The Hackett Group's Rick Pastore examines what is behind IT's woeful track record for innovation effectiveness.
Minus fifty-six (-56). That is the net promoter score (NPS) that stakeholders give their technology organizations for innovation effectiveness. This is the lowest rating of anything The Hackett Group measures in our Technology Stakeholder Satisfaction Survey: Worse than technology’s strategic thinking and analysis (-50); worse than technology’s partner orientation (-41); even worse than technology’s communication abilities (-38).
Technology leaders have a more positive, but still far from stellar perspective on their reputation as innovators: 40% of respondents to our recent poll said their stakeholders don’t see them as effective innovators. They also admitted that 50% of their disruptive innovation efforts failed to meet expectations.
To consider what is driving this woeful reputation and marginal track record, let’s first answer this question: What does innovation have in common with transformation?
- They are both four-syllable words that look important in board presentations? Sure, but what else?
- They both lead to lucrative consulting engagements? OK, but that’s not where I’m going with this.
- They are both often cited as goals, objectives, strategies or outcomes – none of which they actually are? BINGO! They are a both means to an end.
Specifically, transformation is a set of disruptive actions that help put in place the new operating or business model needed for future success. Technology innovation is a set of actions that introduce technologies to products, services or processes for the purpose of driving change that generates value. That change can be disruptive, differentiating or defensive – but the goal is always business value that would otherwise be lost, missed, diminished or delayed without that innovation.
The Big Spoiler
So, if you agree that innovation is a means to an end, then it shouldn’t be surprising that the top spoiler of technology’s innovation efforts is not knowing what the end goal is. In our poll, technology leaders ranked as their #1 most harmful innovation hurdle “lack of a shared vision, purpose or strategy” for innovation. There is no executive perspective for, or commitment to, “why we are doing this.” This makes it next to impossible to target, prioritize, gain commitment and marshal resources.
Interestingly, the 20% of poll respondents who had the best results from their innovation initiatives (top performers) ranked this hurdle last on their most harmful list (see chart below). So the top performers have a shared vision, purpose or strategy for their innovation efforts or program. Following this logic, a true key to innovation success is a consensus on why you are innovating.
Innovate for a Purpose
So what can technology leaders do about this? Seems like a no brainer, and far simpler than solving resistance to change or a lack of time to focus (high-ranking hurdles for the top performers as well as the general population). Employ the same discipline used to vet any technology-enabled project or initiative. Assess the business case and determine with stakeholders how well it maps to official business goals and strategy. Why isn’t that already happening naturally? Could it be that the executive committee lacks goals and strategies (doubtful) or can’t agree on or communicate them clearly (possibly). Regardless, don’t let that be an excuse to fail.
I’m not saying the technology team shouldn’t be discovering and experimenting with emerging technologies unless they have a predetermined business goal or value proposition. I’m saying the business opportunities that this experimentation reveals must be saddled up to visions, purposes or strategies before moving forward, the better to cross the finish line successfully.
Interview with Joe Bruhin, CIO, Breakthru Beverage Group
What are the goals associated with innovation wins these days? Again, let’s turn to the poll results. Employee and customer experience improvement, as well as cost takeout, are the most common purposes for technology innovation over the past two to three years. This is understandable given the pandemic’s impact over the past 18 months. Happily, they are also among the most successfully achieved goals (see performance to goal ranking below). If CIOs want to improve their innovation track record quickly, they should target these types of outcomes and be content with delivering incremental value through differentiation.
The least common goals for innovation are busines agility, shortening time to value, and business model change. All three goals require significant, disruptive change to business processes, structures and the core business model itself. So, it’s understandable that they are least often attempted, and also the least successfully achieved. CIOs should find their innovation legs before going there.
Actions to Improve
What can CIOs do to improve their innovation records? We’ve identified several structural and process actions that really move the needle. One of the most effective structural changes for better innovation is alignment of technology teams with business customers, products or portfolios. The closer technologists get to the nexus of value and customers, the more familiar they will be with needs, goals and strategy. It is a small step from there to conceive relevant ways to apply new technology, test and pilot with close customer feedback, and develop and launch solutions with ongoing user engagement.
Most (60%) of CIOs say they are dedicating some part of their technology team to innovation. This way, they are able to concentrate scarce skills and resources in one body chartered to investigate the most promising emerging technologies and pursue the most high priority opportunities and challenges. Top performers in our poll are less likely to field a dedicated innovation team. This is most likely because their innovation capabilities are more mature and their talent less scarce, enabling them to spread innovation responsibility more generally throughout their organizations.
A more tactical capability that has been very effective in facilitating innovation is the consistent use of agile or rapid development techniques for innovation projects. This enables iterative validation of the concept, spreads out the risk, and helps keep the fires of interest stoked. Innovation can’t survive a three-year waterfall timeline.
Finally, innovation is more likely to succeed if it is woven into the technology organization’s culture, rather than isolated as a capability or process. The most successful technique to instill and maintain that culture is periodic exposure of the team to new thinking and ideas (offsites, guest speakers, etc.). Even during this time of remote work, it is still possible (and perhaps also cheaper) to hold virtual group discussions with notable innovators, deep thinkers, futurists and people who solved similar challenges in different ways.
Just make sure to tie it all back to business goals and strategies. Because it’s just as important know what innovation will do as it is to know how to do it.