core capabilities of ict innovation management

8/9/2019 Core Capabilities of ICT Innovation Management

1/21

www.detecon.com

> Study

Core Capabilities of ICTInnovation Management

Empirical Insights

2008/12


2/21

Core Capabilities of ICT Innovation Management

Study 2 Detecon International GmbH

Table of Contents

1 Management Summary ....................................................................................... 32 Introduction ......................................................................................................... 4

2.1 Motivation .................................................................................................... 42.2 Approach ..................................................................................................... 4

3 Results ................................................................................................................ 53.1 Strategy and culture .................................................................................... 63.2 Organization and processes...................................................................... 133.3 Innovation management success factors and problems ........................... 18

4 Recommendations ............................................................................................ 205 The Authors....................................................................................................... 21


3/21



1 Management Summary

In a highly competitive ICT marketplace, in which 1) industry boundaries blur, mostly driven

by disruptive technology innovations, and 2) the pace of technology and product lifecycles

accelerate, there is a need to differentiate and take advantage of new innovations & techno-logical trends to optimize product portfolios and operational processes.

This holds especially for industries which use ICT innovations within their product portfolios,

as a specific product or which deploy internal ICT capabilities to reduce operational and pro-

duction costs. ICT innovations therefore have the potential to largely affect product portfolios,

business models and operational costs of various industries deploying ICT in one way or the

other.

However, many companies struggle to efficiently innovate and/or leverage the ICT innova-

tion landscape for their own competitive advantage.

This study is set to analyze the core capabilities of ICT innovation management by interview-ing executives of companies who are leveraging ICT in their business models, product port-

folios, or operational processes. The status quo is described with regard to 1) strategic and

cultural aspects, 2) innovation processes and organization. It gives an insight as to what

innovation managers believe are the 3) critical success factors and major problems for an

efficient ICT innovation management. Recommendations on core innovation management

capabilities are given based on the survey results and the in-depth interviews undertaken

with 19 organizations and can be summarized as follows:

Elaborate clearly the set of critical success factors for ICT innovation manage-

ment within your specific organizational and market environment

Be more aggressive in adapting ICT innovations Clearly communicate your innovation strategy to all employees

Measure your innovation process more detailed

Have a clear linkage between technology and market oriented departments


4/21



2 Introduction

2.1 Motivation

In the early 80ties information and communication technologies (ICT) became the backboneof modern enterprises across all industries. With a growing number of technologies CIOs

and CTOs began to create processes and blueprints how to structure, utilize, and foster

these technologies in the enterprises everyday life from business modeling, to product

portfolio management, to operational support.

In the beginning of this millennium 20 years later futurists, technologists, and strategists

are arguing about the future of ICT. While one could easily find more different opinions than

bubbles in a fresh pils, we can safely assume a general acknowledgement of two major ef-

fects: A) The boundaries between information and communication technologies seem to

vanish, and B) Product, service, and technology lifecycles and innovation cycles seem to

accelerate.

The question arises how do companies cope with these effects and how do they implement

efficient and sustainable ICT innovation management?

2.2 Approach

The focus of this study is analyzing the status quo of ICT innovation management core ca-

pabilities across companies who are deploying ICT innovations either in their product portfo-

lios as core product component or as part of their internal ICT capabilities supporting their

production processes. A holistic overview is given by considering strategic and cultural as-

pects, innovation processes and organization and gives an insight in the opinion of innova-

tion managers as to what they believe are the critical success factors and major problems of

an efficient innovation management.

The study is structured into the following parts:

Chapter 4: Recommendations

ICT innovationmanagement

core capabilities

Chapter 3: Results

Strategyand culture

Organizationand processes

Successfactors

and problems

Strategyand culture

Organizationand processes

Successfactors

and problems

Chapter 1:Management Summary

Chapter 2:Motivation and approach

Figure 1: Study Overview


5/21



The status quo identified is derived from 19 in-depth expert interviews with major innovation

stakeholders (CIOs, innovation managers etc.). Because we wanted to find out how ICT

innovation management is planned and executed across different heterogeneous compa-

nies, we decided to do in-depth interviews of a rather selective group of executives. We set

out to understand similarities and underlying concepts of ICT innovation management

through specific contacts across different industries, geographic locations, and companysizes.

