The strategic CIO’s new role in innovation

Innovation is the next frontier for all CIOs, and now is the time for the CIO to prepare and take action. Innovation is the next frontier for all CIOs, and now is the time for the CIO to prepare and take action.

By Vinod Baya, Galen Gruman, and Bud Mathaisel

After years of nearly 100 percent focus on cost-cutting due to the recession, company boards are now pushing their organizations to find ways to grow the business. In fact, most CEOs are looking to gain both efficiencies and differentiation at the same time. In a recent survey of CEOs conducted by PwC, 80 percent of CEOs believe innovation will drive efficiencies and lead to competitive advantage. (See Figure 1.) For most of them, technology is one way of capturing both. Close to 70 percent of CEOs are investing in IT to reduce costs and become more efficient, while 54 percent are also funneling funds toward growth initiatives. This sentiment is not limited to any particular industry sector, such as high-tech. It applies to enterprises of all sizes in all industry sectors.

Figure 1

As a result, CIOs increasingly hear demands to be “more strategic” and to “add value” through the adoption of mobile technology, social networking, and the analysis of customer and market shifts—all under the guise of enabling or even leading innovation.

But innovation is not based on technology, even if technology is used in innovation. As the article, “Can innovation be disciplined without killing it?,” on page 06 explains, core to innovation is solving problems to create better products and market results. The CIO can aid innovation by scouting for useful technologies and by applying technology to improve existing processes. (See the article, “Powering the innovation life cycle,” on page 26.) But this has long been part of the CIO’s charter.

To add more value and become more strategic, the CIO can help to develop and execute an end-to-end innovation process in which innovations are more likely to be discovered, better assessed, and better converted into profits—what PwC calls the idea-to-cash process. CIOs can contribute in two distinct areas:

  • Help drive the creation and management of the innovation process, as a key member of the executive committee and thus of the strategic business management
  • Put together and implement the technology on which the enterprise executes much of the innovation process

CIOs should be comfortable with the second area because of their experience implementing enterprise processes such as enterprise resource planning (ERP), supply chain management, and order-to-cash. Some CIOs are familiar with the first area (perhaps not in an innovation context) if they have experience in business process reengineering or have gone beyond the technology implementation and helped the business leadership think through the processes. The CIO organization’s experience in helping to design and then implement earlier process-enabling systems makes it a natural group to take on the innovation process.

No other enterprise unit typically has the expertise to help digitize and rationalize business processes across functional boundaries and the competencies to source and deploy the technologies that need to be brought together to weave the siloed processes into an effective whole. If the CIO organization has a reputation for creating step-change improvements in the execution of key business processes, that’s all the better.

Designing and implementing the innovation process

The design of the end-to-end innovation process comes first, and that’s a role the CIO should undertake as a member of the management team—even though it is not strictly a technology role. It’s a strategic business role—exactly what more companies are asking of CIOs.

Few companies consider innovation to be an end-to-end process; most still think of it as the eureka moment. So the essential first step is to accept that having an innovation process requires an enterprise transformation designed to bring consistency to ad hoc, decentralized business processes.

Figure 2

This is a business process reengineering effort. The innovation process moves through stages as shown in Figure 2 and discussed in the article, “Can innovation be disciplined without killing it?,” on page 06. These stages lay out the progression of innovation from an idea to cash.

End-to-end transformations have occurred before, and the best-practice patterns are known. Before business activities are reconceived as end-to-end flows, the typical pattern includes local, not global, process optimizations with staff interventions when work crosses functional boundaries; multiple distinct and inconsistent terms for similar business entities; and an inability to predict how changes in one part of the enterprise will impact others. When organizations set out to transform siloed, sub-optimal processes into seamless, efficient end-to-end enterprise processes, they focus on four deliverables:

