There is a lot of buzz about innovation in IT and more than a few articles urging CIOs try to become “chief innovation officers” to find it. However, the way companies find innovative business uses for technology is changing and so is IT’s role. In our recent conversations with CIOs, we’ve identified three areas where traditional approaches to innovation in IT need to be rethought.
1. Most technology innovation no longer comes from IT
We define technology innovation as applying technologies in ways that are both new to the industry or sector and that have business impact. Business leaders understand their customers, competitors and operations better than IT staff do, so despite the costs and risks, it’s hard to argue that they aren’t best placed to identify the most promising innovation opportunities.
This is exactly what is happening as more than 75% of business leaders are now willing to evaluate and select technology tools by themselves. As business leaders participate more actively, the role of IT changes. IT staff may not come up with the ideas, but they need to be there as the ideas are proposed, and be ready to help develop and improve the idea. This requires a change in mindset among IT staff. They need to be ready to challenge business leaders about ideas, act as thought partners and suggest alternative approaches. They also have to overcome an aversion to ideas that are risky or have (as yet) uncertain business cases.
2. Technology innovation should be about employees, not just customers
Innovation in digital marketing attracts a lot of attention, but technology innovations that boost employee productivity is at least as important. When we surveyed several thousand business executives, they told us they need a 20% increase in employee productivity to meet their goals in the next five years. To put this target into perspective, it requires more than double the historic rate of productivity growth.
Work has also become more interdependent so that half of an average employee’s contribution to business performance now stems from their ability to help others and be helped by others. At the same time, more than 80% of employees are in roles that involve knowledge work. These two trends significantly increase the value of better collaboration and analytics tools.
Employees recognise this and seek alternative sources if IT doesn’t provide the capabilities they need. Today, the majority of employees use personal devices for work purposes, but it doesn’t stop there. At least 25% of employees have started to obtain applications or data from external sources. This trend needs to be managed to reduce risk, but can’t be stopped. Instead, IT should look at the unofficial tools employees are adopting, spot the best ones, and spread the word to the rest of the company. Employees who routinely find innovative new tools should be treated as lead adopters, not rogue users, as their tool choices are a good indicator of what other employees will need in the future.
3. The real challenge is idea exploitation. not ideation
As more innovation ideas come from business leaders and employees, the real challenge for IT becomes idea exploitation – taking good ideas and helping them to develop.
When innovations are proposed, the real uncertainties often relate to the business model, not the technology. In other words, “will it make or save money?” or “will anyone use it?” not “will the technology work?” Answering these questions requires a different approach to prototyping. The prototype should test uncertainties with the business model, not the technology, and so it can be partially or even entirely manual.
An insurance company we spoke to told us how this can work in practice. They had an idea for a website that gave instant quotes for insuring high-value items such as works of art. The real innovation was instant quotes, not the ability to quote online, and the uncertainty was whether instant quotes would generate new business. The prototype they built was entirely manual – an underwriter in a call centre who could give instant quotes by phone. This confirmed that speed to quote was a differentiator and only then did they build the technology.
Another hurdle to idea exploitation is scaling the idea once it has been proven. This is one reason why a growing number of organisations are adopting an end-to-end IT services model. Unlike traditional service management models where service managers run services but don’t build or enhance them, end-to-end service managers are expected to be entrepreneurial enough to push through innovations in their service. The service managers are close enough to the service users to spot promising innovation ideas quickly, and the service model creates a ready-made platform for scaling ideas as they can become new components of existing service offerings.
By recognising and responding to these three changes, CIOs can position IT to play a valuable role in business and technology innovation.
By Andrew Horne, managing director of CEB