Companies which participated in the survey are listed below:

Allianz Shared Infrastructure Services SE GmbH

AT&T Inc.

BSH Bosch und Siemens Hausgerte GmbH

Deutsche Telekom AG

Deutsche Telekom AG Laboratories

German Insurance Company

Hewlett-Packard Company

ITERGO Informationstechnologie GmbH

Merrill Lynch & Co., Inc.

Microsoft Corporation

Ooma Inc.

Salesforce.com, Inc.

Siemens Healthcare (Siemens AG)

Sprint Nextel Corporation

Sdwestrundfunk

T-Systems

VeriSign, Inc.

Vodafone Group plc

Yahoo! Inc.


6/21



3 Results

3.1 Strategy and culture

With regard to strategy and culture the survey concentrated on questions about innovationfocus, linkage of innovation strategy to business goals, communication of innovation strat-

egy, innovation sourcing, and innovation culture and spirit.

Major Findings Strategy & Culture:

ICT innovations that are contributing to efficient production and pro-

cesses as well as to innovative new product portfolios are rated as

business critical by the majority of organizations. However there is a

trend to rate ICT innovations which contribute to internal cost optimizations

through efficient processes and production with a higher criticality than inno-vations contributing to innovative new product portfolios.

The majority of organizations have market driven innovation strategies

with a strong focus on satisfying customer needs with the help of ICT.

The customer is rated by a majority of respondents as main trigger to

deploy ICT innovations.

Only a minority of organizations rate themselves as first movers in

adapting ICT innovations.

Internal innovation capacity is regarded as a must and major competi-

tive advantage. Executive management of the majority of organizations fosters and

supports an innovation culture within the organizations.

1) Innovation focus

For most of the surveyed organizations (81%) business critical ICT innovations are innova-

tions that contribute to efficient production and processes and realize efficiency gains and

cost optimization. This shows a clear trend that organizations mainly leverage ICT innova-

tions to cut cost.

A less significant majority of companies (58%) also see product development and optimiza-tion through ICT innovations as business critical. They leverage ICT innovations to retain

market shares and increase customer satisfaction via innovative product portfolios or re-

duced price.


7/21



Low criticalityMedium criticalityHigh criticality Low criticalityMedium criticalityHigh criticality

18%

16%

26%

47%

6%13%81%Efficient production

18%64%Efficient processes

26%58%Product optimization

16%58%Product development

11%42%Business models

Figure 2: Which innovation focus fields are regarded as business critical?

47% of the surveyed organizations tend towards pure market driven innovation strategies.

They are focused on satisfying customer needs with the help of ICT innovations. For some

companies markets are external customers, for others internal employees or business

units. 21% of the organizations have a combined market and technology driven strategy:

Technology is one of the core components of their innovation strategy, but always assessed

through the eyes of the customer and market. Both factors show the trend towards marketand customer driven innovation strategies.

Technology

driven

Market

and technology

Market

driven

No

answer

21%47% 21% 11%

Figure 3: Would you rate your innovation strategy as market or technology driven

Looking at the triggers for innovation, we can see an interesting result: While in the previous

question only 47% said that their strategy is market driven, a large majority of organizations

(79%) rate the customer as the main trigger to deploy ICT innovations, followed by competi-

tors (47%) and technology (42%). The subtle difference of these two questions reveals an

important finding: While the majority of companies are triggered by external, non-technical

factors, they translate these triggers differently into their strategy.


8/21



While 42% were highly triggered by technologies, the majority of companies translate these

technologies into a level-headed, market driven ICT innovation management strategies.

These technology triggers are not seen as business critical, only attacks on business and

market strategies are.

That also explains why all companies stated that the customer is the main focus of innova-tion activities: If a direct customer need is satisfied, ICT innovations are more likely to be

seen as successful.

42%

37%

Customer

11%47%Competitor

21%42%Technology

5%16%79%

Low triggerMedium triggerHigh trigger Low triggerMedium triggerHigh trigger

42%

37%

Figure 4: What are the main triggers for your innovations?

