Asset
Content
CIO EXECUTIVE B OARD IT PROJECT SUPPORT DESK
May 2006 Issue Brief
Emerging Technology Scanning
CONTENTS
Overview of Current Practice Percentage of IT Budget: R&D Spending, 2002-2005
RENEWED FOCUS ON IT R&D
(Page 2)
2005 Member Imperative
7% 3% 3%
OPTIMIZING EMERGING TECHNOLOGY SCANNING
(Page 3)
Advanced Practices
2004 2002
In the early 2000s, many emerging technology scanning groups saw budgets decrease as IT R&D spending diminished. As these groups resurface in many companies, IT executives face great opportunity to identify various tactics and strategies that can help formalize a technology scanning process and ensure successful new technology deployments.
PROFILE SUMMARIES
(Page 4)
Source: InformationWeek 500, InformationWeek, 2002 and 2005.
PRACTICE PROFILES
(Pages 5-9)
Executive Summary
INVESTING IN THE BEST NEW TECHNOLOGIES
The Dilemma in Brief Many companies have restructured their IT R&D groups to align with business and revenue goals as IT R&D today has a new focus on business priorities, proper testing and ensuring strong companywide partnerships. After the dot-com fallout in the early 2000’s many IT R&D groups lost funding, in part due to failed objectives and poor project strategy. In recent years, however, these groups have reformed in many companies, as strategic innovation remains a key priority within new technology development and deployment. IT R&D groups now face a growing opportunity to influence new product creation and revenue by identifying innovative emerging technologies. Steps to Consider CIO Executive Board research suggests that organizations should utilize three strategies to optimize emerging technologies scanning:
•
ADDITIONAL CASE EXAMPLES (Page 10-11)
Dell Computers
Create a formal emerging technology scanning process: Companies are faced with the challenge of identifying a small number of emerging technologies fro m a large pool of information. IT organizations must implement a standard process to strategically identify technologies that are relevant to the enterprise and its audience(s). Align IT’s priorities with business strategy: The success of an emerging technology is reflected in its impact on business and revenue goals. IT groups must collaborate with business partners to ensure an understanding of company goals and expectations. Require extensive testing and experimentation: IT groups must mandate that all identified technologies go through rigorous testing and evaluation processes to ensure that the technology continues to support the expected goal as it evolves.
•
•
© 2006 Corporate Executive Board Project Number: CEB155ILXT
EMERGING T ECHNOLOGY SCANNING May 2006
P AGE 2
Overview
RENEWED F OCUS ON IT R&D
After losing funding for IT R&D due to the economic downturn of the early 2000s, many companies are now reorganizing emerging technology groups with a renewed focus on business priorities. In 2000, most large IT organizations had internal R&D groups, typically garnering three percent of the total IT budget, as the graph below illustrates. The IT R&D groups focused on exploring new emerging technologies for quick implementation to the business. When the economy weakened, however, cutting IT R&D funding became a necessity. More recently, however, companies have begun to increase IT R&D spending, devoting an average of 7 percent of IT budgets to this reemerging area in 2005. 1 Many companies feel that now is the time to revive IT R&D. As such, many have reinvigorated these types of internal organizational groups focused on identifying and deploying promising new technology approaches and solutions.2
IT R&D FUNDING BREAKDOWN OF IT BUDGETS AT INFORMATION WEEK 500 COMPANIES 2004-2005: BUDGET CATEGORIES AS A PERCENTAGE OF TOTAL IT BUDGET
2005 IT BUDGETS BY INDUSTRY : R&D ALLOCATION IT R&D spending increased by 4% on an average from 2004 – 2005, with spikes in the biotechnology/pharmaceutical and media/ entertainment industries.
33% 34%
12%
20% 19% 16%
20% 15% 10% 13% 10% 7% 3%
10%
2004
2005 1
2004 2005 Applications
2004 2005 Hardware Purchases
2004 2005 IT Services or Outsourcing
2004 2005 Other
2004 2005 R&D
Salaries & Benefits
Media & Entertainment
Biotechnology & Pharmaceuticals
IT R&D spending increased by 4% on average from 2004-2005
S OURCE : I NFORMATIONWEEK 500, I NFORMATIONWEEK, S EPTEMBER 2005.
© 2006 Corporate Executive Board
Project Number: CEB155ILXT
EMERGING T ECHNOLOGY SCANNING May 2006
PAGE 3
Member Imperative
OPTIMIZING EMERGING TECHNOLOGY SCANNING
To improve the return from emerging technologies and the impact of IT R&D groups, IT executives must strive to ensure each project will deliver incremental value to the business. IT R&D has refocused on business priorities and business case validation in order to avoid the pitfalls of of earlier IT R&D efforts. The objective of a successful IT R&D group is to consider how technology can can both educate internal staff and demonstrate specific value to the business.
K EY FACTORS IN EMERGING TECHNOLOGY S CANNING
R EFOCUSED R ESEARCH THE NEED FOR NEW EMERGING TECHNOLOGY GOALS
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"We call our IT R&D group 'E&D' for engineering and development… the name implies that the group's goal is to engineer applications for business rather than research emerging technologies.” -Robert Scott, Vice President of IT and Innovation Procter and Gamble Company S OURCE : “R&D REVIVAL”, COMPUTERWORLD , O CTOBER 2005.
Create a Formal Emerging Technology Scanning Process
Align New Technologies with Business Needs
Require Extensive Testing
Early Challenges
Ineffective IT R&D resources: Initially, IT R&D’s goals were often broad and did not focus on practical and pragmatic technology solutions. The unstructured focus resulted in poorly supported projects, late project delivery or projects that did not materialize.3
IT R&D isolation: During previous emerging technology projects there was often little to no company-wide collaboration on business goals. As a result, the IT R&D group lacked top-down support and did not integrate effectively into the company’s vision, causing internal communication gaps and project failure.
Lack of project justification: Because companies pursued technologies without requiring enough testing, there was no justification of the technology’s value to the business or structured plans for engineering it into the environment. The absence of a formal evaluation process often led to unfocused technologies and dis appointing revenue results.4 Extensive testing: Many past IT R&D projects failed, in part, because of lack of proper testing. Companies must continually assess the value of new technologies with a comprehensive testing process. Ford Motor Company (profiled on page 9) emphasizes the importance of testing in the company’s four-step emerging technology system. 6
Discipline Today
Streamlined research process: Emerging technology research must be relevant and fueled by the right drivers (revenue, consumer, interest, business unit input) and includes various sources such as the internet, industry experts, technology showcases, and in-house research. Companies benefit from prioritizing new technologies by first strategically identifying and analyzing key trends to create research buckets and areas of interest. Company A (profiled on page 5) uses a technology filtering process to manage various information resources.5
Emphasize business value: As IT R&D reemerges, forming an effective partnership with the business is essential. IT R&D projects should prove a new technology’s business value. IT R&D teams should provide plans for properly engineering and deploying the technology, leaving it poised to achieve success and deliver revenue gains. In addition CIOs should clearly understand the value that an IT R&D function can provide, and they should be able to convey this value to stakeholders.
