Innovation is hot. There are a huge number of articles about being innovative; every company wants to think of itself as innovative; consultants warn us that only innovative companies will survive and grow.
But what is innovation, and how can IT participate in a central and valuable way?
This post, written by Stephen Kell, explores these topics.
Innovating to Create and Increase Business Value
I believe the main characteristics of innovation are new ways of doing things that help an organization or community realize more value from strategies and investments.
For a company, benefits could be either greater efficiency, new revenue streams, or improved brand perception. For a not-for-profit organization, innovation could produce benefits that increase social impact and the value of services provided to a community.
Innovation Categories Supporting Value
In order to manage innovation ideas, I categorize innovation into three different types:
Continuous Service Improvement Innovation
Small changes or improvements which can have huge impacts on the cost and quality of service delivery
Cross-Industry technology mega-trends that have emerged to offer potential business value
New business models based on new value propositions, disruptive new entrants, technology disruptors.
Can be organizational, process, systems, or facilities.
Industry and market trends, drivers and disruptors and their business impact
Innovation distinguishes business from competition
By categorizing types of innovation, we can apply different processes to the different types of innovation.
Continuous Service Improvement
This type of innovation can come from anyone within the organization and the ideas are often collected by an ideas hub, enabling people to vote for the ideas. The ideas are then passed to a panel from IT and the business to decide whether to move forward with the ideas.
If the idea goes into production then the business often makes a token award to the innovator. These ideas are often small changes but can have a huge impact on the bottom line, making it worthwhile to collect the ideas and sift through them in order to find the real gems.
Technology Led Innovation
Technology Led Innovation is based on new technologies which are potentially disruptive. The IT organization monitors new and potentially disruptive technologies and assesses impact to the business. When valuable technologies are identified, they are then used to create a proof of concept. In order to realise full value, an enterprise will need to create a business change program to accompany the technology project.
This type of innovation is where the most value is derived, but also the most risk encountered. Here, business models are developed around new technology or new value propositions. Companies pursuing business innovation are seeking value propositions that are fundamentally different from that of their competitors. Innovative ideas end up at the board level, although initial ideas can come from anywhere in the company.
An example of a technology led business innovation is eBay, which imitates auction houses but with a different, more accessible business model.
A useful book that discusses this type of business innovation is “Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant,” W. Chan Kim and Renée Mauborgne, Harvard Business School Press, ISBN: 1591396190.
Making the CIO a Partner to Innovation
Companies are very dependent on technology in order to perform their business. The CIO should, therefore, be a key member of the executive management and be seen to be one of the leaders of business strategy and innovation.
However, all too often the CIO and IT department are seen to be the providers of infrastructure, a view that may inhibit innovation because of business restrictions to help ensure security and system integrity.
In order for the CIO and his IT department to be seen as a valued business partner, the CIO has to demonstrate how IT is adding real value to the business by business innovation. Otherwise the CIO may be side-lined as just a provider of infrastructure services, and the business will look for other sources of innovation to add value. Sometimes enterprises even establish rival organizations to IT under a Chief Digital Officer or a Chief Innovation Officer.
Connecting IT Innovations to the Business
Though IT departments sometimes set up “innovation centers,” they all too often stay restricted to testing new technology or upgrades to existing applications or products, with little relevance to the business.
In order to be relevant to the business, innovations have to be linked to business strategy or business initiatives; innovations have to be solutions to business challenges; innovations need to focus on realizing more value from operations, sales, employees, customers, and other facets of the business.
The types of tools that can be useful to drive this relevance and to show the value of the innovations are:
- Business capability mapping and maturity analysis
- Analysis of the underlying IT services which are delivering business capabilities
- Benefits Dependency Networks (BDNs) to link the IT and business changes to the investment objectives and business drivers.
These techniques are useful for demonstrating the relevance of innovations to a business and the value generated from innovations.
Thinking in Different Boxes
When discussing creativity or innovation, one mantra is “think outside the box.” However, I would instead agree with Luc de Brabandere (Thinking in New Boxes: A New Paradigm for Business Creativity, Random House, ISBN-10: 055384119X), who advocates thinking in different boxes.
Brabandere points out that people think in structures and models, not in a vacuum. Therefore a person’s thinking is bounded by the box that he or she is thinking in. In order to be truly innovative or creative a person needs to think in a different box.
The Beatles, one of the most creative bands that shaped the music we listened to for decades after they split up, thought about music in many boxes, including a new one that combined Indian music with jazz and blues. The band embraced the diversity of different cultures to come up with something truly innovative.
Similarly, by embracing the diversity of their employees, rather than trying to fit them to a mold, organizations can become more innovative. Organizations can find different boxes by challenging the way they look at themselves and exploring if there are other ways of categorizing themselves.
Innovation is the life-blood of an organization that wants to grow. But innovation must be linked to business value to be effective. Technology is one of the key drivers behind innovation and the CIO must be one of the innovation leaders in partner with the business. The business and IT leaders should not challenge the organization to think outside the box but rather provide pointers to different boxes that employees can think within to innovate in valuable ways.
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