At the ACT-IAC 2011 Executive Leadership Conference, ITIF president Rob Atkinson presented on the importance of innovation in IT and government leadership in IT practices. This presentation highlights the innovator’s challenge of exploiting and exploring industry facets simultaneously.
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IT Innovation in the Federal Government
1. October 24, 2011
IT Innovation in the Federal
Government
ACT-IAC 2011 Executive Leadership
Conference
Presented by:
Rob Atkinson, President, ITIF
2. The Information Technology and Innovation Foundation (ITIF) is a
Washington, D.C.-based think tank at the cutting edge of designing
innovation policies and exploring how advances in information
technology will create new opportunities to boost economic growth and
improve quality of life. ITIF focuses on:
Innovation processes, policy, and metrics
E-commerce, e-government, e-voting, e-health
IT and economic productivity
Science policy related to economic growth
Innovation and trade policy
2
3. Today’s Presentation
1 What’s the Challenge and Why Innovation is an Answer
2 What is Innovation?
3 Where’s the Federal Government?
4 Why is Innovation So Difficult?
5 What are the Federal Opportunities?
6 Leading Innovation
3
6. What’s the Answer? Innovation
Innovation Can Cut Costs
The Tech CEO Council estimates that better
use of IT could save the federal government
over $1 trillion by 2020
Innovation Can Boost Citizen Satisfaction
6
7. Today’s Presentation
1 What’s the Challenge and Why Innovation is an Answer
2 What is Innovation?
3 Where’s the Federal Government?
4 Why is Innovation So Difficult?
5 What are the Federal Opportunities?
6 Leading Innovation
7
9. Innovation is Different from Quality–and Comes in Different Degrees
modest radical
change
degree of change change
Improving what
you already do
Creating new elements
quality of value and
systems-centric differentiation
process-centric
improvement-oriented
innovation
customer-centric
design-based
Exploiting known Exploring unknown creation-oriented
certainties possibilities
incremental architectural discontinuous Degrees of innovation
Incremental innovations Architectural innovations Discontinuous innovations
involve small involve incorporating new occur when an advance is
improvements to an technology and processes so powerful, it makes old
existing product or process to change business products or processes
to enhance efficiency. elements. obsolete
9
10. There are Ten Types of Innovation
1. Business model 5. Product performance
how the enterprise makes money basic features, performance and functionality
2. Networking 6. Product system
enterprise’s structure/ extended system that surrounds an offering
value chain
7. Service
how you service your customers
Finance Process. Offering Delivery
Business Networking Enabling Core Service/prod. Svc/prod Service Channel Brand Customer
model process process performance system experience
8. Channel
how you connect your offerings
3. Enabling process to your customers
assembled capabilities
9. Brand
how you express your offering’s
4. Core process benefit to customers
proprietary processes that add value
10. Customer experience
how you create an overall
“Ten types of Innovation” by Larry Keeley/Doblin Inc. experience for customers
10
11. What Are the Consequences of Not Innovating?
1. Failure to meet rising customer expectations.
2. Risk of losing the best talent.
3. Risk of losing new revenue opportunities.
4. Risk of getting “Baumol’s Disease” (low productivity, high
costs).
11
12. Today’s Presentation
1 What’s the Challenge and Why Innovation is an Answer
2 What is Innovation?
3 Where’s the Federal Government?
4 Why is Innovation So Difficult?
5 What are the Federal Opportunities?
6 Leading Innovation
12
13. Federal IT Challenges
Customer-facing challenges:
Too many web sites still hard to use
Too many web sites still organized around agencies and
bureaus
13
14. Users Rate E-gov Websites Lower Than E-commerce Sites
8.4
E-Government/Agency
8.2
8.146 E-Business/Company
8
7.8 7.78
7.6 7.679 7.704
7.4 7.484
7.449
7.382 7.391
7.2 7.279
7 6.995
6.8
6.6
6.4
Customization Organization Navigation Overall Statisfaction Comparison to Ideal
Source: Forrest V. Morgeson III and Sunil Mithas. Does E-Government Measure Up to E-Business? Comparing End User Perceptions of U.S. Federal
Government and E-Business Web Sites. (Public Administration Review, 2009).
15. The Range of Satisfaction is Higher for E-gov Sites
10
E-Government/Agency
E-Business/Company
9
8.7
8.2
8
7.9
7
6.6
6
Source: Forrest V. Morgeson III and Sunil Mithas. Does E-Government Measure Up to E-Business? Comparing End User Perceptions of U.S. Federal
Government and E-Business Web Sites. (Public Administration Review, 2009).
16. Federal IT Challenges
Customer-facing challenges:
Too many web sites still hard to use
Too many web sites still organized around agencies and bureaus
Internal Challenges:
Considerable duplication of applications instead of
widespread shared services
Gap (growing?) between commercial best practice and
current government practice (e.g. slow to move to the
cloud).
16
17. Federal IT Challenges
Customer-facing challenges:
Too many web sites still hard to use
Too many web sites still organized around agencies and bureaus
Internal Challenges:
Considerable duplication of applications instead of widespread
shared services
Gap (growing?) between commercial best practice and current
government practice (e.g. slow to move to the cloud).
Overall Challenge:
No systemic focus on driving automation and productivity
17
18. Today’s Presentation
1 What’s the Challenge and Why Innovation is an Answer
2 What is Innovation?
3 Where’s the Federal Government?
4 Why is Innovation So Difficult?
5 What are the Federal Opportunities?
6 Leading Innovation
18
20. Innovation Isn’t Easy – Some Puzzles to Ponder
Why didn’t IBM keep the operating system?
