“Growth is never by mere chance. It is the result of forces working together.”
– James Cash Penney
Quest for growth
In an ultra-competitive global economy, where a nimble footed startup in any corner of the world can upstage even an established market leader, businesses are perennially in a quest to protect their turf and pursue growth. It is an inescapable fact that for any business, growth is essential for survival, and stagnation will result in irrelevance in no time. While this is a principle that is equally applicable to all businesses irrespective of domain, it is probably even more relevant for technology and software-driven businesses. The ability to strategize and pursue growth in challenging conditions is perhaps the single most defining characteristic between business success and failure.
Innovation drives growth
Disruptive technologies and new business paradigms are having a transformative impact on virtually every segment of the economy, creating new business models and opportunities. Recognizing that technology-driven innovation is critical to drive growth, and that majority of the innovations are software-driven, even traditional businesses are transforming themselves into agile organizations with mature capabilities to develop their own software products and services. Thanks to the impact of digital disruption, software-driven innovation has evolved from a supporting role to being a strategic differentiator in driving business growth.
Challenges of software-driven businesses
Many software-driven businesses, especially those located in the developed economies of Europe, Australia, and North America are also struggling to overcome some typical challenges, such as those listed below:
- Inability to deal with a continuous stream of technology disruption
- Pressing need to migrate legacy products to newer technology stacks and deployment environments like cloud and mobile
- Lack of agility with established business models and practices
- Lack of engineering skills to transform domain expertise into marketable products and services
- Faster time-to-market
- Capacity and engineering challenges
Sometimes, even successful businesses can be blindsided by the need to change and innovate, as they operate in silos and are wary of cannibalizing their own products and services. As they try to address these challenges, software-driven businesses are also facing an uncomfortable reality that they either don’t have the required capacity or lack the appropriate technology and engineering capabilities to pursue their innovation strategies.
Focus on core competencies
It is increasingly becoming clear that it will be virtually impossible for any single company to master all the technologies and skills to keep up with the continuous stream of technology disruption. Therefore, it has become even more important for businesses to focus on their own core competencies or domain expertise and leverage the strengths of a partner ecosystem to complement their weak areas.
Collaborative models of Innovation
This trend of focusing on niche, core competencies has also given rise to collaborative models of innovation. Especially with the advent of the platform eco system, multiple players, each with a distinct competency, have learned to co-exist and collaborate for mutual benefit. Perhaps the best case to illustrate this is that of Apple.
Apple’s model of collaborative innovation
Recognizing early on that their primary strength is in design, Apple has wisely chosen to work with a network of partners to develop and market their iconic products and services across the world. The core micro-processor, display screens, flash memory chips and many other critical components used in iphone and ipads are developed in partnership with Samsung electronics. Similarly, the Taiwanese company Foxconn is used to assemble Apple’s products, leaving it to focus exclusively on what it does best. i.e. engineering and delivering a great customer experience. In parallel, Apple encouraged thousands of application developers to build Apps offering them a lion’s share of the revenue generated, which gave rise to the phenomenally successful Apple App store. This collaborative model of innovation has created enormous wealth for all stakeholders and made Apple one of the most valuable companies in the world.
Distributed and collaborative innovation
As software-driven businesses seek the right partnership model that will help them overcome their challenges, there is a lot to learn from the success of Apple and similar companies. At the same time, businesses must also be aware of the potential pitfalls associated with traditional offshoring, which were covered by my colleague Kiran in a separate blog.
In our experience of working exclusively with software product companies for more than 30 years, we feel that geographically distributed, yet tightly integrated teams working in close collaboration is the best suited model for software innovation and offers the following clear benefits:
- Establishes a long-term strategic relationship
- Extends technology and delivery capabilities
- Transparency and trust drive the partnership
- Knowledge continuity is assured, which is critical for success
- Mature, collaborative engagement with optimal costs
- Flexible and scalable model that offers business flexibility
- Offers optimal risk management and delivers long-term business value
While the benefits of distributed innovation are too obvious to ignore, the best fit for any given business will be determined by their business needs, technology goals, risk appetite, financial strength, and governance bandwidth. However, on balance, we strongly feel that collaborative innovation is the best suited model that can transform and deliver growth for software-driven businesses.