Growth and innovation is clearly on the minds of the 443 senior business, finance and IT executives recently surveyed by Saugatuck Technology and BusinessWeek Research Services.

In fact, revenue growth outpaced both cost control and asset allocation by a 5-to-1 margin as the top business strategy for C-Team executives to improve their firm's financial performance for 2007 - implying a more than subtle shift in priorities - and what looks like an emerging scenario of accelerated business spending rather than saving. At the same time, the need and desire to innovate as a means of driving growth (and achieving competitive product or service differentiation) was a high priority for C-Team executives - with more than 70 percent indicating that innovation was critical to ensure their organization's long-term survival.

What is not yet clear is whether the desire for growth will be matched by dramatically accelerating IT investment over the next 12 months - as IT spending in 2007 (while robust at 5%-6% growth) appears to lag relative to the business priorities that C-Team executives are embracing. As IT spending controls begin to loosen, however, we anticipate that enterprises will begin to shift toward larger investments, as IT and the business better align to evolving business priorities.

Why is this happening?
In December, 2006, Saugatuck Technology and BusinessWeek Research Services (BWRS) conducted a worldwide web survey of large company CEOs, COOs, CFOs, CIOs and CMOs (what we refer to as the "C-Team"), focusing on the following key issues:

• Pace and strength of economic growth in 2007
• Key areas of strategy / focus that will lead to improved business performance
• Prioritization of key C-Team business goals
• Role and importance of innovation in driving growth / ensuring long-term survival
• IT budget and spending intensions

Here we summarize some of the key findings a recently published Saugatuck Research Report entitled "C-Team Research: Growth and Innovation Driving The Global Business Agenda" (SSR-325, 28Feb07) - focusing in particular on the issues of business goal prioritization and innovation.

As our study has shown, reinforcing the shift toward achieving revenue growth at the expense of cost control is the fact that the top five business goals of C-Team executives are all revenue, customer and market share growth related. As Figure 1 below illustrates, "managing budgets" has fallen from the second highest priority in 2005 to now being seventh out of seventeen top business priorities. Sales / Revenue growth has grown from being fourth on the list to now being the top business priority of large company C-Team executives.

Figure 1: C-Team Business Goals



Source: Saugatuck Technology Inc. and BusinessWeek Research Services C-Team Study (Dec. 2006)
Sample Size: N=443, all C-level (CEOs, COOs, CFOs, CIOs and CMOs from large companies with greater than $1 Billion in revenue - worldwide distribution).

Interestingly, C-Team executives believe they can have their cake and eat it too, as "increase profit margins" has risen from eleventh to sixth on the list of top C-Team executive business priorities. In this sense, the realignment of spending and budgets to achieve these business goals and priorities has apparently not yet fully occurred. Our guess is that corporate profit margins are likely to fall at the expense of accelerated spending to support top-line growth.

Another important and continuing sign that C-Team executives are less interested in keeping the lid on spending is the decline from seventh to thirteenth place in the need for better ROI metrics on corporate expenditures. This may signal the beginning of a re-evaluation of the role that ROI metrics play in corporate spending and approvals, as balanced scorecards are widely in place, and current long-term initiatives such as SOA will require sustained IT investment for years to come.

The Role and Importance of Innovation
The need to innovate as a means of driving competitive product or service differentiation clearly came through in our research (see Figure 2). Not surprisingly, nearly nine out of ten CIOs and CTOs believe that innovation is necessary for organizational survival (either agree or strongly agree) - while more than 70 percent of CEOs, COOs and CFOs likewise agreed (a surprisingly high figure in our opinion).

Figure 5: Importance of Innovation



Source: Saugatuck Technology Inc. and BusinessWeek Research Services C-Team Study (Dec. 2006); N=443

No doubt, investments in technology are and have been a leading driver of innovation. However, there are many other forms of innovation - organizational, business model, cultural. In fact, further research that we have conducted suggest that roughly half of the CEOs (and more than 60 percent of COOs and CFOs) believe that organizational transformation is necessary for long-term survival.

In contrast to the enthusiasm by most C-Team executives to embrace innovation as a key means of driving growth, CMOs appear to be almost jaded about the current innovation mantra circling corporate boardrooms - believing instead that other forms of corporate investment (e.g., marketing and promotion) will yield greater top and bottom-line results (see C-Team Research: Innovation Divergence May Inhibit Investment, RA-320, 21Feb07).

Implications for Users
IT users need to pay close attention to evolving business strategies to ensure appropriate alignment and allocation of investment strategies. User enterprise executives, especially IT executives, have focused on cost-cutting and margin management for so long that an increase in IT investments is a relatively new phenomenon. Existing controls and practices need to be adapted and adjusted - and resources need to be added.

While it will take time for business-growth-driven demand to translate to significantly increased IT spending, we anticipate an up-tick in IT capital budgets as the decade comes to a close - especially around initiatives that drive innovation and revenue generation, and that provide unique and competitive differentiation.

Implications for Vendors
No doubt IT vendors and services providers should see increased opportunity for integration and managed IT and business services as firms seek new and faster/different means of adding and expanding IT resources to enable business growth.

Further, we anticipate significant growth in pure-play technologies and solutions that enable greater enterprise flexibility and agility, and that help user organizations bring fresh and innovative ways of doing business (e.g., SaaS, SOA). While innovation will largely come from small and nimble start-ups, we anticipate continuing if not accelerating M&A on the part of larger vendors (with more established distribution channels) which will no doubt help drive the vast majority of new customer capabilities.

Most important, however, we recommend that all IT vendors and services providers invest the time to carefully re-examine (and potentially realign) their core product and service messaging and positioning around these new themes - as a new investment-led and innovation-driven business climate appears to be on the horizon.

Bill McNee is founder and CEO of Saugatuck Technology. He helps lead Saugatuck Technology's subscription research and market strategy consulting practice. This blog summarizes some of the key findings from a new 15-page Research Report that was published on February 28, 2007, entitled "C-Team Research: Growth and Innovation Driving the Global Business Agenda." It is available by visiting Saugatuck's website at www.saugatech.com/325order.htm. For further information, go to http://www.saugatech.com/c-teamresearch.htm, or call 1-203-454-3900. Email: bill.mcnee@saugatech.com.