Only a minority of organizations (37%) rate themselves as being first movers in adapting new

ICT innovations. This effect can be mainly explained by ICT executives being cautious and

cost-oriented in deploying innovations. ICT innovations that fail can produce high costs due

to instabilities or even, after failing, backward migration costs.

26%26%37% 11%26%

NoPartiallyYes No answerNoPartiallyYes No answer

Figure 5: Would you rate your company as a first mover in adopting ICT innovations?

Interview quotation on innovation focus:

In the past we integrated a lot of products and services [] but we tried to have no radi-

cal, disruptive innovation to prevent customer churn. We're more involved in integration

than development.

2) Linkage of innovation strategy to business strategy & goals

Results show that innovation is clearly anchored and stated in business strategy goals for

84% of surveyed organizations. Subsequently, a majority (79%) of surveyed organizations

have a dedicated innovation strategy.


9/21



Clearly anchored

11%

84%

Medium anchorage

Low anchorage

5%

Dedicated innovation strategy

79%

No dedicated innovation strategy

21%

Figure 6: Is innovation clearly anchored within your corporate/business strategy?Does your company have a dedicated innovation strategy?

Naturally, the majority of surveyed organizations (74%) link their innovation strategy to busi-

ness goals. All companies stressed the fact that giving ICT innovation management a focus

and explicit mission to contribute to business goals will foster result-oriented innovation and

prevent innovation expenditures that might lead to interesting ideas and prototypes but with-

out any application or use for the organization. However, innovation experts also value a

specific level of freedom within their innovation activities to explore potentially new busi-

ness fields and extend organizations core business via new product portfolios or business

models into other areas. Many companies across industries and geographic location stated

some sort of managed internal disruption as one of the main functions of ICT innovation

management.

0%

21%74% 5%

NoPartiallyYes No answerNoPartiallyYes No answer

Figure 7: Is your innovation strategy clearly linked to business goals?

Interview quotation on linkage of innovation strategy to business strategy & goals:

Constant re-inventing our market against competitors requires very flexible and innovative

approaches.


10/21


11/21



Internal innovation 100%

Partnering with supplier 95%

Cooperation with innovation institutes 74%

Specialized innovation consultants 63%

Aquisition of start ups 53%

Venture capital approach 21%

Figure 9: What is your innovation sourcing strategy?

5) Innovation culture and spirit

In 73% of our surveyed organizations the executive management strongly promotes an inno-

vation culture, and in 58% of the organizations an innovation culture is actively lived. In some

companies executive management is advocating an innovation culture but buy-in of employ-

ees is scarily low. Other companies have no explicit executive management promotion of aninnovation culture but still live and breathe innovation in and out.

These exceptions prove the rule that executive management promotion alone is not suffi-

cient for a successful culture of ICT innovation. It is crucial to choose the right mechanisms

so that the culture is and can be actively lived by the employees.

Interview quotation on innovation sourcing:

Outside-in innovation is very important, but we need to find a balance so we dont disrupt

our core competencies and profit sanctuaries. We need internal process and program

knowledge to do that.


12/21



NoPartiallyYes

73% 16% 11%

Figure 10: Does your executive management promote an innovation culture within the organization?

32%11%58%

NoPartiallyYes

Figure 11: Is the innovation culture actively lived by employees?

When it comes to these right mechanisms to foster and promote an innovation culture, our

surveyed experts were astonishingly conservative: rather than following every trendy and

newly hyped method of innovation management or sophisticated toolsets, they were focus-

ing on reliable, proven, and traditional methods and culture, but executing and mastering

these really well. Leading with 84% was group brainstorming, followed by idea management

(79%) and prototypes (58%).

The consensus on traditional methods and tools does not mean an absence of supportive

software solutions or processes, but rather using tools and processes that employees and

executives felt comfortable with, stressing the immediate impact and participation of employ-

ees and their brains.

Many executives agreed that events and conferences can only trigger or inspire a well oiled

innovation machine, while think tanks require a constant load to justify operational costs as

well as a strong connection to day-to-day business to reduce the risk of becoming a costly

host for pet projects.


