Institutionalize Innovation through IT

1. Institutionalize Innovation through IT Leverage IT’s strong multi-department spanning position to facilitate innovation across the enterprise.

2. Introduction The changing technology landscape provides opportunities for IT to become an innovation partner and facilitate enterprise-wide innovation. CIOs and IT leaders trying to maximize efficiency and value to the business. CEOs and Business unit leaders looking for greater innovative thinking from IT. Business and IT leaders trying to move from ad hoc innovation to having a repeatable business process that fosters innovation. Ensure that IT is achieving the levels of business satisfaction necessary for it to be a partner in innovation. Adapt your IT strategy as business strategies evolve with disruptive technologies. Facilitate innovation across the enterprise by leveraging IT’s cross-silo functionality. Prepare for the future with people and processes equipped for repeatable improvement and innovation. This Research Is Designed For: This Research Will Help You:

3. Executive Summary Disruptive technologies are changing the IT landscape. • Easy access to socialmedia,cloudcomputing,big data, and mobile serviceshave bred a new class of business employee that are impacting IT’s positioning within the organization. They are more tech-savvy and have access to services outside of traditional IT departments, but may not understand the security, compliance, and risk implications that will arise. • IT is being increasingly disengaged inorganizations with high investments in disruptive technologies. An Info-Tech survey sees business units taking on more technology projects without IT. IT must find a way to get involved in these high value projects to prove themselves as an innovation partner to business executives while maintaining compliance, mitigating risk, and maximizing security. Earn the mandate to facilitate innovation enterprise-wide. • Due to its role, IT already has insights into departments across the organization, and into the business processes, issues, and opportunities faced by those departments. Those insights combined with IT’s knowledge of technology trends and their capabilities to impact the business enables it to facilitate innovation. • Business executives will not see IT as an innovation partner until IT demonstrates value through: providing basic IT functions, innovating within the IT department, and helping business units innovate to achieve their strategic goals. This will allow business leaders to develop confidence in IT, and will allot IT the authority to facilitate innovation across the organization. Position IT in an engine that allows innovation to be an iterative and managed business process. • IT can strategically position themselves to help facilitate an innovation engine on behalf of the organization that continuously gathers ideas, supports small teams on innovative projects, and maintains an innovation project portfolio. • IT can provide the organization with the tools and expertise needed to facilitate innovation ideation and execution.

4. Follow Info-Tech’s Innovation Roadmap to drive innovation throughout your organization 1. Build a Culture of IT Innovation Read this research to understand the cultural preconditions necessary for innovation success: business buy-in, time and resources for innovation, IT awareness of business strategy, diversity of experience, idea exchange, and innovation recognition. 2. Institutionalize Innovation through IT Read this research to understand innovation within the enterprise, how IT can become an innovation partner with the business, and how to position IT to facilitate innovation enterprise-wide while making it a managed, continuous process. Helping IT earn the mandate for innovation, the innovation value chain, and the innovation governance model will all be covered in this solution set. 3. Innovation Ideation (Upcoming Research) This research will focus on how IT can provide the ideal processes, resources, tools, and expertise that go into innovation ideation. Investigating problems, generating, assessing, and prioritizing ideas, developing the concept prototype, create business case, and idea classification will all be covered in this solution set. 4. Innovation Execution (Upcoming Research) This research will focus on how IT can provide the ideal processes, resources, tools, and expertise that go into innovation execution. Assessing needs, formalizing operations plans, team assembly, formalizing operations test plans, conducting test operations, and obtaining insights will all be covered in this solution set.

5. The Business’ access to disruptive technologies is exposing IT to the risk of marginalization and reduced involvement • Social, Mobile, Big Data, and Cloud provide new avenues for Innovation ROI, but more of these projects are being taken on without IT. Organizations who invest more in disruptive technologies are experiencing shadow IT Source: Info-Tech Research Group, N = 87 Source: Info-Tech Research Group, N = 82 +538% +112% ROI from IT innovation Investment in disruptive technologies • Disruptive technologies likesocial media, mobile devices, big data, and cloud computing have been converging and are opening new avenues for highly valuable innovation investments. • IT must have the knowledge to innovate around such technologies and work with the Business to optimize innovation success. • More high value technology projects are being taken on by the Business without IT. However, taking full advantage of disruptive technologies requires technical expertise and vision, something IT can provide that business units lack. • Get IT involved and be part of the solution by facilitating innovation. Keep IT in the loop while mitigating risk, maintaining compliance, and maximizing security.

6. IT is well positioned to facilitate innovation like any other business process Due to its insights into business processes and the needs of multiple business units, IT is well positioned to facilitate enterprise-wide innovation. Improving IT Service Delivery Improved IT-Enabled Innovation Success IT has a unique horizontal view of business processes Source: Info-Tech Research Group, N = 91 Marketing Finance Sales Customer Service IT Applications & Infrastructure Supporting Enterprise Processes • IT enables multiple business processes across departments, giving IT: • Multi-departmental insights into everyday needs and activities of business units. • Working relationships with business units. • Awareness of new and emerging technologies that enable and impact business processes. • There is an opportunity for IT to provide business value by facilitating innovation to other departments across the organization as a whole. • IT’s role isn’t necessarily to innovate new products or services. IT can facilitate innovation; making the processes of innovative thinking and executing innovative initiatives less strenuous. Quality of IT Service Delivery Organizations with IT departments that deliver advanced services are more likely to notice high IT-enabled innovation successes, however, getting the basics right is a prerequisite.

