Core Competency. Many business leaders use the term core competency to describe where their companies put most of their efforts. Few of these people might be aware that C.K. Prahalad coined that term in 1989.  This university professor's best selling books, Competing for the Future, and The Fortune at the Bottom of the Pyramid, have changed the way CEOs think about business strategy.

Now C. K. Prahalad, the Paul and Ruth McCracken Distinguished University Professor of Strategy at the University of Michigan's Ross School of Business, has set out to change the way CIOs think about business strategy and their enterprise architecture as new business models force their companies to become more consumer-driven or customer-focused in a global economy. His new book, The New Age of Innovation: Driving Co-Created Value Through Global Network, provides CIOs with both a blueprint of Prahalad's strategy and a host of examples of how it is already in work on some of today's best companies.

Prahalad says, "Established companies can no longer think of themselves as just selling discrete products, but how these products can provide customers with a unique experience." He cites the example of how Unilever, a traditional multinational company, encourages Ponds' skin care customers to specify their budget and their skin type to create a customized set of skin care products."

Recently, enterpriseleadership.org saw down with Prahalad to talk about how these new business models with alter the CIO's role, and what can both CIOs and other business leaders do to avoid any disconnects between IT and businesses processes. Here's what he had to say:

EL. Ten years  from now, how will the CIO's role be different from what it is today?

CP. Within the next 10 years, the CIO's role will change because the CIO in a major company will sit on a major source of competitive advantage for the company. Flexible, adaptive, and response business practices will become a key source of competitive advantage. At the same time, focused analytics, which will allow managers to define the behavior of one person or one supplier at a time among millions of consumers, will offer another source of competitive advantage. To this end, the CIO plays a critical role in building the new information communications technology (ICT) architecture, which looks at these opportunities, and then it rethinks the way you can collaborate and be flexible. IT is going to matter significantly.

EL. What  must CIOs and business leaders do to avoid any disconnects between IT and the  business?

CP. In the book, we talk a lot about the emerging disconnect between business leaders and CIOs. Yes, CIOs need to have good technical expertise. However, CIOs must begin to have a distinct and clear point of view about where the business is going. They must begin to start talking the language of the business and to understand the possible directions of the business. Likewise, the business unit leaders must take responsibility for understanding the opportunities that the information communications technology architecture provides. CIOs will miss the boat if they continue to gravitate mostly to managing IT more efficiently, and if all of the return on investment calculations are based on savings in the IT organization rather than profit growth in the business.

EL. Do CIOs really understand the economic impact that IT has on the business? To be more specific, how many CIOs think in terms on how a change will affect the gross margins?

CP. Some do, but most of them don't.  The architecture of the company has it exists today can become an impediment for the growth of business. Therefore, we need to establish a new dialogue between business unit leaders and CIOs. This's inevitable. If the current CIOs don't want to engage in that debate, they'll loose out and just become technology managers, not partners in creating new business opportunities.

EL. How many companies  really have the business strategy and IT strategy in one  entity?

CP. If you think of ICIC example in my book, I'd see that no one in senior management at that company thinks of the IT strategy and the business strategy as two distinct spheres. They can't isolate IT from the business strategy and the business from the IT strategy. They think of it as one in the same.

In the financial services industry, the IT strategy and the business strategy should be one in the same. The interesting question is this: Can you be a strategist and a business leader in a company like MasterCard, VISA, or Wells Fargo without a good understanding of not only where the technology capabilities are, but where it is likely to go?

On the other hand, if you're a CIO in one of these companies, can you participate in business discussions without a deep understanding of where the business is going? The technology strategy, the HR strategy (what we call the social architecture), and the business strategy are facets of one in the same. You can't do one without the other. So, how we start seeing the three sides of the same problem using different lens, but recognizing it's the same thing we're looking at and describing.

EL. What's the most important  requirement a company needs in order to innovate?

