CIOs: How to innovate during a recession

Downturns are no time for businesses to sit still, says Colin Ashurst. Here's a plan for nurturing new ideas in any economic climate.

Innovation may not be the obvious top priority in a downturn. But for entrepreneurial CIOs, innovating in tough times can enable their organisations to punch above their weight.

But how to do this? I've come up with a straightforward approach any IT leader can follow.

The first step is to make sure you have an IT investment portfolio that aligns individual projects with the organisation's strategy.

Each project should fit in one of the following categories:

• Strategic: Investments in IT applications which are critical to sustaining future business strategy. Strategic investments are often confused with large and expensive. The definition relates to the contribution to strategy - as a result what goes here will differ from organisation to organisation.
• Key operational: Investments in IT applications on which the organisation currently depends for success. These are the core systems: electronic point-of-sale, warehousing, credit card authorisation etc.
• Support: Investments in IT applications which are valuable but not critical to success. There may be dozens or hundreds of these and they often soak up far too much time and money.
• High potential: Investments in IT applications which may be important in achieving future success. These are often neglected. This is about business R&D not technology experimentation.

  High potential projects can be about new products and services or new ways of working. They might involve adopting and adapting ideas from elsewhere. They are often about building new business capabilities through people, process and technology.

  Many knowledge management, customer relationship management and e-learning initiatives would have been good opportunities for high potential projects. There is clearly an opportunity - but the detail of how to realise it is not clear.

Once you've organised your portfolio into these categories, set aside some percentage of the budget and IT resources for investments in high potential projects. Small, high calibre teams need to be given small budgets and tight timescales to have a go and see what's possible with these tasks.

They won't all work - but some of them will provide valuable new innovations that will lead to strategic projects later on. If they fail, better they fail now, having had minimal investment, than later after much more would be at stake.

High potential projects require close engagement between senior business and IT managers. It is through this close relationship that the ideas emerge and opportunities are identified. They also require trust - a willingness to have a go - and the leadership to ensure that the red tape does not stifle the innovation and learning at birth.

Having spotted an opportunity and decided where to invest, the next challenge is to consider how to approach the project.

Most approaches to IT projects are risk-averse and designed for an age when IT was mainly about automating well defined and well understood business processes. This is almost certainly not the case in a high potential project - by definition you are doing something new and exploratory.

High potential projects are the ideal opportunity for following an agile development approach, where upfront definition of requirements is replaced by an initial high-level vision and a small, multi-disciplinary team exploring what is possible.

After all, how effectively can you specify the requirements for something new and innovative?

Key practices of agile development include:

• Co-location: Bringing the team members together so they can work together face to face with the minimum of paperwork. Their interaction will be the source of innovation.
• Multi-disciplinary team: Ensure that key skills are in the team from day one , with individuals representing the organisation, the customer and the technology possibilities.
• Milestone-based control: Tight timescales contribute to innovation. The team needs to work to clearly defined timescales and stick to them to ensure that the exploration and innovation does not drift. On a high potential projects there should be a major milestone every two to three weeks. The focus on milestones keeps up momentum and motivation while avoiding too much micro-management.
• Daily meetings: A 30-minute daily meeting might become the primary means of controlling the project and responding to problems and opportunities.

Entrepreneurial CIOs working closely with senior business colleagues, have real opportunities to innovate - regardless of a downturn.

The formula is simple: Adopt the investment portfolio, ring fence a small percentage of the IT budget for some high potential projects, build some small high calibre teams and let them have a go. Be ready to take responsibility if things go wrong on one or two, and recognise the efforts of the teams that succeed.

Colin Ashurst is a senior teaching fellow in MIS at Durham Business School.

Some of the ideas presented in this article are based on the work of Professor John Ward and others at Cranfield School of Management. For more, see Ward's book with Joe Peppard, Strategic Planning for Information Systems, published by Wiley.