Capitalizing on IT-based opportunities (ITOs) fuels the pace of innovation in all businesses, not just leading-edge industries. Yet few businesses do it well.
ITOs are innovative opportunities with a significant IT component that enables the business to do something differently. The real secret is to generate many ITOs for preliminary investigation and then rapidly reduce these to just a few.
In our work with Gartner Executive Program members we found a whole range of effective approaches to do this. For example, British Airways established the eBA group as an incubator and development factory. eBA dreams up e-opportunities, assesses their commercial viability and develops them to the point where they can be handed back to mainstream operating managers in the business.
DHL International’s Business Development Group focuses on disruptive innovations – of the type customers often don’t ask for. The focus in DHL is not on what the customers ask for but more on the underlying benefits they are seeking to achieve.
All effective approaches had elements of three processes: a generation process which deliberately created many possibilities; a development process with a good mix of competencies, people and disciplines; and a transfer process with the ability to transfer high-value ITOs to the mainstream.
Generating Many Potential Opportunities
The generate stage has three steps, starting with the ability to conceive a lot of bright ideas initially. Then the challenge is to rapidly reduce the volume of ideas to a much smaller number worth pursuing, and ratify a selected few in readiness for the development stage.
This technique is currently being used by the UK Post Office, which has established an internal venture fund to provide an incubation centre for innovative ideas. The average budget for an individual idea is US$130,000. The research group is responsible for encouraging managers to think of innovative ideas and enrol them in the fund. It also educates managers about new technologies that may potentially impact their area.
The next stage is developing an ITO. Because of the inherent uncertainty, this stage comprises a succession of short sense-and-respond (trial-and-error) steps that allow you to feel your way into the future. The essence is to sense the opportunity, then to respond with a fast, cheap experiment. Progress is punctuated by frequent evaluations by a panel separate from the development team. The whole develop stage should run through in no more than 90 days.
Transfer is the third and last stage in the process of creating an ITO. There are two steps: linking with operating managers to gain their allegiance, and handing over. Probably two thirds of the IS budget allocation of ITOs is likely to go on the transfer stage.
In some cases, disruptive ITOs should be implemented in a ‘spin out’ – a separate start-up on a green-field site where more-appropriate values and cultures can take root.
A recent example of a spin-out is ‘yourautochoice.com’, which sells Avis Europe’s used cars. The company expects a large percentage of future clients to come via the Internet. Consequently, a separate company was formed to manage this start-up.
Managing The ITO Pipeline
Successful enterprises need to manage a pipeline of many ITOs, each one at a different stage. This also ensures that the risks, returns and resources of the ITOs stay in balance. And it monitors the success of ITOs following rollout, so that earlier stages can benefit from the feedback.
Don’t underestimate how many ideas you need to generate to have a reasonable implementation rate. According to a survey of U.S. corporations (published in Research Tech-nology Management in 1997), it takes 125 well-formed, unwritten ideas on average to yield one commercial success.
Assume it takes five months on average for an ITO to traverse the length of the pipeline. To commercialize one ITO a month, more than 300 must be in the pipeline at any point in time, of which 30 would be in the combined stages of development and transfer.
Managing ITOs matters, and it’s set to become a key management discipline.
Dr Marianne Broadbent is Group Vice President and Global Head of Research for Gartner’s Executive Programs.