Over the past 2 to 3 decades, organizations across different geographies & various industries have been witnessing a phenomenon called as digitization. Digitization has been defined by many consulting & advisory organizations like Gartner, Mckinsey & more in different contexts based on their experiences with clients worldwide.
The degree to which an enterprise’s products and service value and revenues are realized through technology (Source: Gartner)
While Mckinsey describes it differently: ‘Digitization is an enablement of processes to be fundamentally reconfigured with the use of technology’
What you need to know as a CxO ?
As CxO’s & IT Leaders, you should anticipate the speed of digitization much faster than we perceive it in our organizations & industries, Why? because the increased availability & adaptability of technology has already transformed the way business is done in many industries across geographies and is probably a few steps away from your ecosystem. You also need to believe in the fact that Digitization is not going to stop or slow down ! It is a continuous phenomenon not an end to a means, and that makes it even more important to realize the benefits & challenges for your organization & professional growth as an individual.
If you are an executive, who aims to create a positive impact towards his /her organization’s objectives, employees, customers, suppliers & shareholders, you need to start thinking about this concept from a different mindset.
A mindset which believes & executes in a dual mode i.e. like a high speed Startup (Startup Mode) & your Traditional (Legacy) IT Mode.
‘Good News: CxO’s & IT Leaders who will develop the capabilities to manage digitization in both the modes & balance this act well, will be the winners for tomorrow as this skill is very rare !’
How is the traditional IT Function Perceived by your Management ?
Let’s first see how the perception of IT has changed in the last 5 years drastically from the management’s viewpoint. This above is a result of a survey conducted by the ‘Economist Intelligence Unit’ across many organizations in multiple industries explaining what CxO’s expect from the IT Function.
Series 1: IT Function as a Partner to Business supporting Strategic Initiatives.
Series 2: Technical support & some influence in helping to improve operating efficiency and reducing costs.
Series 3: Mainly a technical support function, to keep our systems up and running.
Question: Why does the IT function struggle to support Digitization?
First Myth & Challenge, Digitization requires increasingly sophisticated Technology: Blu Matter Consulting & Advisory works with government & commercial entities and it is surprising every time to see an organization’s inclination to adopt & implement exactly the same technologies as their competitors in the industry, unfortunately this approach does not work well and most often these initiatives either completely or partially fail to deliver results. For the simple fact that every organization is different !
This approach is also not very helpful to differentiate & innovate, Top management & CIO’s needs to choose & invest in technologies which will work for their organization’s culture & what resonates with their business objectives not the industry alone.
Secondly, The pressure & responsibility on the IT Function to keep the current IT operations running efficiently. The word ‘efficiency’ was a performance indicator of the past just like your legacy IT function, because today CEO’s & Shareholders do not care just about efficiency but also branding, customer mindshare, quicker time to market, improved customer relationships and insights for better decision making etc.
CIO’s need to understand that they are not only gauged on performance of systems & their IT function, but more importantly on what value they have brought to the organization’s goals and objectives month over month.
Thirdly the dangerous one, IT Function’s fear to prepare itself to engage with the big boys in the organization: We have observed from our consulting experience with many enterprises, that IT function is many atimes aware of the C-Level Challenges and probably also has a solution to it, but unfortunately has the fear to share the solution and set the right expectations to derive positive outcomes.
When IT breaks these shackles of fear, we have observed with many clients that it has delivered value by increasing upto 40% of a company’s revenue, 20% reduction in costs, and sometimes even the business’s very survival.
Big Question, What should be my approach as a CxO?
Below we have outlined a step by step process for CxO’s & IT Leaders on how to think, approach & create a strategy to redesign an innovative IT organization which supports digitization. We will answer your question on how you will add value to your business is a measurable form to compete better and differentiate to scale your value proposition.
As CxO’s we understand that consumers are far more connected today than yesterday, and this places a huge demand on the organization and the IT Function. Many enterprises are struggling to deliver on new demands because the same traditional model to deliver results is not as effective as it was a few years back.
Reason to not deliver: ‘Most CxO’s are trying to fit a square box in a circular hole’
What’s really required is the reinvention of the entire IT function, which can help incumbents compete against new companies & startups who have created more digitized platforms to work with customers, suppliers, products and service offerings for their own strategic advantage. We all know it is easier said than done !!!
However as a senior management member you should be thinking about creating a new stream in your IT function (Startup Mode) which operates without an influence from your traditional IT function and is only formed with an objective to differentiate your organization & its objectives in your industry.
This is not an easy task, and requires many changes right from human resource & talent to infrastructure, and most importantly the attitude and mindset in the team & leadership which will take multiple years to walk the digital transition journey.
The Good News !
Enterprises & their CxO’s can adopt an approach which can deliver faster results while they shape the IT function on a dual mode (Startup & Traditional) for a long term success. CxO’s should think of one or two business objective which need reforms in order to have a positive impact for their enterprise.
For example: One of our clients in the UAE chose to improve customer service by 10% through innovation and digitization. The CEO was directly involved on this project with the (Startup Mode) IT team, specially chosen to achieve this objective in the next 12-18 months by a tangible % increase related to key metrics and performance indicators. They invested in applications and a close tie up with the marketing team to make it happen in 9 months.
