Posted by: Monideepa Tarafdar | May 9, 2010

Five Capabilities that Support Innovation: How can IT help?

Of all organizational processes, that of innovation would seem to be the least amenable to use of IT, since IT is usually applied to workflows that are orderly, repeatable and given to formal specification. However, as Steve Gordon and I have found out in studies from over 40 companies, IT has a significant role to play in helping innovators in their tasks and the firm to increase the returns from its innovation portfolio.

In order to accomplish innovation, R&D folks need to tap certain capabilities. They can do so by combining the resources at their disposal in ways that are not easily imitable. For example, every corporate R&D department has a history and archive of previous projects, technical know-how, market trends and success-failure stories. But how many can claim to have organized this potentially priceless store into a knowledge management system than is accessed and updated by innovators so that they can effectively utilize the firm’s memory for identifying promising projects or solving problems? We find that inspite of the plethora of knowledge management systems existing in many firms, innovators either do not use them or do not substantially benefit from them. The capability to manage knowledge then, is important to make it easy for innovators to execute their tasks. We find that IT, that is the technology itself and the IT department, can help companies develop a number of capabilities that are required for effectively accomplishing innovation tasks (Tarafdar and Gordon 2007, Gordon and Tarafdar 2010).

The Portfolio and Project Management capability is required for organizing and administering the company’s portfolio of innovation activities. Lacking it, the company may not know when to terminate projects that are in trouble or may under-fund those needing to clear a threshold. Neither will it be able to aim toward optimality in the size of its portfolio. One the one hand, having too few innovations under development exposes a company to the risk of being unable to improve its products and services sufficiently to fuel growth or even sustain market share. On the other hand, supporting too many innovation projects runs the risk that the company will be unable to marshal the resources necessary for innovations’ proper and timely development. Therefore this capability draws on portfolio-management tools to help managers maintain a viable pipeline of innovation projects at various stages and funding. And it draws on project-management software to allocate resources within projects, set deadlines, and monitor progress.

Current R&D departments consist of innovators substantially separated by time and space. Indeed there is a line of thinking spurred by the increasing prevalence of crowd-sourcing, that divergent viewpoints of distributed groups of innovators, some not even formally a part of the company can be very effectively tapped to increase the quality and success of corporate innovation. Well, these not-collocated people need to collaborate. The Collaboration capability allows innovators with the requisite knowledge and expertise to connect with one another synchronously or asynchronously, across large distances and multiple time zones, and whether or not they are employees of the company involved. Importantly, the capability enables participants to stimulate each other’s creative efforts by sharing knowledge, information, and ideas. It relies on communication tools such as networks, email, virtual meetings, webcams, instant messaging, and blogs, and on more relation-oriented tools such as file-synchronization software, multi-user editors, blogs, wikis, tagging, and social networking. Cross-company collaboration, in particular, demands such a competency.

A competency in Knowledge Management is critical to successful innovation because the innovation process is, by its nature, knowledge intensive. An innovator might start with an idea and a personal base of knowledge.  But, to transform the idea into a new product, service, or process, innovators typically need to find and integrate external information, prior research, and the knowledge and expertise of others.  Firms with a knowledge management competency can capture knowledge and related information wherever they exist and make them accessible to knowledge workers and innovators. Companies generate more innovations and innovations of higher value when they draw from a conceptually and geographically diverse pool of knowledge In addition, innovators develop their skills and understanding more rapidly in the context of a knowledge management environment. Thus the capability of knowledge and information management is crucial for connecting these isolated “pockets of innovation.” This capability can be enhanced by expert systems, data-mining software (for knowledge creation and abstraction), database systems (for storage and retrieval), portals (for knowledge dissemination), decision-support systems (for knowledge application), and knowledge repositories (for locating needed types of expertise). This capability helps innovators get an idea of the “lay of the competitive land” – what products and technologies are there in the market, how they have been developed and what the next steps in taking them further might be.

The objective of the Business-IT linkage capability is to make IT departments more like partners with innovation centers, thereby fostering productive interactions between them. Toward that end, it is important that innovators have a basic knowledge of IT and that IT professionals appreciate in turn the elements of innovation. IT folks need to work hand-in-hand with business leaders and, often, a company’s customers and suppliers, to understand the operation and strategy of their company’s business units sufficiently well to contribute to their innovation.  In addition, business leaders need to understand the potential of IT to improve their products and processes; otherwise, they will be unwilling to invest in IT-based innovation.  Many innovations that incorporate IT have been attributed to the intimate involvement of IS professionals in the business and the intelligent exchange of information between IS professionals and business leaders.

The Ambidexterity capability is the ability to achieve and balance strategic vision and operational excellence.  Competency in ambidexterity includes competencies in these two aspects as well as the technical and organizational flexibility to vary the balance between them in response to external conditions and internal needs. If the IT function lacks operational excellence, the quality of its support will be inferior. Its networks, servers, databases, intranets, and portals—components that form the infrastructural and support backbone for  company-wide knowledge management and collaboration systems—will lack adequate functionality, may be compromised, or unavailable altogether. On the other hand, if the IT function lacks strategic vision, it could be driven by standardization zeal and fail to appreciate the need for acquiring and supporting the kinds of nonstandard applications and processes often required by innovators. Further, IT could be unwilling to explore ways for facilitating innovation.

As these examples show, the process of innovation, to be effective, requires certain firm capabilities that innovators can access. These capabilities can scarcely be developed or utilized by innovators without IT.

References:

Gordon, S.R., and Tarafdar, M., Boosting Innovation with Information Systems, Sloan Management Review, Summer 2010.

Tarafdar, M., and Gordon, S.R., Understanding the Influence of Information Systems Competencies on Process Innovation: A Resource Based View, Journal of Strategic Information Systems, Issue 4, 2007.

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