24 Oct Tom Austin: CIOs must keep pace with revolutionary change in workplace IT
There are a few schools of thought on the subject of information technology and its future relevance.
The view that IT doesn’t matter, which is held by a somewhat contrarian group, has been well documented by authors like Nicholas Carr, who wrote a book of the same name.
A polar opposite view, held by a dwindling number of people but still strongly adhered to by certain vendors, contends that IT is the “be-all” and “end-all” of business transformation.
The middle-of-the road view is that IT does indeed matter, but only if it is used to enable a persistent strategic advantage.
Count Tom Austin, a Gartner fellow who starts with the premise that workplace technology can play a significant role in the transformation of a business, with that middle-of-the road lot.
Austin, speaking at Gartner Symposium/ITxpo 2007, a conference that emphasized the importance of delivering IT projects that drive busines growth, offered several case studies of American companies that have leveraged IT in heretofore radical ways and achieved equally radical results.
Procter’s IT gamble
Procter and Gamble’s stock has been rising lately, and a significant part of its improving business outlook is due to a fundamental shift in business strategy [documented in Harvard Business Review, March 2006] that employed, but did not solely rely on, technology.
“They have dramatically changed their business strategy,” Austin noted. “Technology was an enabler. It wasn’t the starting point.”
The starting point was a business challenge. P&G, the nation’s most prolific maker of household products, had to generate $4 billion of new product sales each year, prompting the company to make a strategic decision. It changed its research and development strategy, essentially moving from solely internal research and development to “connect and development.” What had been a very close-to-the-vest company opened itself up to outside innovation in what Austin called “the business ecosystem” across the Internet, and 50 percent of its product innovations now come from the outside.
While P&G’s internal research and development also has grown, it found many more researchers outside who were willing to buy and sell ideas, and it used a variety of techniques to collaborate with this outside universe. These techniques included a reliance on technologies like InnoCentive, an online innovation market where organizations with an innovation need can explain their challenge, have outside problem-solvers bid on it, and evaluate the bids.
In some cases, market research is moving away from focus groups to online communities that are mined for market intelligence. As of June of this year, P&G was on track to generate 42 percent of its innovations from outside the company. More importantly, its revenues have risen more than the stated goal of $4 billion per year – from $56.7 billion in fiscal year 2005 to $68.2 billion in FY 2006 to $76.5 billion in FY 2007 – and it now has 20 brands that generate more than $1 billion in annual sales.
Goldcorp, a Canadien mineral extraction firm, was going downhill because it was not extracting enough gold on land it held the rights to. Looking for answers, the CEO enrolled in an MIT business course and heard some admittedly strange ideas that he eventually pitched to his geologists. The craziest notion of them all was to take all the geophysical data the company had internalized and publish it all over the world. The firm made the data available, announced a contest, and awarded prizes to people who had better ideas for finding gold.
In the end, Austin said company scientists found that 55 percent of the new ideas brought higher yields, and they helped grow the company’s market capitalization.
“They went against the conventional wisdom of `Oh, we have to hold our data,’” Austin noted. “People are transforming their business by questioning core assumptions, externalizing, and using technology in the process.”
Netflix, the online movie rental service, is another company that challenged a core assumption. Netflix had an internalized transaction history of what consumers ordered and when, and it prided itself on its recommendation engine, believing the quality of these recommendations is what distinguished it in the market. In essence, Netflix would guess what customers were going to order based on what they already had seen.
Then it began to really think outside the box, offering to take its recommendations and place them on the Internet. It then established a prize contest to reward anyone who could do a better job recommending future transactions.
Austin called Netflix another example of a company that challenged a core assumption and externalized. It transformed the business by starting with transformation goals and then “working its way down to what technology could do to facilitate that,” he said. The ideas come from business people not IT people, but technology workers must think about their role in the transformation.
A company does not have to be massive or have a recognizable brand to benefit from externalizing. Yet another example is the online T-shirt design site Threadless, which Austin described as a “cool” website that has used a contest – and $2,000 in weekly awards – to great effect. People can submit drawings and sayings for T-shirts, customers can go to the site and vote for their favorites, and the winning T-shirts are then available for sale.
“The market does everything,” Austin noted. “The company has almost completely externalized everything.”
Even federal government agencies are getting into the act. As those who follow the controversy over stem cell patents held by the Wisconsin Alumni Research Foundation know, the United States Patent and Trademark Office’s mission is review patent applications and determine which innovations are novel and unique enough to warrant patent protection. In March, the agency announced it would create an experimental wiki to help patent examiners locate prior art in their attempt to determine whether an invention is patentable.
The pilot will test whether collaboration between patent examiners and the public can locate prior art that might not otherwise be located by the patent office during a typical examination process.
Throughout the Gartner Symposium/ITxpo, technology managers were urged to take ownership of business outcomes. Austin cited several overarching trends that are revolutionizing the role of IT in the workplace, and he advised CIOs to evaluate how workplace technology such as portals and content management and collaboration tools fit into the big picture. Among the trends:
• The impact of end-user IT consumerism that is dramatically changing relationship between workers and technology. Austin noted that a hit song from 1919, “The Farmer’s Lament,” described farmers’ worries that doughboys back from World War I, having now seen Paris and other parts of the world, would abandon agricultural life. The same thing is going on as “digital natives,” children born with a “Silver RAZR” in their hands, have much higher expectations for workforce IT. “We have clients talking to us now about problems in hiring because their IT policies are antiquated,” Austin said. “Their [youthful] expectations are impacting staffing and making more difficult to hire people.”
• Information technology has changed the nature of work. We’ve gone from mind-numbing routine to the non-routine, from 9 to 5 to 24 by 7, from bureaucracy to an “adhocracy” where people no longer have fixed responsibilities and they no longer expect to remain in the same job for life. IT departments will be forced to think about helping people perform non-routine work related to innovation and collaboration because a lot of the routine work already has been automated. “The big ROI in the next 20 years will come from technology that enables business transformation and that helps people do non-routine things,” and not by automating them, Austin said.
• The nature of business has changed, and no company is an island. One hundred years ago, when Henry Ford opened an automobile manufacturing plant in Detroit, raw materials entered the plant on one end and cars came out the other end. Today, companies focus on core competencies and outsource other things, and even Ford Motor Co. is focused on only the final assembly, with car seats and other components provided by subcontractors. It’s an example of collaboration across the business ecosystem, and IT has to serve these ecosystems without dictating to suppliers and others what technology platform they should run.
• Technology markets, themselves, have changed dramatically and they never will be the same. Changes marked by Web 2.0, software as a service, and open source are building on each other and changing the world. When end-users are assigned an ad hoc project and they don’t want to wait to have IT establish a facility for project coordination, a process that can take months, they instead take their personal credit cards and spend $100 or so for ad hoc project space on a website. “They put it in an expense voucher as if it were a lunch,” Austin said. “That’s what’s going on. That’s web 2.0.”
What’s a CIO to do?
The role of CIOs going forward will be to use the projected $3.3 trillion in 2008 IT spend to help people do non-routine things, Austin said. The lowest level function will be upgrading power supplies and disk drives as they age, while the highest level will be social process support.
“What can you do to use social process support and transform the new rules?” he asked.
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