S OURCE: CIO EXECUTIVE BOARD RESEARCH
© 2006 Corporate Executive Board
Project Number: CEB155ILXT
EMERG ING T ECHNOLOGY SCANNING May 2006
PAGE 4
Practice Profiles
SUMMARIES OF PROFILED COMPANIES
A. Create a formal process to identify key technologies
Ford’s Profile Summary: • Created a four step technology scanning and testing process to identify and deploy technologies relevant to Ford’s business goals • Requires extensive testing, evaluation and justification of potential emerging technologies
Page 7
Industry: Automotive • 2005 Revenue: $177 billion • 2005 Em ployees: 300,000 ∗ Industry: Financial Services • 2005 Revenue: Between $5 $15 billion • 2005 Employees: Between 15,000 and 20,000
Company A’s Profile Summary: • Utilized a technology filtering process to predict technology outcomes and benefits • Maintained contact with business and enterprise partners to identify technology pain points
Page 5
Industry: Entertainment • 2005 Revenue: $56.7 billion • 2005 Employees: 110,000
Procter & Gamble’s Profile Summary: • Redesigned IT R&D to integrate and interact directly with business units to engineer against business problems • Eliminated sole focus of emerging technology research to incorporate business strategy and company-wide communication
Pages 10
B. Align IT’s priorities with business strategy
Dell Computers
Industry: Computer Hardware • 2005 Revenue: $56 billion • 2005 Employees: 66,100
Dell’s Profile Summary: • Created core product development research teams focused on customer pain points, needs and requirements • Generated innovation efforts from direct customer interaction Daimler Chrysler’s Profile Summary: • Created global technology council to prioritize business objectives and align expectations and budgets • Participated in customer focus groups to produce more customized products and influence vendor management processes
Page 10
Industry: Automotive • 2005 Revenue: $177 billion • 2005 Employees: 370,684
Page 11
∗ Industry: Financial Services • 2005 Revenue: $19 billion • 2005 Employees: 37,460
Commonwealth Bank of Australia’s Profile Summary: • Created IT Council to create structure and align IT and business priorities • Created separate enterprise and retail technology teams to strategize on different business objectives
Page 10
C. Extensive testing and experimentation
Industry: Health Care • 2004 Revenue: $3.65 billion • 2004 Employees: 3,000
HIP Health Plan of New York’s Profile Summary: • Implemented in-house research lab meant for technology exploration • Mapped internal learning to new product creation to improve HIP’s performance
Page 11
Industry: Leisure • 2005 Revenue: $3.8 billion • 2003 Employees: 61,000 ∗
Hilton’s Profile Summary: • Partnered with university to expand enterprise IT R&D team • Created real-time experimentation and testing room in one of its locations to monitor how upcoming technologies perform with actual guests
Page 11
Pseudonym
© 2006 Corporate Executive Board
Project Number: CEB155ILXT
EMERG ING T ECHNOLOGY SCANNING May 2006
PAGE 5
Practice Profile
Company A∗ : Filtering Emerging Technologies for Business Growth
In order to alleviate business pain points, Company A creates a technology filtering process to scan emerging technologies that best fit enterprise and business partners’ needs.
Industry: Financial Services 2005 Revenues: $5 - $15 billion 2005 Employees: 15,000 - 20,000
ORGANIZATIONAL STRUCTURE Company A’s Strategic Technology function has evolved throughout the past decade. Originally part of the company’s infrastructure group, the Strategic Technology Team today includes an emerging technology branch.
REPORTING S TRUCTURE
Company A
Strategic Technology Team’s Core Responsibilities 1. Executive Education 2. Coordinating with Product Developers 3. Increasing Technology Awareness 4. Testing Prototypes
CIO Head of Strategic Technology & Architecture Head of Emerging Technology
Direct Report
Direct Report
The size of Company A’s Strategic Technology Team sometimes limits the level of company-wide impact the team can achieve. To ensure the best use of its limited resources, the Strategic Technology Team identified four strategic responsibilities with regard to emerging technologies: educating executives, coordinating with product developers, increasing technology awareness and testing prototypes . Managing emerging technologies requires process discipline and the ability to ensure a new technology’s applicability to the business. In pursuing this applicability, Company A tries to match emerging technologies to business needs or new product opportunities. Company A refers to the following guidelines in approaching its responsibilities with emerging technologies:
LAYING THE GROUNDWORK COMPANY A ’S EMERGING TECHNOLOGY GUIDELINES Practice disciplined innovation Produce balanced technology research Ensure technology research is relevant Distribute technology research effectively Produce periodic, well defined deliverables and provide explicit path from conception to implementation Investigations driven by business strategy (top down) as well as reviews by technology domain (bottom up) Potential business impact must be clear and must offer actionable recommendations Executive management, product development, and the architectural community must receive relevant information
S OURCE: COMPANY A, CIO EXECUTIVE BOARD RESEARCH
∗
Pseudonym
© 2006 Corporate Executive Board
Project Number: CEB155ILXT
EMERG ING T ECHNOLOGY SCANNING May 2006
PAGE 6
Practice Profile
Distilling the Chatter
In approaching emerging technology research, Company A’s team seeks to map new technologies to stated business needs while ensuring they provide business value. Emerging technologies are imperative to Company A’s ability to alleviate key business pain points. The Strategic Technology Team relies heavily on input from its business partners, individual CIOs, and the enterprise CIO regarding current business issues and the expected results. After identifying areas of interest to the business and potential customers, Company A focuses resources on the projects that the company predicts will have the most impact. The Strategic Technology Team’s two main challenges are achieving these goals while remaining relatively small in size and visibility, and creating a “concept-to-reality” roadmap for new technologies. In response to business demands and the team’s limited size , Company A prioritizes several key emerging technology drivers, including revenue growth; increased productivity; degree of risk; and enterprise, customer and business partner benefits. Company A has implemented a formal evaluation process, illustrated below, to establish guidelines to determine if a technology is relevant, innovative and profitable.
COMPANY A’S RELEVANCY FILTERING P ROCESS COMPANY A EVALUATES CURRENT A ND FUTURE BUSINESS CONCERNS TO MAP THE M OST BENEFICIAL OUTCOM E. Filter 1 Does the technology impact current business operations? Filter 2 Is the trend relevant to product development or future markets? Filter 3 Are competitors using this technology?
Outcome: Architecture Standards Possibilities Technology Deliverables Technology Guidance Principles
Technology Refresh
Key driver: Pure research Company A conducts technology reviews in several domains, including: • Pervasive Computing • Digitization • Straight-Through Processing • Advanced Analytics • Online Customer Service • Security
Key driver: Business Strategy Company A investigates new technologies from a business perspective with direct input from business partners. Company A considers how the enterprise will benefit, as well as partners, vendors and customers. Key factors include: • New products • Sales effectiveness • Productivity
Key driver: Specific Competitor Cases Company A researches the competitor landscape for a particular technology, conducts analysis on how and why it benefits the competitor, then applies the findings to Company A’s current practice.
Technology Governance
Companywide Technology Publications
Company A produces a firm-wide technology publication every six to eight weeks. The publication provides visibility into the team’s current projects, as well as strategic analysis on how the technology event featured could benefit other groups within Company A. The publication serves as a vehicle to raise questions and encourage further internal technological and business analysis.
