Digital Innovation on a Budget

Mike Baca, Director, Digital Transformation & Mobility, AmerisourceBergen
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Mike Baca, Director, Digital Transformation & Mobility, AmerisourceBergen

Mike Baca, Director, Digital Transformation & Mobility, AmerisourceBergen

It’s no secret that in today’s hyper-competitive marketplace, organizations are under constant pressure to find ways to open new markets and better serve the ones they are in. New and emerging technologies have changed the landscape by redefining not only what is possible but also what is necessary for businesses to change and thrive. Because these are new technologies, operating under unproven assumptions and following trajectories that have never been mapped, their ultimate value and chance for success are unknown.

This risk presents problems for innovation leaders constrained by limited budgets. Given scarce capital, how do we invest in these transformative technologies and have value to show when we are done?

Small is the New Big

A journey of a thousand miles begins with a single step. The bigger they are the harder they fall. I can go on and on with the clichés, but the truth is that if you’re on a tight budget, you have to prove your case pretty quickly. This means you have to think small in two ways: team size and problem scope.

  By equipping a strong, diverse team with problems to solve, adequate tools and a lean methodology, and having them operate in a visibly collaborative manner, your chances of a successful innovation effort on a limited budget are vastly improved 

Small Teams Win:

 Studies have shown that the optimal team size for decision-making, speed and productivity is between four and five people. It’s no coincidence that one of the fundamental organizational bricks within the U. S. Army is the “fireteam”, which consists of four to five soldiers, each with a specific skill oriented towards the mission. If you are fortunate enough to have a larger team, it may make sense to break them up, recognizing that there will be a bit more coordination required. Look for diverse skills that fall across a broad spectrum: business expertise, analysis, design, and software development. Communication skills are paramount, and individuals with multiple skill sets should be coveted. Co-location of the team in a designated space is essential for greater productivity.

Seek Leverage:

 Seeking a problem small enough to tackle and solve within a relatively short time is important for quick wins, but even better is to find one that can be a springboard to similar problems of larger scope. For example, building a chatbot to enable employees to reset their network passwords is a narrow use case with low risk, but once proven it can spawn dozens of ideas with a huge impact on customer engagement. You will need a deep understanding of the business drivers and overall landscape to identify these opportunities, so partnering with business stakeholders is essential here.

Assemble a Toolbox

Arm Your Team: 

The variety of new and emerging technologies powering digital innovation is overwhelming. Software innovation has moved beyond mobile apps to include IoT devices that can automatically sense and respond to events in their environment, machine learning software that can adapt based on experience, conversational AI that provides a more intuitive way of engaging users, virtual technologies that deepen knowledge through sensory experiences, and very small, inexpensive computers that can be configured to perform specialized tasks… and the list goes on. It is not necessary to have deep expertise in each of these, but it does require that the team stay current with technologies and understand the skills needed to employ them. No need to go it alone, as most vendors are only too happy to lend potential customers samples of their products along with technical assistance in the hope of gaining a sale upon a successful proof of concept.

Facilitate Collaboration:

 A successful innovation team must continually take advantage of team knowledge to move forward at a rapid pace. Tools that facilitate communication, real-time collaboration and knowledge-building are essential to success. Cloud-based collaboration tools are fairly cost-effective, and some are offered for free at low volumes. These tools will serve to keep team members informed as well as provide a repository of knowledge for future efforts. Chat, file sharing and broadcast capabilities across multiple channels are key features to look for, with a robust user interface as the differentiating factor.

Operate Leanly

Aim for limited overhead and minimal viable governance. A limited budget does not mean the absence of guardrails. What it does mean is that scope is narrow, effort is focused and that the governance is proportional to the risk involved. The team must establish a process for shepherding initiatives from incubation to full-blown implementation with checkpoints along the way. These checkpoints will determine if your team is on track in reaching its goal and therefore requires more funding and increased governance, or whether it needs to be redirected, managed better or stopped altogether.

Operate Transparently

The innovation landscape is littered with the corpses of failed teams because either A) they never accomplished anything, or B) they did, and no one knew about it. Limited budgets increase the need for collaboration in plain sight. Operating in secret can cause the team to become inwardly-focused, harboring an “us against them” mentality that can cut off the input of critical thinking and fresh ideas. Skunkworks efforts often arouse suspicion among outsiders resulting in more scrutiny and impatience. In addition, failed initiatives within the scope of the team do not get a second life in a different setting because they die in secret.

The team must find the right balance between accountability and autonomy, but even so, it is imperative for them to communicate with the outside world. This can be done with minimal overhead through a variety of ways, including opening up their collaboration platform to a broader audience, hosting virtual open houses, or publishing a blog as some examples.

The R&D Tax Credit

You can take this one to the bank: the Federal R&D Tax Credit is the largest tax credit available for business. And unlike its name implies, it is not limited to laboratory research but to applied research as well. Virtually any research undertaken to improve a product or service through the use of technology can qualify under the IRS’s four-part test examining whether the research eliminates uncertainty about the improvement, is useful in the development of new or improved business components, is technology-related, and is experimental in nature.

Eligible expenses under this law include employee wages, supplies, contract research and research payments to a third party. As such, the team should be diligent in record these activities to be able to provide the proper documentation for receiving the credit. It goes without saying that the financial benefits of the R&D Tax Credit to the organization at-large are real and can be a tangible justification for the creation and support of an internal innovation team.

In Conclusion

There is no doubt that adequate funding is necessary to provide a runway for innovation efforts. However, the case can be made that a limited budget focuses a team, sharpens priorities and eliminates wasteful churn. By equipping a strong, diverse team with problems to solve, adequate tools and a lean methodology, and having them operate in a visibly collaborative manner; your chances of a successful innovation effort on a limited budget are vastly improved.

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