Strategic Experimentation with IT

Chapter 12

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Strategic IT Experiments

Occur in the larger framework of organizational innovation

Used to drive a new business venture

Are not just experiments with IT

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Innovation

Comes about through organizational change

Frequently involves experimentation

Is necessary for long-term organizational survival

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Types of Innovation

Sustaining Innovation – improves a product or service for existing customers.

Disruptive Innovation – targets noncustomers and delivers a product or service that differs from the current product portfolio. It must create and capture new value.

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Forms of Innovation (Brown and

Eisenhardt, 1997)

Continuous Change – Frequent, relentless and endemic to the firm.

Punctuated Equilibrium – assumes long periods of incremental change, interrupted by brief periods of radical change.

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Strategic Experimentation Defined

A series of trial-and-error changes pursued along various dimensions of strategy, over a relatively short period of time, in an effort to identify and establish a viable basis for competing. (Nicholls-Nixon, Cooper and Woo, 2000)

Highest-risk, highest-return category of innovation and requires a unique managerial approach. (Govindarajan and Trimble, 2005)

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Strategic Experimentation and the Innovation Process

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Figure 12.1

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Stages of the Innovation Process

1. Idea stage

2. Proof of concept stage

3. Trial or pilot stage

4. Transition stage

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Idea Stage

Generated through informal or formal processes

Source of ideas are varied

Must include specific objectives that address pain points or core business offerings

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Proof of Concept Stage

Teams are assigned to specific ideas.

Testing is done within a formal or informal laboratory setting using controlled experimentation.

Ideas may morph into other ideas.

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Trial or Pilot Stage

Idea is exposed to market in a limited and measurable way.

Measurements are taken to evaluate results.

If successful, requirements for the next stage are defined.

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Transition Stage

Idea now enters full system development life cycle.

Short-cuts must be engineered to meet production standards.

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Strategies for Successful IT Experimentation

Motivate: Establish rewards for strategic IT experimentation.

Support: Create infrastructure to support experimentation.

Direct: Manage innovation strategically.

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Establish Rewards for Strategic IT Experimentation

Experimentation is risky.

Incentives and rewards must be provided to support experimentation.

Good ideas can come from any source.

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Create Infrastructure to Support Experimentation

Infrastructure is needed to support IT innovation and experimentation.Some organizations create formal centers (or laboratories).Intranets are being used to solicit new ideas.Financial support is frequently provided through internal venture support.

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Innovation Center Strategies

Insulate – Create innovation centers where all lines of business can come together to address common problems. Seeks to take advantage of synergy.

Incubate – Innovation centers are placed within lines of business. Seeks to focus on specific problems or opportunities. 12-16

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Manage Innovation Strategically

Strategic IT experimentation must be directed to ensure it is relevant.Link experimentation and innovation to customer value.Link experimentation to core business processes.Use venture funds to guide strategic initiatives.

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Venture Funding Categories

Make greater use of innovation resources.Focus on new business models.Explore new/disruptive technologies.Focus on penetrating new markets.Leverage cross-organizational capabilities.Streamline decision making.Focus on opportunities that scale.

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Lessons Learned from Experimentation

Focus on achievable targets.

Don’t rush to market.

Be careful with cool technology.

Learn by design.

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Conclusion

Strategic IT experimentation can lead the IT function to become more customercentric, assimilate new skills, and work collaboratively with business units.

IT will be able to use strategic experimentation to spin good ideas into gold.

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