CP. You can't innovate unless you have a point of view. N=1, which says companies must co-create value with each customer individually, and R=G, which says that access to global resources is a key factor in continuous innovation, are points of view.  It's very simple. You can draw a simple decision tree if you agree that convergence, connectivity, social networks, and digitization are taking place. If you deny all of them, which is totally factual, you can't dispute the existence of an installed base of three billion cell phones. We can argue that it's 2.9 billion or 3.1 billion. With digitization the cost goes down. That's a fact. If you say yes, then you ask an interesting question:  Will the natural relationship between the consumer and the form change or not change? That's where the dispute is. If the answer is yes, it has to change. If so, then you look at what I call the new age companies, such as google and ebay, and Netflix. These companies didn't have to start with legacy. They could go right to N=1 and R=G, directly.

The second question is this: Can the same transformation take place in traditional business which has a 100-year history? That's why we took the cautious approach in the first chapter to avoid talking about companies such as google. If we did, readers would dismiss it and say but my industry makes tires or provides insurance. Instead, this chapter talks about what a Goodyear or Bridgestone can do to change its business model.

We need to do to develop a point of view and then say, 'If that is the point of view, than how does the role of the CIO change?' If CIOs stay on the same path, you'll see them wallowing in the same activities - a little more efficiency here, and a little more reorganization there. 

EL. Many  companies talk about innovation, but how many really understand what it is?

CP. Many people talk about innovation, but few really have a deep understanding about how it works. To understand innovation, you need to do a lot of blocking and tackling about how things work at the ground level. People easily forget that innovation at the ground level is very different. If you're in a large company, you can create any type of strategic idea. On the other hand, if you want to make it happen, you still have to figure out the business model and business processes.

EL. Aren't a  company's businesses processes apparent to managers?

CP. Business processes can easily get lost in most large companies. They become orphans without anyone to take of them. Here's an interesting example. Look at order to cash which cuts across so many processes. Ask 10 business managers from random companies to write down how the order to cash process works in their company or in their business. If you can get anyone to give you an 80 percent accurate answer, then give the person a metal. y deserve a metal. I don't know too many people who can do this. This functions if delegated deep down in the organization. No one pays attention to how it works.

Look at all of the big problems Sony has always had. Sony couldn't change its business model and didn't understand how to do micro billing. Likewise, Napster didn't understand how to do it either. Napster built the business for ITIL, but drove out the business model and micro billing.  It's a business model innovation resulting in a business process innovation, or it's a business process innovation allowing them to a business model innovation. That's how simple it is at one level and how complicated it is at another level.

Author: Elizabeth M. Ferrarini - She is a technology writer  from Boston, Massachusetts. Reach her at elizabethferrarini@yahoo.com.

Marketing. Information Technology. Engineering. If companies truly want to succeed, then people from different disciplines within those organizations need to work together to develop competitive strategies. Bernd Schmitt, the Robert D. Calkins Professor of International Business at Columbia Business School, says they also need to become big, bold thinkers. Schmitt has called the concept Big Think, an innovative approach to thinking, creating business models, and marketing. Schmitt says, "Big Think enables business leaders to stay relevant, infuse their companies with fresh, revolutionary ideas, leaving competitors scrambling."

Schmitt's latest book, Big Think Strategy, outlines how companies such as MySpace, IBM, Apple, Whole Foods, and General Motors have benefited from Think Big strategies. Schmitt has either authored or co-authored seven books, including the acclaimed Experiential Marketing and Customer Experience Management. He has done consulting work for Eli Lilly, Volkswagen, Siemens, and Vodafone.

Recently, enterpriseleadership.org sat down with Professor Schmitt to learn more about how IT professionals can become Big Thinkers. Here is what he had to say:

EL: Can you briefly summarize the  differences between Small Think versus Big Think?

BS: Small think sets in when middle managers become very risk adverse. They use the same old procedures, checking everything with a step-by-step analytical approach. Before they can launch a new venture, they have to double check with their superiors, and they're afraid to do anything new and innovative.

