Innovation Starts at the Top

A gift subscription to Netflix that my family received for the holidays ran out last week, and we decided to renew it. I bring this up because we’re not the sort of people who part with our money easily. And yet, Netflix, by coming up with an innovative, IT-enabled way to lend DVDs, has managed to get my $10-plus a month. If the emerging thinking about the future of IT value bears out, every company will have to find its Netflix — a technology-enabled way to make more money.

That’s make more money, not find better and better ways to save it. Rob Austin, a professor at Harvard Business School and a Cutter Consortium fellow, has written a provocative paper for Cutter in which he suggests that the future of business depends on creating “novel” things, and that CIOs have to ” learn to create value by supporting the creation of novel and valuable things.” That is, products and services that no one has offered before. Anything else — anything routine, anything that can be broken down into chunks, anything that can be completely automated, will end up being sent offshore. (Austin isn’t the only one to call out this trend. A recent paperby the Association for Computing Machinery concurs that the future of IT in developed economies IT lies in non-standard work.)

Making money, however, demands skills and management approaches that most CIOs — and most business executives, for that matter — don’t have. Austin says CIOs are used to creating value not by creating new things, but by making the production of old things less costly and more efficient. How to create and manage revenue-generating innovations isn’t something many of us know exactly how to do, because we haven’t done it before, he says. The best practices for managing the factory (the same practices that have led us to create the automated business processes that we’re now outsourcing), derived from decades of observation and practice, don’t necessarily apply to managing innovation.

What are these new management approaches? One thing that comes to mind is that instead of charging your IT staff with looking at what exists (e.g. old business processes) and thinking about how to make it work better, you need to direct them to search for what doesn’t exist yet that IT can help create. The genius of Netflix is not that I can order my DVDs over the Internet (even my library, which has a decent selection of classic movies and kids’ shows on VHS for free, lets me reserve materials online). It’s how technology is used to package a more consumer-friendly rental experience.

How do you go about getting your IT staff to generate money making ideas?