INTRODUCING AN INTEGRATED INNOVATION GOVERNANCE FRAMEWORK (I2GF) AUTHOR: YOSHEEN PADAYACHEE
AND MLUNGISI DUMA
Da Vinci Institute, Modderfontein, Johannesburg, South Africa Email:
[email protected]
Abstract: Despite the availability and use of good practice governance frameworks, the success rate of innovations remains disappointingly low. This paper introduces the Integrated Innovation Governance Framework (I2GF). The I2GF model details an integrated approach to successfully deliver innovations. The model focuses on the appropriate use of governance practices when and where it’s needed. The I2GF model remains independent of the delivery methodology used to deliver innovations. The model comprises 5 key zones to deal holistically with innovation management. This research paper also attempts to understand the complexities faced by large organizations to deliver innovations. The study considers well established governance frameworks i.e. CoBit, ITIL, ISO 9000 and PMBok and related work to ascertain the gaps and key contributors that cause innovation delivery to fail. A qualitative study surveying replies from various participants across Financial Services Organizations (FSO) was conducted to answer the following research questions: (I) Are organizations with formal, established innovation processes successfully implementing innovations? (ii) Do large use good practice ICT and Risk governance frameworks and methodologies manage innovation? (iii) Do the use of good practice ICT and Risk governance frameworks and methodologies contribute to improving the success rate of delivering innovations? (iv) What are the key reasons that cause failures of success implementation of innovation? (v) Will an Innovation Governance framework improve the success rate of delivering innovations? The results show that these organizations have included numerous governance and risk management frameworks in their innovation management process. These organizations have established a structure approach to administer their delivery cycle but still experience a low success rate to implement innovation. The final section of this paper presents the results and interprets and contextualizes the gaps in the innovation management process. The researcher explains how to implement the I2GF model to address the gaps in addressing the findings of the research study. Keywords: Innovation, Governance, Risk, I2GF
1 BACKGROUND Large financial organizations have established, understood and practiced the implementation of innovations to compete in the fast changing global economic environment. Financial institutions have created an innovation processes to transform ideas into value-creating innovations. The innovation process typically covers the following steps: Scope, Logging of Ideas, Evaluation and Selection, Development, Implementation and Championship of the innovation (Hansen & Birkinshaw, 2007). Consumers have embraced digital channels to handle their finances and reach beyond traditional banking. The need is personalized and has flexible financial services with a choice on multi-channel access. Financial institutions can no longer overlook the importance of a customer-focused omni-channel digital strategy and user experience to satisfy the consumer, to gain competitive advantage, grow profits and ultimately remain sustainable(Tellis et. al, n.d., Verhoef et. al, 2015) . For this reason financial institutions need to use a holistic, formal approach to innovate in order to keep up and remain relevant. Financial institutions in South Africa face the pressures to comply with legislation and regulation, governments and other regulatory boards. Despite the adoption of good practices for innovation, innovations have failed to comply with governance standard. An
overwhelming number of these innovations which have been funneled through a structured innovation process fall short and succumb to non-compliance to simple governance standard (Nikoukhah, 1993). The paper aims to introduce an Integrated Innovation Governance Framework (I2GF).The goal is to ensure that governance frameworks become integrated into organizational culture and is not seen as an unnecessary hurdle to long established practice. The IG2F will provide a new approach to support innovations while ensuring governance. It will focus on the development and implement steps of the innovation process and provide guidance in order to prevent unnecessary risk, re-work, loss of ROI, and loss in productivity in these phases. The rest of the paper is organized as follows: Section 2 is literature review on innovation and IT governance frameworks. Section 3 introduces and discusses The Integrated Innovation Governance Framework (I2GF) Model. Section 4 describes the research approach including the research questions, assumptions and the limitations of study. Section 5 presents the findings and interprets the results of the study. Section 5 contextualizes the findings and discusses the application of the I2GF Model to improve the success rate of innovations delivery.
