by Lynette Ferrara Successful CIOs face what Clayton Christensen has called "the innovator's dilemma."

The closer they are to their business, the better they contribute to "sustaining" innovations — modest but important improvements to the existing business — that often prevent them from identifying "disruptive" innovations — new ideas that transform an existing practice or market.

The ugly reality is that best-practice management tools such as IT portfolio management (IT PfM) can often stifle disruptive innovation. Risky innovations often cannot compete since they do not fit the criteria set by IT PfM. The result can easily be a portfolio of solid, safe projects.

The remedy we propose is not to abolish IT PfM but to create a separate IT innovation portfolio. This is what Christensen calls "the innovator's solution" — adopting practices and organizational structures designed to stimulate the discovery and implementation of disruptive ideas.

Define categories of innovation

The first task is to select an approach to innovation. The innovation consultancy IDEO has a track record of successful innovations in dozens of industries based on a five-stage process:

1. Understand the market, customers and technologies
2. Observe real people attempting to solve real problems
3. Visualize solutions: new business concepts and the customers who will use them
4. Evaluate and refine your ideas through prototypes and pilots
5. Implement your ideas with the careful attention to details needed to take a new idea to market.

Many businesses fall into an innovation pattern of focusing time and resources on a few narrow objectives. One way to overcome this herd mentality is to use an innovation framework like that in Figure 1. Disruptive innovations often require more than one category of innovation, and this framework categorizes innovation proposals in four broad areas:

• Finance: new business models or new models for working with customers, suppliers, and other business partners
• Process: core processes and enabling processes such as human resources, finance or logistics
• Offering: products, services, and support
• Delivery: new channels, brand, and customer experience.

• Productivity: taking time and/or cost out of the business
• Market expansion: finding new sources of revenue from existing customers or finding more customers for existing products or services
• New markets: creating new markets, usually through the development of products or services that create new customers.

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