Strategic Experimentation with IT

Chapter 10

10-1© 2009 Pearson Education, Inc.  Publishing as Prentice Hall

© 2009 Pearson Education, Inc.  Publishing as Prentice Hall

Strategic IT Experiments

How IT is being used for Strategic IT experiments?

New products and services technology enabled – Electric Car, Solar PowerNew innovationAlliances with functioning departments

Occur in the larger framework of organizational innovation

Used to drive a new business venture

Are not just experiments with IT10-2

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Innovation

Comes about through organizational change

Frequently involves experimentation

Is necessary for long-term organizational survival

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Types of Innovation

Sustaining Innovation – improves a product or service for existing customers.(Software companies)

Disruptive Innovation – targets non-customers and delivers a product or service that differs from the current product portfolio. It must create and capture new value. (Apple)

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Forms of Innovation (Brown and

Eisenhardt, 1997)

Continuous Change Frequent, relentless and endemic to the firm.

Punctuated Equilibriumassumes long periods of incremental change, interrupted by brief periods of radical change.

Exercise: Provide examples of companies who use continuous or punctuated equilibrium techniques?

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Innovation & Strategic Experimentation Defined

A series of trial-and-error changes pursued along various dimensions of strategy, over a relatively short period of time, in an effort to identify and establish a viable basis for competing. (Nicholls-Nixon, Cooper and Woo, 2000)

Highest-risk, highest-return category of innovation and requires a unique managerial approach. (Govindarajan and Trimble, 2005)

(Kind of like gambling)

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Innovation & Strategic IT Experimentation

IT thus plays a key role in Innovation & change (Blackberries, Iphones, Ebay, VOIP)

IT’s role can be considered as a facilitator or enabler of innovation

Syncrude’s Strategic Experimentation with Windows 2000 Pilot, User Pilot and Windows NT

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Strategic Experimentation and the Innovation Process

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Figure 10.1

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Stages of the Innovation Process

1. Idea stage

2. Proof of concept stage

3. Trial or pilot stage

4. Transition stage

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Idea Stage (Telco innovation Process)

Generated through informal or formal processes (Brainstorming)

Must include specific objectives that address pain points or core business offerings

Exercise: In groups come up with a business idea for a technology company in line with their key competence?)

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Proof of Concept Stage

Teams are assigned to specific ideas.

Testing is done within a formal or informal laboratory setting using controlled experimentation.

Ideas may morph into other ideas.

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Trial or Pilot Stage

Idea is exposed to market in a limited and measurable way. (Syncrude Windows 2000)

Measurements are taken to evaluate results.

If successful, requirements for the next stage are defined.

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Transition Stage

Idea now enters full system development life cycle (SDLC IBM)

Short-cuts (DUCT tape solution) must now be engineered to meet production standards.

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Strategies for Successful IT Experimentation

Motivate: Establish rewards for strategic IT experimentation and risk taking

Support: Create infrastructure to support experimentation.

Direct: Manage innovation strategically.

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MOTIVATE - Establish Rewards for Strategic IT Experimentation

Experimentation is risky so we need some incentives.

Incentives and rewards must be provided to support experimentation.

Doesn’t need to be a big reward

Some IT employees relish from playing with new technology

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SUPPORT: Create Infrastructure to Support Experimentation

Infrastructure is needed to support IT innovation and experimentation.

Some organizations create formal centers (or laboratories).

Intranets are being used to solicit new ideas.

Financial support is frequently provided through internal venture support.

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Innovation Center Strategies

Insulate – Create innovation centers where all lines of business can come together to address common problems. Seeks to take advantage of synergy. (IDEO)

Incubate – Innovation centers are placed within lines of business. Seeks to focus on specific problems or opportunities. (Duncan McNeil Centre – NAIT)

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DIRECTION: Manage Innovation Strategically

Strategic IT experimentation must be directed from top management to ensure it’s relevance.

Link experimentation and innovation to customer value.

Customer doesn’t know what it needs!Recommend an idea. (Remember “Being Proactive”) 7 – habits?

Link experimentation to core business processes.

Use venture funds to guide strategic initiatives.

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Venture Funding Categories

Make greater use of innovation resources.Focus on new business models.Explore new/disruptive technologies.Focus on penetrating new markets.Leverage cross-organizational capabilities.Streamline decision making.Focus on opportunities that scale.

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Lessons Learned from Experimentation

Focus on achievable targets.Focus on built to scale for production

Don’t rush to market.Upgrade or clean install (Syncrude)

Be careful with cool technology.NAIT smart projectors and pens

Learn by design. (“Failure is futile”) is it?

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Conclusion

Strategic IT experimentation can lead the IT function to:

become more customer centricembrace new skillswork collaboratively with business units

IT will be able to use strategic experimentation to spin good ideas into gold.

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