'Global Executive Panel' is a platform that brings some of the best 'thought leaders' of the industry together to discuss and envision some of the emerging trends and futuristic challenges of the IT business.

Innovation is applicable to every aspect of transformation. How can organizations democratize innovation across their eco-system and ensure sustainability? We shall hear from global industry leaders on the disruptive technologies that are driving transformation, how to leverage innovation to drive transformation and what should the CIO do to democratize innovation internal and external to the organization to maximize gains.

Abstract

This closing session of Global executive Panel focuses on the relationship between disruptions in the marketplace and innovation. What is the role of leadership in bringing innovation in the organization? How innovation can be generated within companies? Are there any best practices or processes that help in bringing innovation within organizations? The panelists gave their perspective on innovation and how these innovations impact the businesses, consumers, and marketplace. Disruption is defined as a subset of innovation as it can cause changes in demand patterns which in turn can cause disruption. Innovation can be defined as a whole bunch of different things, whether it's a process or different way of doing things, different formula, or different products but the ultimate goal of innovation is to create value

Discussion

Vineet Nayar: We are talking about again collaborative transformation but using innovation as a key theme. We have Dr. Surya Mohapatra, Chairman, President, and CEO of Quest Diagnostics. We have Jaymin Patel, President and CEO of GTech Corporation, and on popular demand, after Tony's performance in the first session, we have once again Tony, Managing Director Global Head of Investment Banking for Deutsche Bank, and we also have Padmasree Warrior, Executive Vice President and CTO of Motorola.

So the question we were asking ourselves here is as we explore transformation, we saw three tracks. We saw a track of global sourcing and how innovation can be applied to sourcing. We saw a track on technology and how disruptive technologies are helping us respond to these situations and we saw the whole environmental issue, India competitiveness, environmental issues, and education issues.

What role innovation plays in this disruption? So before we start there, we come back to the same question - is there a disruption in the market space, which is driving innovation?

So the first question which I would like to start off with the panel is disruptions in the market space are driving innovation. Are they really driving innovation? What are these disruptions in the market space in your respective businesses because of which we should think innovation? What are those disruptions and that is where we get to start.

Padmasree, if you are okay to begin this.

Padmasree Warrior: Sure, In terms of disruptions, there are several disruptions that we see. I manage R&D for Motorola. We invest close to $3.7 billion in R&D. It's an 80-year company and it's definitely a company that has reinvented itself over its history, but if you look at how we develop technology today and how we bring products to market today, that is very disruptive in itself. 20 years ago, a company like Motorola would do all of its product development, all of its research inside the company. Literally within the constraints of what we could afford to do organically. Today, we have many different partnerships with companies like HCL but others as well. We also do partnerships with universities, sometimes our own customers, so the way you innovate itself has been disrupted. So if you think about innovation in terms of how you innovate is probably a paradigm shift, so that is one change. From a market perspective, what we used to think about as vertical industries, like communications industries, computing industries, Internet as a separate industry and media as a fourth separate industry. We are seeing a blending of those four and that means today if you are working in a communications company, you have to understand a lot more about entertainment, and on the mobile, for example, we bring music, we bring video, we bring picture taking, imaging, all of those capabilities., So it's no longer just about voice telephony, so you have to have a broader set of skill sets to drive innovation. So those are some of the things that I see happening.

Vineet Nayar: So that's interesting, let me go back again from a disruption point of view in the market space, I will ask you a follow up question on this. Why is innovation important to respond to any of these disruptions, so let's take the last example where you said where the three or four vertical industries are coming together, why is innovation a response to this? Why is there no other response?

Padmasree Warrior: Define innovation first, I guess, right? The way I simply define innovation is a fresh way of doing things that creates value. That fresh way could be a new technology, the fresh way could be a new business model, the fresh way could be a new way of forming an alliance, the fresh way could be how you go to market and it is important if you look at innovation from that broader perspective, when you think about industries merging, business model changes, you think about how you bring in technology from the outside to the inside, because obviously as a company I said, we invest close to $4 billion dollars in R&D which means we want to have return on that investment at the same time we are forming partnerships. So the tradeoffs between how you integrate those technologies that is important. I think innovation fundamentally drives consumer value. It has to solve a real problem that consumer has and you have to do it in such a fashion at least in the world that we are in, half of our business is today consumer product. When the cell phone was invented by Motorola, it was a business device. It was invented for the business person. We never thought, two billion people in the world would be using this as a way of communication. So apparently, it's very urgent that you have to make calls and you have to have this device with you all the time, right? So that whole paradigm is changing, so it is we as consumers that dictate what applications are needed in these devices and how we bring those. So from a time-to-market perspective, from creating a value perspective, innovation in a broader sense is absolutely at the heart of everything.

Vineet Nayar: So I would come back to you with the second question, but I will park that question with you, sometimes, I wonder whether the technology vendors like you are driving disruption through innovation where none is needed, right? Or do you force fitting disruption in the market just because we can sell more products, but I will come back to that question a little later. Surya, Dr. Surya, what is your views on the kind of disruptions that you are seeing in your industry and is innovation the answer or what is the answer for that?

Dr. Surya Mohapatra: Well, just before I answer that question, how many of you are from the United States, raise your hand. So within the last six months if you have gone to the doctor, your blood probably ended up in Quest Diagnostics. So I own a healthcare company and we have been a very aggressive medical service company. The difficulty we have because we have grown very rapidly, we don't know when the disruption is hitting us and we thought that we have the best model in our business.If you look at Quest Diagnostics, it uses four value prepositions which we have invested millions of dollar to build the infrastructure. We have got 45 thousand people, 800 MDs, and 100 PhDs. We also run a logistics company like a mini-DHL. We have our 4000 cars and 20 planes, so each time you give your blood, it comes to us and that is a different setup for us. We are also like a little bank, because our 35 laboratories and 150 small lab and 2000 patient service centers are all connected by the web, so every night when we test half a million patients, we use this network and those have been our value propositions and what we found that the so- called value proposition we have, has been tested in the market place and Vineet, yesterday you very eloquently put the disruptions can be volume disruption, technology disruption, and consumer disruption and Quest Diagnostics are actually seeing all those three at the same time. Just to give you an example, last year in October, we lost our major customer. I lost a half a billion dollar contract per year for 10 years and I will never forget October 3 when our market cap went down by $2 billion because our competition went and provided 40% discount and 200 million dollar transition cost and we said nobody can really do this thing to us but that actually the volume crunch when the managed-care organization came together and said you know what, we are going to break this paradigm.