S OURCE: COMPANY A, CIO EXECUTIVE BOARD RESEARCH
Company A’s Results
By maintaining a strategic technology function, Company A’s team has, in some cases, been able to have direct influence over product creation. Though small in headcount, the Strategic Technology Team has achieved visibility through Company A’s technology publications, which exp lain the team’s initiatives, findings, and analysis, as well as consistent contact with business partners and enterprise lia isons. In addition, the company’s focus on competitor activity drives the need to investigate innovative technologies that will not only allow Company A to remain abreast of competitor activity, but also gain a competitive advantage.
© 2006 Corporate Executive Board
Project Number: CEB155ILXT
EMERG ING T ECHNOLOGY SCANNING May 2006
PAGE 7
Practice Profile
Ford Motor Company: Stage-Gated Technology Scanning
To ensure that technology leads to valid and visible business benefits, Ford Motor Company devises a four step technology scanning, testing, and deployment process.
Industry: Automotive 2005 Revenue: $177 billion 2005 Employees: 300,000
Organizational Structure
Ford Motor Company has revitalized the IT R&D function by implementing a systematic inception-to-implementation emerging technology process. Ford’s emerging technology scanning function is housed in the Enterprise Architecture and Engineering department. Specifically, the Enterprise Technology Team is divided into three sub-teams devoted to various emerging technology activities.
_____ _____________________________________________________________________________________________________________________________________ REPORTING S TRUCTURE Ford Motor Company CIO
Director: Application Delivery Unit
Director: Infrastructure
Enterprise Architecture & Engineering Group
Enterprise De -fragmentation
Enterprise Engineering
Enterprise Technology
Technology Research
S OURCE: FORD M OTOR C OMPANY, CIO E XECUTIVE BOARD
RESEARCH
Business Partner Application
Architecture & Strategy
Background
In early 2006 Ford Motor Company introduced its “e4 Process” (Experiment, Evaluate, Economize, Engineer) to discover, test and deploy new technologies that benefit the enterprise and business partners and customers. Ford first narrows the scope of its research to 10 focus areas by identifying key IT challenges. The 10 focus areas are then introduced to the e4 process. In addition, the Enterprise Technology Team relies on three resources to gather information:
Interaction with major partners Ford is in regular contact with companies like IBM, Cisco, Microsoft, Sun Microsystems, Hewlett-Packard, etc. These companies brief Ford on each key areas and highlight important focal points. Internal librarian Ford employs a full time librarian who gathers resources around Ford’s areas of interest and assists the team. Technology conferences The Enterprise Technology team attends conferences regularly to gain further insight on the company’s focus areas.
S OURCE: FORD M OTOR C OMPANY, CIO EXECUTIVE BOARD RESEARCH
© 2006 Corporate Executive Board
Project Number: CEB155ILXT
EMERG ING T ECHNOLOGY SCANNING May 2006
PAGE 8
Practice Profile
Identifying the Main Focus Areas
Before a technology goes through the e4 process, Ford identifies key technology focus areas via the company’s “Pervasive Computing Initiative,” a standard developed in response technology’s increasing importance in all aspects of business. The program identifies 10 key work streams – initiatives and challenges that have been identified from an IT perspective – on which the Enterprise Technology Team solely focuses research efforts. To create the focus areas, Ford examines key layers of architecture and considers the future state of technologies from various angles, including security requirements, the importance of the network, applied analytics and the emergence of a more mobile and virtual enterprise.
CREATING THE DRAWING BOARD I DENTIFYING KEY WORK STREAMS
Technology Trends
Security Imperatives
Corporate Strategy
INPUTS
Virtual Workforce Needs
Applied Analytics
Enterprise Technology Team conducts initial evaluation
OUTPUT
Prioritized list of 10 key IT challenges and initiatives, or “work streams”, that guides technology investigation
S OURCE: FORD M OTOR C OMPANY, CIO EXECUTIVE BOARD RESEARCH
Each of the ten work streams is driven by a specific strategy and mission. The Enterprise Technology Team examines the work stream’s overall framework to identify further focus areas. Team members must justify interest through lab proposals and gain approval from management committees in order for a technology to enter the e4 process.
EFFECTIVE EMERGING T ECHNOLOGY SCANNING FINDING THERIGHT P ROJECTS
“My [team] has to submit formal research proposals on the technologies they are evaluating. They have to tell the story of how the technology fits in.”
Vijay Sankaran, IT Manager of Enterprise Technology Ford Motor Company
S OURCE: D AVID GEER, “PEOPLE, ROLES, AND E XPECTATIONS”, COMPUTERWORLD, 2005.
© 2006 Corporate Executive Board
Project Number: CEB155ILXT
EMERG ING T ECHNOLOGY SCANNING May 2006
PAGE 9
Practice Profile
Evaluating, Testing and Implementing New Technologies: Ford’s e4 Process
The e4 process helps ensure all relevant parties within Ford share the same technology vision and goals. To promote this type of cross-function communication, Ford’s Enterprise Technology Team meets monthly with stakeholders to identify pain points. Additionally, throughout each phase of e4 further validation from management is sought to ensure acrossthe-board cooperation and satisfaction.
BEST PRACTICES I N EMERGING TECHNOLOGY SCANNING FORD’ S E4 P ROCESS
E1: Experiment
E2: Evaluate
E3: Economize
E4: Engineer
High Level Research -Identify and research new IT technologies -Experiment with broad, possibly “zany” ideas
Testing -Substantiate interest through lab research or specific business case context -Partner with business or service application to apply business case examples -Establish technology visioning and future plans -Solidify core ideas
Business Case Validation -Create business cases for core ideas -Ensure business value proposition -Communicate with business partners -Seek funding and create cycle plan for pilot phase
Standard Business Development Process -Transition to architectural platform -Clearly define products -Integrate into environment
CHECKPOINT Management team reviews lab research and decides whether to stop analysis or proceed to e3
S OURCE: FORD M OTOR C OMPANY, CIO EXECUTIVE BOARD
RESEARCH
CHECKPOINT Ford’s Technology Management Council reviews final lab results and decides whether to roll out technology
Ford’s Results
Ford’s implementation of the e4 Process addresses the central challenge of keeping both the business and IT aligned. Although it was first conceived in order to create a repeatable process to introduce new technologies, Ford has experienced additional benefits:
• Visibility: The Enterprise Technology Team now has a portfolio and dashboard that maintain information on all current projects, including what stage of maturity they have achieved. Additionally, team managers can drill down and quickly identify the value of the project. Consistency: One of the biggest challenges of previous R&D efforts was the lapse in effective partnering and communication of each project’s value proposition and key methods. Ford’s e4 process provides a vehicle for quickly clarifying why or why not a project should be pursued in a standard format. Cross pollination: Ford’s e4 process allows staff from any other internal organization to gain an understanding of ongoing projects and new initiatives, which encourages and creates unprecedented internal partnerships. To further promote crossfunction visibility, Ford produces a weekly newsletter that features one of the ten key work streams the enterprise technology team focuses on.
