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The role of enterprise IT is shifting from managing systems to enabling new solutions, transforming business processes, and creating competitive advantage. Here's how IT can build an innovation focus.
CEOs have high expectations for their CIOs to deliver innovation. Top projects like analytics and business intelligence, cloud computing and mobile applications, and redesigns of workflows to facilitate collaboration involve relatively new technologies that are in early and disruptive stages. Even within IT itself, revamping internal infrastructure is disruptive of older IT approaches to resource organization and deployments. In the face of this, CEOs are taking a hard look at IT management.
For CIOs and other IT decision makers, the message is clear. Yes, CEOs are expecting IT innovation — but they are expecting it on relatively lean budgets. They want to rely on their IT leadership for smart and innovative technologies that are cost-effective. In this environment, IT is no longer regarded as a back-office function supporting the business, and few CIOs will accomplish what's expected of them simply by taking orders and implementing systems. Instead, they have much more to think about... like how to bring competitive solutions to the business quickly and confidently and how to realign their IT organization (and staff) to produce innovative solutions when they might not be set up for innovation.
New innovation use cases
- Ford Motor Company is engaged in building a "platform for innovation." For example, its Energi line of plug-in hybrid cars generates 25 gigabytes of data per hour, which is subsequently processed and given back to drivers via a mobile app. The app tells drivers about battery life and the nearest charging stations and provides other data about the vehicle's performance. Taking this sensor-based data collection even further, Ford is analyzing data on car performance and driver experience that monitors fuel consumption, engine performance, and other data about its vehicle fleets. The goal is predictive modeling that will yield intelligence to produce superior product designs in the future.
- The Open Source Robotics Foundation (OSRF) and its Defense Advanced Research Projects Agency (DARPA) are seeking innovative ways to use robots for disaster response operations. They are employing cloud-based technology that connects more than 100 teams from around the world with a network of physical robots that are capable of assisting in a disaster response situation. The goal is to help victims of major disasters, while keeping first responders safe from harm in relief efforts that pose grave risks to health and well being.
- Yarra Trams uses its IT to track 91,000 discrete pieces of equipment that make up its end-to-end tram network in Melbourne, Australia. The system uses sensors that relay vital equipment health information, such as track conditions. This Internet of Things (IoT) intelligence facilitates preventive maintenance before tracks fail. When there is a system failure, messages are pushed out to the mobile devices of customers, advising them on alternate routes they can take to their points of destination.
- Renown Health wanted to expand its health services network beyond the city of Reno. It decided to use telemedicine as part of its outreach plan to rural communities in Nevada and California. As it expanded its healthcare services market, Renown brought medical resources and expertise into rural communities that had never had access to them. These capabilities were facilitated by Renown's network, which the company had reengineered using high quality of service (QoS) standards.
- A major hospitality chain discovered that would-be customers were abandoning its reservations website because of latency issues and booking reservations with competitors, so it decided to shard its US-based master database into several smaller databases and locate them in data centers within each of its major worldwide markets. The result is that customers in these markets enjoy speed of transactions from in-country data centers and internet that they didn't experience before. Revenues in these markets have gone up.
These use case applications are diverse, but they all have one common element: innovation. However, along with innovation comes the risk of failure.
Risks and rewards
For today's CIO, a major challenge is balancing the need to innovate with a continuing climate of conservative spending in IT. In April, Gartner projected that worldwide IT spending will reach $3.8 trillion dollars this year — a 3.2% increase from 2013 — but CIOs know they have to invest wisely and conservatively. At the same time, rapid changes in the marketplace and the appearance of innovations from competitors are forcing CIOs to do more than stand pat with their existing systems.
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Toyota's Innovation Lab (iLab) is one example of the new collaboration and innovative spirit that enterprises and their CIOs are embracing to share both the risks and the rewards of creative IT solution discovery. In Toyota's case, a C-suite team that includes corporate counsel, the CEO, the vice president of sales, the CIO, and the vice president of product and marketing collaborate on innovation and share in the successes and the inevitable failures that will occur along the way.
"You have to be transparent and you have to have courage," said president and CEO Mike Groff. Central ingredients in the Toyota IT innovation story are strong partnerships and trust among the C-level executives.
Nowhere is the need to innovate more keenly felt than in the area of big data and analytics, where enterprises are expecting to uncover groundbreaking insights into age-old problems that were once thought to be unsolvable. As president of Teradata Labs, Scott Gnau directs a large staff of data scientists. Gnau advises enterprises to hire creative risk takers whom he classifies as "artist-explorers." "These individuals look at data in new ways," he said. "They are creative, and they aren't afraid to fail." But Gnau also believes that his best data scientists are those who know when to cut their losses if an exploratory approach into big data isn't producing what it was expected to.
IT as an innovation catalyst
As enterprises become increasingly global and also more "virtual" in their operations, technology — and software in particular — will play a central role in effecting business transformation. The call will grow louder for integrated, seamless, and automated business processes that are repeatable and dependable. Those processes will need to enable real-time collaboration among enterprise personnel, suppliers, and business partners, any time and from any place.