Vineet Nayar: So I go back to the same question, is innovation driving disruption or disruption driving innovation? From the examples you are giving, it looks like innovation by another company is driving disruption for you rather than disruption in the market space and therefore innovation as a response to that market space.

Dr. Surya Mohapatra: The disruption to me is somebody is attacking our value preposition and what we have to do is to be not in denial and trying to figure out. Innovation for me is survival at the moment.

Vineet Nayar: Okay, response. Okay let's go to Jaymin. You run a very interesting business, lottery, and which is supposed to be very consistent and nothing should be changing, very regulated. So where is disruption? Where is innovation? Is there a play for disruption in that market space and is there a play for innovation at all in your market space?

Jaymin Patel: Sure. Well as you said, Vineet, we run a global online lottery business where we provide systems that power gaming solution for our customers. So our business is really about how we can provide new content to our customers to drive increased traffics through networks. We have terminals, satellites and systems in place all around the world and how can we drive more traffic through 425,000 retail points of sale. In our business, we are now in the third re-bid cycle. Our contracts typically run between 7 and 10 years, so the question is every 7 to 10 years you have to re-bid for a government contract and the way our contracts work, it is a percentage of gross ticket sales., So sales grow over 10 year period as do our revenues. What we have found in the third re-bid cycle is that our customers now are very smart and the governments have become much smarter as to the services we provide as our consumers and so disruption in our industry is about competition, rapid price changes, but basically providing the same kind of infrastructure that we have in the business today. So we think about innovation more now as how we can provide new games and content that we can push through our distribution systems to increase sales for our customers because ultimately it's the game innovation which is supported by the entire systems framework we have in the company that would drive value for us. So we have had to find ways to innovate to lower the cost of technology, to provide services at a much more competitive pace so that we can rebid and keep our contracts and then build value through game innovation which is a way of adding incremental value versus the market place. So I would say that in our business, very clearly, technology is a fundamental given these days. Most companies can do it in our industry. It's what you do over and above the technology in terms of new games and content that would drive same store sales to increase revenues for governments around the world.

Vineet Nayar: Tony before I come to you, I want to make a statement here. I am not very sure if innovation really happens or it's a fashionable word to try and fit in every situation and saying that every response to a situation is innovation. At least, in your business, I am hoping that you would say that I don't need innovation. You know, 80% I need no innovation. I want to be able to follow process and only 20% innovation. Is innovation the really answer? I mean for companies like you that survive on processes, is innovation responsible for the disruption happening in your market space?

Tony McCarthy: So, I hate to disagree with you, but I will since we are friends. We have an innovation challenge that emanates from the business and the competition, right? I am absolutely certain that many of those people who created that industry years ago are out there figuring out where the next opportunity is and they are going to drive a new wave of products in the market place. They are going to require some fairly sophisticated technology and technology tools to do that business and they are all going to try to stay ahead of each other in terms of the competitive pressures. That is the front side. The backside is as challenging. When you talk about the complexity evolution of products and really the need for firms like ours to drive complexity out of the equation and to move towards simplicity does require a reengineering mindset, a transformational mindset and I believe part and parcel with that is an innovative mindset. We have a lot of processes in our environment that were built, in fact, much of the industry was built in the 70s and 80s, batch processes, running, a couple of 100,000 transactions a night or a couple of million of transactions a night and as I said the other day, we have seen a 100- fold increase in volume in some of those core products over the last 20 years. When that number becomes a 1000 for over 30 years you just cannot squeeze it all into a limited window in a 24-hour day. You have to change the way you do things. So the challenge is think about the full life cycle of this business, think about the computing opportunities available today, the restrictions that were in place 20 or 30 years ago that aren't in place any longer and think about how to reengineer your platforms to actually take advantage of the 24 hours in the day, to take advantage of the computing opportunities, and paradigms in the market today and to actually give yourself a fighting chance to handle a thousand times the volume that your systems were originally architected for, so I can consider that to be an innovative challenge, whether we succeed or not is another question and we will talk about that.

Vineet Nayar: Okay, so may be, I am not very clear after the initial comments as to what exactly is innovation and may be we went into this discussion a little too fast.

So let me ask you - can you A: Define innovation and B: Give examples of what in your industry would you term as a good example of innovation. So we get the definition very clearly as to what do we deem by innovation and what is not innovation and then go down to seeing how we should be responding to innovation.

Padmasree Warrior: First let me answer, address your previous question, right? Is innovation always in response to a disruption? Disruption is a subset of innovation. In other words, a disruption can create innovation but innovation is broader than that. So we shouldn't confuse the two. That is very important. So how I define innovation is very simple. It's just a new way of doing something that creates value. It can be a new product, can be new technology, can be a new type of a financial arrangement, hopefully done the right way, and it is a different kind of a business model. Examples can vary.

Vineet Nayar: So let's just stick to that definition so that we can nail this down a little bit, so when you say new way of doing a process, which adds value because we are going to go down to how should we generate innovation within our own company, that is the core topic. Isn't there a measure of how much value because otherwise of small process and reengineering we can call it innovation? Shouldn't the definition of innovation be a little more specific so that we say this is innovation? .

