Procter & Gamble does it. IBM does it. So does 3M. Why can't you?
Innovate, that is. According to research from Stamford, Conn.-based consultancy Gartner Inc., 80% of CIOs say IT innovation is critically important to the business. Only 40%, however, act on this imperative by funding a project or naming someone in the organization accountable for innovation. And of the projects that are launched, 90% bite the dust two years later.
So what? Well, according to another survey, this time courtesy of Deloitte, 70% of products on the market in 2005 will be obsolete by 2010. Companies need to push the envelope or perish. They must move beyond "current success" to "continuous innovation," said Gartner analyst Kathy Harris, who prepped IT execs on innovation at the recent Gartner Symposium/ITxpo. IT departments that are good partners to the business will find ways to foster innovation.
Most companies, when they do innovate, innovate from crisis, usually because revenue has declined or costs are out of control, Harris said. Innovating from success is much harder, but it can be done. IBM, under CEO Sam Palmisano, is a good example of a company that was able "to shift from success to innovation," she said.
Mere mortals can innovate, too
Harris said innovation tends to take three forms. Companies innovate their way to a big jump in revenue and operational performance; companies innovate by changing their organizational structure, a "moving the deck chairs" approach to charting new territory; and companies use their bleeding-edge customers to point them to the future.
(To capitalize on the third approach -- letting the boldest customers lead the way -- Harris says you need to systematize interactions with those customers but not box them in. For example, an online forum that asks open-ended questions generates more ideas than the usual requests for feedback.)
A "first-mover" or "Type A" company, like Microsoft or Accenture Ltd., invests millions in research and development to identify the "disruptive business trends" that will affect their markets, then works like mad to exploit those trends, Harris said. The aim of the Type A's is to build new markets.
But mere mortals can innovate, too, without all the R&D. Companies can focus on finding a breakthrough solution for persisting business needs. Or they can take one of their core values -- customer satisfaction, for example -- and try to bring it to a new level. Bank of America Corp., for example, found that improving customer satisfaction by 1% led to 3% revenue growth.
Nick Christiano, CIO at Health Quest Systems Inc., a three-hospital chain in Poughkeepsie, N.Y., says he takes a "portfolio approach" to innovation. Around 40% to 45% of the hospital's IT investment goes to basic infrastructure. Another 40% or so goes into a category he classifies as "transitional systems."
"These are the systems that are the high ROI contenders: I put in this system and I will completely retool this process and make x amount of dollars," Christiano explained. About 10 % of the transitional systems are information-based, real-time and predictive modeling systems that tell the hospital how it's doing.
The remaining 5% of Christiano's budget falls into a high-risk/high-reward category. These are strategic systems. "One of the things you always want to make better in health care is physician relationships. So one of the things we said was a high-risk area was to develop a Web-based portal that any physician can use anywhere in the world, secure and safe," he said.
Christiano says he doesn't make a move on a high-risk/high-reward project without business buy-in. Indeed, he doesn't make a move unless the business leader takes responsibility for the project.
"My role as the CIO would be to make sure that the technology itself is something that fits into an overall strategy of where the industry was going: So the technology would be Web-based; it would be interoperable; it would have certain standards on the underside," Christiano said. "But in terms of features and functions and the actual implementation and forcing the people at the frontlines to use the technology? That would be the business leader."
Actually, this is true for all Health Quest IT projects, Christiano added. "I work with the business leader, I do the technical assessments, I provide the project management, I provide any expertise, skills set and experience to the business leader -- what I know about the product, where it has been used, successes and failures -- but when the business leader gets up and says, 'We're putting in a new human resources information system,' or 'We're putting in a new medication bar-coding system' -- that business leader has done his or her job, has put together the request for proposal and gone through the responses, has met with the vendors. It was not at arm's length, they were in it up to their neck."
Road blocks: 15 minutes of fame
The biggest obstacle to innovation is the "tyranny of ideas," Harris said. Ideas, it seems, are a dime a dozen. To innovate, companies need to select the good ones and get going. Charlotte, N.C.-based Bank of America, for example, puts a three-week limit on generating ideas, then takes a vote, Harris said.
Another "big rock" stands between the selection of idea and development. Organizations stumble here because they have not thought about how to fund those good ideas, or integrate them into current operations.
How do you fix it?
First, you need to get endorsement from the business. (Gartner, not surprisingly, suggests you also might want to bring in an outside "special team" to help.) If you don't have business sign-on, "go to the next idea," Harris advised. Remember, there's rarely a shortage of ideas.
Once the business-backed idea is selected, the free-for-all culture of the brainstorming stage stops. Put someone in charge of the project, Harris says. Make sure you find someone who can foster the cooperation it will take to get the project implemented, and don't be afraid to replace that person if the project stalls.
Harris also counseled CIOs to banish the perfectionist in themselves. The IT department should not -- repeat, not -- spend months fixing broken parts of an innovative technology. As long as IT is "15 minutes ahead of the people using the process," implementation will move forward, she said.
Let us know what you think about the story; email: Linda Tucci, Senior News Writer