Timing is Everything

Bleeding, leading and trailing edge technologies all have a part to play in the modern enterprise. But how does a CIO pick the right time to invest? The key to mastering innovation, say local experts, is to never fly too high without a safety net.

The number one recommendation from Australia's National Innovation Summit was for the nation to "develop a broad innovation culture in the community". It is the sort of motherhood statement that will not offend anyone bar the staunchest Luddite.

The 2000 Summit argued in favour of a closer alliance between industry, education and research and government in order to restore Australia's appetite for innovation, and hence its ability to compete internationally and prosper. Innovation, it argued, was the only way forward.

But is innovation always appropriate when it comes to information systems, especially in turbulent economic times? The IT vendors would certainly have us believe so, and past generations of killer apps have demonstrated there are payoffs for innovation. Yet Australian corporations at the pinnacle of their industry sectors operate mainframes running assembler code, suggesting there is no need for technological innovation for its own sake.

Derek Goh is the general manager of IT for Challenger Financial Services Group, which recently merged with CPH Investment, and he believes there are occasions when information systems innovation is essential, and other times when it is less appropriate. "Innovation itself is key in the financial services industry; but the landscape has changed," he says. "Seven or eight years ago the funds business was a growth business and you just went with the wave. Now it is more of a semi-matured business, and you have to be quite innovative to have a place in the market.

"You have to consider the business framework. When you are in a semi-mature business you will be dealing with legacy products where the key driver is offering service to the existing investor. You need to be efficient, but innovation is not that important. Then there will be growth areas where differentiation is the key, and finally there is future product where innovation is everything." Challenger, Goh says, operates in all three environments.

He adds that within this business framework it is important for the CIO to recognise the implications for not just the technology, but for the business processes and people as well. "When you structure your team and look at your capability to compete in this sort of environment, you need to deal in different mind-sets and you need the right people. A key challenge is to get good people to maintain all three systems. You have to make sure they have career development opportunities and transition paths."

Until November 2001, Goh was the general manager of IT for Colonial First State, eventually leaving to start a consulting practice. When Challenger appointed Chris Cuffe as chief executive, he personally approached Goh to take on the IT role for the business. Goh likens running a financial services company's IT shop to being commander-in-chief of a modern day military campaign.

"It's like the recent campaign in [Iraq] where you have an air, land and sea, all-in-one campaign; whereas in World War II these were all separate operations," says Goh. "Today [our effort] is coordinated. We have one campaign comprising legacy, growth and future systems; the management challenge is to make it move as a whole and maintain harmony." To achieve that, says Goh, demands a focus on the people. He believes he has a strong team, capable of helping Challenger quickly elevate its information systems capability, which he acknowledges is presently somewhat behind its major competition.

Goh believes there are three levels at which a financial institute can compete via its information systems. First, through its transaction capability and the efficiency at which it can run those systems; second, through information competition by use of data; and finally via knowledge-based competition, which is more about business intelligence. "Our goal is to move towards business intelligence competition," says Goh. Which, as the innovation statement suggests, will require an innovation culture to support it.

Ron Johnston is the executive director of the Australian Centre for Innovation and International Competitiveness, and he suspects that the level of innovation in each company is largely decreed by the competitive factors at play in specific industry sectors.

"First, innovation in information systems is very sector-specific and will vary between manufacturing and mining and services, for example. Beyond that there seems to be an effort to extract the maximum value from existing systems which leads to incremental advance. But for the companies that are marked by innovation there seems to be some capacity to develop new approaches.

"There was a BCA study 10 years ago that suggested businesses need to combine this sort of incremental innovation with step change," says Johnston, who believes that finding still holds true. However, he notes that today business is far more risk averse than it was a decade ago - in part because the risks themselves are greater thanks to higher levels of uncertainty regarding the business climate, and much shorter business cycles. "The variety of risk is much greater," he says.

In addition, there is a growing population of companies that had been prepared to accept risks and explore new opportunities, which then came unstuck in spectacular fashion. Johnston offers the example of the AMP's bold push into Europe, including the relocation of its global CIO to London, as a strategy that foundered. Naturally, other companies observe that experience and adjust their own strategy to be more risk-averse.

Join CIO, the CIO Executive Council & IDC on 6 October at Australia’s premier Melbourne event for senior IT executives – the CIO Summit 2010. Find out more or register now.

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