Chapter © 2012 Pearson Education, Inc. Publishing as Prentice Hall

Occur in the larger framework of organizational innovation Used to drive a new business venture Are not just experiments with IT 12-2

© 2012 Pearson Education, Inc. Publishing as Prentice Hall Comes about through organizational change Frequently involves experimentation Is necessary for long-term organizational survival 12-3

© 2012 Pearson Education, Inc. Publishing as Prentice Hall Sustaining Innovation – improves a product or service for existing customers. Disruptive Innovation – targets noncustomers and delivers a product or service that differs from the current product portfolio. It must create and capture new value. 12-4

© 2012 Pearson Education, Inc. Publishing as Prentice Hall Continuous Change – Frequent, relentless and endemic to the firm. Punctuated Equilibrium – assumes long periods of incremental change, interrupted by brief periods of radical change. 12-5

© 2012 Pearson Education, Inc. Publishing as Prentice Hall A series of trial-and-error changes pursued along various dimensions of strategy, over a relatively short period of time, in an effort to identify and establish a viable basis for competing. (Nicholls-Nixon, Cooper and Woo, 2000) Highest-risk, highest-return category of innovation and requires a unique managerial approach. (Govindarajan and Trimble, 2005) 12-6

© 2012 Pearson Education, Inc. Publishing as Prentice Hall 12-7 Figure 12.1

© 2012 Pearson Education, Inc. Publishing as Prentice Hall 1. Idea stage 2. Proof of concept stage 3. Trial or pilot stage 4. Transition stage 12-8

© 2012 Pearson Education, Inc. Publishing as Prentice Hall Generated through informal or formal processes Source of ideas are varied Must include specific objectives that address pain points or core business offerings 12-9

© 2012 Pearson Education, Inc. Publishing as Prentice Hall Teams are assigned to specific ideas. Testing is done within a formal or informal laboratory setting using controlled experimentation. Ideas may morph into other ideas

© 2012 Pearson Education, Inc. Publishing as Prentice Hall Idea is exposed to market in a limited and measurable way. Measurements are taken to evaluate results. If successful, requirements for the next stage are defined

© 2012 Pearson Education, Inc. Publishing as Prentice Hall Idea now enters full system development life cycle. Short-cuts must be engineered to meet production standards

© 2012 Pearson Education, Inc. Publishing as Prentice Hall Motivate: Establish rewards for strategic IT experimentation. Support: Create infrastructure to support experimentation. Direct: Manage innovation strategically

© 2012 Pearson Education, Inc. Publishing as Prentice Hall Experimentation is risky. Incentives and rewards must be provided to support experimentation. Good ideas can come from any source

© 2012 Pearson Education, Inc. Publishing as Prentice Hall Infrastructure is needed to support IT innovation and experimentation. Some organizations create formal centers (or laboratories). Intranets are being used to solicit new ideas. Financial support is frequently provided through internal venture support

© 2012 Pearson Education, Inc. Publishing as Prentice Hall Insulate – Create innovation centers where all lines of business can come together to address common problems. Seeks to take advantage of synergy. Incubate – Innovation centers are placed within lines of business. Seeks to focus on specific problems or opportunities

© 2012 Pearson Education, Inc. Publishing as Prentice Hall Strategic IT experimentation must be directed to ensure it is relevant. Link experimentation and innovation to customer value. Link experimentation to core business processes. Use venture funds to guide strategic initiatives

© 2012 Pearson Education, Inc. Publishing as Prentice Hall Make greater use of innovation resources. Focus on new business models. Explore new/disruptive technologies. Focus on penetrating new markets. Leverage cross-organizational capabilities. Streamline decision making. Focus on opportunities that scale

© 2012 Pearson Education, Inc. Publishing as Prentice Hall Focus on achievable targets. Don’t rush to market. Be careful with cool technology. Learn by design

© 2012 Pearson Education, Inc. Publishing as Prentice Hall Strategic IT experimentation can lead the IT function to become more customercentric, assimilate new skills, and work collaboratively with business units. IT will be able to use strategic experimentation to spin good ideas into gold

© 2012 Pearson Education, Inc. Publishing as Prentice Hall 12-21