This only says that, digitization can help you achieve many business objectives and goals and there are 100’s & 1000’s of such examples in every part of the world. But how were these traditional models transformed and could achieve results?
Below are some of the best practices which will instigate your thinking
Innovation & Digitization driven CxO’s can only be successful if they avoid the overlap between the Startup Mode & Traditional / legacy IT functions.
Best Practices to Create an Innovative IT function in a Startup Mode
‘Traditional companies don’t need to be told that competitors that are “born digital,” such as Amazon & eBay have a digital advantage by virtue of their lack of legacy operations’ – Source ‘Mckinsey’
Creating an innovative digital IT function stream is the source to provide differentiation & competitive advantage for existing enterprises as your’s. We are not saying that there is a predefined path to success here, however there are certain elements we have identified which are critical to build this Startup Mode IT Function which will help you tangibly support your organizations business objectives & adapt to compete in the new digital world.
1.Make ‘Digital’ a top business priority: You might like or dislike what we are recommending here, but there is no other best way to get this done. The senior management & CxO’s should be aligned with the fact that IT’s new ‘Startup’ stream has to be overseen by the entire executive board and has to be treated as a top business priority.
One of the important recommendations for CIO’s would be gain the early support of business leaders by laying out a road map that delivers value quickly. If CIO’s fail to deliver partially or completely, the senior management may reject similar future requests from the IT function.
2. Objective & Goals Clarity: Organizational leaders should set goals and objectives where they would like to create reforms, improve processes and achieve tangible results using digitization. This is important because all the divisions and departments like sales, marketing, manufacturing, inventory, service & accounting etc should be aligned to spear their energies and focus to support the Startup Team in IT.
‘Top management backing up the Startup IT Function Stream to get the job done, helps in avoiding bureaucracy, resolution to competing priorities and resistance from other departments and business units’
3. Hiring Elite Technology & Business Talent: Reform in your IT function requires you to get new technology & business talent which has the experience in leading & cutting edge technologies. More importantly a mind-set and attitude check needs to go flawlessly while hiring these individuals, since the importance to bring quick change of digitization and working like a startup will drive innovation and disruption.
For example: One global retailer, for example, opened a rebranded development center in Silicon Valley, encouraged a start-up culture, and acquired start-ups to demonstrate its commitment and new attitude (Source Mckinsey)
4. Importance of Sourcing: Hiring elite talent & recruiting can be expensive to some organizations while the other alternative can be a mix of your own talent and having the right sourcing partners who can support you without all the lengthy bidding and procurement processes.
‘Partner with niche technology & consulting firms who can be aligned to your objectives and can provide more specialized skills’
5. Balance in IT Portfolio: The Startup Mode IT function originates to generate business benefits quickly but is limited to one or two business initiatives where the senior management would like to focus. CIO’s should not lose their sight on running the engine room (traditional & legacy) IT Systems and supporting functions to keep the lights on.
‘A right balance in terms of focus based on your organizational objectives is required by the CIO when it comes to diverting his/her energies to the Startup Mode Vs Traditional IT Function’
6. CIO’s focus on Agile Development & Rapid Releases: Most of the innovative organizations, software firms and system integrators work on the Agile Development model, and it has shown great progress in terms of adoption among development teams. This will help you create a “test & learn” approach to changes.
Unfortunately, we often find that the challenges here are not within the IT function but in persuading the business to adopt this approach
7. Rapid Innovation by use & reuse of Architecture & Platforms: We see so many organizations trying to use different architectures and platforms within an organization, this is one of the pitfalls, where organizations cannot leverage from the unified & consolidated architectures. CIO’s should carefully look into Enterprise Architecture and focus on reusing platforms for multiple ‘fit to purpose’ services.
‘For example: one of our telecom clients based in Bahrain has achieved a threefold acceleration in ‘time to market’ by consolidating web & mobile platforms into one’
8. Data Integrity: We cannot emphasize enough on the fact that data which is unpolluted and clean in nature can drive insights which your organization has never experienced before. It is very crucial to understand which data sets are of priority to your specific departments and goals associated to them.
The potential of clean data (information) and its use to gain insights of your customers, supplier, partner & employees can deliver results in millions of hard $$$ revenues & savings along with the emergence of new product & business model potential.
9. Scalable cloud based Infrastructure: Cloud can be an answer to many questions related to infrastructure & operations scalability and elasticity. However this path specially in the Middle East region need to be carefully chosen because of low adoption and immature ecosystem of vendors and technology providers.
Summary & Words of Caution
The most successful transformations use a two-speed dual model. As much as the speed is important to quickly achieve your business objectives, digitization has to be very carefully observed by the top management and at regular intervals for a specific period of time.
This model is based on a very intangible trait i.e. Mindset of the leadership along with the IT function. Always remember this is the foundation of your Dual Mode Model and it requires accountability and governance in choosing the right initiatives, talent, budgets and processes which require reforms and improvements.
It is a vast topic of discussion among CIO’s & Business and we hope this blog post has touched some important points, provided insights from our experiences, so you can think with clarity on digitization in your organization’s context.