RESEARCH
•
•
S OURCE: FORD M OTOR C OMPANY, CIO EXECUTIVE BOARD
© 2006 Corporate Executive Board
Project Number: CEB155ILXT
EMERG ING T ECHNOLOGY SCANNING May 2006
PAGE 10
Additional Case Examples
EMERGING TECHNOLOGY SCANNING INITIATIVES
Sheridan Bank ∗ Expands Enterprise Technology Team to Embed Emerging Technologies into IT Strategy Sheridan Bank’s Strategy and Enterprise Architecture team focuses on distilling emerging technology research into enterprise-wide IT strategy. Sheridan has both an enterprise technology team as well as a retail technology team, with both groups strategizing on business value for their particular function. Each relies on a weekly IT Council meeting to align priorities and strengthen Sheridan’s emerging technology efforts. The enterprise team attends technology conferences, speaks with analysts and industry experts, and conducts internal research in order to identify key trends. Sheridan focuses on moving projects through a testing phase to a business case reality. The company also emphasizes market analysis when considering new technologies. In addition, Sheridan is constructing a lab with Sun Microsystems and IBM software to promote internal research and testing efforts. The enterprise technology team expects to expand within the next year to increase bandwidth in technical application areas. By dividing the enterpris e and retail technology teams, Sheridan can strategically focus on emerging technologies that support Sheridan’s internal and external business visions.7 Procter & Gamble Co. Reorganizes IT R&D to Increase Business Value Procter & Gamble Co.’s (P&G) IT R&D function has reshuffled over the last decade in order to reflect P&G’s business goals. In the 1980’s and 1990s up to half of the company’s IT R&D budget focused solely on emerging technology research, creating communication gaps between the technology and business sides. As the company focused on the future, IT and innovation staff prioritized integrating IT R&D into P&G’s overall strategy to maintain a competitive business edge within the marketplace. In order to achieve this goal, the company changed the structure of its IT department, as well as how IT integrated with the rest of the company. Over the past four years, the company’s IT R&D leaders made a concerted effort to better incorporate their teams with the business by setting goals that aligned with the company’s goals, working more directly with the business units , and refocusing employees within company groups. Today, approximately 80% of the IT R&D budget allows for engineering against business problems, and P&G’s innovation model has reinvigorated the company’s strategy and significantly impacted revenue.8 Dell Computers Relies on Customer-Driven Innovation to Increase Business Value from New Technologies Dell Computers has over 4,000 employees worldwide devoted to product development research, including core teams focused on current customer requirements, pain points, and interests. These teams focus on how innovation can fulfill these requirements in order to increase customer satisfaction. Dell’s regimented process and approach includes generating innovation efforts from direct customer interaction. This allows the company to project both short-term and long-term technology initiatives that help to ensure greater customer satisfaction and loyalty.9
2005 Revenues: $10 -25 billion 2005 Employees: 25-000 – 45,000
2005 Revenues: $56.7 billion 2005 Employees: 110,000
DELL Computers
2006 Revenues: $56 billion 2006 Employees: 66,100
∗
Pseudonym
© 2006 Corporate Executive Board
Project Number: CEB155ILXT
EMERG ING T ECHNOLOGY SCANNING May 2006
PAGE 11
2005 Revenues: $177 billion 2005 Employees: 370,684
DaimlerChrysler AG Implements a Technology Council to Improve Business Value and Increase Product Design Visibility In order to prioritize business objectives, DaimlerChrysler created a global technology council with members from business, IT and IT R&D. The group meets monthly to discuss business unit expectations and align project budgets. At DaimlerChrysler, IT R&D not only measures the performance of strategic suppliers but also has the power to affect it. The company’s product managers participate in customer focus groups in the research labs of the company’s top suppliers and suggest features they would like to see in upcoming versions of those products. In addition, the product managers are permanent members of the supplier councils, meeting a minimum of four times per year. This provides product managers with more visibility into upcoming vendor products than previously achieved, and allows them to have direct input into what the product should look like. By combining business strategy with the IT R&D team at a project’s start, DaimlerChrysler more effectively prioritizes business objectives, including budget and revenue goals.10 HIP Health Plan of New York Shortens Turnaround and Expenses on Patient Care Through In-House Technology Research Across 2003 and 2004, HIP Health Plan of New York implemented a research lab equipped with dedicated systems for technology exploration that are separate from production systems. In 2004, HIP introduced a tablet PC with customized software used by nurses to gather information about hospital patients. This information is then analyzed by the health-insurance company’s case managers to recommend the most cost-effective treatments. In New York hospitals, nurses visit patients who are insured by HIP, then type each patient’s case information into a standard form on the PC. With the new tablet, information is uploaded directly from the nurses’ notes, via a wireless network, to a database accessible to case managers. The case managers can then analyze the information and make recommendations to caregivers within 24 hours. HIP’s CIO reports that the project, and others like it, improve patient services and reduce administrative expenses.11
2004 Revenues: $3.65 billion 2004 Employees: 3,000
2005 Revenues: 2005 Employees: 61,000
Hilton Hotels Contributes Funding to University Center for the Study of Emerging Technology to Boost Testing and Hands-On Experimentation Hilton Hotels Corp. uses both internal and external research resources for IT R&D efforts. The company contributes to the FedEX Institute of Technology, located at the University of Memphis, allowing for additional research resources not available within Hilton’s enterprise emerging technology staff. In addition, the company houses a testing room in one of its hotel locations in Los Angeles, where the company tests how new technologies work in the actual environment. Hilton guests stay in the room, which is equipped with emerging technologies such as retinal scanners, fingerprint readers and wireless reservation coordination devices. Through this testing method, Hilton developed a new handheld product that assists staff in helping guests with check-in kiosks. Experimentation with technologies relevant to business value allows Hilton to discover which technologies will most directly impact the business.12
© 2006 Corporate Executive Board
Project Number: CEB155ILXT
EMERG ING T ECHNOLOGY SCANNING May 2006
PAGE 12
1 2
Barbara Gomolski, “IT R&D Redux”, Computerworld, July 2005. Randy Bean, “Emerging Technologies Still Emerging”, CIO Update, August 2004. 3 David Geer, “R&D Revival”, Computerworld, October 2005. 4 Ibid. 5 CIO Executive Board, Ford Motor Company Research, 2006. 6 Ibid. 7 CIO Executive Board, Commonwealth Bank of Australia Research, 2006. 8 David Geer, “R&D Revival”, Computerworld, October 2005 and Larry Huston and Nabil Sakkab, “Connect and Develop: Inside Procter & Gamble’s New Model for Innovation”, Harvard Business Review, March 2006. 9 Robert L. Mitchell, “Unconventional Innovation”, Computerworld, May 2005. 10 David Geer, “R&D Revival”, Computerworld, October 2005. 11 Charles Babcock, “R&D Envy”, InformationWeek, June 2004. 12 Ibid.
The Corporate Executive Board has worked to ensure the accuracy of the information it provides to its members. This project relies upon data obtained from many sources, however, and the Corporate Executive Board cannot guarantee the accuracy of the information or its analysis in all cases. Furthermore, the Corporate Executive Board is not engaged in rendering legal, accounting, or other professional services. Its projects should not be construed as professional advice on any particular set of facts or circumstances. Members requiring such services are advised to consult an appropriate professional. Neither Corporate Executive Board nor its programs are responsible for any claims or losses that may arise from any errors or omissions in their reports, whether caused by Corporate Executive Board or its sources.
