April 23, 2013

Innovation – Helping CIOs Get Beyond the Buzzword

“We need more INNOVATION!” I hear that so often from the companies I talk to every week. Of course every organization really does need more innovation, but too often it’s an empty buzz word with little or no follow through, with nothing substantial behind it. When you listen carefully, what these companies really are saying is, “we need to be more competitive, deliver new products and services, retain our current customers, attract new ones and grow revenue.”

That’s what I call tangible innovation. Tangible innovation gets beyond the buzzword and looks at what really can keep a company competitive in its markets. Every company says they want it, but the bad news is most companies are not structured organizationally to deliver tangible innovation.

The organizational structure of the typical company hasn’t changed in decades. The standard hierarchical and siloed structures tend to hinder innovation and re-evaluation of business models. Innovation ownership itself is a challenge. When it comes to the topic of innovation, organizational units claim their ownership stake.

However, when it comes to accountability for innovation, few claims are laid. Innovation is no longer a single organizational unit’s problem, it is a company problem and companies need to embrace delivering on innovation in ways that transcend ownership and organizational structure. When they do, they will be better able to make innovation tangible and deliver results to their stakeholders.

Take a look at the Chief Information Officer organization. The role of CIO has changed over time, but it hasn’t changed fast enough to meet the demands of today. The role of the CIO rose in prominence and prestige during the first information age, during which technological innovation was focused on systems of record. Technological innovation was focused on differentiating and optimizing business processes for competitive advantage. There was a lot of investment in the infrastructure and internal systems.

Usually internal audiences inside companies have no appreciation for what it takes for IT to merely keep the lights on. Most CIOs find the largest proportion of their budgets and resources are consumed by the cost of simply maintaining ongoing operations. This doesn’t imply it is a simple task. In fact, it is complex and time consuming to continue to evolve security, perform upgrades and the like, while at the same time looking to consolidate, modernize and reduce cost in the hopes that budget dollars can be freed up to support the growing demand for IT to support innovation.

While IT budgets have remained flat to down over the past ten years, the demand from the business is growing at a rate that simply cannot be matched. The rate of technological development and the pace of innovation today are far outpacing IT’s ability to execute. So today’s CIO is in a quandary.

They are responsible for supporting the on-going revenue producing activities of the company, thereby short-changing the evaluation and investment portion of the classic CIO role. The most pressing need today is supporting new revenue generating initiatives through innovation, driving tangible results for the company.

When you look at the demand backlog for the CIO office, the past would have seen a long list of systems of record requirements. Today, that list overflows with systems of engagement requirements largely dependent on innovation.

The tangible innovation demand on the CIO today is for building new systems, leveraging modern and emerging technologies and service models to engage customers in new ways. This engagement delivers revenues that will not only complement the revenues supported by the existing infrastructures, but likely at some point on the future replace those old revenues. Essentially the CIO is being asked to drive innovative new product development.

Unfortunately that’s not feasible for most of the reasons aforementioned. And for those organizations that can execute on the demand for tangible innovation, the timeframes for time-to-revenue are unacceptable. Most organizations do not know how to operate like software companies, but that is what CIO’s are being asked to become.

In order to succeed, CIO’s need help today, from both internal and external ecosystems. Companies today need proven partners who can help them articulate a strategy for tangible innovation that is disciplined, rapid, iterative and scalable. The outcomes of such an approach are optimized or entirely new revenue generating and competitive products getting to market in the shortest amount of time possible.

Whether most companies realize it or not, they have become software companies. But they don’t see themselves as software companies, and they are not organized like software companies. They have processes and systems that get in the way of realizing tangible innovation in a game changing timeframe.

We’re living in disruptive times of business change. The challenge today is as much one of vision as it is technology. Based on my experience, only 25-30 percent of companies truly understand the necessity to in part operate like a software company.

The 70-75 percent of companies that don’t understand this risk getting left behind, losing competitiveness and market share. They will struggle to grow their businesses in the face of rapidly executing new market entrants.