IT spending is back up. Gartner reports the average IT spending increased by 4% in 2012 and is expected to increase by another 3.1% this year (Gartner Market Databook 4Q13 Update) reaching $3.8 trillion. The revival in IT spending suggests that progress is proceeding quickly so it may come as a surprise that many believe that innovation is stagnant and the rate of innovation has been slowing for decades.
The argument that organizations are not innovating runs along two lines. The first comes from growth statistics. Growth can be divided into two different types, “run the business” and “grow and transform the business.” “Run the Business” is about keeping the operations alive by adding more labor, capital and resources. “Grow and transform the business” is powered by the discovery of ever better ways to use workers and resources. This is the sort of investment that allows continuous improvement in revenue and enables a company to grow. At the moment, it appears there is less investment in “grow and transform” because most of the available funds are being consumed by the “run the business” expense.
The cynics’ second line of argument is based on how much invention is taking place. Our experience indicates that innovation can be attributed to the availability of breakthrough technologies and the ability to effectively apply them to business needs. Because neither factor can continue endless growth without some new factor coming into play, innovation is likely to slow. Some suspect that the innovation doldrums may be rooted in the way projects are created. I would argue that the stagnation is masking a deeper stagnation rooted in the project portfolio management process. The first step in this process is to create opportunities for investment. For all the technology existing out there, it seemed that organizations had run out of ideas. The bottom-up approach does not generate valuable ideas.
Reason for Optimism
Closer analysis of innovation processes in IT suggests reason for optimism. Full exploitation of IT cannot be based only on individual heroics. Effective innovation technology is based on optimizing what they are actually doing and that is what matters to the company.
One potential culprit of the slow innovation is lack of a methodical and easy way to generate the demand portfolios, which allows scanning the current IT applications and infrastructure portfolio and recognizing improvements and transformation opportunities. Given the right leadership conditions, this is a process that can be transformed.
Enterprise integration software is increasingly good at performing the tasks of integrating all business and IT layers and in modeling and analyzing the total organizational effect of investments. Isolated and local sub-optimum portfolios are vulnerable. The success of software like UMT360, which provides a complete portfolio perspective and promotes smarter decisions, will encourage further movement to a new era of effective innovation. Even if the shift from generating projects at the project level to generating projects at the application level is difficult, the rise of the collaboration in the enterprise is among the biggest reasons for optimism. The larger the group of people collaborating, the greater the opportunity to identify new ideas and apply them across more activities and individuals.
