on the experiences and research of Deloitte practitioners. Deloitte is not, by means of this publication, rendering business, financial, investment, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte, its affiliates, and related entities shall not be responsible for any loss sustained by any person who relies on this publication.

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a U.K. private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. In the United States, Deloitte refers to one or more of the U.S. member firms of DTTL, their related entities that operate using the “Deloitte” name in the United States, and their respective affiliates. Certain services may not be available to attest clients under the rules and regulations of public accounting. Please see www.deloitte.com/about to learn more about our global network of member firms.

Deloitte Digital has created a new model for a new age — a creative digital consultancy. That means bringing together all the creative and technology capabilities, business acumen and industry insight needed to help transform clients’ businesses with digital. With Deloitte Digital’s end-to-end capabilities, clients bring their greatest ambitions, knowing Deloitte Digital has what it takes to bring new business visions to life.

Deloitte Insights publishes original articles, reports, and periodicals that provide insights for businesses, the public sector, and NGOs. Our goal is to draw upon research and experience from our professional services organization, and that of coauthors in academia and business, to advance the conversation on a broad spectrum of topics of interest to executives and government leaders. You may contact the authors or send an email to insights@deloitte.com for more information.

References

1. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a U.K. private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. In the United States, Deloitte refers to one or more of the U.S. member firms of DTTL, their related entities that operate using the “Deloitte” name in the United States, and their respective affiliates. Certain services may not be available to attest clients under the rules and regulations of public accounting. Please see www.deloitte.com/about to learn more about our global network of member firms.

2. “About Us,” Enroll Hero, accessed May 10, 2019, http://blog.enrollhero.com.

3. Bethlehem, once one of the U.S.’s biggest steelmakers and shipbuilders, went bankrupt and ceased operations in the early 2000s.

4. N. Furr and A. Shipilov, “Building the Right Ecosystem for Innovation,” MIT Sloan Management Review 59, no. 4 (summer 2018): 59-64.

5. G.G. Parker, M.W. Van Alstyne, and S.P. Choudary, Platform Revolution: How Networked Platforms Are Transforming the Economy — and How to Make Them Work for You (New York: W.W. Norton, 2016).

6. M.J. Arena, Adaptive Space: How GM and Other Companies Are Positively Disrupting Themselves and Transforming Into Agile Organizations (New York: McGraw-Hill, 2018).

7. M. Heller, “Why CarMax’s ‘Shock the System’ Digital Strategy Is Working,” April 26, 2017, www.cio.com.

8. “CarMax Brings the Future of Car Buying to Atlanta,” CarMax, Dec. 4, 2018, http://investors.carmax.com.

9. K.E. Weick, “Educational Organizations as Loosely Coupled Systems,” Administrative Science Quarterly 21, no. 1 (March 1976): 1-19.

10. “12 CFR Part 1002: Equal Credit Opportunity Act (Regulation B),” Consumer Financial Protection Bureau, Jan. 1, 2018, www.consumerfinance.gov.

11. T. Berners-Lee, “30 Years On, What’s Next #ForTheWeb?” Web Foundation, March 12, 2019, https://webfoundation.org.

12. J. Guynn, “Meet Tony Prophet, Salesforce’s Chief Equality Officer,” USA Today, Sept. 15, 2016.

13. “Paula Goldman Joins Salesforce as Chief Ethical and Humane Use Officer,” Salesforce, Dec. 10, 2018, www.salesforce.com.

14. “Today at Davos With Salesforce: Thursday, Jan. 24,” Salesforce, Jan. 24, 2019, www.salesforce.com and P. Renjen, “The 4 Types of Leader Who Will Thrive in the Fourth Industrial Revolution,” World Economic Forum, Jan. 23, 2019, www.weforum.org.

15. Berners-Lee, “Thirty Years On.”

16. S.R. Nilsen, “The Enron Code of Ethics Handbook From July 2000 Is a Fascinating Read,” CFA Institute, Oct. 14, 2013, https://blogs.cfainstitute.org.

i. J. Pfeffer, “The Knowing-Doing Gap,” Insights by Stanford Business, Nov. 1, 1999, www.gsb.stanford.edu.

ii. “Farmers Reap Benefits of Automated Tractor Tech,” July 1, 2015, www.cbsnews.com.

iii. C.S. Dweck, Mindset: The New Psychology of Success, updated ed. (New York: Random House, 2016).

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