For most businesses, their next critical step is business transformation. But the step after this needs to be innovation. But how are the two terms reconciled when so often they are put together. According to Isaac Sacolick, author of Driving Digital, “innovation is something new while transformation is about business change.”
We hear much discussion in the press about the CIOs role in transformation, but what is the CIOs role innovation? And what steps can CIOs take to assist their businesses with innovation?
The CIO’s role in business innovation
CIOs suggest that the CIO function needs to become a driver of innovations that are beneficial at the organizational level. These should be about establishing new business capabilities that offer competitive advantage to the business as a whole. This means CIOs lead delivery of “capabilities-driven strategy.” This strategy is focused upon optimizing “the underling mechanism of value creation in a company” (The Essential Advantage, Paul Leinwand and Cesare Mainardi, Harvard Business Press, pg 19). To be clear, a capability is defined as “the ability to reliably and consistent deliver a specified outcome, relevant to the business” (pg 23).
At the same time, CIOs say that it is their job, where needed, to be an ‘educator’ to the rest of the business on the potential coming from innovation. Sometimes this means partnering with business leaders and others to sharing ideas, POC results, and business cases for innovation. CIOs believe the need for a “change instigator” (Deloitte deserves credit for the term) will vary from industry to industry. In higher education, for example, technology is not considered the product of the organization, so the CIO role is typically a co-instigator and co-creator. Here the CIO must introduce new possibilities that others may not see.
Additionally, the ability to facilitate innovation depends upon the CIO themselves. Each CIO brings to their job a unique point of view and set of expertise. Added to this is the business and its appetite for innovation. Clearly, the CIO role can differ based upon the maturity of the CIO and the organization’s openness to innovation. It’s situational. In some cases, it works to be the instigator and in others, to be a co-creator or others, yet to be a follower. Here, it is important to key off the leadership styles and influencers in customer facing business areas to choose how to play it.
Importantly, the CIO may not own innovation as a part of their charter. They may be a participant instead. Clearly, they should have responsibility for innovating internal services, but marketplace functions are often a team effort with the CTO and business units leading the way. Additionally, there are many organizations that have multiple leaders driving innovation. Where this occurs, the CIO should focus upon co-creation and making sure the most promising opportunities are given the resources they need.
Innovation drivers needed
CIOs believe organizations that don’t have innovation drivers, instigators, or catalysts will be left behind. For this reason, they say it is a good thing for the CIO to actively be pushing the envelope. Where possible CIOs should challenge the status quo. In some cases, they must establish inertia with key business areas before they have credibility with innovation. With credibility, however, they can drive it, foster process around it, identify promising solutions, manage investment dollars, and most importantly, find effective business partners.
One CIO said that they actually prefer the term “change agitator.” Often change, they say, is not embraced easily by organizations even when the innovation can improve profit margins. It is important that CIOs persist. Effective CIOs constantly build advocates across the organization that understand how technology can drive innovation. It essential that CIOs understand their organizations appetite for innovation.
Clearly, CIOs can feed their organization’s appetite for innovation, but if it’s not there at all, they can’t be the only pusher for innovation. Sadly, at times the CIO may play the change driver, while actively avoiding wrenches thrown into impede progress. CIOs need to know the role the organization needs from them at each point in time. In most cases, CIOs must get some inertia in key business areas before they can move to innovate.
It depends on the CIO style and business maturity. For this reason, some CIOs prefer to be executive team co-conspirator, planners, and deliverers of value. There are clearly ideas that should originate in IT especially around business capabilities. There are other initiatives that make sense to be originated in business but nevertheless, require strong IT partnership. While it varies from situation to situation, the ‘I’ in CIO needs to range from Innovation -> Inspiration -> Instigation -> Implementation.
What are the most important things CIOs can do to enable the creation of new products, new experiences or the invention of new business models?
CIOs suggest, the first thing a new CIO needs to do is learn, learn, and learn. In this process, CIOs should ask a lot of questions about what a business is trying to accomplish. What are its end goals? What does done look like? How do we know that we have accomplished something that matters? CIOs need to spend time too meeting with and talking to customers.
Here again, CIOs need to listen, listen, and listen so more. Some of the best ideas will come from your customers or team, who are closer to organizational pain points. This includes being networked to innovators across the organization. It’s the CIOs job to forward and strengthen ideas generated by the organization. This, I found was my job as a startup entrepreneur. I could come up with a big idea but without validation or a pivot it was worthless.
As a part of this, it is essential that CIOs educate the business on the possibilities that they unearth. This can involve building proof of concepts (POCs). People more easily support a concept when they can see it in action and how it will impact them personally. CIOs think of POCs as scale models like the ones that architects use to get clients excited about a new building.
CIOs believe that it fundamental to survival in a disruptive era to continually innovate on new models for doing business. The only way to protect against digital disruption is to keep moving ahead of the fallout. This is a similar point to Derek Abell who argues in “Managing with Dual Strategies” that managers need to be planning for today and the future at the very same time. This may represent a considerable change in management models where it occurs. However, it essential to foster a “test-and-learn” culture that values regular experimentation and business change.
At the same time, it is essential that CIOs recognize whether they are in a space that allows for fast fail or in a space that truly is mission-critical-must-never-fail. One CIO said at this point that they always have 3 to 4 pages of innovation slide topics in their binder. They walk the floors each day and get into timely conversations whenever possible. They, also, go on customer sales calls and introduce the ideas during debrief with marketing/sales. The role is to inform, educate, demonstrate, and influence. CIOs need to exert their will. They need to illuminate the return on value. At the same time, they need to listen, keep learning, watch peers, and ask questions. It is essential that they know their audience and environment and be willing to experiment.
Who is the most reliable partner for CIOs in driving business innovation?