13/21



5%

84%Brainstorming in groups

79%Idea management

58%Prototypes

53%Dedicated time for innovation

32%Innovation events

26%Think Tanks

21%Developer program

21%Sponsoring

21%Conferences

11%Start-up weekend

Other

Figure 12: By which mechanisms is the innovation culture fostered?

Interview quotation on innovation culture and spirit:

Were small enough that we can bounce ideas directly to each other no need for another

technology sitting in our way.

3.2 Organization and processes

In order to understand the current status quo regarding organization and processes, we ana-

lyzed companies innovation process, innovation organization and innovation measurements.


14/21



Major Findings Organization and processes:

75% of surveyed organizations have a documented and communicated

innovation process, which is critical to optimally leverage internal innovation

capacities.

Most of the organizations have a dedicated innovation department.

Only 37% of the surveyed organizations involve the Marketing depart-

ment into the innovation process.

The majority of companies try to measure innovation outcomes, common

measurement metrics employed are cost savings, customer satisfaction and

ROI.

Measuring innovation KPIs is difficult because of the long-term nature of

innovation activities and the many side-effects.

1) Innovation process

75% of surveyed organizations have a documented and communicated innovation process

which mainly can be classified into the four steps of innovation strategy development, idea

screening, project portfolio management, and innovation realization.

None of the interviewed executives felt comfortable with giving a rule-of-thumb duration of

the process or its steps: some had many different types of ICT innovation departments and

processes, others had a lack of measurement (see also section 3, innovation measurement),

and some didnt want to disclose confidential information that could allow competitive in-sights into their product and service releases or lifecycles.

Interview quotation on innovation process:

My experience over the last 20 years has shown me that most of the processes are either

very very generic you can basically copy any current innovation management book, re-

gardless of its publishing date or obsolete within 18 months.

2) Innovation organization

Most of the organizations (79%) have a dedicated innovation department within their organi-

zation structure. 58% tend towards a tight integration of R&D units or innovation departments

into organizational processes. 52% of organizations prefer a close link between market and

technology oriented departments. While most organizations find it beneficial to have a dedi-

cated innovation department, the later two numbers confirm our observation of a slight am-

bivalence in how to best combine technology and market know how, and how this innovation

department can play a disruptive, but productive role within an organization.


15/21



21%79%

NoYes

Figure 13: Is there a dedicated innovation department in your company?

21% 5%16%58%

SeparationBothIntegration No answer

Figure 14: What do you think is more important: strong separation of R&D/innovation units or tight integration of R&D units into organizational processes?

5%

11%32%52%

NoPartiallyYes No answer

Figure 15: Is there a close link between technology and market oriented departments,units or entities involved in the innovation process?

Focusing on the several departments involved in the ICT innovation process, it can be no-

ticed that for a large majority of organizations (74%) product management and IT/production

play a major role in the process. Also departments that do not directly push innovations like

controlling or purchasing are involved in the process. It is remarkable that marketing depart-

ments are only mentioned by roughly a third of the organizations. Even if the understanding

of what a marketing department is responsible for is different throughout the interviewed

companies, the common understanding is that corporate promotion and advertising, marketand competitive research, as well as internal communications are key functions within every

innovation process.


16/21



Purchasing 21%

74%Product management

74%IT / Production

68%Strategy

42%Controlling

37%Marketing

Figure 16: Which departments, units, or entities are involved in the innovation process?

Interview quotation on innovation organization:

Innovation should always be a step ahead and know what the demand and requirements

will be to deliver the next generation of services and features. We need a tight integration

into day-to-day operations and data models in order to develop efficient products with stra-

tegic value.

3) Innovation measurement

The majority (79%) of surveyed organizations stated that they measure the outcomes of their

innovation activities. Most of the organizations measure cost savings (63%), customer satis-

faction (58%), ROI (58%) and added revenue (53%). The focus on cost savings realized via

innovations goes along with the focus on realizing efficient production and efficient proc-

esses with the help of innovations.

Yes

79%

No

21%

Figure 17: Do you measure your innovation outcomes?


17/21



63%

58%

53%

47%

Customer satisfaction 58%

Cost savings

Added revenue

ROI

26%

Time to market

Product sales

26%Overall market share increase

42%

Overall market size increase

Figure 18: Please list the measurement metrics employed to measure your innovation outcomes?

