Soumitra Dutta is professor of information systems and the Roland Berger chaired professor in business and technology at leading business school INSEAD. He advises national governments on ICT issues, is chairman of the European Commission’s panel on innovation in the ICT sector and is a fellow of the World Economic Forum. His most recent book is Throwing Sheep in the Boardroom: How Online Social Networking Will Transform Your Life, Work and World. In this interview he discusses how technology is hastening the pace of innovation — and how business must adapt to meet the new global demands this is creating…

Is the need to innovate in business speeding up? And how is that being driven by technology?

Yes, because the progress and adoption of technology itself is speeding up. For example: the adoption of Facebook. If you compare it with the [historic] pace of adoption of fixed-line telephones or television sets, it is orders of magnitude higher. So, people are adopting technology faster — and this adoption is much more global. Technology previously was the privilege of the rich, but today at least some kinds of technology — although not all — are increasingly available to poor countries. And people are innovating with that technology to satisfy needs in the local context.

How can business leaders achieve the agility they require to quickly bring new products and services to market to meet this new global demand?

Business leaders have to first of all understand and accept that business-as-usual is no longer possible if they have ambitious growth targets, ambitions that extend beyond their current business scope, or are even ambitious to protect and defend what they have right now. The second realization is that they need to fundamentally change many of the core capabilities of the organization.

One example is how they deal with geography. Traditionally companies have very much focused on home markets; and they tend to focus their core competencies and their core product development on these home markets. Then they migrate the successful products or services to other markets with minor adaptations and tweaks. And today, the fact that a lot of new growth is coming in countries which are far away from your traditional home markets means you have to think about how you will be a player in those new areas. How will you actually learn about what the needs are of this new segment of people?

To do that you have to redefine the notion of geography inside your company and this involves a change in culture to accept the fact that new knowledge — and, in fact, maybe better knowledge — for new growth might be coming from less developed parts of the world. It might be coming from places very far away that traditionally you didn’t think of as sources of innovation.

This is similar to the concept of “reverse innovation” put forward by Jeff Immelt [CEO of General Electric] and Vijay Govindarajan [Professor of International Business at the Tuck School of Business].

Yes, reverse innovation is one example of that. However, I think the whole idea of reverse innovation implies that innovations from emerging markets enter back into developed markets. But it’s not even a question of entering back. If you look at where the growth is, forget about entering back. You just have to succeed in selling new services in Africa or in India. You just have to do things differently.

I was reading recently about the success of M-Pesa in Kenya, which is moving aggressively into banking for the unbanked there. This is only a prediction, but they forecast that in a few years the proportion of the population of banked customers in Kenya will be higher than in the US. It’s a fairly startling statistic, but the fact of the matter is, today, if you look at banks — and they are in a situation where they are being buffeted by various crises — most of them are missing the biggest opportunity of all, which is banking for the unbanked. Most are doing very little in this respect, because it requires a dramatic change of business model. That agility is something that many of the large banks in the world don’t have today.

In order to be able to do this, what role should CIOs and technology be playing?

If you want to create better products for many of these emerging new customers and new needs, technology becomes a very important part of actual product and service delivery. So there’s an embedded value that comes out of it which is critical. CIOs have to look at that aspect very carefully.

A second — and also very important — aspect of technology is that it is vital for global networking and global collaboration. So if you want to have teams collaborating across geography, if you want to have teams learning from each other, if you want to have shared knowledge bases that companies can exploit for accelerating innovation, then technology is the great enabler of that global collaboration. And we know collaboration is very important in innovation.

It seems that, increasingly, all C-level executives — and not just CIOs — need to have a firm grasp of technology. What should boards be doing in order to ensure IT plays a key role in business agility and rapid innovation?

More focus has to be given to increasing the engagement and understanding of technologies, the role of innovation and the importance of global innovation. Some businesses are doing those things in multiple ways. For example, many companies are now holding their board meetings in India or China just to give people a real-time, first-hand feel for the country. But there are a number of issues that have to be taken into consideration. The average age of directors is very important: if you have more younger people on the board of directors that can certainly bring in some better perspectives. If you have more board directors from emerging markets and more diverse cultures then that can also bring in a different perspective. I think a lot can be done about board composition, board awareness, board engagement.

And certainly what C-level directors and board directors have to understand is that overwhelming change is happening all around us — there are all these global forces — and if organizations are not able to see it coming they will not be able to negate the harmful effects or take advantage of the new opportunities being created.

Would you say that the average non-IT executive doesn’t have a sufficient grasp of IT to be able to understand how to leverage technology for innovation?

Yes, because one of the problems out here is that the average non-CIO C-level executive may have had a good view of technology as it was 10 or 15 years ago, but technology today is not the same as 10 or 15 years ago.  When you look at their views, they are simply not up to speed. I’ve had many discussions about social media, for example, but even today it’s amazing how limited the perspective even today of many C-level directors is about social media.

Is that because they don’t use it themselves?

Either they don’t use it, or they view it primarily as a Facebook phenomenon of sharing pictures and family events: they see this as being much more in the personal realm, not a business issue. Or they see young people using it, [so believe] it’s a generational issue, not a serious business executive issue.  There are all kind of misconceptions. They don’t necessarily fully comprehend that social media leads to a different level of transparency, a different level of engagement, a different level of openness, a different level of trust as far as their own corporate leadership behavior is concerned.

Of course, all senior directors are very bright people. They didn’t get there by accident. But they’re human beings, so like all human beings they are subject to constraints: constraints of time, constraints of knowledge and so on. So the challenge really is how do you increase the rate of learning about some of these technology opportunities for the C-level directors?

And should that role of “educator” fall to the CIO?

It’s a difficult one because, of course, you can’t keep dumping everything on the CIO. One can make the argument that, yes, the CIO should do more, and I think CIOs in many companies do take on a role of educating their peers, and that’s something which is always useful and recommended. But this is a broader issue today: how technology impacts openness and transparency and governance. That goes far beyond the mandate of most CIOs in many companies.

CIOs already have a very tough job in terms of balancing the technology architecture with all the technology changes, with all the business requirements and the business changes. It's a very stressful job — plenty of things being asked from them, while there are a lot of constraints in delivery and execution. The CIO is capable of at least stimulating some processes, stimulating some kind of activities or schemes inside the company to increase the level of education. That is great, but I do believe that this is something that has to be a more company-wide phenomenon. The CIO has a role to play, but let’s not expect miracles.

Further reading: Soumitra Dutta’s “Boardroom View,” on why a CIO’s primary responsibility must be to enable agile innovation, in our Special Report.