Case Study: Accenture Technology Labs Drives Innovation

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1 Vendor Analysis Case Study: Accenture Technology Labs Drives Innovation Abstract: Innovation is developing into a critical issue for the IT services industry. One way IT services companies try to drive innovation is to invest in research and development laboratories. By Michael J. Palma Strategic Planning Assumption The R&D function of IT services providers will gain critical importance by 2004 and will become a key competitive asset and engine for driving profitable growth (0.8 probability). Publication Date: October 2, 2002

2 2 Case Study: Accenture Technology Labs Drives Innovation Introduction An eventual recovery in the IT services industry and its future health partly depends on innovation. Innovation can be driven by various methods, but it generally requires an organization to be willing to accept risk and invest the time and resources to develop new and better ideas, shift frames of reference and accept change. IT services providers have addressed this task in many different ways. Some larger service companies have established groups focused on R&D activities with a longer-term horizon than line R&D organizations. Generally, these R&D laboratories have limited involvement in the ongoing operations of the company and are allowed to focus on innovation. The R&D laboratories are charged with laying the groundwork for the development of future assets. A laboratory is an environment where people are willing to risk failure in the search for new discoveries; a place where ideas can be explored and concepts can be tested; and experiments can be conducted. In this Research Brief, Gartner Dataquest examines one of the critical elements in the IT services research and development (R&D) process managing and nurturing innovation. One leading service provider's approach to the problem is using technology laboratories. This overview of Accenture's Technology Labs, one of the R&D activities at the company, is the first in an occasional series of case studies on R&D practices of IT services providers. The analysis presented is based on an interview with Accenture's chief scientist and conversations with researchers and developers who work in the laboratory. Accenture Technology Labs Accenture, with a tag line of "Innovation Delivered," is focused on creating value through solving the most critical business problems of the largest organizations, on a global scale. Delivering a constant stream of innovation requires a robust R&D strategy that focuses on how to apply technologies to business problems. Accenture has established many organizations and roles to drive innovation, including the following: R&D efforts and delivery centers that support the full IT development life cycle from planning to operations in the industry teams. A chief architect identifies and assembles the strategic technology platforms and supporting infrastructure needed to enable the effective delivery of IT capabilities and solutions to clients. The chief architect is also responsible for facilitating the adaptation of evolving technologies, such as Web services, to ensure the successful delivery of complex, large-scale IT engagements that leverage proven, standard architectures and cost-effective infrastructures. A chief systems engineer is responsible for the capability development of the developer community and for designing and deploying methodologies and tools that better enable those developers to speed-tomarket the delivery of solutions to clients.

3 The Institute for Strategic Change conducts research into strategic business issues. R&D laboratories Accenture Technology Labs drive technological innovation. Technology Labs' Organization ThehistoryoftheTechnologyLabscanbetracedbacktothefirst laboratory, which opened in 1985 in Chicago and focused on decision support systems. Accenture now has three laboratories under the direction of the company's chief scientist, Glover Ferguson. The three laboratories, one in France and two in the United States, employ more than 150 researchers, developers, marketing and support workers. The Technology Labs are led by the chief scientist, who spearheads the innovation and thought leadership efforts, and a managing director, who is responsible for the operations of the laboratories. In addition, two directors oversee the efforts of the research and the development staffs. In addition, there are lead researchers and developers on-site to oversee and direct the local staffs of the laboratories. All the Lab executives also participate directly in client and research work. The Technology Labs are part of the Technology & Outsourcing capability group led by Gregg Hartemayer, Group Chief Executive; and part of Technology & Research led by James Hall. This ensures that the Technology Labs' innovations feed naturally into capabilities linked to more established technologies. The Technology Labs' mission is to "turn technology innovation into business results." To achieve this mission, the Technology Labs act as: A focal point of innovation within the organization An engine for the creation and commercialization of intellectual assets A technology vanguard for Accenture Technology Vision Accenture's Technology Labs have developed a vision of the future called "Reality Online" theorizing how the world will be affected by technology's impact on markets and the conduct of business. They believe that advances in technology are leading to an even greater penetration of devices and greater access to information into our lives. Our lives will be even more connected and businesses will continue to learn new ways to derive greater value by leveraging information and technology. The Technology Labs' projects combine multiple ideas and employ a variety of technologies, however the current portfolio can be loosely organized into seven research areas: Ubiquitous commerce Information insight Human performance enhancement Media and entertainment services Privacy and rights management 3