7. IT must get the basics right to gain the credibility needed from the Business before facilitating enterprise innovation Keep reading this set if the IT department is adequately providing the basic competencies, otherwise read the following recommended solution sets first. IT Functions Increasing IT’s Mandate to be an innovation partner CEO’s Hierarchy of IT Needs CIO’s Innovation Sweet Spot: Innovating within IT and with the Business to prove value. Innovative Competencies: Define New Frontier Helps Create New Industry Keep reading this set if you are providing the basic competencies Extends Into New Businesses Expand the Business Read the below solution sets: Increases Revenue Decode the Real Corporate Strategyto position IT to build a strategy in line with the corporate strategy. Increases Efficiency Optimize Business Processes Decreases Costs Basics Competencies: Satisfies business needs Support the Business If you are not providing business units with basic IT services, focus on improving these before reading this set Inexpensive service delivery Move to a Stable & Controlled IT Departmentto identify and tackle root causes of instability in the IT department. Adequately enabling business units Get Fundamentals Right Uninterrupted service delivery

8. Put the measures in place to avoid the risks of not innovating Innovation “inaction” can be detrimental to revenues, market share, and brand loyalty. Late to Digital Photography Outdated Distribution Method Tried to Charge for Services When Yahoo tried to charge its users for email and file sharing, the newcomer, Google, started giving them away for free. Users made the easy choice to switch. When competitors entered the market with new, more convenient distribution methods, Blockbuster failed to innovate and was left behind. Kodak failed to innovate and capitalize on the demand for digital photography, as well as the printers, file-sharing, and apps that followed. Closing hundreds of stores and struggling to pay off enormous debt. Market value dropped to $19 billion, when they were offered $45 billion only three years ago. Stock price is roughly 96% below its peak from 1997. For more information, see the Appendix – Innovation “Inaction” Risk.

9. Use your IT department to support a coordinated innovation strategy Problems in innovation may not stem from a lack of ideas, but from poor governance, development, culture, or processes. Enterprise-wide Coordination Improves Innovation Success1 Embed innovation into the corporate strategy. Innovation needs to be institutionalized like a business process. It needs to be nurtured and coordinated, and not just pushed to the side or something that is loosely discussed. IT can improve your organization’s innovation success and avoid failing to execute by reducing the friction points of coordination. Source: Info-Tech Research Group, N = 57 82% of Fortune 500 CEOs feel their organization did an effective job of [innovation] strategic planning. However, only 14% of those same CEOs indicated that their organization did an effective job of implementing the [innovation] strategy. – Forbes Magazine in American Institute for Innovation Excellence +293% Companies typically realize only about 60% of their [innovation] strategy’s potential value because of breakdowns in planning and execution. – Harvard Business Review in American Institute for Innovation Excellence Organizations encounter many stumbling blocks when trying to coordinate their innovation initiatives. IT is well positioned to help overcome this. Keep reading this set to discover how to position your IT department to improve the innovation process in your company.

10. This solution set will help position IT as an innovation partner and facilitator in the organization • Facilitate Enterprise- • Wide Innovation Follow this model and its phases throughout this storyboard to begin your journey in institutionalizing innovation through IT. Info-Tech Insight Understand Innovation.Understand classes of innovation, IT’s role within the innovation value chain, the value of an innovation portfolio, and the innovation engine within an enterprise. Innovate Within IT. After establishing proficiency as a firefighter and trusted operator, IT must gain credibility by showing the Business that they can innovate within themselves (e.g. reduce IT costs without negatively impacting performance). Innovate with Business Units. IT must show the business that they can provide significant value by working alongside business units to achieve strategic goals and optimize processes. IT will then earn future projects and partnerships. • Facilitate Enterprise-Wide Innovation.After earning the innovation mandate, build repeatable innovation processes that become standard, collaborative efforts between the Business and IT within the organization. 4 1 IT won’t be able to convince the CEO it can be an innovation facilitator until it earns the mandate through getting the basics right, innovating within themselves and for business units. When business units want to work with IT on complex projects, IT can begin its pitch in facilitating enterprise-wide innovation. • Understand Innovation Innovate Within IT 1 2 2 • Innovate with Business Units 3 3 4 This solution set will help IT position itself to facilitate innovation across the organization Follow this diagram to navigate your way through the storyboard.

11. Understand Innovation Understand Innovation Innovate Within IT Innovate with Business Units Facilitate Enterprise-Wide Innovation The innovation value chain. Definition of innovation and classes of innovation. Value from managing the innovation portfolio. Organizational innovation ecosystem. Cultural preconditions and barriers to innovation. Models of innovation within an enterprise. Perceptions of innovation across the enterprise.

12. Understand an ideal Innovation Value Chain that ensures effective ideation and execution Innovation requires a process to ensure ideas are continuously generated, filtered, prioritized, and executed. Innovation Value Chain Filter Idea Into: Incremental Evolutionary Transformational 2. Execution 1. Ideation Build Insights & Refine Model Select Concept & Create Business Case Assess Capability Needs Frame & Investigate the Problem Assemble Team Formalize Experiment Conduct Experiment Generate & Assess Ideas Screen & Prototype Concept Innovation Portfolio Management Ideation is about… Execution is about… • Fostering creativity within the organization. • Generating a high volume of broad ranging innovative ideas. • Developing, testing and validating ideas through concept prototyping. • Screening, uncovering and selecting high potential concepts. • Developing business cases for high potential concepts. • Selecting high potential concepts for execution. • Being exposed to new and emerging trends in areas of interest. • Allocating appropriate resources for implementation. • Creating the unique team, skills, business model, processes, metrics, etc., as needed, for the initiative. • Developing and managing the initiative in a structured and disciplined manner, enabling targeted insights and refinement. • Regularly comparing the performance and direction of the concept against base assumptions to increase accuracy of predictions. • Once success is achieved, embedding the initiative into the existing organization or terminating the initiative if unsuccessful.

