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“It is fair to say that over 50% of Swedish CIO is stuck in ‘Operational Excellence hell’ without tools or competence to move, acting as the biggest threat to future business success. Digitalization is no longer a dream but reality now!”

Last year, I attended a Gartner conference headlining the effects of digitalization. Over 5,000 CIOs and IT managers attended the conference and the message was clear – it is time to act now before it is too late. On the way home, the messages faded and returning to reality, I collided with the operational issues that had been piling on my desk. The idea of digitalization became a dream, something to think about when things calm down – because it could not compete with my daily responsibilities. Things never calmed down.

Reports from PA Consulting, Harvey Nash and Forrester display the current state (global and local/Swedish) of companies’ ability to meet the digital revolution. The message is clear; a large majority of companies and IT departments are not prepared for the digitalization and are most likely to suffer in the digital transition jeopardizing the company’s market position and future revenues. We know for a fact that the rate of change is increasing every day creating an unpredictable business landscape where digital preparation is essential for survival. Secondly, that we already now can conclude that companies with a well-implemented digital strategy are more successful than other. The evidences are there!

Digital Strategy (global study):

  • 21% of CEO sets a clear digital vision
  • 21% of companies have the right people to define the digital strategy
  • 15% of companies have the right competence to execute digital strategy
  • 14% of companies have the right processes to execute a digital strategy

A digital strategy differ from a normal IT or business strategy in a number of ways. The fundamental difference is that a digital strategy acknowledges unpredictability, need for adaptability, and teams up with marketing and business to understand the changing customer behavior. The digital strategy is normally iterated with high frequency (see Agile IT Performance Management) based on quickly adjusting to new digital pre-requisites. The question is how to achieve Great Customer Experience in a digital environment with new market channels, new customer behavior and endless new opportunities. The era of long IT strategies (3-5 years) is over!

A good starting point is to understand the new customer behavior. What is happening is your industry and how does this new behavior affect your IT department? My view is that five basic rules can be stated for the digital landscape:

  • Customers have no patience for non-relevant information
  • The customer requirements will change constantly (unpredictability)
  • Customers want to be approached in different ways depending on situation
  • Customers want the services they need to be successful
  • Customers want their services immediately without trouble! (No waiting time)

The local research (Sweden) highlights the issue in a quite precise way. IT departments are stuck in Operation Excellence strategy with high focus on productivity gains, cost reduction and optimizing internal structure. The Operational Excellence strategy is based on the assumption that the business environment is stable (>5 years) meaning that it is possible, according to lean theory, to remove disturbances and waste (change) from internal structure to optimize efficiency. The assumption is not valid since the business environment is unpredictable (<12 months) demanding an agile governance structure focusing on optimizing business value and supporting digitalization. It is fair to say that over 50% of Swedish CIO is stuck in “Operational Excellence hell” without tools or competence to move, acting as the biggest threat to future business success.

Local IT Capabilities (Swedish Study):

  • 43% of CIO sees revenue growth as key focus area (global = 63%)
  • 54% of CIO has the capability to drive innovation (global = 71%)
  • 31% of CIO supports ongoing digitalization (global = 42%)

In many cases, the IT department is forced into an Operational Excellence strategy by business and senior management. IT is often seen as a production unit with little strategic importance and is therefore left of any strategic discussion. IT is a “black box” cost center that needs to be controlled – and work in cost efficient way. But why is that? Why cannot IT express the cost levels in a transparent way using business language and how the cost levels are a function of business behavior? IT has difficulties to justify its existence as “business enables” by not being able to expressing how it can create value and supporting digitalization. It is easy for many CIOs to continue with the Operational Excellence track as this is their “cup of tea”, but it is a very dangerous track. What we need to understand, stated by Gartner numerous times, is that the digital battle will take place in the IT departments and ability of IT to drive innovation, agility, and digital success!

OK, I understand the message – what to do? Keep it simple! No huge transformation programs but step-by-step gradually building digital competence. Build to awareness; start listening to marketing and digital experts, and start engaging the employees in digitalization. It often starts with governance, strategy and leadership. The future is after all as bright as you want it to be.

Recommendations:

  • There are tools to measure and drive IT value creation in the business IT value chain. Learn more of these tools and how they can be implemented in your organization.
  • Implement Agile IT Performance Management to optimize business value and success in digital landscape. The first step is to do a diagnostics analyzing the current capabilities and the strength and weaknesses.
  • Re-focus your time from Operational Excellence activities (outsourcing, EPR implementation and lean) to Customer Intimacy activities (environmental scanning, business dialogues, leadership development).
  • Contact me for an introduction to Value of IT framework, Agile Performance Management Diagnostics and coaching.

During the last couple of years, we have heard from analyst talk of this thing called “digitalization” and how it is going to change the world. It has been something distance and difficult to understand. A dream that is too unlikely to become true. We return to our reality and the endless operative tasks to fix an outsourcing or software license contracts, ERP installation or the lean steering group meeting. No time to think about what that “digitalization” dream actually means. But the dream is now reality! Digitalization is no longer a distance fluffy concept but is currently tearing down your business brick by brick. You need to wake-up before it is too late! Cancel the next steering group meeting and think about how to support digitalization in your IT department. It is time to act and make a difference!

– Hans Gillior

Hans Legend 1