Centers of Expertise Can Drive Innovation – But Only if You Specifically Contract for It!

A few months back I had written about the need to set up CoEs for an innovation program. In this article, I will focus on the importance of vendor strategy to setup a successful CoE.

Let’s start by listing the typical challenges while setting up an innovation CoE (read as setup for any of the emerging technology(s) like AI or Analytics).

1. Lack of skills and expertise
2. Poor choice of use cases and inability to scale or grow
3. Project funding
4. Security, Risks and Data Privacy
5. Implementation complexity like integration with legacy systems.

As per SSON’s Global Intelligent Automation Market Report (H2 2017), lack of skills and poor choice of use cases are the biggest reasons of failure. During the initial stages of CoE setup, clients are generally inward focussed. The priority is to create the vision and arrange for funding and buy-in from sponsors et al. Indeed, these are all correct steps.

However, things start getting tricky the moment innovation centers are expected to execute, deliver and achieve scale.

In all kinds of trouble what exactlyWhat happens when the innovation office/CoE gets the go-ahead from the management but doesn’t yet have an in-house or vendor team to deliver? Can they risk execution failure at an early stage? Certainly Not!

That’s where it is important to have a robust vendor strategy in place. While defining a strategy and setting up a CoE, it is important to take into considerations delivery capability and capacity. Do you have the required capability in-house or do you need to work with a vendor?

Vendors offer crucial support in addressing various challenges.

1. They can provide capacity, capability and people/skills during such an initiative.
2. Vendor’s experience is useful to understand an outside view. It helps organizations understand the prevalent use cases adopted by their peers and helps refine the strategy.
3. Having flexibility to use vendors to drive innovation also prepares for recovery from failures. It is possible to pause or dis-engage the vendor and plan for the next use case.

For long, outsourcing deals generally had provisions for vendors to introduce innovation as part of service delivery. Clients have used such provisions – at times successfully – to get new solutions and innovative ideas.

The role of vendors in a typical innovation life cycle is undeniable. They have a critical role to play at various stages of innovation lifecycle as shown below:

Vendors are not always incentivized to provide innovation, however, as more often than not this means taking steps that may cannibalize their own revenue.

Real innovation is hard to come by, but when it is identified and implemented through vendor support (contractually or otherwise) it can yield unprecedented value to the business from IT.