13. Filter your innovative ideas into three classes to prioritize within an innovation project portfolio Innovations do not necessarily have to be technology driven. The assembly line process is an innovative way to improve productivity, but doesn’t always leverage technology. Also, innovations do not need to be brand new, and are industry specific. For example, a municipal government leveraging GPS units in snow-plows to best manage and track fleet would be considered an evolutionary innovation. “Innovation is the effort to create purposeful, focused change in an enterprise’s economic or social potential.” – Peter Drucker Internal IT Innovation Internal Business Innovation External Client Innovation Product / Services Innovation

14. Balance your innovation portfolio to achieve above-average returns Although transformational innovations provide the highest ROI, they are almost always the most risky and resource intensive. Recognize that incremental process improvements still have many tangible benefits such as better alignment and communication across the organization. Diversifying your innovation portfolio works much like optimizing risk in a stock portfolio. This is one allocation of innovation initiatives that has been impactful with some companies, and may work for you. Highly innovative companies have found the following innovation project allocation the most beneficial. Consider it for your organization’s portfolio. A report looked at companies that outperformed the S&P 500 and found a pattern of innovation investment allocation: Studies in several organizations show the highest long-term cumulative return is achieved by transformational innovations. Resource Allocation Profile Proportion of Return from Innovation Class 10% to Transformational 70% ROI from Transformational 70% to Incremental 20% to Evolutionary 10% from Incremental 20% from Evolutionary Source: Managing Your Innovation Portfolio, by Bansi Nagji and Geoff Tuff - Harvard Business Review, May 2012

15. Recognize the factors that impact your organization’s Innovation Ecosystem Innovation Ecosystem Organization Innovation Vision • CEO vision • Anticipating future • Opportunity ambition • Risk appetite • Incentives • Management buy-in • Clear goals and accountability • Strategic alignment Enablers (Pull Factors) • CEO vision • Anticipation of future customer and market needs • Competitive leadership • Research leadership • Shareholder expectations Drivers (Push Factors) Organization Culture Governance & Portfolio Management Barriers Enablers • Social factors • Political factors • Global and local factors • Competitive pressures • Environmental changes • Disruptive technologies • Strategic priorities • Client behaviour • Explicit responsibility for innovation • Accountability • Transparency • Risk aversion • Other cultural barriers • Inter-departmental barriers (“Not IT’s role” attitude) • Legacy systems • Incentives • Broad vision of opportunities • Organizational agility • Technological agility • Willingness to invest in experimentation Ideation Process Execution Process • Drivers, Measurement, Rewards • Skills and talent • Cross-functional thinking • Culture of change • Environment & competitive intelligence • Playing to win, rewards, celebrating eccentricity External Relationships and Collaboration • Customers / Clients • Suppliers • Alliance Partners • Research organizations • Academics and scientists • User generated content / Social Networks • Subject matter experts • Government(s)

16. Implement the cultural preconditions needed for innovation success Benefits of innovation can include… • Organizational process improvements • Product or service developments • Achievement of the strategic goals • Costs of not innovating can include… • Reduced market share • Declining revenues • Outdated business processes • Costs of innovation can include… • IT worker and managerial time • Infrastructure use • Monetary rewards and payouts To 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, use Info-Tech’sInnovation Roadmap & Cost Estimator Tool. Compare the cost of achieving innovation with the organizational benefits of IT innovation to assess whether the roadmap makes sense for you.

17. Overcome the innovation barriers to accelerate the innovation process Survey respondents ranked five obstacles from most to least challenging. Overcoming a risk averse culture was cited as the most challenging. Top 3 Obstacles: Successful Innovation Organizations • Lengthy Development Times • Risk Averse Culture • Seeing the Right Ideas Info-Tech Insight Obstacles can be unique to your organization based on size, industry, or complexity. However, overcoming a risk averse culture should remain a top priority as both successful and unsuccessful innovation organizations cited it as a top 3 barrier. For more advice on creating a culture of innovation see Info-Tech’s solution set Build a Culture of IT Innovation. Source: Info-Tech Research Group, N = 56 • Top 3 Obstacles: Unsuccessful Innovation Organizations • Lack of Coordination • Risk Averse Culture • Lengthy Development Times

18. Understand the organizational models that can facilitate innovation, and how IT fits into them Centralized Support Model Drawbacks Benefits Benefits Benefits Drawbacks Decentralized Model Federal Model IT BU1 Lead BU2 Lead BU3 Lead Innovation activities are the sole responsibility of the business units. This model is not recommended. Info-Tech recommends the Federal Model where activities are shared by the business and a multi-department spanning entity like IT. A central unit responsible for all innovation activities. This model is not recommended. • Scale economics • Pooled experience • Critical mass of skills • Business unit ownership • Pooled resources • Business units control priorities • Shared innovation leadership • Enterprise perspective • Scale economics • Pooled experience • Critical mass of skills • Potentially more costly • No synergy • Lack of critical mass and budget to pursue transnational innovation • Less responsive to business unit priorities • Little business unit ownership • Little business unit cost control • Business unit ownership • Pooled resources • Business units control priorities IT BU1 Lead BU2 Lead BU3 Lead IT Innovation BU2 Innovation BU1 Lead BU2 Lead BU3 Lead BU1 Innovation BU3 Innovation Innovation Group Shared Innovation Team

19. Do not be quick to set innovation goals or processes that have been successful in other companies or industries The optimal focus is dependent on the innovation goals and strategy, and is influenced by industry, competitive position, and stage of development. Industry • Some industries, like technology, have more opportunities for transformational innovations and indeed expect more of it from the players in that industrydue to the fast paced environment. • Other industries, like consumer goods, might not require the same frequency of transformative innovation. Competitive position within industry • Transformational innovations may have the most impact for a company, but it carries a higher risk. • Companies who are lagging behind may feel that this risk is worth the reward, but leading players in the market might not be willing to compromise their position as much.Trailing companies may in fact benefit from the innovations by industry leaders. Stage of development • The maturity of the organization is going to influence how adaptive it is to change, and change is a big part of transformational innovations. • Large, established organizations are going to find it harder to change major processes than small, agile organizations. • Small, new players are trying to make a name for themselves and carve out a spot in the market, so they are more likely to take on the risk that comes with transformational innovation.