4 4 Case Study: Accenture Technology Labs Drives Innovation Augmented reality Future watch From these research areas, the Technology Labs are working on more than 40 projects. These include new methods to monitor consumer reactions and opinions; translate languages in real time; and target the needs of customers via the Internet. Other projects are centered on integrating a variety of future devices to track items through supply chains and monitor environments to allow for operations that are more efficient. This last item involves developing processes to integrate new semiconductor technologies and Radio Frequency Identification (RFID) devices into businesses. These methods will allow organizations to improve the efficiency and quality of data collection, activity monitoring, and enable more efficient means to carry out business activities. Other projects examine new ways to search, access, and share knowledge within and across organizations. Other important projects focus on delivering viable mobile computing solutions to solve business problems around decision support, customer service and location-based services. Several examples of the work of Accenture's Technology Labs include: Physical Media Tracking A prototype that demonstrates how businesses can use RFID, or other smart tags, to track and find physical objects from dock door to cashier in a retail environment. Physical Media Tracking prototype makes products "intelligent" and allows them to assume inventory management responsibilities by continuously reporting their exact locations, wherever they may be in the value chain. Personalized Pricing Tool This prototype helps companies to maximize the profitability of each customer by understanding an individual customer's pricing threshold for specific items and setting prices accordingly. The tool can profile individual customers as they walk in the door, access their purchase history, review sales volume, retrieve coupon sensitivity data and present a personalized pricing offer designed to maximize profits per person. Similar technologies could be applied to the financial services sector to track spending patterns, investment patterns and consumer attitudes. Manufacturing Telematics Services This telematics prototype for industrial environments explores the opportunities enabled by the proliferation of embedded computing, sensors, short-range wireless technologies and Web services in an industrial setting, in particular for industrial equipment maintenance and regulatory compliance. Using Web services, the monitoring and maintenance of industrial equipment can be easily transmitted to regulatory bodies, third-party service providers or the equipment manufacturer.

5 Virtual Home Improvement Services Accenture researchers built the Virtual Home Improvement Services prototype to demonstrate a personal Web services application. It uses the Web Services infrastructure to connect people together, using a home improvement scenario to demonstrate how a home improvement store can provide remote 'how-to' advice to a do-it-yourselfer at the moment of need using a small video camera, voice activation and wireless technology. Sensor Aggregation Models An application to help manage and aggregate the data coming from potentially millions of sensors, allowing businesses to track and manage in real time inaccessible, vast or remote assets such as an oil pipeline, forest or a component on an aircraft. The Work of the Technology Labs Ideas for projects are developed through a variety of methods, including scanning the broad spectrum of the technology landscape, Accenture's knowledge systems, other R&D activities within the company, its vast network of business alliances and contact with clients. The vision, discussedabove,servesasameanstofocuseffortsanddirectideasfor innovation into areas of the most interest to the company. Work in the laboratories is divided into two efforts. First, researchers look at emerging business and technology trends to identify the most important opportunities that Accenture can address and then create prototypes of future solutions. These prototypes lay the groundwork for new services, methodologies and tools. These can then be adopted by the client teams within Accenture or used to help clients think of potential future business solutions that may significantly impact their industries with a focus on the intersection of business and technology for their potential competitive advantage. Developers, on the other hand, specialize in applying leading edge technologies to client problems, often spending time with clients. Out of these efforts, practical solutions are designed and tested. These solutions are then presented to the industry groups and service lines throughout Accenture. At this stage, the industry teams' knowledge and the experience is further harnessed in the creation of new solutions: formalizing methodologies, testing in diverse environments, refining processes, and integrating with established offerings. As the solutions gain traction, they are added to the inventory of solutions and services. When projects do not fit well within established business units, they can serve as the core for new business lines. In this manner, prototypes from the laboratories are commercialized, and Accenture can continue to provide leading-edge solutions to customers. 5