While this sounds obvious in theory, all organizations stressed the problem of measuring

KPIs of the innovation process, and more so innovation success. Innovation processes have

not yet reached full maturity across all organizations in the ICT industry. Many organizations

have just introduced a dedicated and documented innovation process. Therefore some com-

panies are just beginning to analyze the average number of steps and the average duration

of their processes. Measurement of the outcome of this innovation process with the depicted

KPIs is difficult because there are many interdependencies to other influencing factors like

exchange rates, general economy development, product and service pricing, or competitor

offerings. Furthermore the success of innovation activities can often only be measured years

after the innovation project was actually conducted.

The lesson learned is that not only each industry, geographic location, or organization size

requires a different approach for measuring KPIs, but actually each and every company will

need a tailored and customized design that aligns processes with actual measurable values.

Further on, this alignment and design has to be constantly revised and tweaked to reflect

current operational proceedings as well as shifts in corporate strategy and goals.

Interview quotation on innovation measurement:

We mainly focus on effectiveness, less on efficiency, as innovation process efficiency is

hard to measure and depends on too many other external and internal factors.


18/21



3.3 Innovation management success factors and problems

In order to evaluate the most common innovation management success factors and major

problems the interviewed executives had to rate a set of given methods and problem areas.

Additionally company specific best practices or critical issues could be mentioned during the

survey.

Major Findings Innovation management success factors and problems:

Innovation management success factors which are rated very critical by the

majority of organizations (52%):

Innovation clearly anchored within business strategy

An innovation culture which is promoted and fostered by executive manage-

ment

Innovation management tightly linked to product life cycle management

Innovation management problem areas rated as very critical are only seen

by a minority of organizations, amongst them are:

Linkage and contribution of innovation activities and outcomes to business

goals (21%)

Promotion of an innovation culture by the executive management (16%)

A dedicated budget for innovation management activities (16%), and

Participation of the customer in idea development (e.g. lead user innovation)

(16%)

ICT Innovation Management is very diverse and has no clear industry andorganization independent best practice approach

It was astonishing to see that the answers to this question show an ambiguity in critical suc-

cess factors that comes from organizational and industry specific differences in ICT innova-

tion requirements and setups. Each of these different approaches has their own pitfalls, so it

seems.

Slightly more than half of the companies (53%) find that the most critical success factors are

to anchor innovation clearly within the business strategy; to have an innovation culture that is

fostered by the executive management; to tightly link innovation management to product life

cycle management. Similar, slightly less than half of the organizations (47%) agree that adedicated budget for innovation projects; innovation activities which are linked to business

goals; customer centric innovation management orientation; the valuation of failed innovation

projects are critical success factors. Both in-market-testing for new products as well as

measuring and tracking innovation activities dont stray far away with 42% of the interviews

executives citing them as business critical.

Having such an even distribution of nine success factors shows the diversity in best prac-

tices for successful ICT innovation management and of course the complexity of it: there is

no single ingredient for success, and success or failure do depend on many more input vari-

ables than only the execution of ICT innovation management.


19/21



None of the interviewed executives could name us any major or even critical problems within

their organizations. However, we did get a few pointers to critical issues, which were almost

as even distributed as the above stated success factors.

Some companies (21%) struggle with linking innovation activities to business goals. The

reasons mentioned were current change in industry, general economic downturn, and stra-

tegic realignment due to repositioning or recent merger. The same reasons were mentioned

again for the runner ups of fostering the innovation culture by the executive management; a

lacking dedicated budget for innovation activities; the participation of the customer in idea

development (16% each). All these problems are not unknown to many other companies.

Success factors [% ofrespondents rated very high]

5%Innovation clearly anchored

53%16%Culture fostered by management

53%Inno. linked with product life cycle mngt.

47%16%Dedicated budget for innovation projects

47%21%Inno. activities according to business goals

47%11%Customer centric innovation management

47%5%Valuation of failed innovation projects

42%11%In market testing for new products

42%Measuring / tracking innovation activities

32%Idea screening / project selection

32%16%Part. of customers in idea development

32%5%

53%

26%Coop. of prod. and techn. departments

21%11%

Communication of successful innovations

11%End-to-end process responsibility

5%Parallelized process steps

Clearly communicated

Problem areas [% ofrespondents rated very high]

Success factors [% ofrespondents rated very high]

5%Innovation clearly anchored

53%16%Culture fostered by management

53%Inno. linked with product life cycle mngt.

