how to innovate in 10 steps or less: the innovation imperative

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1 WHITE PAPER January 2013 how to innovate in 10 steps or less: the innovation imperative agility made possible

2 overview Building a better innovation strategy via best practices In today s environment of disruptive technologies, growing business demand and tech-savvy end users and customers, innovation doesn t have to be elusive for IT leaders and the businesses they support. Innovation can be nurtured with the appropriate people, processes and technologies in place to carry ideas from inception through to true innovation. Innovation is defined as a practice, process or technology that is demonstrably new and different and has a measurable positive impact on an organization s success. To learn more about the current state of innovation worldwide, CA Technologies commissioned an independent research survey of top IT and business executives from large organizations in the US, UK, Brazil, France, Germany, Australia, Singapore and Japan. With a combined total of 800 surveys completed between June 2012 and July 2012, the research proves that enterprises worldwide understand the need to foster innovation. Yet, not all organizations approach innovation in the same way, and the different methods deliver more or less success for IT and business leaders. Specifically, the Innovation Imperative research study showed that when asked to assess the state of innovation in their organization, 48% of the respondents said it was established or widely practiced while 20% on the other end of the scale said it was minimal or none. This presented us the opportunity to look at the differences in practices between the most innovative and the least innovative organizations. Could the data show us which processes and practices are typical of those organizations that are the most successful in their innovation strategies? This paper explores some of these practices, and provides additional advice from key CA Technologies executives on how IT and business leaders can increase their success in driving innovation in their own organizations. 2

3 1. Establish a formal innovation process For many, the idea of innovation conjures up images of light bulbs magically appearing over one s head, innovative approaches emerging from the simplest, unrelated acts (an apple falling from a tree, for instance) and one person catapulting the kernel of hope into a full-blown innovation. This is the stuff of fantasies or at least popular imagery associated with innovation, yet in reality, innovation typically doesn t just happen. It requires the proper care, feeding and nurturing to evolve those simple ideas from that light bulb into a practice, process or technology that is demonstrably new and different. As expected, the research shows that innovative organizations embrace activities such as experimentation, exploring the unknown, and hypothesizing and learning all of which can lead to great ideas. But, the most innovative take it further they place even MORE emphasis on analyzing and planning and have found that having a well-established process and structure is a critical component to capitalizing on innovation and turning the great ideas into real results, as outlined in a recent blog post by Jacob Lamm, Executive Vice President of Strategy and Corporate Development at CA Technologies. In contrast, organizations which are less innovative place much less emphasis on all these activities. (See Figure 1). Figure 1. Innovation activities with significant emphasis Analyzing and planning Stressing process and structure Allowing freedom and flexibility Hypothesizing and learning Rewarding experimentation 37% 35% 26% 29% 24% 56% 54% 52% 50% 67% Most Innovative Least Innovative Q: How would you rate the level of emphasis your company places on each of the following in its day-to-day activities? Base: Most Innovative387. Least Innovative 156 3

4 2. Listen to your customers Highly innovative organizations believe in the old saying, the customer is always right. Not only do such organizations enjoy more innovation success, they also are able to cite innovation benefits such as attracting new customers and improving customer retention, according to the study. Figure 2. Not only can customers, partners and other third-parties help to drive innovation within any given organization, but the organization can also keep those customers, partners, etc. happy and drive business growth by incorporating their ideas into innovation efforts. Add to that the consumerization of IT and customers could actually be tech-savvy enough to introduce new and better ways to solve existing or emerging challenges for the business. This could be why the most innovative organizations list customers as their #1 instigator of innovation, versus the less innovative organizations who list them next to last. (See Figure 3). 4

5 Figure 3. Biggest instigator of innovation in the most innovative organizations Customers 26% Exec Management 25% IT 24% LOB employees 15% Competitors 10% Q: Which group or function is the single biggest instigator of innovation for your organization? Base: Most Innovative Meet with millennials For IT and business leaders alike, there could be great value in meeting with the newest members of the staff specifically millennials. This group of tech-savvy employees might just reveal new ways to approach old problems or uncover unidentified opportunities with customers, just by virtue of the fact that they have been raised on technology and essentially think differently about how to approach problems. Andi Mann, Vice President of Strategic Solutions at CA Technologies, recently expanded on the concept of tapping the brain power of millennials to spur innovation in a blog. Based on his own experience and in talking with CIOs, Mann says the value these younger employees bring to the table is they don t know what they don t know, what s off limits or what they re not allowed to do. That means innovative ideas could come to them while IT and business leaders with more experience could get stuck in old approaches. 5