80 percent of CEOs believe innovation will drive efficiencies and lead to competitive advantage, and technology is one way of capturing both.
  • Common nomenclatures—A semantically rich and meaningfully rationalized terminology that accounts for all business unit perspectives is essential. Expecting diverse areas of the business to agree on important issues, such as process design, is impossible if they don’t speak a common language. Innovation is rarely treated as an activity that requires a common nomenclature. Research and development (R&D), sales, market research, partner relations, and other units each typically use their own vocabulary for the activities that precede, inspire, and create innovation. To achieve an enterprise-wide, end-to-end innovation process, you need a common nomenclature, one that emphasizes the terms used to define problems and solutions.
  • Digital interfaces—Computer-based digital interfaces that replace human mediation are building blocks for any end-to-end business process, including innovation, because the process typically flows in and out of more than one business unit. Because most companies do not see innovation as being susceptible to end-to-end redesign and management, even companies that have idea management systems find that ideas pile up at the first stage—initial selection. That’s because the ideas are not digitally integrated with the selection process, much less with design, prototyping, alpha and beta testing, and other stages in the flow. You need digital interfaces between each stage in the end-to-end innovation process, not just at the beginning or the end of the idea funnel.
  • Introduction of technology-enabled new processes— Information technology complements rather than replaces human intelligence. Work that dates from Hammer and Champy¹ in the 1980s shows that introducing technology to execute tasks that people aren’t particularly good at leads to radically improved end-to-end processes. Adding data feeds from the business use of credit cards into expense reports is a great example: far fewer errors and omissions occur when this task is computer mediated. New process opportunities in innovation are built on systematic problem solving as the core activity in each stage of the idea-to-cash life cycle. Certain mental disciplines with proven value to innovation are too complex for the majority of staff to easily acquire. Technologies are emerging that can address this challenge, enable new innovation processes, and deliver more and better innovations.
  • Continuous monitoring and improvement—The history of process reengineering shows that enterprises with successful end-to-end processes don’t just install and forget. They institute measurement and analytics at meaningful points in the process, and they constantly monitor and improve. For example, the days of sales outstanding and the cash-to-cash cycle have become key measures of end-to-end processes against which companies benchmark themselves. Because innovation is rarely measured this way, companies cannot know whether changes that target innovation performance have the desired effects. Deciding on appropriate metrics, capturing them, and sharing them will set the stage for ongoing improvement of the innovation life cycle.

How does innovation differ from previous end-to-end process implementations? The overall innovation process is not linear. Rather, it is iterative with a great deal of trial and error, and only one in a hundred ideas will complete the cycle. CIOs will need to make thoughtful adjustments to their past experiences to accommodate this difference.

Innovation processes are also likely to be more unpredictable than prior experiences. By having an end-to-end innovation process, “you start to find where you have bottlenecks within the organization,” says Patrick Sullivan, chief architect of Chubb in the CIO organization. Sullivan likens innovation to building a road, with an identifiable end point but numerous places along the way where an organization can fail because execution is difficult.

Technology-enabling the idea-to-cash innovation process

Figure 3

With an end-to-end innovation process defined and its management structure in place, the CIO’s organization can do what it does best: implement tools that enable improved information flows and processes. A mapping of the tools along the innovation life cycle is shown in Figure 3.

Tools unique to the innovation process

Two types of tools, which the article, “Powering the innovation life cycle,” on page 26 describes in detail, can be deployed to assist the innovation process.

Idea management tools. These tools facilitate idea creation through idea capture (the “idea funnel”), idea assessment (usually through collaborative communication and social networking components), and idea status tracking. They also provide the ability to translate high-level strategic challenges identified by the leadership team, as a result of assessment of ongoing operations, into demands on the enterprise for ideas that address specific problems and opportunities. (See Figure 4.) Often, enterprises hold challenges or competitions to generate ideas to address strategic challenges. The most sophisticated idea management systems track each stage from strategy through the idea-to-cash process.

Figure 4

An idea management system has made a difference at Chubb. “We’ve been able to much more rapidly discover new ideas and, in some cases, discover things that have been out there but were lost. You’re able to build momentum around ideas through the transparency of the process, whereas in the old scheme, things kind of bounced around through the organization and never really got any traction,” says Jon Bidwell, chief innovation officer of Chubb.

Idea capture and status tracking are the easy parts of such tools, whether they’re homegrown wikis or commercial idea managers. The trickier part is idea assessment. Ideally, the assessment should be based on more than individual experience and opinions, and so having a way to access both internal knowledge repositories (such as marketing and R&D) and external knowledge repositories (such as market trends and component specifications) is ideal. In an automotive company, for example, the knowledge repository could include the details from its CAD/ CAM/CAE and product information management systems.

These systems are further enhanced when the repositories are shared among trusted providers and vendors, as in a supply chain. In medical systems, for example, research, clinical trial, and patient results can be linked together in a “starter kit” knowledge repository for pharmaceutical companies, practitioners, hospitals, and insurers. The value is far greater when the data and insights are “crowdsourced” from qualified contributors.

Solution identification tools. Having ideas is important, but turning them into real products and services is the goal. Often, the solution to a problem is not a new idea but one that exists elsewhere and is waiting to be discovered and applied to the “foreign” context. That’s where tools that use methodologies such as TRIZ² (also known as TIPS: Theory of Inventive Problem Solving) come in. These methodologies help the user derive the intrinsic patterns in the problem and find candidate solutions in repositories of patents, lab notes, reference material, Web sites, past problem-solving results, and nearly any source that has a problem and solution pattern. The step-change effect on innovation is here because most novel solutions—typically called inventions—are likely to come from other fields that address a conceptually similar pattern. These tools help identify a “foreign” solution that may be adaptable to the problem at hand.

