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Tuesday, October 23, 2007

Driving Innovation

Driving Innovation

Genius is 1 percent inspiration, 99 percent perspiration." We've all heard that famous Thomas Edison quote before. But did you know that Edison, one of the most productive inventors of all time, only received three months of formal schooling? Father to more than 1,000 inventions - including the phonograph, the light bulb and motion pictures - Edison was self taught and focused on continuously improving his intellect throughout his amazing career. His quote explains how he did it: with hard work.

Innovation isn't easy, but in today's competitive environment, companies must excel at it in order to grow and succeed. Done right, innovation will deliver significant financial and operational benefits, such as asset utilization, new opportunities through expanded markets to grow revenues and improved ways of doing business to increase margins. Quite simply, innovation moves forward businesses, industries and even cultures.

But make no mistake, innovation today isn't only about inventing new products and services. According to a recent survey of top executives sponsored by software leader SAP, 55 percent of corporate leaders report that new business models - organizational structures, competencies, processes and partnerships that determine how an organization operates - will provide greater strategic advantage than new products and services by 2010.

Innovation involves entirely new ways of thinking about issues and solving problems that really matter. It's our job to cultivate that culture in our organizations, and today technology is increasingly playing a key role in our success.

To see how, let's first look at enterprise innovation in three basic ways:

Traditional product/service innovation, which focuses on eco-system R&D to generate product revenues
Continuous operational process innovation, which maximizes the utilization and efficiency of resources
Disruptive business model innovation, which concentrates on the creation of quantum leaps in business margin
Although the lower levels of innovation - actually, extensions of existing services or products - are important, the innovations that will most likely create new industries and growth potential are at the highest levels of innovation. And that innovation requires thoughts, processes and technologies that break with our existing norm.

True innovation addresses impediments to business success, while adding practical value. That requires understanding all of the variables of the business, because without that understanding, it's impossible to identify needs. Understanding the business opens the door for improvement.

Every industry has its own individual marketplaces and the issues of automation, visibility, quality and complexity. Understanding how these variables interact allows businesses to identify which ones are out of tune, which then allows for the creation of new processes or technologies that will get that business back in tune.

If you fail to understand the processes within an enterprise, it's unlikely that you'll be able to invent anything meaningful to that organization. All of the old schools of thought about understanding the value chain still ring true today: If you don't know what truly drives an enterprise, and what elements are on the value chain, you'll be unable to improve it.

To be sure, the highest order of innovation receives the glory, but it also comes with the most risk. In many cases, third-party outsourcers can deploy processes, people and techniques to minimize the amount of risk in developing new technologies or ideas. The need for innovation must be balanced with the amount of risk a company is willing to take at this stage in its evolution.

Feeding the Innovation Pipeline
In his book, Crossing the Chasm: Marketing and Selling High-Tech Products to Mainstream Customers, Geoffrey Moore makes a case for the Technology Adoption Lifecycle, which divides the population into three groups: the techies and visionaries, the pragmatists and conservatives, and the skeptics. Using a Bell curve to illustrate these groups, he places techies and visionaries at one end and skeptics at the other. In the middle, we find the largest segment - the pragmatists and conservatives.

The secret to making these groups work together is to create a pipeline of ideas. We need projects attuned to both ends of the spectrum, which requires a lot of ideas in the pipeline. Many of those ideas may never make it to the market, but the pipeline provides an incubator in which they can grow. At EDS, this process is called CtO, or Concept to Offering.

The CtO pipeline has about 160 elements in it, and all of those ideas are in different stages. Some are in the early stages and are being tested by our techies and visionaries, while others are less risky service offerings ready to be implemented for our pragmatist/conservative team. The key to the success of this pipeline is to have a lot of ideas, to have varying degrees of risk associated with them and to have them at various stages of development. The most successful combination for a business is a blend of those who create innovative improvements on existing products and services, with those who are able to think far ahead into the future, take some risks, and then hand the offerings over to the delivery people - once they've put the process through the wringer and proven it to be successful.

