Build a Culture of IT Innovation

1. Build a Culture of IT Innovation Enable IT innovation to achieve business goals.

2. Introduction IT innovation can produce lasting results for the business: new markets, reduced costs, and improved alignment with the business strategy. Influencing the culture is the IT leader’s first step towards IT innovation. IT leaders seeking to create a culture of innovation in their departments, but who are wary of costs or push-back from the business. IT leaders trying to improve on an existing culture of innovation. IT leaders facing pressure from business leaders to reduce costs or improve IT effectiveness. IT leaders trying to support a business strategy to introduce new products or services into the marketplace. Formulate a roadmap to improve your organization’s capacity for IT innovation. Understand the necessary cultural preconditions for your organization to achieve IT innovation. Learn the steps you will need to take to bring about those preconditions, and measure the expected cost. This Research Is Designed For: This Research Will Help You:

3. Executive Summary To spur innovation in the IT department, the IT leader must bring about the key cultural preconditions using Info-Tech’s recommended steps. • Info-Tech research identifies six key preconditions for bringing about a culture of innovation in the IT department: • Business buy-in. While IT can always innovate inside a ‘black box’, it has to work with the business to have a real impact on the organization. • Time and resources for innovation. Innovation is risky. The organization must provide employees with time and resources to invest in innovative ideas, or few IT workers will innovate. • IT awareness of business strategy. Innovation requires an end-goal. Help IT workers understand the objectives of the organization and let them figure out how to get there. • Diversity of experience. Innovation thrives on diverse backgrounds and experiences. Applying concepts from one domain to problems in another allows teams and individuals to come up with radically new solutions and approaches. • Idea exchange. Innovation is a collaborative activity. Facilitate the exchange of information in a variety of contexts. • Recognition of IT innovators. While individual monetary rewards do not promote innovation, individual recognition does. • In this solution set, Info-Tech provides the key steps to achieve each of these preconditions, as cost effectively as possible. • Achieving a culture of innovation may be easier than you think. The aggregate cost of the strategies Info-Tech recommends can be well under $100k. • The Innovation Roadmap & Cost Estimator Tool will evaluate the gaps in your organization, prioritize the preconditions based on your organizational characteristics, and tally the expected cost of achieving a culture of innovation. Compare the cost of achieving innovation with the organizational benefits of IT innovation, to assess whether the roadmap makes sense for you.

4. IT innovation: A valuable but elusive goal IT innovation: an elusive goal Communicate the strategy Get business buy-in Seek a diversity of experience Allocate time and resources Create an idea exchange Reward innovations Build the roadmap The importance of IT innovation Key preconditions for innovation

5. IT innovation augments corporate strategy and emerges as the final stage of IT maturity Three Levels of IT Maturity Stage 1: Firefighter A largely reactive IT environment with a focus on resolving urgent or recurring technology issues to achieve short-term gains. Innovation: A Critical Competency The IT department proactively focuses its efforts on operational activities in order to maintain a stable and controlled business environment. The IT environment focuses creatively on achieving business benefits through novel methods (within the context of the business) and strategic IT investments. • A recent study showed that 26% of organizations point to innovation as a key priority of corporate strategy; 45% see it as a top-3 priority. (Source: Innovation 2010) • For IT, innovation offers the chance to better align its services with business goals and improve its own performance. • The desire to innovate can come from within the IT department or from the business side. Level 1: Firefighter Level 2: Housekeeper Level 3: Innovator Innovating in good times and bad • IT innovation is often seen as a nice-to-have, and a natural target for budget cuts in recessionary periods. • However, IT innovation becomes all the more important in these times, as it can make the difference to your organization’s ability to survive. This solution set focuses on the transition from Level 2 to Level 3. For information about getting to Level 2, see Move to a Stable and Controlled IT Department.

6. The importance of IT innovation lies in product & process improvement What is innovation anyway? Innovation is creating a new process or tool and applying it to drive business strategy. Using an existing technology in a way that is new for your company. For example, bringing social collaboration tools into your IT department. - or - Creating completely new technologies. For example, creating a new algorithm to retrieve from a specialized database. Measure the success of innovation strategies by the impact that IT innovation has on business performance. Two types of innovation IT innovations are classified by the key benefits they bring to the organization. • Product or service innovation. IT innovation can open the organization’s eyes to new products or services that it can offer customers, using its existing capabilities. • Process innovation. IT innovation can improve the organization’s methods for providing its current products and services, allowing it to provide these at a higher quality (effectiveness) or with fewer expenses (efficiency). (Source: Innovator's Toolkit) Product Process Most common Common Existing technology • Innovation is… taking current or new, emerging technologies… and turning them around into a new or changed service that… [is] supporting the strategic goals. • - Director of ICT at a university Rare Most rare New technology

7. Evaluate the benefits of IT innovation success Ask these questions to evaluate IT innovation for your organization. Questions to assess the value of achieving IT innovation success Elements of IT innovation success Driving organizational process improvement What are your organization’s process improvement needs to remain competitive in your industry? What would be the impact on profit margins of meeting these needs? Driving organizational product or service development What is the pace of new product or service introduction in your industry? What is the first-mover advantage in your industry; what are the incremental profits for new products or services over existing products or services? Driving organizational competitive advantage What are revenues and profit margins for market leaders in your industry? What is your current competitive position, and what would be the impact on profits of attaining market dominance? To what extent does your business strategy currently rely on IT innovation? To what extend does the current pace of IT innovation meet the business expectation? How do gaps between business expectation and IT innovation performance affect the business’s ability to achieve its goals? What are the costs to the business of missing those goals? Driving achievement of business strategic goals Achieving business satisfaction with IT innovation

