The road to innovation

For those with a love of technology, innovation can be a difficult dream to pursue. It may be self-evident that something as fast moving as IT can drive innovation within the enterprise, yet many CIOs are simply denied that freedom by having to channel their energies into more workaday business functions. The reason for this, says Myron Hrycyk, CIO at supply chain services group NYK Logistics, is a credibility gap.

“As a CIO, if I can’t run the IT discipline to operational SLAs (service level agreements), I don’t get to talk about strategy,” he told delegates at the Effective IT 2007 Summit in January.

CIOs have to earn their spurs, demonstrating not only the value IT is delivering, but proving that the IT strategy is aligned with business objectives. “Only then can you talk about innovation,” he says.

Hrycyk has a blueprint that he believes can be utilised by any CIO, and guide them on the path to becoming a trusted partner at the board table.

Even when the CIO is elevated to the board, he says, they are too often viewed as an outsider who is rarely asked to play a role in defining business strategy and who’s input is typically restricted to a review of the company’s IT issues towards the bottom of the board meeting agenda. “If that’s the case, IT will always be seen as a cost centre and never a core part of the business.”

Hrycyk’s thesis on how to augment the strategic importance of IT is based on the combination of academic research and hard-won practical experience gained from its successful implementation at his previous company.

The academic side of the plan may sound familiar to some. He fervently believes in speaking a “common business language”; aligning the IT and business; and demonstrating the credibility of the IT department. But for Hrycyk, these are not merely soundbites, but key to the process of improving IT’s standing within the enterprise, and so its ability to pioneer business-changing innovation.

Myron Hrycyk
CIO, NYK Logistics

First principles

It sounds obvious, admits Hrycyk, but the importance of getting the IT operations right cannot be understated: “How many IT projects get delayed or cancelled altogether because operational problems intervene?”

Building an IT department that can deliver operational excellence provides the foundation for convincing business leaders of IT’s worth, he says. “It’s not about being perfect, it’s about delivering the services that your organisational colleagues require.”

For colleagues to appreciate what the IT department is up to, Hrycyk advocates the wide application of SLAs – but this needs the CIO to understand the key performance indicators for the IT department, and to provide clear guidance on performance.

Some of these key measures will be familiar ones: helpdesk response times, performance transaction rates or batch runtimes; but others may include the IT department’s financial data, its utilisation of human resources and responses to user satisfaction surveys.

An immediate benefit of the approach is that business colleagues can get a clear measure of how the IT department is performing. Fine-tuning the process, to establish a better understanding of how IT performance will impact business units requires a common understanding, Hrycyk says, which can be achieved by describing IT’s status in established business management terminology, such as Six Sigma.

Talking to business colleagues about response times of the SAP system may illicit looks of incomprehension; if the information is couched in terms of Six Sigma measurements, they can assimilate it, he explains.

“IT has not traditionally measured its performance as rigorously as other areas. Perhaps that stems from the notion of IT as black art. It’s not, I firmly believe it is a process,” says Hrycyk.

It may take some IT professionals time to adjust to different ways of measuring performance, but it has advantages: as the IT team becomes used to project management methods, such as Prince 2, they are able to participate more in business projects, creating a federated IT unit, “integrated into the business we support”, says Hrycyk.

Building credibility through high performance and business alignment can give the IT function the foundation to then embark on innovation. But what is the best way to encourage innovation?

It may happen by chance, says Hrycyk: some business leaders intrinsically trust IT to become “process champions” – people ideally placed to take a holistic view of business activity and identify areas ripe for improvement.

But even when the IT function “has the headroom” to look at innovation, instilling a culture where that creative process flourishes in a genuinely beneficial manner is a delicate task, says Hrycyk. “I have looked at trying to introduce procedures that encourage innovation, but it doesn’t work. You need to create a culture and environment where ideas are [naturally] generated and picked up.”

Partners may be a vital source of innovation, notes Hrycyk. Although it can seem counter-intuitive to look to third-parties for ways to drive the business forward, forging strong relationships with key suppliers is becoming an increasing important role for the CIO. “You need to get damn close to them; learn what skills they’ve got,” he adds.

Ultimately, the move to reinvigorate IT’s relationship with the wider business cannot be seen as a linear process, says Hrycyk: “You can’t just spend two years getting IT operations running perfectly before you try to engage with the business: it’s about priorities.”

His approach is not without challenges, as he acknowledges: some deeply technical staff may feel disconnected from a more business-focused IT department, for example. And it is no easy option. “Driving innovation is tough: it takes a lot of time and energy. But it is something that CIOs today have to do.”

Effective IT breakout: Effective IT management

Has the outsourcing bubble burst? The first indications of unease over outsourcing were seen in contract cancellations by the likes of JP Morgan Chase and UK utility company Centrica. The Effective IT 2007 Survey also highlighted the malaise: the 700 leading IT practitioners that participated identified outsourcing as the worst performing strategy of those they were questioned about.

Elsewhere, research by sourcing advisory firm Morgan Chambers predicts that £7 billion worth of outsourcing contracts that are up for renewal before 2008 will be broken up: instead of big, high-value outsourcing deals they will be distributed among a group of suppliers or simply brought back in-house.

The sense of disillusionment with large outsourcing deals was palpable among delegates at the Effective IT 2007 Summit. But this is far from a total condemnation of outsourcing. Instead, users were frustrated with deals that had been put together poorly, with little insight into what aspects of IT could hope to be successfully outsourced.

One of the delegates stated that he believed any parts of the infrastructure that impact on the company’s ability to deliver on its strategy must remain in-house. Design and delivery functions can be successfully outsourced if required, providing a capable service provider is engaged.

Another IT director at a UK-based IT consultancy recommended that organisations should assess what constitutes their intellectual capital; then draw a line under it and consider outsourcing anything that lies below that line.

However, many delegates remained suspicious of potential outsourcing partners. Delegates highlighted the ‘land and expand’ strategy they suspected many outsourcers have adopted, where initial engagements are priced well below market value to lure customers in – the service provider then seeks to make a profit by expanding its role.

Sadly, for many business leaders, it is simply not possible to make a judgement on when outsourcing represents value-for-money, because IT has been relatively poor at analysing the costs of its activity, said the IT director for a financial services company.

While some research companies can provide benchmark to allow CIOs to compare their IT expenditure against industry averages, there are other options that can be far more effective, he said.

When outsourcing has been an option for his company, the IT department has submitted a bid for the contract. This has “concentrated the minds” on calculating a value for being done, he added. Furthermore, the internal bids had a good track record of winning the bids, and were often able to deliver value back to the business far quicker than an outsourcing partner because they were already up-to-speed with the business processes within the company.

Pete Swabey

Pete Swabey

Pete was Editor of Information Age and head of technology research for Vitesse Media plc from 2005 to 2013, before moving on to be Senior Editor and then Editorial Director at The Economist Intelligence...

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