IT innovation -- once a nice-to-have -- is now considered a necessity for gaining competitive edge. With globalization, changing customer behavior, the spread of consumer technologies and cloud capabilities lowering the barrier of entry to new competitors, organizations are increasingly looking to technology-induced innovations to distinguish themselves in the market.
But we're not talking about one-off great ideas, says Chip Gliedman, an analyst at Forrester Research. "Companies need to instill processes, governance and incentives to support a continuously sustained innovation program," he says. Otherwise, it's all too easy to revert to day-to-day operational concerns and avoid the risk of failure that is a faithful companion to creative pursuits.
There is no one-size-fits-all approach to jump-starting an innovation program. Some organizations, like CapitalOne and MasterCard, create "digital labs" to foster new ideas and bring them to fruition. Others, such as the American Cancer Society, form steering committees to guide smaller core groups. Still others, like Grange Insurance, take a skunk works approach, while organizations like Equinix choose a decentralized model of innovation.
We spoke with those five organizations to find out how they are building their futures on innovation.
Where do you position the innovation group, organizationally?
" Equinix: Innovation at this global data center provider happens in pockets around the company, with support from top leadership. "Instead of centralizing innovation or having a badged team, we have smart engineers, applying a concentrated effort to real business opportunities," says CIO Brian Lillie. Small teams periodically submit ideas and, when approved, are given resources to pursue innovations. A challenge of this approach is freeing people from day-to-day work. "We have to be clear in our minds that we're putting our best engineers on our best opportunities, not our biggest problems, and we don't hammer them when they drop the ball on something else while they're innovating," Lillie says.
" American Cancer Society: At the nonprofit health organization, a cross-functional steering committee sets the rules of engagement for innovation and provides executive-level "air cover," as well as support, motivation and engagement, says CIO Jay Ferro. Meanwhile, a core innovation team works at an operational level. All employees are invited to submit ideas through an innovation management platform, and the core team manages the entire process, from submission through approval. "With 12 divisions and hundreds of locations around the world, it was important to approach the ideation process in a unified way rather than having different sets of ideas aimed at different goals," Ferro says.
" CapitalOne: The financial services company set up three innovation labs in New York, the Washington, D.C., area and San Francisco, all intentionally placed in the middle of technologically innovative cultures, according to CTO Monique Shivanandan. "We combine technology people, data analysts, marketing people, brand managers and product managers in the labs to be sure we're focused not just on cool technology but innovative products and services to delight the customer," Shivanandan says. She points out that the emphasis of the innovation lab approach is more about establishing an innovation "ecosystem" than it is about setting up a physical facility.
"You could get a conference room, put a paper sign up and designate it as 'the lab,' and you'll have a structure in place," she says. "Even with just a handful of people, you can foster a culture of creativity, as long as they're not operating in a vacuum but with the right folks across and outside of the business, to drive results that are valuable to the business and its customers."
" MasterCard: The payment industry giant formed MasterCard Labs in 2010 as a global R&D arm focused on developing innovative payment solutions. Labs are located in New York, St. Louis, Dublin and Singapore. Additionally, MasterCard Labs works closely with business owners to spread the innovative spirit across the company, says Garry Lyons, chief innovation officer.
" Grange Insurance: A core group of business and technology professionals meets monthly at the $1.3 billion insurer to brainstorm opportunities to move the business forward with new technology and then uses agile practices to explore the feasibility of ideas and bring them to fruition.
The group is purely focused on driving profitable growth, says Michael Fergang, CIO: "Every group has goals for continuous improvement, but we focus on new technologies that will help Grange differentiate itself in the marketplace." Because of their business acumen, Grange's technologists are in a prime position to link new technology trends with new opportunities, according to Fergang. "The business can't envision what can be done, because by themselves, they can't imagine the applicable technologies," he says.
Because of this skunk-works-type approach, passion is a requirement, Fergang says. "We will never have the capacity to support the demand," he says. "It takes the ingenuity of the individuals and their managers to reshuffle their work. We're not Google, where people get every fifth day to innovate."
How is the innovation group staffed?
" Equinix: Rather than appointing someone as "the innovation guy," Lillie says, "we try to hire creative, idea-generating people." For instance, job candidates are asked during the interview process how they would solve particular business problems.
" American Cancer Society: The organization's innovation steering committee includes senior leaders from marketing, operations, mission delivery and corporate communications. "I'm the only IT representative, and that was key to showing this wasn't just IT doing new things but a commitment to impacting the organization," Ferro says. Meanwhile, the core innovation team includes just three people, with an additional dozen or so employees from diverse functions and geographic areas rotating in and out of the group, each serving about a year.
"These are folks who live with functions like fundraising and the advocacy mission every day," Ferro says. "That diversity is one of the secret sauces to innovation." Workers from the rank and file, he says, tend to offer more radical ideas, while executives can be more risk-averse. The trick is capturing the best of both worlds, Ferro says. That means securing unquestioned support for innovation from the CEO on down. "That is a core tenet of innovation at ACS," he says.
The Innovators Speak Out
"I truly believe innovation can come from anywhere."