8. Despite efforts to innovate, building a culture of innovation remains a challenge Innovation remains elusive for some In a recent study, only 34% of IT leaders rated themselves as effective at introducing IT innovation that drives competitive advantage. Despite disappointment, 65% of IT leaders take technology-driven innovation into account when formulating IT strategy. (Source: The next frontier in IT strategy) Continued investment in innovation, despite disappointment in performance, shows the premium that organizations place on IT innovation. Key reasons that IT innovation does not pay dividends • A different study looked at key reasons why organizations fail to get value from innovation investment. • Some top reasons cited are: • Risk averse culture (31% cited) • Not enough great ideas (22% cited) (Source: Innovation 2010) The failure of many IT departments to innovate, coupled with strong corporate interest in innovation, creates an opportunity for IT leaders to shine by taking the right steps to foster innovation.

9. Six key preconditions improve IT’s ability to innovate Info-Tech research shows that bringing about key cultural preconditions drives successful innovation in the IT department. • Info-Tech’s definition of IT innovation success: • IT innovation driving organizational process improvement. • IT innovation introducing new products or services. • IT innovation creating competitive advantage. • Achieving business satisfaction with IT innovation. • IT innovation leading to achievement of business objectives. To improve these success metrics, work on each of the preconditions below. Each precondition addresses at least one of the key reasons for innovation failure. = addresses this problem Preconditions Business buy-in Time and resources for innovation IT awareness of business strategy Diversity of work experience Idea exchange Recognition of IT innovators Not Enough Ideas Risk Aversion

10. Key elements of IT culture drive IT’sability to innovate Awareness of business strategy IT workers understand the business strategy The IT leader can adjust these elements using a toolkit of policies, official announcements, and formal processes Recognition of IT innovators There are motivators that drive the desire to innovate Innovation Business buy-in There is support from the business for IT innovation CIO tools Idea exchange IT workers have a forum for sharing ideas Diversity of work experience IT workers have been exposed to new activities Time and resources for innovation There are resources dedicated to IT innovation

11. Innovation preconditions improve odds of success, but come at a cost Innovation preconditions improve your odds of IT innovation success The following innovation success metrics are all improved by the innovation preconditions that Info-Tech identifies: • Product or service innovation: Driving new product or service development • Process innovation: Improving operational efficiency and effectiveness • Driving competitive advantage • Business satisfaction with IT innovation • Advancing business strategic objectives Innovation programs come at a cost • Like any organizational change initiative, the effort to build a culture of innovation will come at a cost. • These costs are discussed in detail in the following sections, which discuss methods for bringing about each of the preconditions. • Key areas of cost for bringing about the preconditions include: • IT worker and managerial time • Infrastructure use • Monetary rewards and payouts Compare Measure the estimated dollar amounts of these costs using the guidelines in each section. Measure the value of achieving those business strategic objectives that depend on IT innovation. Does the value of innovation justify its cost?

12. Prioritize preconditions according to their likely impact on IT innovation success Small organizations need to focus on the desire to innovate. Starting with a small pool of IT workers, it becomes more important to ensure that at least a core group is interested in innovating. Large organizations need to focus on preconditions that give IT workers the capability to innovate. With many innovation-enabled IT workers, IT innovation will follow. Small Large Medium • 1. Business buy-in • 2. Recognition • 3. Awareness • 4. Idea exchange • 5. Diversity of experience • 6. Time and resources • 1. Business buy-in • 2. Diversity of experience • 3. Idea exchange • 4. Awareness • 5. Recognition • 6. Time and resources • 1. Business buy-in • 2. Idea exchange • 3. Awareness • 4. Recognition • 5. Diversity of experience • 6. Time and resources Increasing priority Private sector Public sector Precondition priorities are based on the magnitude of observed correlations between preconditions and innovation success • 1. Business buy-in • 2. Idea exchange • 3. Diversity of experience • 4. Awareness • 5. Recognition • 6. Time and resources • 1. Business buy-in • 2. Awareness • 3. Time and resources • 4. Recognition • 5. Idea exchange • 6. Diversity of experience Increasing priority (Source: Info-Tech Research Group; N=209)

13. Plan your path to IT innovation using the Innovation Roadmap and Cost Estimator Tool Determine your priorities. • Based on your company’s demographics and the results of a short survey, the tool will prioritize the key preconditions you need to bring into place for your IT organization to start innovating. • Plan your roadmap. The tool will provide the priority roadmap, showing the steps you should take to achieve IT innovation success as well as a rough cost estimate. • Info-Tech’s Innovation Roadmap and Cost Estimator Tool • Based on advice described in the previous sections, the tool evaluates what you need to start doing to encourage innovation in your department • Take into account your organization’s current state: what preconditions are in place, and which ones are not. • Take into account precondition priorities: which steps should come first. Your innovation roadmap will: The tool will estimate the total cost to achieve a culture of innovation in your organization. Use this cost to evaluate your business strategy and strategic reliance on innovation. Will IT innovation cost more than it’s worth to your organization? Use the Info-Tech Cost/ Benefit Analysis Tool to frame your thinking.

14. Move from firefighter to housekeeper before you try to innovate Before you can start innovating IT has to earn the trust of the business, by showing it can deliver results consistently and on-schedule. Without the trust of the business, you will not have access to funds for the various innovation programs that Info-Tech recommends. Fostering innovation is a long-term project and requires long-term business support. This applies particularly during periods of economic doubt, when IT’s budget is under scrutiny. Move from firefighter to housekeeper • Perform root cause analyses to determine the cause of recurring IT issues. • Evaluate which aspect of the IT department (people, process, technology) is the most important to adjust. See the Info-Tech solution set Move to a Stable and Controlled IT Department for more details. Why? Do not try to skip from firefighter to innovator mode. Even the most impressive IT innovations will not distract the business from failures to provide basic services. To secure long-term funding for innovation, get your house in order first.

