For years, digital transformation has been the mantra for businesses everywhere. Yet, despite substantial technological investments, many organizations have reached a plateau.
According to Gartner, IT departments allocate a substantial portion of their budgets to maintaining existing systems and operations, rather than innovation. Specifically, IT budgets often allocate around 66% to running and maintaining systems, leaving only 34% – and far from all of that is spent on growth-focused innovation.
This isn’t surprising when digital transformation is often viewed as a means to an end; as a way to optimize existing processes and reduce costs rather than a catalyst for growth. But what if we shifted our perspective and saw our digital assets not only as tools for efficiency but also as engines for generating new value?
That’s where experience innovation comes in.
SVP of Strategy at Valtech.
What is experience innovation?
According to the IDC’s Worldwide Digital Transformation Spending Guide, companies worldwide are projected to spend more than £2.6 trillion on digital transformations in 2026, with a five-year compound annual growth rate of 16.3%.
However, too many of these projects develop into a tunnel vision on optimization.
Experience innovation is the next step. It’s about moving beyond optimization and into the realm of value creation; it’s about using digital tools and technologies to create new products, services, and customer experiences that grow revenue and establish market differentiation. Instead of just streamlining existing processes, it uses digital advancements to deliver exceptional customer experiences that lead to loyalty and growth.
For example, experience innovation for a retailer might result in an augmented reality feature that lets customers try virtual clothes and receive personalized recommendations based on their choices, preferences, and body type. Or it might lead the other way, making in-store experiences into digital hybrids that create a more engaging and personalized shopping journey. It can also redefine the organization from within. IKEA proved this by using AI to drastically lower customer support workloads, allowing them to retrain part of the support staff into interior design advisors.
This is what it means to transform and redefine customer expectations. By harnessing the power of technology and data, businesses can create customer-centric experiences that are far more engaging and emotionally resonant, increasing satisfaction, loyalty, and, ultimately, growth.
Yet while the potential of experience innovation is immense, four challenges often prevent organizations from realizing its benefits.
The roadblocks
Firstly, budget constraints and misaligned priorities. Teams often have many innovative ideas but struggle to connect them to concrete business strategies and secure the necessary funding. As a result, innovation is often sidelined and viewed as a luxury rather than a necessity.
Secondly, siloed organizations tend to impede collaboration. In many organizations, particularly mature ones, silos hinder the cross-functional collaboration essential for experience innovation. This fragmented approach makes designing and delivering genuinely seamless and engaging experiences difficult.
Thirdly, there’s the risk of ‘innovation theatre.’ Innovation can sometimes become an empty buzzword, with companies setting up innovation labs and design sprints without a clear plan for bringing those ideas to market. This often leads to disillusionment and skepticism from the C-suite, who starts seeing innovation as a costly distraction.
Finally, the talent gap. Many companies lack the digital leadership and expertise needed to drive experience innovation. While there’s an increasing convergence of CIO and CMO functions, not all organizations have seasoned digital product owners who can bridge the gap between technology and business strategy.
So, how do you solve these challenges?
Unlocking the potential: a roadmap for success
Companies must take decisive action to transition from digital transformation to experience innovation. The sequence may vary, but it’s usually best to start by embracing a growth mindset.
While cost optimization is a healthy and necessary practice, it’s important to avoid getting fixated on it and to remember that cost savings can and should be reinvested in growth initiatives. Companies must open their mindset to include revenue generation, viewing digital assets as tools for creating new value and driving business growth. Establish clear value cases for experience innovation initiatives, demonstrating their potential to generate revenue and contribute to the bottom line.
Then, start developing a customer-centric culture. Cultivate digital leadership and attract individuals with the skills and experience to drive experience innovation, empowering them to lead the charge and transform ideas into reality. You can do this by developing in-house talent, engaging third-party experts, or finding new people with a deep understanding of technology and customer experience. Often, a mix is best.
These people will then help you finalize your strategy and ensure that innovation initiatives align with overarching business objectives and have a clear path to market. They’ll help you break down organizational silos and prioritize the end-to-end customer experience to ensure that every touchpoint contributes to a positive and engaging journey.
The result is a comprehensive experience innovation project that hits the ground running.
The future of experience innovation
The industries ripe for experience innovation are numerous and diverse, from automotive and financial services to retail and healthcare.
Each sector faces unique challenges and opportunities, but the underlying principle remains the same: by embracing a customer-centric approach using digital technologies and fostering a culture of innovation, organizations avoid stagnation and instead unlock new avenues for growth and customer loyalty.
In a world where customer expectations evolve constantly, innovation is no longer a ‘nice to have’. It’s an absolute necessity. By bridging the gap between digital transformation and business strategy, companies can ride the wave of momentum that only experience innovation can generate.
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