Building a New Digital Business Model is Not a Functional Expertise Problem It’s a Collaboration Problem

Everywhere you look today someone is trying to harpoon the CIO and the role and value of corporate IT:

  • A recent Forrester study showed that by 2015 for the first time in history IT departments will lead only a minority of IT projects.
  • Pundits galore are pontificating on the need to replace the CIO with the CMO or the new Chief Digital Officer role.
  • Shadow IT, technology purchases that bypass corporate IT, are growing at double digit levels.
  • Long standing adversarial relationships between IT and its internal business partners and users have furthered a “legacy mindset” that believes “IT takes too long, costs too much and never gives me what I really want.”
  • Lastly, many companies still see Corporate IT as only a cost center/support function rather than a direct contributor to driving new revenues and profits.

What all these arguments misunderstand is that building a new digital business model is not a “functional expertise problem” it’s a “collaboration problem.” That’s why C-Suite executives cannot solve these problems with a “command and control” management approach, which just fosters a silo mentality. Rather, they need to find a way to get all the key stakeholders to work together to create cross enterprise digital innovation solutions.

Converting Adversarial Relationships to Collaborative Relationships

The foundation for this new approach is what I’ve called “Collaborative IT” and as the model below shows it involves a mindset change, a process change and a conversation change.

Collaborative IT Model

At the core of the new digital business model is a company’s ability to leverage and deploy “technology enabled innovation” as a driver of new revenues and profits. To do that successfully requires the full participation and collaboration of all the key stakeholders in the company working against mutually agreed upon business outcomes and deliverables. No one functional area or business unit can hope to have anywhere near the desired impact that this collaborative approach can deliver.

Working Together to Create “Friction Free” Customer Engagements

Man using Ipad & Iphone

One of the major drivers of the new era of digital interactions is the demand by customers for “friction free” engagements. What consumers are looking for from companies is to be able to engage with them as easily as they engage with their family and friends using a variety of applications and tools:

  • Web has made searching for information friction free
  • Mobile has made access friction free
  • Cloud has made computing friction free

To deliver these types of consumer interactions within the enterprise, IT must be able to develop and deploy a stable and secure architecture that organizes and manages seamless interfaces between human assets armed with systems of engagement with data assets managed by systems of record. Here are some examples of how you can deliver these friction free customer engagements with this seamless interface:

  • Charles Schwab – Remote Deposit Capture
  • FedEx – Re-Route Your Package Delivery Location in Transit
  • Hyatt Hotels – Eliminate Lobby Check-In
  • Canadian Diary – iPhone Milk Testing App

This collaborative process begins by:

  • Identifying the key moments of customer engagement that define the success of the business
  • Then asking who or what represents the company at this moment of engagement
  • And finally asking how can systems of engagement make that a friction free customer experience

This process strongly relies on the cross enterprise distribution of data, information, knowledge and expertise in order to achieve that kind of outcome. It also must recognize and account for the fact that the customer now wants, in fact demands to be, more in control of how they engage with a company instead of the other way around.

Some Interesting Early Adopter Actions

In my view, one of the best indicators of the progress of a disruptive innovation, like the emergence of the new era of digital interactions, is to identify specific actions that early adopters are taking to get out in front of this shift and in doing so hopefully gain the competitive advantage of that head-start. Here are three recent ones that I thought were quite compelling:


starbucksStarbucks CEO to Focus on “All Things Digital” –
At the end of January, Howard Shultz, CEO of Starbucks, announced that he was reassigning all his operating division head reports to the company’s COO so he could be freed up to focus on “all things digital.” As part of this new focus, he will work directly with his Chief Digital Officer and Chief Strategy Officer on what he called “next generation retailing and payments initiatives.” This work will include the convergence and integration of Starbucks retail, e-commerce, digital, card and mobile assets around the world.

pizzaBig pizza chains are Investing in web- based systems – Domino’s Pizza, Papa John’s and Pizza Hut have all made significant new investments in web-based systems that let their customers order and pay for deliveries quickly without having to call their order in by phone. These chains say that they now derive “40% or more of their sales from digital orders.” This growth has come at the expense of smaller, independent pizza shops with large pizza chains accounting for 52% of pizza orders, up from 47% in 2009, while smaller pizza shops’ share fell to 29% from 32%.

bmw BMW brings its dealerships into the Digital Age – BMW just announced a new program that will fundamentally change the look and customer experience at their dealer showrooms. They plan to rip out showroom cubicles, install flat screen displays and hire “product geniuses” to explain the complex digital technology in its cars without the pressure to close the sale. Taking a page out of the Apple retail customer experience, BMW hopes to create a “more digital, hands-on” customer buying experience than today’s more traditional buying experience.

As I have written in previous blogs, we are still in the early stages of this major transformative shift. But some early evidence suggests that the new digital business model will deliver much better returns when all stakeholder’s use a collaborative approach rather than a command and control siloed approach.

As always, I am interested in your comments, feedback and perspective on the ideas put forth in this blog. Please e-mail them to me at pdmoore@woellc.com

The Evolution of Enterprise IT

Why it’s Critical for Companies to Achieve “Technology Leadership Competency”

A Wide Gap between Expectation and Performance: Over the past two years, The Harvard Business Review and The Economist have been conducting primary research to better understand the changing role of the CIO and IT Department. Some of the key findings from their research suggest that there is a wide gap between the role IT currently plays today versus what it should play going forward.

