Can dreamers and discipline coexist and create new business value? A  lot of smart business leaders say yes

Chances are you've at least heard of Cingular's Rollover Minutes plan, which lets the North American wireless carrier's customers hang on to precious calling minutes from month to month. Since its inception, the program has been an overwhelming success. And why not? From a consumer's perspective, it seems like a fair deal -- and a simple one.

But it's hardly simple to Thaddeus Arroyo, CIO of Atlanta-based Cingular. "Rollover Minutes is a massive record-keeping project," he says. "We're tracking minutes across billing cycles, which gets complex. And we have to provide flexibility for customers to move between [various Rollover Minutes] plans and, of course, the transition from one plan to another."

Thus, what looks intuitive to consumers is actually a hugely successful but complex campaign jointly created by Cingular's marketing and IT groups in an effort to differentiate the company from its competitors. As for simplicity, well, as Thornton May, a futurist and the dean of the IT Leadership Academy in Jacksonville, Fla., puts it, "The great ideas are always the monstrously simple ones."

Busting Out

Don't look now, but innovation is making a comeback. For several years, the post-Internet bubble business climate focused -- with grim determination, some would say -- onoperational efficiency and cost-cutting. These are both worthy goals, to be sure, and were sorely needed after the Internet- and Y2K-driven flurry of IT spending that marked the 1990s.

Nevertheless, to business and IT leaders who enjoy nothing more than using technology to solve problems, all that efficiency tasted a bit like a side of spinach. "The trauma of it all," says May, "is that a whole generation of IT has grown up without innovation."

Now, with outlooks improving all over the world, new attention is being paid to creativity and innovation. "For a long time, the only question was, "Can you get this enterprise software deployed?" May says. "But the zeitgeist is changing. CEOs are now asking, "Can we change the game?"

This is not the "Cost is no object!" Toy Department IT mentality of the late 1990s, but rather a more disciplined effort to introduce bold ideas to the business -- if, and only if, they contribute to business goals. Can innovation and discipline coexist? A lot of smart people, and respected companies, think so.

TALKING POINTS

After years of IT focus on cost-reduction, innovation is back in global enterprises -- and technology is playing a leading role in creating new business value. This edition offers tips for fostering innovation with leading-edge technologies such as:

• Information Lifecycle Management
• Service-oriented architecture
• Virtualization

Hand in Glove

As in Cingular's case, much of that innovation is enabled by technology. Indeed, it's difficult to imagine a breakthrough business idea today that doesn't rely on IT. Supply chain innovation, lean manufacturing, deeper connections with customers, breakout products -- they all go hand in glove with technology.

Recent customer service changes at Cingular exemplify the shift from cost-cutting mode to innovation. "We've been doing a lot of thinking about customer self-service," Arroyo says. "Historically, enterprises thought about that strictly as a cost reduction. What we're doing, on the other hand, is examining the way our customers choose to interface with us. What are their preferences? How do they want to communicate?"

For example, the most common question among wireless customers is how many minutes they have left before they're hit with surcharges. "Folks want easy access to that information, and they usually don't want to talk to a customer-care rep to get it," Arroyo says. Cingular's response: a simple key combination that immediately provides customers with the status of their minutes.

No Longer "Moving Bits Around"

If there's one key adjective to describe the new innovation in technology -- and, in particular, to distinguish it from earlier eras -- it's "discipline." The cost-consciousness of the past several years has created an atmosphere in which IT initiatives must be justified before they're green-lighted.

"Yes, IT is definitely getting more creative," says Gil Amelio, former CEO of both National Semiconductor and Apple Computer. Amelio -- who knows a thing or two about innovation -- is now a venture capitalist, chairman of the board at SiVault Systems (a hot company in the transaction-processing area) and a sought-after speaker. Until fairly recently, he says, a lack of standards made it difficult for technology spending to translate into productivity.

"In the 1990s, all the application software being written [by vendor companies] was essentially custom," Amelio says. "But because there were few standards, a lot of it was merely moving bits around so that applications could work together, without really increasing productivity."

Sometimes, choosing the right standard is in itself innovative. In 1998, the global relief organization UNICEF selected Internet Protocol as its only networking standard -- a nearly unprecedented move at the time. But a few years later, with IP far more mature, it would be the key technology when UNICEF created a satellite communications program, dubbed Fly-Away VSAT, that allows the organization to set up complete relief centers in areas ravaged by disaster, such as those hit by the devastating tsunami in December.

In 2000, when UNICEF asked providers about running IP traffic over a satellite network, people scoffed, according to CIO Andre Spatz. In 2004, the system was honored by Computerworld magazine as a "Best in Class" IT  leader.

"The term "innovation" was thrown around a lot in the late 1990s," says Jack H. Cage, senior client partner, technology markets, at Korn/Ferry International. Cage is a veteran recruiter of senior technology executives and has seen the demands on those executives shift. "Today, when businesses talk about technology innovation, they use the term in a very focused way," he says. "They are seeking technology that helps the company meet its business goals."

