How IT Shops Should Attack New Investments

By Brian P. Watson  |  Posted 06-05-2008

How IT Shops Should Attack New Investments

When it comes to investing in emerging technologies, corporate IT departments could--and many say should--be like those "alpha consumers" so many businesses target. Alpha consumers are up on the latest gadgets. They buy early. And they become make-or-break test cases for new products.

Sure, it's a little more complicated for IT shops to act like yuppie spenders. The latter are competing with friends and colleagues to snag the coolest new toys around, while the former grapple with changing business needs, increasing competition, bleak economic forecasts and, perhaps most importantly, serious complexity in actually determining how new technologies will perform.

But when it comes to gaining a competitive advantage, the analogy is spot on. Despite that, businesses aren't exactly buying in.

Corporate executives are the most receptive to new, untested tools if they show promise for cutting costs, according to CIO Insight's May research report on emerging technologies. Beyond that, measuring value is a tougher game. One technology may be cheaper than another to buy, install and maintain, but the overall return-on-investment math is tricky.

"Because innovation is so difficult to measure, it can lead companies to make the wrong decisions," says Scott Anthony, president of innovation strategy firm Innosight. "You'll take something that's measurable over something that's not, even if the thing that's not measurable has much greater long-term impact."

The risk-versus-reward argument is especially tough when applied to emerging technologies. Last year, when CIO Insight looked at emerging technology adoption, IT executives said their biggest problem involved coming up with clear estimates for benefits like cost reduction and process improvement. If the technology truly is new, they said, there isn't a preponderance of case studies from which to base those projections. Without those results, CIOs are left in the lurch.

Add to that the differing objectives for investing in new tools. The vast majority of IT executives in our May survey listed process improvement--namely in speed, agility and flexibility--as their company's top goal. But when asked which benefit was most likely to garner executive support, they pointed to cost reduction above all others. Other goals that ranked high in both areas included increasing productivity, boosting revenue, and creating new products and services.

Delicate Balancing Act

Surprisingly, though, keeping up with the competition scored lowest in both categories. That's a striking counterpoint to the numerous experts who equate emerging technology investments to key drivers of competitive advantage.

One of those experts, IT benchmarking pioneer Howard Rubin, says businesses should use a tightly managed venture capital model for their emerging technology buys. That means picking the tools they think can deliver benefits, then analyzing performance scenarios and setting their patience timelines for the tools.

These considerations force CIOs and their teams into a delicate balancing act between pushing what's new and what the business actually needs--or thinks it needs.

All the while, executives must view these moves not as risky experiments, but as strategic investments. "Now is the time to take your boldest but most carefully managed bets," Rubin says.

To get the decision-makers on board, CIOs need to stick to a strategy, Innosight's Anthony says. For starters, that means coming up with a quantifiable result, whatever it may be. Then they have to remember that more modular tools--namely, those that won't have unpredictable interactions with other key systems--are more likely to get approval.

Finally, the more tangible the technology is to end-users, the easier it is to envision being successful. For instance, cloud computing is a great concept, but it's difficult for some to grasp. On the other hand, a collaborative tool like instant messaging can have a concrete impact on communication and teamwork.

The current economic climate doesn't help. Most IT leaders told us their emerging technology strategies shouldn't change in the near term due to the slowdown, but many pointed to scalebacks later in the year, if the bad news persists.

Rubin says the bad times are the best times to invest strategically in emerging technologies. Not doing so can cause almost irreversible damage. "This is not the time to be shy," he says. "The guys who aren't will take over their markets."

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