FOSTERING IT-ENABLED BUSINESS INNOVATIONS
An Approach for CIOs to Innovate the Business
Michael Lang and Michael Amberg
Friedrich-Alexander University Erlangen-Nuremberg, Lange Gasse 20, Nuremberg, Germany
Keywords: IT-enabled Business Innovation, IT Management.
Abstract: Nowadays companies are in worldwide competition for innovations which are essential to ensure their
competitiveness and consequently their business success. Information Technology (IT) plays an important
role in this context. Thus, it is expected from IT organizations to provide an own value contribution to the
corporate performance by delivering innovations. This raises the questions how chief information officers
(CIO) can facilitate the generation of IT-enabled business innovations. As a result of our research, we
identified 22 factors concerning the relevant aspects in IT organizations - IT projects, IT systems, IT
processes, IT services, IT personnel and aspects referring to the organizational structure. These factors help
CIOs to foster the generation of IT-enabled innovations and therefore should be considered in the
management of IT organizations.
1 INTRODUCTION
Business models and their constituent processes are
increasingly IT-enabled. This means that IT is
touching more parts of businesses and in more
fundamental ways. Consequently, organizational
efforts should not only focus on single IT
innovations, but also on interrelated innovations
(Fichman, 2001). Especially, IT-enabled business
innovations attain more and more attention. These
innovations are decisive factors for business
development and competitiveness (Mahnke et al.,
2006) (Müller and Neidhöfer, 2008). In general, IT
can enable three kinds of business innovations
(Dietrich and Schirra, 2006) (Hofbauer and
Wennmann, 2008):
 product and service innovations: new products
and services or the improvement of existing products
and services
 process innovations: certain parts of a business
process or the entire business processes are
improved measurably
 strategic innovations: IT enables new
businesses or new business models
The confluence of two forces – the strategic
importance of innovations for a company, and the
critical role of IT in driving business innovations –
underscores the importance to CIOs of fostering
innovation (Watts and Henderson, 2006). Therefore,
it is reasonable that the relevance of innovation
increases from the viewpoint of CIOs: according a
survey from Gartner Inc. innovation has the sixth
highest priority for CIOs in the year 2009. For 2012,
the interviewed CIOs consider innovation as the
topic with highest priority on their agendas (Gartner,
2009).
Considering the previous explanations, it is
imperative to understand how CIOs can foster the
generation of IT-enabled innovations (Watts and
Henderson, 2006). On the one hand, they can
provide tools that support business managers in
developing new products and services. For instance,
IT can help to create linkages within the enterprise
as well as with external entities to enable
collaborative pursuit of new ideas. On the other
hand, IT itself can fundamentally alter business
processes, products, services, business models or
enable new ones (Teo et al., 2007). In this paper we
focus on the second way of enabling innovation
through IT. Thereby, it is not sufficient to anchor
innovation within the IT strategy, i.e. as an own
partial strategy. It is rather particularly essential to
configure the IT control objects, i.e. IT project
portfolio, in an innovation-conducive fashion. This
can be traced back to the fact that the actual,
operative configuration of IT management takes
place in these IT control objects (Mauch and
Wildemann, 2006).
242
Lang M. and Amberg M. (2010).
FOSTERING IT-ENABLED BUSINESS INNOVATIONS - An Approach for CIOs to Innovate the Business.
In Proceedings of the 12th International Conference on Enterprise Information Systems - Databases and Information Systems Integration, pages
242-248
DOI: 10.5220/0002901702420248
Copyright
c
 SciTePress

Principally, it also would be possible to consider
the innovation aspect as a separate control object of
IT management. But according to Kütz (2006) this
aspect is invariably a characteristic of the
conventional IT control objects. Therefore, the
innovation aspect should not be regarded as own
control object. Instead, specific characteristics of it
should be aimed when managing the conventional IT
control objects (Kütz, 2006).
Despite agreement on the importance of CIOs
fostering IT-enabled innovations and the
significance of an adequate configuration of IT
control objects for successfully generating such
innovations, there is no integrated concept available
in literature which reveals factors for an innovation-
facilitating management of IT control objects.
Within our literature review, we analyzed a
comprehensive number of selected sources. These
sources included top academic IS conferences and
journals as well as innovation management
conferences, journals and handbooks. Preliminary
research on IT-enabled innovations mostly focuses
on the role of IT in business innovations (e.g.