Corporate Executive Board 2000 Pennsylvania Avenue NW Washington, DC 20005 Telephone: 202.777.5000 Facsimile: 202.777.5100
www.cio.executiveboard.com
© 2006 Corporate Executive Board
Project Number: CEB155ILXT
May 2006 Issue Brief
Emerging Technology Scanning
CONTENTS
Overview of Current Practice Percentage of IT Budget: R&D Spending, 2002-2005
RENEWED FOCUS ON IT R&D
(Page 2)
2005 Member Imperative
7% 3% 3%
OPTIMIZING EMERGING TECHNOLOGY SCANNING
(Page 3)
Advanced Practices
2004 2002
In the early 2000s, many emerging technology scanning groups saw budgets decrease as IT R&D spending diminished. As these groups resurface in many companies, IT executives face great opportunity to identify various tactics and strategies that can help formalize a technology scanning process and ensure successful new technology deployments.
PROFILE SUMMARIES
(Page 4)
Source: InformationWeek 500, InformationWeek, 2002 and 2005.
PRACTICE PROFILES
(Pages 5-9)
Executive Summary
INVESTING IN THE BEST NEW TECHNOLOGIES
The Dilemma in Brief Many companies have restructured their IT R&D groups to align with business and revenue goals as IT R&D today has a new focus on business priorities, proper testing and ensuring strong companywide partnerships. After the dot-com fallout in the early 2000’s many IT R&D groups lost funding, in part due to failed objectives and poor project strategy. In recent years, however, these groups have reformed in many companies, as strategic innovation remains a key priority within new technology development and deployment. IT R&D groups now face a growing opportunity to influence new product creation and revenue by identifying innovative emerging technologies. Steps to Consider CIO Executive Board research suggests that organizations should utilize three strategies to optimize emerging technologies scanning:
•
ADDITIONAL CASE EXAMPLES (Page 10-11)
Dell Computers
Create a formal emerging technology scanning process: Companies are faced with the challenge of identifying a small number of emerging technologies fro m a large pool of information. IT organizations must implement a standard process to strategically identify technologies that are relevant to the enterprise and its audience(s). Align IT’s priorities with business strategy: The success of an emerging technology is reflected in its impact on business and revenue goals. IT groups must collaborate with business partners to ensure an understanding of company goals and expectations. Require extensive testing and experimentation: IT groups must mandate that all identified technologies go through rigorous testing and evaluation processes to ensure that the technology continues to support the expected goal as it evolves.
•
•
© 2006 Corporate Executive Board Project Number: CEB155ILXT
EMERGING T ECHNOLOGY SCANNING May 2006
P AGE 2
Overview
RENEWED F OCUS ON IT R&D
After losing funding for IT R&D due to the economic downturn of the early 2000s, many companies are now reorganizing emerging technology groups with a renewed focus on business priorities. In 2000, most large IT organizations had internal R&D groups, typically garnering three percent of the total IT budget, as the graph below illustrates. The IT R&D groups focused on exploring new emerging technologies for quick implementation to the business. When the economy weakened, however, cutting IT R&D funding became a necessity. More recently, however, companies have begun to increase IT R&D spending, devoting an average of 7 percent of IT budgets to this reemerging area in 2005. 1 Many companies feel that now is the time to revive IT R&D. As such, many have reinvigorated these types of internal organizational groups focused on identifying and deploying promising new technology approaches and solutions.2
IT R&D FUNDING BREAKDOWN OF IT BUDGETS AT INFORMATION WEEK 500 COMPANIES 2004-2005: BUDGET CATEGORIES AS A PERCENTAGE OF TOTAL IT BUDGET
2005 IT BUDGETS BY INDUSTRY : R&D ALLOCATION IT R&D spending increased by 4% on an average from 2004 – 2005, with spikes in the biotechnology/pharmaceutical and media/ entertainment industries.
33% 34%
12%
20% 19% 16%
20% 15% 10% 13% 10% 7% 3%
10%
2004
2005 1
2004 2005 Applications
2004 2005 Hardware Purchases
2004 2005 IT Services or Outsourcing
2004 2005 Other
2004 2005 R&D
Salaries & Benefits
Media & Entertainment
Biotechnology & Pharmaceuticals
IT R&D spending increased by 4% on average from 2004-2005
S OURCE : I NFORMATIONWEEK 500, I NFORMATIONWEEK, S EPTEMBER 2005.
© 2006 Corporate Executive Board
Project Number: CEB155ILXT
EMERGING T ECHNOLOGY SCANNING May 2006
PAGE 3
Member Imperative
OPTIMIZING EMERGING TECHNOLOGY SCANNING
To improve the return from emerging technologies and the impact of IT R&D groups, IT executives must strive to ensure each project will deliver incremental value to the business. IT R&D has refocused on business priorities and business case validation in order to avoid the pitfalls of of earlier IT R&D efforts. The objective of a successful IT R&D group is to consider how technology can can both educate internal staff and demonstrate specific value to the business.
K EY FACTORS IN EMERGING TECHNOLOGY S CANNING
R EFOCUSED R ESEARCH THE NEED FOR NEW EMERGING TECHNOLOGY GOALS
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"We call our IT R&D group 'E&D' for engineering and development… the name implies that the group's goal is to engineer applications for business rather than research emerging technologies.” -Robert Scott, Vice President of IT and Innovation Procter and Gamble Company S OURCE : “R&D REVIVAL”, COMPUTERWORLD , O CTOBER 2005.
Create a Formal Emerging Technology Scanning Process
Align New Technologies with Business Needs
Require Extensive Testing
Early Challenges
Ineffective IT R&D resources: Initially, IT R&D’s goals were often broad and did not focus on practical and pragmatic technology solutions. The unstructured focus resulted in poorly supported projects, late project delivery or projects that did not materialize.3
IT R&D isolation: During previous emerging technology projects there was often little to no company-wide collaboration on business goals. As a result, the IT R&D group lacked top-down support and did not integrate effectively into the company’s vision, causing internal communication gaps and project failure.
Lack of project justification: Because companies pursued technologies without requiring enough testing, there was no justification of the technology’s value to the business or structured plans for engineering it into the environment. The absence of a formal evaluation process often led to unfocused technologies and dis appointing revenue results.4 Extensive testing: Many past IT R&D projects failed, in part, because of lack of proper testing. Companies must continually assess the value of new technologies with a comprehensive testing process. Ford Motor Company (profiled on page 9) emphasizes the importance of testing in the company’s four-step emerging technology system. 6
Discipline Today
Streamlined research process: Emerging technology research must be relevant and fueled by the right drivers (revenue, consumer, interest, business unit input) and includes various sources such as the internet, industry experts, technology showcases, and in-house research. Companies benefit from prioritizing new technologies by first strategically identifying and analyzing key trends to create research buckets and areas of interest. Company A (profiled on page 5) uses a technology filtering process to manage various information resources.5
Emphasize business value: As IT R&D reemerges, forming an effective partnership with the business is essential. IT R&D projects should prove a new technology’s business value. IT R&D teams should provide plans for properly engineering and deploying the technology, leaving it poised to achieve success and deliver revenue gains. In addition CIOs should clearly understand the value that an IT R&D function can provide, and they should be able to convey this value to stakeholders.
