If your company has refocused on innovation, it’s not alone. After deprioritizing innovation in 2009, companies recommitted to innovation in a big way last year, according to the Boston Consulting Group's Innovation 2010 survey (PDF) (conducted in conjunction with BusinessWeek). The global management consultancy found that despite a stalled economy, 72% of companies consider innovation a top-three priority and 84% consider innovation a way to reap the benefits of a recovering economy. Two thirds, 64%, plan to boost innovation spending.
Such a focus is wise: BCG found that innovators outperformed their industry peers by a full 12 percentage points over three years. "Becoming better at innovation is the single most important thing you can do," write the authors.
But just what is innovation, in the context of an IT department or established business? Defining the term can seem like a challenge. "There are far too many long-winded definitions of innovation, and many of these tend to focus on the whole debate around incremental versus disruptive innovation," says Tom Koulopoulos, CEO of the strategy and innovation consultancy Delphi Group. These academic discussions do little to focus people on the core of what innovation is a how it should be measured, he says. "So let's keep it simple: Innovation is any change that adds value to a process or product." Another definition is offered by Jatin DeSai, CEO of the management and innovation consultancy the DeSai Group: "Innovation is when you use ideas to make money.”
The promise of a financially fruitful outcome — now that makes any CEO smile. In fact, most experts agree innovation efforts are difficult indeed without CEO participation, because innovation efforts inherently involve risk. In addition, innovation depends on creativity, which relies on thinking and acting differently, says DeSai. Most organizations are designed exactly for the opposite behavior: Employees are taught to conform, to follow a predictable process, to assure certainty.
It is just those issues of predictability and risk that arise when discussing IT's innovation potential. IT is more often seen as an innovation block rather than as an enabler, says Langdon Morris, partner at innovation consultancy InnovationLabs. He points to his recent experience with a hospital industry client. The client has been developing and making significant progress on a long-term and wide-ranging innovation program since 2008, including customer communication initiatives focusing on Web and mobile applications.
The problem, Morris says, is that progress in these areas has stalled because of IT. The initiatives are blocked at every turn: It's not our priority; this project has too many security risks; we don't have the manpower. At Morris’ client, people working on the customer initiatives have the impression IT is working against them. Such roadblocks cost the company money and brand equity. "If this was just one company then it would not be worth mentioning,” he says, “but it is very common.”
John Pipino, CIO at innovation consultancy the Doblin Group, has had similar experiences. He says that in companies where technology is not the end product, the IT department is more likely to be a barrier to innovation than to drive it. In his view, there are three main reasons. First, IT is generally given two broad mandates: support the company strategy and stay on budget. Using the IT budget to support business strategy is difficult in companies where that strategy is not clear, or at least not clear with respect to IT.
Even when strategy is clear, Pipino says, time and money are tightly calculated, and innovation does not respond well to those pre-formatted conditions. IT — like HR and legal — is often dedicated to compliance, which is a fixed process. This is another condition to which innovation responds poorly, he says.
Finally, opines Pipino, IT often believes that it is innovation. IT is not alone in this self-perception. Such a view is often also held by product development, R&D, and marketing groups, he says. Still, disputes about “who owns thought leadership” discourage creative thinking and introduce interpersonal tension — two more conditions that inhibit innovation.
The company's view of IT can also problematic. Much has been written over the years championing the CIO's right to a "seat at the table" and IT's strategic function. The reality may be quite different. IT is increasingly marginalized and commoditized, says Koulopoulos. In most companies, IT is a support function and not a strategic function, though Koulopoulos believes that such a view is a mistake.
IT does have the potential to play an important role in a company's innovation efforts, Koulopoulos says. IT is typically the only group that crosses the existing silos and otherwise disconnected parts of an organization. "Who is better suited to build an innovation practice?" he asks.
Pipino also believes in IT's potential to participate in innovation. "Going from a sketch on a napkin to run-time code is a discipline the rest of the firm could benefit from," he says. "Outlines, story boards, wire frames, prototypes, proofs of concept, testing cycles, pilots, and roll outs are coin of the realm for development projects." In other words, the everyday tools and processes upon which IT relies have much benefit for the innovation process. That said, "IT can regularly contribute to innovation only when they have a strong connection to the ultimate customer of the company," Pipino adds.
Customer. That's a word that comes up often when discussing IT's role in innovation. That's because innovation is about adding value, and you can't do that without understanding your customers, both internal and external. If innovation is ultimately about making money for the company, it's not hard to see why learning about your customers — really understanding their needs — is crucial. IT needs to discover how to use its capabilities to improve communication with customers, and also how to make it easier for people to work inside the company, says Morris.
DeSai says that the most innovative IT groups he has worked with share a strong commitment to making money for their internal customers and innovative methods of doing so. When IT departments can help find new insights about customers, markets, macro trends, competitors, and technology-enabled business models, they can be a strategic practice such as the marketing and finance departments, says Jatin. But gaining this level of business savvy requires work; IT staff need to truly learn how the business makes money.
To participate in innovation, IT must be seen as a competitive advantage, not merely a support function. To help lead your company's innovation efforts, you must first change any such views and perceptions. In other words, run IT like a business.
IT departments must master the delivery and quality demands of information systems first, says Jatin. This means IT must demonstrate that it is making money for the organization — coming below budget and helping the organization achieve a customer centric focus — and not just a cost center for the organization. "Only then, they have the ‘right to be at the table’ and help drive the overall innovation and technology agenda for the entire organization," he says.
Apart from larger discussion of innovation, IT leaders can start with innovation in their own groups, even in less-than-ideal conditions. "I don’t think IT organizations should wait for the world to change or improve," says Jatin. "Ideas come from people; if you have people, then you can start to innovate now," he says.
Jatin suggests that you can create such a climate in your department, and accomplish this much faster than any big innovation program led from the corporate office can roll out. You can do this in part by looking at the everyday with fresh eyes. For example, promote questioning. He recommends, promoting "the four whys" for every project discussion. Don’t just take accept the status quo. Ask why should something be done, or why now, or why that way, or why not this path vs. that path? This starts to push people to get out of the usual way of thinking, so that they can rethink possible solutions. Learn and teach to dig deeper, just to see what possible new solutions to an old problem are. In fact, a questioning spirit may be one of the most important skills shared by innovators.
Though innovation requires creativity, it actually relies on structure. Koulopoulos and others recommend systematizing your innovation process. Definitions and measurement are crucial. What is innovation for your group and company? Don't leave it abstract or unclear. And be sure that you create clear measurements as well. After schooling your team on innovation, be sure they know exactly what's expected of them, recommends DeSai, and integrate those behaviors into the HR performance management process, even setting up a reward fund if possible.
Most important: Make innovation a priority. It won't “just happen.” Despite the plethora of hurdles, IT is crucial to innovation. "I believe that IT departments can be the best program managers for innovation," says DeSai. "Especially when IT departments are in partnership with marketing, they can create powerful platforms to gain deeper understanding of current and future needs of the customers."