Padmasree Warrior: No, I actually don't think it should be specific because if you are specific you limit yourself. Inventions are different. Not everybody can invent things, not everybody can create things but as long as we as human beings think and that is the ability all of us have, the human ingenuity drives us to think about a simpler way, an easier way, a different way of doing something, otherwise, we would all be robots. I mean there is a reason why we are who we are and as a collection of human beings when we are working on a process or working on addressing a problem, we will come up with ways to do that.

Now I think your question is how much change? What is the tradeoff between creating the change and the value that it creates? That's a very valid question because sometimes it may be not, so I would say it is change, not necessarily innovation. When you are trying to implement a change, there are certain barriers to that, right? For example, you may have come up with a great way of providing a solution but they may be incumbent in the market. That is huge, so there is a huge barrier to entry. So you are a small company, you come up with this great product, and I see this happening all the time as I travel, startups come and pitch me ideas but there is already an incumbent out there which is a big large company that you cannot displace with. May be your solution is very elegant, so what is the tradeoff between trying to force your solution into the market? How much do you have to invest versus the value that you are going to generate? That's where you need discipline and you need more definition and the metrics but not in the front and part where you are creating something.

Vineet Nayar: Any example of innovation?

Padmasree Warrior: Example of innovation, one that is close to my heart, since I work for Motorola is the RAZR. When we designed the RAZR, it was actually a very simple solution. It actually violated every process we had in the company because we have a $26 billion dollar business making cell phones so it's pretty structured. It runs like a factory. A group of people got together and said, "Hey, what about if we made a cell phone that would fit in a pocket, a shirt pocket, or a purse." Because today, before the RAZR, all phones had this big antenna and they were chunky and you couldn't really fit it into your coat pocket, or a shirt pocket, or woman's purse. So a group of them got together and said that would be great. They didn't know whether they could go off and do it and they decided to solve that problem, so it was a very simple problem to solve. People can put their cell phones in their pockets in an easy way if it is inconspicuous, let's go and solve that problem. But it required a lot of engineering and technology to do that because the antenna couldn't be outside. It had to be inside. We had to do a lot of RF engineering around that. We had to make it so that if you put it in your pocket and you sit on it, it doesn't break, so it had to be stainless steel frame. So that is to me a perfect example of innovation. Nothing was invented. It was all existing technology that had to be put together to create value in a different way and it also changed the paradigm. The RAZR was the first mobile device that made the cell phone a fashion statement. Before that it was just something that I used to text or call someone. Today, people use it as a status symbol or fashion statement. Colors matter, looks matter. It's amazing, right?

Vineet Nayar: Surya, what's your definition of innovation and when would you say innovation is not worth it?

Dr. Surya Mohapatra: Yeah, I agree with Padmasree that there is a difference between inventing something and innovating something. In my past life, when I was involved in magnetic resonance imaging, every two or three years, we really invented things just to make other people see that their technology is obsolete but now that we are running a service company, Innovation can be a fresher way of looking at certain things and it does not always come from the R&D people.

One example I will give you that we ship a lot of blood samples from place to place and the pilots have come up with a way to how package those test tubes in a better way so that they can take advantage of every inch on the plane so they created a bubble pack specifically to transport blood samples and now it is being used for us and for other people. It's a way of thinking, doing things differently. It's not limited to only the PhDs and MDs and their R&D people but you have to have a culture to really innovate certain things which is going to help you in immediate terms. In my business there is actually no long-term without short-term, so we are able to fix it.

Vineet Nayar: Jaymin, how do you define innovation?

Jaymin Patel:, It is a very hard word to describe in one context. People typically associate innovation with product development and R&D but we tend to think of innovation as ways in which our customers can drive more sales because we are in business to help our customers drive more revenue. As they are successful, we are very successful.

Vineet Nayar: So that way we can define every proposal as innovation.

Jaymin Patel: We hope so and the innovation comes in the way of lower costs for the basic infrastructure that allows us to bid the contract at a lower price versus competition versus the previous contract and then secondly and more importantly what gain innovation can set on the technology that will drive sales faster than my competitor. So that is innovation in our business. How do you use the technology to enable distribution and new forms of content that would drive exciting play?

Padmasree Warrior: Actually, I have a comment on that though, are you limiting yourselves when you say that you define innovation as a way to create value for your customers? What if you are eliminating potential new customers that you may not have thought about?

Jaymin Patel: That's a good question, so in our case, based on the audiences' response you can tell that this is not the demographic that buys lottery tickets, so we are going to figure out ways.

Jaymin Patel: If I can use your conference for a quick commercial, if you don't mind Vineet, for a second, we have to find ways of engaging this crowd in the interactive sense on the Internet using the RAZR mobile phones, you can play, games on phones, so we have to find new ways of rolling out technology that increase distribution and bring new players, young players, and people like the people in the audience here into our industry, that's innovation for us.

Vineet Nayar: So we understand product innovation. Tony, it is easier and there is a historical relevance to that, but as the CIO what is the definition of innovation?

Tony: So I look at it in two ways, one is either you are making a quantum level change in how you are now performing something, where it's five fold to ten fold increase. Something that can do what you used to do at "X" cost and you can do ten times that at that same "X" cost and figuring out how to go about doing that. That's one way. Another way is to change the playing field. We had a guy called Zachy come and speak to us a year ago and one of the things I liked about something he talked about was change the curve, jump the curve. So going from how they used to make cold houses by going out into the middle of the lake in the winter time and cutting the block of ice and using that all year long to be your refrigeration unit, those people were not the ones figuring out how to make refrigerators. There was some entirely new paradigm of thinking and the new way of operating and in our industry my analogy on that is looking at a lot of processes that today are very manually intensive and moving to more of a driven work flow environment where it is very prescriptive. Work that used to be done by people doing a very rote thing, rote action is now automated, doing those actions in parallel versus in sequence changing the playing field and changing the landscape to A: Give yourself a competitive advantage and to enable yourself to actually deal with some of the challenges of the future.

Vineet Nayar: So very interestingly Tony, why have you not talked about time to market as innovation?

