Hey, IT, want to innovate? Become a network

My editor hates innovation. Actually, what she really hates is the way the term “innovation” gets dropped onto everything, particularly in the technology sector. The term and what it incapsulates is a relatively recent phenomenon in East Coast conversations, after a long Silicon Valley gestation. But innovation as a corporate buzzword has gained new legs for legitimate reasons.

IT departments are finally figuring out how to move from cost center to revenue generator. As they transfer necessary but dull computing functions to cloud-based services or outsourcers, CIOs and senior IT execs can take a lead role in how the company innovates by driving the adoption of new collaboration tools and processes. See, for example our recent Sector Roadmap report on innovation platforms (subscription required).

Even more, as “software eats the world,”IT departments can become better contributors to what the company sells. They must reallocate resources away from automating back office functions and set them on re-inventing the company as a collection of services. But the result needs to be more than just a collection; it needs to be a network.

I’m old enough to remember when Sun Microsystems’ tagline was “The network is the computer.” Nowadays, it’s the company itself that’s the network, and so is its product.

Company as network

As Haydn Shaughnessy details in the Sector Roadmap, most of the products calling themselves innovation platforms (from Spigit, Hype, Brightidea, and others) are optimized for old-school practices: find an idea, try it out, move it through “graduation gates.” Most are thin at bringing IT and business management together in a truly transformational context. Imaginatik does relatively better.

He argues that this collaboration, and other big transformations like creating new revenue models and exposing assets through APIs, needs a better support platform. That platform must act as a part of a network that includes feedback loops inside and outside of corporate walls, extending the network to an organization’s supply chain and customers. Features from so-called listening platforms (subscription report) need tighter integration.

Unsurprisingly, the tech industry is farther along this type of innovation scheme than most. But financial services have started to do better at platform management and social ecosystems for customers and partners.

For once, IT execs are in a good position to promote, rather than inhibit, these new organizational networks. In supporting new tools and meeting modern workforce expectations, they’re not as far behind as conventional wisdom would suggest. In fact, they’re often ahead of the workforce.

Actual and preferred internal communications and collaboration

Source: Gigaom Research global workforce survey, n=1,208 workers (ages 18-34)

Product as network

But IT must take the next step and help companies turn their products into networks of apps and services. Of course, everybody wants to be the hub of that network, and it takes more than exposing a bunch of APIs to successfully execute a classic tech-industry “platform” strategy. Creating product networks is subtler, and not everyone can be the top carnivore in an ecosystem’s food chain.

Compare “app constellations.” That’s a Fred Wilson coinage describing both mobile app promotion and how tech companies like Facebook and Foursquare are atomizing monolithic services into single-function apps. Back in pre-mobile days of yore, we called them “portals,” but who doesn’t love a new buzzphrase?

An app constellation is an example of a visible network. In media, Disney is a visible network while Viacom is invisible. The customer is only too aware of the Disney network of products, and Disney successfully sells multi-channel entertainment, toys, travel, and hospitality to a similar group of customers with common interests. Disney doesn’t brand sports as Disney, but as ESPN, and does little cross-promotion between sports and family entertainment.

In contrast, Viacom harnesses common corporate resources, and sometimes sells ads across MTV and BET, but the Viacom brand is invisible, and individual properties target different demographics. Both strategies are viable. Visibility can limit a network’s scope; it’s highly debatable whether Facebook audiences want to read real news or to shop on Facebook.

Outside of tech markets, many companies in financial services and packaged goods have rich marketing experience in managing the subtleties of visible versus invisible networks. If their IT guys can get their minds around apps and services, those organizations are in good shape to ride the network trend.

Keep an eye out for forthcoming Gigaom Research analysis from Haydn, and for Laura Stuart’s series on “The Transformative CIO.”