IT Must Create Products, Not Just Cut Costs - InformationWeek
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Chris Murphy
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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?

IT Is Part Of The Product

At Hilton Worldwide, guest surveys show that the No. 2 factor affecting satisfaction, just behind a clean room, is having a reliable Internet connection. And Hilton has made a huge strategic bet on Wi-Fi, making it free in many of its chains, including Hampton Inn and Hilton Garden Inn, and free to frequent guests at its higher-end hotels. So should CIO Rob Webb turn part of his IT team into the world's leading Wi-Fi networking experts?

Webb thinks not, so he outsourced operation of the networks in Hilton's U.S. hotels to AT&T. Instead of worrying about whether the Wi-Fi's running, he has a team of 14 people whose job is to figure out things like how guests want to use that network--experimenting with services like new streaming in-room entertainment options and an iPad app to access concierge services. "Now that you have this high-speed pipe, guests will want to do a lot more things," he says.

At the same time, Webb has tried to eliminate the idea of these innovative projects being tagged IT projects. The company just created an Enterprise Program Initiatives Council, which tracks the most important Hilton projects that span the company and all the hotel brands. That includes 17 top-priority projects, such as redesigning its Web sites, developing a new Hilton Honors rewards program with more automated services, reinventing in-room entertainment, bringing mobile services to guests, and using more sophisticated revenue management techniques to price rooms.

All those projects are tracked--company-wide, not just in the IT organization--using Hewlett-Packard's program management center software. "What we don't want to have is the hand-off: This is a business program, and now we will hand it off to IT," Webb says. "I wanted every project to be a business-sponsored program, enabled by IT."

Outsourcers like AT&T aren't off the hook for innovation. Hilton has a core set of IT vendors, including Accenture, AT&T, IBM, Microsoft, and Tata, that it calls the Hilton Innovation Collaborative. For some of them, to win their long-term contracts with Hilton, each had to commit "multimillion dollars," Webb says, to a reinvestment fund they commit to spending on innovation projects they implement with Hilton. Hilton in return will work with the vendors to develop those innovation projects, sharing its industry knowledge and intellectual property to help the vendor essentially create a new product. AT&T, for example, built a call center to provide Hilton guests with Internet service, and it's selling that same capability to the likes of McDonald's, Starbucks, and Barnes & Noble. Hilton and AT&T are also co-developing other applications, such as "auto-authentication," whereby a customer's cell phone alerts the hotel once the customer is in the area, so the hotel's staff is prepared for the guest's check-in.

Hilton benefits from tapping into its vendors' R&D pipelines early on. "It's about scale and speed and resources," Webb says. "To not tap into these resources in a thoughtful way would be missing a huge opportunity."

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