20. Identify how business units perceive innovation and IT’s role within it to ensure strategic alignment Innovation can mean something different to IT and the Business. Ensure that IT sees innovation the same way as the Business to earn the mandate. Innovation can look different within the enterprise. How business and IT executives view innovation will impact innovation success. The greater the difference in how the CEO and CIO view innovation, the more difficult it becomes for IT to create value that is aligned with the business’ strategy. CEOs are more concerned with new revenue streams or new products, and IT leaders are more concerned with innovating through efficiency gains. IT is often viewed as the trolls under the bridge that don't know anything about what the business is doing; we only pop up to create roadblocks. In actuality, IT is often going the extra mile to address issues the business left unanticipated in project formation and necessitate significant re-work and/or re-planning. - Erich Huemoeller, IT Director, State of Wisconsin Investment Board Inform your IT department. Communicate to the IT department the strategic goals of the Business and relate that to current and future IT projects. The more often the Business sees IT providing useable and cost-effective tools, the more likely IT will have a seat at the strategic table. When IT has an aligned strategic vision, it is more likely business executives and IT leaders share the same innovation views. If I went to most of the VPs in the company, their opinion of IT would be not dissimilar to other organization’s IT departments in that they may consider us to be slow and bureaucratic. But I would hope that they would suggest that in an informal ‘consultative’ model with our IT leaders, we are very helpful and help steer some innovative solutions for our company. - Steven Groves, CIO, Goodlife Fitness Keep the Business interested in IT. Due to the rapid adoption of disruptive technologies by business units, they may perceive IT as being less capable. Also, the Business may believe that IT is actually a barrier to innovation by constantly putting up roadblocks to new ideas. If the CEO does not think IT has what it takes to be an innovation player and is outsourcing technology services, the CIO needs to accommodate these needs while maintaining compliance, mitigating risk, and maximizing security. At the least, the business will not see IT as a barrier and it will improve rapport.

21. Involve IT in a range of innovation initiatives that may not all be technology focused Innovations can range from purely business to purely technology based, and purely internal to externally focused. Increasing difficulty for IT to execute Technology Based Innovations are new technology initiatives that take place in the IT department to primarily improve efficiency. Examples include server virtualization, virtual desktop infrastructure, and automated security monitoring. These are key for innovating within IT. Business Based Innovations are improvements to business activities without the need for IT systems or support. Examples include client experiences (without technology use), business model innovation, and customer segmentation approaches. These are key for innovating with business units. Client and Industry Innovations are about innovating how the organization interacts with clients and stakeholders. Examples include client experiences, new products, services, and markets, transformational platforms, and market creation. These are key in facilitating enterprise-wide innovation. Business Based Innovations Pure Business Client and Industry Innovations Technology-Enabled Business Innovations Technology Based Innovations Pure IT Internal Focus External Focus Technology-enabled business innovations are one way that IT can be involved with enterprise innovation. These are about using new or existing technologies to automate business operations or to create new business models to improve efficiency. Examples include business analytics and business process automation. IT is well positioned to be involved in purely business or purely client and industry innovations by facilitating ideation and execution, so get IT working to improve the innovation practices across the enterprise.

22. Innovate Within IT Understand Innovation Innovate Within IT Innovate for Business Units Facilitate Enterprise-Wide Innovation Importance of innovating within IT. Innovations within IT having business value. Case study of an innovation within IT. Barriers to innovation within the IT department. Communicating the importance of innovation to IT staff.

23. Get the basics right and innovate within IT before attempting to innovate with business units Increase IT credibility by doing more than keeping the digital lights on. IT organizations need to have the fundamentals correct in order to innovate; having a stable infrastructure and virtualizing servers before thinking about innovation in the context of the enterprise, is a prerequisite. - Steve Njenga, IT Director, H.D. Vest Inc. • Innovate Within IT Get the Basics Right IT Departments that Achieve Business Satisfaction with IT Innovations Improve IT-Enabled Innovation Success • Optimize service efficiency by: • Reducing costs (e.g. service tiering, server virtualization). • Improving quality of service [e.g. integrating enterprise applications, leveraging cloud application program interfaces (APIs)]. • Gaining confidence from business units that IT can manage, plan, and strategize. • Gaining an understanding of what it takes to be a successful innovator. • Keep the lights on and manage assets effectively to: • Acquire insights into everyday needs and practices of business units. • Understand internal infrastructure capabilities and integration requirements. • Acquire insights to the types of technologies workers are using (phones, laptops, tablets) and what applications they are using (customer relationship mgmt, enterprise content mgmt, etc.). • Gain basic confidence and credibility from business units. • Provide IT units with more time to focus on innovation initiatives as they are not constantly fighting fires. Source: Info-Tech Research Group, N = 91 +391%

24. Show innovations within IT as having business value by speaking the Business’ language • Business units live on the bottom line, and do not necessarily see the work that IT does to enable their everyday processes. • Server virtualization, service tiering,and leveraging cloud APIs are examples of innovations within IT that provide significant value. However, business units do not know, or necessarily care, how IT is providing this value. They may not understand how much effort is going on within IT to move forward with such initiatives. • When speaking with business units, portray IT value with metrics or examples that they can understand such as cost savings, time reductions, or increases in competitive advantage. These value propositions may differ with the nature of the business units (marketing, finance, etc.). We approached the business with the dollars and cents of the project to portray value. Business people don’t necessarily care about the specifics like number of VM’s. - Manager of Data Center Operations, Entertainment Industry Server virtualization Cloud API Ecosystem Service Tiering • Can yield large cost savings (e.g. lower utility bills and application isolation to reduce server sprawl), increased uptime, and faster server provisioning. • Communicate the cost savings and lower time to dedicate resources. • Can yield large cost savings and ensure that IT resources are allocated to where they are needed most. • Communicate the cost savings to the business by avoiding over provisioning. • Can yield cost savings and service benefits when used appropriately. • E.g. cloud bursting on a customer interaction website with volatile peak usage creates value through more uninterrupted time with clients. Do not try to shoot for the stars when innovating within IT if it is not feasible. Incremental innovation within IT is a great place to start to gain the credibility necessary to be an innovation partner. Recall that IT departments that achieve business satisfaction improves IT-enabled innovation success. An effective way to communicate IT value is to optimize quality of service and show value to achieve business satisfaction.

