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November 13, 2012

Infrastructure Execs Search for Innovation Value

By Marie Lingblom

Cloud computing, data access and analytics, and unified communications and collaboration earned the top innovation priority slots among a group of Fortune 500 executives recently interviewed by McKinsey & Company.

Eighy-four percent cited cloud computing as the top priority; this includes private cloud and virtual private-cloud environments as well as public cloud-based infrastructure and platform services. But, many are also aggressively seeking to support data analytics and provide richer end-user experiences.

Reports McKinsey, most leaders of infrastructure functions aren’t satisfied with their units’ ability to innovate. Progress is there, to be sure, but most say their organizations don’t have a repeatable process for extracting value from innovation. Many IT functions, they say, are still not viewed as a source of innovation. As a result, organizations aren’t devoting enough resources to IT functions when compared to day-to-day operations.

The senior executives held enterprise-wide infrastructure responsibilities for companies in the banking, consumer electronics, e-commerce, health care, insurance, media, and retail industries. Many executives said they believe constant innovation is the only chance of meeting user expectations while supporting increasing demands for computation, data storage and connectivity — within budget constraints.

A couple of useful takeaways from the McKinsey report include the need to have proactive engagement with business, and an increasing need to have the right talent in place.

Roughly half of all executives interviewed say their organization manages innovation in a reactive way — in response to business requests and in support of business projects. This makes it harder to get in front of business needs or drive cross-cutting innovation across business units, say McKinsey’s authors.

McKinsey highlights a couple of organizational constructs helpful in achieving a proactive stance:

1) A few of the executives report their organizations have set up small, funded groups to work with business owners. The goal is to develop ways to leverage technology to solve business problems. At least one executive reported to McKinsey they are seeing positive change in how the company engages its customers at branch sites via wireless technology.

2) Others have created product-driven models, notes McKinsey. Infrastructure product managers oversee the road map for end-user services or application hosting that integrates initiatives with tactical investments, such as refreshing technology assets. This model enables infrastructure organizations to innovate much more proactively, but it also requires a constructive working relationship with business-unit IT for success.

Some infrastructure functions have managed to be proactive at innovation without creating specific processes or organizational constructs by creating space for talented staff to focus on innovation. A couple of executives told McKinsey they hold “hackathons” during which small teams collaborate on topics other than daily activities to build solutions aimed at improving performance.

On the talent front, McKinsey’s report finds many infrastructure leaders saying it’s tough to find managers with the combination of deep technology knowledge, commercial insight, communication skills and creative problem-solving skills to drive innovation initiatives.

Infrastructure organizations say they are experimenting with a variety of levers to overcome challenges and build talent:

• Empowering engineers by expanding their decision-making authority. They allow engineers, for example, to decide independently when to roll out a new feature and with what group to test it.

• Reducing risk aversion by supporting failures and successes. These organizations allow time spent on an effort even if it doesn’t work, but they also emphasize the importance of testing new ideas early and rigorously.

• Leveraging nontraditional talent. Aimed at bringing new ideas, perspectives, and approaches into infrastructure organizations. Hiring managers from application development, for instance, delivers insight directly from development teams to the infrastructure organization.

Leaders of IT infrastructure functions, say McKinseys’s authors, face a formidable challenge when it comes to innovation. Integrating technology with new services and processes that meet business-user needs is the best way to make the most of opportunities such as cloud computing, unified communications and mobility.

McKinsey suggests a path forward that includes engaging proactively with business operations, hiring the right talent and building vendor relationships that support innovation.

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