Digitization is transforming large swaths of the business landscape. Seizing the opportunities and managing the risks that emerge demand a range of capabilities across the enterprise. One of the most critical is optimized IT. IT supports all business functions and is a key enabler of the speed and agility necessary for digital success. Yet many IT organizations remain mired in predigital-era thinking and practices. As a result, they may be failing to meet the business’s expanding needs, at a cost to both the company and their position within it.
IT organizations, led by the CIO, need to rethink their value proposition in light of today’s digital realities. Specifically, they need to consider developing a “second gear,” one focused on the company’s digital efforts and capable of operating at digital speed. Achieving this while continuing to support the business in its customary role may be a tall order for many IT organizations. It will necessitate rethinking how the IT function is organized and governed. It will also entail significantly retooling its capabilities. But the payoff for successfully transforming IT in this manner, both to the IT organization and to the company as a whole, stands to be vast.
What might that payoff look like? Consider the real-world example of a bank that recently upgraded its webpage. Users’ reaction on Facebook and Twitter was unanimous—they did not like it. The bank responded immediately. By the end of the week, it had made a range of changes to the site based on customers’ feedback, winning itself praise for both its willingness to listen and its quick response. The bank’s ability to execute in this manner was no fluke. It was enabled by an IT organization that had consciously developed a second speed, one much faster than the normal pace of IT delivery.
Given its mandate and familiarity with the terrain, the IT organization should, logically, drive or have a hand in every digital initiative. Yet frequently that is not the case. Many corporate digital efforts today are being launched and managed by the business side, with little or no input from the company’s IT organization (similar to what occurred more than a decade ago in the dot-com era). In many companies, for example, the business deals directly with suppliers, such as advertising agencies and service providers (salesforce.com, for example). It is also unilaterally engaging third parties to build internal digital capabilities, such as big-data functionality, that broadly support the company and online services (for example, the launch of a Facebook fan page) that support individual products.
Why would the business bypass IT? Concerns over perceived shortfalls in IT’s capabilities and skills is one reason. Dissatisfaction with IT’s organization and governance is another. The business often finds it easier and faster to secure funding for digital initiatives when it does not involve internal IT. It also finds that interactions are more fluid, and projects get completed more quickly (or get completed, period), when it opts for third parties over the company’s IT function. The downside of the business acting on its own can be sizable, however, and includes fragmented solutions, one-off efforts that are difficult to integrate throughout the company, unnecessary duplication of efforts, and inconsistent branding.
Realistically, the business is not entirely wrong in its assessment. Most IT organizations are used to engaging with the business in a specific manner. But the model necessary for success in the digital realm is different. Digital initiatives operate outside IT’s standard project methodology and portfolio-management practices. They call for dedicated teams that are staffed with jacks-of-all-trades rather than specialists. They can also demand the leveraging of ecosystems that are outside traditional IT control, whether it be a social-media platform such as Facebook, Apple’s iPhone operating system, or an external cloud platform shared with a third party.
IT organizations need to overhaul their support model to adjust to this new paradigm. A critical element is recognizing that IT needs two speeds of service delivery. The first, which we refer to as industrial speed, is the optimized speed at which IT, in its customary role, can deliver service to the business. The second—digital speed—is the speed necessary to enable and drive the company’s digital agenda. (See Exhibit 1.) This is the capability that most IT organizations need to build—and build quickly.
To create this second speed, many IT organizations will have to develop a standalone entity within IT that is devoted solely to digital initiatives. This requirement reflects the considerable differences—in orientation, demands, and required capabilities—between the provision of industrial-speed IT and digital-speed IT. Industrial-speed IT, where the primary emphasis is on cost optimization rather than flexibility, is characterized by predictability, long lead times, and siloed, functionally organized teams of individuals who possess specific skills. Digital-speed IT is characterized by unpredictability and places a premium on flexibility, speed, and collaboration. (See Exhibit 2.) There are clear tradeoffs between the two in cost, flexibility, and required quality.
Staffing and governing the digital arm is thus a considerably different challenge than doing so for the traditional IT organization. The ideal candidate for the digital-speed team is not an IT specialist but rather a jack-of-all-trades who has both excellent technical skills and functional knowledge. He or she should have the orientation and aptitude to design and implement a prototype in a few weeks, propose innovative solutions, and challenge the business when necessary. The individual should also be comfortable operating in an environment where there is a high degree of uncertainty.
Governing the digital-speed organization also calls for a different approach. The governance for digital projects needs to be streamlined to enable reactivity and flexibility. This means employing more-flexible demand management and a more flexible budgeting and resource-allocation process. It also means adopting a more agile project-development methodology.
Note that while the digital organization, once established, will take the lead in supporting the business’s digital agenda, industrial IT will play a discrete role as well. Digital initiatives can be broken down into two categories. The first consists of autonomous digital applications, such as viral-marketing efforts, that do not require any connection with corporate information systems. For such projects, industrial IT may or may not be involved. The second category is digital applications that require access to enterprise data or systems—for example, mobile applications that give customers the ability to modify personal data. Here, both industrial IT and digital IT play critical roles. Industrial IT will provide data and standardized services to digital IT; digital IT, in turn, will provide the front-end application to the business.
In all cases, the need for high-quality, secure data will remain paramount to the business as it pursues its digital aims. The CIO can play a vital role as keeper and champion of the company’s data, both in building the necessary systems and in communicating the new imperatives and opportunities to users through appropriate change-management channels.
As CIOs adapt to the demands of two-speed IT and, more broadly, seek to optimize their IT organizations to an increasingly digitized business landscape, there are steps they can take to advance their cause, including the following:
Identify and empower jacks-of-all-trades. Look for technological experts who have business knowledge, are able to quickly develop prototypes, and can challenge the status quo. Embed them within IT but have them report on a dotted line to the business for the duration of their projects. Give these experts business objectives and also the license, time, and resources to try new things. Let them use emergent technologies if doing so can help them bring ideas to fruition faster than the company’s competitors.
Build speed and flexibility by fostering an agile IT environment. Strive to ingrain a philosophy of “fewer features sooner” and “fail fast, fail often.” Infuse agile principles and elements into all areas, even ones where traditional approaches will prevail.
Develop communications networks among customers, the business, and IT. Enable organized as well as ad hoc collaboration across internal hierarchies and silos. Actively seek out customer feedback through social media, and expand the company’s innovation horizon by crowd-sourcing ideas.
Build upon external platforms; don’t reinvent the technological wheel. Skew strategy toward consuming services found in third-party ecosystems rather than creating those services internally. Gain from and contribute to the broader external community (by, for example, contributing to the development of open-source software).
It is critical that, in implementing these measures, CIOs maintain a long-term perspective. Eventually, all digital applications will fall into the mainstream IT portfolio, as happened with Web 1.0 efforts. CIOs should learn from the mistakes of that era and avoid making similar ones. Specifically, CIOs should focus on assembling the right talent, emphasizing younger staff with potential over highly paid CTOs and CMOs. They should also continue to stress maintainability and security as they guide the company’s digital-related efforts. And they should plan for the eventual handover of digital applications from the business to IT and map out a prospective timeline and IT staff roles and responsibilities.
Capturing the advantages offered by the digital age demands changes throughout the company. The IT organization, in particular, needs to reinvent itself. Developing a second speed of delivery should be a key aim of that reinvention.
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