Answers varied significantly to this question. Some CIOs said it is business leaders that are willing to take a step off the cliff regarding how the company does things today and drive agile innovation experiments. CIOs said that these folks have the right mindset or are effectively “cliff divers.” CIOs complain that too many business leaders get to the edge and are not able to make the leap. A change master can come from any position, but attitude is critical to success.
With this said, CIOs say that chances for success in innovation plummet without the CEO and board backing. This is impossible without the CIO knowing the organization and the opportunities that it has to transform. Some CIOs say the CMO and the support functions of the business, which are hyper focused on data around user experience and customer needs drives far more innovation in the business than the CIO can ever prototype or execute on their own.
The CMO has been a key partner for CIOs over the last several years. There are lots of innovation opportunities for CIOs and CMOs to work together. This is regardless of who is leading the show for their organizations. It is important that CIOs identify quickly their innovation champions. Right now, some CIOs say they are seeing the CFO becoming a more reliable partner because CFOs are looking for new investments and new returns. One CIO said that they worked with CFOs who saw opportunity in funding innovation that drive to better outcomes. Clearly, the existence of a CFO partner will vary wildly across industries and depend upon the existence of the so called ‘strategic CFO’.
One CIO said that when they were in a consumer goods company, their champion was the CEO. However, this relationship created stress with VPs and unit presidents. The potential for this depends upon industry, but also the day based on the strategic and even tactical actions of the business.
Nevertheless, having the CEO partner with the CIO to drive business innovation shows the entire organization that what IT is doing is not an isolated IT project, but something connected to the overall business strategy. Also having the CEO on board ensures the CIO get the attention and support needed from other departments.
In addition to the CEO, CIO partners don’t need not have to be traditional leaders. They can be influencers or trusted partners at any level of the organization. A strong financial partner is one who buys into a vision and wants to contribute. This is what venture capitalists call ‘smart money’.
CIOs say that it would be good if the entire leadership team is involved. If it isn’t, then it’s not a role, it’s the individual who is willing to buy in and foster innovation. Once again, it depends on the industry, organization and business project/task at hand. This is why CIOs need to be an authentic, reciprocal partner across all levels of the organization.
How is innovation fundamentally different from business transformation?
Isaac Sacolick said that the easiest answer is that innovation and business transformation form a Venn Diagram. Isaac believes that it is a big mistake to think that transformation requires innovation. Transformation is changing the business over time which can be done in many ways. Many confuse improvement with innovation. Improvement is doing things better while innovation is doing better things.
Innovation is often taking steps into the unknown, while digital transformation involves applying a lot of research and lessons learned along a path to a concrete set of goals. For this reason, transformation is evolutionary, and efficiency or process focused. What might result from a great transformation is an improved opportunity for innovation though better culture and customer intimacy.
It is important to note that innovation and business transformation aren’t mutually exclusive. A CIO can introduce an innovation, but it may not transform the business. A retail CIO may, for example, introduce WIFI into stores. It may make shoppers happy, but will it lead to additional sales? Innovation is doing something in a new way, business transformation is doing things in a smarter, better way. Clearly, you might use the innovation to transform the business. Here, the innovation is typically disruptive to the status quo, as opposed to sustaining innovation which improves a default condition while typically reinforcing the status quo.
What is your advice for CIOs aiming to help their organizations innovate?
One CIO started this portion of the discussion by saying “be aware of history, but do not be tied to it”. CIOs are candid there is no list. It is an on-going process from the first day until a CIO leaves their job. Nevertheless, CIOs say it is important to be consistent. CIOs should disrupt when situation allows. They should put attention into getting quick wins, so they are able to build trust and budget. At the same time, they need get other business leaders’ sense for the order of importance of:
- Culture change
- Customer intimacy
- Competitive analytics
CIO say that IT leaders need to understand their organization’s business. They need to create the stakeholders support needed to drive cultural change that embrace innovation. Innovation can be hard at times. And it can be significantly disruptive. It is important, for this reason, that CIOs not go it alone. They need supporters. Importantly, the last thing on the list should be to decide which technology to use.
When I teach my marketing classes, I tell my students there is one thing that they should learn from my class. It is to be always ask customers. I tell them that customers will tell you the answers to the things that you need to know. CIOs similarly say listen, listen, listen. CIOs say listen to your team, the business, its influencers, the board, the CEO, and more. CIOs need to understand the perceived corporate world view and the reasons behind change. Leading CIOs for this reason focus upon learning, communicating, and building relationships.
At the same time, CIOs need to always understand that innovation doesn’t comes from them or even from their team. For this reason, IT leaders need to serve, grow, and celebrate it when they see it occur. Innovation is longitudinal. It is the long tail of business strategy. Importantly, what is innovative for one organization may be ‘old hat’ for another. It’s all about the context and ecosystem.
Success at enabling innovation starts by understanding your organization’s culture, and how to influence it. CIOs don’t think there is a last if you want to innovate. This is not a thing you finish, it’s a mindset change that you need to become. As Joe Pucciarelli of IDC says it is “not a one and done; innovation is a cadence.” At the same time, CIOs need to consider the model they are using to manage teams. Does it support innovation? Does it support listening to the business? And does it involve collaboration across the business in ideation?
Everything depends on the industry, organization and business project or task at hand. That’s why CIOs need to be an authentic, reciprocal partners across the business. Part of this is prioritized based on wanted outcomes of overarching business strategy and goals. Innovation might sound fun, but the purpose should always include a measurable outcome, a why and a business priority.
Vanguard CIOs are about enabling innovation that fits into their organization’s culture. They understand that innovation is typically situational. They understand as well the importance of “creating a village” that supports and nurtures innovations undertaken. Finally, they push for quick experiments like those described in Michael Schrage’s book, “The Innovators Hypothesis.”