When Dan Hill, CIO of Exelon Energy, the $14 billion owner of two of the nation's largest electricity utilities, decided to outsource a major project, he evaluated several companies and then awarded the contract to Computer Sciences Corp. (CSC), a global $16 billion IT services company with more than 90,000 employees in 80 countries. According to Lem Lasher, CSC's chief innovation officer and president of CSC's global business solutions, says that Hill was impressed with depth and breathe of CSC's Office of Innovation. "Hill said that's what played a key role in earning his business.

Lasher has every right to blow his horn about CSC's Office of Innovation. In 2007, the American Productivity and Quality Center (APQC), the organization that sponsors the Malcolm Baldridge Award, did an independent benchmarking study of companies with programs to embed innovation within the organization. Lasher says, "Our competitors, such as IBM, Accenture, and Hewlett-Packard, funded the study. We didn't." After reviewing CSC's innovation programs on the company's Web site, APQC interviewed Lasher and his team, and then audited all of CSC's innovation programs. As a result, CSC received one of APQC's five Best Practice awards. The other winners included four product companies -- HP Printing and Imaging, Efficon Endosurgery, Boston Scientific, and Air Products. He says, "We were the only professional services firm to get this award. It has given us a huge competitive advantage."

Recently, enterpriseleadership.org sat down with Lasher to discuss the many programs that comprise CSC's Office of Innovation. Here is what he had to say:

EL. Why did CSC decide to create an  Office of Innovation?

LL. We needed to do something different about the way we operated. We wanted to bring about a change that would reflect an appropriate innovation agenda for our customers and for the business. We began by reorganizing a number of activities and programs we ran across the enterprise. In April 2005, we set up the Office of Innovation to establish an explicit global innovation agenda within the company from idea generation through solutions development. The Office of Innovation functions as a funded corporate department which runs with unified governance and management structure responsible for CSC's innovation agenda to run the business.

EL. How does your office carry out thought-leadership programs  for your customers?

LL. The Leading Edge Forum is the Office of Innovation's front-end piece where we do our basic research and development for thought leadership and business idea. This forum has two program activities. The executive program provides the thought leadership agenda for CIOs. The technology programs address socialization of intellectual capital rewards and recognition among the employees, and engagements with our customers.

EL. What do your customers' CIOs get from your innovation  program?

LL. We'll create an account innovation program that we tailor to each customer. We have a formal taxonomy or a formal way of setting up those programs that includes agreed upon definition of innovation, objectives, governance, processes we'll put in place, funding mechanisms, commercial terms and conditions, and underlying technologies and tools that support that. Each program is unique and specific to each customer. My team spends much time with customers, designing account innovation programs that an account team runs and my office supports.

EL. Does your  office have any type of a research component?

LL. Our internal research network comprises a group of individuals who do market-based analysis and research for CSC employees. We might use this group's findings for making investment decisions, for making offshore location decisions, for doing competitive analysis, and for investigating various types of technologies and products. This global research covers all of CSC's business lines and verticals.

EL. How do get  ideas flowing from both employees and customers?

LL. The Office of Innovation program called CSC Collective Intelligence runs ideation campaigns for customers, for employees, for internal organizational challenges, or for specific account issues we have. We have a good record running these programs.

EL. Can you explain how an  ideation campaign works?

LL. We view ideation as something done in a short-term, project setting that focuses on solving a particular problem. We call this activity a campaign. We'll identify a particular problem we want to solve, and then we'll create the appropriate executive ownership, the appropriate executive governance, and the taxonomy for triage of the ideas that come in. Each campaign ends with a solution that customers or employees can carry out. We do measure the results of the campaign. It's not a standing suggestion box.

EL. Can you discuss the  strategic aspect of your office?

LL. Our Global Service Offerings (GSO) group runs the programs office for the development of all of our global strategic offerings. This office abstracts the taxonomy, and maintains the repository, the portfolio, the business case, and all of the governance associated with how we make strategic investments in service offerings across the business.

The people who run these programs engage directly with customers for validation of concepts, for explaining to them what those propositions are and for helping them to shape those concepts around particular solutions.

EL. Does your office have specific  programs that leverage intellectual capital?

LL. The Intellectual Capital and Knowledge Management program supports all of the CSC communities by harvesting, storing, and leveraging intellectual capital. This intellectual capital has been explicitly articulated and put in the repository. This program also provides technical support for groups of individuals who want to form communities across the business.

