Innovation Strategy Needs IT Input
How can companies leverage IT’s innovation skills to increase product success rates and exploit new market opportunities?
Product innovation and differentiation are critical to success in a global economy still emerging from the Great Recession, and innovation ranks among the top strategic priorities of business executives.
Meanwhile, CEOs consistently rank IT as the most innovative of their companies’ functional organizations, and IT has some unique abilities as a driver of the strategic agility businesses needed to achieve consistent innovation across the enterprise.
Yet chief executives and directors rarely invite IT to the innovation strategy table. That needs to change if companies hope to build an operational model that can:
- Match innovation initiatives to strategic business objectives
- Reprioritize initiatives and product portfolios in response to changing market conditions
- Balance investment in sustaining and disruptive initiatives
- Infuse customer responsiveness into everyone’s job
- Uncover new market opportunities and respond with the right products
Making this operational model workable requires an open and agile approach to innovation management. It also requires continuous alignment between executive and development organizations. These two elements define a new enterprise state of being for innovative companies—one called strategic agility.
Strategic agility keeps executive strategy in tune with market conditions and ensures that functional organizations react in unison to changes in that strategy. Specifically, it defines a set of operational practices and supporting technologies that keep all eyes focused and all hands synchronized.
Why Strategic Agility Matters
Achieving organizational alignment is no small feat. Linking strategy to execution is a tricky job, and a disconcerting number of R&D investments never yield a return. There has been progress, via initiatives such as more liberal data-sharing and product lifecycle management (PLM) processes, which have in many cases significantly reduced the delays and waste that have historically plagued product development, while increasing the number of products launched on time and within budget.
But these changes are primarily focused on improving efficiencies. They do not address the fundamental issue that prevents companies from remaining competitive: Namely, that technology, competition, customer preference and economic forces are always changing.
Within such a constant state of flux, senior managers struggle to stay abreast of changing customer needs, reprioritize innovation initiatives, cancel initiatives that no longer support the strategy, reassign or acquire resources, modify investment strategies, and alter the requirements of products already in development.
These are not new activities. But today, such decisions and their implementation need to occur within days—not weeks or months—of market changes. And they need to be driven more by up-to-the-minute data and less by gut instinct.
Accordingly, strategic agility incorporates four essential operational practices that help innovative companies make better product decisions through improved market responsiveness, and then carry out those decisions with speed.
The first practice eliminates the periodic forecast schedule. Instead, it keeps forecasts current based on market, customer, economic, competitive and regulatory data continuously acquired from internal and external sources.
The second improves visibility of information throughout the enterprise, including strategic objectives, program status, forecasts, plans, requirements, resource allocations and decisions.
Third, synchronize operations and priorities— both vertically, between executive and lines of business, and horizontally, among all functional organizations. Synchronization ensures that strategic objectives automatically cascade down the organization and link to team and individual objectives. Conversely, the impacts and gaps resulting from decentralized decision making automatically flow upward to middle and senior managers.
Fourth, manage all product initiatives in the aggregate in order to understand each initiative’s contribution to the overall strategy and to balance investment. With aggregation, managers waste fewer resources and keep the pipeline filled with profitable initiatives.
This is the essence of strategic agility.
The capacity to see innovation initiatives as pieces on a chessboard guided by an adaptive strategy requires new technology. Why? Because not one of today’s enterprise IT systems —ERP, PLM, CRM, SCM, etc. — addresses the holistic imperative of keeping executive and functional organizations continuously aligned.
More than any other enterprise entity, IT comprehends the data, process and automation needs of each functional organization. Innovation management in general (and strategic agility in specific) requires technology that makes data instantly and globally accessible, supports dynamic relationships among those data, and provides analytics, dashboards, decision support and communication services that span the enterprise.
Within that context, here are just a few of the areas where IT can assume a leading role in implementing strategic agility.
Define the requirements and access policies for a global repository that houses market and economic data, resource capacity, business assumptions, plans, product requirements, schedules and resources.
Define standards, methods and interfaces for acquiring real-time market data, communicating with external stakeholders, and capturing data typically stored in firewalled data repositories and static formats such as notebooks, spreadsheets, presentations.
Define the traceability and auditing policies to ensure that changes in data, strategy, priorities and resources remain consistent throughout the enterprise.
Work with IT software vendors to ensure that available technology supports the needs of strategic agility.
Finally, IT’s role in servicing a broad customer base with many voices presents an opportunity for companies looking to improve idea management. IT can use this expertise to create processes and practices for analyzing, selecting and prioritizing ideas gathered from internal and external sources.
Companies that adopt strategic agility can markedly improve their performance, as measured by deeper market penetration, higher ROI, lower R&D costs, a higher percentage of revenue from new products, stronger margins and consistent growth patterns. In Predicts 2011: Pattern-Based Strategy Technologies and Business Practices Gain Momentum, Gartner reports that companies employing data-driven, predictive decision-making outperform their peers by as much as 25 percent across many of these metrics.
The opportunity is tremendous. The rewards are clear. But strategic agility requires that executives embrace change. And acknowledge that it can only be done by shining the spotlight on IT.
Christine Crandell is senior vice president of marketing for Accept Corporation, a maker of software to help companies manage innovation, product development, and strategic product alignment.