Research Summary: “Drive Innovation Using The Right Skills: The Value Of Custom Software Development” Prepared by Forrester Research, Inc. (2015)

Why Choose Custom Software?

At Issue: Successful businesses continually seek to improve their ability to win, serve, and retain customers.  As organizations compete, they must find innovative ways to differentiate themselves in the marketplace.  As a result, organizations face increasing pressure to utilize custom software systems tailored to meet their unique business needs.  However, custom software development projects are not guaranteed to be successful. Organizations must take a disciplined, thoughtful approach to custom software development in order to unlock the significant business value that it offers.

Research Objective(s): The researchers’ objective was to evaluate organizations’ success with outsourced custom software projects.  The researchers sought to test the hypothesis that custom software projects succeed not when organizations contract raw development capacity at the lowest possible cost, but rather by hiring the right team for the job – one that offers a mix of technical skills and continuous delivery practices, with a proven capability to deliver business value.

Scope: The study encompassed organizations in a variety of industries in the United States, United Kingdom, and Australia.  All the organizations surveyed had outsourced custom software development for at least 30 percent of their systems and applications.

Approach: The researchers conducted an online survey in 2014 of two hundred IT and business decision-makers.  All survey respondents were at the director level or higher.

Findings: The study yielded five key findings:

(1) Organizations prefer to utilize custom software systems and applications to drive innovation but require help to build these systems.  Nearly 50 percent of companies that outsource custom software development do so because they lack the time and skills internally to complete custom projects.

(2) A majority of companies that outsource custom software development are not satisfied with the services that they receive.  The areas of least satisfaction included product release frequency, autonomy of the development team (respondents noted teams’ insufficient ability to make correct decisions without instruction), development processes used, and speed of product delivery.

(3) Organizations are challenged to find custom software development teams with the right combination of technical, development, and delivery skills.  While software developers commonly possess advanced technical skills, many lack the necessary experience and autonomy to make efficient, intuitive decisions on an organization’s behalf.

(4) Organizations are willing to pay a premium for experienced development teams.  Eighty-seven percent of survey respondents indicated that they would pay more for high-performance development skills, with one in four responding that they would be willing to pay a premium of 20 percent or higher.

(5) Organizations are seeking strategic partners that can immediately provide the necessary technical skills in addition to educating internal IT staff.  The survey respondents, who cited developers’ technical expertise as the top priority when selecting third-party providers, ranked knowledge transfer to internal teams as the second most important factor in their selection processes.

Notes: The full text of this study can be accessed here.

Keywords: custom software development, innovation, differentiation

Researcher Profile: Allie Grace Garnett is a professional researcher and freelance writer with a background in finance and entrepreneurship.  A serial entrepreneur who has established numerous businesses, Ms. Garnett previously was a founding Principal of Nexos Resource Partners (NRP), an energy project finance firm in New York.  Prior to co-founding NRP, Ms. Garnett provided financial advisory and fund raising services to institutional-scale energy funds with Sustainable Development Capital. Ms. Garnett served as the Vice President of Marketing and Strategic Partnerships for the start-up Rentricity, and additionally founded a nonprofit organization (YAVA) that encourages volunteerism among college students.  Ms. Garnett holds a Master of Business Administration degree from Harvard Business School and a Bachelor of Science in Civil Engineering degree from Northeastern University.

Research Summary: “A Research on Determining Innovation Factors for SMEs” By Ebru Beyza Bayarçelik, Gelisim University & Fulya Tase and Sinan Apak, Maltepe University (Istanbul, Turkey 2014)

Most Important Factors Affecting SME Innovation

At Issue: SMEs, by their sheer prevalence, are essential components of every sector of the economy. Therefore it is crucial that innovation by SMEs be encouraged and supported, such that SMEs may remain competitive with larger organizations. To innovate effectively, SMEs must fully embrace strategic management decisions. However, many SMEs struggle with the decision phase of pursuing innovations, and are significantly impacted by both external (market) conditions and internal factors.

Research Objective(s): The research focuses on determining the primary factors that enable SMEs to achieve strategic innovation success.

Scope: This research examines innovation by SMEs in industrialized nations worldwide.

Approach: The authors of the study conducted both primary and secondary research to obtain their conclusions. For the primary research, they surveyed the owners of 34 SMEs on the relative strengths of eleven factors as pertaining to the degree of innovation within their organizations. The researchers then employed mathematical models to further analyze the data and justify their conclusions.