6 These young IT pros are full of vision, vim and vigor. Putting them in the spotlight at an executive level can unleash a fountain of innovative ideas, Mann says. While many ideas will be left on the cutting room floor, an honest, open and receptive dialog with your organization s Millennials will certainly lead to a few ideas that work spectacularly well. 4. Enlist executive management It s no surprise that without buy-in from the executive suite many projects IT or otherwise fail. IT innovation efforts must get the stamp of approval from executive management to succeed. For instance, the less innovative organizations in the study view their own executive management team as the primary barrier to innovation. Another top obstacle cited by these innovation underachievers is a lack of organizational mandate around innovation. Now consider those organizations identified as innovative. In these companies, leaders are more successful at getting top management to approve of the efforts and understand the potential business benefits such as increased revenue or market share and faster speed to market of a successful innovation project. Organizations that make executive management a key part of innovation efforts enjoy more success. 5. Collaborate across IT and the business One might think that IT leads innovation efforts in most organizations today, but that isn t necessarily the case. In fact, the research shows that organizations in which business and IT work well together enjoy more success in their innovation efforts. For other organizations in which IT and the business don t collaborate as well together, attempts to innovate see less or no success. Figure 4. 6

7 When IT and business leaders were asked to describe their relationship as part of the study, 78% of those identified as the most innovative among organizations defined the relationship as collaborative or cooperative, compared to just 54% of the less innovative organizations surveyed. Nearly half of those less innovative organizations identified the relationship as wary, distrustful or combative. (See Figure 5). Figure 5. Relationship between IT and the business Collaborative Cooperative Neutral/Siloed 16% 17% 31% 47% 38% 33% Distrustful/Wary Combative 4% 9% 2% 4% Most Innovative Least Innovative Q: How would you characterize the business and IT relationship with respect to innovation? Base: Most Innovative 387, Least Innovative 156 A good relationship between IT and the business isn t the only requirement to enable innovation success: the business must also consider IT critical to innovative efforts. For instance, business executives from the innovative organizations are more likely than less innovative organizations to view IT as experts in innovation (32% vs 13%) and more likely to position IT s role as critical to innovation (24% vs 13%). On the other hand, business leaders in the less innovative organizations were more likely to view IT as a barrier or having no role in innovation than the more innovative (31% vs 14%). Organizations looking to ramp up innovative efforts must not only include IT, but must also empower IT to take the lead and drive innovation efforts. 7

8 6. Welcome disruptive technologies While IT must remain cautious and work to mitigate risk to the business associated with innovative efforts, the technology organization also needs to embrace disruptive technologies sooner than perhaps IT departments historically have in the past. For one, tech-savvy end users and customers are already experimenting or engaging with those technologies and will expect their employers and potential business partners to do so as well. Or in the case of customers and consumers, they will more likely engage with those companies that make it easy for them to do business with these emerging technologies. And in today s era of the Innovation Imperative, companies cannot afford the time previously spent vetting new technologies as they may fall significantly behind the competition and risk losing customers as well as talented employees. For instance, innovative organizations are planning to invest in a range of technologies to a much larger extent than the less innovative, including cloud, virtualization, business analytics/big data, social media and mobile technology. (See Figure 6.) Rather than fear technology disruption, the most innovative organizations fully embrace it and proactively implement plans to leverage it. Figure 6. Technology investments for innovation Cloud Mobile Business Analytics Virtualization Social Media 40% 24% 39% 33% 29% 18% 27% 19% 20% 12% Most Innovative Least Innovative Q: In which of the following technologies will your organization invest or increase investment over the next 12 months? (Please check all that apply.) Base: Most Innovative 387, Least Innovative 156 8

9 7. Find the budget to boost innovation Budget is often cited as a primary reason that an IT organization can t explore innovation. For instance, 49% of the less innovative organizations in our study say they spend less than 10% or less of their budget on innovation versus 22% of the more innovative. The more innovative organizations polled for the study realize they need to focus investment on innovation while also maintaining operations. Figure 7. IT and business leaders must work together to earmark those projects focused on innovation that promise the most reward for the organization, while also maintaining smooth infrastructure and operations. That means they must consider which projects could be eliminated. In a recent blog post Jason Meserve, Sr. Product Marketing Manager from CA Technologies outlines costsaving options to fund innovation that include auditing the hardware and software inventory to ferret out waste, right-sizing the application delivery infrastructure to reduce overhead, finding ways to incorporate automation technologies and reduce manual labor around day-to-day, non-mission-critical tasks and more. Again the thinking has to change: IT has long been doing more with less, and the business constantly wants to grow services. The two must come together to see that investing in maintenance and operations will keep IT viewed as a cost center and drive the business to seek innovative technologies elsewhere. In another blog post, Andi Mann explains: Certainly budget constraints are a vexing problem. But when it comes to the intersection of budget and innovation, I think it s largely a problem of perspective. When I talk to business leaders about innovation, they tell me there s always budget to make money. It s all about the ROI. 9

