Does your IT Plan support your organization’s innovation agenda?

By this I mean how your organization uses IT to support its innovation agenda not how innovative your IT organization is in the delivery of its services — although that is important too.

In IBM Global CEO Study 2006 Expanding the Innovation Horizon, CEOs considered three forms of innovation:

1. Business model – Innovation in the structure and/or financial model of the business
2. Operational – Innovation that improves the effectiveness and efficiency of core processes and functions 
3. Products/services/markets – Innovation applied to products or services or “go-to-market” activities.

All are important but at the time of the study CEOs were increasingly focused on business model innovation. As an IT leader do you know what is on your organizations innovation agenda? Does your IT plan recognize and support innovation and does it lay the foundation for change?

(The same study also emphasized the importance of external collaboration in driving innovation. Does your collaboration strategy support external groups? Far too often I have found that enterprise collaboration tools end at the firewall and are confounded by the need to add external parties such as trading partners, consultants, lawyers, and external researchers to innovation projects.)

Operational innovation focuses on business processes to be better, faster, cheaper. Examples might include automated materials handling, elimination of hand-offs in business processes, centralized and automated records and so on. Disciplines involved include business process improvement and industrial engineering.

Product innovation deals with improvements to what the organization outputs (regardless of whether it is produced better, faster, cheaper). Examples might include telemetry for heavy equipment or aircraft, automated guidance for heavy equipment, or adaptive cruise control for vehicles.

The obvious example for business model innovation is the move from bricks and mortar to the web — the Amazons of the world — but there are plenty of others. In the world of aircraft engines we have Rolls Royce’s Power-by-the-Hour which offers a complete engine and accessory replacement service on a fixed-cost-per-flying-hour basis. In the IT industry we are witnessing a rapid business model change to cloud computing and software as a service.

Of course each category does not stand by itself and a given piece of technology might support two or all three categories. For example 3D printing (or additive manufacturing) could enable more efficient business processes (make to order rather than inventory), new products, and new business models (customer designed items).

From an IT strategy viewpoint we are probably most comfortable with operational innovation — we have been doing this for a long time. Business model innovation is also familiar. In the 1960’s American Hospital Supply placed communicating IBM keypunch machines in hospitals, provided pre-punched cards representing items to be ordered ( a catalog!) and allowed hospitals to place orders by interleaving product cards with quantity cards.

The least familiar area is product innovation especially when IT is incorporated into the product itself.  As products include sensors to measure their performance, systems to control their behaviour and communications capabilities to relay information this creates many IT needs and the opportunity to provide innovative IT services to complement the products.

In conclusion, as IT leader do you know your company’s innovation agenda; does your IT plan anticipate and support this agenda; and can you see how IT can add value to operational, product and business model innovations?

ps For a different look at innovation I recommend “Where Good Ideas Come From” by Steven Johnson.