May 2015 Archives

In McKinsey's latest survey on business technology, few executives say their IT leaders are closely involved in helping shape the strategic agenda, and confidence in IT's ability to support growth and other business goals is waning.  Furthermore, "executives' current perceptions of IT performance are decidedly negative."

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This sort of criticism of IT is not new.  

In fact, it goes all the way back to Nick Carr's 2003 IT Doesn't Matter article in Harvard Business Review. At the time, Carr managed to infuriate the CEOs of numerous IT companies, including Craig Barrett, Intel's CEO, along with Bill Gates and Larry Ellison.

"My point, however, is that it (IT) is no longer a source of advantage at the firm level - it doesn't enable individual companies to distinguish themselves in a meaningful way from their competitors. Essential to competitiveness but inconsequential to strategic advantage: that's why IT is best viewed (and managed) as a commodity."

- Nicholas Carr

At the time, there were numerous rebuttals to Carr's view, but none more powerful than the one from John Hagel and John Seely Brown.  They argued:

  • Extracting business value from IT requires innovations in business practices. In many respects, we believe Carr attacks a red herring - few people would argue that IT alone provides any significant business value or strategic advantage.
  • The economic impact from IT comes from incremental innovations, rather than "big bang" initiatives. A process of rapid incrementalism enhances learning potential and creates opportunities for further innovations.
  • The strategic impact of IT investment comes from the cumulative effect of sustained initiatives to innovate business practices in the near-term. The strategic differentiation emerges over time, based less on any one specific innovation in business practice and much more on the capability to continuously innovate around the evolving capabilities of IT.

According to JH3 and JSB: far from believing that the potential for strategic differentiation through IT is diminishing, we would maintain that the potential is increasing, given the growing gap between IT potential and realized business value.

So how does IT become more strategic?  

The Wall Street Journal's Rachael King recommends:

CIOs also need to bring some transparency to their operations by sitting down with business leaders and going over the budget and setting priorities together. The CIO needs to also actively market how the IT department is driving value in terms that business can understand. For example, Intel CIO Kim Stevenson recently published an annual IT report where she detailed how her department implemented advanced data analytics that helped drive $351 million in revenue for the company.  

The ability for Ms. Stevenson to demonstrate the value of her organization's work in dollars and cents is changing how IT is perceived in the company. It changes the relationship from that of a service provider, a department that helps people set up servers or configure PCs, to one that uses technology to solve business problems.

CIOs must demonstrate and quantify the business value of IT.

What does this mean for the sales people of IT company's trying to sell to CIOs?  It means that the role of the CIO is often supplanted by business executives.  (In my discussions with our clients, I often emphasize this point.)

IT is so strategic, one could argue, that it is no longer left to IT.  Often it is CMOs and other non-IT business executives who are actively pursuing the mobile, social, and analytics strategies that are creating the organizational pull for new approaches to rapid application development, and as a by-product, the cloud services offerings needed to enable those strategies.

The new generation of IT will support new business strategies. This means that any vendor selling IT solutions will have to speak the language of business strategy.  And most importantly, the vendor will have to show the client how to achieve the "promised" benefits of IT.

So here's the takeaway: CIOs must work on getting a place at the strategy table.  When they do, they are viewed as effective business partners.  What must the CIO do to be viewed as a strategic partner?

Ask:

- Does your company have a clear view of how advances in IT (Big Data, AI, IoT, Cloud Computing) is likely to reshape your relevant markets over the next five years?

- What areas of business growth can IT contribute to?

- Does your company have an equally clear view of the implications for the changes you will need to make to continue to create value?

- Are these views shared effectively among your senior managers across the organization?

- Does senior management recognize the risks and uncertainties as part of the decision-making process?

- Has your company been sufficiently aggressive in using IT to improve strategic areas of your operations?

- Are there opportunities to use IT to improve operations around existing products and services?

- Are their opportunities to use IT to significantly reduce costs and cycle time in existing work processes?

- What are the data sources? How will you monitor them? How do you trigger events based on the intelligence gathered from the data? Is there a profit or cost-savings optimization opportunity?

FURTHER READING
Why CIOs should be business-strategy partners Feb 2015, McKinsey
Most CIOs are Not Seen as Influencing Corporate Strategy: Report, Feb 2015, Wall Street Journal
Public Cloud a first choice for minority of projects: Gartner CIO survey, March 2015, ARN

How does innovation happen? Most company's struggle to understand how innovation works, often confusing creativity with innovation. In today's tacit, knowledge-based creative economy, innovation and differentiation rarely come from one distinct source. Rather, innovation evolves from:

  • new ways of thinking,
  • new business models,
  • new processes,
  • new organizations (or new collaborative inside/outside team structures),
  • and new products (offerings including services)
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In his classic book - Innovation and Entrepreneurship, the late Peter Drucker found seven sources of innovation. The first four sources were internal, inside the enterprise, whereas the last three are external, outside of the company.

1. The Unexpected
2. Incongruities
3. Process Needs
4. Shifts In Industry And Market Structure
5. Demographic Changes
6. Changes In Perception
7. New Knowledge

A good description of the seven sources is here. Unfortunately, not everyone stumbles into innovation like the legendary 3M Post-It notes, or the unexpected discovery of Aspartame, but innovation can, and should be pursued in a systematic way.

Larry Keeley's Ten Types of Innovation: The Discipline of Building Breakthroughs gives us a glimpse into how that might be:

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Here is an added insight from Keeley and friends: the things we love in the world--the services and systems we value and use--are the ones that make it easy to do hard things.

What does all of this have to do with business results?

Clearly there is plenty of room for innovation when it comes to designing superior, differentiated experiences for customers.  Every interaction with your customer can be differentiated, integrated with the purpose of the customer.  Make it easy to do business with you, said Jakob Nielsen, the web usability expert, many years ago.

What about the power of ecosystems?  At the individual level, ecosystem thinking can help you create better ideas. it's all about disorganization.

Ideas need to be sloshing around or crashing in to one another to produce breakthroughs:

  • Research shows that the volume of ideas bouncing about make large cities disproportionately more creative than smaller towns.
  • Having multiple hobbies allows your brain to subconsciously compare and contrast problems and solutions, forming new connections at the margins of each.
  • Similarly, reading multiple books at the same time vs serially lets your brain juxtapose new ideas and develop new connections.
  • Wandering minds are more creative.
  • Studying a field "too much" doesn't limit creativity -- it does the opposite. More ideas banging about just produces even more ideas.
  • The "accept everything" mantra of brainstorming doesn't work. Debate is far more effective. Let those ideas fight.
  • ADD and bipolar disorder are both associated with greater creativity. When you're drunk or exhausted your brain is poised for breakthroughs.
  • Even with teams, it's better to mix up experience levels, familiarity with one another and other factors to keep things rough around the edges.
And at the organizational level, there's ecosystem strategy.  That's a post unto itself...

Ask:
- How do you make it easy for the customer to do business with you?
- What outcomes do you want to see?
- What is required to achieve those outcomes? 
- What must be done? What needs to change?
- How do we make innovation a embedded process?

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This page is an archive of entries from May 2015 listed from newest to oldest.

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