Innovation Atrophy: How Companies Can Fight It

May 27, 2011 (08:05 PM EDT)

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These days, information technology giveth.

Web-enabled mobile devices and applications are the biggest game changers since the PC. The cloud has redefined how we think about computing power and even the need for data centers. Big data analytics are a looming business opportunity. The Windows desktop is giving way to a variety of devices--tablets, smartphones, maybe even Google rent-a-Chromes, all working alongside conventional PCs and laptops. IT is being embedded in everything from cars to slot machines to handheld checkout devices in retail stores.

It's a whirlwind of potential that business technologists can help their companies seize. So why aren't people more fired up about doing that?

When InformationWeek, in our 2011 U.S. IT Salary Survey, asked IT professionals about their most important job attributes, the ability to work on creating new, innovative IT solutions was cited by only 20% of IT staff, down 11 points from 2009's survey. A mere 21% cited working with leading-edge technology--a five-point drop from 2009. Just 39% cited the challenge and responsibility of the job as an attribute, a decline of eight points. Hardly the stuff of a profession facing the opportunities of a lifetime.

ADP CIO Mike Capone saw this mood recently at a breakfast meeting with IT pros from other companies around New York City, which led him to give an impromptu pep talk. Based on the questions and discussion that ensued, it became clear that a lot of the attendees felt "beaten down" by cost cutting and left out of company strategy, he says.

David Guzman, CIO of the marketing data and technology company Acxiom, thinks IT leaders evaluating their innovation strategies need to start by acknowledging reality--that cost cutting has dominated the business environment and taken its toll on the troops. "All investment in IT has had to be very ROI-focused," Guzman says. "It's part of what we've had to do to keep pace with the business."

Dell CIO Robin Johnson looks at the InformationWeek salary survey data showing diminished interest in working on the newest technologies and isn't at all worried. In fact, "I think we have far too much of a focus on new technology," he says.

At every IT team meeting, Johnson reminds his people that they're in the business of making Dell's business run better, not implementing technology for technology's sake. Johnson has a dedicated innovation team. But starting with what a technology can do, instead of a business goal like cutting order-to-cash time, has led to a lot of folly for IT operations. One way to interpret the data from our salary survey, he says, is that "IT has grown up a lot."

That's good, as long as it doesn't mean that those youthful innovation muscles have gone flabby in the process. The danger is innovation atrophy, a condition where risk taking and daring become so neglected amid belt tightening, quick ROI, outsourcing, and plain old fear that IT pros forget how to take a chance on a big, potentially brilliant idea.

Even the most successful companies must constantly guard against innovation atrophy. Bill McNabb, CEO of mutual fund giant Vanguard, saw his company seize the Web to reshape its operations--from being a company dependent on the phone and mail for customer relations to one in which Web interactions are the norm. Sometime after that flurry of Web innovation, though, the company hit what McNabb calls "a bit of a lull in innovation." In an effort to get more high-impact projects into the mix, Vanguard's leadership took steps to create ad hoc project teams geared to the rapid development of prototypes. In 2010, Vanguard was at the top of the InformationWeek 500, our annual ranking of IT innovators.

Fostering innovation should be high on every CIO's priority list, as companies shift into growth mode as the economy recovers. (See 4 Steps To Spark Innovation.) Their approaches, however, must be consistent with their companies' culture, such as their tolerance for risk and failure, or how far into the future they're planning. Following are some of the key questions CIOs must consider as they look to build innovation muscle or tone up after extended inactivity.

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>> Innovation Lab Or Not?

Some companies establish lab environments where technologists are dedicated to the pursuit of IT innovation. These formal efforts must be well managed. Without a clear purpose, they risk becoming the corporate equivalent of a high school science fair.

The mission of innovation labs differs by company. Dell's IT innovation team consists of about 15 people charged with coming up with completely different approaches to business problems. Ideally, the team creates templates and frameworks that others in the company can implement where there's a need.

For example, Dell's testing a screen for internal enterprise search that sounds spartan even compared with Google's simple search page design, with only a box for the search terms. Say someone in customer service has a part number, invoice, or customer name and address, and needs more information. The idea is to let that person type one of those data points into the search box and get options laid out in search results format. The business goal is "radically simplifying" how employees interact with technology and ultimately customers, Johnson says. That customer service rep wouldn't have to know which application to use with the tidbit of information in hand; the search tool makes that easy.