25. Innovations within IT matter: A communications firm built a private cloud that resulted in large cost savings We internally set up our own private cloud to have an end-user interface to compete with external cloud resources. If customers want a VM or new equipment, they can go through the interface and provision it as easily as they could on Amazon, at a lower cost and on-site; so latency and throughput are excellent. - IT Director, Communications Industry Communications Retail Telecommunications Industry: Segment: Situation Resolution Results • The firm is a decentralized telecommunications company. The company was 65% virtualized, and were considering private cloud options to improve service delivery across the enterprise. • An opportunity existed to reduce the TCO and improve service quality by moving to a cloud environment. • The Data Center Operations team was tasked with spearheading the initiative. • The project was communicated to the business in business terms: dollars and cents, and improved service delivery metrics were detailed instead of specific RAM or bandwidth specifications. • The private cloud yielded costsavings of 45%, and improved service delivery through lower latency and higher throughput. • After extensive research and cost comparisons, the Team discovered that building the private cloud infrastructure internally was the most cost effective option for their situation. • The initiative was piloted within technology departments before an enterprise-wide rollout. • The infrastructure granted better quality of service than external vendors at a lower cost.

26. Avoid a private approach when innovating within IT to keep relevant stakeholders informed and interested • Communicate innovations within IT to the rest of the enterprise. • 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 or not relating these improvements to business processes. • IT leaders hope to impress the Business with productivity improvements, without emphasizing that IT innovation was the root cause. • While this approach can bring about efficiency improvements within IT, the impact of this type of innovation will always be limited. • 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 Source: Info-Tech Research Group; N=209 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. IT can improve its own efficiency without business buy-in, but it is better if the business is aware of IT improvements since 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.

27. Overcome the common barriers to increase your chances of innovating within IT Info-Tech has identified the following major barriers to innovating within IT. There is so much knowledge wrapped up, and in some cases locked up in the minds of people in IT. We are not always able to take advantage of it because their skills and resources are being applied to the jobs we hired them to do. - Steven Groves, CIO, Goodlife Fitness

28. Showcase the importance of IT innovation in the business strategy to IT employees • A large barrier is a lack of innovation culture within IT. Motivate your IT staff to innovate, and align innovations within IT to business strategies. Communicating the importance of IT innovation to the business strategy to IT workers drives innovation success 2 • 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. 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. Understanding the importance of innovation helps define the problem that innovation solves Without a direct link to business strategy, IT innovation will have limited value. This needs to be communicated across the organization, including IT staff. For more on how to motivate employees to innovate, see Info-Tech’s research Build a Culture of IT Innovation. Source: Info-Tech Research Group; N=216 Key techniques for communicating strategy • Communicate the importance of IT innovation • Stay involved in IT innovation

29. Innovate with Business Units Understand Innovation Innovate Within IT Innovate with Business Units Facilitate Enterprise-Wide Innovation The value of IT helping to achieve strategic goals. Early IT involvement in projects. Communicating IT’s value to business units. Competing or completing the Cloud. Example of IT-driven innovations for the Business.

30. Enable business units to achieve strategic goals to earn the mandate for facilitating enterprise-wide innovation The more experience you have innovating with business units, the more successful you will be at facilitating enterprise-wide innovation. IT Departments that Facilitate the Achievement of the Business’s Strategic Goals Improves IT-Enabled Innovation Success Source: Info-Tech Research Group, N = 91 Innovate with the Business • Improve business productivity by: • Providing the business with appropriate tools and analytics. • Reducing points of frictions in the supply chain. • Working with the business to roll out new products and services. • Reduce business costs by: • Helping business units leverage IT technologies to reduce costs. • Business units live on the bottom line and are very concerned with reducing costs without impacting quality. • Communicate business value of IT through: • IT excellence • Open communication with business units • Highlighting past challenges where IT provided value +531% IT Achievement of the Business’ Strategic Goals Finance was amazed at the realization that ‘this IT guy gets my line of business, he is speaking my language, and he understands the different ins and outs that I deal with.’ That automatically raises not only credibility but it adds a level of trust that may not have been there before. - Ed Murphy, Director of Application Development, University of Wisconsin Colleges Facilitating innovation across the company is a large step forward from innovating with individual business units. Gain the detailed insights into business units and the confidence necessary to facilitate enterprise-wide innovation by getting involved with business unit innovations.

31. Business units will not turn to IT if you just manage problems reactively or only innovate within IT. • Advance IT services to improve business efficiency and to show IT can innovate with business units Prove to business executives that IT should be involved in innovation projects and earn the mandate to be part of innovation by: Remember: Improving IT Service Delivery Improves IT-Enabled Innovation Success Source: Info-Tech Research Group, N = 91 • Working extensively with the business to roll out new products and services. • This is a very good way to show tangible benefits of IT innovating with the business. • Provide the tools to optimize new products or services through practices such as process automation. • Providing the business with appropriate tools and analytics.  • The right tools can significantly reduce time to production or market. • Analytics are especially valuable for employees that require data to make decisions. Having timely, accessible, and accurate data will empower decision makers. • Improving the efficiency of business processes. • Reducing time or resources necessary to execute processes. Advanced IT service delivery is defined as: Working extensively with the business to roll out new products and services Providing the business with appropriate tools and analytics  Improving the efficiency of business processes

32. Prompt the business to realize that IT is a necessary project partner to reduce project costs IT is usually only involved in projects after the initial issue identification and problem is scoped. Get IT involved earlier in projects. Ideal case: Successful models get IT involved from the initiation of the project. Typical case: IT is not involved till much later on in the project due to a lack of knowledge of the value IT can provide, or low confidence in IT from the Business. This is the area where most problems can be identified. More IT involvement earlier in the project Source: Info-Tech Research Group The longer business units wait to involve IT, the greater the risk of more expensive solutions, ill fitting solutions, server overload, reduced data security, and lost opportunities for optimizing or automating with IT. Earlier IT involvement improves project design resulting in lower costs. Communicate the value of IT by proving value through IT practices,openly communicating with the Business, and highlightingprojects challenges where IT could have provided value.