6 6 Case Study: Accenture Technology Labs Drives Innovation What stands out about Accenture's R&D efforts is the linkage between technology advancements and how to apply these advancements to the needs of their clients. The purpose of the laboratories is to determine how the technology will function within live environments, connected with complex IT architectures, and achieving the business goals at hand. This requires the development of methodologies to design, integrate, deploy and manage solutions through their life cycle. In essence, it is not about creating technology but creating how to best use technology to achieve specific business goals, which is what makes IT services R&D distinct from R&D efforts in product-oriented companies. Technology Laboratories: Management Issues Below are several of the management issues that Accenture has faced regarding its Technology Labs and how it has addressed these issues. Funding Innovation Because R&D activities generally do not directly generate revenue or reduce costs, it can be difficult to justify spending precious resources for this function, especially in the current market downturn. Accenture's management, though, has long realized that the company's value to clients rests on its ability to anticipate and solve critical business problems. The Technology Labs are one way to ensure that Accenture's solution offerings remain on the cutting edge of innovation, maintaining value, and management has remained committed to, and has increased funding for, the Technology Labs. The Technology Labs, to help in its mission to communicate Accenture's thought leadership, regularly hold Innovation Workshops for clients. Clients are invited to on-site briefings on the various research areas and more importantly can interact with the researchers and developers. Here clients can discuss the problems they face and explore ways to harness the next generation of technology before their competitors. These interactions help to keep the staff abreast of client needs and requirements and can result in new engagements. The fees for these workshops go to defray the Technology Labs costs. Although the interactions are not staggering, they can lead to new client engagements resulting in added revenue for Accenture. Costs for the Technology Labs are also partially covered by the billing objectives of the development staff, about two thirds of the organization's workforce. Although they spend more than half of their time working on Lab projects, developers often work on client projects. A lot of these engagements come out of the interactions between clients and the laboratories' staff during the workshops. Developers also focus on projects that demonstrate the work of the Technology Labs internally to Accenture.

7 Staffing an R&D Operation Finding the right mix of skills for a successful R&D activity can be difficult. According to Mr. Ferguson, researchers are the most difficult to find, because the role involves demonstrating technology skills, imagination and curiosity with deep knowledge of business issues. Balance is equally important researchers cannot lose site of the practical limits of future and current technology. Finally, researchers need an entrepreneurial spirit to garner acceptance for their ideas and projects; pursue the inevitable challenges and difficulties of innovation; and who can keep an eye on turning ideas into commercial offerings for the company. One way that Accenture has tried to address this problem has been to use its network of relationships with universities to search out and screen candidates for its Technology Labs. This ensures Accenture is accessing the right talent pool since most of the researchers have doctorates from a variety of fields. In addition, these candidates will have experience with the research process, peer review of work, and likely have the curiosity necessary for a research role in the Technology Labs. The company has experience too in recruiting, managing and retaining developers. As with the researchers, Accenture looks for a deep understanding of business issues in its developers for the Technology Labs. Also, Accenture can recruit internally from a large pool of developers to staff its Technology Labs. Fostering a Culture of Innovation A successful R&D process flourishes in an organization that supports innovation and rewards creativity. For such to take place, a company's culture must emphasize quality and value creation for clients and the willingness to take risks to achieve these goals. In an environment where risk is not tolerated, at least in finding possible ways to solve core customer problems, innovation will falter. New ideas need to be shared, considered and challenged if they are ultimately going to prosper. If a culture does not value this opportunity for innovation, then the incentive for creativity can dry up. Not to say every idea or project is or will ever be ready for release in the market. Rather, the opportunity to try is the key element to a corporate culture that supports innovation. While sufficient resources and the right staff go a long way to building this culture, management attitudes toward proposals and ideas are the critical element in building a culture of innovation. In the case of Accenture and its Technology Labs, management has adopted an interesting perspective regarding what projects to invest in and pursue. Management looks for an "Ah ha" experience, where ideas challenge the common assumptions regarding what is possible and how technology will evolve and impact business and life in general. This is reflected in Accenture's concept of the "Petri Dish of Innovation," where business and technical imperatives and possibilities are allowed to mix in the search for new solutions. 7