-- Brian Lillie, CIO
"We're focused not just on cool technology but on innovative products and services to delight the customer."
-- Monique Shivanandan, CTO
American Cancer Society
"We're not Google or Facebook, but that doesn't give us license to be stagnant."
-- Jay Ferro, CIO
"Supporting breakthrough innovation efforts is at the heart of differentiating MasterCard from our competitors, and key to sustaining our competitive advantage in the marketplace."
-- Garry Lyons, chief innovation officer
"With the right business acumen, and the right understanding of technology trends, IT can deliver solutions that the business could not have fathomed."
-- Michael Fergang, CIO
Compiled by Mary Brandel
" CapitalOne: When staffing its labs, CapitalOne combined "the best of the best" from its internal teams and then hired people with business or technology backgrounds and expertise in areas such as startups, rapid prototyping, agile processes and technologies like mobile, big data and the cloud, Shivanandan says. CapitalOne has also acquired several startups to seed its labs with specialized technology or business skills, such as mobile coupons or data analytics.
Lab staffs are kept small, Shivanandan says, with 20 to 45 team members in each lab, including technology and business experts. Additionally, people from business units typically get involved in projects aimed at their particular area. "We are one of the best data companies in the world, so we have a lot of people who understand how to use data," Shivanandan says.
Because of the lean staffing model, the labs find that their services are always in demand, but they're also able to respond quickly. "They're viewed as a necessity, not a nice-to-have," Shivanandan says. "When people get something out of the lab, it's seen as a privilege and a great opportunity."
" MasterCard: Lyons says he looks for smart, creative people "who have an appreciation of how technology can make people's lives easier." They don't necessarily need to have a background in the payments business; in fact, Lyons prefers candidates with different backgrounds and perspectives. "I have access to a lot of phenomenal payments knowledge at MasterCard, so I want to hire people with other skill sets," he says. "I believe that if you know too much about a domain, you either start with the premise that something isn't possible or you can only incrementally improve what already exists."
" Grange Insurance: Grange's innovation group includes programmers and business people at all levels, Fergang says. "It includes myself as CIO, down to relatively junior programmers," he says. People rotate in and out of the group every couple of years -- an approach that helps up-and-comers get to know higher-level managers.
How do you establish processes and expectations for delivering ideas and bringing them to fruition?
" American Cancer Society: After reviewing best-of-breed innovation processes, the innovation steering committee established specific processes for the core innovation team to follow, from encouraging idea submissions, to vetting ideas, to deciding which to pursue. Once an idea moves forward, it moves into the standard project management life cycle.
The innovation management platform ensures that these processes are followed without a lot of direct oversight, Ferro says. One of the basic tenets is focusing the ideation process on specific business issues. Workers from around the world can comment and vote on one another's ideas. The core innovation team reviews ideas that get a lot of thumbs up and also scores ideas itself, using criteria such as mission impact, cost savings, community outreach and risk mitigation. "This isn't a glorified suggestion box; it's about how to do things faster or deliver higher quality on a program," Ferro says.
The crowdsourcing approach yields fresh ideas with minimal resources, Ferro says. "You don't want to dedicate 100 people to innovation, but if you crowdsource ideas from people who might never have interacted before and then use a small core team to manage the process, a natural evolution takes hold," he says. "The speed of innovation is rapidly increasing."
" CapitalOne: Within the labs, staffers are split into small teams that follow agile processes, such as frequent iterations and fast prototyping. The environment itself -- including whiteboard-covered walls -- encourages creativity and brainstorming.
Each lab has a main focus for innovation, Shivanandan says: leveraging big data for better products and services in New York; mobile wallets, couponing and other digital services in Virginia; and opening the company's banking APIs to third parties to provide additional services in San Francisco.
The labs make monthly presentations to the steering committee on current projects and lessons learned. "The teams are agile and quick, so they get a lot done each month, and when something happens in the industry, we can quickly reprioritize," Shivanandan says. "We're really trying to create a tiger team to focus on the art of the possible."
Importantly, each lab's focus is well integrated with business goals. "It's not just this cool place where people do crazy things," Shivanandan says. "There's a prioritization process, and it's integrated with the work people are doing on an everyday basis."
" MasterCard: Each lab has three priorities: innovation management, technology and incubation. The teams work closely together to generate ideas, evaluate them and then define concepts, build prototypes and use a test-and-learn approach to see how those ideas will fare in the market.
The teams aren't judged based on hits and misses, but on their ability to apply lessons learned to what does eventually succeed, says Lyons. "We want to be honest with ourselves about whether or not ideas are viable," he says. "[That] involves failing fast and making the tough decision to stop work when it's appropriate."
Additionally, the company sponsors processes that spur innovation from its employees, Lyons says. For instance, more than half the company has participated in Aspire, an online, social collaborative brainstorming program, he says, and employees are also given time to work on ideas that they're passionate about. Meanwhile, Innovation Express is a 48-hour competition to build prototypes, video demos and go-to-market plans, and KickStart is a fast-paced, time-boxed, dedicated startup-like environment to accelerate commercialization of a product.