33. Communicate the value IT can bring to business processes Proving value through IT delivery, open communication, and highlighting project challenges are impactful ways IT leaders can portray business value. Open communication Provide significant value through IT Project Challenges • As described, demonstrating innovation within IT is an impactful way to get the business units’ attention. • If you have your own house in order, the business is more likely to come to you for help. • . • Quantify the benefits past project could have accrued if IT had been involved. • Show the value IT brought in recent projects, or can bring to upcoming projects. • See the New England School of Law case study where allowing IT to remain uninvolved led to a catastrophic event. • Meet regularly with business units and highlight any suggestions for improvement to help enable them to achieve their strategic goals. • It is imperative to speak the same language as the Business. • Once business units see the value IT can bring, they will be more likely to involve you in projects. • The CIO should promote IT value within the executive team. The most impactful ways to get IT’s message across will be unique to your existing relationships and communication with business units. If you have other mediums for communication that are working continue using them and do not substitute them with the above suggestions.

34. Highlight how IT’s early involvement in projects can negate potential failures • Most business units do not see IT as an innovation partner even though IT involvement can identify critical problems that may not be addressed. Case Study: Business units proceed with ERP project without IT Other departments did not want to involve IT as it was typically viewed as ‘the people who always say no’. It took our networks being down for 5 days to change this thinking and have departments involve us more. Info-Tech Insight • A few years ago, the business units in the New England School of Law thought IT would be quick to disregard any technology projects pitched by the business. • Business units proceeded with technology projects without involving IT, with the assumption that once deployed, IT would be responsible for fixing any errors. Although IT did achieve higher project involvement, the Business must be aware of the risks of not having IT involved before a catastrophe occurs. IT must also be knowledgeable enough to foresee such issues when approached by the Business as an innovation partner. What Actually Happened: IT was not involved • Situation: Business units did not involve IT as they were fearful of IT pushback, which would delay the process. They went ahead with their own ERP initiatives. • Issue: After the project rollout, the entire network and ERP system crashed. • Business impact: The network took 5 days to repair, blacking out network access, and IT had to pick up the pieces. Afterwards, IT was consulted on more projects. - Nathan Reisdorff, CIO, New England School Of Law What Should Have Happened: IT is involved as a partner • Situation: IT is involved in the process from the start. • Issue Avoided: IT foresees capacity issues after consulting with business units and proposes alternative solutions or ensures adequate capacity can be made available. • Business impact: No wasted resources and improved relationship between IT and the business.

35. Complete or compete with external cloud services to combat ShadowIT The Cloud makes it difficult for IT to innovate with business units as services can be provisioned by a dedicated external vendor in very little time. • ShadowIT: Business units may not involve IT in external deployments due to some combination of: • Unawareness of any potential issues that may arise (e.g. compliance or integration with existing systems). • Poor relationships with IT leading to the opinion that IT will complicate or lengthen the implementation process. • You must understand where the issue lies and improve the problem at the source. If end users are unaware, you must communicate the risks and issues of not having IT involved, and try to work around these in a timely way. Improving relationships goes back to getting the basics right and innovating within IT. If you are not addressing these, business units are more likely to deploy cloud services without IT involvement, or even worse, without IT even knowing about initiatives • Complete the Cloud • Compete with the Cloud • This option requires a critical mass of scale to achieve a cost savings against an external alternative. However, if this is feasible it is a worthwhile option to consider. • Private clouds are an innovation within IT that can empower employees with secure access to quality service delivery to enable business processes. • Recall the case study where the company developed a private cloud to compete with external offerings. • For more details on how to manage internal clouds see Info-Tech’s research Manage & Plan Capacity for the Internal Cloud. • This is the ideal solution for companies that cannot reach the critical mass necessary for cost effective private clouds. If end users are going to the Cloud regardless, make sure they do it in a way that is effective and minimizes risk. • Consult: Provide risk assessment training to end users to communicate complications surrounding the Cloud. • Manage:Managing Cloud deployments through service tiering or administrative controls can yield large cost savings and more control over data. • Optimize: Track usage and spending of external deployment to optimize cloud consumption. • See the Dropbox Case Study: realize where a need is, and innovate with the Business, for the Business.

36. IT works to implement secure cloud-based file-sharing after learning of the Business’ use of Dropbox.com There was the Dropbox security incident that occurred without IT involvement. Our current network drive and SharePoint file-sharing structure was too cumbersome with mobile devices. - IT Director, Financial Services Industry Financial Services Industry: Segment: Banking Situation Resolution Results • As the IT department became aware of the situation, they immediately emailed the users to change their network password if it matched their Dropbox.com password. • IT educated business users and communicated the importance of security surrounding file-sharing and leveraging cloud-based services like Dropbox.com. • IT realized the desire for mobile file-sharing, so they explored solutions that could provide the appropriate functionality. IT is in the planning stages of implementing Box.com’s “Box for Enterprise IT” to give their users the functionality they desire in a much more secure and controlled environment. • IThas improved its credibility and gained business confidence by giving end users their desired tools without impeding security. • Business users realized that Dropbox.com could enable them to share, store, and send files from a mobile device while in the field much easier than SharePoint. • The adoption of this service had spread organically among end users without the involvement or consent of IT. As a result, the bank became exposed to a few security incidents. The following resolution and result is an example of completing Cloud.

37. Once you have earned the mandate, get ready for facilitating enterprise-wide innovation IT has worked hard to show the Business they can be an innovation partner. Make sure you deliver within IT and with business units before advancing. IT Departments That Achieve Business Satisfaction With IT Innovations Improve IT-Enabled Innovation Success • Source: Info-Tech Research Group, N = 91 IT Departments that Facilitate the Achievement of the Business’ Strategic Goals Improve IT-Enabled Innovation Success

38. Facilitate Enterprise-Wide Innovation Understand Innovation Innovate Within IT Innovate with Business Units Facilitate Enterprise-Wide Innovation An introduction to the Innovation Governance Model. IT’s role within the Innovation Governance Model. The role of the CIO in facilitating innovation. Tools and expertise IT can provide to the ideation process.