S OURCE: CIO EXECUTIVE BOARD RESEARCH
© 2006 Corporate Executive Board
Project Number: CEB155ILXT
EMERG ING T ECHNOLOGY SCANNING May 2006
PAGE 4
Practice Profiles
SUMMARIES OF PROFILED COMPANIES
A. Create a formal process to identify key technologies
Ford’s Profile Summary: • Created a four step technology scanning and testing process to identify and deploy technologies relevant to Ford’s business goals • Requires extensive testing, evaluation and justification of potential emerging technologies
Page 7
Industry: Automotive • 2005 Revenue: $177 billion • 2005 Em ployees: 300,000 ∗ Industry: Financial Services • 2005 Revenue: Between $5 $15 billion • 2005 Employees: Between 15,000 and 20,000
Company A’s Profile Summary: • Utilized a technology filtering process to predict technology outcomes and benefits • Maintained contact with business and enterprise partners to identify technology pain points
Page 5
Industry: Entertainment • 2005 Revenue: $56.7 billion • 2005 Employees: 110,000
Procter & Gamble’s Profile Summary: • Redesigned IT R&D to integrate and interact directly with business units to engineer against business problems • Eliminated sole focus of emerging technology research to incorporate business strategy and company-wide communication
Pages 10
B. Align IT’s priorities with business strategy
Dell Computers
Industry: Computer Hardware • 2005 Revenue: $56 billion • 2005 Employees: 66,100
Dell’s Profile Summary: • Created core product development research teams focused on customer pain points, needs and requirements • Generated innovation efforts from direct customer interaction Daimler Chrysler’s Profile Summary: • Created global technology council to prioritize business objectives and align expectations and budgets • Participated in customer focus groups to produce more customized products and influence vendor management processes
Page 10
Industry: Automotive • 2005 Revenue: $177 billion • 2005 Employees: 370,684
Page 11
∗ Industry: Financial Services • 2005 Revenue: $19 billion • 2005 Employees: 37,460
Commonwealth Bank of Australia’s Profile Summary: • Created IT Council to create structure and align IT and business priorities • Created separate enterprise and retail technology teams to strategize on different business objectives
Page 10
C. Extensive testing and experimentation
Industry: Health Care • 2004 Revenue: $3.65 billion • 2004 Employees: 3,000
HIP Health Plan of New York’s Profile Summary: • Implemented in-house research lab meant for technology exploration • Mapped internal learning to new product creation to improve HIP’s performance
Page 11
Industry: Leisure • 2005 Revenue: $3.8 billion • 2003 Employees: 61,000 ∗
Hilton’s Profile Summary: • Partnered with university to expand enterprise IT R&D team • Created real-time experimentation and testing room in one of its locations to monitor how upcoming technologies perform with actual guests
Page 11
Pseudonym
© 2006 Corporate Executive Board
Project Number: CEB155ILXT
EMERG ING T ECHNOLOGY SCANNING May 2006
PAGE 5
Practice Profile
Company A∗ : Filtering Emerging Technologies for Business Growth
In order to alleviate business pain points, Company A creates a technology filtering process to scan emerging technologies that best fit enterprise and business partners’ needs.
Industry: Financial Services 2005 Revenues: $5 - $15 billion 2005 Employees: 15,000 - 20,000
ORGANIZATIONAL STRUCTURE Company A’s Strategic Technology function has evolved throughout the past decade. Originally part of the company’s infrastructure group, the Strategic Technology Team today includes an emerging technology branch.
REPORTING S TRUCTURE
Company A
Strategic Technology Team’s Core Responsibilities 1. Executive Education 2. Coordinating with Product Developers 3. Increasing Technology Awareness 4. Testing Prototypes
CIO Head of Strategic Technology & Architecture Head of Emerging Technology
Direct Report
Direct Report
The size of Company A’s Strategic Technology Team sometimes limits the level of company-wide impact the team can achieve. To ensure the best use of its limited resources, the Strategic Technology Team identified four strategic responsibilities with regard to emerging technologies: educating executives, coordinating with product developers, increasing technology awareness and testing prototypes . Managing emerging technologies requires process discipline and the ability to ensure a new technology’s applicability to the business. In pursuing this applicability, Company A tries to match emerging technologies to business needs or new product opportunities. Company A refers to the following guidelines in approaching its responsibilities with emerging technologies:
LAYING THE GROUNDWORK COMPANY A ’S EMERGING TECHNOLOGY GUIDELINES Practice disciplined innovation Produce balanced technology research Ensure technology research is relevant Distribute technology research effectively Produce periodic, well defined deliverables and provide explicit path from conception to implementation Investigations driven by business strategy (top down) as well as reviews by technology domain (bottom up) Potential business impact must be clear and must offer actionable recommendations Executive management, product development, and the architectural community must receive relevant information
S OURCE: COMPANY A, CIO EXECUTIVE BOARD RESEARCH
∗
Pseudonym
© 2006 Corporate Executive Board
Project Number: CEB155ILXT
EMERG ING T ECHNOLOGY SCANNING May 2006
PAGE 6
Practice Profile
Distilling the Chatter
In approaching emerging technology research, Company A’s team seeks to map new technologies to stated business needs while ensuring they provide business value. Emerging technologies are imperative to Company A’s ability to alleviate key business pain points. The Strategic Technology Team relies heavily on input from its business partners, individual CIOs, and the enterprise CIO regarding current business issues and the expected results. After identifying areas of interest to the business and potential customers, Company A focuses resources on the projects that the company predicts will have the most impact. The Strategic Technology Team’s two main challenges are achieving these goals while remaining relatively small in size and visibility, and creating a “concept-to-reality” roadmap for new technologies. In response to business demands and the team’s limited size , Company A prioritizes several key emerging technology drivers, including revenue growth; increased productivity; degree of risk; and enterprise, customer and business partner benefits. Company A has implemented a formal evaluation process, illustrated below, to establish guidelines to determine if a technology is relevant, innovative and profitable.
COMPANY A’S RELEVANCY FILTERING P ROCESS COMPANY A EVALUATES CURRENT A ND FUTURE BUSINESS CONCERNS TO MAP THE M OST BENEFICIAL OUTCOM E. Filter 1 Does the technology impact current business operations? Filter 2 Is the trend relevant to product development or future markets? Filter 3 Are competitors using this technology?
Outcome: Architecture Standards Possibilities Technology Deliverables Technology Guidance Principles
Technology Refresh
Key driver: Pure research Company A conducts technology reviews in several domains, including: • Pervasive Computing • Digitization • Straight-Through Processing • Advanced Analytics • Online Customer Service • Security
Key driver: Business Strategy Company A investigates new technologies from a business perspective with direct input from business partners. Company A considers how the enterprise will benefit, as well as partners, vendors and customers. Key factors include: • New products • Sales effectiveness • Productivity
Key driver: Specific Competitor Cases Company A researches the competitor landscape for a particular technology, conducts analysis on how and why it benefits the competitor, then applies the findings to Company A’s current practice.
Technology Governance
Companywide Technology Publications
Company A produces a firm-wide technology publication every six to eight weeks. The publication provides visibility into the team’s current projects, as well as strategic analysis on how the technology event featured could benefit other groups within Company A. The publication serves as a vehicle to raise questions and encourage further internal technological and business analysis.