15. Communicate the business strategy IT innovation: an elusive goal Communicate the strategy Get business buy-in Seek a diversity of experience Allocate time and resources Create an idea exchange Reward innovations Build the roadmap Why understanding of the strategy is important Key steps to bring it about Challenges and how to overcome them

16. IT awareness of business strategy Showcase the business strategy and the role of IT innovation in that strategy Provide motivation as well as guidance Make sure you understand the business strategy as it relates to IT, and that you communicate the following to IT workers: • The business objectives. • How IT innovation will accomplish those objectives. • The benefit to the IT worker of participating in and advancing those objectives. Understanding the importance of IT innovation to the business strategy is a major driver of success. See the Info-Tech solution set Decode the Real Corporate Strategyto decipher the corporate strategy. Understanding strategy achieves: Problem definition: knowing the business strategy, IT workers can innovate to advance company objectives. Motivation: a sense of the importance of IT innovation to the business strategy helps motive IT workers. Communication to IT workers, of the importance of innovation to business strategy, drives innovation Understanding the importance of innovation helps define the problem that innovation solves (Source: Info-Tech Research Group; N=216) Without a direct link to business strategy, IT innovation will have limited value. Key techniques for communicating strategy • Communicate the importance of IT innovation • Stay involved in IT innovation

17. IT awareness of business strategy Explain the role of IT innovation in the corporate strategy Many IT workers have an attitude of I just do my job. They lack an awareness of how they fit into the organization’s broader strategy, and do not particularly care. (Source: Innovator's Toolkit) Make sure your workers understand the company’s strategic direction and how IT fits into that. At the beginning of IT meetings, reiterate the strategy or update the group on changes in the strategy. Throughout your presentations and departmental emails, refer to particular ways in which IT innovation will play into the company strategy. For example, when show-casing successful innovations, describe how they advance the business strategy. Also describe how the successful innovations benefited the individual IT workers who contributed to them. Explain the strategy and evangelize innovation Problem Solution Cost driver Estimated magnitude • The CIO must first establish and communicate the long-term strategic direction. • - Derek Boutang, Director of IT, Pembina Trails School Division Occasional announcements 5 minutes per month × value of IT department’s time

18. IT awareness of business strategy Define the role the IT worker plays within innovation • Sample strategic scenario • A hotel with 3 IT FTEs has a strategic goal to improve customer retention by 5% in the coming year. Translate the business strategy into terms understandable to the IT worker Every IT worker must have a sense of the role that he or she plays in the wider organization. Help the IT worker distill the particular action items from the high-level strategic direction. It is the IT leader’s responsibility to translate high-level, non-technical goals into specific action items for individual IT workers. These action-items should feature in the performance reviews for IT workers. • The IT leader explains the situation • The IT leader informs the application developer of the organizational strategy. • She explains that the developer must improve the usability of the organization’s customer-facing Web interface. • The developer must improve usability measures on customer satisfaction surveys by at least 20%. • Innovating to achieve company goals: • Researching online, the developer learns about new HTML 5-based Web page designs that improve visual appeal and usability. • The developer applies these new concepts to the company Website, improving usability (his objective) but also visual appeal (an unstated goal that also advances the corporate strategy) . Cost driver Estimated magnitude Added dimension to performance review Minimal

19. IT awareness of business strategy Case Study: A sense of empowerment leads to innovation success It always goes back to having a vision [and] leading. It was… individuals that were motivated enough. -Michel Bouchard, Director of R&D, Solution provider Financial services Small business Michel Bouchard (now with Medisys Health Group) Industry: Segment: Source: Situation Action Lesson Learned • A small software manufacturer serving the financial industry had 25-30 employees. • A highly motivated IT group was keenly aware of its importance to the corporate strategy. • IT workers routinely spent 2-3 weeks per year at conferences, on their own initiative, staying up to date on changes in the industry. • IT recommended a series of innovations that helped the company stay at the forefront of the market for their high availability transactions platform. • After an acquisition, the company’s focus shifted away from empowerment. • The new management began controlling more of the employees’ schedules, providing operational tasks that filled their days. • Management did not continue to involve IT in strategic discussions. • The emphasis on innovation disappeared, and the company’s market position began to decline. • IT workers respond well when given latitude and told the importance of innovation to the company. • Empower IT workers to achieve your business goals through innovation.

20. IT awareness of business strategy Communicate the importance of innovation by staying involved This an exception to Info-Tech’s general recommendation that IT leaders remain out of the details of daily IT work. Get involved in innovation Formal projects To credibly communicate the importance of innovation to the business strategy, the IT leader must stay personally involved in innovation. Instead of outsourcing monitoring of formal projects to a project manager, the IT leader should remain personally, visibly involved in these projects. Doing so communicates the importance of IT innovation to the organization while allowing the IT leader to guide innovation project development. (Source: Innovator's Toolkit) Involvement creates a sense of importance For the same reason, it also helps for the IT leader to maintain some awareness of the ad hoc innovation projects on-going at a given time. Casual conversations with IT workers can reveal this information. Formal projects • Even token behaviors on the part of the IT leader can impact people’s perception of their role in the firm. • For example, if the IT leader takes a few support tickets in his downtime, it communicates to the helpdesk team that their work is important. And that is an important motivator for innovation. Against the general trend Informal projects Cost driver Estimated magnitude Monthly drop-ins on innovation projects 3 hrs/month of IT leader time