39. Create an Innovation Workflow driven by IT to catalyze organizational innovations of all classes Embed the innovation process with the strategic initiatives put forward by the Business and be the catalyst for continuous improvement. Embedded Strategies Increase IT-Enabled Innovation Success Source: Info-Tech Research Group, N = 88 Facilitate Enterprise-Wide Innovation • Apply the skills and expertise gained from innovating within IT, and with business units. • This is a large step forward from innovating within IT and with business units, so the more experience gained with these, the more business knowledge and innovation credibility IT will earn. • Familiarize yourself with the Innovation Governance Model and IT’s role within: • IT-Led Innovation Support Group • Innovation Advisory Group • IT’s Innovation oversight board • Provide the appropriate tools, expertise, and analytics for ideation: • Innovation Process Management • Collaboration and Content Management • Analytics and Business Intelligence • Testing Environments and Pilot Projects • New Technology Developments +140% Corporate Innovation Strategy

40. Use the Innovation Governance Model to identify, nurture, and transform ideas into business value Slowly integrate aspects of this model into your business processes to maximize the ROI of your innovation portfolio. BU3 BU1 BU2 IT’s Innovation Oversight Board The Innovation Governance Model’s main objective is to identify and nurture creative ideas showing significant potential up to and including the development of a business case. Both the Business and IT participate in this model’s process. • Ideas are collected into a repository from business units and are then managed by the Innovation Support Group. Each business unit designates an Innovation Champion, who is responsible for passing on ideas to the repository. 1 1 4 Innovation Advisory Group The Innovation Support Group (ISG) is responsible for facilitating the collection of organizational generated ideas into the idea repository. The ISG also provides support to projects teams working on incremental projects, while collecting insights on these projects. Secondly, the ISG drives the process of the Innovation Value Chain and takes control of planning and facilitating all innovation activities. 2 2 3 IT led Innovation Support Group Idea Generation & Collection 2 • The Innovation Advisory Group (IAG) is responsible for providing insights and business guidance to projects teams while ensuring all innovation projects have business value. The IAG receives idea proposals and business cases from the ISG and filters evolutionary and transformational ideas into the innovation project portfolio and delegates incremental ideas to project teams for agile execution. The IAG is made up of both business and IT innovation champions. 3 3 1 Idea Repository • The Innovation Oversight Board (IOB) is responsible for providing the overall governance for innovation. It makes executive decisions regarding the value of the innovation portfolio and approves funding for innovation projects. The IOB acts as the ultimate escalation point for any innovation issues. 4 4 Innovation Value Chain

41. Filter idea classes differently within the Innovation Governance Model Optimize resources spent on ideas by allocating idea classes to: agile project teams, your regular project portfolio, or the innovation project portfolio. Innovation Value Chain 2. Execution 1. Ideation Build Insights & Refine Model Filter Idea Into: Incremental Evolutionary Transformational Select Concept & Create Business Case Assess Capability Needs Frame & Investigate the Problem Assemble Team Formalize Experiment Conduct Experiment Generate & Assess Ideas Screen & Prototype Concept Agile Execution of Incremental Ideas

42. Create an Innovation Support Group to drive the ideation and business case processes To build the foundation for the Innovation Governance Model, use Info-Tech’s Innovation Support Group Charter. Innovation Advisory Group BU3 BU1 BU2 IT’s Innovation Oversight Board IT led Innovation Support Group Innovation Support Group (ISG) Overview Idea Generation & Collection Purpose 1. Organize innovation activities across the organization. 2. Drive the ideation to business case development process. 3. Drive the process selection of incremental ideas for agile execution. 4. Conduct funnel tracking and maintain the repository of ideas, business cases, and potential projects. 5. Support project teams as needed. Agenda 1. Organize and drive the activities planned in the innovation portfolio. 2. Facilitate ideation across all parts of the organization. 3. Facilitate concept prototyping from all parts of the organization. 4. Facilitate business case development for ideas from all parts of the organization. Idea Repository ISG Members • Business Unit Staff • IT Unit Staff and Manager • Ad hoc members; as required Innovation Value Chain

43. Get Innovation Champions involved in the Innovation Advisory Group to outline innovation priorities To define the appropriate tactics to meet business development goals, use Info-Tech’s Innovation Advisory Group Charter. BU3 BU1 BU2 IT’s Innovation Oversight Board Innovation Advisory Group IT led Innovation Support Group Idea Generation & Collection Innovation Advisory Group (IAG) Overview Purpose 1. Ensure all idea proposals, business cases, and projects have business value while understanding business and technical implications. 2. Provide insights and business guidance for idea proposals, business cases, and projects. 3. Detail strategies, priorities, and goals for the innovation projects and define appropriate tactics to meet business development goals for specific services.  Agenda 1. Oversee the calendar of innovation-related events and activities. 2. Review innovation ideas and funding requests to ensure relevance and value creation for at least one or more business units. 3. Rank innovation projects within the innovation portfolio by measured value and readiness to implement. Idea Repository IAG Members • Business Unit Innovation Champions • IT Innovation Champion • Chief Enterprise Architect • Chief Risk Officer Staff • Additional BU / IT Staff, as needed Innovation Value Chain

44. Govern the innovation portfolio through the Innovation Oversight Board to ensure strategic alignment To give the final stamp of approval on innovation initiatives, use Info-Tech’s Innovation Oversight Board Charter. BU3 BU1 BU2 IT’s Innovation Oversight Board Innovation Advisory Group IT led Innovation Support Group Idea Generation & Collection Innovation Oversight Board (IOB) Overview Purpose 1. Act as the ultimate escalation point for issues that cannot be resolved at the working level for innovation initiatives. 2. Make executive decisions regarding the value of the innovation project portfolio and the approval (or denial) for any innovation funding. Agenda 1. Review the innovation project portfolio and idea repository. 2. Review current investment requests and value delivery schedule. 3. Address any innovation expectations. 4. Oversee and approve (or deny) funding requests. Idea Repository IOB Members* • Chief Executive Officer • Business C-level heads • Chief Information Officer • Chief Risk Officer Innovation Value Chain