Cherian, 2009), IT-enabled innovations in the
context of business process improvements (e.g.
Habermann and Scheer, 2000), innovative IT
climates (e.g. Watts and Henderson, 2006) and the
relationship between IT competence and business
innovations (e.g. Sambamurthy et al., 2003). In
addition there are publications which illustrate the
necessity of a framework for IT-enabled innovations
but do not reveal the essential factors concerning the
IT control objects (e.g. Watad and Paterson, 2009).
However, until now there is no integrated concept
available in literature which reveals relevant factors
to be considered in the management of IT control
objects for facilitating business innovations.
This paper aims to fill this gap by identifying
factors which help to foster the generation of IT-
enabled business innovations and therefore should
be considered within the management of IT control
objects.
2 RESEARCH METHODOLOGY
For this purpose, we used qualitative research
methods. In doing so we conducted in-depth
interviews which are particularly useful for
exploration purposes, such as developing
propositions on a particular subject (Churchill,
1999). It is a suitable research technique for
relatively unexplored subjects (Eisenhardt, 1989).
For this work several elements of the so called
Grounded Theory according to Glaser and Strauss
were used (Glaser and Strauss, 1967). It is rather a
style how to analyze qualitative data than a specific
method or technique (Strauss, 1994). In contrast to
other methods, the Grounded Theory does not start
with a theory that should be proved. It starts with a
research question and lets the theory evolve itself.
For this reason, this paper doesn’t start with a certain
number of existing hypotheses but asks generally
and impartial for factors which help to foster the
generation of IT-enabled innovations and which
should be considered when managing the IT control
objects.
Within the sampling procedure we focused on
participants who have been very experienced in both
issues: IT management and IT-enabled innovations.
For this, we analyzed IT management associations,
CIO circles, CIO working groups and IT practitioner
conferences in German-speaking countries
(Germany, Austria, and Switzerland). In this way,
we identified potential participants with different
positions and perspectives: (1) CIOs who have
concerned themselves intensively with fostering the
generation of IT-enabled innovations, (2) IT
business unit manager who have been responsible
within their IT organization for innovation through
IT and business development management as well as
(3) specialized IT management consultants with
much project experience on the subject of this paper.
Altogether 14 experts – five CIOs, three IT business
unit manager and six IT management consultants –
were interviewed. The interviewed CIOs and IT
business unit manager are from several industries,
including automotive, banking & insurance,
transport & logistics as well as IT and
telecommunication. The interviews lasted for an
average of 90 minutes. Comprehensive notes of the
answers were taken and transcribed into an interview
report immediately after each session. Follow-up
questions were asked by telephone and/or e-mail
when clarification was necessary. Immediately
afterwards we studied the interview reports
intensively to identify common categories of
meaning.
3 FACTORS FOR FACILITATING
IT-ENABLED INNOVATIONS
Based on our research we identified 22 factors
concerning the management of IT control objects
which should help to foster the generation of IT-
enabled business innovations.
The following chapters describe these factors.
FOSTERING IT-ENABLED BUSINESS INNOVATIONS - An Approach for CIOs to Innovate the Business
243

Table 1: Factors for facilitating IT-enabled innovations.
No. Factor
IT control
object
F01 Sufficient supply of IT project
resources for the implementation
of the business strategy
IT project
portfolio
F02 Sufficient supply of resources for
IT innovation projects
F03 Creation of project teams with
fundamental IT and business
knowledge
F04 Extensive involvement of
business departments into the IT
project portfolio management
process
F05 Systematic and continuous
technology management
IT system
portfolio
F06 Innovation-conducive
composition of the IT system
portfolio
F07 Flexible IT architecture
F08 Short development and
implementation duration of
information systems
F09 Proactive management of
innovative IT services
IT process
and service
portfolio
F10 Differential management of
commodity services and strategic
services in outsourcing situations
F11 Continuous examination and
adaptation of the IT service
portfolio
F12 Innovation-conducive design of
cost charging for IT services
F13 Continuous improvement of IT
processes and services
F14 Regular exchange of information
between the IT department and
business units about possibilities
and demands concerning new
information technologies
I
T organization
F15 Technology management for
information technologies should
be anchored in the IT department
F16 Cooperation with innovative
external partners
F17 Flexible organizational structure
of IT department
F18 Innovation-conducive IT
Leadership
IT personnel
F19 Promotion of freedom and
creativity
F20 Support of exchange of ideas and
communication between IT
professionals
F21 IT and business knowledge of IT
professionals
F22 Incentives for innovations
We grouped these factors into the typical control
objects of IT management: IT project portfolio, IT
system portfolio, IT process and service portfolio, IT
personnel as well as IT organization. Thereby, the
control object IT organization contains aspects
concerning the organizational structure as well as
aspects which can’t be assigned to one of the other
four control objects because they concern the whole
IT organization and not only one of the other IT
control objects. Table 1 shows the identified factors
(F01 – F22) and their assignment to the five IT
control objects.
