New wealth-creating strategies don't just happen, they need to be nurtured.
IT-based opportunities (ITOs) are innovative opportunities with a significant IT component that enable the business to do something differently. Capitalising on ITOs fuels the pace of innovation in all businesses, not just leading-edge industries. Yet few businesses do it well. That's because the special characteristics of ITOs demand two management processes which seem to be at odds: the creativity to generate and initially nurture a wealth of initial possibilities, and the discipline to assess and progress just a small number of these.
ITOs are unpredictable; at birth, you don't know how they are going to turn out. They are inherently risky and can't be managed like conventional IT-related projects. But fail to seize an ITO, and you risk your competition stealing a march on you. And the window of opportunity is getting smaller each week.
The real secret is to generate many ITOs for preliminary investigation and then rapidly reduce these to just a few. The few emerge through rigorous management and evaluation procedures to become highly productive opportunities. But this doesn't just happen. There are many bright ideas that wouldn't get through the usual planning and justification processes, or maybe they come from another part of the business. For example, you have a great idea which links two business units or which is about a new or different part of the business. Where do you take it? Is there a transparent process that everyone understands for assessing bright ideas? In our work with Gartner Executive Program members we found a whole range of effective approaches.
For example, British Airways established the eBA group as an incubator and development factory. eBA dreams up e-opportunities, assesses their commercial viability and develops them to the point where they can be handed back to mainstream operating managers in the business. DHL International's Business Development Group focuses on disruptive innovations, that is products or services not prompted by customer input. The focus in DHL is not on what the customers ask for but more on the underlying benefits they are seeking to achieve.
All effective approaches had elements of three processes: a generation process which deliberately created many possibilities; a development process with a good mix of competencies, people and disciplines; and a transfer process with the ability to transfer high-value ITOs to the mainstream. Though opportunity management is primarily a business discipline, the role of IS is critical in all three processes.
Generate many potential opportunities.
The generation stage has three steps starting with the ability to conceive a lot of bright ideas initially. Then the challenge is to rapidly reduce the volume of ideas to a much smaller number worth pursuing and ratify a selected few in readiness for the development stage.
To conceive ideas that will be useful, you need to set some boundaries. The boundaries identify what's in scope and what's not. One way to do this is to build consensus through regular meetings of key managers. Another is to bring together purposely-mixed groups across businesses and hierarchies and challenge them with reinventing the business or taking on the role of their competitors.
IS should be deeply involved. As well as joining with the business staff in all three steps, IS should harness IT to help track and predict the impact of the kind of emerging technologies that trigger ITOs in your industry, and help boost the productivity of creativity.
This technique is currently being used by the UK Post Office, which has established an internal venture fund to provide an incubation centre for innovative ideas. The average budget for an individual idea is $US130,000. The research group is responsible for encouraging managers to think of innovative ideas and enrol them in the fund. It also educates managers about new technologies that may potentially impact their area.
Develop ITOs through sense-and-respond with constant evaluations.
The next stage is developing the ITO. Because of the inherent uncertainty, this stage comprises a succession of short sense-and-respond (trial-and-error) steps that allow you to feel your way into the future. The idea is to sense the opportunity, then to respond with a fast, cheap experiment. Progress is punctuated by frequent evaluations by a panel separate from the development team. This can be tough, but building up the expectation that the filtering process is continuing is really important.
The whole development stage should run through in no more than 90 days. The aim is to show how the technology can support a new, innovative way of working. Finally, test and demonstrate the prototype.
An evaluation panel should decide what happens next. In the best case the ITO proceeds to another iteration or moves into the transfer stage. In many instances the opportunity should be killed off. Either way, any learning should be recorded and reused. Killing a carefully evaluated ITO off at this stage should be seen as a positive move!
The IS organisation's key role in the development team is to quickly prepare and demonstrate prototypes. There is a possibility, too, for the CIO to serve on the evaluation panel.
Within Gartner we have an Innovation Council (GIC) responsible for mining, capturing, prioritising and capitalising on good ideas which otherwise might not get taken up. The process is transparent and the steps and outcomes are well communicated. Simple and standard templates are used at each stage of the process. GIC members use a "business case rating sheet" and "quick assessment template" to decide whether the idea should be killed, or have resources allocated to develop a business plan. The business plan outlines in fine detail all the elements of the business along with a complete "go to market" strategy. The resulting business plan is evaluated to determine whether to continue development. If successful, a comprehensive launch plan is funded which details exactly how this new business is going to commence operations.
Transfer ITOs in the right way to the right managers.
Transfer is the third and last stage in the process of creating an ITO. There are two steps: linking with operating managers to gain their allegiance, and handing over. Probably two thirds of the IS budget allocation of ITOs is likely to go on the transfer stage. Though important, IS's role in this stage - ensuring systems implementation - is little different from its role in supporting more conventional projects.
Several things improve the success of transfer. Try to arrange for the ITO champion and the manager responsible for the operating team to be the same person. Involve the IS staff during the development stage. Learn how to recognise tree huggers and try to circumvent them.
Barilla, an Italian producer of pasta and bakery products we worked with, is an example where the ITO champion and the responsible manager are the same person. Currently the warehouse manager is championing the evaluation of radio frequency tags on stock, which will allow goods entering and departing warehouses to be automatically monitored.
In some cases, disruptive ITOs should be implemented in a "spin out": a separate start-up on a green-field site where more appropriate values and cultures can take root. A recent example of a spinout is yourautochoice.com, which sells Avis Europe's used cars. The company expects a large percentage of future clients to come via the Internet. Consequently, a separate company was formed to manage this start-up.
Manage the pipeline of ITOs to balance risk and return.
Successful enterprises then need to manage a pipeline of many ITOs, each one at a different stage. This also ensures that the risks, returns and resources of the ITOs stay in balance. And it monitors the success of ITOs following rollout, so that earlier stages can benefit from the feedback.
Don't underestimate how many ideas you need to generate to have a reasonable implementation rate. According to a survey of US corporations (published in Research Technology Management in 1997), it takes 125 well-formed, unwritten ideas on average to yield one commercial success.
Assume it takes five months on average for an ITO to traverse the length of the pipeline. To commercialise one ITO a month, more than 300 must be in the pipeline at any point in time, of which 30 would be in the combined stages of development and transfer.
Managing ITOs matters and it's set to become a key management discipline. There's too much at stake for it to be a hit-and-miss affair and one of the great risks many organisations now face is not having an ITO pipeline. How many ITOs does your organisation have in process now? How are the creators and nurturers rewarded?
Dr Marianne Broadbent is Group Vice President and Global Head of Research for Gartner's Executive Programs.
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