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Published on 07/05/2022
Last updated on 05/10/2024

The Five Keys to Digital Innovation Success


A Month of Innovation:

Digital innovation often requires doubling-down on the investments that your business has made in digital technology. Even if you’ve already digitized the business, your work is not done. There are always opportunities to build even more efficiencies into your operations by taking advantage of newer, better technology – such as migrating from monolithic applications to microservices, or embracing API-first design.

Embracing digital innovation initiatives like these is important not only for improving the way your business works, but also for ensuring continued business success in an evolving business landscape. Virtually every company today continues to face disruption, and relying on traditional technologies – even if they were considered innovative only three years ago – is not enough to remain competitive. You must continue innovating to meet the ever-increasing expectations of consumers. This is because consumers are growing more savvy, and can switch to your competition’s products or services more easily than ever.

This, at least, is the imperative businesses face today to innovate digitally. Let’s take a look at five practical steps to drive digital innovation.

The challenges of digital innovation in business

We just told you digital innovation is necessary, but no one said it’s easy.

On the contrary, as McKinsey notes, a mere 8 percent of businesses report complete success with their current digital initiatives. The rest struggle to achieve a full and sustained digital innovation initiative, for several reasons:

  • Constantly changing business models: It’s difficult to ensure you’re taking advantage of the latest technologies when business models constantly change. This is true even for the most tech-savvy companies: Consider players like Netflix and Spotify, for example, which built great digital platforms from the start, but which have needed to pivot heavily as they have evolved their business models. They achieved this by getting away from shipping physical DVDs in the case of Netflix, and investing in streaming videos in Spotify’s case), and both investing in original content creation.

  • Measurement difficulties: Measuring the ROI of digital innovation investments is rarely fast or straightforward. You need to collect a large body of data related to product development and tooling investments, then calculate the impact of those investments – which are typically indirect – on your business.

  • Assessing success and failure: Even if you can calculate digital innovation ROI, determining which levels of improvement amount to success can be challenging. Does an increase in customer retention of a few percentage points mean that your DI investment was worth it? That’s not a simple question to answer.

  • Lack of management buy-in: Higher-ups in your business may believe that you’ve already invested in digital technology, and may therefore be reluctant to support continued engagement with digital innovation. The fact that digital innovation ROI is hard to measure only makes this challenge more acute - especially for risk-averse business leaders.

  • Minimizing risk: Last but not least, digital innovation should never come at the expense of undercutting what already works well in your business. If you experiment or innovate too fast, you may lose existing customer bases or successful revenue streams.

The list could go on, but you get the point: Putting digital innovation into practice can be complicated and messy.

5 principles for digital innovation success

With the right approach, however, it’s possible to overcome these common barriers to digital innovation. These five key principles can help ensure digital innovation success:

Build a culture of innovation

The foundation for digital innovation in business is a cultural commitment to innovation. Employees at all levels should be rewarded for taking calculated risks, and they should not be punished if their bets don’t ultimately succeed.

Support entrepreneurialism from the top down

Along similar lines, company leadership should be fully supportive of innovation and change. No matter how large your company or how established its business model, executives and managers should embrace a startup mindset – and communicate that mindset to employees – when it comes to how they approach change and experimentation.

Fail fast

The faster you fail, the faster you can innovate. Again, employees should never be punished for taking risks that don’t pan out; they should be celebrated and encouraged for doing so, provided that the risks are calculated.

Keep in mind, too, that some new ideas are never actually pursued. You shouldn’t think of the time spent developing these ideas as a waste; instead take the key learnings from those ideas and embrace it as an investment that may inform other ideas later.

No idea is a bad idea Toward that end, every idea should be treated as a great idea from the outset. Even if ideas are ultimately rejected, the mere fact that they were developed is beneficial to long-term business success.

At Cisco, we operationalize this principle by providing an open mic forum where every employee gets up to ninety minutes to pitch an idea and receive feedback. No idea is rejected, and the ideas don’t have to relate to Cisco. They can be anything, because the goal is to amplify new thinking, not shut it down.

Embrace collaboration

The more people talk to each other, the more likely you are to identify and pursue great innovations. This is why your business should foster a culture of collaboration in which people in different departments or business units are constantly talking to one another – even if those business units don’t appear relevant to each other. You never know which great idea might spring up from a conversation between a customer relations technician and a network engineer, for example.


Digital innovation is deeply challenging, but also deeply necessary. It’s the only way to ensure long-term, sustainable business success.

The foundation for digital innovation success is a culture that enables innovation. Being radically open to new ideas, thinking of failure as a form of success and encouraging collaboration even in contexts where it may not seem to make sense are the roots of effective digital innovation.

Read more about how we put these principles into action at Cisco through our ET&I initiative.

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