On the other hand, Big Think is about visionary leadership, thinking out of the box, and taking risks. This leadership style has certain kinds of thinking, such as looking into the future, and doing things differently from what is happening currently in your industry. Big Think is also a behavioral style. You manage projects by focusing on making a major impact on the marketplace, and looking at where you want to take things in the future.

Many companies, which start with an entrepreneurial spirit often, get  stuck doing the same procedures repeatedly.

EL: What are some of  the Big Think strategy types?

BS: Big Think has four strategy types. With integration, you add seemingly incompatible concepts, proving they're really compatible. For example, amazon.com demonstrated it could offer great customer service without the need for a human touch. Opposition assumes a contrarian viewpoint. For example, Dove's advertising campaign for real beauty celebrates older women, not the 20-something perfect models. Essence takes the essential characteristic of a strategy to an extreme. For example, Wal-Mart uses it massive distribution system to keep driving down costs. Transcendence goes beyond the established boundaries. The Blackberry is an example of transcendence.

EL: Some companies say they that innovation is built into their culture, but some of these companies can't score more than one homerun. Why?

BS: The executive team communicates corporate culture, which can be key to innovation. However, this team has to keep getting the innovative message out, even after the company has a major breakthrough. Take Motorola's very successful Razr cell phone. It had a great product launch. On the other hand, what else is happening at Motorola?  Organizations that have one innovative success don't necessarily have Big Think cultures. Many of these organizations are lucky enough to have a very energetic team behind the innovation.

EL: How do you create a  Big Think culture?

BS: To create a corporate culture to sustain Big Think, organizations need to hire people from a diverse talent pool, to provide them with the right environment, and to set up teams and to provide them with challenging projects. Organizations need to stimulate these people mentally so they'll get excited about taking the projects forward.

I've worked with many siloed organizations. When I do a project on Big Think and innovation, I always set up cross-functional teams. Research shows that innovation can benefit from cross-functional teams.  However, most companies lock cross-functional teams in siloes. Government agencies know the benefit of using cross-functional teams or multidisciplinary teams for solving problems such as global warming.

EL: Can you provide an example  of the innovative ideas developed by a cross-functional team you set up?

BS: I've done many projects with Vodafone in Europe. We put together cross-functional teams of Vodafone people from IT and marketing. These teams started with a project WOW initiative that was suppose to create innovative ideas that could delight customers. One particular project focused on developing more innovative mobile phone services, but also providing more innovative treatment of customers in the call center, on the Web site, and in the stores.

For example, Vodafone in Portugal came up the pizza delivery concept of getting a new cell phone. The goal was to get a cell phone into a customer's hand within a half hour after they called in. With a GPS, the company could track where the customer is, and have a representative get on a motorbike and deliver the phone to the customer. The representative could explain the phone's feature to the customer, as well as to synchronize information from the customer's old telephone to the new one.

EL: Can you provide another example of a company that has  benefited from your Think Big strategy?

BS: Samsung is doing very well these days with its brand.  A few years, Samsung Electronic offered poor quality projects in the U.S. That company made a major change to improve the quality of its product. In fact, in some ratings Samsung has surpassed its key competitors, such as Sony, in innovative product design and quality.

Samsung has also focused more on the consumer experience rather than just their products and technologies. How did this happen? A few years ago, the chairman of Samsung set up cross-functional teams comprised of people from marketing, product design, and information technology. These teams went around the world studying how consumers in different parts of the world live, and what kinds of products they needed for their homes and their work. We've seen a dramatic success here. Samsung has aligned its new initiative, called creative management, with Big Think. Now that Samsung has an edge on its competitors, it has to figure out how it will stay ahead through continuous innovation.

EL: What affect does timing and marketplace trends  have on Big Think ideas?

