The Innovation Imperative: Why IT Needs to Lead Now. September, 2012
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1 The Innovation Imperative: Why IT Needs to Lead Now September, 2012
2 Some thoughts on innovation Innovation is creativity with a job to do John Emmerling There s a way to do it better find it Thomas Edison You miss 100% of the shots you never take Wayne Gretzkey Never innovate to compete, innovate to change the rules of the game David O. Adeife 2
3 The age of technology innovation CLOUD COMPUTING SOCIAL NETWORK BIG DATA ANALYTICS MOBILE DEVICE INTERNET OF THINGS 88% new commercial enterprise apps will move to the cloud 1 30 billion pieces of content shared on Facebook every month Zetabytes 90% unstructured 3 Mobile web bigger than desktop internet by billion networked devices by IDC, IDC Predictions 2012: Competing for 2020, IDC #231720, December Ijustdid.org, 30 Billion Pieces of Content Shared on Facebook Monthly, Jonha Ravesencio, November 30, Data sources cited: Google, BBC. 3 CenturyLink projections cited in ReadWriteWeb article, Infographic: Data Deluge -- 8 Zettabytes of Data by 2015, November 17, Morgan Stanley data from The Mobile Internet Report December 15, Cited in Mashable article, New Study Shows the Mobile Web will Rule by 2015, April 13, PCWorld, Cisco Predicts 15 Billion Networked Devices in 2015, citing data from Cisco Visual Networking Index Forecast., June 1, 2011.
4 Cloud Computing IT no longer the only game in town Business CLOUD COMPUTING Consumer 4
5 Consumer Driven IT... a tipping point Dependent IT User WORK STYLE IT Consumer Self-Service The Office LOCATION Anywhere M-F, 9-5 WORK HOURS 24/7 Devices NEEDS Flexibility Scalability IT Users have matured to become IT CONSUMERS 5
6 The Innovation Imperative IT must innovate to deliver new services to support initiatives that drive revenue While optimizing delivery of mainstream IT Mobility Social Big Data SaaS Client Experience Rationalization Agile Cloud Delivery Standardized Infrastructure Automation Reengineering Bring Your Own Device AND do it faster than your competitors! The opportunity for IT is to become the catalyst and innovation driver who will define and execute their organization s business-centric strategies to: create innovation faster from scratch unleash innovation by transforming existing resources secure innovation across their entire environment 6
7 Are you ready to respond to the Innovation Imperative? 1. How well is your IT organization positioned to be able to respond to the Innovation Imperative? 2. Do your business executives agree with your assessment, and how can you improve alignment? 3. What barriers and obstacles are you facing? 4. Have you identified the benefits for your innovation projects as well as the risks of not innovating? 5. Are you investing for innovation while still supporting ongoing maintenance? 7
8 Insight from your peers CA Technologies recently sponsored an in-depth survey of 800 IT and business executives from large organizations in the U.S., Brazil, U.K., France, Germany, Australia, Japan and Singapore. The research explored key topics in innovation, and the evolving role of IT as a key driver of innovation for their organization The results may surprise you! In this survey we define innovation as a practice, process or technology that is demonstrably new and different and has a measurable positive impact on an organization s success 8
9 A few highlights 48% of your peers report that innovation is widely practiced at their organizations, while 20% indicate innovation is minimal or nonexistent Surprisingly, innovative organizations emphasize analysis, process and structure as much as experimentation and exploration Customers are often the driving force behind innovation and meeting their needs is a leading trigger for investment in innovation. There are major gaps in perception between IT and business executives on what IT s role is in innovation and how prepared they are to drive innovation. Lack of budget and resources remain a key obstacle to innovation. While current investment in innovation is low, 69% expect spending on innovation to increase over the next year. Roughly 80% report their organizations have achieved or expect to achieve higher customer satisfaction and increased speed to market as a result of innovation. 9 9
10 Research Results 1. Current state and best practices around innovation 2. Top triggers, obstacles and benefits 3. Investing in innovation 4. IT Report Card 10
11 State of innovation: 48% report that innovation is widely practiced, while 20% say it is minimal or nonexistent 1. Current state and best practices Current State of Innovation Established and Formulized 13% Frequent: widely practiced and encouraged Moderate: Pockets of innovation and supporting culture 32% 35% 48% Minimal: Pockets of innovation, culture does not support or reward None: Innovation is nice-to-have and largely unsupported 4% 16% 20% 33% of organizations in the U.S. report that innovation is minimal or nonexistent Q1: Which of the following best describes the current state of innovation in your organization? Base: Total