When this occurs, business functions that have traditionally been siloed, such as marketing, manufacturing, finance, and the supply chain, will be actively and collaboratively engaged with each other, sharing systems and depending upon consistent information. The CFO, the CMO, the head of engineering, the manufacturing executive, the supply chain officer, and even the CEO are unqualified to lead the charge for such massive integration and business transformation. Indeed, there is only one function that touches every base within the enterprise at global and detail levels, with actual systems integration experience: IT. It is natural for IT to be called upon to lead in enterprise innovation — or at least to enable it, when ideas flow in from other business areas.
This places many CIOs in an uncomfortable position.
In the Harvey Nash CIO Survey 2013, 71% of CIOs interviewed saw substantial innovation potential in their organizations, but only 2% considered innovation to be fully achieved. The same report revealed that CIOs preferred for their leaders to have strong visions for the future, but not necessarily to be "blue sky thinkers."
The Nash report concluded that may CIOs have an aversion to an uncertain future, and that they are by nature conservative. There is good reason for this, when you hold end responsibility for the company's governance, security, and regulatory compliance.
"The CIO's traditional role, which is one of managing information, IT systems, and cost management, has transformed to be one of creating new competitive advantage, new products, and new services," said technology futurist Daniel Burrus. "Traditionally the CEO was the innovator, but many of today's CEOs, as well as the rest of the C-suite, are unaware of what is technologically possible now or in the future. However, the CIO does have interest, access, and the understanding of that type of information and knowledge, which is why the CIO position needs to transform into the Chief Innovation Officer."
Best innovation practices
Transforming IT from a support to an innovative function doesn't happen overnight. The first step is to recognize two hard realities:
- More than 50% of IT time is spent on maintaining (not on developing) systems and applications.
- CIOs in enterprises have very high turnover rates.
In addition, a major CIO responsibility is to ensure corporate system governance, security, and regulatory conformance. These duties take time away from innovation.
Yet it's clear that enterprises are expecting their CIOs and IT departments to be innovators and not mere system technicians. As the top IT executive, the CIO must make this transition to innovation happen, while maintaining other traditional IT duties.
The heartening news for CIOs and IT departments is that there are industry best practices and empirical information that point the way to a number of successful innovation practices that work in IT.
These practices include:
Some CIOs are inherently innovative, while others are not. CIOs who are by nature innovative will find it easy to be enthusiastic about the new innovation focus that the enterprise expects from IT, and their enthusiasm is likely to ignite the enthusiasm of their IT staff. Conversely, conservative-minded CIOs will need to find strong leadership for the innovation function to serve as a counterpoint to their more cautious natures.
CIOs who understand their personal strengths and weaknesses going into the innovation process are ahead of the game. They can make upfront adjustments that complement their individual strengths in advance of starting an innovation function that will require a balance of both creativity and a conservative and practical view of when it makes sense to pull the plug on a given project.
Creating a platform for innovation
To build an innovation focus for IT, CIOs must establish an operational and political platform that will withstand failures while celebrating successes. The primary elements of this platform are political. In other words, if the CIO (and IT) are charged with creating innovation, the enterprise commitment to the effort must be more than lip service. Active endorsement and project involvement should come from the board and the CEO at a strategic level — and from a collaborative effort in the innovation process by other officers within the C- suite.
Staff across the enterprise must be able to see this commitment as well. It will be difficult to succeed in innovation if key decision makers constantly send their second-in-commands to project meetings because their schedules are tight. Staff will perceive that lack of direct involvement as a way of saying that innovation projects are not important enough to command a higher priority.
The CIO must facilitate a strong collaborative project environment in innovation with business leaders in the enterprise. Key IT staff members should also be enrolled actively in the innovation projects, especially those with demonstrated ability to think outside of the box. In addition, enterprise budget must be committed to hardware, software, and other IT-related purchases that will facilitate innovation.
CIOs should forego a major innovation commitment until they can check off all these items on their to-do list.
The strongest IT contributors might not be the best innovators. IT staff also wants to escape the mundane maintenance projects and to get into something new, so there are likely to be many volunteers for innovation projects. Since the best innovators and the most senior staff talents may not be the same people, IT staff needs to understand this situation upfront — and it's up to the CIO to communicate it.
Developing innovation methodology and visibility
Innovation does not imply unbridled project tinkering without methodology or expected results. Like traditional projects, innovation projects begin with an expressed enterprise requirement or desire and a subsequent effort to develop an IT solution to meet the need. Innovation projects then get specified, developed, tested, and if successful, deployed.
Innovation projects should be under project management methodology like any other project. Since innovation projects can produce unusual results that may or may not succeed for the enterprise, there should be methods for either moving the innovation into the enterprise or for rapidly decommissioning it as soon as it demonstrates that it won't succeed. The entire innovation process (and the status of innovation projects) should be visible to all stakeholders.
Including work processes with system processes
If IT is going to be an innovation and transformation vehicle for the enterprise, the transformations will involve work process flows as well as information flows. It is critical for the CIO, as part of innovation platform building, to cement relationships with key business leaders throughout the enterprise who understand that innovation will, by its very nature, demand changes in workflows and perhaps even policies. If the technological innovation works great but the enterprise lacks the will to modify its operational practices to incorporate the innovation, it will fail.
Expecting — and measuring — for results
It is important to leave enough "space" in innovation projects to allow for occasional failures. But it is equally important to enter projects with expectations of success and with business cases that projects are going to be measured for. In the end, innovative projects must provide enough beneficial results to warrant continuing a concerted innovation and transformation effort. More than anything, this is what IT and the CIO have to deliver.