Why didn’t Microsoft create the browser?
Why didn’t AT&T create AOL?
Why didn’t American Airlines create
Southwest?
Why didn’t Citibank create PayPal?
Why didn’t Blockbuster create Netflix?
Why didn’t Sam Goody’s create iTunes?
It takes effort to stand in the future and see new
possibilities.
Just because you’re not willing to disrupt your own
business, doesn’t mean someone else isn’t willing to
do it for you.
20
21. The Innovator’s Challenge is to Exploit and Explore Simultaneously
Game-Changing Innovations
exploit explore
Incremental Architectural Discontinuous
Research
Typically found within your core business Originate from discovery-oriented activities
Originate from continuous improvement efforts Often found at the margins of your core business
Enabled through OTS components May require significant enabling technologies
May require coordination across lines of business
Dev
Implemented within a current line of business
External partnerships, if any, are straightforward Often require major external partnerships
Funding
Fit within your existing business model May run counter to your current business model
ROI is modest but clear-cut ROI is uncertain but upside potential is significant
21
23. National Governments Invest More in IT
IT$/Share of Revenue
9
8
7
6
5
4
3
2
1
0
National governments Average
Source: Gartner, 2011
23
24. National Governments Invest More in IT
IT$/per Worker
15,000
14,500
14,000
13,500
13,000
12,500
12,000
11,500
National governments Average
Source: Gartner, 2011
24
26. But Money is Not Enough
Firms that adopt digital organization tenets and simultaneously
invest more in IT have disproportionately higher performance
than firms that do not.
MIT’s Erik Brynjolfsson: “Something unique happens when
human capital and other workplace practices are combined
with technology.”
26
27. Organizational Change is Also Required
A distinct corporate culture and organizational practices
are found in most corporations that make extensive use of
IT and the Internet. They:
1. Move from paper-based to digital business processes
2. Empower front line service personnel
3. Foster open information access
4. Link incentives to performance
5. Maintain focus and communicate goals
6. Hire the best people
7. Invest in human capital
Erik Brynjolffson
27
29. McKinsey Finds the Same Result
% increase in total productivity
75th
+
percentile There are productivity
and above +8% +20% gains from simply
Management practice score
automating processes.
Yet the biggest
productivity gains are
achieved when IT
investments are
0 +2% combined with changes
25th in business practices.
percentile
and below This is hard and takes
_ Intensity of IT Deployment + lots of time and effort.
25th percentile 75th percentile
and below and above
Source: LSE – McKinsey survey and analysis of 100 US, UK, French, German companies, 1994-2002
29
33. IT investment by asset in OECD countries, 2007,
percent of non-residential capital formation
30
25
20
15
10
5
0
Software Communication equipment IT equipment
33
34. Today’s Presentation
1 What’s the Challenge and Why Innovation is an Answer
2 What is Innovation?
3 Where’s the Federal Government?
4 Why is Innovation So Difficult?
5 What are the Federal Opportunities?
6 Leading Innovation
34
41. IT Impacts on Public Sector Capabilities
(positive – negative impacts)
120
100
80
60
40
20
0
Improved Staff Reduction Data access Control
Services
Source: Anderson, Henriksen, Medaglia, Danzinger, Sannarnes, and Enemaerke. Fads and Facts of E-Government: A Review of the Impacts
of E-government (2003-2009), International Journal of Public Administration, 2010
41
42. Today’s Presentation
1 What’s the Challenge and Why Innovation is an Answer
2 What is Innovation?
3 Where’s the Federal Government?
4 Why is Innovation So Difficult?
5 What are the Federal Opportunities?
6 Leading Innovation
42
43. What’s Different About this New Management Style?
2000s leadership style The new leadership paradigm
Rarely talk about innovation Speak candidly about
No innovation definition or innovation challenges
metrics Clear definition of risks and
No leadership time spent on rewards
innovation Leaders spend hands-on time
Leadership style is directive: Inspiration and collaboration:
“Make it happen” “We can do it”
43
44. Managers Must Lead Innovation Differently
Created a strategic design Implemented a
capability in every BU Measures BU leaders on Run/Grow/Transform
“courage” to drive out-year strategy
Requires that 50% of new revenue growth
innovations come from
outside the company Uses Six Sigma (quality)
savings to fund innovation
investments
44
46. IT Executive’s View of the Role of Their CIO
50
45
40
35
30
25
20
15
10
5
0
Steward Strategist Revolutionary
Deloitte: September, 2011 (survey of 1000 IT executives: How do you view your
CIO?
46
49. “We have to strike the right balance between
being in touch and being in control. The
irony is that the more in control we are, the
more out of touch we become.”
- A.G. Lafley, CEO Proctor and Gamble
49
50. Striking the Right Balance
Successful innovation requires marrying Passion, Permission, and Protocols
Senior management:
•Declares an innovation intent The organization:
•Sets conditions for innovation Permission • Establishes processes to
support innovation.
Processes
success
zone
Your people:
• Have the passion, they just need the Passion
proper channels to unleash it.
50
51. Thank You
Robert Atkinson ratkinson@itif.org
Follow ITIF:
facebook.com/innovationpolicy
www.innovationpolicy.org
www.youtube.com/user/techpolicy
www.itif.org
Twitter: @robatkinsonitif