The Right Recipe for Innovative Tech Investments

It’s nearly impossible for business executives to approve investments on technologies that haven’t yet proven their value elsewhere, but that problem will go away soon, says Scott Anthony, president of Innosight, a strategic consulting firm.

In the meantime, CIOs and their teams need to focus on the tangible, immediate advantages emerging technologies can bring to their business.

Anthony, a former McKinsey consultant, joined Innosight after working for the firm’s co-founder, Harvard Business School professor and innovation guru Clayton Christensen. With Christensen he co-authored  Seeing What’s Next: Using the Theories of Innovation to Predict Industry Change (Harvard Business Press, 2004), and is the lead author of the soon-to-be-released The Innovator’s Guide to Growth: Putting Disruptive Innovation to Work. 

Anthony spoke recently with CIO Insight Online Editor Brian P. Watson.

CIO INSIGHT: There are lots of goals for adopting innovative and emerging technologies. What are executives thinking now?

Scott Anthony: There’s an interesting juxtaposition of the markets now, where people who intuitively feel they should spend their innovation time in coming up with new products and services that create new revenue streams and profit pools. But with the economic climate being what it is, there’s also tremendous pressure to innovate processes to reduce costs.

So people are trying to walk this fine line where they know they can’t cost-reduce or process-optimize their way to greatness, but economic pressure is making it hard–for at least some of them–to really focus on the revenue- and process-producing innovations that they know they need to do for the long term.

CIOs say the economic outlook isn’t killing their plans, though some see potential long-term problems. Historically, does one goal trump the other? Is there a winning strategy?

Process improvements, along a lot of dimensions, are predictable. They’re not tremendously fascinating sometimes, but they produce fairly predictable, fairly measureable results; whereas creating new products, services or business lines, when done right, can produce blockbuster returns, but the results are a bit more variable.

Along some dimensions it’s scarier to push for the new creation because it just feels to some people like they’re spinning a roulette wheel. The problem is, a lot of companies, through a 20- to 30-year investment, have basically done all the process improvement they can. So there’s not much more room for marginal improvement. So if they don’t turn the innovation lens to a different place, they’re just not going to get anywhere.

That is one of the really interesting things we’re seeing in the market here. I don’t see any signs that the people who are really strategic about innovation are slowing down. In fact, along some dimensions, you see companies saying, “This is the time I should really double down and really create space between myself and my competitors. I know what I’m doing, and if I made the right investors when my competitors can’t, I create a circumstance where it’s hard for them to respond.”