3.1 Factors Concerning the IT Project
Portfolio
This chapter reveals four factors which should help
to foster the generation of IT-enabled innovations
and which refer to the IT project portfolio.
Sufficient supply of IT project resources for the
implementation of the business strategy (F01):
Several respondents stated that IT organizations
usually are confronted with a high ratio of
maintenance and support projects which oftentimes
leads to insufficient resources for IT projects that
help to implement the business strategy, e.g. new
development projects. This is critical because the
business strategy defines how the business should be
changed and innovated. Therefore, IT requires
sufficient supply of resources for the implementation
of the business strategy. This way allows that
business objectives are supported optimally by IT
and the generation of IT-enabled innovations is
encouraged. Hence, this aspect should be considered
in the IT project portfolio management process, e.g.
by using adequate prioritization criteria for IT
projects or by bringing the issue of IT project
resources in the top management’s attention.
Sufficient supply of resources for IT innovation
projects (F02): Most of the interviewees stressed that
IT investments should not only help to run the
current business and implement the business strategy
but also help to enable new business practices and
business strategies. To ensure such innovations, new
information technologies need to be proved
systematically and suitable possibilities for their use
should be designed. Therefore, sufficient resources
for IT innovation projects are required.
Creation of project teams with fundamental IT
and business knowledge (F03): In order to exploit
the entire innovation potential of IT, project
members need more than just distinctive IT skills.
They also need extensive knowledge about business
processes. IT innovation projects require such
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knowledge to allow an adequate evaluation of new
technologies and to design specific options of usage
for the company. This knowledge is also essential to
accomplish IT projects that implement the business
strategy and that transfer business requirements into
the right IT systems. This can deliver a significant
contribution to a successful generation of IT-enabled
innovations. Therefore, most interviewees argued
that it is essential to ensure an extensive IT and
business knowledge within such IT project teams.
For instance, this could be realized by an
appropriately skilled IT staff, by integrating project
members from business units and/or involving
appropriately skilled external consultants.
Extensive involvement of business departments
into the IT project portfolio management process
(F04): Our interviewees stated another factor which
is important when CIOs aim to foster the generation
of IT-enabled business innovations: representatives
from business units should be extensively involved
into the IT project portfolio management process.
This concerns particularly the identification of
project ideas as well as their evaluation and
prioritization. Relating to the identification of
project ideas, business unit representatives often
have valuable ideas for innovative IT-based
processes, products and services. Within the
evaluation and prioritization of IT projects, they can
– due to their comprehensive knowledge about the
business – help to identify these projects with the
highest potential for business innovations.
3.2 Factors Concerning the IT System
Portfolio
This chapter reveals four factors which should help
to foster the generation of IT-enabled innovations
and which refer to the IT system portfolio.
Systematic and continuous technology
management (F05): According to what our
interviewees said, a systematic and continuous
technology management is the fundamental basis for
identifying innovative information technologies and
for considering them within the composition of the
IT system portfolio. In this context, an
environmental scanning helps to identify chances
and risks of innovations within the IT section that
influence the company’s business units.
Innovation-conducive composition of the IT
system portfolio (F06): The fundamental
requirement for facilitating IT-enabled business
innovations is an adequate composition of the IT
system portfolio. In this context, our interviewees
argued that CIOs should ensure an adequate ratio of
information systems with a high innovation potential
within their portfolio, and not only the use of
operational and support systems.
Flexible IT architecture (F07): Another
important factor seems to be the IT architecture
because it generally has to be adapted as a result of
changing business practices and new information
technologies. In this context, a flexible IT
architecture supports IT-enabled innovations by
creating an infrastructure that allows implementing
or adapting technologies comparatively easy, fast
and cost-efficient. This way, flexible architectures
like SOA represent the basis for innovative
processes and a fast and flexible enhancement of
business concepts.
