by Chunka Mui
The history of the technology function could be characterized as an episodic but inexorable elevation into the command centers of business. Each generation of information technology brings new opportunities to help manage the business, and the IT leaders are called upon to integrate those capabilities into the organization. Better IT means better information, making each generation of technology more strategic relative to the core competencies of the business. As such, the role of IT becomes more strategic as well. There are periodic lapses, when it appears that the technology is well understood and the IT’s focus becomes more operational, less strategic. Then the relentless advance of Moore’s Law brings another wave of even more powerful technology to address. The emergence of edge technologies represents the latest wave and will drive another escalation of the IT’s reach and responsibilities.
Part of the escalation will be a magnification of current responsibilities. As previously mentioned, edge innovations will send a tsunami of data back to core systems. Technology leaders must ensure the necessary integration, management, and analysis strategies are deployed to ensure that this information is absorbed and leveraged to serve customers, give a clear picture of the status of the enterprise, and properly inform business decision-making.
IT will also be called in to assess rapidly advancing edge technologies and help figure out how to incorporate them into the core processes, products, and customer relationship strategies of the enterprise. They can leverage their experience with previous generations of information technology to guide the development of new platforms. They can also build on their experience with privacy and security issues to manage new streams of external data and emergent knowledge, and help to address the issue of trust—which might well become the make-or-break issue for leveraging edge innovations.
In addressing these challenges, however, technology leaders must make sure that they learn from the failures of French generals whose response, after the trench warfare of WWI, was to build the Maginot Line, a system of even stronger trench fortifications. IT leaders must not fight the last war. They must build on their prior experiences, but realize that the challenges ahead encompass radical escalations in both technology and information. They must respond with escalations in the skills and ingenuity of their own organizations.
Perhaps the best advice on how to best take advantage of edge technologies comes from Peter Drucker, who offered this general principle: “Innovation begins with the analysis of opportunities. The search has to be organized, and must be done on a regular, systematic basis.” Don’t subscribe to romantic theories of innovation that depend on “flashes of genius.”
In that vein, let me offer the following 90-day plan for to setting up the mechanisms for purposeful, systematic development of edge innovation opportunities.
Month 1: Inventory Opportunities
The nature of edge innovations is that the best ideas probably come from the front lines, where the organization interacts with products and customers. That is the place to look for opportunities. Chances are that a number of edge innovations are already being considered or even implemented, probably outside the purview of central IT.
Sponsor a series of innovation workshops to educate, build alignment, and uncover potential innovations. Questions to ask include: Can you augment your products to collect diagnostic data and connect with customers, as GM did by installing OnStar in its vehicles? Can you augment your customer interfaces to reveal customer preferences and to customize the customer experience, as Amazon does? Are there large stores of customer, operational, or performance data, either thrown off by business processes or generated to meet financial or regulatory requirements, waiting to be knit together into some coherent form? What key business, customer, and competitive issues might be better addressed by the application of edge technologies?
Opportunities should include both continuous and discontinuous innovations. Continuous innovations offer incremental or faster, better, cheaper-type optimizations, such as shedding costs, reducing cycle times, and generating incremental revenue. Discontinuous innovations are about killer apps.
Month 2: Develop a Holistic View Using an Innovation Portfolio
Array the inventory of opportunities in the portfolio analysis framework as shown in Figure 1. The first step is to assess each opportunity based on competitive impact and type of investment. Competitive impact measures differentiation against what competitors might have deployed by the time an idea is launched (a key mistake is evaluating an idea against one’s current capabilities, as opposed to that of the competition). Investments can be one of three types: a non-discretionary “stay in business” investment, e.g., basic infrastructure or government mandated; “return on investment” investment, yielding some predictable financial return; or an “option creating,” investment, creating a real business option that might yield killer-app-type financial returns in the future.
Next, eliminate opportunities that fall outside of acceptable boundaries—for example those opportunities that, once completed, would be easily overtaken or already at a disadvantage against the competition. See Figure 2. For the remaining opportunities, develop an initial sizing of investment levels and potential benefits according to each investment category, and filter as appropriate. For example, eliminate ROI investments that do not meet standard corporate hurdles rates. Eliminate option creating investments that do not exhibit extraordinary option value.
Month 3: Balance the Innovation Portfolio
Like any investment portfolio, it is important to not place all hopes in one or two investments. The same is true for innovation portfolios. They should include a mix of incremental and killer-app-type projects, ensuring competitiveness in the near term and in the future.
The right balance and prioritization, however, depends on a company’s investment capabilities and competitive circumstances. For example, as shown in Figure 3, a market leader might field a portfolio geared toward aggressive growth by enhancing its infrastructure, investing heavily in near-term profitable opportunities, and developing a number of killer app options for sustaining its competitive advantage. However, as shown in Figure 4, a company that is retooling might emphasize infrastructure and near-term investments and make only minimal investments in future options.
At the end of 90 days, the company should have a prioritized, staged investment plan that represents a coordinated enterprise approach to edge innovations. This understanding of the entire landscape of possibilities should facilitate the development of common platforms, rather than isolated applications. It should also help identify opportunities for creating trusted information partnerships with customers.
Figure 1: Inventory of Opportunities Arrayed on Portfolio Framework
Figure 2: Eliminate Unworthy Opportunities
Figure 3: A sample market leader portfolio
Figure 4: A sample retooling company portfolio
ABOUT THE AUTHOR
Chunka Mui is the co-author, with Larry Downes, of Unleashing the Killer App, Digital Strategies for Market Dominance, the digital strategy best-seller (Harvard Business School Press, 1998). His current writing projects include Killer Platforms, an essay series that explores leading edge digital strategies, and The Devils's Advocate, Avoiding the Mistakes that Cost Companies Billions, a book, co-authored with Paul Carroll, that draws the lessons of the largest strategic failures of the last 25 years.
In addition to research and writing projects, Chunka Mui is an independent business advisor and a frequent speaker at public and private conferences. He also chairs the Diamond Fellows, Diamond Management and Technology Consultants' network of external advisors, and regularly works with Diamond consultants on client-related research and consulting projects. He is also a member of the board of advisors for Brulant.
Previously, he was a partner and chief innovation officer at Diamond, a vice president at the CSC Index division of Computer Sciences Corporation, and a founding member of Center for Strategic Technology Research (CSTaR) at Arthur Andersen & Company (now Accenture).
Chunka Mui was born in Hong Kong but grew up on the south side of Chicago. He holds a B.S. Degree in Computer Science and Engineering from MIT. To find out more about Chunka Mui, or to contact him, visit http://www.chunkamui.com/contact.htm.