“There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else”
I frequently encounter quotes in different forums that spark ideas and new thinking. Today I found the above quote on LinkedIn and it got me thinking about new customer behavior driven by digitalization but also around business and IT interaction. The fact is that the described business-customer relationship also can be applied to the IT-business relationship. So, what does this quote mean for the IT organization and the CIO role? Has the power of business increased during the last couple of years due to digitalization?
It is important to understand that customer behavior is drastically changing due to digitalization challenging many industries and companies. The nature of competition is changing as protective fortresses (barrier of entry) are destroyed, customer value is refined (individualized and driven by emotions) and goods and services are becoming standardized and commoditized. A fair conclusion is that the power of the customer has increase rapidly during the last couple of year with increased digitalization, new business opportunities and unpredictability.
The digital era is often called “New Normal” with new customer and business behavior. It is important to understand that the changing behavior can be summarized into five rules.
New Normal Rules (Customer/Business):
- Customers/Business have no patience for non-relevant information (IT reports in IT language)
- The customer/business requirements will change constantly (unpredictability)
- Customers/Business want to be approached in different ways depending on situation
- Customers/Business want the services they need to be successful (not what IT provides)
- Customers/Business wants their services immediately without trouble!
IT organizations have a monopolistic position in delivering IT services in many organizations and therefore the internal competition is not changing. Business is only allowed to buy IT from the IT organization but still we see that the business demand is changing according to the New Normal customer/business rules. IT’s monopolistic position creates a unaligned focus and lack of “burnings platform” to achieving business and customer success. The IT department will receive its revenues in any case, independent of performance and value creation, since it is the sole supplier.
Many IT organizations (approximately 55% according to resent research) have focus on Operational Excellence and increasing productivity through efficient internal processes and cost reduction. This is a quite immature behavior that delivers little business value in the digital era. These IT organizations deliver those IT services from an “inside out” perspective based on what IT can deliver in cost efficient way – not what business want. In my discussion with many CIOs, I hear that these CIO define success by how well the SLAs are achieved – not have to deliver value to support business success.
“It is in the IT departments where the company’s future will be determined. The whole business climate is changing – and it is happening now!” Gartner 2013
According to the original quote, the business power has increased and has the possibility to fire the IT management team if they are not satisfied. This trend is increasing. CIOs and IT management teams that do not understand their value proposition and support business success are removed and replaced by more business oriented IT management. I have seen this happening first hand in many cases! An interesting observation is that many IT leaders talk about “total integration with business” without understand how they provide business value – and fall into the Operational Excellence trap. The expected survival of these CIOs are approximately 18 months while CIOs with clear value proposition (and understand how to deliver value) is 3-4 times longer – and then moving into more challenging positions.
What can we learn from this reasoning? My point of view is that CIOs need to understand its value proposition and support business success in order to survive in his/her position. IT organization’s monopolistic position is a key dilemma as it often sets the wrong focus of the organization with focus on productivity, cost reduction and efficient internal processes. What would happen if the IT department was exposed to competition, forced to create customer value for survival? How would that work?
- Understand and define your IT organization’s value proposition! How do you deliver value in the digital “new normal” landscape. Measure and communicate.
- Learn about the pre-requisites of your business in the digital landscape, and how your IT department can support business success.
- Don’t see the IT department as a monopolistic role in the value chain but expose yourself to competition by benchmarking other IT departments.
- Define how you see your career and future. What insights and tools do you need to be the business oriented CIO? Are you ready to be the digitalization hero?
- Contact me for a further discussion and advice!
“There is only one boss. The business.” That is an alternation of the above statement that is applied to the business IT relationship. Business requirements are affected by the New Normal rules and IT departments have difficulties to reply with focus on Operational Excellence rather Customer Intimacy. The consequence of this unhealthy relationship is reduced competitive advantage and customer satisfaction. It is therefore important for business to act quickly and not lose valuable time in the digital market place. How many CIOs will survive the digitalization tsunami sweeping across many industries?