BS: Big Thinking is not just about having this big idea, but you have to take it to the marketplace. Big Think ideas very often work best if they click with some trend that's happening in the current consumer environment.  Take the wellness trend, which has caused an explosion in spa services and in spa products, which have unusual ingredients no one heard about 10 years ago. If you want to come up with an innovative skincare product line or some new spa massage services, you have to do it fast. These trends come and go. Who knows if American consumers in five to 10 years will want to go to spas. You have to cut the bureaucracy and other things that are preventing bold ideas to come about.

EL: Can you  briefly summarize the differences between Small Think versus Big  Think?

BS: Small think sets in when middle managers become very risk adverse. They use the same old procedures, checking everything with a step-by-step analytical approach. Before they can launch a new venture, they have to double check with their superiors, and they're afraid to do anything new and innovative.

On the other hand, Big Think is about visionary leadership, thinking out of the box, and taking risks. This leadership style has certain kinds of thinking, such as looking into the future, and doing things differently from what is happening currently in your industry. Big Think is also a behavioral style. You manage projects by focusing on making a major impact on the marketplace, and looking at where you want to take things in the future.

Many companies, which start with an entrepreneurial spirit often, get  stuck doing the same procedures repeatedly.

EL: What are some of  the Big Think strategy types?

BS: Big Think has four strategy types. With integration, you add seemingly incompatible concepts, proving they're really compatible. For example, amazon.com demonstrated it could offer great customer service without the need for a human touch. Opposition assumes a contrarian viewpoint. For example, Dove's advertising campaign for real beauty celebrates older women, not the 20-something perfect models. Essence takes the essential characteristic of a strategy to an extreme. For example, Wal-Mart uses it massive distribution system to keep driving down costs. Transcendence goes beyond the established boundaries. The Blackberry is an example of transcendence.

EL: Some companies say they that innovation is built into their culture, but some of these companies can't score more than one homerun.  Why?
BS: The executive team communicates corporate culture, which can be key to innovation. However, this team has to keep getting the innovative message out, even after the company has a major breakthrough. Take Motorola's very successful Razr cell phone. It had a great product launch. On the other hand, what else is happening at Motorola?  Organizations that have one innovative success don't necessarily have Big Think cultures. Many of these organizations are lucky enough to have a very energetic team behind the innovation.

EL: How do you create a Big Think  culture?

BS: To create a corporate culture to sustain Big Think, organizations need to hire people from a diverse talent pool, to provide them with the right environment, and to set up teams and to provide them with challenging projects. Organizations need to stimulate these people mentally so they'll get excited about taking the projects forward.

I've worked with many siloed organizations. When I do a project on Big Think and innovation, I always set up cross-functional teams. Research shows that innovation can benefit from cross-functional teams.  However, most companies lock cross-functional teams in siloes. Government agencies know the benefit of using cross-functional teams or multidisciplinary teams for solving problems such as global warming.

EL: Can you provide an example of the  innovative ideas developed by a cross-functional team you set up?

BS: I've done many projects with Vodafone in Europe. We put together cross-functional teams of Vodafone people from IT and marketing. These teams started with a project WOW initiative that was suppose to create innovative ideas that could delight customers. One particular project focused on developing more innovative mobile phone services, but also providing more innovative treatment of customers in the call center, on the Web site, and in the stores.

For example, Vodafone in Portugal came up the pizza delivery concept of getting a new cell phone. The goal was to get a cell phone into a customer's hand within a half hour after they called in. With a GPS, the company could track where the customer is, and have a representative get on a motorbike and deliver the phone to the customer. The representative could explain the phone's feature to the customer, as well as to synchronize information from the customer's old telephone to the new one.

EL: Can you provide another example of a company that has  benefited from your Think Big strategy?

BS: Samsung is doing very well these days with its brand.  A few years, Samsung Electronic offered poor quality projects in the U.S. That company made a major change to improve the quality of its product. In fact, in some ratings Samsung has surpassed its key competitors, such as Sony, in innovative product design and quality.

