the age of innovation - · pdf filethe age of innovation ... starts to die.” not only...

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.”


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


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


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


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


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


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!)


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.


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


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


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


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.

https://enterprisersproject.com/hbr-infographic

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