Harrah's Innovation

Last year I had the opportunity to be part of Harrah's newly formed Innovation Team. We were working on some cool projects including the Microsoft Surface, location based services, and mobile applications.

"The best way to fast-track a promising innovation, he says, is to operate it as an independent venture, separate from the tethers of everyday business processes. That often means running an innovation project on separate IT systems to avoid mingling experimental data with business operations." Tim Stanley, CIO & Chief Innovation Officer

Check out this InformationWeek article on the innovation process at Harrah's.

Outsourcing and Innovation

The CISR research project I have been working on for the last year, "Building an Environment for Innovation," is in the process of finishing up. My last case study for the project is focused on vendor innovation. Our research has found the vendor innovation and outsourcing should not be lumped together. Managed right vendor driven innovation can be an important piece of an innovation portfolio. This research will be available to CISR sponsors this spring. Until then the quotes from a recent CIO Magazine article do a good job of summing things up:

Indeed, most outsourcing SLAs and pricing models deter innovation. Take data center management. It’s the outsourcer’s responsibility to ensure 99.99 percent uptime or provide backup services. “The value add would be when the service provider looks at the environment and says, Now I understand how you support your business and I see that by leveraging this new technology or different hardware, we can improve the quality of the service or your costs,” says Taylor of Fluor, which is on its fourth major outsourcing contract since the mid-1990s. “But you’re paying the vendor X dollars per server so there’s no motivation for them to reduce that number.”

Fluor signed a new contract with IBM last year. “The lesson we learned was that we needed to put a more generic umbrella agreement in place for future innovation,” says Taylor. “There are specific towers of service in the scope of work that are commoditized. But there is also a separate agreement that will enable IBM to provide innovation in all kinds of areas, like virtualization.” The contract includes prenegotiated terms for future innovation around issues of indemnity, risk and intellectual property protection. “If we want to have IBM explore virtual desktops, there’s already a fabric in place. We don’t have to call the lawyers and go through a full negotiation each time,” explains Taylor. “And it’s separate from the rest of the outsourcing, so IBM doesn’t need to get reimbursed through the fees we pay for the commodity activity.” Now Fluor can increase and decrease services from IBM without penalty. “It’s important not to lock yourself in because you don’t get the benefit of innovations that present themselves every day,” Taylor says.

Innovation and Productivity

In my work on innovation one topic that frequently arises is the definition of innovation. Innovation is not the same as invention. In contrast, innovation includes both value creation and value capture. This means that innovation is just as likely to be a service as a product or technology. In addition, innovation has a direct link on the economy in a way that invention does not necessarily have. The Economist's recent article & interview with Vijay Vaitheeswaran does a good job of covering these concepts.

John Patrick at MIT

Last week internet pioneer John Patrick came to speak to my Technology Driven Business Change class. John worked at IBM for over 30 years and helped guide IBM through the internet revolution. In addition, the class is taught by Irving Wladawsky-Berger who headed IBM's internet division. Together John & Irving have some great experiences and stories about the challenges IBM faced. Rather than relay them all I'll just say that you should check out Lou Gerstner's book "Who Says Elephants Can't Dance?" Also, John's slides are posted on his blog.

Check out John's blog and post about his experience at MIT and Irving's technology leadership blog.

Banking's Most Innovative CIO

As you may know I used to work for a research and consulting firm focusing on financial services technology. Most of my clients were banks and vendors to banks. I get many of the trade emails and I thought this one might be of interest:

Bank Systems & Technology is accepting nominations for September 2007 "Innovative CIOs" issue. The person must be a senior technology executive at a bank (CIO, CTO, EVP or VP in charge of a line of business technology, such as e-business strategy, customer solutions, etc.). Keep in mind that bankers can be from non-U.S.-based institutions as well.

Your role in nominating potential candidates will be completely confidential. This year's nominees will be honored at the Bank Systems & Technology Executive Summit, to be held Sept. 23-26 at the Royal Palms Resort and Spa in Phoenix. Please provide the following information on your nominee (as much data as you can provide will be helpful):
Nominee's name, Title, Bank name, Contact information (if possible)

Tell us in just a few sentences why you think this person should be included in BS&T's 2007 Innovative CIOs feature. Deadline for nominations is Friday, June 1, 2007. E-mail all submissions to mbritz@cmp.com with "CIO 2007" in the subject line.

