Operationalized innovation as a strategic lever to tackle the Digital Dichotomy

HFS has discussed the Digital Dichotomy at length. Organizations continue to react to macroeconomic headwinds by squeezing budgets. At the same time, they lean on their providers to find savings through innovation while ensuring they respond flexibly to demand pressures from those headwinds. Against this background, discussions about innovation take on a new perspective. Organizations must decide whether to build their own innovation management capabilities, forge transformational engagements to obtain innovation, or externalize the entire process.

HFS sat down with the Infosys Center for Emerging Technology Solutions (iCETS) team to learn from their engagements.

With GenAI compressing development lifecycles, innovation management must take center stage

GenAI’s most significant impact to date is likely compressing innovation lifecycles. Because of this, innovation management can no longer be an academic and abstract exercise to evaluate technology trends. Instead, innovation is becoming a key lever for value creation—baked into large transformational deals or even delivered as end-to-end outsourcing.

GenAI is also accelerating another trend—namely, the emergence of new ecosystems—at an unprecedented pace. The best way to think about the evolution of innovation management is akin to DevOps or continuous integration/continuous delivery (CI/CD). It is about bridging organizational boundaries and silos by championing multidisciplinary approaches. It is no longer about capturing trends in an ivory tower but embedding and operationalizing innovation on the journey toward what HFS calls the OneEcosystem™ HFS defines this as an innovative framework that transcends organizational boundaries by fostering seamless collaboration between customers, employees, and partners to create new sources of value through integrated experiences and shared objectives.

So, how is Infosys organized to help clients navigate that transition?

Infosys is pivoting from internal to external innovation management

iCETS is pivotal to Infosys’ innovation strategy as a hub for incubating and scaling emerging technologies and broader innovation. Here’s how iCETS integrates into and supports Infosys’ overall innovation strategy while also delivering innovation to clients:

Emerging technology incubation: iCETS focuses on incubating next-gen technologies such as AI, generative AI, blockchain, quantum computing, IoT, smart spaces, and robotics. This aligns with Infosys’ broader strategy of innovating in Horizon 3 spaces and exploring future technologies.

Immersive innovation experiences: iCETS manages the Living Labs program, which provides clients with immersive experiences and showcases emerging technologies. These labs facilitate hands-on interaction, generating client insights and business outcomes.

Platform and IP development: iCETS contributes to new integrated service offerings, platforms, and intellectual properties. Initiatives such as the Infosys Applied AI Platform accelerate AI adoption.

Global innovation ecosystem: iCETS leverages the Infosys Innovation Network (IIN) to collaborate with startups, venture capital firms, incubators, and innovation hubs globally. The network helps de-risk innovation by integrating niche startups into Infosys’ service offerings, ensuring continuous and scalable innovation.

Client engagements: Through Listening Post as a Service (LPaaS) and other client initiatives, iCETS captures client demands and aligns technological innovations with business needs, ensuring the innovation strategy is tied to client requirements and market trends.

To make this more tangible, Infosys has built innovation hubs in San Francisco, Raleigh, and Indianapolis. Outside the US, it has hubs in Dusseldorf, Bucharest, Shanghai, Melbourne, Bengaluru, and Hyderabad. It has earned 250+ patents and launches more than 20 emerging technology solutions each year.

Large deal pursuits and standalone deals reference the externalization of innovation

As Infosys matured its journey with innovation management and expanded that approach to look at all aspects of the innovation life cycle, it began the Living Labs program. They used it to engage with clients in a consultative co-creation model. A critical part of the offering is curating a startup ecosystem and bringing it into a more contextualized manner. Crucially, this ecosystem was not geared to serve just Infosys; the intent was to bring thought leaders from different technology companies, industries, universities, and startups together and define problem statements.

A compelling example of Infosys’ progress in this journey is a successful bid to run innovation management for a large professional services firm. The company delivered a Living Lab at the customer’s main training center, followed by a second lab for GenAI. This engagement deepened the collaboration with the customer and helped Infosys win a hackathon and secure a follow-up engagement to implement the hackathon ideas.

The client generated $2 million in revenue from those labs. In our view, this win stands out for another reason—it demonstrates an ecosystem mindset as partners that have tended to be fierce competitors can collaborate to drive innovative engagements—a compelling example of the progress toward OneEcosystem.

Another angle on the operationalization of innovation management is that Infosys is using the approach to differentiate itself from other companies as it pursues large deals. It can reference proof points by demonstrating commercial success with clients rather than just providing lip service on PowerPoint.

How should organizations think about measuring innovation?

Innovation and transformation are complex; measuring them is equally complex. By combining quantitative, qualitative, process, and outcome metrics, organizations can gain a more comprehensive understanding of their innovation performance and identify areas for improvement. Infosys’ executives shared their experiences and best practices, including:

Client engagement and culture of innovation: Examples include employee engagement, the number of hackathons held, innovation events and activities organized, and measuring learning and cultural change through participation levels and employee engagement in innovation activities.

Idea generation and development: Specific metrics include the velocity of ideas, such as the number of ideas generated, moved to the MVP stage, and adopted for production. Similarly, the quality of ideas, e.g., the number of MVPs produced, and sponsor reactions.

Business impact: This includes the financial impact, such as cost savings and revenue generated from implemented ideas. Equally, business outcomes, such as successfully implemented ideas delivering tangible business value, are included.

Client-specific metrics: Tailored metrics such as idea adoption rates and system integration success.

Exhibit 1: Infosys’ approach to innovation management

Source: HFS Research, 2024

The Bottom Line: Infosys must double down on conveying the outcomes of innovation to gain the mindshare of enterprise leaders

As innovation cycles become increasingly compressed, enterprise leaders must decide whether to build out their own innovation management or contract with partners to help with some aspects. Infosys has demonstrated competence in operationalizing innovation by delivering successful projects to clients. Yet, its executives used an iceberg metaphor to describe the complexity of innovation—only a small part is visible.

To effectively convey the complexity of innovation—and its skill driving it—to the broader market, Infosys must invest in executing creative marketing strategies to accelerate market traction.