Tony McCarthy: Implicit. It is just implicit in our business.

Vineet Nayar: For a CIO, is time to market the biggest issue?

Tony McCarthy: On the revenue side, yes! On the cost efficiency side, no! Stability is, as I talked about it yesterday and then on the heels of having a stable environment that alpha that we talked about, moving to alpha once you really established your stable environment is then that different scale of thinking, right. So the example we built in our shop, an event driven real time sub-environment, messaging technology, network based. People thought we are nuts. You are using front office technologies for the back office. Why would you do such as thing? It changed the landscape. Not only did it save immense amount of money, it threatened service providers to the point where they came to us asking us to stop doing it. I loved it. Because I knew, we are in the sweet spot. We are over the zone because we were hitting at something that was fundamentally changing the game. To me, that's innovation.

Vineet Nayar: Very good! So now let's move to the second phase before I go to the audience and we are going to have audience participation. Now we are a CTO or CIO. There are two kinds of people in this organization working on engineering projects and people who are looking at IT. What is the good framework for us to think about innovation? What do you think we should do to think about innovation in our organization? How to think about it? How to monitor it? How to execute it? What are the best practices you have seen in your organization or your experience?

Padmasree Warrior: So, I lead a team of about 25,000 engineers worldwide. So chances are somebody is thinking about something new or a different way of doing something all the time, every second, so when we get ideas inside the company and that's just inside, I am not including all the different startups that are out there and partners that come up with great ideas, etc., I tried to keep it very simple like bring it down to fourth or fifth grade level and I say okay, tell me answers to five questions that are important. First, is: this idea, what relevant problem is it solving? Does it solve a problem for a consumer? Does it solve a problem for a market? Does it solve a problem for a customer? That's why I was challenging the earlier discussion. It's dangerous to just listen to your customers. You have to think ahead of the customer sometimes.

So that's the first question. The second question is how this idea is different from existing ideas. What is so unique about it? What's the differentiating value from it? The third thing is - what are some alternative ways we haven't thought about? What happens usually and this is only engineers, they always think their idea is the best idea. I am sure marketing people and all don't do this. So how do you make sure that you are listening to other ideas and exploring that? What are the alternative ways? What are the barriers to entry? That was my earlier point. Your idea may be a great idea but there may be incumbent with 80% market share that's very difficult to displace so what is the opportunity there and the last one, and these are not in any order of priority is, what is the true commercial value or business opportunity. Can you sell and make money with this, so I tried to ask those five fundamental questions and everyone who comes to pitch me an idea have to answer that, even including our researchers and research labs.

It's not like a check box that you always have to check off on these but that forces some kind of a discipline in terms about thinking about innovation and especially commercially bringing that to market. Actually, I want to ask the team here but I don't want to take up too much time and if you ask anyone, play a word game, word association, I will say innovation, you say the first world that comes to your mind. I do this often when I speak publicly and most people say breakthrough, out of the box, different. Not a lot of people say team work, collaboration, discipline, time to market, and that is where the misconception rises. So be in your face, ask questions and it's as important to think about the opposites of all the conventional things we think about innovation like out of the box, etc. It requires a lot of discipline, lot of monitoring and measuring to actually bring in innovation to the market.

Vineet Nayar: So we get it, but one thing I don't get. In the example which you gave, where people come with the ideas of innovation it is still individuals. Obviously technology companies have to have structured innovation, right? Where you mandate or you do research and you come up with product problems, and you mandate the structured response or structured process of innovation in response to some amount of disruption you identified. Is there a structure? One is the idea up, another is problem down.

Padmasree Warrior: It's more than a structure. It's actually a sequence of processes like there is ideation where you just basically brainstorm and collect the ideas. The other thing that people always think in the brainstorming stage - don't kill any ideas. That is the conventional wisdom. I think that's wrong too, anyone who says, don't kill ideas probably does not know what they are talking. May be never had a good idea before, that's how I challenge people. Because a lot of ideas are actually bad ideas and by asking the right questions you can filter out those ideas that you don't want to pursue.

The second big challenge becomes how much you want to invest in that idea. Whether it's funding and VCs do this. They have a methodology of doing it. Large companies do it and I'm sure you do it. At every process, it's like decision making process you do, right? And so you have to figure out what are you going to fund.

The third thing becomes, once you hit the first early milestones, that's the tough part when you really need to double down. Now the investment goes from $50,000, $100,000, to 5 million dollars. So it's a quantum jump in terms of investment it's going to take. I think that's where it is tough to make those calls on because that requires more than one individual or one type of a skill set. Typically, you need business skill sets, you need technical skill sets and you need marketing skill sets. All those are combined together, so you now need a team of people working on that innovation, so that's where may be structure comes in. You need to now go to a structured process.

Vineet Nayar: Surya, what are the best practices for innovation, creating innovation in your industry?

Dr. Surya Mohapatra: We are in service industry and half of our people are hourly employees. One of the things, we are trying to create a culture not to really use the word innovate, because I want people who are working on the shop floor also to think that they are empowered and one of the things we encouraged people to steal, borrow, whatever it is, the good ideas, whether it is Six Sigma whether it is a Lean Six Sigma, to do their process and then we have some kind of reward for them so even if they reorganize the laboratory it is really innovation for us. Now, when we don't have innovative technology, we buy or we partner and many of you know that India is going to be Quest Diagnostics' second largest operations. So we have a large aspiration. So one of the innovative business model we have with HCL and it was a difficult decision for us because our IT guys wanted to build the infrastructure here. So people understood that the Intel Inside was a good innovation but when we say we can have HCL services inside, it was difficult but they understood and now we are creating an innovative business model in Delhi to really have time to market much quicker. So it has accelerated the entry to the market, so for me that's an innovation. Anything that can solve my problem quickly is innovative for us.

Vineet Nayar: Jaymin, going to you, what is structured innovation process or is it idea up in incentive? What do you follow within the company?