In Johnson's view, the technology behind that radically simple interface is secondary. Yet, as is so often the case in IT, making something appear so simple takes a lot of back-end sophistication. Behind this search box is an array of enterprise search software, such as Microsoft's Fast, embedded in hundreds of applications used within Dell. The search screen is in pilot mode. "I don't know if we'll deploy it or not," Johnson says.

Acxiom's IT innovation lab has a different mission. It's focused on evaluating emerging technologies. Acxiom's business is data, providing information that companies use to supplement their own customer data for marketing programs and segmentation. "We were Big Data before Big Data was cool," Guzmán says.

So Acxiom has a 1,500-square-foot lab where it puts the latest software and gear through its paces. For example, it tested Cisco's new UCS server blade system before it was released and got its hands on one of the first of IBM's xSeries servers. It's essential that lab personnel stay close to Acxiom's customers as a way of keeping such work relevant. "If they are really involved in the business, understanding what's happening in our business and what our customers' problems are that we're trying to solve, the more they can apply what they're doing to those problems," he says.

Acxiom recently colocated the tech R&D team with its product development group, since their work is so connected.

One of the hardest challenges with driving IT innovation is getting everyone involved, so it doesn't become the sole responsibility of one small team. That's one of the risks with an innovation lab: The company's other technologists interpret it as a sign that they're off the hook for big ideas.

Capone sees the opposite risk at ADP: how to share the wealth. "The challenge I have is everyone wants to work on the new stuff," he says.

At ADP, like Acxiom, IT's not a back-office or support function. ADP handles payroll for half a million companies, and systems and software are the heart of the business. ADP's IT team works regularly with the company's business units to drive new products.

ADP opened an innovation lab a few weeks ago. It will be staffed with a core team of four or five technologists, including some new hires from outside with innovation expertise, and 15 to 20 others will rotate through the lab on temporary assignments of around six months. This is out of an IT department of about 5,000 people.

Capone's strategy is to engage more people in the pursuit of innovation, while maintaining a sharp focus on the needs of the business and its customers.

CNA Insurance this year made a major shift to rely on outsourcers heavily for IT operations. It used to have about 1,000 IT staffers and 1,000 contractors, and the majority of them focused on what CIO Ray Oral calls "run the business" IT operations. Now CNA has about 400 IT staff mostly focused on "change the business" IT projects, he says, while four key service providers handle most IT operations. In addition, though, Oral has three of its service providers provide innovation lab services. Oral says they're still developing how best to use this new model, but one thing he likes is that, in addition to the people the outsourcers have full time on CNA concerns, they also pull in as needed people who specialize in other industries--from manufacturing to derivatives trading--to bring new ideas.

Vanguard had a formal IT innovation lab in the early 2000s. The lab pursued long-range, "maybe-someday" projects. Its goal was to get people to think about the potential of emerging technologies, Web technologies in particular. But it was an un-Vanguard-like place. The company is the king of low-cost mutual funds, and its innovations are grounded in practical client needs.

That's why CIO Paul Heller led the creation of an ad hoc innovation program. Employees volunteer to work on new ideas, and they generally do so on top of their day jobs, not in lieu of them. A small team of five people is dedicated to innovation, but most of their work involves assisting the ad hoc teams, doing things such as coordinating development scrums to get prototypes going.

Is a lab the right way to keep innovation strong? That depends on your company's culture and the kind of innovation it demands.

>> What's Your Time Frame?

One gauge of the cultural question is to consider how quickly the business needs to get results from its innovation efforts.

Is three years down the road too far? Not at Caesars Entertainment (formerly Harrah's), the world's largest casino operator, which for years has had a team dedicated to innovation projects. Led by CTO Katrina Lane, the innovation group stayed in place through a recession that hit the tourism and entertainment industries hard.

A long-term view for the innovation group is important because, while everyone's on the lookout for new ideas, no one else in the company is specifically charged with looking several years down the road for disruptive technologies. But a long horizon doesn't equal a lack of urgency. "The group has to not be constrained by 'It's got to pay back tomorrow,'" Lane says. "But at the same time, we have to actually start doing things tomorrow, to evolve the vision and try things out." That means building prototypes and even testing them in casinos to get real-world interaction.

The recession prompted Caesars to think more consciously in terms of a portfolio of projects--to always have some with quick expected returns, along with others whose returns might be realized in three years or more.

