Is ‘best practice’ an innovation handbrake?

Think Progress Team

Wednesday 7 September 2016

While many enterprises go to great lengths to establish IT and business governance frameworks based on ‘best practice’, the reality is this approach can be anything but ‘best’ for an organisation facing rapid and disruptive change.

Organisational governance frameworks based on best practice exist for almost every aspect of the enterprise. These cover areas as diverse as corporate governance, day-to-day operations, human resources, information technology, compliance, procurement, risk, sales and security, to name a few. But what worked for other organisations yesterday might not be best for your business tomorrow.

What defines best practice?

Best practice is defined as: “Commercial or professional procedures that are accepted or prescribed as being correct or most effective.”

In an environment that is relatively predictable, accepted best practice generally makes sense. After all, it’s been shown to work elsewhere, and reinventing the wheel is a risky and potentially expensive venture.

Case in point: your local airport’s air traffic control operates in an environment that is relatively immune to rapid and disruptive change. It operates within a highly evolved and well-established governance framework based on best practice. Due to the high cost of failure, airports meticulously assess any opportunities to refine and adjust demonstrated best practices before adopting them.

However, if your business has a choice in the design and operation of its IT and business governance frameworks, you need to test the assumption that success automatically follows the adoption of best practice.

Organisations that continually challenge and adjust the implementation of industry best practice will maintain the relevance of their applied best practices in the context of their business. To illustrate this, through a formalised ‘community of practice’ group made up of approximately 50 managers, the German chemicals company Degussa collaboratively challenged prevailing best practice project management tools and methodologies, resulting in measured improvements against defined business criteria.

When innovation and disruption meet best practice, who wins?

Accepted best practice may no longer be up to the task for organisations dealing with the pace of technological disruption.

If your business is dealing with a disruptive competitor that is constantly changing and innovating, adhering to best practice may limit your ability to respond with agility and speed. This is partially because the context that produced your best practice is now different to your present circumstances.

On the other hand, if your organisation is the one doing the disrupting, it has likely broken rank from those peers still constrained by the prevailing governance models.

The reality is that both rapid change and innovation challenge the business value of governance models predicated on what worked yesterday.

To illustrate this point, adherence by individual taxi firms to the prevailing industry best practice is of limited value when faced with a disruptive newcomer such as Uber.

What about IT governance best practice?

IT is at the heart of most (if not all) aspects of many organisations. Any assumptions about the interplay between IT and enterprise governance need to be carefully considered on a case-by-case basis. It’s dangerous to assume that IT governance exists independently of the business’s daily operations.

Companies that depend on IT but do not bring the function in from the cold should read the report on the UK’s Co-operative Group and the £1.5 billion capital shortfall it announced in June 2013. It makes compelling reading for anyone interested in the roles corporate governance, disruption and the CIO play in meeting business expectations over IT.

Moving beyond IT-business alignment

Organisations that implement an integrated and adaptable governance model for both IT and the business will be better equipped to innovate and evolve with their industries.

On the other hand, organisations that insist on keeping separate business and IT governance frameworks based on their respective best practices may well be limiting their ability to thrive in the face of fierce competition and rapid change, according to a research paper in The European Management Journal, ‘Why communities of practice succeed and why they fail’.

The authors studied applied best practice across 57 major European and US companies including Siemens, Oracle, IBM, Daimler, Mitsubishi, Mazda, the World Bank and CERN. They identified that maintaining the rigidity of competences along functional lines as one of the five key failures of applied best practice.

Organisations serious about building an adaptive best practice capability need to make the shift towards adopting an integrated IT and business governance framework.

To that end, organisations need to stop thinking of IT as a cost centre subservient to the demands of the business. Instead, these organisations need to treat IT as a valuable driver of innovation and an enabler of organisational resilience.

This calls for a degree of peer collaboration between key business and IT decision-makers at all levels – all within an adaptable governance framework. Now that’s a recipe for success.

This post originally appeared at ThinkFWD.