Warning – innovation ahead!

Vivekanand Venugopal

FOR many organisations, innovation is a major driver – if not THE driver – of business growth. And today’s CIOs are under intense pressure to drive innovation across their businesses to support the insatiable corporate appetite for expansion.

However, according to a new research conducted by Hitachi Data Systems (HDS) and The Economist Intelligence Unit (EIU), many CIOs face considerable hurdles. On one hand, while as many as a third of respondents are planning to increase their IT investment in the coming year, a larger number is transitioning from spending more on IT to spending less!

This means that the majority of CIOs are being forced to utilise existing IT assets better, creating a potential barrier to effective innovation. The burning question is whether a lack of budgetand/or resources and the resulting slow decline in the standard of technology infrastructure will put the brakes on IT innovation. Will it impact business growth and, could it drag down the already precarious regional and global economy?

Resetting the default

In recent years, efficiency has become the CIO’s default niche. There is a rising expectation that CIOs will contribute to business growth in the next twelve months.

CIOs have an important part to play in innovation, which has been a major driver of revenue growth at almost three in five (59 per cent) companies in the survey. This relationship is expected to continue on an upward trend, despite some respondents expecting the significance of innovation to tail off.

However, when it comes to leading innovation, not just contributing to it, the majority of all executives agree that the CIO should drive innovation across the business. Over four out of five respondents share this view, even though IT is considered a driver of innovation at only 28 per cent of firms.

There are also signs of misalignment when it comes to strategic priorities for IT investment. The majority of CEOs would like to see their IT investment used to increase sales, but CIOs rank increasing sales only seventh on their list of strategic priorities for IT investments. For them, increasing organisational flexibility – and thus the ability to innovate – is the top priority.

Close alignment with the business is important at a time when IT departments are increasingly taking control of the overall IT budget. Nearly one in three firms is moving from a situation where some of the IT spend is devolved to business units to one where the IT department exclusively controls all IT spend. Some 87 per cent of board- or C-level executives agree that CIOs should have final decision-making authority on all IT expenditure. This is potentially a positive development, but only if the IT team works in close consultation with all the business units to agree on their IT needs.

According to an EIU survey last year, 45 per centof business executives in Asia-Pacific believed that big data insights could boost revenue by 25 per cent or more by improving both decision-making and understanding of customers. Understanding this shift from efficiency gains to sales would enable CIOs to frame IT investment in a language that the business understands. After all, cloud computing and data analytics are key components of any big data play.

This will be important as IT investment hangs in the balance. Over one-third (38 per cent) of companies – and a majority in China (60 per cent) and India (57 per cent) – are currently increasing IT investment. However, a majority are transitioning from spending more on IT to spending less – particularly in developed markets, such as Australia, Hong Kong, South Korea and Singapore. Creaking IT infrastructure is already one of the top barriers to innovation; so cutting investment further could prove costly.

Conclusion

Technology may have thrust the CIO into the spotlight, but his or her career is not tied to IT. As in other areas, the future CIO’s role in innovation now goes beyond deploying and managing IT.

Early-stage involvement in business-critical decisions means the conversation with other C-level colleagues has to focus on achieving business goals first and foremost, rising above the specifics of hardware and software. Looking ahead, the strong link between innovation and revenue growth should cast an even brighter spotlight on the CIO.

Thus, if CIOs want to build on their hard-won reputation and become more involved in the business then they will have to start thinking beyond a narrow technology remit. Simply demonstrating that they have the technical skills to do their job will not be enough to lift CIOs above the IT function.

(Vivekanand Venugopal is VP and General Manager, Hitachi Data Systems. The views expressed here are of the author and CyberMedia does not necessarily endorse them)