IT needs to move away from being an “order taker” and move towards continually selling itself business-wide if it is to succeed in driving innovation, according to Prof. Joe Peppard.
In a fast-paced and wide-ranging talk, Peppard spoke of the difficulties faced by IT as it tries to convince the rest of the business of the value of its ideas, and he gave numerous examples of companies that are using technology — both new and existing — to gain a competitive edge.
Outlining some of the ways IT can innovate, Peppard said it can:
- Improve products or performance
- Find new ways of managing or organizing
- Deliver competitive advantage
- Develop new businesses
Zeroing in on Competitive Advantage for the lecture, Peppard talked of how IT can informate existing products. One example he cited was jet-engine manufacturer Rolls Royce. Its old business model saw it sell an engine, get money, and then continue collecting revenue through service and parts for the next 20 years.
But Rolls Royce decided to change its business model to one where it “sold thrust,” Peppard said. Sensors have been added to engines and they continuously relay in-flight performance, via satellite, back to engineers in Derby, England. Using sophisticated pronostic and diagnostic tools, Rolls Royce engineers monitor performance and optimize the engine’s maintenance schedule. “A traditional hard-nosed manufacturing company is moving in to services,” Peppard said.
Another example comes from the U.S. where football helmets now come with electronics. Speaking of the players, Peppard said they are required to come off if there is any sign of head impairment. “These guys take some big hits,” he noted. Traditionally hard to monitor, players are now feeding back information wirelessly to staff on the sidelines.
However, “innovation doesn’t need to be about new technology,” Peppard said. UK clothes retailer, Social Suicide, decided to build buzz around itself by offering larger discounts as the amount of people who gave it a Facebook “like” increased. This came from someone in senior management who was clued in and “joined the dots,” Peppard said.
More old technology has helped pharmaceutical companies combat counterfeit drugs in Africa even in pharmacies. This was overcome by the companies printing a 10-digit code on the packs. The customer then texts a phone number on the pack and gets another code back and compares them. As Peppard noted, “That is very old technology. How long have mobile phones been around? How long have texts been around?”
As for potentially disruptive technology, Peppard advised keeping an eye on one of MIT’s latest innovations. This is the NETRA (pictured), an
inexpensive and portable eye-test device that clips to a mobile phone. Traditional optometrists saw their business decline with the arrival of chain stores offering walk-in eye tests and trendy glasses. Will the NETRA or a descendant disrupt the chain stores?
Yet despite IT’s potential for innovation, it is still in many places an “order taker,” Peppard said. IT management speaks frequently of aligning its strategy with the business’s. But how can IT be less passive and impact the business strategy? How can IT “push” innovation and how does that compare to the business “pull” on IT?
“The key challenge is awareness,” Peppard said. His research has shown that the prevalence of IT innovation in firms is highly correlated to whether the organization as a whole has an innovation process in place, he said.
For IT, Peppard suggested four steps:
- Identify Sources of New Ideas
- Filter out new technologies
- Business engagement
Identify sources of new ideas: Citing the new car-rental model introduced by Zipcar, Peppard said, “The big problem is the myopia of incumbents in a business.” With a concentration on customer needs, business innovation is often incremental, he said. But as Henry Ford noted: “If I asked customers what they wanted they would have said a faster horse.” Major successful book sellers were caught off guard in the mid-90s with the arrival of Amazon.
Peppard said there is an opportunity for IT to source new ideas because they are further removed from the customer.
Filter: How do you decide which one is going to be the winner? UK retailer, John Lewis, marries IT awareness and environmental scanning in a very structured way, Peppard said. The CIO reports to senior management on the state of the company’s technology in a very graphical and accessible way. Meanwhile, a structured IT process examines new technologies and tests them in house to determine how they could be of use to the business.
Wal-Mart’s British subsidiary, ASDA, has an Innovation Lab. But this is not a laboratory, as such. It is a mock up of a store with different experimental technologies. To make it visible, the CIO put it beside the Cisco teleconferencing center where attendees, very frequently senior management, walk through the lab to join video conferences. “It was strategically placed to spark ideas, spark interest and get a sponsor,” Peppard said.
One idea in the lab was an LCD display of item prices on the shop shelves. Paper-based price displays are slow to change. But when the head of retail saw the new displays, he began to wonder about differential pricing to get customers in during typically slow times during the day.
Huge organizations like BP use a variety of ways to scan for technological developments. With a $3 billion budget for IT alone, Peppard quipped, “It opens doors.” BP meets Silicon Valley VCs twice a year and asks what they have in their portfolios that could be of use to BP. Less sophisticated is its CIO Seeker Network. This is where senior IT people merely send out a periodic newsletter to a mailing list asking for help with questions.
Peppard said their goal is to be “no more than two phone calls away from an expert in any field.”
Engagement: “Does your organization have some kind of IT awareness program?” Peppard asked. This needs to be a sustained effort by IT to communicate its role to the rest of the business because establishing legitimacy for your proposal is “often a major hurdle.”
There are three aspects to think of with legitimacy Peppard said:
- Cognitive: Do we understand it?
- Pragmatic: Will it work as advertised?
- Normative: Is it right for us?
He suggested asking who can be enlisted to help provide legitimacy for your proposal, and have a working demonstration early on to overcome skepticism.
Photo of helmets courtesy Steel Shark’s Traun on Flickr. Photo of NETRA courtesy of MIT.