21. IT awareness of business strategy Overcome IT worker indifference to business strategy Challenge: IT workers can be skeptical of strategy Overcome: Emphasize products, not profits Many IT workers are skeptical of business strategy. They find it intangible, uninspiring, and uninteresting. • They did not become engineers to talk about profits and ROI. This apathy can form a barrier in the way of the IT leader who wants to explain business strategy to his IT workers, for purposes of guiding innovation. • Try to translate the business strategy into terms that appeal to the IT worker’s world view. • IT workers respond to the themes of: • Making quality products and services • Helping their customers • Mastering the latest technological tools • Describe the business strategy in these terms, instead of the more commercial concepts often used in the executive suite. Watch out for these interpretations of strategy: IT leader says: IT worker might hear: Business strategy Increase market share in the apps market by 20% while maintaining price level. “We’re repositioning our product.” “We’re changing the names of everything.” “We need to improve profit margins.” “I want to fire some engineers so I can get a bonus.” IT-friendly version Improve the quality of our apps, to the point that we become leaders in the domain. Achieve this by using the best technology and tools. “Our goal is to increase revenue.” “Your responsibilities will double, but your salary will not.”

22. Get business buy-in IT innovation: an elusive goal Communicate the strategy Get business buy-in Seek a diversity of experience Allocate time and resources Create an idea exchange Reward innovations Build the roadmap Why business buy-in is important Key steps to bring it about Challenges and how to overcome them

23. Business buy-in Business buy-in is critical to innovation success Without buy-in, IT innovation will not drive business satisfaction with IT Since the goal of IT innovation is to help the business achieve its strategic objectives, IT must align its innovation program with the business. Info-Tech recommends the following steps to ensure alignment with the business: • Explain IT innovation capabilities to the business. • Include business stakeholders in brainstorming activities. • Seek early approval from the business before pursuing innovation concepts. • Identify to the business those individuals responsible for key innovations. These are explained in greater detail below. Stakeholder involvement drives IT innovation success In each of North America, Europe, and Asia, only a minority of Info-Tech clients report that they use these methods to seek business stakeholder involvement in IT innovation. This is a major area for improvement among Info-Tech clients, worldwide. (Source: Info-Tech Research Group; N=209) Innovation success is defined in the appendix.

24. Business buy-in Avoid the innovation ‘black box’ approach Even operational improvement requires business buy-in Many IT leaders seek the ‘black box’ approach to IT innovation: driving IT workers to innovate and improve IT efficiency without making the business aware of IT’s agenda. These leaders hope to impress the business with productivity improvements, without emphasizing that IT innovation brought them about. While this approach can bring about efficiency improvements within IT, the impact of these types of innovation will always be limited. Really impactful innovation that aligns IT with the business; requires business buy-in from the beginning. Stakeholder involvement drives improvement of organizational efficiency through IT innovation Improving efficiency of the entire organization requires coordination of IT innovations with business processes and practices. Without coordination, IT innovation cannot service the future state of the business, and IT innovation cannot drive business change. (Source: Info-Tech Research Group; N=209) IT can improve its own efficiency without business buy-in, but improving organizational efficiency requires coordination with the business. Ultimately it is IT’s impact on the broader organization that really counts, so seek business buy-in for IT innovation.

25. Business buy-in Get the business involved in idea generation Why? How? Foster an on-going dialog between the business & IT Business-aligned innovation requires an on-going dialog between the business and IT about how IT can help the business achieve its goals. As the business learns about the myriad ways that IT can solve business problems, its support for IT innovation will only increase. Work with business leaders to get IT workers invited to operational meetings. Attend a few of the meetings and coach IT workers to speak up regarding their ideas. The best way to get a dialog going is to show that IT wants to innovate: communicate IT’s enthusiasm to business leaders. Get the business stakeholders included in brainstorming sessions Why? How? • Instead of presenting IT innovation as products of the ‘black box’, get business stakeholders included in the creative process. • While they will not understand every technological nuance of the conversation, business stakeholders can help focus the conversation while adding their own ideas. • By making IT innovation a joint business-IT endeavor, you will improve long-term support for IT innovation. • Encourage IT workers to bring one of their key users to IT brainstorming sessions. • For example, an application developer participating in a brainstorm on user interface design techniques could bring one of the operational staff- people who use his or her software.

26. Business buy-in Continue business involvement beyond idea generation How? Why? Seek approval before pursuing ideas Identify successful innovators to the business • As part of the approval process for formal innovation projects (discussed below), solicit feedback from impacted business groups. • If intended business users express disinterest in the idea, even after a discussion of all the potential benefits, then deny funding to the innovation projects. • It may seem easier to present the business with completed innovations than to seek out approval for pursuing new ideas. At the early stage of idea generation, that certainly makes sense. • As ideas mature and move toward implementation, make sure that your idea generators seek business approval. • It helps set up expectations for upcoming innovations and gives the business a sense of control. Why? How? • Include the business groups impacted by the innovation in e-mail announcements recognizing key innovations. • Indicate, in the e-mail, the way in which the IT innovation advanced those groups’ objectives. • As part of the recognition process (identified below), include business executives in announcements concerning successful innovators. • Showcasing successful innovations is key to demonstrating value for the IT innovation program, and to maintaining long-term business support.

