Thursday, May 8, 2014

How to Maximize the Returns on IT Innovations

IT has to build cohesive strategy, practice strong IT governance, and calculate financial and  performance indicators wisely.


Businesses today face fiery competition and rapid digital shift either technologically or economically, most of the organizations are focusing on improving margins by reducing the bottom-line cost rather than top-line growth; as innovation and risk are proportional, improving efficiency takes a little creativity and risk, while working on innovation effort usually takes higher risks and creativity. Still, forward-looking companies will spend more resource on innovation investment in order to reap the fruit for out beating competitors and gaining long term advantage. So the question is how to maximize returns on innovation, specifically, IT innovations, as overall IT project has much lower success rate than other business initiatives.    

Practicing strong IT governance: You need to have some kind of governance and monitoring mechanism in place following the implementations of the innovations. Many companies invest in IT innovations based on business cases that show a return on investment. What tends to happen is once the innovation is in place, there is little or no governance and audit performed on a periodic schedule to ensure it is being used as intended. Therefore, there may be some gains from the initial hype and support of the initiative although the gains may quickly decrease as time passes. So to maximize the returns put in place a governance and audit system to ensure systems, processes, procedures etc are being used in their intended use following implementation.

Taking proactive approach: Aligning IT innovation (ultimately the business innovation) with desired corporate strategic outcomes, by implementing excellent IT Financial, Demand, and Asset management processes. Some set up the IT strategy steering committee which is part of the larger governance structure. By having a competent board-level IT strategy committee which prioritizes projects (including innovation) in alignment with corporate strategy and then measures that the IT portfolio is being optimally maintained through effective benefits management programs.

Put right people in the right place: Today’s digital workforce is more dynamic, the talent may not stay in the same company as long as the previous generation. But as always talent is the most invaluable asset in business if calculating ROA (return on asset), it has expenditure on assets in the denominator. As increasing the assets always reduce the ROA of the firm, and give returns in a long term, which don't fall in the line of employee life of 3-4 years, so CIOs or sr. management are more interested in status quo and don't go for investment in new innovation and ideas. However, calculating ROA only could be short-sighted. Some innovative businesses have a mantra: Employee first, customer second. They believed that if you hired the best, provided them the tools to provide feedback, created a 365 program where employees evaluated each other and their managers. Managers/leadership was responsible for the success of their employees. Turnover is extremely rare. There is the rewarding system in place for praising employees that have brought in new business or exceeded a quota. 

Develop ambidextrous capability: Innovation is underpinned by key elements of business such as process, technology, people, etc. An ambidextrous organization can improve efficiency as well as practice innovation effectively, they separate the exploitation of the existing methods and technologies from the exploration of the new radical or potentially disruptive innovation. There is no one size fits all, every organization has to walk the talk and explore its own sets of best practices and next practices. Balance organizational structure with the working or leadership style of "key" people. Leadership is held accountable for the employees’ success, senior leadership is held accountable for management success. Think about the people first before attempting to control them with unnecessary processes, red tape, eliminate politics, open door policies. The ultimate business capabilities are enablers for maximizing return from innovation.

In summary, in order to maximize ROI (Return on Innovation), businesses have to build cohesive strategy, to consume resource efficiently; calculate financial & performance indicator wisely. Get right talent in the right place for the right cause, ­and keep them informed on the same page, fine-tune the cycle also the trail, and orchestrate the innovation portfolio with harmony.


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