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A Recipe for Digital Innovation

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At each of the five Celent Innovation Roundtables held in the last several months, innovation practitioners consistently identify culture change as a significant success factor. A particular challenge, poor communication between technologists and their business partners, is often cited as a barrier.

The Second Machine Age by MIT professors Erik Brynjolfsson (@erikbryn) and Andrew McAfee (@amcafee) offers some help. Their explanation of digital innovation made a big impression on me as the clearest description that I have found so far. The approach is simple: “digital information….is built on multiple layers”. It is a “recipe” of different automation solutions mixed together. That is, look at a list of digital technologies, pick a few and combine them in unique ways so that they work together, and deliver new value.

Also see 3 Things We Now Know About Success in Digital

This description led me to revisit some Celent insurance innovation case studies and rethink how to best explain them. The first, the AXA claims example (Visualizing the London Riots at AXA UK), outlined how the insurer combined data from public police records, media reports, and their internal systems to predict which of their insureds might suffer a loss during the multi-day rioting in the U.K. in 2011. AXA “layered” successive sources of digital data, then added some analytic algorithms to produce a new and valuable tool designed to proactively identify at-risk insureds (mainly small businesses that were exposed to looting). All of these technologies existed on their own, in isolation, until they were combined to yield new insights which helped avoid losses.

The second study is from Tokio Marine & Nichido Fire Insurance Co., Ltd. They were recognized as a Celent Model Insurer for their One Time Insurance product (Model Insurer 2012: Case Studies of Effective Technology Use in Insurance). They combined geo-location, text messaging, and data prefill services to deliver real-time insurance offers to subscribers. As a prospect drives to the airport, their mobile phone receives a text from the insurer with an offer for travel insurance. Similarly, texts are sent as golfers arrive for their tee times, skiers approach the lifts, etc. It is the combination, or layering, of these technologies in a unique manner that creates the innovative service.

The value of this explanation is not only academic. Layering strikes me as a useful tool to explain how all of this “digital stuff” can fit together. The recipe and layering metaphors succinctly describe digital in non-technical, accessible terms. It can be used with any audience to illustrate how the sum of the parts can be greater than the whole.

I also see value in using layering to generate new ideas. My thought is that, in an interactive session, a group of participants can create a list of technologies, data sources, etc. and then brainstorm different combinations from them.

Our continuing research illustrates that there is no one prescription for innovation, but there are guideposts to follow. The use of the layering metaphor to improve communication and as a technique for brainstorming is one such guide.

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