27. Business buy-in Overcome business and IT resistance to change as an obstacle to business buy-in Create change enthusiasts at the interface between IT and the business IT workers who interact with the business play a key role in orienting the business towards innovation and change. In appointing IT workers to these positions, look for individuals with an interest in innovation and change. Demonstrated experience driving IT innovation is key. As an alternative, get IT change enthusiasts more involved with the business, without a change in title. • Personal relationships are one way to do this. Build personal relationships • Part of the way IT can improve business willingness to change is by building personal relationships between IT workers and business people. • The IT leader must lead by example, by dropping in on operational meetings, having lunch with business execs, etc. • He or she can even directly orchestrate meetings between IT workers and business staff. • In general, IT workers should be encouraged to interact with the business in a non-obtrusive way. Relevant business-facing IT roles: Two key benefits of IT-business relationships • Business analyst • Technical product manager • Enterprise architect • IT leadership • Increase business’s willingness to change its practices as IT innovations dictate. • Help IT learn about the business, leading to better innovation ideas.

28. Business buy-in Case Study: A business analyst advocates for change and IT innovation You need to see that conviction in [the BA], to help people grow and to improve. - Former IT director at the insurance company Insurance Mid-sized business Former IT director at the insurance company Industry: Segment: Source: Situation Action Lesson Learned • An insurance company with 500 employees needed to implement a new ERP solution. • The cost of the implementation was $7 million. • Since the ERP implementation was innovative for the company, management expected a 75-80% chance of failure. • A motivated business analyst can have a huge impact on the business’s attitude towards IT change and innovation. • Seek out business analysts who have demonstrated an appetite for innovation and change in prior work experience. • The firm’s business analyst became the major advocate for the change. • He spent two years working with business and IT staff prior to rolling out the new system. • He solicited requirements from all stakeholders and made sure to incorporate these into the final implementation. • He actively coached IT and business people how to work with the new system. • As a result, IT implemented the change within two months with no major obstacles.

29. Seek a diversity of experiences IT innovation: an elusive goal Communicate the strategy Get business buy-in Seek a diversity of experiences Allocate time and resources Create an Idea exchange Reward innovations Build the roadmap Why diversity of experiences is important Key steps to bring it about Challenges and how to overcome them

30. Seek out IT workers with a diversity of experience Diversity of work experience Creativity thrives on a variety of experiences Exposure to a variety of work responsibilities improves IT workers’ innovation capabilities. New ideas arise from the ability to see problems from a variety of perspectives. Many innovations arise from combining approaches to problems from across disciplines. With a variety of backgrounds, your IT workers are empowered to innovate. (Source: The Innovation Killer) Exposing IT workers to new responsibilities improves innovation success Exposure to a variety of environments stimulates idea generation Key techniques for exposing IT workers to new responsibilities • Rotate IT workers through different areas • Build cross-functional teams • Seek out workers with cross-functional backgrounds as a criterion in recruitment. (Source: Info-Tech Research Group; N=215) See the appendix for the definition of IT innovation success used in this solution set.

31. Set up a rotational program Diversity of work experience Create T-shaped IT workers The organization wants IT workers with deep technical expertise in a particular area. Ideally, your IT workers will be ‘t-shaped’, as innovation experts at IDEO (www.ideo.com) put it: deep in one area but having broad expertise as well. (Source: Innovation Killers) For example, an ideal application developer for a treasury operations systems would understand cash flows, database structures, and C++, but would also understand the basics of high frequency trading and asset pricing algorithms. Rotate IT workers periodically • IT workers should be rotated to new job responsibilities on a periodic basis. What How • The new responsibilities should match the previous. • For example, if a software developer has experience managing and developing for the ERP system, have her work on a line-of-business application. • The idea is not to completely re-educate workers, but to give a sense of how other departments do things. Who Cost driver Estimated magnitude • Start the program with IT workers who are interested, then broaden to all IT workers. Added training time for rotated workers IT worker salary × 5% for lost working time Periodically rotating IT workers brings the diversity of experience that IT workers need to innovate.

32. Build teams that reflect a variety of backgrounds Diversity of work experience • Sample project team scenario • Situation • An app-dev team composed of 3 C# software developers is charged with creating a new user interface for treasury operations. • Introducing diversity • The team invites a user interface designer from the Web team to participate in the project, as well as a database expert from the high-frequency trading group. • Result • The UI designer recommends a number of new interface designs, borrowed from Web page design, that make the tool radically easier to use. • The database expert shows techniques for accessing data, borrowed from the world of high-frequency transactions, that make the new program radically faster. Arrange project teams to include people outside the IT department (but inside the company) Individuals with diverse backgrounds have an enhanced innovation capability, and the same is true of teams that reflect diverse backgrounds. Instead of including only subject matter experts in your project teams, include people who provide additional expertise as well. • These individuals would have an advisory or consultative role, they would not be core project team members. That way, your teams will reflect the same ‘t-shape’ in expertise that you want your team members to have. • Since the team structure is temporary, this is an opportunity to bring in people from very different backgrounds. Such innovative organizations as IDEO and the Strategic Studies Group at the US Navy have used this management style to achieve innovation success. (Source: Innovation Killers) Cost driver Estimated magnitude Extra staff on project teams 1-2 extra FTEs on some project teams for 3-12 weeks

33. Seek out IT workers with diverse backgrounds Diversity of work experience Look for diversity in career and outside interests in hiring. The easiest way to promote diverse experiences in your IT staff is to select for this quality when bringing in new IT workers. Career-switchers can provide unique backgrounds from their previous work experience, even if it lies far outside the domain of IT. Similarly, people who have international work experience or have worked in a variety of industries can provide unique viewpoints. • These individuals are also more likely to have an openness towards change, since they have experienced change in their own work lives. Look for these qualities in potential new hires to help build the culture of innovation. Career experiences • In addition to strong IT capabilities, look for individuals who have unrelated outside interests with transferable skills. • Having a diversity of secondary interests on project teams can have many of the same benefits as a diversity of functions. • Individuals who have these backgrounds can contribute new approaches to problems. Outside interests Cost driver Estimated magnitude • If the company has diversified people coming from … different countries … that will help in order to make change ... That kind of person has a particular mindset.- IT Director, Manufacturing Additional candidate assessment Minimal 10% increment to cost of recruiting FTEs Additional avenues of candidate sourcing

