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The age of innovation When change is no longer an option
The Age of Innovation – A Thomas Duryea Logicalis "How to" Guide page | 2
“Enterprise resilience as an organisation’s capacity to address change – not only in surviving change, but in evolving and adapting to change so that it yields greater opportunity for growth” - Fiorella Iannuzzelli, PwC
Defining Innovation
This practical “How to” Guide looks at why innovation is critical to organisational success, and how IT leaders can adopt a more innovative approach.
We live in a fast moving, global, hyper-
connected economy. Most of the time, we
seem to be lurching from one crisis to
another. How can we not only survive but
also thrive in the modern global business
system in which we operate?
Innovation, reinvention and
transformation are all terms that regularly
top the list of survey responses when
CEOs are asked about their key strategic
priorities. But why is innovation and
reinvention so important in modern
business? Isn’t it enough to drive hyper
efficiency and effectiveness by continually
improving our processes and technology?
Steve Denning from Forbes summarises:
“Fifty years ago, ‘milking the cash cow’
could go on for many decades. What’s
different today is that globalisation and
the shift in power in the marketplace from
buyer to seller is dramatically shortening
the life expectancy of firms that are
merely milking their cash cows. Half a
century ago, the life expectancy of a firm
in the Fortune 500 was around 75 years.
Now it’s less than 15 years and declining
even further.”
One of the key attributes of organisations
that have not just survived significant
market transitions but flourished is the
ability to manage and adapt to rapid
change. PwC’s Fiorella Iannuzzelli as
defined this capability as enterprise
resilience. “Enterprise resilience requires
innovation and innovative thinking to
manage disruptors and change.
Innovation is key to building this adaptive
capacity and relevance for companies.
Organisations that have clearly defined
and identified what their business
purpose and objectives are can use
innovation as a way to evolve through
change while maintaining alignment to
their core strategy.”
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The importance of innovation While hard to do, the ability to innovate – and to do it quickly and constantly – has become a competitive differentiator.
With the explosion of start-up firms
seeking to capitalise on digital and
technological disruption, the ability to
innovate and pivot the business is
becoming a core competitive
differentiator and driver of value.
But innovation and reinvention is hard to
do. Established organisations are well
managed and execution-focused, driven
by intelligent, experienced and dedicated
management teams. Our most basic
instincts are to sustain and improve the
environment we control: it taps into our
instinct for survival. Innovation implies
changing the way we do things, change
involves risk and risk makes us feel
anxious and afraid.
But change we must. Denning
emphasises: “Because it’s easier to milk
the cash cow than to add new value, the
firm not only stops playing offense: it
even forgets how to play offense. The firm
starts to die.”
Not only must we learn to innovate and
reinvent ourselves but also we must do it
quickly. Speed is the key; firms have about
three years to reach their peak and then
start the reinvention cycle again.
Nadya Zhexembayeva, author of Built to
Reinvent: The Ten Commandments of
Today’s Sustainable Company and
Overfished Ocean Strategy, argues that
many firms acknowledge the strategic
importance of innovation but less see it as
an urgent task. She says firms must see
innovation as a constant state, and this
requires a change in mindset, dedication
and persistence. It must become a
process. Organisations need a new breed
of “pragmatic futurists”; employees need
to be “fit for change”.
“…we must reinvent so frequently and so radically that the traditional roles and processes inside of an organisation cannot keep up.” – Nadya Zhexembayeva
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How to innovate successfullyInnovation can be a complex task that requires a structured approach, but with the right governance framework and culture, it can succeed in any organisation.
In The eight essentials of innovation, an
article summarising the results of a multi-
year study of 2,500 executives, McKinsey
& Co concludes that it’s a complex task,
calling for a careful, well thought-through
approach. Those firms that had been
successful, set out to establish a set of
cross-functional practices and procedures
to structure, organise and achieve
innovation. They call it an “innovation
operating system”.
At the same time there is an opposing
view that innovation has become over-
complicated, with Forbes stating: “So what
was once a simple concept — the idea of
systematically finding, encouraging, and
implementing new ideas — has become
horribly complex. Unfortunately, by
complexifying innovation, we’ve probably
started to kill it.” In order to simplify the
process of innovation, organisations need
a clear process and a culture that
promotes innovative thinking.
These two views have much in common,
both agreeing that the ingredients for
success include:
Culture
Process
Structure.
“The problem is that nobody quite knows what the word actually means. Instead we’ve gotten tangled up in all of the variations, nuances, tools, techniques, models, frameworks, and paradigms of innovation” – Forbes
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A Culture of Innovation
Forbes states: “Be clear about how
managers can best enable a culture of
innovative thinking” and calls for robust
and regular interaction between business
units, as well as recognising and
rewarding individuals who succeed at
innovation – as well as those that “fail
smart”.
McKinsey&Co argues that it’s crucial for
targets to be set by the senior executive.
The target cascades down through the
organisation, sets a framework, creates a
sense of urgency and focuses the mind of
the firm’s executives. Whilst executive
sponsorship seems a key ingredient of
success in setting the right cultural “tone”,
appointing an innovation advocate who
owns it and chairs the designated team
and manages the budget is a vital,
pragmatic requirement.
