1/9/18

By Mary K. Pratt, published on CIO.com

As one of the original fintech companies, TD Ameritrade has leveraged technology to do business differently.

CIO Vijay Sankaran says he’s well aware of that tradition.

“This ability for technology to innovate is probably one of the most important things for us,” he says. “The cornerstone of that is how technology facilitates speed and how it helps with the prototyping and adopting of new paradigms.”

Innovation is often portrayed as the mind spontaneously lighting up. But Sankaran and other innovation leaders say innovation happens in organizations that structure their people, processes and technology the right way.

“As businesses mature, what ends up happening is a more execution and operation mindset can creep in. So you have to be very deliberate around how you get new juices and ideas flowing,” Sankaran says.

They’re ditching legacy systems

Digital companies born into the cloud and agile world have an advantage: They’re not burdened by legacy systems. “They’re able to be faster and more flexible and can focus more of their spend on creating value vs. keeping the lights on,” says Rudy Puryear, a partner and director in Bain & Co.’s Chicago office and leader of the consulting firm’s IT practice.

That doesn’t mean CIOs at older companies are always left in the dust. Puryear says those CIOs who have modernized their infrastructure can deliver fast, flexible, value-creating, and differentiating projects just as well as their digital company colleagues.

But CIOs with mostly legacy systems? Not so much, he says.

Puryear says Bain research shows that some organizations spend up to 80 percent of their resources on maintaining legacy environments — “and trying to keep it from breaking” — vs. forward-looking, innovative projects.

“If the company is spending $1 billion on IT and only 20 percent is invested in the future and that has to interface back into the legacy environment, that has a productivity or legacy tax behind it. So the business isn’t getting anywhere close to $1 billion out of that investment,” he explains.

Puryear says CIOs focused on innovation have committed to modernizing their environments; they’re not just delivering stand-alone innovative projects on the edges, as those aren’t enough to truly transform any organization.

“The reality is that traditional IT isn’t really ready for digital. Leading CIOs understand that. They embrace new adaptive architectures so that everything they build and buy going forward is more modular, microservices and plug-and-play. They have a cloud-first mindset and they embrace far more agile, product-centric operating models,” he says.

They develop innovation-focused processes

To drive innovation, Sankaran says he and his 1,500-member technology team has adopted new technologies and work processes.

That includes moving from a shared services model to a product-first agile culture over the past 18 months, a move that has helped IT nearly triple its output. It also includes adopting increased automation and a DevOps environment to support technologists as they work to deliver game-changing applications quickly.

Sankaran says he’s also taking additional steps to ensure TD Ameritrade can continue to foster innovation. He’s testing integrated collaboration platforms to support cooperation and communication across the organization. “It’s really around how you share ideas in a more natural way and how you create communities of communication,” he says.

Sankaran started an Advanced Technology Group tasked with evaluating emerging technologies, identifying prototype opportunities and bringing them to market. And he’s implemented programs, such as an incubation process and hackathons, to spur and develop innovative ideas wherever they come from.

Management experts say they see progressive CIOs making similar moves as they adopt agile, DevOps, automation and innovation labs to speed delivery of new ideas. But, they note, those CIOs represent only a fraction of the IT leaders. Consider, for instance, Deloitte’s 2017 Global CIO Survey found that 74 percent of CIOs surveyed “are investing less than they should in emerging technologies that could contribute to innovation and growth.”

Seth Robinson, senior director of technology analysis with the nonprofit tech trade organization CompTIA, says companies must have processes for people to explore technologies that have potential to drive innovations and test how those technologies could transform the organization’s processes and workflows.

“IT has been focused on lowering costs and investing in pieces that are strategic, but in terms of being collaborative and IT understanding business goals and then being able to take those back into the tech department to come up with innovations, that’s not something we see as the standard course of business. Only leading CIOs are doing that,” Robinson says.

They reimagine work

Technology drives innovation today, no doubt about that. But successful CIOs remember that technology itself is only part of the equation, says Michael Gretczko, a principal at Deloitte Consulting.

“It’s fundamentally about changing how people work,” Gretczko says. “And to truly innovate, CIOs have to change how people work. They’ve got to be considering the people component and partnering with their HR counterparts. We see that the most progressive CIO understanding that.”

Gretczko says he sees innovative CIOs, in collaboration with other executives, ask how jobs will change and how customer interactions with the organization will be different. Moreover, they’re articulating how and why those changes will benefit the business to ensure they’re not adopting new technologies simply for technology’s sake.

