New Florence. New Renaissance.

Innovation and Discipline

Michael Schrage at MIT questions free thinking, nurturing cultures as contributing to innovation.

"Inspired by MIT's research on lean manufacturing, the IT Process Institute surveys zeroed in on the controls, not the metrics, the elite used to define and assure process discipline. Two controls towered over all others in impact and importance: Do you monitor systems for unauthorized changes? And are there defined consequences for intentional unauthorized changes? No ambiguity or nuance here. The key discriminator between the best and the rest was that elite performers rigorously monitored and punished unauthorized changes. They had situational awareness of change."

"The findings quantified distinctions between IT shops that live for the average and the few that take process leadership seriously. Elite IT performers weren't just two or three times better than median performers—they were seven or eight times better. High performers—roughly 13 percent of the 98 sampled—contributed on average eight times more projects, four and a half times more applications and software, four and a half times more IT services, and seven times more business IT changes. They implemented 14 more changes with half the failure rate."

CIO View of Tech Innovation: The MAGIC Framework

I am presenting at a session on Innovation at MR's Enterprise conference at Pebble Beach in October. I will be be moderating two CIO guests  - John Dean of Steelcase and Dave Watson of Kaiser Permanente who will be presenting on the CIO view of Tech innovation.

CIOs, like most executives, are under intense pressure to innovate as global competition intensifies. But as I talk to John, Dave and other CIOs it is becoming clear that their views on innovation are very different from those of tech vendors and VCs. They do not want to be "spoon fed" innovation - they want building blocks they can adapt to their own vision of innovation. They bristle at the premium and large spend expectations around vendor innovation.

I have pieced together 5 elements - what I am calling the MAGIC framework -  of what CIOs like John and Dave are using to define tech innovation and deliver it within their enterprises

Mashups - in the CIO world, there is a clear recognition there is no silver bullet. Mashup to them is about exploring every nook and cranny of the Doblin innovation framework - business model changes, channel optimization, product improvement and more. Also, most CIOs are looking at wide array of promising technologies from mobility to sensors to grids to web services. They want basic building blocks in each area and then have their teams do the mashup.

Vendor tip:  Curb your enthusiasm. You may think your technology solves world hunger (like many Web 2.0 companies do right now), but few vendors can dream of or service the wide ranges of innovations CIOs are looking at. Present your capabilities rationally and knowing it individually is a small part of the CIO's innovation portfolio.

Alpha technology - a quiet revolution is taking place in CIO budgets.  After years of vendor consolidation, the top 10 vendor share of their wallets is now shrinking. CIOs realize they have to take more risk to deliver innovation and are willing to give younger vendors and technologies much more of a chance. Also, many CIOs are having to scratch out innovation budgets from "utility" spend with incumbent, large vendors. The confrontional re-negotiations are not encouraging CIOs to listem to innovation pitches from such vendors. Besides, having outsourced R&D to vendors, many CIOs are disappointed only 5 to 10% of that spend actually has gone over the last few years to vendor R&D and innovation.

Vendor tip: The number of patents you have is not that important. Innovations in release 8 of a product are just as unimpressive. Early, but usable, technology in the hands of the CIO team is what counts.

Global inspiration - While globalization is affecting every business executive, in the last couple of years I have seen CIOs travel more and become more fascinated with global sourcing. Mobile applications from Korea. Open Source from Scandinavia. BPO ideas from India. Manufacturing innovation from China. CIOs are becoming global faster than many of their executive peers. And global in another sense - willing to look outside their own verticals. They do want learn about web services at banks, telematics at distribution companies.

Vendor tip: Every buyer has historically told vendors to show them relevant, industry specific citations and applications. They will continue to, but you will be surprised how open they are to new ideas from wherever.

Intensity-  CIOs assign small "tiger teams" to innovation projects. Short time frames. Stingy budgets. Constrained based innovation. The old dream of huge Sabre like "competitive advantage" projects is gone. It is about tactical, but significant, payback projects.

Vendor tip: Think big, execute small and intense. Talk quietly and carry a big stick. Necessity is the mother of invention. Cliches I know- but each points to constraint based thinking and focus on high payback areas. CIOs also want to hear how you have innovated your own sector's business model. It could be through different licensing, delivering software as a service. They want to understand the risks, but they do not want "same old".

Collaboration with LOB - Many of their tech innovation ideas are coming from their non-tech executive peers. Business execs, helped by reading materials (yes even airline ones) and peer sources, see several technologies as facilitating innovation. Yes, many do believe the I in CIO is Innovation.  CIOs in turn see it as their job, not just to ensure security and compliance, but to deliver applications to delight business users, not  to impress technologists. The bond between CIO and LOB is being strengthened on the back of innovation projects.

Vendor tip: Would a business executive understand your pitch? If not, leave out elegant architecture,  methodology and other materials. Focus on what the CIO needs to delight the LOB.

CIOs are under huge pressure to help their businesses innovate. Their next generation of vendor partners will be brimming with ideas, will be intense and will themselves be innovating their own business models. The Chief Innovation Officer should expect no less from his/her supply chain.

Tech Savvy CEOS

Always nice to see CEOs who believe in technology driven innovation. This article profiles 4 CEOs - not surprisingly in financial services, where technology is lifeblood:

Ray Killian, ITG
Seth Merrin, Liquidnet
David Krell, International Securities Exchange
Thomas Peterffy, Interactive Brokers Group

Florence during the Renaissance

Welcome to my new blog. Some of you may have read my Deal Architect blog.