12 Innovative organizations emphasize planning and process even more than experimentation and hypothesizing 1. Current state and best practices PERCENT PLACING SIGNIFICANT EMPHASIS ON EACH ACTIVITY Innovation is Frequent/ Established Innovation is Minimal/ Nonexistent Meeting current customer needs 71% 48% Analyzing and planning 67% 37% Anticipating future customer needs 69% 36% Exploiting what you already know 62% 45% Stressing process and structure 56% 35% Allowing freedom and flexibility 54% 26% Hypothesizing and learning 52% 29% Rewarding experimentation 50% 24% Exploring the unknown 48% 29% Not straying too far from what you know well 33% 39% The U.S. more likely to report emphasis is minimal or nonexistent on exploring is the unknown (47%) and experimentation (43%) Q2: How would you rate the level of emphasis your company places on each of the following in its day-to-day activities? Base: Freq/Est 387. Minimal/None
13 For technology projects, iteration is much more prevalent than disruption 1. Current state and best practices Percent indicating innovation projects fall under each category frequently Technology iteration/evolution Service innovation Design innovation Business model innovation (e.g., pricing models) Business process innovation (e.g., supply chain) Route to market/channel innovation Technology disruption 46% 43% 40% 38% 35% 34% 30% Q3: Thinking of past, current or planned innovation projects within your organization, how frequently do these projects fall under each category? Base: WW 750 (Those who report at least minimal levels of innovation at their organizations) 13
14 74% of the most innovative orgs have formal processes to measure innovation 1. Current state and best practices Measuring Success with Innovation Projects Formal technology-enabled measurement process Formal but manual measurement process Informal ad-hoc measurement processes We have not completed any innovation projects Innovation Freq No processes in place Innovation Minimal 1% 3% 9% 17% 16% 16% 28% 35% 35% 39% 55% of organizations in the U.S. report no or only ad-hoc processes to measure innovation Q20: How does your organization measure its success with innovation projects? Base: Freq /Est 387, Minimal /None
15 Research Results 1. Current state and best practices around innovation 2. Top triggers, obstacles and benefits 3. Investing in innovation 4. IT Report Card 15
16 Customers are the #1 instigator, customer needs one of the top 2 triggers of innovation 2. Triggers, obstacles and benefits Biggest Instigator of Innovation Major triggers of Innovation LOB employees 16% Competitors 10% Customers 26% IT 24% Exec Mgmt 25% U.S. more likely to report mandate from the executive team as trigger(31% versus 18% in total) Q4: Regardless of whether innovation is supported or encouraged currently, what have been or would be the most likely triggers to spur innovation within your organization? (Please select up to three.) Base: WW 800 Q5: Which group or function is the single biggest instigator of innovation for your organization? Base: WW
17 LOB employees and exec management are biggest roadblocks, major obstacles are budget and time 2. Triggers, obstacles and benefits Biggest Roadblock to Innovation Obstacles to Innovation Competitors 14% Customers 15% LOB employees 26% Exec Mgmt 26% IT 19% Many more in the U.S. (versus total) report issues with lack of budget (47% vs 29%) and no time to think (43% vs 27%) Q7: What are the major obstacles to innovation at your organization? (Please select up to three.) Base: WW 800 Q6: Which group or function is the single biggest roadblock to innovation for your organization? Base: WW
18 Benefits achieved and expected as a result of innovation 2. Triggers, obstacles and benefits Higher customer satisfaction 33% 53% 10% 4% Increased speed to market 32% 47% 16% 5% Ability to enter new markets 31% 51% 14% 5% Increase in profit 31% 54% 11% 4% Increase in revenue/market share 30% 53% 12% 5% Identified growth opportunities 29% 52% 14% 5% Higher employee satisfaction 29% 50% 16% 5% Competitive advantage 28% 53% 14% 5% Decrease in capital investments 22% 45% 26% Benefit Achieved Benefit Expected Benefit Not Achieved or Expected Don't know Q21: Which of the following benefits has your organization achieved or is it expecting as a result of innovation? Base: WW
19 Potential outcomes resulting from a lack of investment in innovation 2. Triggers, obstacles and benefits Inability to attract new customers /markets Increased competitive pressure Revenue loss Loss or inability to attract skilled resources Profit loss Loss of traditionally loyal customers Increased need for capital investments Damage to company/brand reputation 37% 33% 31% 29% 29% 26% 22% 21% Q12: Which of the following potential outcomes are a likely result of a lack of investment in innovation? (Please select up to three.) Base: WW
20 Research Results 1. Current state and best practices around innovation 2. Top triggers, obstacles and benefits 3. Investing in innovation 4. IT Report Card 20
