The Secrets of IT Innovation

The 2007 Boston Consulting Group’s innovation survey of 2,468 senior executives worldwide found that although companies are spending more on innovation, many are dissatisfied with the return on those investments. And although innovation may seem like a strictly business concern, IT has a crucial role to play. So says James P. Andrew, who leads BCG’s innovation practice. How can IT become a true innovation partner?

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True innovation partners, what Andrew calls IT superstars, have secrets that the rest of IT should know. He shared them with CIO.com’s Associate Online Editor Diann Daniel.

CIO: The BCG survey found that many executives were frustrated with their innovation spend. What is the main cause of that frustration?

Andrew: The biggest problem in innovation today has to do with money. In other words, how do I generate return on my innovation spending? In the survey, only 46 percent said they were satisfied with the return. One cause can be traced to this: There’s a lot of fuzzy thinking about innovation.

Problems occur when people confuse invention with innovation. Invention is new and clever; innovation is a process that takes knowledge and uses it to get a payback. Invention without a financial return is just an expense. Ideas are really the sexy part of innovation and there’s rarely a shortage of them. If you look at the biggest problems around innovation, rarely does a lack of ideas come up as one of the top obstacles; instead, it’s things like a risk-averse culture, overly lengthy development times and lack of coordination within the company. Not enough ideas, on the other hand, is an obstacle for only 17 percent. At the end of the day all that creativity and all those ideas have to show on the bottom line. That’s why we called our book Payback [2007, Harvard Business School Press]. The goal of innovation is to make or save money, and IT should never lose sight of that central fact.

CIO: You said innovation is a process. Can you describe in the simplest terms what that process looks like?

Andrew: Innovation is a three-step process: 1. Generate an idea. 2. Commercialize it. 3. Realize the value.

CIO: Why is IT important to innovation?

Andrew: Information is the jet fuel of innovation, and IT is about providing information and making sure it’s in the hands of the people who need it. It is extremely difficult to do innovation well with bad information or no information, so IT is critically important.

CIO: How well is IT enabling innovation?

Andrew: It depends on the company. Some do it well and IT is a great innovation enabler. In those companies, IT is great at handling and providing information. In companies where IT is not an innovation enabler, IT at best doesn’t contribute and at worst, actually stands in the way of innovation.

CIO: What must IT do to become a part of innovation and strategy conversations?

Andrew: First, be brilliant at the basics. It’s quite hard to be a credible business partner if you are not doing what you’re core job is. And you need to not just do a brilliant job, but you must be perceived as doing a brilliant job. A lot of IT professionals run into some challenges because that perception is not there.

Second, have a business view of IT. You need to be able to articulate to someone with a P&L how IT can help the business make more money. Everyone who runs a P&L is looking for any way to save or make money. When I talk to CIOs who say they can’t get the time of business leaders, it is because the rest of the business doesn’t think IT is doing the basics well or IT doesn’t understand the business from the perspective of the business leaders. You need to be able to translate technology into money-making opportunities. What I encourage IT execs to do is whenever you talk with a head of business, you should have ready two or three specific money-saving ideas or new ways to make money. And that puts a burden on IT to be able to understand the business side and translate technical knowledge into money-making business activities.

If IT is not seen as executing well or brilliantly on what they are supposed to be doing, the business is not going to ask them to do more. Moreover, many IT professionals don’t make the link that their job is to help someone make more money. If that is not the perspective you bring, then you won’t be a part of the business organization and its conversations. In companies where CIOs are seen as business enablers, they have no problem being invited to the right conversations.

Innovation Studies

Read a copy of Boston Consulting Group’s reports, “Innovation 2007” by clicking here, and “Measuring Innovation 2007,” by clicking here. Both reports are based on the consulting group’s surveys of senior management.

CIO: How can IT become a true innovation superstar?

Andrew: Beyond being brilliant at the basics and becoming a true business partner, IT must do three things:

1. Know what’s on the agenda of business leaders and what goals for the business they have.

2. Know what the current information gaps and deficits are. A lot of times IT already has ways to meet gaps; there’s often information needs that aren’t being met but can be easily met with the technology already in place or with simple additions.

3. Become proactive about offering the capabilities IT has that the business may not even be aware of. As the CIO or IT executive you are tech-savvy, on the leading edge of technology and know what capabilities already exist. If you understand business goals you can use that knowledge and say we have this capability and it might be used here or a certain capability would be possible, but you have to know the business well enough to do that. Again, you should always be carrying around three ideas you can pitch to the right business leaders and help them realize you are thinking about business and seeing it from their perspective.

CIO: Why is innovation so important today?

Andrew: There are three ways you can grow: You can grow because the market grows through mergers and acquisitions, or you can grow organically, which is where real growth lies. And really, innovation is the only way to do it.