Findings: Prior studies have determined management skill and industry maturity to be key factors in driving SME innovation. Other important factors cited in previous studies have been industry demand, industry-university partnerships, employees’ attitudes toward change, industry size, and personnel age.

The direct research conducted for this study concluded that management skill, technological capability, financial capacity, and firm size carry the most weight (approximately half) of the eleven independent factors considered.

Notes: The full text of this study can be accessed at https://www.sciencedirect.com/science/article/pii/S1877042814050812.

Researcher Profile: Allie Grace Garnett is a professional researcher and freelance writer with a background in finance and entrepreneurship. A serial entrepreneur who has established numerous businesses, Ms. Garnett previously was a founding Principal of Nexos Resource Partners (NRP), an energy project finance firm in New York. Prior to co-founding NRP, Ms. Garnett provided financial advisory and fund raising services to institutional-scale energy funds with Sustainable Development Capital. Ms. Garnett served as the Vice President of Marketing and Strategic Partnerships for the start-up Rentricity, and additionally founded a nonprofit organization (YAVA) that encourages volunteerism among college students. Ms. Garnett holds a Master of Business Administration degree from Harvard Business School and a Bachelor of Science in Civil Engineering degree from Northeastern University.

Research Summary: “Skill Shift: Automation and the Future of the Workforce” By Jacques Bughin, Eric Hazan, Susan Lund, Peter Dahlström, Anna Wiesinger, & Amresh Subramaniam, McKinsey & Company (2018)

Skill Shifts in the Future of the Workforce

At Issue: Automation and artificial intelligence (AI) are changing the nature of work. As people increasingly interact with machines in the workplace, demand for workforce skills is shifting and how work is organized within companies is changing – both at an accelerated pace. Workers everywhere must either deepen their existing skill sets or acquire new ones. Companies, too, must rethink how work is organized and executed within their organizations.

Research Objective(s): This research on automation and AI in the workplace was completed as part of McKinsey’s wider effort to assess the impact of technology worldwide on the economy, business, and society.

Scope: The study focuses on five sectors – banking and insurance, energy and mining, healthcare, manufacturing, and retail – primarily in France, Germany, Italy, Spain, the United Kingdom, and the United States.

Approach: The McKinsey team conducted both primary and secondary research, with a main goal of estimating the time spent on 25 core workplace skills, both today and in the future.

Findings: Automation and AI will accelerate the shift in required workforce skills that has been occurring over the past fifteen years. The demand for technological skills, currently the smallest category of workforce competencies, will rise the most – 55 percent – and by 2030 will represent 17 percent of hours worked, up from 11 percent in 2016. This surge will encompass increased demand for both basic digital competencies and advanced technological skills. However, basic cognitive tasks, such as simple data input and processing, will decline by 15 percent, falling to 14 percent of hours worked in 2030, down from 18 percent in 2016.

Companies will need to make significant organizational changes to stay competitive, and executive teams must acquire additional knowledge to lead the adoption of automation and AI technologies. Nearly 33 percent of firms are concerned that they currently lack the skills necessary to increase automation, and that this skills deficiency will negatively impact their future financial performance.

Competition for high-skill workers will continue to increase, and companies that are slow to adopt automation and AI technologies will experience increasing difficulty with attracting and retaining top talent.

Notes: The full text of this study can be accessed at https://www.mckinsey.com/featured-insights/future-of-work/skill-shift-automation-and-the-future-of-the-workforce.

Researcher Profile: Allie Grace Garnett is a professional researcher and freelance writer with a background in finance and entrepreneurship. A serial entrepreneur who has established numerous businesses, Ms. Garnett previously was a founding Principal of Nexos Resource Partners (NRP), an energy project finance firm in New York. Prior to co-founding NRP, Ms. Garnett provided financial advisory and fund raising services to institutional-scale energy funds with Sustainable Development Capital. Ms. Garnett served as the Vice President of Marketing and Strategic Partnerships for the start-up Rentricity, and additionally founded a nonprofit organization (YAVA) that encourages volunteerism among college students. Ms. Garnett holds a Master of Business Administration degree from Harvard Business School and a Bachelor of Science in Civil Engineering degree from Northeastern University.

Research Summary: “Delivering Large-Scale IT Projects On Time, On Budget, and On Value” By Michael Bloch, Sven Blumberg, & Jürgen Laartz, McKinsey & Company (2012)

Cost Overruns, Schedule Overruns, & Benefits Shortfalls, Oh My!