S OURCE: COMPANY A, CIO EXECUTIVE BOARD RESEARCH
Company A’s Results
By maintaining a strategic technology function, Company A’s team has, in some cases, been able to have direct influence over product creation. Though small in headcount, the Strategic Technology Team has achieved visibility through Company A’s technology publications, which exp lain the team’s initiatives, findings, and analysis, as well as consistent contact with business partners and enterprise lia isons. In addition, the company’s focus on competitor activity drives the need to investigate innovative technologies that will not only allow Company A to remain abreast of competitor activity, but also gain a competitive advantage.
© 2006 Corporate Executive Board
Project Number: CEB155ILXT
EMERG ING T ECHNOLOGY SCANNING May 2006
PAGE 7
Practice Profile
Ford Motor Company: Stage-Gated Technology Scanning
To ensure that technology leads to valid and visible business benefits, Ford Motor Company devises a four step technology scanning, testing, and deployment process.
Industry: Automotive 2005 Revenue: $177 billion 2005 Employees: 300,000
Organizational Structure
Ford Motor Company has revitalized the IT R&D function by implementing a systematic inception-to-implementation emerging technology process. Ford’s emerging technology scanning function is housed in the Enterprise Architecture and Engineering department. Specifically, the Enterprise Technology Team is divided into three sub-teams devoted to various emerging technology activities.
_____ _____________________________________________________________________________________________________________________________________ REPORTING S TRUCTURE Ford Motor Company CIO
Director: Application Delivery Unit
Director: Infrastructure
Enterprise Architecture & Engineering Group
Enterprise De -fragmentation
Enterprise Engineering
Enterprise Technology
Technology Research
S OURCE: FORD M OTOR C OMPANY, CIO E XECUTIVE BOARD
RESEARCH
Business Partner Application
Architecture & Strategy
Background
In early 2006 Ford Motor Company introduced its “e4 Process” (Experiment, Evaluate, Economize, Engineer) to discover, test and deploy new technologies that benefit the enterprise and business partners and customers. Ford first narrows the scope of its research to 10 focus areas by identifying key IT challenges. The 10 focus areas are then introduced to the e4 process. In addition, the Enterprise Technology Team relies on three resources to gather information:
Interaction with major partners Ford is in regular contact with companies like IBM, Cisco, Microsoft, Sun Microsystems, Hewlett-Packard, etc. These companies brief Ford on each key areas and highlight important focal points. Internal librarian Ford employs a full time librarian who gathers resources around Ford’s areas of interest and assists the team. Technology conferences The Enterprise Technology team attends conferences regularly to gain further insight on the company’s focus areas.
S OURCE: FORD M OTOR C OMPANY, CIO EXECUTIVE BOARD RESEARCH
© 2006 Corporate Executive Board
Project Number: CEB155ILXT
EMERG ING T ECHNOLOGY SCANNING May 2006
PAGE 8
Practice Profile
Identifying the Main Focus Areas
Before a technology goes through the e4 process, Ford identifies key technology focus areas via the company’s “Pervasive Computing Initiative,” a standard developed in response technology’s increasing importance in all aspects of business. The program identifies 10 key work streams – initiatives and challenges that have been identified from an IT perspective – on which the Enterprise Technology Team solely focuses research efforts. To create the focus areas, Ford examines key layers of architecture and considers the future state of technologies from various angles, including security requirements, the importance of the network, applied analytics and the emergence of a more mobile and virtual enterprise.
CREATING THE DRAWING BOARD I DENTIFYING KEY WORK STREAMS
Technology Trends
Security Imperatives
Corporate Strategy
INPUTS
Virtual Workforce Needs
Applied Analytics
Enterprise Technology Team conducts initial evaluation
OUTPUT
Prioritized list of 10 key IT challenges and initiatives, or “work streams”, that guides technology investigation
S OURCE: FORD M OTOR C OMPANY, CIO EXECUTIVE BOARD RESEARCH
Each of the ten work streams is driven by a specific strategy and mission. The Enterprise Technology Team examines the work stream’s overall framework to identify further focus areas. Team members must justify interest through lab proposals and gain approval from management committees in order for a technology to enter the e4 process.
EFFECTIVE EMERGING T ECHNOLOGY SCANNING FINDING THERIGHT P ROJECTS
“My [team] has to submit formal research proposals on the technologies they are evaluating. They have to tell the story of how the technology fits in.”
Vijay Sankaran, IT Manager of Enterprise Technology Ford Motor Company
S OURCE: D AVID GEER, “PEOPLE, ROLES, AND E XPECTATIONS”, COMPUTERWORLD, 2005.
© 2006 Corporate Executive Board
Project Number: CEB155ILXT
EMERG ING T ECHNOLOGY SCANNING May 2006
PAGE 9
Practice Profile
Evaluating, Testing and Implementing New Technologies: Ford’s e4 Process
The e4 process helps ensure all relevant parties within Ford share the same technology vision and goals. To promote this type of cross-function communication, Ford’s Enterprise Technology Team meets monthly with stakeholders to identify pain points. Additionally, throughout each phase of e4 further validation from management is sought to ensure acrossthe-board cooperation and satisfaction.
BEST PRACTICES I N EMERGING TECHNOLOGY SCANNING FORD’ S E4 P ROCESS
E1: Experiment
E2: Evaluate
E3: Economize
E4: Engineer
High Level Research -Identify and research new IT technologies -Experiment with broad, possibly “zany” ideas
Testing -Substantiate interest through lab research or specific business case context -Partner with business or service application to apply business case examples -Establish technology visioning and future plans -Solidify core ideas
Business Case Validation -Create business cases for core ideas -Ensure business value proposition -Communicate with business partners -Seek funding and create cycle plan for pilot phase
Standard Business Development Process -Transition to architectural platform -Clearly define products -Integrate into environment
CHECKPOINT Management team reviews lab research and decides whether to stop analysis or proceed to e3
S OURCE: FORD M OTOR C OMPANY, CIO EXECUTIVE BOARD
RESEARCH
CHECKPOINT Ford’s Technology Management Council reviews final lab results and decides whether to roll out technology
Ford’s Results
Ford’s implementation of the e4 Process addresses the central challenge of keeping both the business and IT aligned. Although it was first conceived in order to create a repeatable process to introduce new technologies, Ford has experienced additional benefits:
• Visibility: The Enterprise Technology Team now has a portfolio and dashboard that maintain information on all current projects, including what stage of maturity they have achieved. Additionally, team managers can drill down and quickly identify the value of the project. Consistency: One of the biggest challenges of previous R&D efforts was the lapse in effective partnering and communication of each project’s value proposition and key methods. Ford’s e4 process provides a vehicle for quickly clarifying why or why not a project should be pursued in a standard format. Cross pollination: Ford’s e4 process allows staff from any other internal organization to gain an understanding of ongoing projects and new initiatives, which encourages and creates unprecedented internal partnerships. To further promote crossfunction visibility, Ford produces a weekly newsletter that features one of the ten key work streams the enterprise technology team focuses on.
