IT Builds a Better Idea

Innovation in big companies has always been treated like gold — hidden deep inside secret vaultlike labs and protected from everyone except the researchers in lab coats. When products or services emerge from the labs after years of development — and just one in a hundred does — they fail most of the time.

Faced with this lack of productivity, along with increased competition and shrinking product lifecycles, CEOs are no longer willing to rely exclusively on their internal labs. Asked in a recent IBM survey to rank their most important sources of innovation, CEOs placed internal R&D labs eighth out of nine, far behind the general employee population, business partners and customers. But only half felt that their organizations were collaborating beyond a moderate level. Worse, in another survey by The Boston Consulting Group, nearly half of executives said they are dissatisfied with their companies' investments in innovation.

Out of all this dissatisfaction emerges a tremendous opportunity for CIOs: to use IT as the glue for a new, more distributed innovation process. The CEO wants to invite customers, suppliers, independent innovation mercenaries, even competitors into the innovation process. But if these groups can't effectively communicate, collaborate and share information, this new process will be less productive than the old one. Integration — of data, of people, of internal and external organizations — is critical, according to nearly 80 percent of the CEOs surveyed by IBM. Yet fewer than half say their organizations have adequate technology integration to support innovation.

There's a job here for the CIO beyond providing the glue gun of integration support. With a process that is becoming IT-intensive, why shouldn't IT design and own the process itself? So far, however, there is little evidence that CIOs are driving the innovation train. "CIOs are the caboose," says Jeff DeGraff, associate professor of management education at the University of Michigan's Ross School of Business. "The COO and chief R&D officer have a vision, they appeal to the CEO and they all craft the innovation strategy in an off-site. Then they appeal to the CIO and say: 'How do we support this?'"

Yet with their reliance on IT to enable a broader, more global innovation process, companies may not be able to develop and maintain a long-term competitive advantage in innovation unless the CIO plays a bigger part in developing the strategy as well as executing it. "Innovation more often expresses itself on the revenue side of the income statement, and CIOs have a historical bias toward the cost side," says Robert Austin, associate professor of business administration at Harvard Business School. "That has to change."

The increased emphasis on collaboration, process standardization and integration will test CIOs' ability to lead process change in an area of R&D where they have had little, if any, involvement: the "R" part of early idea exploration and more free-form experimentation. First, they need to figure out how IT can enable many groups to communicate and collaborate without creating a management nightmare. In doing this, CIOs need to create and support standard processes for innovation so that this newly expanded and connected network doesn't crush productivity. In a recent survey by research company Aberdeen Group, more than 80 percent of business executives identified process definition and standardization as an important strategy for improving their product development performance.

In companies where innovation is a critical part of success, the need for greater IT involvement will give the CIO more knowledge of the innovation process than any other C-level executive. Whether that translates into a strategic voice in the market direction of the company will depend on CIOs' leadership skills, their personal relationships with their CEOs and these CEOs' own views of the strategic value of technology.

Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.

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