CIOs have the technology knowledge and the enabling platforms to give the innovation process the same advantages that technology brings to any enterprise process: consistency, efficiency, speed, deeper insight, and more predictable execution.

Another approach is to provide exploratory tools so staff can investigate issues to find an existing solution or identify a need for a solution. AES, an energy company, has developed a system it calls Revelation, which includes a rules-based engine that captures live plant-process information and historical data for pumps, motors, and other components. “One of the good things about the rules-based engine is that it enables plant engineers to really drive the behavior of the system going forward, because we are providing the platform and facilitating that,” says Paul McCusker, CIO for the Europe, Middle East, and Asia region at AES. Although designed for operational analysis, Revelation is extensible as an innovation platform for ideation and solution identification. “We want this system to evolve to be our innovation platform that is global and allows more employees both from IT and non-IT functions to drive greater innovation at AES,” he continues.

Most enterprises already use certain processes and software on portions of the innovation life cycle. Product life-cycle management (PLM) software is used in the acceleration and scaling phases after a product has been identified and investment has been sanctioned for its development. Project management systems are used when ideas become full-blown projects. And portfolio management systems manage a collection of projects or products. Matthew Greeley, CEO of Brightidea, explains that as ideas mature, an idea management system may hand off to these systems. “When you move into a project that is funded, then that project can either hand off to an existing portfolio management system or you can continue the project within our Pipeline product, which is a social project management application and is a lot like Facebook.”

Innovation centers of excellence to facilitate adoption

In some cases, it makes sense for IT to set up groups to manage the idea management tools and knowledge management repositories, since these elements are crucial to executing the innovation process. Such groups should not become a repeat of the 1970s’ “churches” in which business “supplicants” begged IT “high priests” for pearls of information wisdom. Instead, IT should be able to partner with users and apply their greater experience with such tools in a collaborative style. Doing so will reinforce the notion that IT is not “outside the business.”

For example, the TRIZ methodology is complex and the supporting tools are designed for highly trained engineers, making it difficult to apply broadly. Thus, a TRIZ center of excellence within IT or the chief innovation officer’s organization to support innovation efforts across the enterprise could be useful. This is not unlike centers of excellence for Six Sigma. “In Six Sigma, we teach people at the Green Belt, Black Belt, and Master Black Belt levels. We want everyone in the organization to have this Green Belt level of understanding, few to have Black Belt, and very few to have Master Black Belt. A similar concept can apply to structured problem solving,” says Peter Hanik, president of Pretium Innovation.

The purpose of centers of excellence would be to understand the tool sets and to train and support others who use them. Accomplishing these goals requires staffing the team with people who are innovation advocates, who have the new technology skills, and who can help ensure the integration of the data and architectures of the new tools with the IT infrastructure.

Figure 5

To facilitate adoption, many CIO organizations may consider the IT function to be a pilot for the end-to-end innovation life cycle. By bootstrapping the approach within IT and implementing the necessary idea management and solution identification tools, IT can gain valuable experience and insight necessary to transfer the same process to business. Next IT can become a consultant to business units and incrementally bring them into the end-to-end innovation process. Over time, this can evolve into an enterprise-wide innovation management platform. (See Figure 5.)

Test beds for use outside IT

The translation of many ideas into new products and services often requires synchronizing business functions, workflow, and information technology changes. “For us, nearly every road of innovation leads back to information technology,” Bidwell says. Typically, in a business process reengineering effort, you test the new process in a pilot program; in a product development effort, you create prototypes. Likewise, an innovation process will benefit from having a way to test specific innovations being evaluated and developed where the new product or service relies on IT for its creation or delivery.

To the extent that IT can provision test beds for such innovations and streamline the information flows, the more effectively an organization can realize value from tests—or cut investments sooner when the innovation is not as promising or needs a different approach.

Although the test beds are often specific to the innovation being explored and must be custom built, in some cases IT can simplify and expedite the deployment of test beds to enable non-IT staff to explore innovation more easily. For example, virtualization tools let IT quickly spin up software development test beds, and this approach could be used to let innovators create test beds for Web-based products in a self-service way. IT also could set up test labs equipped with various emerging technologies, such as mobile devices, cloud-based services, and social networking tools that innovators could experiment with, aided by IT’s expertise and maintenance.

Core systems may need to be strengthened and made more flexible

As an organization implements an innovation process and the tools to support it, it will likely find that the process and tools stress the core infrastructure. At the very least, IT will need to anticipate and enable a more modular application and information architecture, one whose elements are more loosely coupled than legacy monolithic architectures.