8 8 Case Study: Accenture Technology Labs Drives Innovation This attitude is unique in the industry and quite critical to the success of the Technology Labs. The mere fact that the Technology Labs have survived for more than 15 years says much about how the organization views its commitments to innovation. In most cases, nonrevenue generating personnel are the most likely to be let go when times get tough in professional services companies, yet the laboratories have flourished during good and bad times. This situation holds true even during the current crises in IT spending, considering that Accenture has not reduced the headcount of the Technology Labs. Accenture's culture of innovation is finally reflected in its brand and its tag line "Innovation Delivered." Out of all the choices facing the firm, they choose to focus on innovation, the heart of R&D, as their corporate message. Managing Ideas The purpose of R&D organizations is to turn out successful, scalable service offerings, solutions to business problems and operational procedures, but how many ideas does one need to consider before coming across an idea that leads to the successful creation of a new asset? Assuming the goal is to turn out four major new service offerings each year, can an IT services company reliably reach this goal while only generating four ideas each year that will flow through the research and development process without a problem? The answer is no, there is no risk-free method to generate truly innovative ideas. Trial and error is a necessary part of creation. Recent studies have shown that the successful inventors and innovators do not necessarily have better ideas, but they generally have more ideas and are willing to risk failure more often than others do. In Accenture's case, management recognizes that they need to sift through thousands of ideas to find the few key projects that will drive its future offerings. The company is willing to invest resources on a wide range of projects, though most projects are not likely to work out. At the end of the process the few projects that do result in viable assets will deliver high value to clients. Connecting the Technology Labs with Stakeholders The most innovative ideas, creative solutions and best technological discoveries are worthless if they are not shared. Accenture acknowledges this has been a challenge for the laboratories in the past. To improve its image, fulfill a part of its mission and better market the results of its innovations, the Technology Labs increased communication efforts throughout the company, to clients, to alliances, to educational institutions/other laboratories and to media and industry analysts. The Technology Labs sponsor Web portals, newsletters and discussion forums on the research areas they are working on.

9 As a gauge of how well they are doing, about one-third of all Accenture employees subscribe to one particular forum, "The Innovation Network," which reaches a community of individuals (about 23,000 people) interested in information about the Technology Labs. Information about the Technology Labs is disseminated to an even broader audience via company-wide communication channels. This is impressive given that all such communications in the firm require the employee to seek out and subscribe to the newsletters. A key lesson the Technology Labs have learned in communicating in this manner is to keep documents focused and the length down as they compete with the wealth of other content options. Another method, that was initially unsuccessful, was to place champions of the Technology Labs with the industry groups and service lines to act as advocates for the organization's innovations. The Technology Labs found that to be successful, it was key to weave connections between the Technology Labs and the champions. Thus, people from the Technology Labs are specifically tasked with making the connections between the industries, geographic areas and service lines. Another effective means of communicating findings and generating interaction between the Technology Labs and the rest of the organization is to invite people into the laboratories. Apparently the experience of interacting with the researchers and developers in the laboratories and seeing their projects in person is quite powerful and leads to requests for lab personnel to work on client projects. The Technology Labs regularly hold innovation workshops for clients where idea sharing is encouraged and supported. In fiscal year 2002, there were more than 200 client visits and other external workshops/events at the Technology Labs. Another important aspect of the Technology Labs' communications strategy is ensuring their R&D efforts link into Accenture's overall strategy. People from the Technology Labs regularly meet with their colleagues, who are responsible for R&D activities in the industry groups, and with the Institute for Strategic Change to ensure that they are in step with one another. The chief scientist and his team also regularly meet with Accenture's strategic planning group to update each other on objectives and possible strategic options. Evaluating Success The final major management issue regarding R&D laboratories is to understand when the group has created value for its organization. Few hard measurements are established and the Technology Labs have not always been recognized for their successes. Although some of these issues are being addressed, Accenture evaluates the Technology Labs' performance using the following questions: Is there demand for the ideas and research areas the laboratories are working on? Is the group effectively leading the company in terms of business technology? 9