Jaymin Patel: When you think about innovation, it's a collection of processes in the company that result in innovation, so we think about innovation from the bottom up to the top in terms of idea generation.

Vineet Nayar: If I go back, what is your definition of innovation in your industry?

Jaymin Patel: It's how we can deliver new technology and gains that drive same store sales for our customers.

So in our business, if you look at innovation, we have a collection of processes one is where we encourage the organization to come up with new ideas to make our business better, any idea whether it is technology, a process improvement, a new game idea that would excite our customers. We have things like innovation week where we encourage our employees across the board to put forward new ideas. We also have senior management driven process where we look out over the next five years and try to figure out where the industry is going and we place some big bets so one of the innovations or one of the ideas we have is that in the next five years we believe that at self service rather than clerk activated, self service terminals will be the way that people will buy lotteries in the future, so we are placing some fairly big bets. That that's the way the industry will go so through our research and development. We're looking at ways of developing self service terminals and play a habit to encourage that kind of place which is going to shape the market. So it's both top down and bottom up, is the way that we think about it.

Vineet Nayar: Yeah, what I'm seeing is one commonality between the two services industries out here and it is more top down, it is more in response to disruption that you want to create in the market space and then you take a longer term view to that and invest in R&D or whichever way it is process changes to respond to that disruption.

Coming back to you Tony, once again, what is your advice to CIOs who want to innovate? What should they do, what are the five or six things they should do to drive innovation within their organizations.

Tony McCarthy: So, it would be nice to proceduralize all this. It's very hard to do that. Some of the best innovations we have seen in our shop are scum-board projects. I didn't even know about it, and one day I read about it and I say, "How did this get into the press". And you find out that it was one or two people, your non team thing, one or two people who actually built a phenomenal piece of software that's being used by one of the training desks. It was so small in its size in terms of cost, ran under the radar screen, yet had phenomenal impact on the business. Certainly, I don't want to stop that. I would like to know about it a little more and we take some steps to know about those things more in the form of doing CIO challenges. I am very open with all the senior people in my organization, 500 to 600 of the senior most people and really what are all of our challenges and I do this on a monthly basis and then I bring small teams to get together and I will throw out to them one of the challenges to go work on and give them four or five weeks and then let them come back and what are their ideas and we get hundreds of ideas as you would expect and then we try to implement some of those ideas to make them feel engaged and to actually tap some of their know-how, some of their expertise and we have actually done it at the macro level. We have a GTO Hermann Division, a GTO Award where we will award in four different categories of innovation, so we are creating more of a culture where innovation is accepted in the open rather than something that people think they need to do around their horse's back and it's paying dividends. We have got some phenomenal programs of work that are now going on that have yielded some nice paybacks for us and for the bank that we know about versus the past. But that's not the only thing going on in innovation, there are other changes in the industry that require a fundamentally different mindset around how to support the business five years out and those I find a little more top down. All these bottom up things are going on and then it is also some top down things. We try to get the best of both worlds and a lot of those top down ones come from either the business who see the change in the way the world is going or from some of the more senior managers in IT who think there is a better way to do things and while we don't necessarily legislate the innovation. We do drive people towards a different way of thinking and that drive generates ideas on how we might achieve that new way of operating which in turn leads to projects that I consider to be very innovative project.

Vineet Nayar: Which is very interesting, you are saying define a goal post which is a new way of doing business and everybody rallies around it slowly and the innovation gets generated from the process of going from point A to point B. I really like that idea.

So let me go back to audience and I'm sure, I'm in search for some good ideas of innovations adopted in your organizations which will be useful for all of us. So what I am going to do is that I am going to split this into two discussions: one for the CTO from the engineering organization perspective and one from the CIOs. So let's focus on the CTO first.

Michael from Juniper is here somewhere, right? .What's your view on structured innovation and what best practices from Juniper can be adopted to drive innovation and product engineering.

Michael Frendo: I think a little bit of both. I mean, if you have a goal post then you have the possibility of having some level of structured innovation.

Vineet Nayar: If you have a goal post?

Michael Frendo: If you have a goal post, if you know where you want to go and in many cases you do.

Vineet Nayar: In product engineering, in most cases we do...

Michael Frendo: I won't say in most cases, but in some way perhaps it's a natural thing. Have to get bigger, have get faster, have to get cheaper, they have to provide most services and so you could look ahead in those cases. I have to agree a lot with the comment made earlier. The customers don't necessarily know what their problems going to be in three years. That's where I think it is a little less obvious. Where you can't... you don't necessarily know the goal post, you are guessing potentially or in other cases, it's just somebody has an idea and having a culture that recognizes an idea for either good or bad and runs out for the good ideas is something that it's hard to maintain. It's very easy to maintain in a small company with a startup. It's more difficult to maintain in a 1500 person company. It gets more difficult with 6000 person company. It becomes almost impossible with a 60,000 person company, so what you see is 60,000 person company has gotten by innovation rather than creating. You know any point at which they are not, 6000 range and we do both. We have the goal post ideas because we know where our products need to go from a logical perspective. Let me give you an example. I have a group of people who work for me whose job it is to break security and that's what they do and by breaking things they teach us how to fix things. Security is a big part of my business. That's a road of innovation. It's an interesting one. It is a very unusual one. One of the people who works for me, we hired him when he was 17 years old, graduating from high school because he was good at breaking into systems.

Vineet Nayar: Rahul you are on the other side, you are on a very interesting causeway, you are on the other side that you see a lot of innovations going your way. What's your view on structured innovation? I mean you have seen a lot of customers than your own organization. What is your prescription for us?

Rahul from Celestica (Audience): So Vineet, I'm going to take a slightly different track. I tend to think about things in very simple terms because my mind doesn't allow me to do more. Therefore in simple terms, disruption is really caused by changes and demand patterns at the end of the day. One way or another, if you look at it, all disruption really comes up from changes in demand patterns. Innovation on the other hand is, in my view, just another point on the same continual which is a circular continual. So innovation can cause changes in demand patterns which in turn can cause disruption. It's a great case study in the company.

