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EXECUTIVE SUMMARY

Confusion about what innovation is and how to handle it all too frequently stymies the CIO's best efforts at helping drive business innovation. To clarify this confusion, CIOs should treat innovation as part of a continuum of opportunities ranging from business-as-usual investments to radical new ideas. As everyday investments and innovations impact the same IT and business resources, CIOs should manage them in a common portfolio. But to keep innovation from being overly burdened in the funding and development cycles, CIOs should help establish separate budgets and decision-making processes for innovative ideas as well as driving innovation through more innovative development processes.

INNOVATION MANAGEMENT THAT'S TOO TIGHT OR TOO LOOSE LIMITS RESULTS

While innovation is attracting the attention of most CIOs, many govern their innovation efforts too rigidly (see endnote 1). Instead of pursuing innovation with a wide-open approach, these CIOs constrain their ability to find, fund, and reward innovation because they:

• Miss lower-impact opportunities by looking only for earth-shattering change. Surely innovation must be non-standard, unanticipated, and strategic, say many of those IT leaders charged with enabling innovation. But this perspective misses many opportunities derived from less exotic solutions. "Implementing SAP is not innovation," said the CIO of a large chemical manufacturer—even as his firm's rollout of the ERP system drove significant new margins by enabling global aggregate planning. And Verizon's innovation team created substantive impact on customer satisfaction, call center rep (CSR) close rates, and subject-matter expert utilization by linking CSRs and experts with instant messaging, hardly breakthrough technology.


• Fail to find ideas lying everywhere while looking for innovation from a few smart people. Many firms are enamored of some indefinable "other" as the source of innovation—whether it's an R&D organization, the business executives, or some third party. One oil-and-gas service firm's business executives get together for a few hours a year to "innovate." But they miss the opportunities for improvement that come constantly from the rank and file, such as a consulting firm's field practitioner who developed a way to use early portal technology to collect and share best practices for providing services.


• Stymie innovation by managing it just like any other investment request. Firms look to govern investments of every sort, especially when funds are tight—and thus many put innovations through the same hoops as any other opportunity. A large pharmaceutical firm requires that every IT-based investment compete for limited investment capital according to the same rigorous business case approach—and be reviewed by the same IT steering committee. But this approach fails—favoring business-as-usual investments over opportunities, such as the high-tech factory worker's suggestion of using cell phones to track tasks and results, reducing the frequency with which workers had to move in and out of the factories' clean rooms.

ADDRESS INNOVATION AS A CONTINUM OF OPPORTUNITIES

To break away from the inclination to view innovation in a narrow context, CIOs should help their firms work with a broader view of innovation—like Forrester's definition of business innovation (see endnote 2):

The transformation of a business process, market offering, or business model to boost value and impact for the enterprise, customers, or partners.

This definition begs the question, where do ongoing investments end and innovations begin? All of them transform some aspect of the firm and seek to boost value and impact, so is everything innovation (see Figure 1)? As the head of IT innovation at a utility firm put it, "You want to avoid the opportunities in the middle. They're hard to get funded." But firms that apply Forrester's broader view of innovation don't try to isolate innovation to an extreme but instead work hard to address the opportunities across the full continuum. To make this happen, they:

Figure 1: Where Business As Usual Ends And Innovation Begins Is Not At All Clear

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