"There has been an understandable focus on efficiency and globalization and outsourcing," says Jim Eichner, vice president of advanced technology at Pitney Bowes Inc. in Stamford, Conn. "But a lot of those things have played out to a large degree. People are wondering how to differentiate themselves, and they have to innovate to do that."

"After the dot-com bust, companies kind of went internal," notes Sally Grant, CIO at the California State Automobile Association (CSAA) in San Francisco. "But efficiency and process are not going to take us to greatness." Or to put it another way, "You can't downsize to success," says Scott Anthony, a partner at Innosight LLC, a consultancy in Watertown, Mass.

But the goal is not innovation for its own sake; a key element of current efforts is to stop reacting to what customers are demanding and start anticipating their needs even before they've had a chance to articulate them.

Examples of this business trend include The Procter & Gamble Co.'s Swiffer, a replacement for the old broom-and-mop routine, and Earthbound Farm 's prewashed salad mixes. "It's about changing the status quo and delivering something of such value that users adopt it and thereby change what's 'normal,'" says Tom Andrews, a principal at Stone Yamashita Partners, a consultancy in San Francisco.

What does all this mean for IT? Well, just as businesses need to differentiate their brands, IT also needs to prove its worth, and it can leverage innovation to accomplish that goal. "IT has to think of themselves like a stand-alone business," says Joyce Wycoff, co-founder of Innovation Network, a consultancy in Bakersfield, Calif. "Somehow, they have to come up with a vision that both excites them and creates value for their customers."