“The biggest challenge of Nordic CIO is to combine cost reduction with executing IT transformation to address increased digitalization. New challenges require new tools and leadership. Let us open our eyes and take a first step towards digitalization.”
In a recent survey (Management Events CIO survey 2015), the biggest challenge of Nordic CIOs is to combine cost reduction with executing IT transformation to meet increased digitalization. The business expectation is not only to successfully solve the “impossible” equation but also to solve it now! How is that even possible? Yes, it is impossible if you view the challenge from a “traditional governance” perspective with high level of command and control. The fact is that new challenges require new tools and leadership. The challenges will not disappear – but rather increase in speed and magnitude.
Digitalization is here! The key affect of digitalization is fundamental change in the business ecosystem with new customer behavior, disruptive trends, and lower barriers of entry. In fact, it has never been easier to establish a digital business (without extensive access to capital) to compete with traditional businesses. We see companies such as AirBnB, Uber, Alibababa and Spotify quickly redrawing the business ecosystem by listening to the new customer behavior. For example, 70% millennials (future digital consumers) believe in a completely different way of paying for goods and services. Also, that 73% of respondents stated that they are more excited about new offerings in financial services by Google, Apple, Amazon and Paypal than their national bank. Businesses unprepared for digitalization are sitting duck – and hunting season is here!
Digitalization has high influence on the IT organization – and it is evident studying the Management Events CIO study 2015. The key question is how to address the new business challenges.
“Insanity: doing the same thing over and over again and expecting different results” – Albert Einstein
The fact is that new challenges require new tools based on focus on value creation in all aspects of the IT organization, change capability with motivated employees and making fast and correct decisions. It all boils down to the IT operating model that dictates how IT contributes to business competitiveness. Productivity and cost efficiency comes from focused effects, intelligent planning and commitment to excellence – aligning to business challenges. But majority of IT organizations are not there – still organized in silos, with ”command and control” governance and unmotivated employees.
Let us not just talk – let us show a couple of concrete examples how to digitalize the IT organization.
- Re-focus and reallocating resources of IT Operating model
Value creation is based on collaboration across the value chain across IT and business. No organization will ever address digitalization with a silo-based operating model. The first step is actually to understand how each part in the value chain contribute to customer experience and how to collaborate with partners in the service stream. Define the value chain, how each part delivers value and collaborates. Secondly, to re-allocate resources from service management (by higher maturity and automation) to planning and governance functions to set the right agenda for IT. Cost efficiency comes from doing the right value-based prioritization. Cost efficiency and digitalization transformation combined. It is a matter of mindset and leadership – and running IT like a business.
- Avoid waste in investment planning
The fact is that up to 30% of all IT investments do not contribute to the strategic objectives of IT (support business competitiveness). The dilemma of investment planning is visible in CIO surveys. The biggest challenge in PPM is to prioritize IT investment from a business value perspective (Management Events CIO survey 2015).
Key to avid waste in investment planning is to understand how IT investments contribute with value. What challenges and objectives are the investments set to solve and support? What is the linkage between projects and strategy? How much does each investment contribute to strategic objectives?
A couple of months ago, we launched Return on Strategy where we concretely optimizes business value of IT investments with great success. We lowered the waste in investments planning substantially. This is another example where it is possible to increase cost efficiency and business value creation to support digitalization of the enterprise.
- Self-governing to increase motivation
Digitalization is driving an increased unpredictability affecting the IT organization. The digital IT organization needs to address the increased unpredictability with a change capability to constantly adjust and change according to the business agenda. The question is how to achieve change capability with low motivation among employees?
When we look at organizations with highly motivated staff, we see a trend of self-governance and a leadership of trust. We see IT organization with a lower degree of centralized governance and allowing business IT units to decide themselves on how to deliver value within set governance frames. First, discuss what governance principles are absolutely needed to run IT as a business. Secondly, reduce the mandatory KPIs to a minimum to allow IT business units to set their own strategic agenda. Thirdly, trust employees and view them be the most valuable resources in the organization. Listen, learn and coach!
My point of view is that the challenges of the CIO (cost efficiency and transformation execution) will continue and the complex expectation will increase in magnitude and speed. The agile and digital IT organization will support business competitiveness while traditional IT organization will stop the enterprise aspirations to grow or survive in a digital industry. It is all about operating model, attitude and leadership but also the competence and experience of the consultants to lead the way. My view is that many consultants do not contribute to a digital IT organization but rather strengthen traditional governance – making the enterprise a sitting duck in the digital ecosystem. Dare to question your consultants and their view on governance and digitalization. Will it actually help you to support business competitiveness or not?
- Paint a picture of how a digital IT organization looks like in your company and industry. How does it contribute to business competitiveness?
- Is your IT operating model prepared for digitalization and cost efficiency? Discuss, challenge and adjust!
- Have a new look at your consultants – what value are they actually delivering? Do they understand the digital challenges and the workings of a digital IT organization?
- Contact Sofigate – we understand the true meaning of digitalization and how to qualify IT for digitalization in 12 months. We have the best practice framework, largest competence center in northern Europe, and understand of digitalization.
Qualifying IT for digitalization is the biggest challenge for the CIO. It is a challenge that needs to be addressed quickly and with concrete results. Many hesitate to start the digital journey – what does digitalization mean for me and what is our first step? It is the same challenge for much IT organization but some IT organization has been successful – why? Our point of view is that it is about leaving your comfort zone – and take a daring first step. Sofigate has coached IT organizations through digitalization with speed and results. We are here to coach you through the journey.
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