2 LITERATURE REVIEW Organizations innovate to make profits and ultimately to gain competitive advantage. Innovation is a practice to generate novel ideas, methods or fresh products to an organization. Large organizations use an innovation management process hoping to deliver successful innovations and maximize profits (Hansen & Birkinshaw, 2007). These organizations are guided and administered by the adoption of good corporate practices and processes (Lin, 2011). Research indicates that there is a need for governance by engaging defined frameworks like COSO, CoBit, ITIL, ISO and Prince 2 (Mireila, 2005) and PMBok (ISACA, 2014) and its contribution to ROI (Weill, 2004).
Figure 1: Adapted: Implementation Best Practices IT Governance (Stephenson, 2004)
Innovation is a destabilizing power that eventually translates into value (Lawson and Samson, 2001). Despite organizations adopting holistic, formal innovation system, research shows that executives of large organizations are comparatively dissatisfied with the returns on innovation (Koetzier and Alon, 2013). More needs to be done to ensure organization maximizes returns on innovation and ultimate grow profits to remain sustainable. Innovations deal with different levels of complexity, risk and dependencies.
Figure 2: Adapted Integrated Innovation Model (Lawson and Samson (2001)) These complexities comprises of numerous individual components that relate to each other in a “non-simple way” (Simon, 1962). The urgency to understand these complexities contributes in being able to deliver successful innovations. Further works supports understanding components that support innovation success. Studies on IT governance, illustrates a direct association between governance and economic achievements (Weill, 2004). The CoBIT framework focuses on what organizations need to do (ISACA, 2014), but does not cover how organizations should implement this good practice. Handbooks and guides detail project processes, tools and techniques that encompass the practice of project management i.e PMI and Prince2. A number of literary works detail and discuss numerous governance guidelines and blueprints readily available (ISACA, 2014, ISO, 2014, Hill et al., 2009). Research on reasons many enterprises fail to achieve and sustain the competencies for innovation (Skarzynski et al., 2008) indicate that alignment of corporate governance, innovation management, ICT governance, portfolio management and project management is needed to deliver innovations efficiently and effectively. These discreet governance guidelines and blueprints provide valuable insight to delivering successful innovation but innovations fail despite organizations adopting these best practices. Research shows that individual components Simon (1962) mentioned have been clearly understood. However, how they relate and how they integrate (Lawson and Simon, 2001) to each other is not substantiated. An integrated process framework, to achieve innovation success through use of these guidelines and blueprints this is absent. The proposed framework discussed in this paper aims to address this gap.
3 THE IG2F MODEL
Figure 4: Integrated Innovation Governance Model: The Zones The I2GF model is an integrated approach to successfully deliver innovations. I2G2F focuses on integration of appropriate governance good practices to achieve the required balance between governance and domain expertise. The model aims to ensure that the appropriate governance is applied where the need independent of the delivery methodology is utilized to deliver innovations. The model comprises 5 key zones to deal holistically with innovation management. 3.1.1 ZONE 0: THE NAVIGATOR (CORPORATE AND PORTFOLIO GOVERNANCE ) The Controller Zone of I2GF focuses on corporate and portfolio governance pertaining to the innovation. The inputs to this zone comprise corporate and regulatory governance policies, procedures, standards, innovation management processes, portfolio management principles, guidelines and business rules. The output of this zone is the prioritization, categorization and alignment of innovations to the organizations’ strategic goals. 3.1.2 ZONE 1: THE GAUGE The Gauge serves as the key control in the I2GF model. This zone works, in tandem, with all zones in the model. The controls associated with this zone ensure that throughout the delivery cycle, the innovation continues to be aligned to the strategic goals, meeting the specifications that are expected, and that the appropriate governance standards have been applied to deliver innovations successfully.
3.1.3 ZONE 2: MINI-INNOVATION The mini-innovation zone focuses on small, low risk, low complexity innovation. There is little governance required in this zone. The outputs or results from zone 0 and zone 1 are used as inputs to ensure portfolio alignment and management of resource dependencies, ensuring that the scope of the innovation has been met. In this zone, high focus is placed on ICT governance adherence to ensure the integrity exists. 3.1.4 ZONE 3: INCREMENTAL OR TRANSITIONAL INNOVATION Zone 3 focuses on high and medium risk, with more complexity innovation, which deals with substantial enhancements to current value service and delivery offerings of the organization. The impact of the changes determines the governance levels required in this zone. The outputs or results from zone 0 and zone 1 are mandatory for this step. In this zone high focus, is placed on ICT governance, Project Management good practices and risk management frameworks. Zone 1 is required to be used at various stages of the delivery cycle. 3.1.5 ZONE4: RADICAL OR DISRUPTIVE INNOVATION Zone 3 focuses on highly risky, highly complex innovation that has a sizeable impact on the industry and economy. Owing to the high impact of the changes, high governance adherence is required in this zone. The outputs or results from zone 0 and zone 1 are mandatory for this step. In this zone high focus is placed on all governance frameworks. Zone 1 is required to be used more frequently at all stages of the delivery cycle.
