Tech Companies Innovate at the Edge. Legacy Companies Can Too.
Technologies like 5G, artificial intelligence, and low and no code software design tools are changing how companies need to approach innovation. Specifically, they look to the edge of the organization where the business interfaces with its customers, suppliers, and other stakeholders, and where small-scale innovations are happening. Companies should adopt three practices: 1) free up small teams to act independently, 2) feed these teams with the systems, resources, and tools they need, and 3) funnel the best innovations back through the company.
In the next few years, new and expanded technologies will change the business landscape at unprecedented pace and scale. Consider the impact of a few major trends. 5G is expected to deliver network speeds that are about 10x faster than what 4G LTE networks offer, with expectations for significantly faster speeds on the horizon. AI-driven speech, written word, or computer-vision algorithms are projected to augment 50% of user touches by 2024. Global data creation is projected to grow nearly threefold between 2020 and 2025. And the low code development platform market — which is changing who can write powerful software — is projected to grow at about 30 percent compound annual growth, through 2030.
The result of these trends is an explosion of computing power, a massive expansion of data sets, and vast improvements in the way users access technology. This means it will become cheaper and easier to develop, launch, and scale new innovations quickly, leading to a much faster pace of innovation.
While many business leaders are broadly aware of these trends, few are prepared to harness the resulting innovations. Doing so is ultimately a scale and skill problem, and traditional top-down strategies and mechanisms (e.g., corporate venture capital funds) will struggle keep pace with the opportunities — and most lack the expertise needed to evaluate these opportunities, even if they could keep up. Instead, companies need to look to the edge of the organization where the business interfaces with its customers, suppliers, and other stakeholders, and where small-scale innovations are happening.
Specifically, there are two groups in this “edge” workforce companies need to empower: 1) the hands-on experts — engineers, chemists, product developers, and scientists — who are working on the most complex problems for the business, and 2) non-tech workers who can use low code/no code tools and SaaS products and services to act as “citizen developers.”
The question for today’s business, then, is how to empower these workers at the edge to operate as innovators, and how to bring in the best of what they develop so the entire organization can benefit. This is more than a matter of providing these would-be entrepreneurs with sufficient seed capital. Companies instead have to invest in an innovation model. Tech companies have been developing the muscle to innovate at the edge for years, and larger incumbents can borrow a page or two from their book. Companies that are doing this well have adopted three common practices:
To empower the “edge” workers in your organization, form a portfolio of small teams and give them the freedom to work independently along with clear goals and responsibilities. That means, for example, that if the business doesn’t have people with the skills they need, the team can go out and hire them directly. They can spend their allocated budget as they see fit, experiment and fail without penalty (within boundaries), and decide on technologies to meet their goals (within proscribed guidelines).
Some businesses McKinsey has worked with are already practicing this kind of approach. Haier, the appliance and consumer electronics company, has 4,000 “microenterprises” (as they call these teams), each with 10-15 employees. These teams have the freedom to self organize to address a specific opportunity that someone has identified.