21 IT budget allocation will be shifting modestly towards delivering new business services 3. Investing in innovation IT Spending Today IT Spending 3 years from now 37% 63% 42% 58% Maintaining current systems ("keeping the lights on") Delivering new business services The U.S. is showing a greater shift, from 73/27 to 63/36 in three years but still lags Q13a: What percent of your IT spending today is allocated to the following? Base: WW 800 Q13b: Three years from now, what percent of your IT spending do you expect will be allocated to the following: Base: WW
22 Low investment in innovation today, but likely to increase 10-30% in next year 3. Investing in innovation Average Percent of Current IT Spend Characterized as Innovation Spend Expected Change in Innovation Spend Over next 12 Months 29% Don't know No change 5% 13% 20% 14% 20% 21% Decrease (NET) 13% Increase (NET) 69% Total United States EMEA APAC Latin America Innovation spending is evenly divided between IT and Corp/LOB budgets Q14: What percentage of your organization s current IT spend would you characterize as innovation spend? That is, spending on technology, services, equipment, and/or human resources that are intended to enable innovation within the organization. Base: WW 800 Q15: Overall (including both IT and non-it budgets), how do you expect the level of spending on innovation at your organization (e.g., the technology, people and processes that support it) to change over the next 12 months? Base: WW 800 Q16: With the total equal to 100%, approximately what percent of spending on innovation at your organization over the past 12 months (e.g., the technology, people and processes that support it) fell under IT s budget versus that of the business? Base: WW
23 Mobile and Cloud will see the largest investments over next 12 months 3. Investing in innovation Mobile technology Cloud computing Business Intelligence/Analytics Security management Service management Virtualization Automation Collaboration tools Social media Internet of Things Portfolio/Project management tools Rich Media/Video 26% 26% 25% 25% 23% 22% 19% 16% 15% 12% 35% 37% 0% 10% 20% 30% 40% Q11: In which of the following technologies will your organization invest or increase investment over the next 12 months? (Please check all that apply.) Base: WW
24 Research Results 1. Current state and best practices around innovation 2. Top triggers, obstacles and benefits 3. Investing in innovation 4. IT Report Card 24
25 Who is the biggest instigator of innovation? 20 point gap 4. IT Report Card IT Respondents Business Executive Respondents IT 34% Top management 30% Customers 22% Customers 20% Top management 20% LOB employees 17% LOB employees 14% IT 14% Competitors 10% Competitors 9% 0% 10% 20% 30% 40% 0% 10% 20% 30% 40% Q5: Which group or function is the single biggest instigator of innovation for your organization? Base: IT 399 Bus Execs
26 What is the perception of the CIO/top IT Exec role with regard to innovation? 13 point gap 4. IT Report Card IT Respondents Business Executive Respondents Authority or expert on innovation 34% Authority or expert on innovation 21% Not an expert but a proactive champion 24% Not an expert but a proactive champion 29% Enabler of innovation 30% Enabler of innovation 32% IT does not play a major role 7% IT does not play a major role 10% Barrier to innovation 6% Barrier to innovation 7% Q19a: What is the perception of the role of the CIO or top IT executive in your organization with regard to innovation? Base: IT 399 Bus Execs
27 How important is it that your CIO or top IT Executive be a proactive champion of innovation? 4. IT Report Card Business Executive Respondents Critical Very important 20% 53% 73% Somewhat important 19% Not very important 7% Not at all important 2% Q19b: Regardless of the current perception, how important is it that your organization s CIO or top IT executive take on the role of a proactive champion of innovation? Base: Bus Execs
28 Current relationship between IT and the business is the most positive in innovative organizations 4. IT Report Card Collaborative Cooperative 18% 31% 47% 40% 78% Innovative Orgs (58% Non-Innovative Orgs) Neutral or Siloed 17% 32% Distrustful/Wary Combative 4% 8% 2% 2% 23% Innovative Orgs (42% Non-Innovative Orgs) Innovation Frequent/Est Innovation Minimal/None Q17: Which of the following best describes the current relationship between IT and the business with respect to innovation at your organization? Base: Freq/Est 387, Minimal/No:
29 How innovative projects are led: percent indicating frequently for each scenario 4. IT Report Card Business-Led: The business approaches IT first with their technology requirements to support a new project Collaborative Process: IT and the business engage in an established process to identify new projects/opportunities for innovation IT-Led: IT approaches the business with opportunities to invest in new technology that will enable innovation Stealth IT: The business circumvents IT and purchases technology on their own to support a new project Bus Exec Respondents 42% 42% 25% 34% 19% 34% 19% 28% IT Respondents Perception gap 12 % Q18: How frequently do the following scenarios occur within your organization with respect to innovative projects? Base: IT 399 Bus Execs