It’s also important to ensure a balance
between the bureaucracy that’s in place to
manage risk and the cross-functional
collaboration that supports new ideas:
“Virulent antibodies undermine innovation
at many large companies’ (McKinsey&Co).
The best companies find ways to embed
innovation into the fibres of their culture,
from the core to the periphery.
In addition to agreeing on how to define innovation and on what it means to your company’s mission, you need to change your team’s perspective, shifting from thinking about innovation as a ‘risky endeavour’ to it being an exercise in risk management. In short: Innovation is something to be managed, not something to simply throw money at.” – Forbes
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A Reinvention Process
Nadya Zhexembayeva explains that it’s
key to get the reinvention process right or
the content won’t matter. She argues that
in most firms there is no shortage of ideas
but a shortage of successful
implementation processes.
It seems the experts agree that the
ideation phase needs to happen away
from the bureaucracy and internal politics
of the core business. They suggest setting
up a cross-functional innovation team in a
central physical location, with its own
budget, free from interference; a kind of
laboratory that’s set apart from the larger
host organisation.
In 2007 Uri Neren of Innovators
International was commissioned by The
Mayo Clinic to research the best practices
of companies that most often succeed at
innovation. One of his top five findings
was that most of the time was spent in the
invention stage, the most “fun and
exciting area”. Instead, a lot more time
needs to be spend at the discover stage
to understand the behaviour and drivers
of the intended audience and the problem
that needs to be solved.
Four findings by Neren stood out for how
to structure a repeatable, reliable
innovation process:
Commit to the percentage of
growth that the business expects
from innovation and stick to it, as
the catalyst for growing the top
line.
“Obsolete yourself.” Reward
engineers and R&D for building,
designing or concepting the next
innovation that will act to
“obsolete” a current product or
process (before the competition
does it for you).
Create a set of agreed to metrics,
and a decision process by which
products or services will be funded
or killed
Incorporate CEO ownership.
Innovation teams should report to
the CEO or COO.
“The insight-discovery process, which extends beyond a company’s boundaries to include insight-generating partnerships, is the lifeblood of innovation” – McKinsey&Co
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Structuring for Innovation
There are many examples of structured
approaches to change. Toyota famously
invented a process called Kaizen, meaning
“good change”. At the time, the rules of
the industry said you could either build
well-made expensive cars or low quality,
more affordable cars. By empowering
their employees to look for small
improvements to their entire process – up
to one million changes in a single year –
they were able to harness an innovation
army and change the rules of the car
industry forever.
In more recent times the modern titans of
industry such as Google (“20% time”),
Apple (Blue Sky program) or Atlassian
(Hackathons) exploit innovation through
structured programs. A common feature
of such programs is employees spending
time away from their day-to-day duties,
for example, on a three-month sabbatical.
It’s hard to be a successful, part-time
innovator. Interestingly, Google’s 20%
time policy has come under fire in recent
years. It became increasingly hard for
employees to dedicate 20% of a working
week to a “passion project” whilst still
completing their day-to-day tasks.
Marissa Mayer, the now Yahoo CEO and
ex Google employee said that the 20%
time projects were really a myth.
According to Mayer, these aren’t projects
you can realistically do instead of doing
your regular job for a day every week. It’s
“stuff that you’ve got to do beyond your
regular job”.
This lends weight to the innovation
laboratory concept, sitting separately from
day-to-day activities. But this
organisational freedom needs to be
balanced by a strong “keep or kill”
governance framework to initiate suitable
projects and evaluate potential winners.
Additionally, successful firms should invest
in many more projects at the idea stage
than they could ever fully support, as
research shows only 15-20% of projects
will ever see the light of day.
“You’ve got to structure your organisation to allow innovation to flow through it.” – Uri Neren
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The Thomas Duryea Logicalis (TDL) Approach to Innovation A formalised approach enables TDL both to innovate within the business, and to collaborate with customers to support their innovation goals.
TDL realised that for innovation to happen
we needed to establish a Solutions
Lifecycle Board to provide structure and
guidance to our customers, employees
and partners in identifying and assessing
new innovative ideas.
We see an opportunity for IT to become
the catalyst and innovation driver that
defines and executes customers’ business-
centric strategies to drive innovation
faster from scratch, unleash innovation by
transforming existing resources and
secure innovation across the entire
environment.
We follow and recommend the following
six-step innovation process:
1. Identify your organisation’s
innovation advocate.
2. Restructure budgets. Look for
money outside of traditional
budgets, the discretionary
spending often referred to as
“shadow IT” (the rogue projects!)
The Age of Innovation – A Thomas Duryea Logicalis "How to" Guide page | 9
3. Perform an initial innovation
assessment to establish clear
objectives, context & perspective.
4. Restructure teams. Identify your
required skill sets for the project.
Set up “innovation sabbaticals” for
key employees to join a “90-day
team”. Encourage team members
to reach outside the firm to
connect with other networks and
organisations.