I wish it was customer but it's not, a small company called Apple, this was the company which came back from the dead effectively. Their innovative product was the iPod but the true innovation there wasn't the iPod. It was the interface that iPod created for the consumer into iTunes which is where Apple makes really a lot of money and that in turn got the consumer hooked and they started then pushing more and more content through iTunes, right? Apple is a huge company and if a company like that can produce an environment where there is innovation of that nature, structured or unstructured, frankly, that's what we all have to do, we all have to strive towards, is to whether it's a process and I agree with Padmasree, innovation can be a whole bunch of different things, whether it's a process or different way of doing things, different formula, different products, whatever it is. I think the debate is a little misplaced to think about disruption versus innovation. I really do think that they are both points on a continuum and creation is going to drive changes in behavior which is going to drive more demand from more creation and so that from my perspective is a kind of environment that we all should be striving to create in our organizations.

Vineet Nayar: So I wanted to bring Shiv in here. Shiv for 30 years, all you have done is innovation and we are looking at product engineering. Your perspective on structured innovation or unstructured innovation of sustaining 30 years of HCL. What's your views?

Shiv Nadar: From product engineering perspective, I belong to a timeframe at the very beginning of modern computing, so it was relatively simple. When Padmasree was saying specifying a product. Take out something which would fit in a pocket or something which would fit in a ladies purse and they had to think back every part of technology that had to fit into that. So the initial part of where HCL product engineering belonged related to specifying a need. Those days we inferred all these things from IBM. So you write the instruction manual first and then work backwards to the need specification and work it backwards to system specifications, then you did system architecture and then start back to the statement of work. So it was a lot easier at that time because something else did not exist, so many technologies did not exist. The more complex one which I have faced and I will give the first example was the PCs or the mini-computers with multi-process based systems. The complex one that we faced was five years ago when Boeing visited us. When they visited us, there were teams of 12 and 15 people who came every time then I got down to asking them, you want to do this, you want to do this, you want to do this. How did he come on to the specifications of this? How did he specify the need? They took sometime to specify the need because as systems integrator this is what Boeing is. They got together some of the very diverse customers, may be Nippon Airlines or Singapore Airlines, or Qatar Airlines and asked them to define a product that they would want to buy. Very diverse. If petroleum crude oil prices go up to $150 a barrel, at that time, Airline fuel will be this cost, and this is what is the price at which we want to fly someone from point A to point B which is in itself was a question?, It should be 6000 miles or 8000 miles. I was listening with rapt attention because to participate in their product engineering and their product innovation we had to understand how they wanted to serve the customer. So to me, the fundamentals still stay the same whether what we inferred from IBM or what we inferred from Boeing or very apt is something what Padmasree said. RAZR, it's very simple to fit into the purse or fit into a pocket - that is what should be driven for them.

Vineet Nayar: So Padmasree, why don't I ask you to sum this up? Take all the comments together and tell us that we in the engineering organization, how should we look at the innovation and how to drive the maximum value out of innovation and give us some examples where that is not the thing to do. We are always focusing on things to do but give us some examples of these are not the things to do.

Padmasree Warrior: What I heard in the discussion is disruption is a subset of innovation. It's a necessary but not a sufficient condition. There are other things that are required in innovation like changing a process, coming up from the shop floor. It can be a top down, bottom up kind of thing but the ultimate goal of an innovation is to create value and I think the tradeoffs have to be balanced in terms of how much it's going to cost you to drive that innovation versus the revenue or the profit you're going to get from that innovation.

The other thing that was mentioned here is to try to solve the simple problem that exists that can return maximum value. One of the things that I didn't hear mention, and I think that one of the traps that we all fall into is, - its actually to get ideas generated, that's probably the easiest thing, right? I mean if I go around and ask people, "Hey, give me an idea to solve this" we can each come up with 10 ideas. May be five will be bad but five will be good. But if I ask the same set of people, give me the list things we should stop doing. Usually it's much harder. And so, innovation - I think the trap we fall into is trying to do everything. I think as we think about innovation, and especially think about doubling down, when you come to a stage where you have to make intelligent decisions and use your judgment to say that I am going to back this idea and not that idea, the difficult thing is going to be to try to decide what not to do, so one of the things that I would advise is to try to think about the pitfalls and by the way innovation can do that. Stop doing does not just mean canceling a product or canceling a project, it could actually be a new way of doing things which would prevent redundancies or inefficiencies that you may have which you will stop doing, so one of the things that we often ignore is that innovation always has to be about creating new ideas. We do not focus enough about, let's think about innovative ways and new things that we should not be doing and this is especially true I think in a large global company like we are because we have processes all over different regions of the world. So that's something that we should also think about.

Vineet Nayar: So is this purely left on manager's competence to ask these questions or is there a structured methodology where you definitely have to ask these questions or answer these questions. The question I am asking is, how do we move towards innovation outside the competence of a manager to drive his team to innovate? Is there a process?

Padmasree Warrior: I think actually to me, it's very simple. I think there is a lot of myths about innovation, right? The first myth is that big companies cannot innovate. I think that's a complete myth. I don't buy that. I think big companies, if they can create a culture of small teams within the company, can absolutely innovate. The second myth is that innovation cannot be managed. It's chaos. That's a myth. There is a role that chaos plays in the creation process but after you get through that you need structure and discipline, etc. The third myth is that innovators are a breed that have a unique profile and I don't think I buy that. There is an innovator in all of us and a leader's job or a manger's job is to figure out how do you engage that innovator or how do you bring that innovator out, right?

Good example of that is we have a team in India, in Bangalore, that writes software for all of our products and they are very good at doing certain things and for the longest time, our team in the US used to always think new ideas have to come from the architecture team that was in the US and of course we have 4000 engineers in Bangalore that are super smart, that are always coming up with new ideas, so we try to stereotype and say this kind of a role, if you are working in creating something that's very structured and disciplined, you can't innovate and here's the creative people out here. They are the only ones that can innovate. Those are some of the myths that we need to burst.

