Leading the Epic Revolution: How CIOs Drive Innovation and Create Value Across the Enterprise

Contents

Cover

Contents

Praise

Title Page

Copyright

Dedication

Foreword: Innovating for Continual Growth and Prosperity

Acknowledgments

Introduction

The Other Side of the Firewall: Understanding Your Company's Markets

It's All about People

Making the Case for Continuous Business Transformation

Chapter 1: The Innovation Challenge

The Psychology of Innovation

An Expanding Range of Influence

Speed and Failure Are Essential in Continuous Innovation Strategies

Fail Fast and Fail Smart

The New Speed of Change

Focus on the Business Challenge, Not on the Technology

In the Modern Enterprise, True Innovation Takes Many Shapes and Forms

Notes

Chapter 2: Governance Trumps Process

Being a Leader of Innovation at an Innovative Enterprise

Great Companies Avoid the Me Too Syndrome When Innovating

Cycles of Innovation and Adoption

Good CIOs Are Leaders at All Stages of Innovation

From Enabler to Innovator: The Evolving Image of the CIO

Replacing Up and Down with Left to Right

Creating a Culture of Innovation

Converting Ideas into Successful New Products and Services

Notes

Chapter 3: Leveraging Multiple Skill Sets

Networking and Connecting

Overcoming Obstacles to Innovation

Two Types of Thinking

Overcoming Habits

Breaking Through and Moving Forward

Professor of Innovation

Leveraging the Cloud and Thriving on Innovation

Notes

Chapter 4: Accelerating Innovation

In the Modern Enterprise, IT Is the Backbone of Innovation

Underlying Principles of Innovation

A Practical Taxonomy of Innovation

The Mouse in the Maze

Managing Innovation Across the Enterprise

Eight Action Steps for Driving Innovation

Notes

Chapter 5: Innovation Begins with Business Strategy

The New Face of IT Executive Leadership

Improvisational Skills Can Elevate Innovation Leadership Capabilities

Blending Innovation and Operations

Innovating in the Battle Against Cancer

Focusing on Value Creation, Improved Margins, and Staying Ahead of the Trend Curve

Escaping the Pull of the Past

Chapter 6: Evolving Relationships Across the C-Suite

From Captain to Coach, from Controlling to Enabling

Connecting the Dots Between Innovation and Analytics

Digging Deeper into Big Data

Innovation in the Age of the Industrial Internet

Moving Toward the Customer

Lining Up the Innovation Roadmaps

Designing Practical Innovation Strategies

Managing Between Extremes

Three Complementary Pairs of Roles

Note

Chapter 7: Why Credible Leadership Matters

Do Not Hesitate to Be a Leader

Sometimes Getting Out of the Way Is the First Step to Achieving Innovation

Innovation Conundrum

Accelerating Innovation Through Partnerships

A Shifting Mindset

Leading Innovation and Driving Transformation

Managing the Merger of Culture and Technology

Two Tiers of IT Innovation in the Modern Global Enterprise

A Role Model for Innovation and Leadership

The Next Big Wave: IT Value Creation

Where Innovation Begins: Understanding the Goals and Objectives of the Business

The Four Dimensions of Continuous Innovation and IT Transformation

Building a Hybrid Platform for Continuous Innovation

Making the Case for Top-Down Innovation in the Enterprise

Avoiding the Emperor Has No Clothes Syndrome

Note

Chapter 8: Leveraging Social Collaboration to Drive Innovation

Tangible Results Through Social Media

Embracing the Social Workforce

Putting Innovation in the Hands of Users

Innovation and Social Collaboration

Note

Chapter 9: Living with Uncertainty

Keep Your Eyes on the B2B Internet

Trust, Freedom, and Responsibility: Keys to Transformational Leadership and Continuous Innovation