30 IT s ability to support innovation (% rating excellent/good) Bus Execs more negative across all areas 4. IT Report Card Knowledge of the business 62% 75% Technical skills and expertise 72% 62% Receptiveness to new ideas 59% 75% 16 point gap! Business and communication skills 69% 58% Access to the right technology 57% 70% Overall speed and agility Staff level (amount of available staff) Available budget IT Responents 62% 51% 57% 47% 53% 46% Bus Exec Respondents Q8: How would you rate IT s ability to support and enable innovation within your organization in terms of the following? Base: IT 399 Bus Execs
31 Advice from business executives on what IT can do to better support innovation 4. IT Report Card Increase speed/productivity Increase business knowledge within IT Be more proactive in identifying opportunities for innovation 26% 26% 29% Improve communication and alignment w/the business Provide better access to data for decision-making Be more proactive in identifying technology to fuel innovation Invest in new talent/skills Reprioritize IT spending towards innovation Develop tools to streamline innovation processes Help the business quantify/measure benefits 25% 23% 22% 22% 21% 19% 17% 0% 10% 20% 30% 40% Q9: In your opinion, how can IT better support innovation initiatives at your organization? (Please select up to three.) Base: WW
32 IT is slightly more confident than Bus Executives that their organizations will be successful implementing innovation projects 4. IT Report Card 64% 56% 28% 32% 8% 13% Extremely/Very confident Somewhat confident Not very/not at all confident IT Respondents Bus Exec Respondents U.S. respondents are less optimistic only 42% are extremely/very confident, and 21% are not very/not at all confident Q23: Overall, how confident are you that your organization will be successful in implementing the innovation projects it needs to be successful? Base: IT 399 Bus Execs
33 Action plan steps to take next Share this research with your peers in the business begin a dialogue on the role your IT organization can and should play in driving innovation Assess your current project priorities is the balance in line? Are you doing enough to support innovation? What can you stop doing? Assess your organization's current skills and expertise do you have what it will take to succeed in driving innovation versus keeping the lights on? Consider formalizing how innovation fits into your existing processes -- innovative companies emphasize planning, process and structure Look for ways to tap into your customers for suggestions on new services or ways you can improve your business Be sure to enroll your executive management show them the bottom line benefits and potential to improve the organization s market position through your proposed innovation projects 33
34 Research methodology This presentation contains the tabulated results from a custom global survey on the topic of innovation by CA Technologies, conducted by IDG in July This survey was administered online and programmed in English, German, French, Japanese, and Brazilian Portuguese. Invitations were sent to IDG Enterprise Research Panel members with the goal of collecting 800 total completes from among the larger pool. Results are based upon qualified responses among individuals who met the following criteria: IT Executive (Director or above) or business executive (VP and above) title Employed at an enterprise organization (revenues of $1 billion or more in the United States and $250 million or more outside the U.S.) A combined total of 800 surveys were completed online between June 28, 2012 and July 16, 2012 in the following regions: 150 in the United States, 300 in EMEA (100 each in the UK, Germany and France), 275 in APAC (100 each in Japan and Singapore, and 75 in Australia), 75 in Latin America (Brazil) The margin of error for a sample size of 800 is +/- 3.5 percentage points. Qualified respondents were required to answer all questions. Percentages on single select questions may not sum to 100% due to rounding. 34
35 All trademarks, trade names, service marks and logos referenced herein belong to their respective companies. This document is for your informational purposes only. CA assumes no responsibility for the accuracy or completeness of the information. To the extent permitted by applicable law, CA provides this document as is without warranty of any kind, including, without limitation, any implied warranties of merchantability, fitness for a particular purpose, or non-infringement. In no event will CA be liable for any loss or damage, direct or indirect, from the use of this document, including, without limitation, lost profits, business interruption, goodwill or lost data, even if CA is expressly advised in advance of the possibility of such damages. 35
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