Lane doesn't think IT pros have lost the fire for exploring new technology, but she sees other risks to innovation. "There is a pressure in finding the time and opportunity to think a little further out when there's an environment of being very efficient in what we do," she says.

At ADP, Capone will urge innovation teams to create prototypes in six- to 12-month cycles--18 months max. Too short? Some will say so, but Capone feels tremendous pressure to "compress the cycles" of how quickly IT delivers on new ideas.

One reason faster innovation is more feasible today than it once was is because "the tools have become so powerful," Capone says. There are cloud platforms for on-demand server capacity and better tools for collaboration. ADP uses iRise's visualization software to generate rapid software prototypes, so business partners can say "we like that; don't like that" before developers start writing code. On the demand side, smartphone and tablet users among ADP's customers are coming to expect a constant stream of new capabilities. "My mantra is everything cloud, everything SaaS, everything mobile," Capone says.

What Matters?
Percentage of IT staff who rank these itemsamong their seven most important job attributes
2011 Point change
from '09
Base pay 50% -10
Job and company stability 45% -4
Benefits 43% -7
Flexible work schedule 42% +5
My opinion and knowledge are valued 40% +4
Challenge of job and responsibility 39% -8
Vacation time and paid time off 38% +8
Job atmosphere 36% +2
Recognition for work well done 31% +8
Having the tools and support to do my job well 29% +5
Working with highly talented peers 25% +9
Skill development, educational, and training opportunity 25% +6
Telecommuting and working at home 24% +5
Commute distance 23% 0
My work is important to the company's success 22% +3
Ability to work with leading-edge technology 21% -5
Ability to work on creating "new" innovative IT solutions 20% -11
Data: InformationWeek Analytics 2011 U.S. IT Salary Survey of 9,936 IT staff, January 2011

>> Do You Know Your Customers?

Innovation efforts can't become too far removed from customer needs. Even companies with a long-term view --unless they're doing truly fundamental, almost academic research--need this grounding in reality.

ADP's approach of rotating lab staff should keep it close to business needs. Beyond that, every IT team member is required to spend time with customers. Developers listen in on customer reviews of ADP products, for example, which Capone finds motivates them even when customers complain. "I really like it when my developers hear that," he says. "IT people have a lot of pride."

ADP IT managers must spend a "day in the life" of a salesperson--working the phone, meeting customers, hearing firsthand what they want. "That's where some of our best ideas come from," Capone says. Watching HR pros process payroll, ADP teams saw that their work is "interrupt driven"--people constantly have to stop a batch process to deal with something else. That realization got ADP's IT pros focused on making it easier for those customers to pause a job and come back to it.

Last fall, ADP delivered a mobile payroll app for the iPad. Payroll might seem like the ultimate desk job, until you think of the head of a landscaping firm going from job to job, squeezing in payroll duties along the way. Customers like that said, "You finally understand I don't sit at a desk all day," Capone says.

Likewise, Acxiom's Guzman sends his IT staff on sales calls and has them help put proposals together. He and Capone both work in businesses where IT is vital to their companies' services, but that direct connection is increasingly the norm across industries, as new mobile experiences change customer expectations. "Innovation burns when it has a problem to solve," Guzman says.

But what if IT work is being done by outsourcers whose people may not understand your business and customers as well as longtime staffers do? Done wrong, outsourcing can be deadly to innovation.

Financial services company UBS minimizes that risk by drawing a distinction between outsourcers used for one-time projects--"transactional" relationships--and those that are partners with which it has long-term relationships. One of those long-term relationships is with Luxoft, which uses IT teams located mainly in Russia, Ukraine, and Poland. UBS at times helps Luxoft recruit IT pros by letting them highlight the projects they'll work on for UBS, and the interaction they'll have with UBS employees.

To keep its partners close to its customers' needs, UBS employs agile development, where its outsourcers work directly with its line-of-business managers. For example, two scrum teams of 16 people from Luxoft work directly with front-office trading managers on projects to improve trading software. Projects like these might go through a conventional, hierarchical planning process to start, but the agile development iterations drive the results. "It doesn't mean we don't plan," says Mark Butterworth, head of UBS Commercial Business Strategy. "But we're increasing the communication and being very clear on how we progress in smaller steps."