Key Traits of Innovative IT Leaders

Security Is Integral to IT Strategy

Maintaining Credibility: You Have to Know When to Get Down in the Weeds

Think Multiregional Before Committing to Global Markets

Walking the Talk

For Many Reasons, Now Is the Perfect Time to Be the CIO

Revisiting the Relationship Between Innovation and Entrepreneurship

The Emerging Ecosystem of Continuous Innovation and Transformation

A Historic Moment

Notes

Recommended Reading

Meet Our Sources

About the Author

About HMG Strategy, LLC

Index

End User License Agreement

List of Tables

Chapter 4: Accelerating Innovation

Table 4.1 Innovation and Execution

List of Illustrations

Chapter 1: The Innovation Challenge

Figure 1.1 Characteristics of Leadership

Figure 1.2 The CIO's Circles of Influence

Chapter 2: Governance Trumps Process

Figure 2.1 IT Life Cycle in Value Creation: Perpetual Pendulum

Figure 2.2 IT Life Cycles—Another Version: Virtuous Cycle

Praise for Leading the Epic Revolution:

How CIOs Drive Innovation and

Create Value Across the Enterprise

Modern markets are changing and evolving at an ever-increasing pace. Future success will require a culture that embraces continuous improvement and rapid innovation. The stories and advice in Hunter's new book will definitely help those who read it optimize and refine their innovation strategies.

—Hunter W. Jones, VP, Enterprise Services,

and CIO, Cameron International Corporation

Great stories, excellent advice, and timely, practical strategies as companies and executives manage through the transition to social, mobile, and cloud. This is a book worth reading from cover to cover.

—Tony Zingale, Chairman and CEO, Jive Software

Leading the Epic Revolution details the processes behind the innovation cultures at highly successful companies such as GE, IBM, AT&T, Box, Facebook, Netflix, and many others. I recommend this book for all forward-thinking executives.

—Mike Kail, VP, Information Technology, Netflix

LEADING THE EPIC REVOLUTION

How CIOs Drive Innovation and Create Value Across the Enterprise

HUNTER MULLER

Cover image: Nikada/iStockphoto

Cover design: Wiley

Copyright © 2013 by Hunter Muller. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

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Library of Congress Cataloging-in-Publication Data:

Muller, Hunter, 1960–

Leading the epic revolution : how CIOs drive innovation and create value across the enterprise / Hunter Muller.

pages cm. — (CIO series)

Includes bibliographical references and index.

ISBN 978-1-118-34047-9 (cloth); ISBN 978-1-118-43189-4 (ebk.); ISBN 978-1-118-43193-1 (ebk.); ISBN 978-1-118-43194-8 (ebk.)

1. Information technology—Management. 2. Technological innovations—Management. 3. Diffusion of innovations—Management. 4. Chief information officers. I. Title.

HD30.2.M84947 2013

658.4'038—dc23

2013002822

For Sandra, Brice, and Chase

FOREWORD: INNOVATING FOR CONTINUAL GROWTH AND PROSPERITY

All companies have different needs and priorities. What all companies have in common, however, is the need to grow. And growth, to an investor, is best measured by increased value.

There are a relatively small number of ways to generate enduring value. Companies can introduce new products or services, attract new customers, and open new markets. They can also improve the quality of their existing products, raise their level of efficiency, and leverage economies of scale.

Accomplishing any of those objectives requires innovation. Companies cannot simply stand still and keep doing the same things they were doing yesterday. The world is changing continually, and companies have to keep pace or risk falling behind.

At McKesson, we fully understand that we live in changing times. We are not a consumer brand, but our presence is extraordinary. We are the largest pharmaceutical distributor in North America, distributing one-third of the medicines used every day.

We also develop and install health-care IT systems that eliminate the need for paper prescriptions and paper medical records. Our software and hardware are used in more than 70 percent of the nation's hospitals with more than 200 beds. Our hospital information system solutions include electronic health record system (EHR) and clinical decision support systems, 3-D radiology imaging systems, and analytics designed for health care. Our Healthcare IT division also serves diverse areas within the health industry by offering solutions such as pharmacy automation and medical claims management software. And we handle the majority of health-care claims transactions—tens of billions of them—in the United States.

