C-Level Execs Miss The Business Model Innovation Boat

C-Level Execs Miss The Business Model Innovation Boat

CEOs, SVPs and CIOs talk a good game about wanting innovation. But I think it's all talk, not much action.

Let's look at a few revealing surveys. First IBM in 2006, then McKinsey in 2007, went out and surveyed top execs about the importance of innovation on their priority list. They each asked a few questions to see if execs put their muscle where their mouth was. In the 2007 McKinsey study, 70 percent of 722 SVPs and above said that innovation was among their top three priorities for driving growth. Uh huh. But fewer than a quarter of top responders indicated that innovation budgets or targets are decided at the top. Whoops. And more than half of the executives said that their firms are primarily focused on product and service-development within the business units.

Now let's look at the IBM 2006 survey of CEOs. Here the majority of 765 global CEOs identified business model innovation (a new way to interact with customers or partners) as critical to their future success, more important than product or service innovation. Understandable - since, according to the IBM study's analysis, business model innovation delivers better operating margin growth than the capital or labor investments to produce new products and services. Now that's a problem. Funding product and services but wanting business model innovation.

Now let's get the CIOs into the picture. In the 2006 IBM CEO survey, IT didn't make the top nine sources of innovation named by CEOs - and worse, IT was named as one of the barriers. But in 2007, 80% of an IBM survey of CIOs believed themselves to be a valued member of the senior leadership team, and 69% indicated they were significantly involved in strategic decision-making.

What's going on here? Of course, you don't need surveys to know what's broken. CEOs want business model innovation. But they don't ask the one organization to help that is most capable of delivering it, even though, according to IBM, CIOs are (proudly) represented at the executive table. Whether that is a smarter online ordering capability to augment stores, using business services to provide a front end to local service delivery in emerging markets, offering a smart predictor of maintenance, or selling products on Second Life, all of these business model innovations are built on technology capabilities managed by CIOs.

It's sad, really. If the CEO doesn't ask and the CIO doesn't suggest, or the CIO suggests and is ignored, do companies have to wait around for some business exec to make a suggestion before they will focus on what is right in front of them?

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