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“A modern operating model brings temporary value to business and then need to challenged and revised as the business ecosystem changes. But operating model is locked up in outsourcing agreements and leanified structure – making it difficult to change.”

 A couple of weeks ago, I had the pleasure to attend the CITE conference in Stockholm. Many of the speakers give their version of the future of business and IT in the new normal of globalization, urbanization and digitalization. The world is changing rapidly challenging the old truths of economics and business, creating a connected world. One interesting speech was delivered by Christian Sandström (Ph D Industrial History) as he tried to communicate why some companies succeed and others fail in the business and technical evolution. It is easy to pinpoint examples such as Facit, Kodak, and Blockbuster – but more difficult to understand the logic behind the failure and what we can learn from it.

In essence, all companies knew that they were being challenged but for some reason did not react to the threat. There were even protocols from board meetings stating the they were out of synch with the current trends but still nothing was done. Why is that? Christian Sandström has identified seven important conclusions from his research that separate winners from losers in the business evolution.

  1. Adding quality that nobody wants – shouting above the target. A common way to meet new market threats is to further excel in your key advantage (what we are good at – for example sound quality) rather than acknowledging the new advantages (what our customer want – for example mobility).
  2. Large companies priorities large markets. Small companies priorities small market. Innovation starts in small markets and are off the radar of large companies. When they are detected – it is too late!
  3. Business models create temporary competitive advantages but also an over-belief in own business model – difficult to change.
  4. A conflict around identity. What is our identity and how we create value?
  5. Decision-making – a situation when the market and the quest for short term financial profits guide decision making. Innovation is often not core and prioritized.
  6. Changing value-chain – leading to a price war on standardized components.
  7. Why change a market we have created? Capitalism is about building and changing market and some companies hold on to old market structure.

The analysis was as simple and crisp – success in business evolution is about having a suitable strategy, having the right people on board and dare to take the difficult decisions.

What does this have to do with IT performance management and governance? My perspective is that the same seven rules also apply to IT and how we manage our “customer” – business! Let us take the first conclusion to begin with. When IT is challenged by business to support business competitiveness (unknown area) – we find the answers in more sophisticated platforms, services and frameworks (what we are good at) rather than trying to find new and innovative solutions (what business actually wants). I remember a conversation with a business executive saying that he started buying IT services from other IT vendors rather than from his IT organization – because his IT organization only talk about platforms and architecture. All statistics show that business are now buying more IT services than IT. This is not difficult to understand.

We also see an over-belief in the IT operating model – the way IT creates and delivers value to business. The IT operating model is often based on a hypothesis of a stable business environment enabling long-term structure (outsourcing, leanification and services). A modern operating model brings temporary value to business and then need to update as the business ecosystem changes. But operating model is locked up in outsourcing agreements and leanified structure. – it is difficult to change. Yes, also rule 3 in the research applied to IT.

We could obviously go on and on to prove that each rule in Christian Sandström’s research also applies to many IT organizations. In the same way that global companies have suffered a painful defeat in the market – also global IT organizations have been capsizing with great business frustration. The difference main difference is that the IT organization has close to a monopolistic position in the company and is not allowed to be closed down. I often wondered if the IT organization competed on the same terms as a normal business – how would that work? How long would the IT organization survive?

The question is if the analysis also apply to the IT organization – that success is built on having a suitable strategy, right people on-board and taking the difficult decisions. Yes, I would agree with the final conclusion also from the IT perspective. Unfortunately, I see that many IT organizations are struggling with these exact questions and have few solutions to resolve them. Why is that?

Success for IT organization is the New Normal

  • A suitable and agile IT Strategy – based on digital situation

  • The right people on board – attitude, motivated and trusted

  • Taking the difficult decisions – leadership and governance

What is important is to understand that the IT Operating Model (based on strategy, people and governance) only gives temporary value creation and need to be updated continuously. The Operating Model needs to be challenged or revised with the same frequency as the rate of change in the industry. Meaning that strategy, competence, investment planning and leadership need to be under continuous revision and updating. The investment portfolio needs to be reprioritized and employees need to learn new skills. That is the receipt for a successful IT organization in the digital era. But many IT organization still live under the impression that an IT Operating Model is fixed over time – which hinders them to be successful.

My recommendation:

  1. Does the seven conclusions of business success also apply to your IT organization? What does that mean? How is your affected by this?
  2. See the IT organization as part of a fast changing business ecosystem and understand how unpredictability challenges your way of working.
  3. Do you have a great IT strategy, right people on board, and do you take the difficult decisions? If not, think about how that can change.
  4. Consult Sofigate who can help your IT organization to be the truth business partner in the digital era.

On the way home from the CITE conference, I picked up my son from kindergarten. In the rainy weather, he gave me a great smile and told me about all fun things they had done that day. What is amazing about kids is there ability to live in the moment an adapt to new conditions. Their imagination has no boundaries or limits in the moment. Sometimes I wish we could be more like kids – living in the moment, agile mindset and optimizing pleasure (value). The question is if our organizations and our current leadership are ready for that?

Hans GIllior (Senior Advisor – Sofigate)

Do not hesitate to contact Hans Gillior for further discussions – hans.gillior@sofigate.com

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