We touch virtually every stakeholder in health care—physicians, manufacturers, hospitals, providers, and consumers. That's a big universe of stakeholders. In fact, we are unique in the breadth and depth of services we offer to health care. We want to keep them happy, and we want to serve their needs better than anyone else can.

I think most of us would agree that innovation happens close to the customer. The better we understand what our market wants, the better we understand what our current customers and our potential customers need; and the closer we are to their world, the better we can apply our unique perspective to see the gaps between what is and what could be.

Typically, a company's relationships with its customers happen far away from IT. They happen close to sales, close to marketing, and close to customer service, but far from IT. That perceived distance can be a disadvantage for IT.

How does IT overcome that disadvantage? I would submit to you that we can take on a consulting role—if we develop the capability, the intimacy with the business, and the awareness of the key business drivers that earns us a seat at the planning table. Then we can work side by side with business leaders to craft solutions that will help the business prosper and grow.

Those solutions, in many instances, will be the result of experiments. That's how innovation occurs, through experimentation. We aren't talking about massive IT projects or multiyear, multimillion-dollar initiatives, we're talking about experiments with mobile devices, with tablets, with cloud services, with social media.

But here's a critical point: IT isn't going to control those experiments tightly. Instead IT will participate, advise, and consult. Most important, IT will be aware of the hundred or so experiments that are happening at the same time across the entire span of the business and will begin threading common technologies through those experiments, linking them to existing systems, building or leveraging common platforms, and minimizing rework and reinvention.

For example, at McKesson we saw more than 20 different development organizations that were each beginning to experiment with mobile computing. By being aware of and helping with these experiments, we were able to put together a single mobility infrastructure and a mobile platform development team that allowed each of the businesses to participate fully and at very low cost, instead of mounting their own one- or two-person development capability or outsourcing that capability somewhere else.

Over and over again, we see that our presence in these businesses, through direct relationship management, through ties into their strategic planning organizations, allows us to encourage and support innovation across the company.

Some of those innovations become real products and services, and they create a competitive edge. When they become truly successful, they are likely duplicated by competitors, and eventually they begin to look more like commodities. During this evolution, IT's job shifts from innovation enablement to operational rigor, and then finally to compressing the costs out and operating at the highest level of efficiency possible.

By embracing that cycle and allocating part of its effort toward each segment of the cycle, IT continually feeds the business and helps it thrive.

This isn't magic. It's discipline—the same discipline required to manage any successful business. You make sure that you're collaborating with the stakeholders at every level. You make sure that you have good governance in place so that you can tie these efforts together across the many divisions of your organization. You make sure you have the right talent and capabilities for each of the jobs to be done. And you make sure you operate at competitive levels of cost and quality.

But you cannot possibly sit at that table unless you have established your credibility. If you can't demonstrate the ability to execute well on basic IT functions, you aren't going to be seen as a credible leader. The best path to credibility is by operating IT like a business. Measure what you do, relentlessly apply the basic principles and leadership concepts of any service organization. Experiment, learn, and, when necessary, kill your experiments quickly. Move with velocity and confidence and humility.

I came into the job of CIO seven years ago. I'm probably the only CIO of a Fortune 15 company who had never been a CIO before. I was running several of our health-care technology businesses when our CEO asked me to apply the same principles we used in the businesses to the IT function. He wanted me to run IT like a business.

The first thing I did was try to figure out who my customers were. The customers were the 12 major divisions of McKesson. I brought together the presidents of those organizations and formed a governance board, and then brought together the IT leaders of those organizations and set up a CIO council. We then brought in their key technologists and set up a technology council. Essentially I said, My job is enabling you. I need to be working on what you need.

We turned IT into an organization that exists to fulfill IT demand. By working together across each of our businesses, and by holding ourselves accountable to the presidents and IT leaders of each of the organizations, and by planning only in collaboration, never in conflict, we were able to achieve some pretty dramatic results on every front. At the same time, the maturity of governing other shared services also expanded, and our presidents now oversee more than $3 billion of shared expense through this overall governance process.