10 10 Case Study: Accenture Technology Labs Drives Innovation Have the laboratories helped to create new service offerings that will stimulatenewrevenueandotherwisehelpcreatenewbusiness opportunities for Accenture? Surprisingly, Accenture does not appear to hold specific quantitative objects for its Technology Labs. Gartner Dataquest believes that for the laboratories to have survived and flourished over the past 17 years without being measured on revenue generated, trust must have been established. Accenture's leadership had the patience to allow its Technology Labs to generate the ideas and solutions that have helped to drive the growth of the company. The Technology Labs maintained its part of this bargain by continuing to fuel Accenture's requirement for continuous innovation in applying business technology. Gartner Dataquest Perspective ThesuccessoftheTechnologyLabsistheresultofAccenture'slong-term investment in the idea that innovation needs a home and a focal point where people suited for creation and discovery can work to commercialize ideas. Through trial and error, Accenture has learned how to overcome the variety of problems associated with operating a laboratory that is charged with designing the future. Gartner Dataquest Recommendations Some useful insight for all IT services organizations can be drawn from Accenture's experience in managing technology laboratories. Although by no means exhaustive, Gartner Dataquest believes the following four elements are critical for the successful management of a technology laboratory for an IT services company: Executive support Is senior management willing to support an effort that is focused on innovation and R&D for some areas or prototypes that may not come to fruition in client work? Investment in R&D is a longterm initiative to create a focal point for innovation to take place and for new offerings, procedures and other assets to mature until they are ready for the market. Risk acceptance Innovation cannot be achieved without taking some kind of risk, and those involved in the process and who oversee R&D functions must be willing to accept failure. In moving to challenge current assumptions, researchers and developers must experiment to discover new methods or applications for established technology. The knowledge gained from understanding failures is often valuable.

11 Provide technical leadership No one is better suited than a technology laboratory to hold the guide for the organization in terms of future directions, but with this leadership role comes the requirement to maintain the trust of the organization. Although researchers and developers may maintain a vision of three to five years or more, most employees of an organization's time horizon is likely to be much shorter. A balance must be struck to ensure the technology vision is rooted in the real world most of the organization is tied to while still producing a significant level of innovation to justify success. If this organization cannot effectively lead the company's technology directions, then an important component of the R&D investment is being wasted. Open communication Without sharing ideas and results, investments in R&D activities, especially in technology laboratories, is often wasted. Withholding or limiting the decimation of information regarding developments can harm the commercialization of these assets. Sharing information can be a spark for new ideas and techniques. In addition, open communication is important for what the researchers learn about the needs of the organization and customers' most pressing problems. In terms of the Accenture Technology Labs, it strikes this balance in communication, having a two-way dialog between the Technology Labs and other key entities to help foster innovation. Key Issue What strategies are being employed by IT services providers to achieve and maintain market leadership? 11

12 12 Case Study: Accenture Technology Labs Drives Innovation This document has been published to the following Marketplace codes: ITSV-WW-DP-0383 For More Information... In North America and Latin America: In Europe, the Middle East and Africa: In Asia/Pacific: In Japan: Worldwide via gartner.com: Entire contents 2002 Gartner, Inc. All rights reserved. Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice

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