What Would Joe Do?
Peggy Aycinena is a freelance journalist and Editor of EDA Confidential at www.aycinena.com. She can be reached at peggy at aycinena dot com.
CINO: solves Big R&D Talk, but Little ROI Walk
December 3rd, 2013 by Peggy Aycinena
When it comes to high-tech, it’s not just those who hang out in Silicon Valley whose sacrifices at the Alter of Innovation must be generously funded and then widely touted. Captains of high-tech industries everywhere must spend oodles on R&D and then brag about it, year in and year out, regularly releasing their R&D budget numbers so people (particularity stockholders) can sense the true scale of the organization’s commitment to the Great Cult of Innovation.
It turns out, however, it’s easy to talk the talk, but much tougher to walk the walk.
It turns out – even though of late, companies like IBM have put up annual growth numbers in the range of 40% and Apple’s have been almost double that – over the last 40 years, actual growth rates in high-tech have been measurably less than growth rates across non-high-tech industries. And this, despite the fact that R&D budgets in high-tech have persistently been 75% bigger, as a percentage of revenue, than R&D budgets for their non-high-tech sector counterparts.
Are you following this? In other words, the ROI on R&D in high-tech – the amount of growth that has resulted from all of that R&D investment – has been shockingly low, and it’s not just because various markets for high-tech goods are saturated.
According to Bill Poston, Founder & Managing Partner of Ohio-based Kalypso, there’s a structural problem within high-tech organizations that’s the root cause for these disappointing results. Speaking last month at Dassault Systemes’ Customer Confab in Las Vegas, Poston said the problem is not a lack of commitment on the part of high-tech management.
Instead, he said, “It’s a problem of accountability.”
“Who’s responsible for the financial health of the organization?” Poston asked rhetorically. “It’s the CFO. And who’s accountable for IT? It’s the CIO. And who’s responsible for productivity in the organization? It’s the COO.”
“However,” Poston continued, “innovation is cross-functional, so where does the accountability sit for innovation within the organization?”
Traditionally, Poston said, with no one: “However, we’re now seeing a trend to identify a single officer – a Chief Innovation Officer – who is responsible. Today, research indicates that 43% of high-tech organizations can identify a particular individual who is responsible for overseeing innovation [within the enterprise].”
And what does such a person do?
According to Poston, the job of the CINO is simple if the following conditions are in place within the organization: An investment allocation that supports and commercializes blockbuster ideas. Robust cross-functional communication. Comprehension of cycle times for implementation of new ideas, and a set of metrics to monitor the subsequent impact. External collaboration with ecosystem partners. And an internal career path for employees that’s enhanced by evidence of successful innovation.
Alternatively, for those who need a more systematic methodology, Poston laid out a step-by-step road map for the successful CINO:
“First, the Chief Innovation Officer formulates and communicates the innovation strategy.
“The second step involves shaping a portfolio [of products] to accelerate breakthrough initiatives.
“Third, there has to be a steady evolution towards business disciplines, competencies and a culture focused on innovation.
“Finally, the office of the Chief Innovation Officer must create a learning organization that measures and monitors innovation performance.”
It all certainly sounded logical and straightforward enough, sitting in the audience in Las Vegas as Poston presented his talk – Formulate, Communicate, Shape, Accelerate, Evolve, Create, Measure, Monitor.
To the less-easily swayed in the audience, however, it sounded ponderously bureaucratic, while also begging the question: If you can’t legislate morality, how in heck can you dictate innovation?
But Poston wasn’t dictating anything. Instead, he was acknowledging: “Innovation is ‘Big Brain’ stuff that’s both capital and labor intensive. Clearly, there is no shortage of people talking about innovation, but growth [based on innovation is complicated]. The barriers are huge and [span] everything from engineering to marketing.”
Nonetheless, he concluded, building on his fact-based optimism: “Although there is no R&D spending problem in high tech, [historically] we’ve not really been driving growth.
“If we commit to working together more effectively, however – especially if that collaboration is led by an officer specifically focused on innovation – we will develop better products.”.
And, no doubt, we’ll also see an associated up-tick in growth. Not to mention, far happier CEOs, COOs, CFOs, CIOs and CINOs – all talking the talk and walking the walk.
Given Poston’ articulate message in Las Vegas, it’s probably a safe bet to say that if you are in New York City later this week, you’ll want to attend the 2-day Chief Innovation Officer Summit, which promises to “Incite Discovery & Inspire Change”.
Kalypso is one of the sponsors.
Prior to founding Kalypso, Bill Poston was a partner at Deloitte Consulting where he spent eleven years serving clients across industries and business functions. He was a leader in the firm’s product innovation and lifecycle management practice. His expertise is in the transformation of organizations to deliver on the promise of innovation. Poston’s specific areas of focus include innovation strategy, portfolio management, product development process improvement, technology commercialization, PLM and PPM technology strategy, leadership alignment, and organizational change.
Poston has an MBA from the University of Texas, a BBA from Texas State University, and is a certified New Product Development Professional.
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