4 THE RESEARCH APPROACH This research utilized a qualitative approach to explore innovation and governance. An unstructured investigative research technique is applied to intuitively examine the aspects of disposition, thoughts, activities, attitudes, etc., to address the research problem. 4.1.1 DATA COLLECTION METHOD The opinions of appropriate participants regarding governance, innovation and good practices will be gathered by means of a quantitative survey. The data collected will be analyzed and contextualized to understand the good practice frameworks used for Innovation, ICT Governance and Risk Management. The research makes use of secondary data collection practices to understand a systemic method to address the research problem. 4.1.2 ASSUMPTIONS The study assumed that the organizations observed had a global footprint, were large in size with well-established, formal innovation cultures and processes. It also assumed that the appropriate research approach was adopted to collect, analyze and address the research problem. The assumption was that the theoretical framework for the research study provided the correct evidence of the observable facts being. The outcome of experiment was restricted by the exactness of the theoretical framework to reveal the facts under study. There was an assumption that the components being observed are quantifiable. It was also assumed that the instrument being used was a valid and reliable instrument to measure these components. In order to achieve validity the participants were representative of the population, willing to participate in the study, and responded to questions honestly or participate without bias. There is an assumption that the results of this study can be applied to entities beyond the sample that was observed and are not limited to a large organization. The closing assumption was that these will bring meaning and significance to all stakeholders and that the results are relevant. 4.1.3 RESEARCH QUESTIONS AND SUB-QUESTIONS This paper will endeavour to research and respond to the following questions:
i. ii. iii. iv. v. vi.
Are organizations with formal, established innovation processes successfully implementing innovations? Do large use good practice ICT and Risk governance frameworks and methodologies manage innovation? Does the use of good practice ICT and Risk governance frameworks and methodologies contribute to improving the success rate of delivering innovations? What are the key reasons that cause failure of successful implementation of innovation? Will an Innovation Governance framework improve the success rate of delivering innovations?
4.1.4 LIMITATION OF SCOPE OF RESEARCH The study is limited to large organizations, which have an established innovation process, thus reducing the sample size of the experiment. The research design utilizes both qualitative and quantitative techniques. The qualitative approach may not be exact even though it makes use of some systematic controls. The frameworks under review might be relevant to the organizations that participated in the study and might not be applicable to other organizations. This study will adopt a cross-sectional time horizon approach. Owing to the vast scope the disciplines under inquiry, there is a possibility that facets pertaining to Innovation, ICT Governance and Risk Management will not be discovered during the research practice. 4.2 The Research Findings The study aimed to understand how large organizations managed and implementing innovations successfully. The participants were required to feed back on the types of governance frameworks their organizations currently use, the type of delivery methods engaged to implement innovation, how much was spent on innovations and how successful the organization was at implementing innovations. 4.2.1 RESULTS ANALYSIS CONSIDERATION CEO’s, Executive Managers, CIO’s, CRO’s, Senior Managers, IT Team Members and Business and Risk Team Members in large organizations were contacted to participate in the survey. The researcher received a total of 45 out of the 50 participants who responded to the survey. The participants provided self-assessed view innovation and governance disciplines used organizations. One can expect a certain level of bias from participants when there is an inclination to respond, deliberately or instinctively, to feign reality (Zikumund, 2003). For this reason the researcher expects a certain degree of bias in context of the responses. 4.2.2 INDUSTRY REPRESENTATION The highest number of responses was received from the financial services industry (79.1%) as depicted in Figure 5. 73% of responses were received from participants that belonged to large organizations. Over 95% of these organizations recorded an annual turnover of R1 million and more.