34. Case Study: A diversity of backgrounds brings a unique perspective Diversity of work experience We appreciate people that have a combination of backgrounds… history or photography or music… It’s interesting the analogies that they pull from that world. - Bar Wiegman, Vice President of IT, GlobalSpec Technology Medium Enterprise Bar Wiegman, Vice President of IT, GlobalSpec Industry: Segment: Source: Situation Action Lesson Learned • GlobalSpec is an online search engine for the engineering profession. • The IT leader, Bar Wiegman, sought to foster a culture of innovation. • When making hiring decisions, Bar sought out individuals with transferable skills from diverse outside interests. • In addition to looking for IT skills, he also selected for individuals who could bring a unique perspective to the table. • He succeeded in recruiting IT workers with interests in art, history, photography, and other fields. • IT innovation benefited tremendously. The artist, for example, came up with improvements to the user interface that dramatically impacted customer satisfaction. • Other ideas that came out of IT have increased site traffic by over 25%. • In addition to hiring for IT skills, seek out individuals who can bring transferable skills from diverse outside interests. • These individuals will contribute in unexpected ways to your company’s products and services.

35. Overcome reluctance to draw on outside experiences among IT staff Diversity of work experience Challenge: IT is siloed and territorial Overcome: Challenge your workers to think outside the box IT workers may hesitate to apply outside experiences to their work. IT departments put a heavy emphasis on expertise within a narrow technical domain, putting an IT worker who steps outside his or her limits at risk of: • Embarrassment • Angering another IT worker who considers himself the expert in that area IT workers often believe in the ethos of “know what you are talking about.” While this makes them effective, useful problem-solvers it inhibits innovation, which is really about stepping outside one’s intellectual comfort zone. An atmosphere of nervousness can self-perpetuate, as IT workers feel especially hesitant to improvise in front of colleagues who act purely as domain experts. • The IT leader must take the lead in breaking the ice. • Identify the outside interests of your IT staff. • Attend occasional project planning meetings and challenge staff to come up with ideas that reflect their outside interests. • For example, ask: “Now, how would a musician respond to that prototype?” • Once in a while the musically-inclined IT worker might answer: “Well, a musician would point out that the alarm bells in this program sound terrible.” • That will spur an innovative user interface idea and get IT staff more excited about bringing outside interests into their work. As the representative of the business within IT, the IT leader has special latitude for breaking the conventions of the engineering culture. Use that latitude to drive people outside of narrow modes of thinking.

36. Allocate time and resources for innovation IT innovation: an elusive goal Communicate the strategy Get business buy-in Seek a diversity of experience Allocate time and resources Create an idea exchange Reward innovations Build the roadmap Why time and resources are important Key steps to put them in place Challenges, and how to overcome them

37. Time and resources for innovation Allocate time and resources to increase business satisfaction with IT Time and resources make innovation possible A key element standing in the way of innovation is lack of time and resources. IT workers will hesitate to spend their own time and money on innovation, even if they expect a reward from good ideas. If the organization does not allow IT workers to innovate on its own time, and using its own resources, many potentially innovative ideas will never get off the ground. Without time and resources, IT cannot innovate to achieve business goals. Key techniques for allocating resources • Ad hoc experimentation • Formal program for innovation projects (Source: Info-Tech Research Group; N=214) Innovation activity is inherently risky, since most innovative ideas go nowhere. The organization cannot expect the IT worker to bring his or her own free time to the table in pursuing innovative ideas, since the risk of failure is too great. The organization’s size makes it far more able to shoulder this risk.

38. Time and resources for innovation Provide time and tools for low-key innovation work The opportunity Provide resources to exploit the opportunity How many resources to provide? Provide resources outside the formal framework for investigating these ideas. Allocate space on the internal or public cloud, or on separate dedicated servers, for ad hoc experimentation work. These systems would be sandboxes, not production systems. Some innovation projects require only a minimal contribution of time and resources to move ahead, or to show clear signs of infeasibility. This is particularly true at the idea generation stage, when a quick proof-of-concept can show whether an idea will work. Link ad hoc and formal innovation programs Organizations have dedicated widely varying proportions of IT workers’ time for innovation. Google famously gives 20% (Source: nytimes.com). Info-Tech clients have given from 10% to less than 1%, and have seen results. Start with 2-3% (about one hour per week per IT worker) and scale up or down depending on results and your business innovation need. Start with app devs, user interface designers, technical product managers, architects, and other more creativestaff. Then provide time to infrastructure and maintenance personnel as well. • If informal ‘play’ leads to a major idea, encourage employees to formally document the idea to receive additional resources. • Document what’s already been done through the resources available for ad hoc innovation, so you can measure the usefulness of informal resources. Cost driver Estimated magnitude IT worker time Aggregate IT worker salary × % allocated Sandbox space on internal cloud Minimal additional cost

39. Time and resources for innovation Case Study: A gadget library spurs exciting innovation in digital media They can see how different stuff works and what’s available. That gets people excited about what’s next. - Chris Berk, Director of Technology, Resource Interactive Digital media Mid-sized business Chris Berk, Executive Director of Technology Industry: Segment: Source: Situation Action Lesson Learned • Resource Interactive employed over 300 associates, who were responsible for driving the company’s business and technical capabilities. • The company sought to improve its associates’ understanding of current technology in the digital media space. • Providing resources to IT staff for experimentation can have surprisingly positive consequences. • Go beyond providing a share of your existing infrastructure. Provide access to systems that are complementary or competitive with your own: the entire ecosystem of products. • The company created a gadget library, a set of digital media devices (cameras, phones, etc.) that associates in the Columbus office could access at will. • The company spent about $15k a year on these devices. • By combining technology in multiple gadget library devices, one associate created an innovative concept that has the potential to become “a million dollar idea.” • Associates have contributed in other ways to key innovations using experiences in the gadget library.