Samsung has also focused more on the consumer experience rather than just their products and technologies. How did this happen? A few years ago, the chairman of Samsung set up cross-functional teams comprised of people from marketing, product design, and information technology. These teams went around the world studying how consumers in different parts of the world live, and what kinds of products they needed for their homes and their work. We've seen a dramatic success here. Samsung has aligned its new initiative, called creative management, with Big Think. Now that Samsung has an edge on its competitors, it has to figure out how it will stay ahead through continuous innovation.

EL: What affect does timing and marketplace trends  have on Big Think ideas?

BS: Big Thinking is not just about having this big idea, but you have to take it to the marketplace. Big Think ideas very often work best if they click with some trend that's happening in the current consumer environment.  Take the wellness trend, which has caused an explosion in spa services and in spa products, which have unusual ingredients no one heard about 10 years ago. If you want to come up with an innovative skincare product line or some new spa massage services, you have to do it fast. These trends come and go. Who knows if American consumers in five to 10 years will want to go to spas. You have to cut the bureaucracy and other things that are preventing bold ideas to come about.

EL: What  personal characteristics do people need to have or to develop if they want to be  successful Big Thinkers?

BS: The key thing is to create something that's exciting and new. When I work with companies, we always do creativity exercises. It's just not the analytical side you need to appeal to. Whenever I discuss what's required to get someone to be a Big Thinker, I mention having a lot of guts because many people might perceive your ideas as risky and want to kill them. If anything needs to be killed, it's those sacred organizational cows. You need to come up with alternative current processes. That takes guts. It also takes passion and perseverance to see a project completed. As a leader, you also need to expose yourself to many different things. Most company people are very narrow-minded and are only interested in certain things. They are experts at some things, but they don't often see the bigger picture. As individuals, they don't expose themselves to different things, such as sports, museums, or travel. When you're on a business trip, just don't sit in your hotel room. Try to see what's outside. Some creative ideas might emerge.

EL: What role can IT departments  play in innovation or enhancing a company's brand if  any?

BS: I've seen IT departments that have done a tremendous job of helping call centers better understand the needs of customers.  Call center representatives need to have at their fingertips all of the relevant customers information. The challenge is how do you turn a transactional approach into a true CRM. Most call center systems have nothing to do with building relationships, they are purely transactional.  Say a call center person has access to a database service that shows, not only when the customer bought the product, but also what concerns a customer had when he or she last called, and what suggestions that customer received. An integrated database system like this can help increase brand awareness because it provides a way to connect emotionally with customers.
What personal characteristics  do people need to have or to develop if they want to be successful Big  Thinkers?

The key thing is to create something that's exciting and new. When I work with companies, we always do creativity exercises. It's just not the analytical side you need to appeal to. Whenever I discuss what's required to get someone to be a Big Thinker, I mention having a lot of guts because many people might perceive your ideas as risky and want to kill them. If anything needs to be killed, it's those sacred organizational cows. You need to come up with alternative current processes. That takes guts. It also takes passion and perseverance to see a project completed. As a leader, you also need to expose yourself to many different things. Most company people are very narrow-minded and are only interested in certain things. They are experts at some things, but they don't often see the bigger picture. As individuals, they don't expose themselves to different things, such as sports, museums, or travel. When you're on a business trip, just don't sit in your hotel room. Try to see what's outside. Some creative ideas might emerge.

EL: What role can IT  departments play in innovation or enhancing a company's brand if  any?

BS: I've seen IT departments that have done a tremendous job of helping call centers better understand the needs of customers.  Call center representatives need to have at their fingertips all of the relevant customers information. The challenge is how do you turn a transactional approach into a true CRM. Most call center systems have nothing to do with building relationships, they are purely transactional.  Say a call center person has access to a database service that shows, not only when the customer bought the product, but also what concerns a customer had when he or she last called, and what suggestions that customer received. An integrated database system like this can help increase brand awareness because it provides a way to connect emotionally with customers.

Author: Elizabeth M. Ferrarini - She is a technology writer  from Boston, Massachusetts. Reach her at elizabethferrarini@yahoo.com.