10 8. Start small, spend less Innovation is a lofty goal and some efforts could get stalled by an organization s belief that for an innovative idea to be successful, it needs to be big and expensive. That s not necessarily the case, according to John Michelsen, Chief Technology Officer at CA Technologies. In fact, his experience in the industry provides multiple examples in which smaller, less pricy projects garnered the most innovation success for companies. Studies show that the more money spent on a project, the less likely the project will actually succeed, Michelsen wrote in a recent blog. Somewhere around 2% of all the $10 million-plus IT investments actually reach production, while 71% of the $1 million-dollar investments go live successfully. Michelsen argues that funding several smaller projects could yield better results than investing too much in just a few ideas. Part of his thinking also includes the premise that to truly innovate, companies must be willing to take some risk and expect failure to some degree. The idea is: the smaller the project, the lower the financial risk and potentially the bigger the return on investment when success is achieved. Also IT needs to be more nimble to speed the process around innovation, Michelsen argues, which will require a change in how IT works, but it will be well worth it in today s climate. Today the world demands fast-cycle changes. IT s traditional, meticulous approach to change now delivers an unintended consequence: increased risk, Michelsen says. Those who move quickly can capitalize on the latest innovative technologies to give their people, organization and executive leadership the contemporary capabilities they want. 9. Apply the innovation acid test Organizations can also weigh the pros and cons of each attempt to innovate using a simple test. The number of ideas coming from various groups and brainstorming sessions could seem overwhelming to organizations looking to find success and truly innovate in some areas of technology and business. And not every great idea will become a wonderful innovation nor should it, according to George Watt, Vice President of Corporate Strategy at CA Technologies. No IT team has limitless budget, bandwidth or bodies to satisfy the needs or whims of every customer. There are certain business realities with which every executive and IT leadership team has to wrangle, Watt explains in a recent blog post. Despite this, we need to ensure that the important innovative ideas are identified, explored and capitalized on. They can t fall through the cracks. The good news? It s not always about saying no. Sometimes it s about saying not us ; though that is not always as simple as it appears. For Watt, that means asking three simple questions: 1. Are we currently the best source for this product or service? 2. Could we develop the skills necessary to become the best? 3. And even if we could become the best, should we? IT and business organizations need to ask themselves and their peers these questions when great ideas start along the path to innovation. The acid test will save time, resources and more while also helping to guarantee more success with the innovation efforts that are explored. Innovation can be intentional. But without an acid test for innovation, IT teams can dedicate their scarce resources to the wrong activities. Make sure your team has an innovation acid test and that all new ideas can make the grade, Watt says. 10

11 10. Measure success As with any project, measurement is critical to gauge incremental progress and ultimate success. It is no different with efforts around innovation. Organizations that do not understand how to measure the success or failure of innovation efforts are less successful, according to the data. Nearly three-fourths (74%) of the most innovative organizations have formal measurement processes in place for their innovation projects as compared with only 43% of the less-innovative. In fact, a full one-quarter of the less innovative have no processes at all, formal or informal. (See Figure 8). Obviously putting the process in place to measure efforts will deliver better results for companies striving to improve innovation efforts. Figure 8. Measuring success of innovation projects Formal technology-enabled measurement Formal but manual measurement 20% 23% 35% 39% Informal ad-hoc measurement 16% 28% No processes in place 9% Most Innovative 24% Least Innovative Q: How does your organization measure its success with innovation projects? Base: Most Innovative 387, Least Innovative

12 For more information For the full results of the Innovation Imperative research study as well as the latest news, research and insights on innovation, visit ca.com/ii. All cartoons are under Creative Commons license (Attribution, Noncommercial, No Derivative Works). About CA Technologies CA Technologies (NASDAQ: CA) provides IT management solutions that help customers manage and secure complex IT environments to support agile business services. Organizations leverage CA Technologies software and SaaS solutions to accelerate innovation, transform infrastructure and secure data and identities, from the data center to the cloud. Learn more about CA Technologies at ca.com CA. All rights reserved. All trademarks, trade names, service marks and logos referenced herein belong to their respective companies. This document is for your informational purposes only.ca assumes no responsibility for the accuracy or completeness of the information. To the extent permitted by applicable law, CA provides this document as is without warranty of any kind, including, without limitation, any implied warranties of merchantability, fitness for a particular purpose, or non-infringement. In no event will CA be liable for any loss or damage, direct or indirect, from the use of this document, including, without limitation, lost profits, business interruption, goodwill or lost data, even if CA is expressly advised in advance of the possibility of such damages. CS3361_0113