Vineet Nayar: Yeah, I agree with that. That's a good observation. Let's go to the CIO role now and let me get views of a couple of organizations where I have seen innovation.

So Anne from HBOS, so tell us about process being followed in HBOS on the innovation and how do you think about it and...if you could stand up, so people could see you.?

Anne McCormack: At first, may be if it sounds a bit dull almost but our innovation is going to come from a process, the process of to how we prioritize our projects, shape our investments to I guess unlock the innovation and the ideas across all our levels in our IT organization that are driving towards how we create the new bank. So that is a lot that is where we are focusing on right now. Still the work is in progress, we don't have the answers and it is quite trip, it really is quite a trip but I guess one of the byproducts that we are finding from our approach is arrange the whole mentality of the organization, the pace and the sense of urgency and almost create a culture of let's try it, a bit like as it was said earlier wash it through the machine and look at what we have at the end, so that was innovative...

Vineet Nayar: Let me ask you a question which Padmasree said. Do you also think in the way of what not to do?

Anne McCormack: Oh yes! The way its different for us because I actually find in our project community that folks focus more on what not to do. The challenge we have is getting them to say okay, if we stop doing all of that A: What are we left with? B: What do we then need to create.

Vineet Nayar: So George, you talk a lot about innovation to me. So here is the chance to explain your bright ideas to everybody. How do you think of innovation?

George from St George Bank (Audience): I don't believe that you can actually suddenly wake up one morning and say well I need to come up with two innovations by 10:30. I really think that the innovative organization goes to very heart of culture. Successful everlasting organizations today have to continually reinvent themselves. You have to continue and that these things are done in waves. You transform the company. You engage in a big project, you then consolidate and leverage that, and while you are doing that you are looking at the next jump up way, and if you don't you become irrelevant because the world moves on and what is successful today is obsolete tomorrow and it doesn't matter what industry you are in.

The innovation that we had or we have at St. George Bank is just a culture of come up with your ideas. Allow ideas to flourish. Have an environment where ideas are not ridiculed and allow a few to fail. It goes to the heart of leadership right from the chief executive down. I guess in our organization, St. George Bank is the fifth largest bank but there is an awful lot of wide space between No.5 and No.4 and God damn a Pacific Ocean between No. 5 and No. 1 and six years ago we were written off. The whole market was counting us out as takeover target and we sat down and we said to survive we got to be as good as we are ever going to be and to do that we have to be innovative, we have to be better. What happened within for the last three years, we have had the lowest cost of operations. We have been counted as the most innovative and we certainly got a set of numbers that leads the market and that went to the heart of the culture, so it's a way of doing business and environment that encourages renewal and a certain amount of experimentation in a controlled way.

Vineet Nayar: So would that change with the leadership change? Or is it a sustainable organization culture? Is it a leader-driven culture?

George: I can't answer that because this is a phenomenal year. I have left, the chief executive has gone and is starting with Westpac in a couple of months. The chief financial officer left as well.

Vineet Nayar: And I am asking are we going to see innovation in Westpac? Is it an organization culture or is it a leadership driven thing? What's your experience?

George: The leader has to create the environment as the set of circumstances so that everyone can flourish and succeed. If it doesn't come from you, if it doesn't come from the leader, it's going to be quashed.

Vineet Nayar: Okay, very good. So we have Sandeep from Franklin Templeton. Could somebody give him a mike there? What's your view on innovation, structured innovation?

Sandeep Bhatia from Franklin Templeton (Audience): For us in financial services, by the way, Franklin Templeton investments is fourth largest mutual fund company in the world. What we struggle with is the future- how are we going to connect with the 14 and 15 year old today. We understand very well how to distribute our funds globally to the current generation but the challenge that we struggle with is how are we going to come with innovative ideas and products to reach the new the 14 and 15 years old in South Korea or in India or anywhere else in the world. I don't have an answer but I would love to hear something from the panel.

Vineet Nayar: Surya, after listening to all comments out here from the CIOs point of view, as a business leader, I mean, you are the CEO of the company, what would you want the CIO to do from an innovation perspective? What is you expectation from the CIO and his participation in innovation? Is it to do with business or is it to do with IT? What is your expectation?

Dr. Surya Mohapatra: I agree with the gentleman that you cannot get up in the morning saying today is Friday, I am going to innovate. It has to be a state of mind. It has to be a culture but it has to be an ingrained culture so that when you see somebody doing something nice or something different, you don't always wonder why he is or she is not working on this project. For a service company like us, the CIO or CTO has to be the business partner with the CEOs. I like reduction of cost but I like speed and growth and for me and as I heard from other gentleman, what is the CIO can do to prepare the company for the next five years or ten years. I am scared to death that I think our marketing departments are in denial.

Vineet Nayar: In denial?

Dr. Surya Mohapatra: Right, because we think that we are going to approach people one on one, we can do the media advertisement as a service company, quality and reputation is important in the Facebook, MySpace, all the affinity group, all they have to say, you know what? We went to this company, we had this service, he is not good and suddenly the democratic way of finding out what is right and what is wrong is going to shut us down. So the flip side of that is if you have a great service and great product, you can even create a buzz and then you will find actually the innovative way of how the business is growing. Now for me, I will go back to my CIO and the first thing I tell her is that don't fall in love with your job because one day you might be the CEO so you need to think about the business first and the function second.

Vineet Nayar:. Jaymin, what are your views? What do you tell your CIO and what do you want him to do?