4.2.3 INDUSTRY REPRESENTATION
Figure 5: Industry Segments The highest number of responses was received from the financial services industry (79.1%). 73% of responses were received from participants that belonged to large organizations. Over 95% of these organizations recorded an annual turnover of R1 million and more.
4.2.4 PARTICIPANTS’ JOB ROLE TITLES
Figure 6: Respondents’ Job Roles
4.2.5 SUCCESS RATE OF INNOVATION
Figure 7: Successfully Implemented Innovations Only 5.6% of these organizations had a success rate of between 80 – 100% on implementing these innovations. Only 11.4% of organizations had an informal innovation process with little or no governance. 45.7% of organizations followed a process with ad hoc governance and 42.9% of organizations followed a strict governance process for innovation management. The innovation of incorrectly scoping (59.46%) was ranked as the top contributor to the failures. The lack of governance (37.84%) was ranked as the second highest contributor to innovation implementation failures, followed by the lack of funding (13.51%) and 21.62% was mentioned under the other category. Detailed analysis of the other category revealed that participants attributed scoping, process and governance as contributors to failures. ITIL (51.7%) and CoBIT (44.8%) ranked as the top 2ICT governance frameworks used, followed by ISO 9002(34.5%). These frameworks were used discreetly or in conjunction with one or more other frameworks. The Agile (85.7%) and Waterfall (54.3%) delivery method ranked as the top 2 methods used by organization to implement innovations. 85.3% of respondents agreed that implementing a governance framework for innovation would improve the success rate to implement innovation.
5 DISCUSSION The findings show that, despite having well established or mature innovation processes, large organizations struggle to implement innovations. Only 5.6% of these organizations had a success rate of between 80 – 100% on implementing these innovations. The findings also show that these organizations actively use a combination of one or more good practice frameworks like ITIL (51.7%), CoBIT (44.8%), ISO 9002 (34.5%) and structured delivery methods like Agile (85.7%) and Waterfall (54.3%), to implement innovations but are still not able to achieve a higher success rate. 85.3% of participants indicated that utilizing governance frameworks for innovation would improve the success rate in delivering innovations. The participants attributed the failure to gaps in understanding the scope of the innovation and the absence of governance. Further scrutiny of the results revealed that scoping, specifications, physical and human resource capabilities, portfolio planning and management and process gaps also can account for the failures.
Figure 8: Framework Silo’s The gap lies in the absence of the use of the governance good practice frameworks in an integrated and collaborative manner in the right places at the right time. The I2GF model addresses this gap and advocates the appropriate use of the applicable framework, at the appropriate time, at the required frequency and appropriate level of detail to aid successful delivery of innovation. The I2GF Model solves through the application the 5 zones guiding the management of innovation in a holistic, systemic, structured approach.
Figure 9: I2GF Model The model addresses the failure to gaps in understanding the scope of the innovation and the absence of governance through the continuous use of The Gauge (Zone 2). The Navigator (Zone 0) addresses the failures due scoping, specifications, physical and human resource capabilities, portfolio planning and management. Zone 2: Mini-Innovations, Zone 3: Incremental Innovation and Zone 4: Radical Innovation deals with the process gaps that cause the failures and remains relevant in all aspects by exercising The Gauge (Zone 2) at the correct frequency.
6 CONCLUSION The purpose of this paper was to consider well established governance frameworks, related work and the results of an empirical study to ascertain the gaps and key contributors that cause innovation delivery to fail. Secondly, it was intended to introduce the Integrated Innovation Governance Framework (I2GF). Previous researchers focused
on the use of discreet, domain specific governance frameworks, tools and techniques to solving innovation failures, in the hope to improve the success rate of innovations. This research shows that this approach was limiting and not effective throughout the innovation management process. The I2GF introduces a new paradigm to innovation management. It not only provides holistic approach to innovations delivery, I2GF provides new knowledge to the field of innovation management by detailing a methodical integrated technique to apply governance frameworks appropriate, at the required level of detail throughout the innovation delivery cycle , to support the level of complexity and deliver successful innovation. I2GF revolutionizes the way innovations are managed, and unlike any previous research works, constructs a blueprint that directs, a systemic approach to manage and deliver innovations successfully in large organization in the pursuit of competitive advantage, profitability and sustainability.
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