In 1907 American psychologist William James, suggested that humans make use of only a small part of his or her possible mental and physical resources. To cut a long story short, within a couple of decades this evolved into the assertion that humans only use 10 per cent of their brain.
Despite being comprehensively debunked by psychologists, this myth persists. Accounting for only about 2 to 3 per cent of your body weight but consuming about a fifth of your daily energy intake, the human brain is remarkably similar to how innovation devours resources in a business undergoing digital transformation (DX).
But many organisations are not using their innovative brain efficiently or effectively and as a result risk being left in the dust by competitors which are optimising their DX journey by building their innovation mojo.
As technology has become more complicated and the stakes for success have been raised, technology providers are now the first port of call when sourcing digital transformation innovations.
CIOs are becoming increasingly uncomfortable about the level of innovation "outsourcing" that they see occurring within their own organisation. Many believe that if care is not taken to preserve innovation capability in-house, organisations risk the loss of organisational knowledge and deterioration of embedded technological expertise.
Many companies are stalling at the opportunistic stage of the DX journey in part due to an ill-thought out innovation ecosystem
Whilst leveraging technology vendors and their ecosystems is an excellent way to keep up with the latest technological innovations, are New Zealand organisations getting the best out of their service providers?
A telling sign t they are not is when little weight is attached to innovation capabilities when selecting a technology provider. Only one in 10 organisations have identified extensive portfolio and capabilities to deliver business outcomes and IT-enabled innovations as a top criterion used when selecting their technology provider and across all businesses it ranked outside the top ten of priorities. If innovation is valued as a critical ICT priority by a third of businesses, then why is so little weight applied to vendor selection based on its innovativeness?
Read more: 'Digital journey is a team sport': IDC
The weakness of IT organisations within the business is the lack of balance in leveraging sources of innovation. As shown below, IT usually relies on innovation from structured resources rather than ambiguous human factor sources (open innovation and through employee schemes). However, a big factor behind this behaviour is that IT has to deal with the complexity of integrating digital innovation with multiple systems and technologies and it makes sense to leverage those vendors to ease the integration process. The challenge is to avoid innovation blindness by not diversifying your innovation portfolio.
Whilst it is good that 43 per cent of IT organisations are using crowdsourcing as a source of innovation this is only half the rate that IDC predicts will be necessary by 2018.
Within two years, IDC expects 80 per cent of development organisations supporting DX will incorporate collective genius and crowdsourcing into their projects as a regular practice. CIOs relying solely on technology vendors or in-house IT skills and resources are not going to be able to adequately meet such demands. Interestingly, crowdsourcing and open innovation usually go hand in hand therefore the LOB approach to innovation is balanced to fit with this model.
Is your approach to innovation follow the leader or does your IT organisation act more like a start-up company?
Read more: Creating Clever Kash
Here are three critical questions to ask as organisations progress through DX:
- Is your approach to innovation follow the leader or does your IT organisation act more like a start-up company? Some organisations are already partnering with or even acquiring start-ups to tap into the innovative culture necessary for DX. But if you do go down this path make sure you do a full due diligence and maintain oversight of the financial health and stability of strategic partners. Alternatively you may consider internal "start-ups" and innovation incubators, to leverage the best of both worlds without the legacy baggage of the company and the risk of external start-ups.
- How far along the DX journey is your organisation? A fifth of New Zealand CIOs aspire to deliver IT through an optimised model by 2018. This will require a massive shift for most organisations which are only at the ad-hoc or opportunistic phases of the DX journey. Ambition is one thing, reality is a lot harder. It will require many to develop a new approach to innovation, one that rewards experimentation, accepts failure and risk will probably be part and parcel on the journey, encourages curiosity and cultivates a culture of innovation inclusion.
- How are you building your Innovation Ecosystem? Many companies are stalling at the opportunistic stage of the DX journey in part due to an ill-thought out innovation ecosystem. Technology provider portfolios all need to be reviewed to ensure they provide the organisation with the innovation capabilities to integrate DX strategies effectively. Instead of relying on technology providers as the main source of innovation, consider a hybrid innovation model to orchestrate innovation through the collective wisdom and co-innovation of products with technology partners, customers and employees.
Ultimately the question all CIOs will need to ask themselves is, "Are we only using about tenth of our innovation brain?"
For most companies a successful progression to an optimised innovation model will come down to how successful they are at rewiring their innovation brain or risk being left behind by competitors who are maximising the DX opportunity.
Louise Francis (firstname.lastname@example.org), is Research Manager, IT Spending at IDC New Zealand.
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Join the CIO New Zealand group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.