“When business wants to talk about business challenges and meeting customer expectations with IT, IT replies by talking about application platforms, ERP systems and outsourcing projects. Not good enough!!”
Digitalization is sweeping across many industries changing customer behavior, corporate competitiveness and the role of IT. But what does actually digitalization mean? And, what are the digital forces challenging the corporate environment and the role of IT. In order to be well positioned in the digital race it is of essence to understand how to interpret the digital tsunami and what actually is driving the change.
In the early age of IT, the role of IT was mainly to automate processes and improve access to data and information. Many staff intensive businesses where able to reduce their workforce significantly. In the bank and finance industry, it is believed that up to 75% of the staff could be reduced with the efficient use of IT. The business environment was quite stable (high predictability) environment creating business strategy and management tools to command and control the organization to drive productivity.
Digitalization: Integration of digital technologies into everyday life by the digitization of everything that can be digitized. (businessdictionary.com 2014)
With focus on one objective and purpose of IT, IT was quite easy to steer and manage. It was a production unit – producing IT or services from the service catalogue in a cheap way to decent quality. Nice and easy! We see a number of frameworks (such as ITIL and COBIT) to support efficient IT management based on this role of IT. By increasing maturity of key IT services and leanified IT process, it was possible to increase efficiency and reach high IT cost reduction goals. The outcome was a standardization of the IT production environment (high switching cost) based on the belief of high predictability.
The increased digitalization is now changing the game completely. To understand the characteristics of the change, it is important to understand what is driving change. It is possible to conclude that eight separate forces are driving the change – not one! The complexity is enormous and the key belief of a stable and predictable environment is shattered.
Key drivers for digitalization:
- Automation of processes and businesses
- Changing customer behavior (social media, mobility, engagement/experience)
- New digital competition
- Increased demand for improved information management (BI, ERP, Big Data)
- Global IT services (outsourcing and cloud)
- Increased demand for security and integrity
- Supporting digital innovation (co-creation and crowd innovation)
- Being prepared for disruptive trends re-writing the business environment
My conclusion when analyzing the driver for digitalization is that the situation is such that the eight digital drivers are becoming equal in size and magnitude. This is the New Normal! Also, that the each of the eight digital drivers is changing the role of IT in the business organization. We are moving from a situation where we only focused on one dimension (automation) to a situation where we need to grasp all eight dimensions in our business and IT management. From order to chaos – and IT generally is not prepared! There is still a brief of a stable environment where ITs role is a production unit with focus on automation – and nothing else. Nothing could be further from the truth.
Is it fair to say that the force and magnitude of the digital forces depend on industry and locations. In some industries (such as media, music and printed media) the digital evolution has come further than in the forestry industry or mining. Also, that the evolution is faster in USA than in Sweden. It has mainly to do with industrial legacy and culture. But one thing is for sure, all industries and geographical regions will be affected by the digital tsunami summarized by the eight digital forces.
What is important to understand is that our previous belief of a stable environment and the way we use that belief to build the IT organization has changed. The environment is not stable and therefore it is certain that standardization of IT services, leanification and outsourcing (long performance contracts) will create business value in the future. Today, it is not about the Operational Excellence any longer but rather Customer Intimacy, where IT is forces to understand the business expectations and adjust quickly to create value. This is a game changer for the IT organization requiring new goals, management tools, competence and leadership /culture. The IT organizations that cannot collaborate with business to create value, time-to-market and customer experience – with jeopardize the whole business.
Research shows that the transformation for the IT organization is long and difficult. Recent research (IBM CEO survey) shows that over 50% of CEOs believes that IT has little understanding of the business challenges and has the wrong strategic focus. One consequence of this is that business (especially marketing) purchase IT services outside the internal IT organization (cloud services) to get better support, prices and flexibility. When business wants to talk about business challenges and meeting customer expectations with IT, IT replies by talking about application platforms, ERP systems and outsourcing projects. Not good enough!!
- Understand what digital forces are changing your industry. What is the level of predictability in your business?
- Review the role of IT in the business organization. How does actually IT create value and business success? What is the strategic objective of the IT organization?
- Understand that digitalization of the IT organization is a tricky and long journey. Don’t do everything at once but mature step by step.
- Contact The Goodwind Company – we are experts at supporting IT organization with agile management methods and coaching to optimize business value in the digital era. We help you to take the first step on the digital journey!
In the discussion with CIOs, I hear the same story. “We invested heavily in the Operational Excellence strategy with specialist ITIL competence, lean projects and new platforms to increase efficiency. Now we are completely unprepared for the digital revolution! We do not have the right competence or time to meet the new business expectation. We are lost!”. This is not uncommon, but the digital transformation starts with attitude, leadership and new way to manage the organization. It starts from the top with the CIO that needs to show a can-do-attitude and lead the work from the barricades! We can support the work with new agile management methods and coach the management team, but the analysis, attitude and leadership need to come within! It is now high time to step forward and make a difference!