40. Time and resources for innovation Provide a more formal process for obtaining additional resources Obtain key information from the IT worker Allocate serious resources to promising ideas that emerge from ‘play’ If initial ad hoc experimentation shows that an idea has promise, IT workers may require additional resources to develop their idea. For those IT workers who do, provide a formal process for submitting proposals to receive additional funding. For those proposals that show promise, your organization will provide: • Additional resources as needed • Freedom from some, most or all of the IT worker’s normal duties during the period of idea development. • Main idea of the innovation • Stage of development • Potential business benefit • Assumptions underlying business benefit • Likely costs to develop and implement • Include estimate of % of time the innovator wants to devote to working on this • Also include equipment or human resource needs • Relevance to the business strategy Cost driver Estimated magnitude Larger innovations (with greater investment costs) will require more detail prior to approval. IT leader time to review submissions Number of IT workers × 5 minutes/month Make your decision based on: • The innovator’s prior track record. • Innovator’s estimate of likelihood of success. • Expected NPV of the project if successful. • Relevance to business strategy. Setting the precedent that solid ideas get funding will motivate innovation among IT workers.

41. Time and resources for innovation Case Study: In a mid-sized IT department, grants drive innovation If we get [return] two times out of ten, we are quite happy with that. The times when we succeed we… get a lot out of it. - Director of ICT at the university Education Mid-sized IT department (20 FTEs) Director of ICT at the university Industry: Segment: Source: Situation Action Lesson Learned • A university employed 20 IT staff who supported users throughout the school. • The organization wanted to increase innovation within the IT department to drive operational efficiency (process innovation). • The university instituted a grants program for IT workers wanting to pursue innovative ideas. • It allocated $100k to $200k per year for innovation grants, ranging in size between $10k to $60k. • IT workers could use the grants to pay for their own time, freeing them from their daily work duties. • The program generated innovations that have improved service delivery and customer satisfaction. • One idea in network monitoring won the organization a country-wide IT award. • For smaller organizations, even a moderate investment in time and resources for innovation can bring significant dividends. • Regardless of your organization’s size, make sure you have a program that allows IT workers to apply for additional capital.

42. Time and resources for innovation Case Study: In a large organization, a formal innovation program gets results I was … amazed that we could actually pick up a phone and call the CFO. - Former consultant Professional services Large enterprise Former consultant Industry: Segment: Source: Situation Action Lesson Learned • A consulting company employed roughly 3000 consultants in various areas of specialty within IT. • The company wanted to spur innovation among its consulting staff. • The company instituted a policy of allowing consultants to submit proposals for new business lines. • Proposals had to be 40-50 page documents with revenue projections, operational details, and plans to get started. • The company provided support to execute about 10-15 of these ideas per year, including one data warehousing project that led to an entire new business practice, potentially adding over $100 million to the business. • Investigating new ideas is an onerous process, but the payoff to the organization can be enormous. • Larger, more expensive ideas require more detail for approval at each stage of the process than simpler, easy-to-implement ideas. • Employees will rise to the challenge if they perceive the opportunity to make a major impact.

43. Time and resources for innovation Manage the portfolio of on-going innovation projects For innovation projects that have received funding through your formal process, monitor them on an on-going basis, checking in at least weekly. The majority of projects will not end up providing value to the firm, so you have to be active in culling the herd. Monitor projects that have received funding through your formal process. Unlike other projects, innovation projects are often initiated with an expectation that the project has a good chance of delivering no tangible result to the company. The focus for the IT leader managing these projects is to gain information as quickly as possible that will allow him or her to make a decision about the fate of the project. In each successive check-in, IT workers must provide more information about the likelihood of the assumptions underlying business value. If two weeks go by without new information, that is a warning sign to the IT leader that the project is stalled indefinitely. Ask for an explanation or terminate the project. Instruct IT workers to focus on those assumptions that most affect the business value of the innovation. Watch out for innovation ideas that take too many forms over the course of the project. If the idea no longer resembles the original concept, it could indicate an IT worker who cannot let go. • Risk: effect on staff morale of being part of a failed project. • Mitigation:emphasize tostaff that their work constitutes useful research into a potential path. Cost driver Estimated magnitude Monitoring time 15 minutes per project per week Innovation projects differ Watch for signs of a slow down

44. Time and resources for innovation Implement stage-gating as the portfolio grows Problem Implement • Tie allocation of resources to stages, and allot a maximum time to each. • Evaluate projects at the transition from one stage to the next: the gates. • At each gate, projects are either terminated, given more time at that stage, or sent to the next stage. • Assemble a team of IT leaders with experience in the relevant area to evaluate these transitions. • Once your organization has developed a portfolio of ten or more funded innovation projects, it will become difficult for the IT leader to monitor projects on an on-going basis. Solution: stage-gating (Source: Innovator's Toolkit) • Divide the innovation project into a set of discrete steps, for example: • Idea refinement • Experimentation • Implementation • Delivery Sample scenario A software developer has an idea to automate part of the sales process using e-forms. She receives a funding grant to develop the idea. Gate: Identified usefulness for streamlining sales process Experiment: Small-scale implementations to show feasibility Refine the idea: Identify potential applications within the business Implement: Learn from experiments to create a functioning system Gate: Functioning system passes reliability tests Gate: Created functioning prototype of key automated tools Delivery: Distribute the new tools, and train users

