Information technology organizations are headed down two different paths, says Graham Waller, an analyst at Gartner Inc. "One type of company is seeing IT that is more commodified, even marginalized, as it focuses on traditional cost and efficiency. The other set is going in another direction, where IT is viewed as critical to the company's success, and understood as a change agent and a source of innovation."

Driving innovation requires different skills and techniques from IT managers, even as they are expected to maintain a focus on their traditional mission. For Vita Cassese, vice president of Global Business Technology for Pfizer Global Pharmaceuticals, the need to support both operating efficiency and top-line growth is a given. PGP is the core drug business of Pfizer Inc., the $52 billion drug giant based in New York City, and innovation has long been the lifeblood of big pharma, where the new-product pipeline must offset expiring patents. "We have always believed you need a balance between driving out costs and driving the top line," she says.

Managing for both innovation and efficiency means pursuing separate strategies for each goal, says Cassese. Cost-control requires centralization and standardization, while innovation demands that technology workers be closely aligned with different business units. "We have technologists embedded in our businesses, in order to understand the strategy and direction needed to help the businesses grow," she says. "They report on a dotted line to IT, but the solid line is to the head of the business unit, so their value can be measured and reviewed by that organization."

When it comes to driving out costs, Pfizer heads in the opposite direction. "The idea is to use shared environments and improve the service level at the least possible unit cost," says Cassese. Pfizer has been working toward a shared, global infrastructure for a decade, she says, and has started to achieve that goal in the past few years as telecommunications and other technology has evolved to support it. "Standardization is a key to driving out cost," she says. "The opposite applies to supporting innovation in the business units."

Consultant Geoffrey Moore, managing director of TCG Advisors LLC and author of the upcoming Dealing with Darwin: How to Innovate Forever in Established Enterprises (Penguin, Dec. 2005) says the two-track approach makes sense. "We focus specifically on innovations that create distinctive differentiation sufficient to create substantial competitive advantage. We call such innovation 'core.' And we suggest that all other work is context. Context work can still be mission-critical and require a ton of attention, but it does not create competitive advantage."

Within his core-context framework, says Moore, "most of IT is focused on mission-critical context. This is where centralizing makes sense, because it helps with mission-critical control, where the IT focus is on transactions and where efficiency matters a lot. By contrast, where the work is core, effectiveness is the key issue, and decentralizing makes more sense, because it helps with increasing the opportunity to discover innovations. In that context, IT is focused primarily on communications bandwidth to support interactions rather than transactions."

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