Smaller firms, particularly entrepreneurial startups, are exploiting technology to invade territory traditionally held by blue chip incumbents.
And much of that innovation is coming from CIOs and their teams: CIOs in companies with fewer than 100 staff spend much less time on IT services and much more time working with customers, according to research from Harvey Nash and KPMG.
But how does the IT organisation go from managing tech to building the next big thing? At the recent TCS Innovation Forum in London, speakers suggested four best practice lessons for C-suite executives looking to respond quickly and effectively to the demand for creativity.
1. Focus on how innovation is changing what customers expect
David Mattin, global head of trends and insights at consumer researcher TrendWatching, says technical innovation is creating ever-increasing customer expectations.
"Trends emerge when change unlocks a new way of servicing a human need," says Mattin. "In a connected world, we all have access to the same pool of data, culture, and knowledge. There's also been an explosion in choice. Executives must interrogate innovation for customer expectations -- because once expectations become real, the impact spreads very quickly."
He cites the advances made by Swedish rail company Stockholmstag, which uses artificial intelligence to predict train delays before they occur, and then it updates customers through an app. He also focuses on the importance of omni-channel approaches and refers to Canal+, which runs short TV shows on bus shelters while customers wait for their transport.
"The people you're competing with are the firms that are setting new customer expectations," says Mattin. "You must think about how innovation is changing what your customers expect. Innovation is about giving people things they actually value and want."
2. Seek out the startups that want to eat your lunch
Simon Calver, chair of ChemistDirect and moo.com and former chief executive of LoveFilm and Mothercare, says the internet has moved from a communication tool to a mechanism that offers us all a fundamentally different way of dealing with the world. Executives looking to cope with the change must embrace both entrepreneurial thinking and the power of digital transformation.
"I have the privilege of working with small innovators and I think the atomic unit of a company is shrinking dramatically," says Calver. "Velocity is crucial -- if you have the right infrastructure and aren't restricted by legacy, you can move in the right direction. By using digital technology, executives are building flexibility into services like never before."
Calver says a surprisingly large amount of companies have been slow to understand the power of mobility and big data. And more change is to come. He says the future will only become more challenging, especially given the game-changing potential of technologies like blockchain, the Internet of Things, and data science. Calver encourages CIOs to take control.
"Confusion happens in organisations because people don't know how decisions are made. Make it clear how decisions are made and communicate that process back. It gives people the confidence to innovate and to think differently," he says, before focusing on the associated requirement for continued skills development.
"Have the right people for the journey. If you don't have these skills, be prepared to change your organisation. Become hyper-connected -- buddy up with the people at startups who are trying to eat your lunch as they want the kudos of being associated with a big company, too."
3. Just get on with it
Markus Perkmann, associate professor of technology and innovation management at Imperial College Business School, says organisations must focus on creating the right culture to support change. He says innovation is a two-step process, where executives need to think of the supporting ecosystem first and then enable entrepreneurial initiatives within the company.
"It's easy to say the old skills are irrelevant," he says, referring to suggestions that digital businesses require new types of professionals. "Rather than looking at external threats as disruptive, existing corporations need to look at the resources they already have and think of that expertise as a positive. Executives must recognise that existing strengths matter, too."
He says executive are often concerned that being creative -- and, perhaps, making existing products and services cheaper -- can lead to the cannibalisation of their own business. The key is to show sponsors across the rest of the business that innovation can create measurable benefits, particularly for the customer.
"Get some projects off the ground and get the senior management interested," says Perkmann. "Running specific projects and understanding the customer is an area where companies could often do more in terms of innovation."
4. Recognise that sectors and business models are blurring
K Ananth Krishnan, TCS' CTO, agrees that the customer holds the key for businesses looking to make the most of innovation. He says the power of connectivity available to everyone today was unimaginable 10 years ago. Now, the digital consumer is social, networked, and helping to create a tremendous churn in business models.
"Every executive in every industry wants to know what's happening in other sectors -- you have to think across boundaries," says Krishnan. "It's no longer sufficient to focus on how your own industry operates right now. Change is fundamental. And that's a huge opportunity for every business."
He points to the cross-sector interests of companies like Amazon and Apple, and suggests the boundaries between industries are blurring. "The hyper-connected world is affecting the very fabric of companies and business models," he says.
"The way we create new products and services is going to be dramatically impacted. We've been trained to think that any product we create is built to last. Now the lifecycle might be years, months, or simply weeks. It's disposable IT -- if you were going to build something for just six months, would you build it differently? The answer is 'yes'."