Innovation Makes Emerging Technologies Pay Off

5.4% of corporate budgets are spent specifically on innovation.

of IT departments are involved in new product and service innovation.

of companies are early adopters of information technology.

of companies have received significant payoffs from adopting emerging technology.

say emerging technologies play an integral role in supporting corporate innovation.

To download the survey results, click here.

Greg Isaacs is following in the footsteps of the missionaries who went to China years ago, only he is not there to do the Lord’s work. Instead, he explained in a phone call from Shanghai, eBay Inc. sent him there to “evangelize to Chinese developers.” eBay estimates that more than 430,000 people in the U.S., and thousands more worldwide, make a living—full- or part-time—selling on the online auction site.

Now the company hopes to add tens of thousands of Chinese citizens to that number. It wants to encourage third-party software developers to create software using Web services that will help high-volume Chinese customers, the sort who sell thousands of items online, to easily manage their eBay sales. eBay also wants developers to create software that will let Chinese buyers place and track bids on their mobile phones. Isaacs’s mission, as director of eBay’s developer program, is “to attract the developer community to build innovative applications.”

It’s too early to tell if Isaacs’s trip will pay off, but few would doubt it’s worth the gamble. Whether developed in-house or obtained from business partners, IT has become a fundamental ingredient in innovation. And today, innovation isn’t just a business fundamental, but an American obsession—even a patriotic duty. “Why is innovation important? Well, quite frankly, it’s the only way we’re going to have a [high] standard of living and prosperity and maintain our security as well,” said Deborah Wince-Smith, president of the Council on Competitiveness, at a recent conference. “The only way we are going to prosper is to attract high-value investment and perform high-value economic activity here in the U.S. And the way to do that is through creating new value, new products and services that compete and succeed globally.”

This attention to innovation led CIO Insight’s editors to expand the annual survey on emerging technology into the topic of innovation. As in previous years, our study looks at the adoption of emerging technologies such as Voice over IP and service-oriented architecture, and tracks whether more companies are becoming early adopters of technology. But this year, our survey of 396 senior IT executives

We also investigated whether emerging technologies, and IT organizations, are contributing to business innovation. The results: Most IT organizations are actively involved in business process innovation, and many are contributing to product and service innovation as well. IT organizations are developing systems that improve or replace processes and finding new ways to deliver products and services. We also learned that more companies are early adopters of emerging technology than in past surveys.

But the most important result was this: Emerging technology doesn’t make companies innovative; instead, innovative companies make emerging technology valuable. Not only are innovative companies more likely to be early adopters, but IT executives at innovative companies are almost twice as likely to report significant payoffs than those who work for companies they do not consider innovative.

Why do innovative companies find benefits from emerging technologies that elude the less innovative? While innovative companies have an IT strategy that is designed to support innovation efforts, that is not a cause of innovation, but an effect. “Innovation starts off with business leadership making a determination that they have to find new ways to do things,” says Dale Kutnick, director of research and senior vice president at Gartner Inc. Such leaders, according to Kutnick, also reward employees who come up with innovative ways to generate revenues or save money. That is largely confirmed by our own survey: While not all innovative companies provide such rewards, innovative companies are twice as likely to do so. Innovative companies also have a culture that supports technology experimentation and risk-taking.

But innovative companies don’t depend solely on incentives and culture; they rely on process, too. Companies where emerging technologies pay off are far more likely to have procedures and processes for quickly implementing promising new technologies. Such companies are also twice as likely to measure the business value of a new technology after they deploy it. These findings were echoed at a presentation on innovation at the May 2005 Gartner Symposium in San Francisco. Kathy Harris, a Gartner group vice president, noted that innovative organizations, including IT organizations, follow a process model for innovation: generating ideas, evaluating and selecting a few ideas from among them, developing and implementing innovations, and learning from the experience so they can improve their programs over time. “That’s what makes their innovation programs sustainable: You must keep the learning going,” she said.

Finally, innovative companies are far more likely to deploy new technologies. Of the 30 emerging technologies we surveyed, just one—speech/voice recognition—has been deployed more frequently by companies that are not innovative. Usually, innovative companies are at least twice as likely to deploy any of these technologies; in some cases, such as grid computing and self-healing computing, the ratio is as much as 9 to 1 or 10 to 1. Given that innovative companies are not only more likely to deploy emerging technologies, but are better at implementing them, it seems they are in a good position to use IT not only to remain innovative, but to maintain a sustainable competitive advantage, in years to come.

To download the survey results, click here.

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