The Innovation Line

I want to now build on my last article "60/40 is the new 80/20" and talk about a concept I have been debating for a while.  The Economist Intelligence Unit in late 2008 published research that was based on a survey of some 661 executives, with over half participating from the C-suite.  The research titled the Digital Company was focused on understanding the 2013 workspace. 

For me there were two key findings in their research, the first that role of CIO was due for huge change by 2013 and second that new ideas in the enterprise in 2013 would no longer come primarily from R&D, instead they would come from customers.  Here indicating a huge change for organisations, in that they would need to collaborate more closely with their customers to deliver specialised products and services.

So coming back to the title of this article, The Innovation Line, what do I mean by this?  Well from my experience from clients in 2008 and from talking with leading benchmarking analysts, organisations spend 75-80% on average of IT budgets keeping the lights on, with only 20% remaining for growth and transformation initiatives.  Given the current climate and the unlikely change to IT investment levels in the short term at least, I think this line is one of the key KPIs for CIOs to manage, if they are not already.

So what will change?  Well there are two forces coming to bear on CIO's, first and hugely important reduce the "run" the business costs.  How?  Either, consolidate, outsource, virtualise, standardise and/or 'utilitise.'  One only has to read the likes of Nicholas Carr to understand the pressure that CIOs may be under over the coming years.  Essentially for all of IT to remain in-house then CIOs, through leading infrastructure maturity intiatives, will need to be able to deliver the same for less and therefore stay competitive, or if this is not achievable they can pass selected elements of IT to someone else who can provide the same service for less.  This may mean, once the cloud is matured, moving core infrastructure services to the cloud freeing up finance for other initiatives. 

Selecting, planning and delivering  these  transformation changes will be tricky but the outcome will mean that the 75-80% "run" the business spend should start to come down.  Here is the interesting part.  If customers demand more specialisation then collaboration and product and service innovation become key.  Therefore CIO's shift their focus (if not already) and their teams into the 20% "grow" and "transform" space.  This is a very diffferent world as many know, a world where innovation, strategy and process are key, a world where collaboration is the norm and innovation is carefully managed and nurtured.  It is an empowering place for the CIO, where knowledge of end-to-end processes can increase their leverage.

The line between the two types of spending I therefore refer to as the Innovation Line.  CIO's focused largely above the line will be ones that according to the Economist Intelligence Unit who "will be a full partner to the business, helping us meet strategic objectives in most areas of operation" those focused below the line will be "along with with technical support, IT is influential in helping us to improve operating efficency and reduce costs."  The Economist Intelligence Unit state that this change will be undertaken in the next 4/5 years by 2013.  Even with the current economic pressures seeds for these changes need to begin to be addressed today as leading CIOs know.