7 Ways Digital Innovation Measurably Improves ROI
Why should your company embrace digital innovation? We're glad you asked. Here are 7 types of ROI you can expect from a digital innovation investment.
Are you looking to capitalize on the benefits of innovative technology like artificial intelligence and machine learning? It’s a trendy conversation in companies today. In fact, a CapGemini study found that 87% of business leaders consider digital innovation to be a competitive opportunity. But not everyone understands what it will take to get the results they want.
Digital innovation isn’t just about adding trendy new capabilities to your technology platform. It’s not about purchasing an AI tool for its own sake, or developing a new app and expecting it to work miracles.
Unfortunately, the “Buy our product and solve all your problems” mindset is easy to fall into at technology conferences or in a sales presentation. But technology doesn’t work that way, especially if you’re operating with outdated systems to start with.
True innovation starts with strategy at the center and then flows outward through the organization. And strategy looks at the potential ROI for each technology investment before developing a plan for digital innovation.
What Do We Mean By Digital Innovation?
Before we talk about ROI, however, let’s agree on what we’re talking about when we say innovation. Digital innovation means developing new strategies or solutions that incorporate people, processes, and technologies to achieve business goals. Those goals might include both customer-facing and internal strategies for improved outcomes.
Here are a few examples of what digital innovation could look like:
* A new database designed to break down information silos and integrate systems used in different parts of the organization
* New business strategies and accompanying software portals that help the company respond flexibly to changes in the marketplace
* A new technology platform that incorporates AI and machine learning for improved customer service
* An IoT strategy that incorporates sensor-equipped machines, broader data collection, and improved analytics for a manufacturing plant
The direction your innovation strategy takes will depend on what tools you already have in place, what your business goals are, and where you want to focus your efforts for the most impact.
Underlying all of those considerations are these questions: How can the technology help your people become more productive, engaged contributors and how can it help you achieve better business outcomes? That’s where the true value of innovation lies, and it’s how we determine the ROI of any technology.
The ROI of Digital Innovation
To be successful, a technology project has to deliver a reasonable return on investment (ROI). That’s why strategy always comes first. Digital innovation, like any other initiative, must have an attainable goal that can be measured. Key performance indicators show whether the project is improving performance as expected.
Here are seven of the most valuable types of ROI you can gain from your innovation strategy.
Innovative work environments support creativity, new product development, and customer satisfaction. These key elements, combined with an emphasis on employee engagement, will drive business growth and higher profits. An SAP study found that 80% of digital innovation leaders report increased profitability, and 85% say digital transformation has increased their market share.
There are several reasons for those impressive statistics. Employees who work for companies with innovative technology tend to be more engaged, which is a proven driver of higher profits. In addition, higher engagement translates into lower turnover and a workplace culture that attracts talented candidates—factors also tied to profitability increases.
Digital tools work faster and more precisely than human operators. Using technology to automate workflows can eliminate bottlenecks in production processes and help employees with tasks like data entry, scheduling, transcription, and document management.
Industrial organizations have a lot to gain in terms of efficiency as well. AI tools can monitor equipment performance to keep each production line operating at full capacity for highest output. You can also use sensor-equipped Industry 4.0 machines to keep tabs on your supply chain, minimizing time and money lost due to lack of inventory or overstock.
Following on the heels of efficiency improvements come increases in productivity. By empowering workers to do their jobs faster and with fewer errors, digital innovation also enables them to get more done in less time. Updated technology supports more agile workplaces, where employees can make better decisions based on critical data analysis.
4. Customer Satisfaction
Digital technology improves customer experiences by upgrading both customer-facing tools and internal processes that serve customers. For example, here are just a few ways digital innovation supports customer satisfaction:
Customer Interfaces – AI tools can support your customers with better online experiences as they interact with your website. Here are just two of the many examples we could share:
* Chatbots answer customer questions and provide information to help them find what they need
* Machine learning creates customized product recommendations based on past purchases and search behavior.
Customer Experiences – Data analytics give organizations a wealth of information about customer behavior. Using that information, you can develop streamlined customer experiences both online and offline, including phone conversations, online shopping, marketing efforts, and communication strategies.
Customer Service – With better tools to support them, employees can provide better service to customers both during the sales process and when offering customer support.
5. Reduced Costs
Cost vs. benefit takes center stage in many discussions about digital innovation, so it’s important to consider all the ways enhanced technology will affect your costs over time as well as the investment you’ll make on the front end. Optimizing your technology platform reduces cost per transaction by improving efficiency, and also supports increased sales. And because digital innovation can improve employee engagement and increase retention, it will also save money on talent acquisition.
6. Deeper Analytics
Digital innovation gives companies the power both to collect and store more data and to analyze that data more efficiently. This translates into targeted business insights that help companies make better decisions, use resources more effectively, and reduce risks.
One example of increased ROI based on analytics is predictive maintenance in the manufacturing industry. AI sensors on industrial machines monitor performance KPIs that indicate the equipment’s performance. When changes in performance are recorded, the technology sends maintenance alerts so the problem can be corrected before the machine goes down. The result is that fewer machines experience downtime and production rates remain stable, resulting in higher output over time.
7. Culture of Innovation
One of the greatest benefits of digital innovation is the shift in thinking that occurs along with it when the company promotes innovative strategy from the top down. Over 90% of executives believe that innovation is essential to the success of their business, and digital innovation often provides the catalyst for promoting collaboration, agility, and creative problem solving.
Of course, simply buying new tech isn’t enough to change your culture. Digital innovation strategy should include careful integration of new tech with legacy systems, strong communication from business leaders about reasons for the change and its expected benefits, sufficient training so that the technology isn’t intimidating, and plenty of support on the ground level so employees actually use the technology and become comfortable with it.
This cultural shift doesn’t happen overnight, but it can create competitive advantage as employees learn to collaborate with one another and use the technology to do their work more efficiently.
Digital innovation is no longer optional. As technology continues to evolve, we will see a widening gap between companies that have learned to implement new technologies to their advantage and those that hold onto outdated methodologies. That doesn’t mean you have to scrap everything and start over from scratch, but it does mean that strategic innovation to solve specific problems and address inefficiencies will be a differentiator in the marketplace.