Breakthrough innovation: the megatrends of transformation

In brief

• Companies need new strategies to harness the rapid pace of technological change, create breakthrough innovations and thrive in a time of unprecedented disruption.
• Legacy technologies limit a company’s ability to change, but a strong digital core built on cloud, AI and metaverse enables continuous reinvention.
• Now is the time to harness the power of cloud, AI and metaverse to establish a digital core and capitalize on next-generation technology advances.

A new era of innovation

While cloud, AI and metaverse are disrupting businesses, they are also catalysts for productive business change.

Technological change has sped up to a massive degree over the past decade. A company cannot keep up, or endure over the long term, without constantly reinventing itself at every major inflection point. More than 93% of companies are continuing to expand their IT foundation. Fully half plan to increase investment levels in AI (51%) and cloud services (50%) over the next year. And more than one-third of companies will further develop their digital core in areas like data technologies (42%), security (39%), and communications networks (37%). It’s not only adoption that has accelerated, but also the technologies themselves.

What makes an innovation a breakthrough? One of three characteristics.

1. Category-defining new products, services and experiences

Breakthrough innovations drive more than just growth and profitability. They spark entire businesses and categories of businesses. Sometimes they spawn entire industries. They do that by creating something that has never been seen before—whether at the level of a product, service or experience. Think of the biometric sensor technology embedded in smartphones. Or the UPI payment infrastructure established in India, which enables users to transfer money within and across platforms regardless of payment standard. They not only created giant successes and other new products in the industry; they laid a foundation for sustainable economic development across the world.

2. Significantly compressed time to value

While breakthrough innovation starts with a great idea, success lies in a company’s ability to bring that idea to life in a radically compressed timeframe. Take Moderna’s process to design mRNA that carries instructions for cells to produce a disease-fighting protein, which led to COVID-19 vaccines. That didn’t just benefit Moderna; it lifted the entire pharmaceutical industry. Rather than bet on a single idea in a single field, leading firms build a dynamic portfolio of ideas for new business products or ventures at different stages of development. In doing so, they increase the probability of success and diversify risk.

3. Dramatically reduced cost of development

Profitable ideas are getting harder to generate, as investment in research is climbing sharply, resulting in high innovation costs and questionable payoffs. But new technologies hold the promise of dramatically reversing this trend. By implementing disruptive technologies like digital twins, computer-vision powered by cloud, edge and private 5G in parallel with the existing manufacturing operations management (MOM) architecture, manufacturers can extract more value from years of technology investments and avoid the need to “rip and replace.” This drastically cuts development time and associated costs.

How will the next generation of breakthroughs happen?

1. Unlocking the power of the platform economy

Companies can come together to offer a new and differentiated product or service to their customers. This is all about taking the power of social graphs—which are essentially models of social networks—to the enterprise world. A prime example is what’s happening in the auto-insurance segment, where the driver can get a personalized insurance service for their automobile tailored to how, when and where they drive. Companies should establish unconventional collaborations with partners and other industry actors, both within their existing market and adjacent markets. That way, they can introduce new products or services that leverage a platform-based business model and deliver differentiated customer value.

2. Deploying next-generation intelligence

When companies master data management, they can aspire to next-generation intelligence. It will be live, multi-modal and cross-functional, drawing inferences from both internal and external sources. China-based Shein became the world’s largest fashion retailer by using next-gen intelligence to reinvent demand-driven product design. Product teams quickly turn around designs based on clicks and sales. An algorithm determines the production plan—ordering extra materials automatically and then recommending items to more users with similar profiles. This kind of model could be applied across other industries to prevent large amounts of stock from going to waste and tie up very little cash in inventory.

3. Exploiting computational and algorithmic advances

We’re entering an era of supercomputing and advanced AI that has led to innovation becoming cheaper, more accessible, less risky and providing more optionality. But advanced computing systems like quantum are still on the horizon. In the meantime, engineers must take a hybrid approach, blending traditional computing systems with elements of next-generation computing. That will help them achieve performance and efficiency boosts of advanced computing while taking advantage of the scalability and reliability of classical computing systems. These blended solutions could offer legitimate value in the next 12 to 24 months.

Transforming technology into breakthrough innovation is indeed possible

Apply next-generation technologies in novel ways to capture white space opportunities and address acute business needs.

We are inspired by many examples of breakthrough innovations happening already and the promise of disruptive technologies like cloud, AI and metaverse. By harnessing these megatrends to establish a digital core and capitalize on the next generation of technology advances, every company—not only digital natives—can reinvent their enterprise with increased revenue growth, operational efficiencies and innovation. If business leaders jettison the mindset of incremental innovation and embrace breakthrough approaches, they stand to dramatically reshape their companies, entire industries and broader society.