Jaymin Patel: Again, it starts with culture. At the leadership level it is critical that the leader create a culture that inspires innovation and demands new ideas and ways that the business has to change quickly to address competition. So for a CIO it is a very-very difficult role. In our business certainly, the CTO and CIO have to encourage and motivate a large engineering organization while changing the business very-very quickly. So how do you get the basic infrastructure resources offshore or out of the company so that what's left can really address the marketing need to the company to innovate. That's a very, very hard job because in one respect you are trying to motivate the employees and make them innovate but at the same time, given that you are dealing with competition. You have to find ways of taking some of the areas out of the business so what's left can be focused to drive innovation and value of your customers. One of the most difficult issues today is how you allocate the resources effectively to allow innovation to take place. In the services business like most businesses engineering resources will gravitate towards serving existing customers and it is very, very easy in a business for all of those resources to be shifted towards serving existing customers and existing revenues whereas the leader's job is to find the resources and focus them on what would drive future revenues. So unless you free up resources and the mentality to be looking into the future, you will be stuck in the cycle of constantly allocating resources towards existing revenue streams.

Vineet Nayar: So one of the things which I have constantly made sure and you always mean, you seem to be driving a sense of urgency or doomsday scenario. I heard that from Surya, you also have a doomsday scenario, which you are driving within your organization by saying, if we don't change, we are dead. Is that the way to drive innovation? Is it because there is a risk? I mean, there is a resistance to innovation in this. Why are the doomsday scenarios to drive innovation?

Jaymin Patel: I just have a feeling that we have to innovate and we have to move faster to compete, and when the head of technology comes to me and says it will take me nine months to get a product to market, my response is always, go and talk to seven companies outside of GTech and come back and see if we have the same answer. That culture should be one where engineers are going outside before they come back to the company with a recommendation. I shouldn't be the one pushing that. So it takes time and we have to do it in appropriate way to keep the resources properly motivated but it should be a part of your culture where going outside, talking to companies in the emerging markets where there are tremendous ideas on how to innovate, talking to companies about how you might present a solution that is better, faster, gets to market in much shorter time frames. That should be part of the culture how the business operates.

Vineet Nayar: Tony, is this unfair to ask, I mean CIOs globally are asked to run the business and nothing should fail. If it fails, then they get their head cut off. They are asked to watch for technology disruptions and make sure their technology is up. If they buy SAP somebody has a better idea, you should have bought Oracle. So in this complexity, while they are managing this business and running the business, they are also asked to participate and understand business and innovate because they are the club which drives innovation so to me there are too many things which we are expecting the CIO to do, what do you think? And if he is expected to do these how should he respond to these multiple requirements from him. Because it's not only innovation, it is also running the business.

Tony McCarthy: Actually it is fair. It's what we have all signed up for, right? And we know this and you have to understand that and that's why I agree with many of the comments both here and from the floor, it's about leadership, it's about establishing the right culture, and it's about being paranoid about the future. Paranoid about what will happen if you don't respond to the challenges. I had an epiphany three years ago. I took a number of new graduates into a room and I always meet with them and talk to them about their ideas and how they are kind of looking at their entrance into the Deutsche Bank and they are full of ideas, full of enthusiasm, and full of lots of energy. And about two weeks later, I took in a group that had been with the firm for two years. They didn't have any questions. They had limited enthusiasm. They seemed to have been grounded into the flow of the environment and the environment had become stifling and that's a leadership problem and that's a culture problem. So over the last three years, we've worked hard to change that, to bring out those ideas, to bring out a better understanding through sharing with them the challenges that we face, hearing from them some of what they see, some of where the opportunities are. We do have two different businesses that I deal with. A manufacturing side that has to have a very high degree of uptime and a huge capacity to handle volume and another is a transactional business side. They require different approaches to meeting the challenges. They both require innovation. Some of that is bottoms up, some of that is top down and most importantly all of those people have to feel that you support hearing their ideas. They are not all going to be ones that you want to pursue but even if I say no, and I will tell teams this, if I say no to an idea, it doesn't mean I don't want the next idea and they have to know that and they have to believe that and it comes all the time and when you get there you start to see it in their actions. They are coming to you with ideas and how to change things and how to do things differently. They are not doing this skunk work things anymore. They are talking to you about that. You may kill their skunk work projects but they know that they can come back with other ideas. It's about leadership and culture.

Vineet Nayar: Padmasree, can I ask you to wind this up with your thoughts of how should we circle this around.,How do you think we should look at this whole picture on a 360 degree and what should we do? What's your conclusion on the conversation?

Padmasree Warrior: I would look at it in a more positive way. I think definitely the doomsday scenario of innovate or perish, and the cliché is that we are always here or there. But there is a huge opportunity for us. The world getting smaller, right, in some ways that we today have technologies that connect us much better than they have ever have. Our research actually says that 16 year olds, consume 1.6 hours of media in one hour. So they are 60% more efficient in consuming media than the age groups above that., So they are IMing, texting, watching a movie, doing all these things which means now we have a channel to project information and extract information that we didn't have before.

I think for India, especially with the demography of having a younger population, that's a huge opportunity because these will be the consumers of tomorrow, so if you think about the future, innovation presents an opportunity for us to be thinking of new business applications, new kinds of enterprise application. The enterprise actually is becoming much more of a consumer-driven place than it used to be., right? When I joined Motorola 22 years ago, I just looked to my CIO as a person that's always going to me a list of things I'm not supposed to do. I get the Don't list from the IT Department. Don't bring this device in, don't connect this, don't use Internet without a VPN and so on. Today, that's very different.,The CIO's role is becoming more about empowering me as a user of the technology. It's okay to bring your mobile device. We'll make sure the security is there. The gentleman that made the comment about- previously if you were a person that broke into software codes or broken encryption, you went to jail. Today we give them jobs not to infer that they hire criminals or imply anything of that sort, so the whole paradigm of about how we are thinking is different. How we are thinking about talent is different. And therefore there is a huge opportunity for innovation, to create more business for all of us. Train talent and develop talent! The role that as leaders of innovation, we can play is to inspire and nurture that creativity.

Vineet Nayar: Thank you very much.