IT and its role in Sourcing and Outsourcing – SIG CIO roundtable report – Part 2 Innovation

What is innovation? Reaching a consensus for a universal definition may be as hard as balancing the US government's budget.
As opposed to Democrats and Republicans in Washington, IT executives reached an agreement quickly at our roundtable last month at the SIG Summit. Regardless of semantics, the bottom line for innovation is that it is measured by its impact. If it doesn't have a positive effect, it cannot be considered innovation. Just as Economist Edmund Phelps, Nobel Prize winner, made the distinction between invention and innovation in his statement: "Segway is a great invention. Starbucks is a great innovation." It was along these lines that we started our discussion, which led to the following exchange of ideas.

When you can't think outside the box

Necessity may be the mother of invention, but for some industries like healthcare or financial services, government regulations may be the biggest drivers for innovation. When a company must operate within very strict boundaries it requires a lot of creativity to remain competitive. The common perception is that industries like advertising, technology or entertainment are on the leading edge of innovation. Yet that perception may be overlooking the innovative capacity of companies in the energy or health insurance sectors, which rely on continuous innovation and process excellence to stay in the game, while complying with government's confining regulations.
These organizations are constantly managing risk. Risk aversion plays a big role in hampering, but also driving, innovation. When an organization has limited control over the costs of its supplies–the  price it can charge for its products/services or its exposure through policy underwriting– innovation may come in the form of information management, process excellence or supply chain management.
Putting on-time and contextualized information in the hands of the right people is a big contribution from the CIO for business competitiveness, enabling an innovative approach to dynamic risk management.
If you live in a sandbox, you better start making sand sculptures; sandcastles won't standout.


Consumer technology setting the pace for corporate IT

"I have more visibility of my orders in, than with my suppliers," said one of the members of our roundtable. This is a palpable example of how the consumerization of IT is driving the expectations for enterprise IT. Innovation in corporate IT will definitely be in the footsteps of consumer technology.
As consumers, executives are totally empowered when using mobile technology or social networking. And this empowerment is penetrating the corporate level in the form of cloud computing. For example, the CPO and her team now have the capability to leapfrog corporate IT, and have full capabilities in cloud-based services from companies like Emptoris, Coupa, SAP or Ariba. Corporate users may not know how to create different instances of a database, but they certainly know how to interact with social networks, create blogs from pillar to post, create and edit videos–everything from scratch and on-the-go with their smartphones. They know that with their corporate credit cards, and within their spending limits they can use cloud-based CRM or SCM systems and avoid long and painful ad-hoc implementations. This creates a complex scenario for the CIO. Cloud computing elevates the buy vs. build debate to a whole new level – and that's not just speaking metaphorically.

Beyond empowerment, the expectations from executives extend also to the user experience front; they want their information systems to work.  No manuals, no training, awesome graphics, surprisingly fast and simple, just like their iPads. It was last year, at the Spring SIG Summit, that the CEO of Ariba said that the next step in procurement solutions was to provide an Amazon-like experience.
The role of the CIO is changing from that of a technologist who understands business, to a business person that understands technology. And it is perhaps in this aspect where the job is becoming increasingly challenging, since nowadays everybody in the organization seems to understand technology.


It's not you, it's me

We asked the members of our roundtable: How well are you leveraging the innovative capacity of your vendors? The answer, almost unanimous, was that they are under-utilizing the capacity to innovate of their suppliers. The reason? Contractual and political barriers imposed from the buy-side. One of the members shared his own experience to work around that. He said their organization decided to put all their main vendors to work together to solve one of the buyer's problems. In the end he made the case that their vendors' collective brainpower is much greater than the sum of its parts.
The capacity to innovate within the enterprise should not be limited to the confines of the organization. A smart organization is one that leverages the innovation that is happening all around: within its supply chain, among its clients and its peers. Another executive made us think about this by pointing out that the combined R&D budget of the major players in the oil & gas industry, is greater than the GDP of many small countries. Just imagine the possibilities.
We are not as smart as the combined market is.


You can read part one of this series, and stay tuned for the upcoming pieces:

Part 3, Social Media: The bridge to capture next-gen talent

Part 4, Globalization: A shrinking world with cultural differences