45. Use agile execution for incremental innovations that are less resource-intensive Aim to execute incremental ideas through agile projects teams that are supported by the ISG and IAG. BU3 BU1 BU2 IT’s Innovation Oversight Board Agile Execution Characteristics Conducting Agile Execution Self-organization and motivation are key to agile execution. These changes are less about the tools being used and more about the individuals executing them. Quickly achieving a functional solution that is validated with users rather than a thoroughly documented project is the goal of agile execution. Collaborate with end users in defining requirements throughout the implementation phase. There is little point in developing an initiative which does not meet the needs of the target audience. Quick responsiveness and adaptation define agile execution. Create an execution team dedicated to implementing incremental ideas. Start small (scale proportionally to size of organization) with a team consisting of programming skills as well as business analysis skills. Provide a pilot budget and monitor performance over the course of six months. Conduct enhancement and development work in two-week sprints, regularly testing outcomes and fit with user stakeholders. Assess results and level of demand for the agile team`s services going forward, scaling up the initiative as required. Innovation Advisory Group Idea Generation & Collection IT led Innovation Support Group Project Team Innovation Value Chain

46. Assemble a capable and versatile agile project team to execute incremental projects Work with business units while keeping customer expectations in mind to deliver an impactful solution. Create a continuous system of feedback and iteration between the agile project team and customer expectations. As a result, the project deliverable and customer expectations will evolve over time and eventually converge in the final result. Impactful Result Customer Expectations Solution Effectiveness See Info-Tech’s job descriptions for the individuals to consider for your agile execution team: • Application Development Manager • Software Developer • Programmer Analyst • Business Requirements Analyst • Business Process Analyst • Business Intelligence Specialist Project Deliverable Source: Info-Tech Research Group Time • Extracting incremental innovation ideas will leave only evolutionary or transformational ideas in the innovation project portfolio. Having a dedicated team to work on incremental projects allows alternative groups to focus on the execution phase of the Innovation Value Chain. Dedicated teams are integral as providing uninterrupted time to work on projects leads to improved business value and likelihood of success.

47. Position IT in the Innovation Governance Model to drive and support innovation activities enterprise-wide BU3 Lead BU1 Lead BU2 Lead • Innovation and Portfolio Strategy • Innovation Mandate • Benefit’s Accountability Info-Tech Insight • This is an ideal situation of IT facilitating innovation across the enterprise. As time passes, adopt the model’s processes slowly, but refrain from implementing it all at once. Eventually, your organization will become more proficient in streamlining innovation projects and managing the innovation project portfolio. Innovation Oversight Board BU1 Innov. Champion BU2 Innov. Champion BU3 Innov. Champion • Balance and manage innovation portfolio • Benefit realization • Cross-utilization and learning • Oversee training and education Project Team Members Project Team Members Project Team Members Innovation Advisory Group Business guidance The Innovation Support Group facilitates ideas generation and collects ideas External Scanning Vendors Insights from projects • Project Team Project Team Project Teams work on implementation Of innovation ideas Innovation Support Group Support projects Plan Innovation Activities Insights from projects Repository of Ideas & Business Cases Drives Value Chain Funnel tracking Exposure to new technologies Innovation Value Chain

48. Use Info-Tech’s tools and templates to build cases for, manage, and rank innovation ideas in your organization To keep track of your top ideas, use the Ideas to Prototype Proposal Template alongside the Innovation Ideas Prioritization Tool. Make this template available to all employees in your organization and encourage them to forward completed proposals to the Innovation Support Group or equivalent individual or team. After reviewing the proposal, the Innovation Advisory Group analyzes the proposal’s business value and will consider adding it to the Innovation Ideas Prioritization Tool. Transpose high value prototype proposals into this tool and score them appropriately based on the Cost and Value weightings. The tool will provide a shortlist of the ideas in “Pursue Immediately,” “Deploy Agilely,” “Plan Into the Portfolio,” and “Question Need and Solution Design” quadrants. Although it is not as comprehensive as Innovation Management Platforms, this tool provides a starting point to managing ideas. Ideas to Prototype Proposal Template Innovation Ideas Prioritization Tool

49. Use the appropriate metrics to measure innovation success • To keep track of innovation initiatives in your organization, use Info-Tech’s Innovation Performance Tracking Template. How to use this template: Use this template to help the IT department and the Innovation Support Group keep track of the performance and success of their innovation efforts within the organization. The Data Entry tab contains the worksheet for inputting specific performance metrics, and their target and actual values. The tool will calculate the difference between them. Delete the grey text, fill in your own values, and then fill in the “Action Plan for Improvement” in the last column. Add any metrics that may be custom to your organization in the rows below.

50. The CIO must champion IT-facilitating innovation activities across the organization Do not buy in to the notion that the CIO is moving explicitly from the “Chief Information Officer” to “Chief Innovation Officer.” Innovation is not a practice that should be siloed. Although disruptive technologies are altering the role of IT, corporate information still needs to be protected. The CIO is well positioned to champion IT facilitating innovation across the organization while still protecting corporate information. CIOs must show the following competencies to promote IT’s role as an innovation facilitator. How does the CIO position him/herself as the organization’s innovation facilitator? External Relationships Business Mandate and Knowledge Internal (Self and IT) Capabilities • Can attract a range of external partners such as experts, universities, or vendors. • Can collaborate effectively with external partners. • Can manage external partnerships and relationships. • Knowledge of innovation management and tools for innovation. • Suitable resources. • Influencing skills and politically savvy. • Plan for advancing the department. • Earn the innovation mandate from the Business. • Insights into business issues, opportunities, and ideas. • Act as an innovation communication coordinator for business units. • Provide business and IT perspectives on applicability and value of innovation ideas.