The Future of IT Value Creation

Robert Austin, chair of the CIO Executive Program at Harvard Business School, finished up the Symposium’s presentations with some straight talk on many of the IT processes he had discovered during his years spent working with and observing CIOs. His presentation, “The Future of IT Value Creation in a Global Economy,” offered some probing examples of how businesses create value—and what that will likely resemble in the future.

He cautioned CIOs that what he was going to tell them wasn’t something that they should go home and implement immediately. They needed to give this topic a lot of thought, just like their careers or other important topics. Of course, these flavors of big-picture, big thinking topics tend to spur creative and innovative thoughts, which dovetailed perfectly with the themes of the Symposium.

“The way you’re likely to use IT in the future to create value, and the way business creates value in companies will change,” Austin said. Clearly, he noted, a shift was needed. “Most of the way we have learned to manage is not going to help us in value creation in the future,” Austin said. “We need to learn and unlearn some things.”

He then challenged the audience with this statement: “The future belongs to those who know how to create new things.” But what exactly what did he mean by “new”? Certainly he meant much more than, say, manufacturing a newer version of a product. In fact, he meant “novel”—something that departs from what we expected from before.

While speaking with an insurance industry CIO, Austin discovered a definition of what that CIO did—what exactly his job was if you stripped away all of the fancy verbiage. That CIO’s job, he said, was to “chunk it, routinize it, digitize it, automate it and send it offshore.” He placed particular emphasis on the offshore part. “Without offshore, this is how IT has created value, and we have been extremely good at this,” Austin said.

The problem he pointed out was that if CIOs can automate it (whatever “it” is for any company), then why do it themselves, if it can be cheaper to do it somewhere else? He delved into several examples of where preconceived notions about what can and cannot be sent offshore didn’t really hold true. “Through clever application of technology you can outsource almost everything,” Austin said. “But we don’t know how to do this yet.” As humans, Austin went on, our reflexes make us want to do what we know how to do, and we have the wrong reflexes that clash with our need to create innovation. So we use the learning that we have rather than trying to learn something new. “One of the nasty things about innovation is that you usually find it where you least expect to find it,” Austin said, citing accidental innovations such as X-rays, Corn Flakes and Nutrasweet.

Interestingly, Austin said that it all boils down to “Building the thing right vs. Building the right thing.” He pressed CIOs to take a more iterative approach (rather than sequential) to innovation—where you experiment, try new things, explore, go back and fix them and then keep doing that over and over again. “The future of innovation is iterative,” he said. Observing behaviors is a key facet of innovation, and for research purposes, Austin has observed artists and how they work, which through examples show a very iterative process.

He then argued that the prerequisite conditions for innovative making were cheap and rapid iteration, and a high demand for innovation. The implications for IT management centered on these facts:

• Most of CIOs’ organizational initiatives will benefit from being structured and budgeted for rapid iteration;

• Companies need to invest in technology, people, processes and trying to make things faster and less expensive;

• CIOs have to figure out ways to do hard work early—sequential thinking is the enemy.

If you are unwilling to pay for innovation in IT, he said, you will feel agony. In sum, Austin came full circle to where he began, leaving the CIOs with a rather ominous and inspiring challenge: “The future belongs to those who know how to create new things.”

 –Thomas Wailgum