At CNA Insurance, the company has a five-year "enterprise business road map"--a plan for developing the IT capabilities it needs to build to meet business goals. CNA shares that with its outsourcing partners, so they can bring ideas in support of that strategy. "We're trusting them more," says CIO Oral.

Another change that grew from CNA's shift to a heavily outsourced operation is that the business and IT teams needed to do a better job of spelling out requirements, Oral says, as they relied more on service providers. As they employed visualization tools from iRise to mock up things such as customer interfaces early in the design process, it took some time and training for business and IT teams to build specs in a more iterative way. "You have to get used to this notion that it's OK to throw something away and start over," Oral says. It's OK, that is, as long as the project is in the early stages, where they're throwing away two days of mockups--not a year later, after a major investment has been made.

The closer ties IT teams are forming with customers and products actually might be one explanation for InformationWeek's survey data showing a decline in the percentage of IT pros who seek out leading-edge technologies as a priority in their jobs.

For the past few years, Lane's team has been working to improve the slot-machine experience by adding screens where guests can order drinks or get personalized marketing messages, if they have a registered rewards card. That's innovation to be sure. But she doubts anyone at Caesars would think of it as an IT-led project. They just think of it as a collaborative project.

>> How's Your Appetite For Failure?

It's easy to say that real innovation entails risk, which means some will fail. CIOs talk a good game about a willingness to fail, with the appropriate caveats of "fail fast" and learn from the experience. But they must be specific about what that means.

At Caesars, there should be about a 50-50 chance that a prototype tested in a casino doesn't pass muster and is ripped out rather than permanently deployed. "Otherwise, the bar is too low," Lane says.

Think about that. We're not talking about half of whiteboard ideas panning out. This is half of the things that make it through the filter, become workable prototypes, and get put in front of customers. Is 50-50 an acceptable success rate for your company?

CIOs need to be clear about these kinds of expectations. Otherwise, IT teams will make their own assumptions, and probably play it safe. These are people who lived through the brutal, risk-averse recession of 2008 to 2010.

Innovation requires a balance between thinking big and being realistic about what's technically possible today. Remember Dell's model, where CIO Johnson pushes teams to think of business value before technology. Couldn't such efforts become pipe dreams that are technically unfeasible? "We've done a few of those," Johnson admits.

Johnson comes back to the focus on value. If innovation teams are geared toward plausible outcomes and doing cost-benefit analyses, then "the impossible dreams are self-regulating," he says, because risk and reward are being taken into account.

But a key tension point in any innovation strategy is how much to emphasize hard ROI metrics. One school of thought says that IT innovators need to know it's OK to spend money that ends up going nowhere. "You've got to start stuff and be prepared to kill it," Johnson says. "If you're placing safe bets, you're not doing innovation."

>> What's The CIO's Role?

Innovation atrophy will set in unless creative people fight it. That's where the CIO has to set the tone.

Guzman puts the heat on himself to build a creative culture where people question the status quo. As CIO, he needs to know Acxiom's customers but also have the technical chops to inspire people to consider new approaches inside their specialties. It's why he participates in the advisory boards of vendors including IBM, Intel, and VMware.

While Acxiom has formal communications channels, like the IT team's "Not So Personal Portal," Guzman puts the most stock in informal discussions. "They have to walk out of those fired up," he says. "Our top networking architect has to have his thinking changed when he talks with me. Our top database architect, same thing. It's a leadership imperative."

Capone looks at the CIO role as helping "envision what's possible" with IT-driven innovation. CIOs must light the fire, so their companies don't become complacent. "You need some burning issues, particularly some competitive threat, to motivate the troops," he says. Then the CIO needs to make sure IT is part of the strategic response and helping to channel that energy.

At Caesars, Lane has been thinking about how to get the word out about its latest innovations. PowerPoint slides just don't do justice to projects like its interactive slot machine screens, so her team is experimenting with Web conferencing tools that can convey the cool factor, build excitement, and pull in feedback from a wider range of people.

More than anything, though, fear of failure leads to innovation atrophy. CIOs must establish that risk is part of the innovation process, giving IT a license to experiment. Because IT is so integral to a widening array of products and services, businesses can't wait for IT teams to get every element perfect in a lab. That means trying new ideas where failure is scariest--in front of actual customers.

"If you really want to do innovation that will lead to customer-facing or employee-facing new technologies, you have to get proof-of-concepts out there," Lane says. "Sometimes they work. Sometimes not so much."

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