EnterpriseInnovator – "Innovation Capacity – Not IT Spend – Matters Most" – a critique

Categories: Innovation Insights, Innovation Software

I had a conversation yesterday with a top 10 innvoation guru – you have read his book, I am sure, if you are working in the field. The discussion turned to IT and how IT supports innovation initiatives. At this point, I now go back to my notes… and he said “I have never found a single IT group who is in line with and truly supportive of the business”. Bearing in mind that this individual has designed programs in at least 20 of the Global 100 clients, this is a damning indictment.

The more research I do on the subject, the more polarized my personal view becomes. IT very rarely supports innovation initiatives. And if they get too involved, their loving touch can smother any chance of good things coming out. They were the guys who brought us e-mail rather than collaboration systems, they are the ones who shout at us for using shared drives, whilst their fancy-dancy knowledge management repository gathers dust.

My spark for today was reading an article on EnterpriseInnovator about “IT Capacity”. The article is largely a synopsis of a recent Forrester Research article: “Memo To CEOs And CIOs: IT Innovation Capacity — Not IT Spend — Is What Matters,” August 3, 2005. To start with, some direct quotes:

  • CEOs should keep their focus on what Forrester describes as “innovation capacity” – which is “the potential for the IT function to support new products, processes, and opportunities.”
  • To fully assess their “innovation potential,” Forrester advises CEOs and CIOs to “look back at the past three years” and “examine the trend line of innovation capacity” – and then to “look ahead to the next three years to set a target for what they want their innovation capacity to be.” Forrester explains that “negative innovation potential” – or a reduction in capacity – is a “recipe for a variety of unpleasant scenarios, including growing business frustration with an ever-scarcer IT resource pool, business units’ avoidance of the IT organization, and CEO dissatisfaction with the performance of the CIO.”
  • Having More To Spend On Innovation By Spending Less On O&M: Forrester observes that innovation capacity is really just “the amount of available funds that IT can spend on new initiatives in any given year,” which is “typically total IT spending minus IT spending on ongoing O&M.” Forrester explains that by making savings in ongoing IT O&M, companies can “free up a constrained resource pool to do new projects and investments” – driving greater innovation. As such, by looking to innovation capacity, companies may use that “difference between ongoing IT O&M and total IT spending as a percentage of total revenue as an indicator of IT’s capacity to support business innovation.”

First issue: Innovation Capacity. The definition used here is way out of the mainstream. IT rarely factors into most companies definition of innovation capacity (the capacity of handling new things that deliver value). I think this is a mistake because IT is a powerful enabler of new types of business, and in finding efficiencies that allow you to redeploy resources to more valuable activities. But, come on. IT – the people who maintain mail servers, databases, spend 3 years implementing SAP (hey, wasn’t that project even outsouced??) – these guys are going to be driving innovation? There are definitely exceptions to the rule (I count Georgia-Pacific and GM at the leading edge of IT innovation), but the point is that they are the exceptions to the rule, not the norm.

Second: Trends and past scarce IT-resources. Now we are getting somewhere. The trend that IT is very bad at supporting real business objectives (I am thinking sales, marketing, etc), and most effort on back-office activities is a big trend, and that trend is not going to suddenly reverse itself. Innovation will NOT be driven by IT – they could not drive other initiatives successfully before, and it ain’t going to happen now.

Third: Innovation Capacity is driven by the amount of money IT can spend on new toys. What planet are they living on. Does P&G drive innovation through ethnographic research and deep customer insight, or by upgrading their collaboration software? Is the IPOD a success because Apple really improved self-service support for employees to access their 401Ks on the intranet. This sounds like an excuse for IT to spend money on new toys, like WIFIMax, RFID, just about anything that takes 1 – 4 years to deliver. That sounds like innovation to me.

I am a converted IT, by the way (although few would realize that now). My IT experience was formed at Intel and GM. I am passionate about the world of innovation, and extremely annoyed on behalf of the business sponsors we work with that non-business focused IT gets in the way of doing good things, or delays projects by six months for no good reason. This has got to stop – the future is coming towards us, the innovators will not stand for it.

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