At Issue: Large IT projects often cost much more money and take much more time than planned; failed projects can put whole organizations in jeopardy. To defy the odds, companies must both understand the underlying causes of project failure and master the key dimensions that align IT project value with business value.

Research Objective(s): The research team’s objective was to determine how companies can maximize the likelihood that IT projects deliver their expected value on time and within budget.

Scope: The research focus was on large IT projects, defined as those with initial cost estimates exceeding $15 million.

Approach: The McKinsey team, working with the BT Centre for Major Programme Management at the University of Oxford, analyzed more than 5,400 IT projects by comparing predicted budgets, schedules, and performance benefits with actual costs and results. The team also conducted a survey of IT executives to determine the most common underlying causes for a project’s success or failure.

Findings: Large IT projects, on average, run 45 percent over budget and 7 percent over time, while delivering 56 percent less value than predicted. The longer an IT project is scheduled to last, the more likely that it will run over time and over budget; every additional year spent on a project increases cost overruns by an average of 15 percent. Approximately 17 percent of IT projects go so badly that they threaten the very existence of the company. Project underperformance or failure is most commonly caused by: (a) a misguided or lack of focus; (b) highly technical project complexity or ever-changing project requirements; (c) a misaligned or unskilled team; and/or (d) unrealistic scheduling or reactive planning. The four most effective ways to enable a project’s success are (1) focus on managing the project’s strategy and stakeholders rather than concentrating exclusively on budget and scheduling; (2) master the technology and project content by securing critical internal and external IT talent; (3) build effective business teams by aligning their incentives and needs with the overall goals of project; and (4) excel at core project-management practices, such as adhering to short delivery cycles and conducting rigorous quality checks.

Notes: The full results of this study can be accessed at https://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/delivering-large-scale-it-projects-on-time-on-budget-and-on-value.

Researcher Profile: Allie Grace Garnett is a professional researcher and freelance writer with a background in finance and entrepreneurship. A serial entrepreneur who has established numerous businesses, Ms. Garnett previously was a founding Principal of Nexos Resource Partners (NRP), an energy project finance firm in New York. Prior to co-founding NRP, Ms. Garnett provided financial advisory and fund raising services to institutional-scale energy funds with Sustainable Development Capital. Ms. Garnett served as the Vice President of Marketing and Strategic Partnerships for the start-up Rentricity, and additionally founded a nonprofit organization (YAVA) that encourages volunteerism among college students. Ms. Garnett holds a Master of Business Administration degree from Harvard Business School and a Bachelor of Science in Civil Engineering degree from Northeastern University.

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Research Summary: “Driving Canadian Growth and Innovation: Five Challenges Holding Back Small and Medium-Sized Enterprises in Canada” By Dan Herman & Anthony D. Williams, deepcentre: Centre for Digital Entrepreneurship + Economic Performance (2013)

At Issue: Small and medium-sized enterprises (SMEs), which comprise over 99 percent of businesses in Canada, are commonly portrayed as the backbone of the national economy. However, only a small minority of companies, approximately 4 to 7 percent, demonstrate sufficient growth to make a meaningful contribution to job creation and overall GDP. It is imperative for policy makers to mitigate or remove the prevailing impediments facing small businesses, such that a larger share of SMEs may embark upon growth trajectories that enable substantial contributions to the national economy.

Research Objective(s): The objectives of this study are to accurately characterize SMEs in Canada, identify key obstacles to their growth, and propose specific recommendations for policy makers to better support the small business economy.

Scope: The study addresses SMEs, defined as companies with fewer than 100 employees, in Canada. In addition to comprising over 99 percent of Canadian companies, SMEs employ more than 6.9 million people and account for nearly 70 percent of private-sector payrolls.

Approach: The authors of this study conducted secondary research by completing a review of more than 23 independent sources.

Findings: Canadian firms lag behind international competitors in adopting productivity-enhancing technologies. In 2006, Canada ranked eleventh among 21 OECD countries in total economic investment in information and communication technologies, down from tenth in 2005 and ninth in 2004. Technology investments by Canadian manufacturers fell by 37 percent between 2000 and 2013. There is a 33 percent technology investment gap between Canadian and U.S. firms, with Canadian SMEs spending 38 percent less on technology than their U.S. counterparts.