One key aspect would be making information more broadly accessible in a secure manner. Perhaps the interface with customers or suppliers requires a new front end, such as a mobility interface or a social network presence. Regardless, the core information and IT systems will be the source and repository of all new information. In describing his team’s experience of building an innovation platform at AES, McCusker shares, “In some sense, we have opened up the data to all employees regardless of stature or position. Lots of information—including commercial, safety, or operational data—that used to be locked away in paper records is now available for all to access, use, and build on.” A big challenge in connecting the innovation platform to the operational platform and infrastructure is the expense and time it takes to make the changes. That’s a problem regardless of any innovation process, but the inflexibility of the existing infrastructure may become more apparent as the organization tries to connect innovation to operations.

The concept of a flexible platform is not new; CIOs have pursued flexible, fast-change infrastructure and applications for decades.

Some IT organizations have established a relatively flexible IT core that can serve as a platform for innovation. The concept of a flexible platform is not new; CIOs have pursued flexible, fast-change infrastructure and applications for decades. An approach that gained much discussion five years ago was the service-oriented architecture (SOA), which re-factors IT assets into mix-and-match resources that can be combined and orchestrated as needed thanks to a design based on process abstraction and consistent interfaces.

“Many new ideas need a new way of using existing capabilities or of exposing them through different external channels or through newer processes that are internal. By conceptualizing IT capabilities as a set of services, we can put these capabilities onto the shelf, so to speak, and expose them for quick reuse, whether it’s a reporting application for a BlackBerry or some form of a customer-facing application,” says Sullivan.

IT can also enable the connections to enterprise information systems or, more precisely, to nonproduction copies of them, so any innovations that act on or add to the existing information systems can be tested in a real-world context. This would be useful, for example, for innovations involving customer self-service.

The real politick of the CIO’s role in innovation

For a CIO to be effective in the two aspects of enabling an innovation process, he or she must first be a best-practices CIO whose infrastructure runs well and efficiently, meeting the organization’s needs. Otherwise, the CIO won’t be trusted to implement the enabling technology, much less be considered part of the innovation process’s leadership team.

CIOs that aren’t known for business process thinking will have a harder time becoming part of the leadership team, but if they’re best-practice CIOs in their IT role, they could leverage the technology-enabling effort to demonstrate their process understanding as a respectful if uninvited contributor. Better is if the CIO has demonstrated process leadership within the IT organization, as that demonstrates successful process thinking even if in a different context.

A key difference between the innovation process and other processes CIOs have helped enable is that the innovation process crosses many more organizational boundaries than others—even the financial process. This is also why the innovation process is not likely to be owned by any one executive but, instead, by a team. CIOs are accustomed to partnering with team members, so this requirement should not be troublesome. “[Today, CIOs] must find champions in the world and within their organizations that will adopt them [technologies for innovation], so they’re extremely well situated to be a driver of the innovation process and the adoption of these tools,” says Brightidea’s Greeley.

The team’s formal and informal makeup depends on the nature of the organization and each individual business leader. Given the CIO’s wide view of the organization’s processes, he or she should be one of the principal team members, along with the CFO, chief innovation officer, R&D chief, and marketing chief. Where an organization has no chief innovation officer, the CIO might grow into that role, serving as the orchestrator of the innovation process redesign. (The R&D chief is typically focused on customer products and services, whereas the chief innovation officer’s purview extends to innovating internal processes, so the CIO has a broader basis for which to fill a vacant chief innovation officer role.)

Conclusion

 

"In some sense, we have opened up the data to all employees regardless of stature or position. Lots of information—including commercial, safety, or operational data— that used to be locked away in paper records is now available for all to access, use, and build on." —Paul McCusker of AES

 
 

Innovation is unlike many previous process improvements because it is extremely strategic, thoughtful rather than transactional, and generally seen as unpredictable if not chaotic. But there is a process to enable it and to capture more value for the organization. The CIO’s knowledge of the entire business at a process level and his or her methodical approach to systems and process design create a unique ability to help move innovation away from being an ad hoc, hit-or-miss activity. And the CIO has the technology knowledge and the enabling platforms to give the innovation process the same advantages that technology brings to any enterprise process: consistency, efficiency, speed, deeper insight, and more predictable execution.

As businesses look increasingly to revenue growth and ask the CIO to be more strategic, the CIO has the potential to do more than identify and add supporting technology for various initiatives. He or she can help design the end-to-end innovation process that leads to a better business in the first place, and then enable it as well.

If you’re a CIO who wants out of a mere operations role, this is the chance you have been waiting for. In innovation, you could increase your strategic value and your business portfolio. One added benefit is that the CIO has a strong chance to demonstrate business acumen and leadership of business futures. This is precisely the ambition of CIOs, and most have the talent to do so. Now they have a great opportunity to turn that ambition into reality.



¹ Michael Hammer and James Champy, Reengineering the Corporation: A Manifesto for Business Revolution (HarperBusiness: June 5, 2001).
² According to Wikipedia, TRIZ is “a problem-solving, analysis and forecasting tool derived from the study of patterns of invention in the global patent literature.” http://en.wikipedia.org/wiki/TRIZ