IT Must Create Products, Not Just Cut Costs - InformationWeek
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3/2/2011
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IT Must Create Products, Not Just Cut Costs

Our Global CIO Survey reveals IT at the core of new products, business models, and innovation strategies. How does your organization stack up?

For an increasing number of companies, IT is a core part of their products, not a back-end support service that the customer never sees. The Web started this fundamental change, but the mobile Web is raising the stakes even higher. And if IT is part of the product, it makes IT's innovation efforts, and how CIOs organize those efforts, absolutely crucial.

That's the backdrop we thought about as we conducted our third annual InformationWeek Analytics Global CIO Survey this year. Among the ideas we research is how CIOs make sure their teams are plugged into the needs of customers and partners, as well as internal salespeople, marketers, engineers, and product designers, so they're part of the brainstorming that leads to new products. We also look at CIOs' biggest technology priorities and biggest concerns about their organizations and budgets.

Understand, most CIOs still haven't embraced this idea of IT being part of the product, though the percentage is growing. Thirty-four percent of the more than 200 IT leaders we surveyed say introducing "new IT-led products and services for customers" is among the top three ways they'll innovate this year. Two years ago, just 18% considered that a priority.

The highest priority, cited by 48% of survey respondents, is to "make business processes more efficient." The third and fourth highest are "lower IT and business costs" (33%) and "create a new business model or revenue stream" (27%). So think about the top four priorities this way: Two revolve around IT's classic job of improving efficiency and cutting costs, and two revolve around this rising priority of creating products and driving sales. CIOs can't trade in their efficiency and cost-cutting hat, but more need to start thinking about IT as integral to what their companies make, do, and sell.

Only 17% of the executives we surveyed say IT isn't expected to drive innovation. So how do the CIOs at the proactive 83% of companies know they're driving big ideas?

The most common way, cited by 60% of execs in our survey, is to form ad hoc teams to attack ideas as they arise. That percentage seems surprisingly low--four of 10 companies aren't throwing swat teams together to quickly vet IT-driven business ideas? Even for companies with more formal innovation programs, this would seem to be an essential complement.

Formal innovation programs are fairly common. About a fourth (27%) of the execs we surveyed have R&D teams dedicated to IT-driven innovations. About the same percentage (24%) have some formal effort to draw ideas out of IT--explicit goals, contests, and the like. Almost a third (32%) have a part of the IT budget dedicated to innovation work, and 42% make innovation part of IT employees' goals.

survey chart: What are the primary areas in which you spend your time?

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