Despite the preponderance of service firms among Canadian SMEs, only 12 percent use supply chain management software. Just 4.2 percent of SMEs in Canada qualify as “innovative SMEs” – defined as those that allocate more than 20 percent of investment expenditures to research and development. Studies of SMEs in the U.K., Germany, and France indicate that greater adoption of technology by SMEs benefits not only individual companies but also the economy at large. Increased innovation by SMEs results in increased job creation, productivity improvements, and GDP growth.

To enlarge the pool of high-growth, high-impact SMEs in Canada, policy makers are advised to:

(1) Incentivize business growth via tax policy reforms that reward revenue and employment growth;

(2) Promote international expansion of SMEs by (a) facilitating access to export markets and (b) proactively identifying would-be exporters and facilitating their global expansion via management training, export assistance, and export financing;

(3) Build SME management competencies by hosting innovative management mentorship programs and providing incentives for participating in ongoing training;

(4) Promote technology adoption among SMEs by (a) sponsoring collaborative industry-government approaches to financing, (b) engaging in information sharing in order to build the case for technological investment, and (c) emphasizing that technology adoption does not just narrowly benefit knowledge-intensive companies or tech start-ups;

(5) Facilitate more competitive prices for telecommunications services;

(6) Encourage R&D spending by (a) facilitating the development of industry-academic partnerships and (b) providing financing options and commercialization support for SMEs that pursue promising ventures with university partners; and

(7) Improve access to capital for SMEs with high-growth potential by providing conditional loans and matching grants, in order to facilitate private SME investment in technology, training, and R&D.

Notes: The full text of this study can be accessed at http://deepcentre.com/wordpress/wp-content/uploads/2013/03/DEEP-Centre-May-2013-Driving-Canadian-Growth-and-Innovation.pdf.

Researcher Profile: Allie Grace Garnett is a professional researcher and freelance writer with a background in finance and entrepreneurship. A serial entrepreneur who has established numerous businesses, Ms. Garnett previously was a founding Principal of Nexos Resource Partners (NRP), an energy project finance firm in New York. Prior to co-founding NRP, Ms. Garnett provided financial advisory and fund raising services to institutional-scale energy funds with Sustainable Development Capital. Ms. Garnett served as the Vice President of Marketing and Strategic Partnerships for the start-up Rentricity, and additionally founded a nonprofit organization (YAVA) that encourages volunteerism among college students. Ms. Garnett holds a Master of Business Administration degree from Harvard Business School and a Bachelor of Science in Civil Engineering degree from Northeastern University.

Research Summary: “Unlocking Innovation to Drive Scale and Growth”, Government of Canada’s Advisory Council on Economic Growth (2017)

Framework for a Functioning Innovation Ecosystem

At Issue: The traditional engines of Canadian economic growth, including production of commodities, liberalized global trade, and an expanding workforce, are slowing. More than ever, innovation “at home” is crucial to maintaining and growing the nation’s economic prosperity. As the world moves briskly towards digitization and automation, Canada must keep pace in the global marketplace. By focusing on innovation, particularly within small- and medium-sized enterprises (SMEs), the Canadian government can serve to increase businesses’ productivity, drive inclusive growth, and encourage high-potential SMEs to achieve the status and scale of global champions.

Research Objective(s): The Advisory Council on Economic Growth performed this study in order to make recommendations to the public sector for enhancing innovation in Canadian small businesses.

Scope: The study examines innovation in the Canadian economy, with a particular focus on small- and medium-sized enterprises.

Approach: The authors of the study conducted secondary research by reviewing more than 51 independent sources. They utilized these sources, in addition to their own expertise, as the basis for their recommendations.

Findings: Three specific bottlenecks are contributing to Canada’s underperformance in the field of innovation:

(1) A gap between invention and revenue-generating commercialization, as evidenced by Canada’s ranking in business-university R&D collaboration declining to 19th place in 2015;

(ƒ2) Difficulty scaling up successful start-ups and SMEs, due to (a) a small and fragmented local market, (b) shortages of experienced business talent, (c) a lack of at-scale sources of growth capital, and (d) risk aversion by more established companies; and

(3) No “burning platform” to drive corporate innovation, as evidenced by (a) Canadian businesses persistently spending at half the U.S. rate on R&D, (b) Canada’s ranking in the OECD Business Expenditure on Research and Development index falling from 12th place in 2001 to 22nd in 2015, and (c) statistics indicating that only 30 percent of Canadian firms consider any form of innovation to be extremely or very
important, with just 15 percent of corporations willing to take significant financial risks in pursuit of innovation.