EL. How do you handle intellectual property for things that you  develop in conjunction with a customer?

LL. We regard intellectual property as intellectual capital that we've protected in such as way to make it proprietary to CSC. As a services company, we aren't interested in acquiring intellectual property for patents. We have flexibility on the terms and conditions of how we would develop and use IT. We'll go through an analysis that says this particular intellectual capital warrants this level of protection and this position. If we've invested in something that would give us a competitive edge in the marketplace, we might be prone to get a patent on it. If we did something with a customer, we'd negotiate on a case-by-base basis about the ownership of the intellectual property.

EL. I haven't heard you mention breakthrough innovations or disruptive innovation. How much emphasis does your office put on them?

LL. We don't focus on breakthrough innovations, nor do we have an efficient way of managing them. Those types of innovations usually happen in a product company. We look at something we call the amplitude of innovation. It's the functional intersect between something being new to the company or being new to the marketplace. We look at the incremental and the adjacent innovations that result in leveraging a way to do something different to provide more economic value to our customers. If we came up with something we consider breakthrough, we'd probably figure out what to do with it. We're better off focusing our innovation activities on incremental and adjacent.

EL. What types of  centers of excellence programs do you have?

LL. We refer to these programs as socialization of intellectual capital. We have centers of excellence and we have innovation centers. The 18 centers of excellence all have physical locations, have a dedicated team, and have a commitment from a group president to fund the center's activities for up to two years. Each center may or not focus on innovation, but each center has deep domain expertise. My office certifies each center of excellence as a way of establishing its importance to constituents within and outside the organizations. Each center's work must undergo a peer review process.

My office also runs some of the innovation centers in India, in Australia, and in the UK. The business groups supports the innovation center in Sweden and the U.S. We support those programs. These facilities do sandbox prototyping, workshops, and solutions demonstration showing vendor's products and technologies. Each center varies according to its geographical region. The centers share resources and communicate with each other. My office leverages the intellectual capital these centers provide. The centers run under their own governance structure.

EL. How do you reward employees  for innovation?

LL. Our award programs run the gamut from an at'a boy to an at'a boy with stock options. Specifically, we have a paper's program, a grant's program, and the Chairman's Award for Excellence.

Employees can submit their original papers to the paper's program. If the peer reviewers come across an outstanding paper, it will get an award at the end of the year.

The grant's program funds both directed and non-directed work. We fund between 10 to 12 projects each year. For directed projects, we tell employees what we want them to research. In contrast, with undirected projects, employees tell us what they think they should research. Both types of research are subject to peer review. Although the grant's program doesn't offer any monetary reward, employees completing this program receive more recognition than those receiving a paper's program award.

The Chairman's award is the highest award employees can get for innovation. It's also the hardest award to win. Each year, the global division presidents nominate their respective candidates who've done an outstanding job on a project. Keep in mind, we do more than 10,000 projects a year. We narrow down between 100 to 150 nominations to 12 finalists, and then down to the six winners. The winners get stock options in CSC, and an invitation to a senior management award's meeting. We make up videos and issue employees a crystal glass reward.

EL. Do you also extend your office to academics?

LL. Our Leading Edge Forum manages relationships with professors at about 20 universities around the world. We look for universities where we can work with the leading professor whose innovative research is in an area germane to our business. We engage with those professors either on a contractual or on a retainer basis to do research work with us. We'll frequently rotate the list of universities we work with

EL. How do your work with David McCue, the CIO, to make IT  investment decisions?

LL. My office's GSO group has a portfolio governance board that oversees the investment decisions we made. McCue is a member of this board. He is current with all the decisions we've made. He uses that as input for the kinds of things that make sense for him to do. He is a non-voting member of the board, but he sits on the board. The other people on the board include all of the global group presidents. They make the overall decisions for investments. The board of directors isn't involved at the service offering level. I negotiate a budget with the CEO, and have funds made available to me. I'm the custodian for this governance board. We vote that money in. Democracy rules! Each group president has one vote. We meet each month to discuss where we need to make investments and approve funding for some of them.

My office monitors and tracks those investments. For example, we track the revenue that comes in from the investments. We know what our rate of return is on investments.

We have some tools. I can't say off the top of  my head what they are, but they aren't Excel spreadsheets.

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