I spend much of my time helping CIOs reduce their “utility” spend with large, incumbent vendors and started my Deal Architect blog to focus on efficiencies and savings opportunities. But the more I work with CIOs the more I realize, for an amazingly new set of economics, they can leverage innovation from many new sources, often from completely unexpected places around the world.  While there is so much noise around “consolidation and the death of innovation” and “IT doesn't matter”. If you cut through the fog and the noise, we are really in the midst of a revolutionary time. And so I also started to write posts on the blog about innovative CIOs and business applications.

I  believe all this innovation deserves its own blog - so I am starting a "spin-off".

This is what Florence must have felt like during the Renaissance with so much happening in so many technology areas:

“Mobile Internet” - see this fascinating presentation by Mary Meeker of Morgan Stanley as she generates renewed excitement this time around the “new Web”

Open Source - when Kleiner Perkins shows excitement, it is usually a pretty solid endorsement for a sector as this BusinessWeek article describes

BPO - a growing recognition in corporations business processes need to be “commoditized” and the wide array of call center, transaction processing and knowledge work that is being done in India and elsewhere

Sensor Telemetry - somewhat high-faluting term used by Accenture to describe all the neat payback companies are seeing from combining RFID, GPS and wireless technologies

Software as a service - the excitement being generated by AppExchange from salesforce.com and the growing understanding of operational and financial success factors for the model

Digital content and new media - the realities of the on-demand, blogging and podcasting world and how Madison Avenue is changing - and changing us along the way

Analytics - a growing focus on the challenge of master data management and the promise of next generation predictive analytics

Security and Surveillance: All the stuff from biometrics to other sensors to basic security for fraud detection and intrusion management

I did not even mention web services, mesh networks, collaboration, storage and server technologies and a whole bunch more.

Here’s what’s really exciting. This time “Florence” is virtual. Open source excitement from Scandinavia, mobile commerce excitement from Japan, BPO from India. New media in the US. Telemetry payback in utilities and healthcare. Security payback in financial services and government. BPO in insurance claims and mortgage processing.

And for a change, many of the technology initiatives do not require 8 or 9 digit budgets. You see this is why CIOs send me emails like this one ” ..more power to your elbow in driving out waste and excessive premia in our industry”. They all want the “innovation dividend” so they can book that trip to the new Florence. Exciting times!

Over the next few weeks, I will be moving many of the innovation focused posts from the Deal Architect blog .The Deal Architect blog will continue to focus on technology negotiation, process efficiencies and reducing “utility” spend. Look forward to your comments on both blogs.

HRO Today Magazine interview

Joe and Kerry Ann Vales interviewed me for HRO (Outsourcing) Today magazine about trends in technology prcourement and particularly, about innovation. Here is the link. Part 2 of the interview appears next month.

New Florence Presentation/Article

I presented to several CIOs at the Software 2006 conference on Innovation and Utility Spend in IT. Attached is the presentation in PDF format

Download new_florence_latest.pdf

I also wrote an article for the UK Magazine Real Finance on the same topic - PDF attached

Download da_vinci_code.pdf

Innovation Season

BusinessWeek has a series of articles on the most innovative companies and its list (along with Boston Consulting Group) of the top 25 most innovative here.

Business 2.0 on the other hand has a list of 25 great ideas at a number of innovative companies.

Nice reads both. Interestingly, Southwest Airlines shows up in both lists. Home Depot and Wal-Mart show up in one of the lists. Proof that you can be operationally efficient and innovative at the same time. Indeed, as I wrote in The Discipline of Market Leaders, it is no longer an either-or.

Easier to Copy than Innovate

So says Rob Carter, CIO at Fedex in this Fortune interview. But Fedex would rather innovate and has an enviable track record of technology innovations that have made its supply chain efficient, tracking packages easier for customers and its drivers much more productive.

He also talks about how UPS has caught up in a number of technology areas. See my profile of UPS technology here.

IBM's Global Innovation Outlook

Courstesy of Sadagopan I saw IBM's Global Innovation Outlook (GIO) Report.

"In 2005 and 2006, the GIO 2.0 gathered 248 thought leaders from nearly three dozen countries and regions, representing 178 organizations across four continents for 15 “deep dive” sessions to discuss three focus areas and the emerging trends, challenges and opportunities that affect business and society:

• The future of the enterprise
• Energy and the environment
• Transportation and mobility"

Lots of neat insights in each of those areas.

In 2004, IBM had released GIO 1.0 which had covered

• The future of healthcare
• The relationship between government and its citizens
• The intersection of work and life."

The GIO 2.0 is a nice summary of the opportunities for innovation in technology, process, networks, everything. IBM's Irving Wladawsky-Berger blogs about it here.

My question for IBM - how are enterprises going to fund innovation? Today my advice is it has to come out of utility spend enterprises make with IBM, EDS, Oracle etc. Does IBM have alternative funding advice or is it going to slash its utility pricing?

The Power to Predict

The CEO of Tibco, Vivek Ranadive has put together a book of case studies on how innovative companies are leveraging technologies to advantage. Readers of this blog know I love to write about "applied" technology - what CIOs do with technology building blocks. They are the unsung heroes even as we like to celebrate high-tech entrepreneurs and vendors.

Dennis Howlett and Tom Forenski provide their endorsements.