Unquestionably, new technologies are important. We need to master and manage them. But the real challenge for IT is building new capability, leadership talent, business relevance, connections, and relationships with business leaders. IT needs to stay on top of the trends and shifts impacting the company and its customers. That's how IT delivers value to the modern enterprise: by understanding how to help it prosper and grow in a continually changing world.

—Randy Spratt

EVP, CIO, and CTO

McKesson Corporation

ACKNOWLEDGMENTS

This is my third book, and like its predecessors, it is primarily a work of collected knowledge. The concepts and frameworks contained in this book are derived primarily from the experience that I acquired over three decades as a consultant in the IT industry. But this book also represents two years of persistent research, involving dozens of interviews. I could not have completed this book without leveraging the collective wisdom of many expert sources. I thank them sincerely for their time, their energy, their intelligence, and their generosity.

I am deeply grateful to Rich Adduci, Thaddeus Arroyo, Bruce Bachenheimer, Ramón Baez, Linda Ban, Puneet Bhasin, Whitney Bouck, Greg Buoncontri, Tim Campos, Mike Capone, Tim Crawford, Sameer Dholakia, Tim Dilley, John Engates, Carol Fawcett, Jay Ferro, Thomas Fountain, Peter High, Kim Hammonds, Doug Harr, Donagh Herlihy, Daphne E. Jones, Sheila B. Jordan, Mike Kail, Jim Knight, Dr. William R. LaFontaine, Jonathan Landon, Françoise LeGoues, Ralph Loura, Tony Leng, Arthur McAdams, Chris McGugan, Todd McKinnon, Michael Minelli, Gordon Payne, Don Peppers, Steve Phillips, Mark Polansky, Bruce Rosenstein, Bill Ruh, Brian Queenin, Doug Schneider, Tony Scott, Frank Slootman, Dave Smoley, Randy Spratt, Tim Stanley, Kimberly Stevenson, Don Tapscott, Patricia Titus, Jim Tosone, John Yapaola, and Tony Zingale.

While researching and writing this book, I received invaluable assistance and ongoing support from my colleagues at HMG Strategy: Cathy Fell, Kristen Liu, Melissa Marr, and Amanda Vlastas.

I also extend my sincere thanks to Sheck Cho and Stacey Rivera, my editors at John Wiley & Sons, who had faith in the value of the project and were patient when I missed my deadlines.

I owe a special debt of gratitude to Mike Barlow, the coauthor of Partnering with the CIO (Wiley, 2007) and The Executive's Guide to Enterprise Social Media Strategy (Wiley, 2011). Mike served as project manager for this book, and his guidance was truly invaluable. In addition to being a talented writer and editor, Mike is a genuinely nice guy. Thank you, Mike!

Most of all, I want to thank my wife, Sandra, and our two sons, Chase and Brice, who put up with long nights of writing, endless phone calls, and lost weekends of heavy editing.

INTRODUCTION

If you believe, as I do, that technology is a primary driver of wealth and prosperity, then it's hard to imagine a better time to be alive. Yes, we are living in a time of great change. But much of the change we see around us is genuinely positive. People are living longer, enjoying their families more, and spending more time following their passions. When you take an inventory of the pros and the cons of modern life, there's no question that we're better off today than we were 100 years ago.

Our health, our material wealth, and our leisure time can all be traced back to technological innovation. In truth, it's hard to overestimate the positive impact of technology on our world.

But all change requires credible leadership. When good leadership is in place, innovation follows. Innovation sets the stage for transformation. Leadership, innovation, and transformation aren't merely words. They are stages in a natural process of change and evolution that elevates us, as individuals and as organizations.

One of the main reasons that I love my job is because it enables me to meet regularly with the world's top CIOs and IT leaders. Talking to brilliant people, listening to their stories, and sharing ideas is inspiring and fulfilling.

As human beings, we learn by sharing stories. Like my previous two books, this book is essentially a collection of stories told by extremely bright people at the peaks of their careers. I truly believe that the work we do at my firm, HMG Strategy, is part of a larger process by which critical information is shared and distributed across a global