47%16%Dedicated budget for innovation projects

47%21%Inno. activities according to business goals

47%11%Customer centric innovation management

47%5%Valuation of failed innovation projects

42%11%In market testing for new products

42%Measuring / tracking innovation activities

32%Idea screening / project selection

32%16%Part. of customers in idea development

32%5%

53%

26%Coop. of prod. and techn. departments

21%11%

Communication of successful innovations

11%End-to-end process responsibility

5%Parallelized process steps

Clearly communicated

Problem areas [% ofrespondents rated very high]

Figure 19: What, in general, are the critical success factors and major problemareas for efficient innovation management?

Interview quotation on innovation management success factors and problems:

Set your goal for time, resources, budget based on business requirements. If you exceed

any of these three things, make a quick check against your original assumptions, but if you

exceed them and you dont have the required results kill the project, and please: stop

whining what couldve/ shouldve/wouldve.


20/21



4 Recommendations

As a result of the conducted survey several conclusions and recommendations can be de-

rived. These recommendations can help to identify optimization potential for more efficient

ICT innovation management within organizations.

Elaborate clearly the set of critical success factors for ICT innovation

management within your specific organizational and market environment.

An in-depth analysis of specific innovation requirements within organizations

and their respective market environment enables companies to identify specific

ICT innovation management success factors. From these success factors spe-

cific ICT innovation management best practices for optimizing innovation activi-

ties can be derived and introduced.

Be more aggressive in adapting ICT innovations.A more aggressive approach in adapting ICT innovations could enable organi-

zations to derive more value creating potential out of their ICT products and

processes. So far the focus on ICT innovation management is mainly cost

driven so that the value creating potential of ICT innovations is neglected to

some extend. This recommendation holds especially for companies where ICT

is only supporting the production process and is not the core product.

Clearly communicate your innovation strategy to all employees.

A clear communication of the innovation strategy to all employees within an or-

ganization empowers them to get more involved in the innovation process and

to increase the innovative potential of the company.

Measure your innovation process more detailed.Measuring the innovation process (duration, steps, outcomes) more detailed

makes innovation initiatives more transparent and enables organizations to

more precisely steer and control innovation activities.

Have a clear linkage between technology and market oriented depart-

ments.

Market and technology oriented departments should more interact and jointly

work on innovation initiatives. This would assure that market and technology

oriented innovation needs are aligned with each others.


21/21


5 The Authors

Frank Wei is a Consultant with Detecon, Munich. Following his studies in business and

computer science and after working for Accenture, he joined Detecon in 2007. As a part of

the Strategic Technology group he gathered knowledge and experience on several projectsin the field of new ICT technologies and ICT Innovation Management.

He can be reached at +49 151 14700161or [email protected]

Thorsten Claus is Managing Consultant at Detecon, San Francisco. With over 14 years of

ICT industry experience he leads Detecons Playout Intelligence group. He is also US head

of Detecons International Center of Excellence for New Media, creating strategies, business

models, and service offerings around mobile and fixed video. Prior to joining Detecon he

held positions as Senior Technology Strategist at T-Systems North America as well as CTO

of Cosynus GmbH, where he created and implemented fixed-mobile unified messaging solu-tions for international large and medium enterprises.

Thorsten holds a Masters Degree in Information Technology and can be reached at

+1 415 904 7925 or [email protected]

Dirk Pracht is Managing Consultant and head of the group Strategic Technology at Detecon

in Bonn. The focus of his work is on strategic technology and innovation management in the

ICT and telecommunication industries where he combines technological competence with

strategic and commercial experience. Prior to joining Detecon he worked as a Senior Con-

sultant at Capgemini with a focus on Business Information Strategies.

Dirk studied computer science in Karlsruhe (Germany) and holds an international executive

MBA from the Rotterdam School of Management.

He can be reached at +49 160 8957837 or [email protected].

core capabilities of ict innovation management

Documents