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Small investment, big payback

Small investment, big payback

Today, with the world undergoing a global credit crunch, technology spending is once more under close scrutiny. And a surprising trend is emerging: Innovation on a shoestring.

In Australia, Suncorp chief information officer Jeff Smith says his company employed a 21-year-old graduate to build a mobile banking platform which "essentially cost zero dollars and did a quarter of a billion dollars worth of transactions in June". Speaking at a recent CIO forum, hosted by Heidrick & Struggles in Sydney, Smith said the browser-based mobile banking service was introduced ahead of its nearest rival, the Bank of Queensland and the 'big four' Australian banks. Unlike ANZ, the Suncorp service does not require customers to download any special software, and it's free.

All of Australia's major banks are expected to launch some sort of mobile banking product, in response to growing customer demand for the technology.

Smith said the internal development of the platform cost little, compared to the A$20 to A$30 million spent by his major rivals on their mobile banking platforms. He says Suncorp's platform is also more secure, as it has been developed leveraging the company's existing technology infrastructure.

One of the 30 technology executives at the Sydney forum noted that the free flow of funds into Silicon Valley at the height of the tech boom, had actually slowed down the pace of innovation and may have led to the tech bust.

Guest speaker Bob Dye, head of research at The Research Board, an international think-tank headquartered in New York City, gave the example of one of the board's financial services members running a contest for university students to submit ideas that would help college students sign up for more banking services. For the cost of a small prize, the company received ideas that have had a major impact on its business.

The key to innovation, according to forum attendees, is to create an environment where young people in particular can flourish without being hindered by rules and regulations.

"Who has time to do Web 2.0?" asks Smith. "You need to let your young people loose. Generation Y don't like going to meetings, so you need to clarify their purpose. If you don't create a productive environment for your people, they will become drones and will be unable or unwilling to innovate."

World of warcraft

Ideas flourish in creative new collaborative environments, according to the CIOs. Roger Kermode, CIO and chief technology officer of the online hyper-local media company iPrime, gave the forum the example of online technology sales company, Circuit City, discovering that its staff were sharing productivity tips and answers to problems, while playing in the World of Warcraft gaming environment.

Dye adds: "Successful multi-user games and consumer Internet applications offer great insight into how to improve collaborative problem-solving and ideas-generation. Understanding what makes these consumer tools really work, is critical to realising value inside the enterprise."

Dye says that corporate 'facebooks' are not a panacea. "They may only be used by those people who are already closely tied. But innovation means bringing together people who would not normally come together to share ideas-making the 'loose ties' communities much more important."

He says that otherwise the outcome of many of the new Web 2.0 tools in the enterprise will merely be collaboration with the same groups using different technology. But the real business opportunity with these tools is to connect new groups.

"Until you connect groups that are loosely tied, you don't get new ideas. The challenge for the CIO is to step back and allow a different spirit to animate the organisation without over-regulating it."

The CIO mandate

The Research Board has found that the emerging mandate for CIOs is three-fold:

  • Cultivate innovative capacity
  • Transform shared services delivery
  • Foster business-process optimisation

"The second has caused some controversy," Dye says. "It is asking CIOs to lead other functional areas. This has worked out, and can work out quite well for many companies, but it can be a challenge for CIOs to lead these broader organisations without losing focus on the strategic IT leadership role. Having a great leadership team underneath the CIO is the key to success."

How fast do you push the rate of change was a theme at the forum. One CIO commented: "I am waiting for the day when a board member asks me, 'My son plays the Halo 3 video game over a VoIP network with players all around the world and the quality is fantastic, so we are struggling to get a videoconference together?' These consumer systems are tremendously more sophisticated than what we build, but how can we drive that kind of innovation in the business when we have so many legacy systems?"

Dye responded that finding the right starting points in an environment of risk and unwillingness to invest is "painful and hard - but at some point you just have to say, we are on this line and where we want to be is on this line, so we just have to decide at some stage that we want to get there from here."

"There's a lot of pressure to cut costs," Dye says. "But it's no good, for example, putting in virtualisation and making savings but then not changing how you provision capacity. Business practices have to change. If you don't get the business right, then you just will recreate the same problems."

One CIO told the forum that cost-cutting often clashed with innovation. "I was focusing on cost-reduction while the marketing department was pushing for a corporate social responsibility program. Instead of enabling the mission of the business, I was in a fix-it role."

Another comment at the forum was about the role of the CIO in digital marketing, with a quote from former Harvard business professor Ted Levitt, who said the role of business was to create and keep a customer. The ability of the CIO to "own" or to drive the customer side of the business was hotly debated.

"Businesses will always ask, 'Why do I need a CIO if I can have some sort of combination of Google and IBM outsourcing?" Dye said. "But at the end of the day there's a lot for CIOs to do, even if it's just integrating. There is a lot more to be done, more than ever. As Ethernet co-inventor and 3Com founder Bob Metcalf says, "IT is not the wave, it's the ocean. It's everything."

Tim Brewin is head of Heidrick & Struggles' CIO practice in Australia and leads senior executive searches in the technology/business and professional services practice.

Join the CIO New Zealand group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.

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