RESEARCH
•
•
S OURCE: FORD M OTOR C OMPANY, CIO EXECUTIVE BOARD
© 2006 Corporate Executive Board
Project Number: CEB155ILXT
EMERG ING T ECHNOLOGY SCANNING May 2006
PAGE 10
Additional Case Examples
EMERGING TECHNOLOGY SCANNING INITIATIVES
Sheridan Bank ∗ Expands Enterprise Technology Team to Embed Emerging Technologies into IT Strategy Sheridan Bank’s Strategy and Enterprise Architecture team focuses on distilling emerging technology research into enterprise-wide IT strategy. Sheridan has both an enterprise technology team as well as a retail technology team, with both groups strategizing on business value for their particular function. Each relies on a weekly IT Council meeting to align priorities and strengthen Sheridan’s emerging technology efforts. The enterprise team attends technology conferences, speaks with analysts and industry experts, and conducts internal research in order to identify key trends. Sheridan focuses on moving projects through a testing phase to a business case reality. The company also emphasizes market analysis when considering new technologies. In addition, Sheridan is constructing a lab with Sun Microsystems and IBM software to promote internal research and testing efforts. The enterprise technology team expects to expand within the next year to increase bandwidth in technical application areas. By dividing the enterpris e and retail technology teams, Sheridan can strategically focus on emerging technologies that support Sheridan’s internal and external business visions.7 Procter & Gamble Co. Reorganizes IT R&D to Increase Business Value Procter & Gamble Co.’s (P&G) IT R&D function has reshuffled over the last decade in order to reflect P&G’s business goals. In the 1980’s and 1990s up to half of the company’s IT R&D budget focused solely on emerging technology research, creating communication gaps between the technology and business sides. As the company focused on the future, IT and innovation staff prioritized integrating IT R&D into P&G’s overall strategy to maintain a competitive business edge within the marketplace. In order to achieve this goal, the company changed the structure of its IT department, as well as how IT integrated with the rest of the company. Over the past four years, the company’s IT R&D leaders made a concerted effort to better incorporate their teams with the business by setting goals that aligned with the company’s goals, working more directly with the business units , and refocusing employees within company groups. Today, approximately 80% of the IT R&D budget allows for engineering against business problems, and P&G’s innovation model has reinvigorated the company’s strategy and significantly impacted revenue.8 Dell Computers Relies on Customer-Driven Innovation to Increase Business Value from New Technologies Dell Computers has over 4,000 employees worldwide devoted to product development research, including core teams focused on current customer requirements, pain points, and interests. These teams focus on how innovation can fulfill these requirements in order to increase customer satisfaction. Dell’s regimented process and approach includes generating innovation efforts from direct customer interaction. This allows the company to project both short-term and long-term technology initiatives that help to ensure greater customer satisfaction and loyalty.9
2005 Revenues: $10 -25 billion 2005 Employees: 25-000 – 45,000
2005 Revenues: $56.7 billion 2005 Employees: 110,000
DELL Computers
2006 Revenues: $56 billion 2006 Employees: 66,100
∗
Pseudonym
© 2006 Corporate Executive Board
Project Number: CEB155ILXT
EMERG ING T ECHNOLOGY SCANNING May 2006
PAGE 11
2005 Revenues: $177 billion 2005 Employees: 370,684
DaimlerChrysler AG Implements a Technology Council to Improve Business Value and Increase Product Design Visibility In order to prioritize business objectives, DaimlerChrysler created a global technology council with members from business, IT and IT R&D. The group meets monthly to discuss business unit expectations and align project budgets. At DaimlerChrysler, IT R&D not only measures the performance of strategic suppliers but also has the power to affect it. The company’s product managers participate in customer focus groups in the research labs of the company’s top suppliers and suggest features they would like to see in upcoming versions of those products. In addition, the product managers are permanent members of the supplier councils, meeting a minimum of four times per year. This provides product managers with more visibility into upcoming vendor products than previously achieved, and allows them to have direct input into what the product should look like. By combining business strategy with the IT R&D team at a project’s start, DaimlerChrysler more effectively prioritizes business objectives, including budget and revenue goals.10 HIP Health Plan of New York Shortens Turnaround and Expenses on Patient Care Through In-House Technology Research Across 2003 and 2004, HIP Health Plan of New York implemented a research lab equipped with dedicated systems for technology exploration that are separate from production systems. In 2004, HIP introduced a tablet PC with customized software used by nurses to gather information about hospital patients. This information is then analyzed by the health-insurance company’s case managers to recommend the most cost-effective treatments. In New York hospitals, nurses visit patients who are insured by HIP, then type each patient’s case information into a standard form on the PC. With the new tablet, information is uploaded directly from the nurses’ notes, via a wireless network, to a database accessible to case managers. The case managers can then analyze the information and make recommendations to caregivers within 24 hours. HIP’s CIO reports that the project, and others like it, improve patient services and reduce administrative expenses.11
2004 Revenues: $3.65 billion 2004 Employees: 3,000
2005 Revenues: 2005 Employees: 61,000
Hilton Hotels Contributes Funding to University Center for the Study of Emerging Technology to Boost Testing and Hands-On Experimentation Hilton Hotels Corp. uses both internal and external research resources for IT R&D efforts. The company contributes to the FedEX Institute of Technology, located at the University of Memphis, allowing for additional research resources not available within Hilton’s enterprise emerging technology staff. In addition, the company houses a testing room in one of its hotel locations in Los Angeles, where the company tests how new technologies work in the actual environment. Hilton guests stay in the room, which is equipped with emerging technologies such as retinal scanners, fingerprint readers and wireless reservation coordination devices. Through this testing method, Hilton developed a new handheld product that assists staff in helping guests with check-in kiosks. Experimentation with technologies relevant to business value allows Hilton to discover which technologies will most directly impact the business.12
© 2006 Corporate Executive Board
Project Number: CEB155ILXT
EMERG ING T ECHNOLOGY SCANNING May 2006
PAGE 12
1 2
Barbara Gomolski, “IT R&D Redux”, Computerworld, July 2005. Randy Bean, “Emerging Technologies Still Emerging”, CIO Update, August 2004. 3 David Geer, “R&D Revival”, Computerworld, October 2005. 4 Ibid. 5 CIO Executive Board, Ford Motor Company Research, 2006. 6 Ibid. 7 CIO Executive Board, Commonwealth Bank of Australia Research, 2006. 8 David Geer, “R&D Revival”, Computerworld, October 2005 and Larry Huston and Nabil Sakkab, “Connect and Develop: Inside Procter & Gamble’s New Model for Innovation”, Harvard Business Review, March 2006. 9 Robert L. Mitchell, “Unconventional Innovation”, Computerworld, May 2005. 10 David Geer, “R&D Revival”, Computerworld, October 2005. 11 Charles Babcock, “R&D Envy”, InformationWeek, June 2004. 12 Ibid.
The Corporate Executive Board has worked to ensure the accuracy of the information it provides to its members. This project relies upon data obtained from many sources, however, and the Corporate Executive Board cannot guarantee the accuracy of the information or its analysis in all cases. Furthermore, the Corporate Executive Board is not engaged in rendering legal, accounting, or other professional services. Its projects should not be construed as professional advice on any particular set of facts or circumstances. Members requiring such services are advised to consult an appropriate professional. Neither Corporate Executive Board nor its programs are responsible for any claims or losses that may arise from any errors or omissions in their reports, whether caused by Corporate Executive Board or its sources.
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© 2006 Corporate Executive Board
Project Number: CEB155ILXT