Short development and implementation duration
of information systems (F08): In general, innovative
information systems have a relatively short life cycle
and allow first users only short-term competitive
advantages as their competitors can use the same
technology shortly after. Therefore, most of our
respondents regard a short time-to-market as a
decisive factor for achieving IT-enabled business
innovations and emphasized the importance of a
short development and implementation duration of
information systems.
3.3 Factors Concerning the IT Process
and Service Portfolio
This chapter reveals five factors which should help
to foster the generation of IT-enabled innovations
and which refer to the IT process and service
portfolio.
Proactive management of innovative IT services
(F09): IT services need to support business
processes optimally. Oftentimes, they are derived
from business unit requirements concerning new or
changed business processes. Our research reveals
that – in order to foster the generation of IT-enabled
business innovations – CIOs should also arrange a
proactive management of innovative IT services, i.e.
informing the management of business units about
feasible IT services proactively and illustrating their
potential for business innovations. For this purpose,
the insights of IT innovation projects or technology
management activities could be used.
Differential management of commodity services
and strategic services in outsourcing situations
(F10): Interviewees suggest furthermore to
distinguish between the management of commodity
services and the management of strategic services in
outsourcing situations. On one the hand, commodity
services like email services, networking services and
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services for providing end devices can be assigned
to external services providers as long as the provider
may deliver better conditions (cost, quality). On the
other hand, outsourcing strategic IT services – which
are usually characterized by a high innovation
potential – requires more attention. In this situation,
the internal IT organization has to care about issues
which assure that these services deploy their entire
innovation potential within the company, although
they are provided by an external provider. This can
include aspects such as innovation agreements
between the internal IT organization and the external
service provider.
Continuous examination and adaptation of the IT
service portfolio (F11): Our interviews revealed the
importance of an IT service portfolio which meets
the business requirements at any time. If the IT
service portfolio does not reflect these requirements
at all or just with significant delay, disadvantages or
even problems may result for the company. This is
especially pertains in the context of IT-enabled
innovations as short time-to-market is essential for
success. Hence, most of the respondents assigned
high importance to a continuous examination and
adaptation of the IT service portfolio in the context
of generating such business innovations.
Innovation-conducive design of cost charging for
IT services (F12): One further important component
of an innovation-facilitating management of IT
could be the cost charging. According to what our
interviewees said, IT cost charging could be used to
incentivize business units to apply IT services with
high innovation potential. For instance, the
respondents argued that IT services which result
from the use of new information systems could be
priced lower than similar IT services resulting from
the operation of older information systems with a
lower potential for business innovations. Besides, an
innovation-conducive design of cost charging seems
appropriate for innovative IT services which do not
base on business unit requirements but result from
IT initiatives and should be managed proactively (cf.
F09).
Continuous improvement of IT processes and
services (F13): To support business units in
generating innovations, the IT service portfolio does
not only have to contain the right IT-services. In
fact, interviewees stated that the included services
need to be improved permanently to ensure a
constant match with changing business conditions
and thereby to optimally enable business
innovations. The same applies to the IT processes.
This offers another advantage: a permanent
improvement of IT processes and services improves
efficiency. Ideally, as a result, costs for operation
and support decline so that a greater part of the IT
budget can be used for an innovative use of IT.
3.4 Factors Concerning the IT
Organization
This chapter reveals four factors which should help
to foster the generation of IT-enabled innovations
and which refer to organizational aspect of IT.
Regular exchange of information between the IT
department and business units about possibilities and
demands concerning new information technologies
(F14): Generally, IT und business units have to work
closely together in order to assure an ideal IT
support of business practices. Several respondents
stressed that this aspect is especially important in the
context of IT-enabled innovation generation as the
exchange has two benefits: for the one thing,
business units get to know to new information
technologies and their potential for innovative
applications within the company. For another thing,
the IT organization gets information about future
products, processes and business practices which
require an adequate support by IT. In order to realize
these benefits, our interviewees advised a regular
exchange of information between the IT department
and business units about possibilities and demands
concerning new information technologies. For
instance, such an exchange could be conducted with
the help of boards, committees or liaison roles.
