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SAYS IBM STUDY Innovation can unlock growth among firms

Posted on: February 24, 2009

By Anna Valmero
First Posted 12:51:00 11/14/2008

Filed Under: Technology (general), Innovation (invention), Computing & Information Technology

SINGAPORE — Innovation by differentiation will define success for organizations in the future, an IBM study showed.

A 2008 IBM Global CEO study found five emerging trends for the enterprises of the future: they have the hunger for change; have the need to innovate beyond customer imagination; have need to become globally integrated; have the urge to use disruptive technology and have the desire to adopt green initiatives as part of corporate social responsibility.

Published in June, the study involved 1,130 CEOs from 32 industries as respondents. Of these respondents 390 came from Asia Pacific. Other regions represented include Japan, Europe Middle East and Africa (EMEA) and the Americas.

The study found that CEOs from various industries expect faster, broader and more uncertain change in the global business space, Colin Powell, IBM Asia Pacific Consulting Services Leader for Singapore, said the during an IBM Business Executive workshop in Singapore.

He said Asia Pacific CEOs expressed more confidence than those from other region in managing the changes ahead.

“Coping with change is nothing new for organizations. However, today’s business space requires organizations to anticipate and manage the rate change is happening,” said Powell. Thus it is important for CEOs to deploy an innovative business model that will allow an organization to sustain its competitive advantage, he said.

Decades ago, technology was viewed simply as a means to implement strategies of the organizations.
Today, business leaders are realizing technology has become a factor that can shape or define growth for the organization, he said.

Citing the study, Powell said CEOs rated market factor, people skills and technological factors as top three drivers that can impact organizations. In 2004, technological factors ranked sixth and in 2006, moved up to the third spot.

Another study from the Harvard Business Review released in August states that companies using enterprise IT systems are winning customers and gaining competitive edge among rivals.

The technology is not simply about software and hardware, said Powell. Rather, it is the totality of IT processes in the organization which involves people skills, infrastructure and partnerships made beyond the company’s wall, he said

Powell noted that from 2006, the gap of how CEOs manage change successfully against the need for it, tripled from 8 percent in 2006 to 22 percent in 2008.

He added that 50 percent of CEOs noted they have limited or no success in adopting and managing to rapid change.

To “embrace unpredictability as the new routine,” Powell said organizations must deploy innovative business models that will move the organization from one that is reactive to change to one that anticipates and is proactive to change. This leads to change becoming an organization’s strategy, he said.

In terms of becoming innovative beyond customer organization, Powell noted that over half of the respondents announced willingness to increase their investments in customer related activities to engage in more informed, more collaborative customers.

Organizations view this informed customers with enthusiasm as they become sources of innovation and information, allowing the organization to achieve differentiation from the pack, he said.

“This ushers the shift from vendor-client relationship to one of partnership,” he added.

In terms of becoming globally integrated enterprise, over 60 percent of CEOs are embarking on radical, new business designs to exploit global integration, said Powell.

In the study, 57 percent of CEOs plan to change the organization’s skill mix. About 85 percent plan on partnering while 66 percent eye mergers and acquisitions.

In Asia Pacific, CEOs are polarized on the issue, said Powell.

“Based on the study, the ‘outperformers’ opted for more global business designs by partnering. The key driver to this is cost. For example, by outsourcing IT activities they can focus on what’s core to the organization and build on that capability to ensure continued competitiveness,” said Powell.

There are also disruptive forces in the business that made majority of the CEOs change their business models: the business model explodes and collaboration models become more common, said Powell.

A client of IBM, Minor Group built a 10-year plan for its business. Neil Hampshire, chief information officer of Minor, said they chose to tap IBM for outsourcing IT activities so Minor can focus on strategic business plans. The distributor of top brands from aircraft to fashion and cosmetics noted that its businesses are growing faster than its IT infrastructure.

“Our decision for outsourcing is not merely about cost reduction,” said Hampshire. “It was doing cost-effectively activities that support capability enhancement, scalability, best practices in IT and our ability to execute change quickly and deliver a strategic plan.”

But before considering outsourcing, there are several things a company must consider.

“First, the company must know its strengths and weaknesses. Then, they must identify partners that can compliment its processes. It is important an organization is open to new ways of doing things and allocate how charges are shared in the partnership like outsourcing,” said Hampshire.

Richard Ruiz, vice president of IBM Global Technology Services in the Asia-Pacific, said that outsourcing is shifting its focus from enabling cost reduction to competency.

“Over time, it is moving from being a commodity process to one of partnership and capability enabler. Outsourcing is moving up the value chain as it becomes an important enabler of business transformation,” Ruiz said.

Finally, corporate social responsibility, especially the green drive is moving up the CEO’s agenda, said Powell.

He said that 25 percent of companies in the study have indicated that they will increase investment in this key area. They want to focus on developing new “green” products. A challenge to this will be how to make corporate social responsibility a more holistic aspect of company processes.

“CEOs are eyeing the “green agenda” as an engine for growth,” said Powell. “More and more they are realizing that going green will mean also efficiency in the company’s operations.”


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