The following five interventions are recommended for the Canadian government to encourage innovation by the private sector, SMEs in particular:

(1) Catalyze the formation of business-led “innovation marketplaces” in sectors and technologies in which Canada has momentum and for those which require new solutions to progress forward;

(2) Create additional pools of growth capital to ensure that promising companies have both (a) sufficient capital to achieve scale and (b) access to investors who can provide advice and other value-added support;

(3) Modify government procurement policy to incorporate strategic procurement and innovation as key objectives, thereby (a) prompting a shift from a requirements-focused to a value-based procurement system and (b) enabling the government and other public-sector players to become important first customers for growing SMEs;

(4) Review and rationalize government innovation programs by (a) expanding those with proven impact and (b) reconfiguring or removing any regulatory barriers that impede development of priority sectors and innovation marketplaces; and

(5) Recruit and train top talent by (a) adopting favorable immigration policies for reducing the talent shortfall and (b) invigorating the existing talent pool via focused innovation training programs and the FutureSkills Canada program.

Notes: The full text of this study can be accessed at https://www.budget.gc.ca/aceg-ccce/pdf/innovation-2-eng.pdf.

Researcher Profile: Allie Grace Garnett is a professional researcher and freelance writer with a background in finance and entrepreneurship. A serial entrepreneur who has established numerous businesses, Ms. Garnett previously was a founding Principal of Nexos Resource Partners (NRP), an energy project finance firm in New York. Prior to co-founding NRP, Ms. Garnett provided financial advisory and fund raising services to institutional-scale energy funds with Sustainable Development Capital. Ms. Garnett served as the Vice President of Marketing and Strategic Partnerships for the start-up Rentricity, and additionally founded a nonprofit organization (YAVA) that encourages volunteerism among college students. Ms. Garnett holds a Master of Business Administration degree from Harvard Business School and a Bachelor of Science in Civil Engineering degree from Northeastern University.

Research Summary: “The Adoption of Digital Technology by Canadian Small and Medium-Sized Enterprises” By Mark Buell, Canadian Internet Registration Authority (2014)

At Issue: Small- and medium-sized enterprises (SMEs) in Canada have been slow to incorporate internet technologies into their businesses. Canadian SMEs, by adopting even basic internet technologies, can better meet the needs of domestic consumers, access the global marketplace, and position themselves as candidates for foreign investment.

What are Canadians Doing Online?

Research Objective(s): The study’s objectives were to (1) characterize the nature and make-up of Canadian SMEs and (2) gauge the extent to which Canadian SMEs that are already online are utilizing the internet for their businesses.

Scope: The study encompassed Canadian small- and medium-sized businesses. Small businesses comprise more than 98 percent of Canadian employers, and medium-sized businesses account for 1.6 per cent. More than 90 percent of employees in Canada, about 10 million people, work for a small- or medium-sized business.

Approach: The Canadian Internet Registration Authority worked with the Strategic Counsel to conduct a national survey in 2013.

Findings: While 87 percent of Canadian households are connected to the internet, only 45.5 percent of Canadian businesses have a website. Of Canadian small businesses, only 41.1 percent of have an online presence, while more than 91 percent of large businesses in Canada are online. The vast majority of Canada’s SMEs, 89 percent, do not sell their products or services online. Of Canadian SME owners who have incorporated the internet into their businesses, 21 percent spend more than thirty hours per month online. By comparison, 26 percent of “recreational” internet users in Canada spend at least 30 hours per month online. The primary online activities for SME owners are email (89 percent), banking (79 percent), and product research (73 percent). Notably, online shopping is not cited as a primary activity by any internet user group.

Notes: The full results of this study can be accessed at https://cira.ca/assets/Documents/Publications/Adoption-of-Digital-Technology.pdf. Visit the Canadian Internet Registration Authority at www.cira.ca.

Researcher Profile: Allie Grace Garnett is a professional researcher and freelance writer with a background in finance and entrepreneurship. A serial entrepreneur who has established numerous businesses, Ms. Garnett previously was a founding Principal of Nexos Resource Partners (NRP), an energy project finance firm in New York. Prior to co-founding NRP, Ms. Garnett provided financial advisory and fund raising services to institutional-scale energy funds with Sustainable Development Capital. Ms. Garnett served as the Vice President of Marketing and Strategic Partnerships for the start-up Rentricity, and additionally founded a nonprofit organization (YAVA) that encourages volunteerism among college students. Ms. Garnett holds a Master of Business Administration degree from Harvard Business School and a Bachelor of Science in Civil Engineering degree from Northeastern University.

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