“CIOs have to drive that process of envisioning the future. And if they’re not thinking about this last mile, they run the risk of technology enabling and not technology innovation,” Gretczko adds.

They leverage their positions

For Peter A. High, president of consulting firm Metis Strategy LLC, what separates CIOs capable of delivering innovation from the others is their attitude.

“There are very few other executives who have a reason to get into every strategic meeting, but great CIOs recognize they have strategic insight across the organization that few other executives have and [they leverage] that strategic perch that they have,” he says.

Here’s how High sees it: Most companies have an enterprise strategy that lists goals like reduce costs, grow revenue, enter new markets and develop new products. The strategic plan often doesn’t get into explicit details about how the various roles — marketing, operations, sales, and so on — will drive those.

“But a CIO who recognizes those gaps and fills them in with the other chiefs, that’s really an essential step for innovation,” he explains. “This is where the CIO can add value. [The CIO] can understand more than anyone else where there are common needs and divergent needs across the organization and then on the back of that develop IT’s own plans.”

He says leading CIOs do that and as a result have officially incorporated that strategic focus into their roles. He points to the 2015 decision at Dunkin Donuts to promote the existing CIO, Jack Clare, to the newly created position of chief information and strategy officer, as one of several examples.

High also notes that CIOs who leverage their unique position within organizations also don’t refer to the business units (or the business unit employees) as customers, as if IT is second to them. “They refer to them as their colleagues,” High says.

Furthermore, he says these CIOs see the organization’s end customers as IT’s customers and, thus, have a focus on how IT can drive new products and services that impact top-line growth.

They build the right talent and culture

Yes, technology and processes must be part of any innovation initiative today. But CIOs need people who understand those pieces and have the vision to leverage them in new ways. Moreover, the company’s culture must support and reward innovation through training programs that develop the technical and business knowledge needed for now, such as collaboration and DevOps skills.

“You can’t innovate if you don’t have that talent and culture,” says Larry Wolff, president and COO of Ouellette & Associates (O&A) Consulting.

Wolff points to a 2016 CIO survey from tech research firm Gartner that found talent and culture were top obstacles to CIOs achieving their objectives. “Most people fall short of looking at, ‘Do I have the organizational structure, the people and the skills to execute these operational changes?”

Indeed, Gartner says in its Building the Digital Platform: Insights From the 2016 Gartner CIO Agenda Report that “Talent has now been recognized globally as the single biggest issue standing in the way of CIOs achieving their objectives.” It cites the biggest talent gaps are around big data, analytics and information management, followed by business knowledge/acumen. Gartner adds: “Talent management practices are not keeping up with the ever-increasing and changing needs of the digital world.”

Wolff says he sees innovative CIOs take very deliberate action on this front.

“They have a very focused and deliberate workforce and talent strategy, and they create a disciplined spirit of continuous improvement,” he says, explaining that they have strong project management skills on staff, they’re good at collaborating and negotiating with the business to determine priorities, and they say no to the business peers when they’re requesting work that deviates from the strategic vision.

They have credibility with their business peers

O&A and Babson College developed the IT Maturity Curve following a year-long research study about IT leadership. This maturity curve puts CIOs into four groups, with the least mature identified as IT supplier and the most mature labeled as innovative anticipator.

Wolff says one element that all innovative anticipator CIOs have in common is credibility with their business-side peers. He explains that the other chief executives, along with their direct reports and in turn their staffers, know that IT operates efficiently and effectively and thus they can trust IT to deliver on the high-stakes items.

He cites his own past experience to illustrate his point. He joined a $400 million company as CIO, tasked with turning around an IT shop that struggled with basic operations. He improved governance, project management and IT training, all of which allowed his team to better keep up with daily demands. That in turn gave them the bandwidth to move into strategic projects. Those wins won their business colleagues’ confidence to tackle innovative initiatives — including one using predictive analytics to identify which sales leads would become customers, a project that saved $50 million in annual costs.

Building credibility isn’t a revolutionary idea; CIOs have long been advised to do this by delivering exceptional operational services. But it still applies today, Wolff says.

“I would be hard-pressed to find an IT organization that doesn’t have pockets of innovative brilliance. But that doesn’t matter if it the organization doesn’t respect IT. Business will not accept innovation from a low-performing IT organization,” he says.

This article was originally published on CIO.com