5. Provide a “sandbox” budget. Let
the team experiment for 3
months.
6. Establish strict “keep or kill”
criteria to establish the potential
reward versus the potential risk of
further investment.
Those projects that make it through the
design and development phase enter a
second discrete transition phase.
The transition phase develops the concept
to fully address the market’s
requirements. Regulatory and compliance
factors are assessed to manage potential
risk and the product or service is fully
tested to ensure it delivers real value to
the identified customer set.
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The CIO’s role in innovation Innovation is increasingly being seen as enabling greater efficiencies and driving growth. CIOs are well positioned to bring together the technology, business process digitalisation and change process to support and drive innovation.
According to PwC, who calls this the ‘idea-
to-cash’ process, CIOs can help to develop
and execute end-to-end innovation in two
ways:
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.
The second area will come naturally for
CIOs since they are inherently experienced
in technology implementation. The first
area, however, will be unfamiliar territory
for those CIOs who haven’t been exposed
to the business processes behind
technological implementations. But
whether CIOs like it or not, innovation is
not always based on technology, even if
technology is often heavily used in
innovation. Forward-thinking CIOs have
long since shifted from being operations-
focused backroom officers in favour of
The Age of Innovation – A Thomas Duryea Logicalis "How to" Guide page | 11
adding strategic value and insight to their
roles. These CIOs are well equipped to
design and implement the innovation
process as a member of the management
team.
Ian McLeod, National IT manager for the
ALH Group, sees his role in innovation as
twofold. On the one hand as a member of
the senior management team, it’s his role
to instil a culture of innovation with his
direct reports; innovation projects are
built into KPIs and discussed at monthly
meetings. Innovation isn’t always found in
big “headline” projects but in small
incremental improvements and over time
value accumulates to generate a
significant overall improvement.
He also acknowledges that technology
innovation isn’t just the IT department’s
job; good ideas can come from many
individuals in different departments
throughout the organisation. A close
working relationship between IT and the
business units facilitates the gathering of
innovative ideas.
CIOs can play a key role in identifying and
managing external innovation partner
relationships, especially when it comes to
those innovation projects with a strong
technology component. With the long
history of outsourcing and more recently
the shift to external cloud technology
providers, CIOs and their team are
increasingly adept at managing external
partner relationships that often provide
the required spark and skill sets required.
“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.” – PwC
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The CEO’s dilemma As challenging as it may seem, CEOs must
grab the innovation bull by the horns.
Innovation is both strategically important
and urgent. Change is inherently risky, but
so is stasis. It is for this reason that CEOs
must create and allow a culture of failure
to facilitate innovation. By reducing
governance to a reasonable level, there is
room for learning. Pradip Sataram, a
speaker at IDG’s 2015 CIO Summit in
Sydney, stressed the importance of this.
When he took on the position of CIO at
real estate investment services company
Enterprise Community Partners, initially he
was told by senior leadership to “be
innovative, but don’t fail”, to which he
responded that he couldn’t guarantee
success, but he could guarantee failure if
nothing was done. A lack of trust in the
process can kill innovation, and trust must
come from the top. Strong leadership is
required to set the right tone, backed with
a structured budget, resources and most
importantly a diligent process that
evaluates the best opportunities and
drives the organisation forward by
bringing new ideas to life swiftly.
There is a mandate for the CIO and their
team to be a key player in enabling and
driving innovation: “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.”
“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” – PwC
The Age of Innovation – A Thomas Duryea Logicalis "How to" Guide page | 13
Are you an innovator? If you can’t say yes to all these questions, you may be missing an opportunity to drive innovation – or you may have great ideas but are missing the structure to embrace and adopt new ideas.
1. Do you work closely with the CEO? (In 41% of technology-driven businesses, CIOs take on more responsibility for leading innovation, side-by-side with the CEO)
2. Do you have a structured approach to innovation? (79% of CIOs at innovative companies use a structured, but fast, approach to prevent IT overload and create an organisation capable of delivering and responding to change more effectively)
3. Are you a business strategist? (Business leaders in technology-driven businesses believe that 46% of their CIOs’ time should be driving business innovation versus keeping the lights on)
4. Do you collaborate with other line of business managers? (Collaboration is critical to the innovation-driven CIO. 61% use cross-functional teams to seek out new ideas and create IT-driven business innovation)
5. Do you align IT with the business strategy? (91% of line of business in innovative companies say their CIO and IT departments have a solid understanding of their overall business objectives and are seen as game changers rather than just cost centres)
6. Do you embrace emerging technologies? (CIOs at innovation-driven companies are twice as likely to invest in an emerging technology group as companies with an ‘ad hoc’ approach to business transformation)
Adapted from: https://enterprisersproject.com/hbr-infographic (Harvard Business Review)
McKinsey&Co identified the use of partners as crucial to the ability of an organisation to accelerate and extend innovation. It’s increasingly rare to find all of the talent and knowledge within your own organisation and geographical borders. Thomas Duryea Logicalis can help you innovate, with proven processes and more importantly a culture of “thinking outside the box” and looking for new ways to deliver business outcomes.
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