Technology management for information
technologies should be anchored in the IT
department (F15): Due to the significance of
technology management for innovations, the
responsibility for it should be anchored adequately
within the IT organization. Interviewees revealed
several alternatives to ensure this. On the one hand,
each IT professional could conduct technology
management for all technologies within the area of
his responsibility. On the other hand, a separate
department could be established within the IT
organization which carries out technology
management for all relevant areas of IT.
Cooperation with innovative external partners
(F16): Usually, IT organizations are not able to
observe the developments of all relevant areas of
information technologies and evaluate their
innovation potential for business practices on their
own. Therefore, it seems promising to our
respondents to cooperate with innovative external
partners like vendors, customers, universities and
further organizations.
Flexible organizational structure of IT depart-
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ment (F17): Similar to the IT architecture, several
interviewees consider the flexibility of an IT
organization as a decisive factor for fostering the
generation of IT-enabled innovations. They argue
that a flexible organizational structure of an IT
department enables fast and flexible adaptions to
new requirements as business needs or IT-based
changes.
3.5 Factors Concerning the IT
Personnel
This chapter reveals five factors which should help
to foster the generation of IT-enabled innovations
and which refer to IT personnel aspects.
Innovation-conducive IT Leadership (F18): In
general, leadership is of great importance for the
performance of IT professionals. This also applies to
the context of IT-enabled innovations, in which IT
leadership can promote the generation of
innovations in different ways. Particularly, coaching,
job empowerment and enrichment as well as clear
objectives, including innovation-related objectives,
were stated as important activities to facilitate the
generation of innovations.
Promotion of freedom and creativity (F19):
Some interviewees stressed the importance of
freedom and creativity. In their opinion these aspects
are essential for the development of ideas for a new
or changed application of information technologies
within organizations. For instance, this could be
realized in the following way: beside routine tasks,
IT professionals should have fixed time slots which
could be used to deal with innovative ideas.
Support of exchange of ideas and communication
between IT professionals (F20): Besides freedom
and creativity, interviewees also mentioned the
exchange of ideas and the communication between
IT professionals as decisive for enabling business
innovations. They founded this onto the statement
that innovation often results from
intercommunication, not only between IT and
business departments, but also within an IT
organization. Therefore, IT department manager
should create an environment which fosters the
exchange of ideas and communication between IT
professionals about information technologies and
their application.
IT and business knowledge of IT professionals
(F21): IT-enabled innovations concern two areas: (1)
information technologies and (2) business-related
aspects as processes, products, services or business
models in which innovation occurs. Based on this
statement, most of the respondents claimed that IT
professionals need adequate IT as well as business
skills in order that the application of IT results in
such innovations.
Incentives for innovations (F22): Although
applying all above factors, several interviewees
assume that not all IT professionals support the
generation of IT-enabled business innovations as
desired. To solve this problem, the respondents
suggested using incentives – tangible and/or
intangible – in order to encourage innovative
behaviour of IT professionals.
4 CONCLUSIONS
Nowadays IT organizations are expected to provide
an own value contribution to the corporate
performance by delivering innovations. This paper
helps CIOs to fulfil this requirement. As a result of
our research, we identified 22 factors concerning the
relevant aspects in IT organizations - IT projects, IT
systems, IT processes, IT services, IT personnel and
aspects referring to the organizational structure.
Considering these factors, CIOs could facilitate the
generation of IT-enabled business innovations
within their organization.
Thus, the 22 factors can be regarded as a check
list which should be considered in the management
of the IT control objects. Thereby, one has to bear in
mind that some factors aren’t applicable to all IT
organizations. For example, factor 10 – a differential
management of commodity services and strategic
services – is only applicable in IT organization
which conduct outsourcing.
The current paper has some limitations that offer
an agenda for future research. As we confined our
research to identifying the relevant factors, further
research work should examine how to incorporate
our results in typical IT management methods like
an IT balanced scorecard. This could help CIOs in
managing the 22 factors within their IT organization.
Another limitation results from the fact that the 22
factors aren’t sufficient conditions. Thus, the effects
of considering the 22 aspects could be limited as
long as a company’s top management doesn’t
support it. For instance, CIOs are presumably not
able to enforce innovation-conducive charging of IT
services (F12) without the help of the top
management. Therefore, future research should also
analyze how to involve other, non-IT employees – as
top management representatives or business unit
managers – who are decisive for a successful
implementation of the 22 factors.
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