Clayton Christensen and Chet Huber at Sloan

Clay Christensen and Chet Huber co-presented today on the topic of disruptive innovation and GM's OnStar. With Sloan's strong connection to the automotive industry, many students were there to hear from Chet while others were just interested in seeing Clay. Professor Christensen, who is well known for his books on innovation, is practically a celebrity around Cambridge. As it turns out both men were classmates at HBS.

I found the presentation to be interesting although much of Professor Christensen's talk was on material from his first book, Innovator's Dilemma. I was unfamiliar with the OnStar business which turned out to be fascinating. Chet recalled how the set up the OnStar business within GM while maintaining its independence. Little did they know that many of their strategies would align with Professor Christensen's future bestseller.

Later in the day I had the opportunity to join a small group of students for a Q&A with Professor Christensen. Here are a few thoughts from that discussion:
Think about the job the product is being hired for not the market segment/demographic it is being marketed to. Too many companies are missing the reasons people use specific products.
Financial analysis is ill suited to foster innovation. DCF, NPV, and shareholder maximization frequently lead to companies sticking with the status quo. The costs of setting up a new business will always look unattractive in comparison to the marginal costs associated with an existing business.
Competing down market requires speed to market and customization. These customers do not need more features they need a lower cost product that better serves their needs.
Christensen has a rapidly growing consulting practice to help other companies improve innovation. Check out there website for some good reading: http://www.innosight.com/

There is also a new article in the Sloan Management Review called "Finding the Right Job for Your Product."

Business Innovation on CNBC

CNBC has a new show called The Business of Innovation airing on Sundays at 9 PM PST/12 EST. I haven't seen the show yet but it looks like they have a good lineup of guests including the CEO of the NASDAQ, founder of Staples, CEO of eBay, and many others. The first two episodes are available for download as a podcast. Episode 2, Evolution to Revolution, featured Larry Huston, former VP of Innovation at P&G, discussing how companies need to realize that great ideas exist outside the walls of the firm.

Even the Economist wants to innovate

It seems that The Economist magazine is on the hunt for innovative ideas. They have set up a website called Project Red Stripe. I'm not quite sure what to make of the site yet. At the very least it seems fairly like a fairly interesting read. A few people have made some sarcastic submissions and there may even have been some good ones. So far they have received at least 140 submissions. I'm not so sure that I'll be sending them my valuable ideas (assuming I had any) but then again they are offering a six month subscription to the magazine as compensation.

Clayton Christensen Speech

Take a listen to Clayton Christensen's keynote speech at the at the 2004 Open Business Conference. It runs 1:48:43 but you can download the file and listen to it on your iPod later.

http://www.itconversations.com/shows/detail135.html

Customer Driven Innovation at Intuit

When I think of innovation Intuit always comes to mind. Visiting the company headquarters this past January only reinforced things as I got to see some of their customer interview rooms and also hear from their Chairman and former CEO Bill Campbell. Their innovation is primarily focused on solving customer pain points. To do this they obsessively listen to customers and watch them use the product. If you are interested in trying out some of their new products and features check out their innovation website.

http://innovation.intuit.com/

Harrah's Entertainment & Innovation

ZDNet has a great series of CIO videos. Recently they interviewd Tim Stanley, CIO of Harrah's Entertainment, on his new role as Chief Innovation Officer. As I've mentioned before, Harrah's is on the cutting edge of innovation in the gaming industry. They view innovation as a requirement for improving customer service. They are constantly looking to other industries to find new ideas and technology to improve the experience of the customers. Listen to the interview with Tim to hear more about the technologies they are looking at including mobile, RFID, etc.

http://video.zdnet.com/CIOSessions/?p=113

Building an Environment for Innovation

This semester I am working as a research assistant on a project with the Center for Information Systems at MIT. The project is headed by CISR research scientist George Westerman. We will be writing a series of short vignettes on innovation as well as some full length case studies. Check out the CISR website for more information.

http://mitsloan.mit.edu/cisr/r-main.php#innovation

In this project we will explore how IT leaders exert the necessary pressure to develop an organizational capability to innovate. Specifically, we will study how leaders in innovative firms reshape IT management processes and organizational culture to enable innovation. We will address the following questions:

How can IT leaders successfully suggest and implement innovative uses of IT?

How do innovation processes differ across firms with different strategies and/or structures?

How do IT management processes need to change to improve IT innovation?

What are the elements of an innovative organizational culture?