InnovaTion – the good old means & ends syndrome (Part 1)

Sorry about the clumsy ‘play’ on the word IT but I just couldn’t resist the temptation as it conveyed a link and disconnect between IT and innovation. We are living through times when these two words are thrown at us every day, in every walk of life, together and discrete. As a preliminary statement, let me observe that the link is not umbilical or self-evident. Perhaps, the primary purpose of IT is not to inherently enable innovation but to help in the smooth flow of operations, business or anything else. And this true even of businesses or organizations whose primary focus is innovation. This might seem an uncharitable remark but is not – it is simply a description, and it is certainly not a dumbing down of IT. In the same vein, it includes within it the seeds of the problematic relationship between IT and innovation. This is probably true even of companies whose business is IT.

Over a decade, there was an intense debate over whether IT should take the lead in innovation within an enterprise, when the enterprise is not an IT company, where IT is a facilitating function. Some of you may recall Nicholas Carr’s provocatively titled book “Does IT matter?” The debate is as alive today as it was then. Without naming names, let me recapitulate some of the most important views, because they are as relevant today too.

One key to fostering internal innovation is a willingness to accommodate ideas from outside the IT organization. Implicit in this observation is another which is that an IT organization typically tends to be internally focused or even defensive. This was one of the reasons why there was a cry those days for treating employees as customers. Some companies distinguish between internal IT and customer-facing IT, a distinction that tends to build friction and resentment among employees. So much so that the HR has to market internal IT opportunities as equally challenging and rewarding. Be that as it may, in any organization and not just in IT, someone has to echo or be the voice of the customer. The CEO of a troubled specialty chemicals company took his employees to a textiles company – a major client – so that his employees could understand that they were making something that their client was using to make a product for final consumption. It turned out to be a good step. I remember suggesting in a company where I was working that one person in a project should voice client’s views. Not surprisingly, it was vetoed. During this time (towards the end of 2001), a leading American bank estimated that about 75% of the enhancements and changes made to its Commercial Electronic Office (CEO) business-banking portal since it was launched seven years ago were customer-driven. Some of these must have inspired the concept of ‘co-creating value’.

A leading health insurer established a group focused on strategic innovation inside and another group to explore ways to take advantage of vendor innovations. It has also set up a project management office to ensure that ideas generated by these groups are acted on with dispatch, and a formal process for trying out new ideas “very, very quickly” in small pilots to see if they work. This was exactly the opposite of what the disk drive industry did (as studied by Professor Clayton Christensen in The Innovator’s Dilemma): it failed to innovate because it listened to its major customers who resisted any innovation from vendors as it would have called for changes in their ways of working. As the CTO of a fast food chains advised, users have to feel like they’re not wasting their time if they are indeed coming to IT with business issues. Establishing credibility with users is a primary requirement. The Ostrich mental make-up is a clear hurdle.

Underpinnings of IT

IT is a facilitating function but if it didn’t innovate itself, it was doubtful it could play a positive role in enabling innovations. There has been the lingering feeling that the level of innovation in IT is “nowhere where it needs to be”. And we say this despite the fact that there have been enormous breakthrough developments in technology per and IT but these were independent businesses by themselves. We are discussing IT in an organization whose business is not IT.

IT departments have had their share of problems some of which lost them credibility with the business side because of past failures on large projects, especially ERP initiatives. The principal reason for this is the increase in scale of operations in many businesses. If you looked at the figures of even Indian companies after 1991, the year of the beginning of economic reforms, you will see the point I am making – a noticeable increase in the minimum efficient scale in almost all businesses. It is a natural corollary that any software system too is going to be large and such implementations have always been fraught with serious problems. To add to this, imagine the further complication in global organizations where ‘one software package’ has dissimilar implementations to accommodate differences in the way the businesses are operated. This in effect also means that a global MIS is not a simple matter of aggregation. Let me emphasize here that we are describing the business software, in addition to which any company will have an accounting software.

That story continues. One of the ironies of software systems is that in addition to an ERP, there is a plethora of software addressing very specific functions or areas – procurement software, HR – itself may be more than one, asset registers, CRM and so on – an unending proliferation of software. Further, mergers and acquisitions bring in their own set of problems. Just ask anyone who has dealt with data migration in cases of mergers or acquisitions. The amount of time IT staff have to spend on back-end integration tasks leaves them no time for anything else. With so many software in addition to an ERP, welcome to the world of interfaces. Marc Andressen once said that interface management will be one of the most significant areas for innovation. Again, we know that, in practice, interface management can be a harrowing experience.

Given all these, it will be naïve to expect IT to take a leading role in promoting innovation. It simply has neither the time nor the orientation. The latter point is rarely, if ever, considered but is actually more potent a factor than lack of time. You have to wade through Quora to gauge the extent and depth of the problems I have talked about here.