ADVANCED PRACTICES COUNCIL (APC) INSIGHTS - OCTOBER 2020 MEETING HIGHLIGHTS
Advanced Practices Council members – senior technology executives across industries – gathered virtually in October to continue learning from exemplary researchers and practitioners (including themselves) on topics they voted as high priority for their future success.
The theme woven through the opening member round table and the four speaker-led sessions was innovation – orchestrating a corporate innovation architecture, monetizing API infrastructure to achieve digital transformation, crafting work enabled by AI, and creating a culture of accountability to execute innovative projects successfully.
Leading Digital Corporate Transformation
Didier Bonnet (Professor of Strategy & Digital Transformation at IMD) asked APC members to select the item with the most lines of code (i.e., Facebook, Ford F150, Mars Curiosity Rover, large Hadron Collider, the book War and Peace, a heart pacemaker, an Android mobile phone, Boeing 787). The answer: Ford F150, which has 150 million lines of code. Commercial digital innovation has become the norm. According to a recent survey, executives are only 6% satisfied with their business’ innovation performance, a critical component of their business success. There are many reasons for dissatisfaction including: lack of clear accountability for innovation at the top, lack of digital capability and skills, digital innovation projects isolated from the core business, uncoordinated pilots across the firm and difficult to scale, too incremental an innovation focus, and lack of adequate preparation (e.g., effective data management). Didier noted an additional factor due to the pandemic: firms focusing more on cost-reduction than innovation.
In addition to the shift of corporations over the last five years towards digital innovation with such digital general-purpose technologies as augmented and virtual reality, 5G, Internet of Things, and artificial intelligence, Didier noted two other shifts within corporations. One is a significant broadening in digital innovation sourcing, leaning more towards external sources due to lack of internal capabilities. He recommends that firms seek ways to reverse that trend by investing in in-house capabilities to enable differentiation from competitors since outsourcing generally provides parity with competitors rather than advantage.
The other shift is towards more transformative, rather than incremental, investment portfolios. Didier recommends portfolios that consider three horizons. The first leads to incremental innovation, which can be beneficial. The second considers adjacent innovation outside the firm’s core, such as new service models. The third and most transformative involves disrupting the firm’s core through breakthrough innovation, such as new business models.
Monetizing API Infrastructure
Nigel Melville (Associate Professor at University of Michigan) and Rajiv Kohli (Professor at College of William & Mary) identified three models of digital innovation leveraging application programming interfaces (APIs). Although all lead to business value, some go well beyond enhancing efficiency to achieving digital transformation.
Model 1, labeled “efficiency,” occurs when companies seek to share data and develop apps more efficiently. Companies have a minimal set of infrastructure features and generate limited value (e.g., programming efficiency and enhanced time to market). Generally, this model is not accompanied by clear governance or data security strategies. The mindset within the firm is that APIs are just another integration tool.
Model 2, labeled “focused,” refers to companies that exploit significant focused business opportunities while reducing costs. The approach reflects a more inside-out mentality in which the goal is to consider the needs of partners, customers and employees. Greater strategic thinking and placement underlies model 2. In one case, API innovation project management was located under the Chief Information Security Officer to ensure rigorous risk management, scalable security, and SOX compliance. One desirable outcome of the model 2 approach can be the development of capabilities as a service.
Model 3, labeled “transformed,” occurs when APIs are aimed at industry leadership and become the foundation of digital transformation across the firm. The mindset that underlies the model 3 approach is that data should be available self-serve so business people can create x-as-a-service on the fly with built-in security and governance guardrails.
Nigel and Rajiv recommend that CIOs assess their current API value model to determine how well it aligns with business strategy. If alignment is not strong, they should select the appropriate API model for the business and form a strategic team to develop a business case for communicating the business value possibilities and risks.
Bottom-up Work Crafting and Automation
At one end of the AI/human work continuum is replacing humans. At the other end is AI replacing repetitive human tasks, thereby allowing humans to perform higher-order tasks that machines cannot (at least at this point) perform. Terri Griffith (Professor at Simon Fraser University) contributes to the discussion through her research on methods for helping humans to improve their potentially AI-enabled jobs. Research has shown that people are not good at crafting better jobs for themselves because they generally don’t think broadly enough about their options. Moreover, vendors focus their pitch on enterprise benefits to high-level executives rather than workers. Terri has developed a work-crafting method that entails a series of workshops that enables workers to craft more efficient, effective, and motivating jobs. The dilemma she raised, however, is that research indicates that top-down direction impedes motivation to craft better jobs, yet her methods incorporate manager-sponsored workshops.
Building a Culture of Accountability
A culture of accountability helps ensure that innovative projects are executed as designed. Since innovation often begins by thinking differently, the discussion on accountability began with a case involving people at the opposite end of the economic and moral spectrum from IT managers and staff. Delancey Street Foundation is a successful residential self-help organization for substance abusers, ex-convicts, homeless and others who have hit rock bottom. The founder is very clear about what each resident is accountable for (i.e., taking responsibility for others’ success and pulling each other up so everyone can make it) and the structures and processes that support accountability. APC members explored how Delancey Street’s approach could inform building and sustaining accountability in their IT organizations and were offered checklists for doing so (e.g., In what ways are you a role model of accountability? What actions reflect that role? How do your communications within IT and beyond reflect your taking accountability seriously? How clear are IT leaders and staff on their accountabilities and how their goals align from the top down? How well do IT leaders achieve expectations of giving and getting constructive feedback? What rewards (intrinsic and extrinsic) do you give those individuals and teams that demonstrate high accountability?)