One thing about new products and new technology is that with innovation comes high risk - and a tendency for things not to work the first time. This is actually a good thing because it forces the visionaries to roll up their sleeves and build tools and processes that reduce risk while improving quality. It's a key part in the process that is known as reducing ideas to practice. It's when an innovator takes a wild idea, wrings out the problems and reduces it to practice. The innovator produces the procedures and the tools that will make it happen-and trains the people who are going to use or deliver it.

Working with Trends
Three technology trends that help drive enterprise innovation today are interactive visibility, automation and simplification. Each of these is equally important and builds upon one another because true innovation exists when all three of these work together for change.

The first trend, interactive visibility, is powered by portals and dashboards to provide real-time information when and where it's necessary. It needs to be kept simple. Each business has maybe five or six things that really matter, and at the end of the day, those measurements will tell you whether you had a good or bad day.

However, to create these dashboards we must take complex business processes and simplify them. There must be complete visibility into what those processes demand and what's demanded of them. This requires understanding business processes from end to end, knowing what functions a particular system supports, and truly understanding what the consequences are if a system fails.

For example, when a service company fully understands the business processes it's supporting for a client, the systems people have a much better chance of creating new ways to automate those processes. The more a business understands about what clients need, the more leveraged solutions that business will be able to develop.

The value of our second trend, automation, is seen on a daily basis in enterprises around the globe. Every time a human being is involved in a Process - no matter how well trained or dedicated they are - the opportunity for something to go wrong increases.

Automation drives down the cost of a process while at the same time minimizing the risk of human error. It opens the door for machines to minimize human shortcomings while at the same time allowing humans to do what machines can't do: allocate more time to serve clients. More energy can be spent increasing business instead of solving problems.

Automation is the direct shortcut to our final trend, simplification. The two are intertwined so closely that it's sometimes difficult to tell where one ends and the other begins. As mentioned earlier, complexity has always been the adversary of quality, which means simplification is its champion.

A simpler, more modernized system is easier to manage while it lowers costs.

Successful modernization can create new business opportunities in addition to increasing employee productivity.

As enterprises wrestle with the issue of legacy modernization, they find the need to balance cost against risk. Enterprises face the critical choice of investing in a new system to keep up with changing technology, or putting off that action and risking losing information when the technology becomes so obsolete that it's unrecoverable.

However, there are alternatives for simplification. We have tools available, called automated "system understanding tools," that allow us to parse old systems' source codes and find the hidden business rules within the systems. That allows us to use the old systems as our entry point and reduce development time, even if it still requires manually rewriting all the code. The important thing to keep in mind is that all the requirements, system definitions, and system design can be gained by looking at the old system this way.

A second alternative is to take the existing source code and move it to a less expensive platform. In addition to using the old platform to understand business requirements, it can be rewritten to a more contemporary platform or simply be moved.

Flawless Execution
To be considered successful, once innovation is ready to be delivered into the mainstream, it must work 100 percent of the time. To do that, a business and its processes must operate in a flawless execution environment. In EDS' case, when we develop a new product or service, or when we change one, we follow specific procedures for how our delivery organization should operate. The output of our product development becomes another process all its own. It develops processes, tools and trained people specifically for that new product or service.

Then people are trained and motivated so they know exactly how the small piece that they're delivering directly affects the client. Armed with that knowledge and charged with that sense of ownership, we can create an environment of flawless execution.

Innovation without implementation is wasted effort. If we innovate and have truly great ideas but never implement them or make money on those ideas, the effort has been for nothing. And innovation and implementation work hand-in-hand. After something is successfully implemented for a business, it may provide the money to fund the next innovation. In today's business world, it boils down to one simple point: We've got to understand the business variables of how we operate and how our clients operate. Innovation can't exist in a vacuum.

Feedback from clients can be the best source for finding out which real-world problems exist and need to be solved, and they can then be added to the pipeline, where the techies and visionaries can work to find a solution.

As with most business successes, the biggest key to enterprise innovation lies in the people you hire and nurture. I like what Edison's longtime friend, Henry Ford, had to say regarding his employees: "I am looking for a lot of men who have an infinite capacity to not know what can't be done." Taking that cue, assemble the right people, give them modern tools, develop an innovative culture and see what develops.-EDS

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