That shift was long overdue, and has helped establish the CIO as a bona fide member of the strategic decision-making team. There's no reason to expect enterprises to go back to the practice of signing blank checks for technology projectsthey don't understand. Rather, experts believe the building wave of innovative technology projects will borrow elements from both eras of the recent past: the envelope-pushing technology of the 1990s coupled with the fiscal discipline and pragmatism of the early part of this century.

Innovation Pays

Intriguingly, research indicates that the enterprises implementing the most innovative technologies spend less on it than do their less advanced counterparts. The Hackett Group tracks IT spending at hundreds of large businesses and studies factors that separate leaders -- that is, enterprises whose IT expenditures can be proven to help meet business goals -- from the pack.

"The leading companies spend about 18 percent less on IT, and 28 percent less on infrastructure," says David Hebert, Hackett's IT practice leader. "And they have 36 percent fewer technology employees." That translates into efficiencies on commoditized IT services, and "frees up money to spend on R&D and value-add projects," he adds. Indeed, Hackett's research shows that the same innovation leaders that spend 28 percent less on infrastructure spend 25 percent more than their counterparts on planning and strategy. Moreover, they dedicate a whopping 40 percent more to application management than do median companies. "That's important because the application layer is the interface between IT and business," Hebert says.

Some experts believe that the keys to IT-driven innovation in the near future are refinements of existing technologies, such as service-oriented architectures, virtualization and collaboration tools. The intersection of these technologies will increase agility and tighten the feedback loop, predicts John Hagel III, an author and management consultant.

"The hardwired, inflexible platforms of the past limited companies to "big bang" innovation that took years, and to which they could only guess at business benefits," says Hagel, who, with John Seely Brown, the legendary former director of Xerox Corp.'s Palo Alto Research Center (PARC), has cowritten The Only  Sustainable Edge, a new book about finding fresh ways to achieve competitive advantage in the global business environment. By contrast, Hagel adds, "these new technologies let you do rapid, incremental innovation quickly and get immediate feedback on the results."

Getting There from Here

The questions faced by many technology groups that have mastered the cost-cutting discipline are: How do you take that next step forward? And how do you return innovation to your IT philosophy without losing your focus on the business?

Hebert points out that you need to walk before you can run. "What we're seeing in leading companies is IT organizations that have proved their day-to-day competency," he says. "You need to be flawless in execution -- on time, on budget, efficient on the help desk and so on. If you don't master those basic skills, you cannot build a true partnership with the business." As an example, Hebert notes that world-class companies" IT groups deliver 30 percent more projects on time than do their lesser counterparts.

What's emerging in leading businesses is a two-tiered IT strategy. Think of the first tier as the operational, keep-the-lights-on level. Here, cost is king; such measures as outsourcing, utility computing and purchasing software as a service (the IT innovations of the past several years) are all ways to reduce dead-money infrastructure and commodity costs.

Now that so many enterprises have mastered tier one and grown remarkably efficient, tier two -- think of it as the innovation layer -- is gathering steam. Innovation is back infashion in products and services that are increasingly difficult to distinguish from IT.

The real beauty of this two-tiered system is that the impetus to cut costs at tier one never goes away. As Cingular's Arroyo puts it, "We're separating operations from new investment, and every dollar we save [at the tier one operational level] funds additional investment" at tier two.

Another major benefit is that after years in heads-down mode, enterprise IT organizations are finally kicking up their heels and offering staffers the chance to do some exciting work. To most programmers and developers, it feels like a long time since the glory days of the successful Y2K work and sky-high signing bonuses. The past several years have been marked by shrinking staffs, growing responsibilities and, most notably, a dearth of go-for-it technology projects.

Yet research consistently shows that these are the projects that motivate IT workers. The most brilliant programmers and analysts often prefer challenging projects over higher pay and other benefits.

All of which means, of course, that the return of innovation will be a shot in the arm for valuable employees. Indeed, it's a shot in the arm for the industry as a whole -- and the big winner is the forward-looking enterprise.

Four Steps to Innovation

Tips for fostering creativity in your enterprise

Too many businesses mistakenly believe that innovation can only spring from some sort of alchemy over which they have no control. But enterprises can create an atmosphere that fosters innovation. Here are four ideas.

1. Take it from the top. Experts say that to have any chance at success, corporate efforts to boost innovation must start at the very top. The CEO should launch the program with much fanfare and a budget that raises eyebrows. This will make a powerful statement that the company is serious about creativity.
2. Create more elbow room. You may not actually set up a separate "skunkworks" team of innovators in a location far from headquarters. But one way or the other, it's vital that innovators know they have freedom to roam, without undue oversight that's guaranteed to crush the spirit. Mistakes are a fact of life for those thinking outside the box.
3. Cross-pollinate. Today's great business ideas often come from IT. Likewise, the most sweeping technology shifts often come from the business side. Any team devoted to innovation should include top minds from both camps.
4. Make it pay. Employees who come up with innovative ideas should be rewarded. And that doesn't always mean a bonus -- for many, recognition is more valuable.

Innovation Resources

To learn more about the new wave of business innovation, please check  out: