At a Glance
Information technology is critical to the success of a business. But just how important is it to set a company apart from the pack? An Accenture study explores the relationship between IT and the CIO in
achieving high performance.
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Is There a Relationship between IT and Innovation?
Balancing the CIO's Strategic and Operational Priorities
Balancing Operational Spend and Discretionary Investment
Innovative Use of
Information Technology Raises Business Performance Posted: February 23, 2004
Few would dispute that information technology is an important facilitator of innovation that, in turn, can lead to higher
performance. Yet, paradoxically, the IT department is the least likely part of
a business to be a primary innovation source. That finding from a new Accenture study highlights the need for CIOs not only to run effective IT operations, but
also to become active participants in the development of the overall business
strategy.
Is There a Relationship between IT and Innovation? Drawing on an independent global survey of nearly 600 senior executives, the study, "The Innovator's Advantage: Using innovation and
technology to improve business performance," examines the relevance of innovation to global business and the relevance of information technology to successful innovation.
The study reveals that companies reporting a strong record of innovation also report that nearly two-thirds (64 percent) of their recent IT investments were successful at meeting their strategic objectives. By contrast, less innovative companies reported only a 28 percent success rate for IT investments. Indeed, more innovative companies report getting more value for
their money from information technology and are more likely to see information
technology as a source of competitive advantage.
The study also confirms that more innovative companies see information technology as an integral part of business strategy. Innovators are far more likely to consider information technology to a great extent when they are developing new business strategies than less innovative companies. In doing
so, innovators consider the relationship of information technology to achieving higher performance and not just the technology alone.
Given the crucial role information technology plays as both
an operational and strategic asset, tactical management alone by the CIO leads to a misalignment between the company's strategic needs and its information
technology. This leads to lost opportunities to improve performance. The CIO's
strategic input is vital. Yet the indications are that even among more innovative companies this particular aspect of the CIO's role needs more emphasis.
Balancing the CIO's Strategic and Operational Priorities It is clearly the CIO's responsibility to ensure the smooth
and efficient day-to-day management of the IT department. Indeed, the Accenture study highlights the immediate priority that businesses worldwide put on cost-effectiveness.
Many organizations have found that the precipitate rush
toward major IT investments in the 1990s, followed by the headlong flight away
from it after the turn of the millennium, has left them with systems that are
not integrated and are hard to maintain. Moreover, these systems often support
customer-facing applications for which they were never intended. All too often
they are surrounded by inefficient IT processes, over-specified services and a
large number of difficult-to-manage suppliers. In these circumstances the CIO
has a pivotal role to play.
By relentlessly pursuing opportunities to drive costs out of the existing technical infrastructure and improving the efficiency of
systems maintenance, the CIO can maximize the proportion of resources available to invest in creating new business capabilities.
The Accenture study supports this, suggesting that one reason why the most innovative companies gain more strategic benefits from
their investments in information technology is because they spend
proportionately less of that budget on day-to-day operations and more on new
investments.
Balancing Operational Spend and Discretionary Investment Of course, the optimal split between operational spend and
new investment varies according to industry and company circumstance. But, in most businesses, greater value is generated when a larger proportion is spent
on discretionary investment. Spending less on operations and more on new
systems is a clear priority of the majority of executives responding to the
Accenture survey.
Consequently, CIOs must not only run an effective IT operation, but also be able to communicate the strategic benefits that information technology—including newer forms of information technology—can
bring. While there is no single approach for CIOs to follow to help drive their
own organization's efficiency and effectiveness, most IT departments can benefit from the following:
- A governance structure that reflects the overall culture of the company and allows business and IT executives to decide on strategic priorities for the company's IT investments and share responsibility
for implementing subsequent initiatives.
- Shared commitment to the business case and actions required to achieve the projected returns on investments.
- Joint accountability for returns on investment and measurement of actual versus projected returns.
- A constant focus on actions to drive costs out of existing infrastructure and maintenance activities.
- A blueprint for the overall architecture of the system that establishes the way in which technology infrastructure will be developed. This should ensure that the infrastructure is sufficiently modular for individual
components to be upgraded or replaced with minimal disruption. It should also
make it easier to enable different systems to work together cost-effectively
and would improve overall security and reliability.
- Transparency and access to information to ensure that the extent of the company's system and assets are known. This is not as easy as it
might be imagined in today's IT-intensive environment in which many IT investments may be made by individual business units outside the purview of the IT department. Companies need to be able to monitor their entire IT spend—not just the IT department's budget. This should enable them to manage IT assets and investments more effectively to exploit their relationships with IT vendors and to support more effective sourcing decisions.
Innovative Use of Information Technology Raises Business Performance If the IT department is to contribute to innovation and
improved performance across the business, then CIOs need to be proactive and
take propositions to the business units about ways to use information
technology to create new, market differentiating business capabilities. One
aspect of this is the increasingly important responsibility of the CIO to
identify how existing and emerging technologies can generate business
innovations and improve company performance.
Innovation and the imaginative use of information
technology can create significant wins for companies in many different
contexts. But it is not a game of chance. To maximize the benefits from IT
investments, the CIO has to be positioned as an equal partner with other
business executives. Creating an effective partnership between the IT
department and the other business units will dramatically improve the odds of
using innovation and technology to improve business performance.
About the Authors: Michael F. Yates,
associate partner—Accenture Strategy & Business Architecture, has
contributed extensively to technology thought leadership at Accenture.
Liz Padmore, partner—Accenture Strategy & Business
Architecture, is global director of Accenture Policy & Corporate Affairs.
Rosemary O'Mahony leads Accenture's Solutions Engineering
for the Resources operating group, which provides technology solutions to
clients worldwide.
This Article is based on the
Accenture Policy & Corporate Affairs study "The Innovator's Advantage: Using Innovation and Technology to Improve Business
Performance." The study draws on the results of a survey focusing on
innovation, technology and the business climate. The survey consisted of 581
telephone interviews conducted in the respondent's' native language.
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