" Grange Insurance: During monthly meetings, the innovation group discusses opportunities, uses a heat map to rate ideas with the lowest risk, lowest cost and highest value and assigns skunk works groups to investigate applicable technologies and idea feasibility. Individual teams do some prototyping and provide updates at the next meeting. Once they have something to show, they share the prototype with business leaders. "When you have something that someone can visualize, you gain support more quickly," Fergang says. When approved, projects get funded and enter a formal project management process.
The key is speed: Prototype fast, and fail fast. "We don't choose 30 things to pursue," Fergang says. "We scale back to just a few and then do them as fast as possible." About twice a year, the group conducts a show-and-tell, inviting business leaders to see a range of prototyped ideas.
" Equinix: It's crucial to recognize that some ideas don't pan out. At Equinix, "no one is penalized" for failures, because failing is part of learning, Lillie says. In fact, one engineer learned so much about hybrid clouds through a stalled innovation initiative that he now helps educate customers on the topic. "Not everything is going to work out, but it's all great learning," Lillie says.
What are some tips for getting executive buy-in and funding?
" CapitalOne: Early in her tenure, Shivanandan organized a "scan trip," which involved taking a group of business and technology executives to visit with innovators and startups, including Google, Facebook and Square, to answer the question, "What is innovation in the banking industry?" "I wish I could say I did it intentionally to get everyone jazzed up, but that was the ultimate result," she says. "It was an 'aha moment' that really showed us there's a lot happening and that technology is a key enabler to banking in the future." Nine months later, the company secured a physical structure for its first digital lab, hired a leader and assembled an agile team to get started.
" American Cancer Society: For Ferro, securing innovation resources hinges on showing senior executives something concrete. "You need to give them confidence that this isn't some nebulous thing," he says. Another important element is focusing innovation around specific objectives. "When executives see you're targeting innovation at outcomes that matter and not aiming it blindly, they derive comfort from that," Ferro says.
Ferro dedicates a small percentage of the IT budget to experimenting with new ideas and spinning up proofs of concept. Before they are moved further in the process, ideas are subject to a more formal review. "Our process recognizes good ideas, so that even if we didn't plan it for 2013, for instance, we will pursue it if the ROI makes sense," Ferro says.
" MasterCard: Above all, says Lyons, having a CEO who understands the importance of innovation is critical. It also helps, he says, to show how the work done by MasterCard Labs enables other company efforts to succeed. Because Lyons reports to both the president of the technologies and operations division and the president of the global products and solutions division, "together, we can work through the really tough questions about why we should advance one idea or another," he says.
" Grange: Fergang agrees that the more you can show business leaders something concrete, the more they will back innovation. "When the business realized we were expending energy on innovation that could have been applied to known production needs, they asked, 'What are you doing?' Fergang says. "But when we started showing them our prototypes on a regular basis, that went away." The key, he says, is to gain the trust of business leaders by executing well on the basics. "You can't apply resources to innovation when you're not taking care of the rest of the business," he says.
" Equinix: The main thing, Lillie says, is to ensure innovation is focused on moving the business forward. "It's important to stay not only current with customers but, really, even ahead of them," he says. To fund innovations, Lillie takes an indirect approach, reserving a portion of his budget for innovation projects. "I don't formally say, 'This is our innovation budget,'" he says. "But in my budget [request], I always leave an earmark for innovation."
How do you involve external organizations?
" CapitalOne: Establishing a community with technology companies, academic institutions, startups, venture capitalists and collaboratives is essential to innovation, according to Shivanandan. CapitalOne works with MIT, Stanford University, Georgia Tech and the University of Virginia on research initiatives and is active in communities such as Fintech, an annual program run by the Partnership Fund for New York City and Accenture to encourage startups developing cutting-edge financial services technology products. The company also participates in hackathons and has sponsored some of these events in its lab.
" Equinix: After hearing a speaker discuss gamification at the Innovative CIO program at Stanford University (which Lillie helped develop), Lillie worked with Deloitte to revamp the company's sales processes using gaming principles and ideas. "We brought these ideas back from Stanford and drove them into the organization," he says. The sales system incorporates game elements such as leader boards, rewards and avatars and is being deployed across the globe, Lillie says.
" American Cancer Society: Ferro agrees that innovation is spurred by communicating with outsiders, which in his case include businesses like IBM and Johnson & Johnson. "We look at how we can learn from the industry standards and best practices in the private sector and apply that to our organization," he says. An example is a recent conversation he had with Terry Jones, founder of Travelocity, who emphasized the importance of being open to everyone and everything. "The trick is not getting overwhelmed by all the input, and that's where having established innovation processes comes in," Ferro says.
" MasterCard: According to Lyons, MasterCard Labs taps into a number of external sources to spark innovation and is currently opening up its services to others through open APIs.
" Grange: The innovation group occasionally shares prototypes with customers to get their input on the idea's value. Additionally, Fergang is involved with TechColumbus, a public/private partnership focused on central Ohio's innovation economy. The ideas shared by entrepreneurs and startups help him keep up with what people outside the insurance industry are thinking about.
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