Here is a blog piece from Ivar Sinka, who is part of Capgemini’s UK’s Business and Information Strategy practice. I hope it will trigger some interesting comments.
In his blog piece on the 12th of March, Andy Mulholland raised the point that the only form of innovation that many CIOs and IT departments are judged on is in reducing the cost of supporting administrative operations. He added that an increasing number of CIOs recognise that this is not enough, but are frustrated in how they break out to play the role of business innovator.
Those of you who have been to management school (sadly, I haven’t) will have come across the name Peter F. Drucker. He has a fascinating biography: he was first published in German in the 1930s, is the author of thirty-nine books, was an editorial writer on the Wall Street Journal for 20 years and now has an institute that bears his name (The Drucker Institute). We used his definition of innovation: “change that creates a new dimension of performance” in our 2008 annual Global CIO Survey. The survey investigates the role of the IT function in business innovation.
When we had gathered the data for the survey, we decided to take a deeper look at Drucker’s analysis to inform our thinking about the IT department and its involvement in business innovation. In 1985, he published “Innovation and Entrepreneurship: Practice and Principles”, in which he set out seven sources of innovation:

  1. The Unexpected—unexpected successes or failures or external events.
  2. The Incongruity—identification of a discrepancy between reality and what is generally assumed.
  3. Innovation based on process need —spotting weak links in processes.
  4. Changes in industry or market structure—opportunities arising from fundamental changes in markets or industries.
  5. Demographics—changes in population indicators, such as size,age or education levels.
  6. Changes in perception, mood and meaning—general changes in society’s attitudes and beliefs.
  7. New Knowledge—important technological or other advances.

The truth is, a typical IT function doesn’t seem to get involved in most of those sources of innovation. You would expect it to be involved in 1. (the unexpected), 3. (innovation based on process need) and 7. (new knowledge) from time to time but even there, it only happens if the business invites it to do so. The other sources typically stay outside of the remit of the IT function, even though IT could clearly play a role here as well.
One of the threads in our survey report is that the IT function could, but doesn’t step up to the innovator role. If you think about it, the IT function remains uniquely placed to help the business identify and enable opportunities for business innovation, through its horizontal view of the entire business organisation; its guardianship of the business’s data and the tools that manipulate that data; and its knowledge of technology trends and the IT market. For some reason, IT stays “in its box”. The CIOs we interviewed were asked to identify where innovation originated, and they place the IT function fifth out of six (below Sales, Marketing, Operations and Research and Development) – only Finance was regarded as less innovative.
We looked at the different routes that IT leaders can take to get more involved. It’s clear that a greater involvement in process improvement (source 3.) and a proactive approach to taking new knowledge from the market to the business (source 7.) are the key ways to increase IT’s involvement in business innovation. These are two areas where the business already looks to the IT function for help and where the specialist knowledge that IT staff have can be a real value-adder. From there, the IT function has a platform from which the business will want to ask it to become more involved. The other sources of innovation listed by Drucker are dependent on analysis, market scanning and helping new ideas to become reality. IT is well positioned: it has the tools at its disposal to analyse business performance, the market environment, customers and society as a whole with the objective of changing the game by business model innovation.
In an age where technology is more user-friendly than ever before, and users better educated in its use, it is easy for a pessimist to see a declining role for the IT function.
On the contrary, we believe that by the CIO can create an IT function that is more indispensable to the business than ever. This transformed IT function will capitalise on the abilities of the new breed of IT-literate users, proactively identifying technologies that will help them achieve business innovation and seeking out improvents to the way businesses provide services to their customers and staff.