45. Time and resources for innovation Overcome business resistance to innovation spending Particularly in lean times, business leaders may look at innovation spending as a luxury the business cannot afford. This perception can present a barrier to spending on both informal and formal innovation programs, leading to: • Barriers to the informal program: lack of resources for ad hoc experimentation, increasingly managed work schedules for IT workers with no time set aside for ‘play’. • Barriers to the formal program: increased difficulty of receiving funding, increased rate of culling of innovation projects. Some business leaders may also perceive the IT innovation program as competing with dedicated Research and Development, possibly leading to increased resistance from R&D stakeholders. Challenge: Innovation seems like a nice-to-have Overcome: Promote innovation as critical to survival • The IT leader must demonstrate the criticality of IT innovation to business survival, especially in times of crisis. • Far from a nice-to-have, innovation can make the difference for organizational survival. • In budget meetings with senior executive, point to the following if innovation spending comes under attack: • Narrowing profit margins due to increasingly competitive pricing in your key markets. This suggests the need for process innovation. • Stalling revenues due to reduced product or service differentiation, suggesting the need for product innovation. • Also point out that the ability to generate IT-specific innovation is a unique capability of the IT department, and must reside outside of R&D. Ironically, it becomes easier to demonstrate the importance of innovation in times of crisis. As the company’s growth and profit figures fall, the contribution of innovations to these numbers will become proportionately larger.

46. Create an idea exchange IT innovation: an elusive goal Communicate the strategy Get business buy-in Seek a diversity of experience Allocate time and resources Create an idea exchange Reward innovations Build the roadmap Why an idea exchange is important Key steps to create an idea exchange Challenges and how to overcome them

47. Provide a forum for idea generation and refinement Idea exchange Exchange of ideas drives IT’s ability to innovate Despite the stereotype, IT workers are social creatures. Exchange of ideas allows IT workers to quickly gather the information they need to: • Decide whether an innovation idea is feasible. • Proceed with the necessary steps to develop the idea. IT innovation is inherently a collaborative activity. (Source: Innovation: The 5 Disciplines) Providing a forum for IT workers to brainstorm ideas drives innovation Innovation, a collaborative activity, requires a forum for brainstorming. (Source: Info-Tech Research Group; N=215) See the appendix for the definition of IT innovation success used in this solution set.

48. Create networks of information Idea exchange Create organizational networks to spread ideas Networks allow IT workers to share information throughout the organization, facilitating idea generation and development. • Networks are an alternative to the command-and-control style of management, in which the flow of information is tightly managed Several important network types are: Support a flexible network • Each of these network types is appropriate for particular contexts. • IT workers need to have the option of working in any one of these networks, as appropriate to the particular context of innovation. • The IT leader should facilitate the creation of each network type through specific steps shown on the next few slides. • If cost is an issue, proceed from the least expensive to the most expensive options, as shown at left. Open source Allows users to post information that becomes browsable for all users (e.g. Wikipedia) Easy Hub-and-spoke Provides access to information repositories Medium User to user Allows for the exchange of information between individuals Hard • (Source: Building the Innovation Culture)

49. Create “virtual watering holes” Idea exchange Open source: create “virtual watering holes” Create a collaborative portal for storing information of interest to the network of IT workers, to facilitate innovation. Collaboration tools should be organized around communities of interest: individuals within the organization who share an interest in a particular topic. These are not necessarily individuals tasked with working on a particular project. For example, IT workers from across the organization may have interest in using mobile devices at work, for widely varying applications. • (Source: Innovation: The 5 Disciplines) Implement a wiki • Wikis are optimal collaboration tools for managing the organization’s accumulated knowledge on a particular subject. • Start with an open wiki that allows everyone to author and edit content. • Provide user training about using the wiki and authoring content. • Assign a content management specialist the part-time responsibility of supervising the site. • As subscribership grows for particular areas of the site, the supervisor will create ownership controls for those areas. • Free wiki tools are available. The free collaboration platform Elgg includes wiki functionality, for example. • For further information, see Info-Tech’s solution set Implement a Collaboration Platform and Vendor Landscape Plus: Collaboration Platforms. Cost driver Estimated magnitude Building the online system Less than $1k to $10k’s

50. Identify experts in each area Idea exchange Hub-and-spoke: identify experts A key element of fostering innovation is identifying those individuals who are experts in particular areas. Management should publish a list of key topic areas, that IT workers can use while exploring new ideas. (Source: Innovator's Toolkit) The purpose of the expert is to distribute information about his area of specialty. Since many innovations combine ideas from across fields, having these individuals available plays a key role in facilitating innovation. Experts are also users of the system An expert in one field will access other experts when working on his or her own projects. However, it is fundamentally a hub-and-spoke network configuration because the expert in one area is the go-to source for that topic. Publish the list of experts Publish the list of experts • Management must maintain the list of experts in each field, and make it available electronically. • Allow IT workers to volunteer for expert roles. • Expertise should be part of the annual performance assessment, and play a part in promotion decisions. • Once you have implemented a wiki, use it to store and publicize the list of experts. • Individuals can update their own pages on the wiki with their areas of expertise as well as other interests. Experts are also users of the system Cost driver Estimated magnitude Identify experts in each area Minimal Time spent answering questions IT worker time × 5%