“If you want your organisation to be the leader in the industry, avoid ‘best practice’ processes,” says Mike Kennedy, Gartner’s senior programme director for executive programmes. Kennedy was speaking at the CIO annual conference held in Auckland last week.
Leading companies don’t follow what everyone else does, he says. They don’t imitate; they innovate.
Most companies go down the reactive path, he says. They are agile and react to all new things that are coming out — new products, new services and new technologies.
Kennedy talks about how the destructive chain (or “death spiral”) of competition-innovation-imitation drives down business value and margins.
The majority of companies aim for operational improvement by “doing things differently”, he says, whereas the industry leaders innovate by “doing different things”.
He gives Apple Computer’s iPod as an example. People had listened to music on handheld devices before, but the iPod concept was something completely new.
Innovative leading companies — for example Dell, Wal-Mart and Starbucks — have some things in common, says Kennedy. They don’t like to imitate; they challenge assumptions in the industry; they treasure their people and they know they won’t be leaders in the industry through reaction.
“Products can be copied, but people and culture cannot,” he says.
However, the leaders of these innovative organisations must be highly dedicated, and they must be willing to put their people and organisations through the pain of change, he says, because they are constantly “ripping up the fabric” and reinventing themselves to achieve that deep change.
Committed, capable organisation leaders are absolutely essential if the innovative approach is going to work, says Kennedy. Other critical success factors include an enterprise architecture that can support change and governance.
“Leading organisations are great at governance,” he says. “The ‘C-levels’ [CEO, COO, CFO] need to be on the team to mandate change and innovation.”
He also gives a few recommendations. For example, make operational innovation a way of life, rather than a project; outsource only as a last resort; accept short-term imperfection and build, not buy, IT capabilities.
Kennedy stresses that he is not a Gartner analyst, but has a background as a practitioner, and that some of his conclusions might go against general research by Gartner.
“Less than 5% of the CIOs I work with would be ready to take this [approach] on,” he says. Kennedy provides advice and guidance to CIOs and senior information systems executives across Australia and New Zealand.