  • Nearly half of CEOs feel IT should be a commodity service purchased as needed
  • Almost half of CEOs rate their CIOs negatively in terms of understanding the business and understanding how to apply IT in new ways to help the business grow
  • 57% of the executives expect their IT function to change significantly over the next 3 years, and 12% predict a “complete overhaul” of IT in their company
  • Only 25% of CEOs thought their CIO was performing above his or her peers

Unfortunately for many companies, the overhang of legacy thinking about IT has permeated the ranks of the C-Suite to a point where they have lost the ability to recognize the value of technology as a source of innovation and transformation that can deliver new revenue and profits for the business. Part of the responsibility for this current state of affairs rests with the CIO and IT Group who have willingly or unwillingly allowed themselves to be put into the cost center/support function pigeon hole. In these cases, the CIO does not report directly to the CEO but rather to the CFO or Head of Operations. As such, the primary focus is on how cost efficiently they can operate and maintain the company’s enterprise IT architecture and systems.

While optimizing the “run the business” IT expenses for a company is not a bad thing, taken to an extreme it can completely neutralize the ability of technology to “change the business” by directly contributing to creating new and compelling ways to engage with employees, customers, supply chain partners and other key stakeholders. These new terms of engagement are redefining the competitive boundaries of most industries and failing to stay abreast of them will result in a significant loss of market share and market influence.

Some Early Examples of Success: The good news is that there are some early examples of how forward thinking CEOs and CIOs are working together to build a “technology leadership competency” throughout their organizations.  Here are some of the actions these early adopters are taking:

  • First and foremost the CIO must report directly to the CEO and be a full participating member of the company’s senior leadership team
  • In some cases, companies have gone so far as to create a separate board level technology committee, just like an audit committee, whose sole focus is to monitor and help ensure the company is getting the highest return and value from its IT investments
  • CIOs are realizing that they must evolve IT from a “developer of services” to a “sourcer of services” and focus on the cost benefit tradeoffs between in house services versus outsourced services
  • CIOs with help from CHROs are reassessing their IT group’s organizational design; the core roles their IT leaders must play to drive major transformative initiatives and the new skills and capabilities they must possess to play those roles
    • At a high level, business oriented IT skills and service based roles are gaining increased importance over the build/deploy/support roles of the past
  • CIOs, CMOs and Business Unit Leaders are embracing a new model of “collaborative IT” where all the key stakeholders work together to align technology investment priorities with critical business goals and outcomes

Some Challenges to Overcome: While these early actions can be very helpful in defining a roadmap and go forward game plan, the HBR research shows the harsh reality that a good percentage of CIOs and their IT Departments are facing.

Based on some of my recent work, I have seen first-hand that the vast majority of current IT job descriptions are well past their sell by date. Traditionally IT professionals have been recruited for their technical skills not their leadership/relationship skills. As such, when they get into discussions about new business IT requirements, they don’t have the requisite sales skills to persuade the business partner that their recommendation is the best solution.

In other cases, IT professionals spend a disproportionate amount of their time and resources “putting out fires” and doing “work arounds” for individual businesses so they never get the chance to truly get out in front of a major change and develop an enterprise wide solution that creates sustainable value.

road

Some Actions to Consider:

  • To create true “technology leadership competency” a company must be prepared to make an all-out commitment from top to bottom to move the IT function out of the engine room and up to the bridge where it can help chart the future direction of the enterprise. This means that the CEO and other members of the C-Suite must see the CIO as a full card carrying member of the senior leadership team.
  • They need to recognize and leverage technology as an essential component to successfully engaging their employees, customers and other key stakeholders in this new digitally empowered environment.
  • They must also realize that they need to do an overall assessment of the new skills and capabilities that senior IT professionals must have in order to be on an equal footing with their business partners and users.
  • The CIO and the IT Group should develop a new cohesive strategy that allows them to identify behaviors and actions they will stop doing e.g.: just being order takers along with new behaviors they will adopt e.g.: being catalysts that drive technology enabled innovation throughout the company.
  • The CIO should create a series of thought leadership forums e.g.: Webinars, Town Halls, Brown Bag Lunch Sessions where they can interact with key internal stakeholders and talk about the major transformative shifts going on in enterprise IT and where they will have the most impact on the performance of the different business units and key support functions.
  • The IT group should create and utilize a series of performance measurement tools including an internal IT Net Promoter Score metric to measure the group’s ability to meet or exceed its internal business user’s needs and expectations.

While this will be a challenging journey for many companies and their senior leadership teams, it will be a journey that defines the legacy of successful leaders versus leaders who fall short of meeting this challenge.

As always, I welcome your comments and feedback along with any suggested actions you think companies should take to achieve technology leadership competency.

The Evolution of Enterprise IT

How Systems of Engagement will enable Collaborative IT to trump Shadow IT

One doesn’t have to look very far or very hard to see overwhelming evidence that key support functions ( eg: Marketing, Finance & HR ) and line of business users in major companies are bypassing the corporate IT group and going directly to outside technology vendors to purchase hardware and software resources.

  • Gartner predicts that in less than 3 years, 35% of all enterprise IT expenditures will happen outside the corporate IT budget
  • PricewaterhouseCoopers’ recent Digital IQ Survey results showed that at the 100 companies PwC ranks as “top performers,” IT controls less than 50% of the corporate technology expenditures

This rise of what is called “Shadow IT” is driven by the age old lament that “corporate IT takes too long, costs too much and never gives me what I really want.” It has received a recent boost by the emergence of software-as-a-service that allows for easy to deploy and configure applications to be installed virtually overnight.

Another forcing function to this more “direct approach” is the BYOD movement, which includes devices and collaboration tools that employees are using to enable faster and more effective communication, coordination and collaboration both within the organization and with customers, supply chain partners and other key constituents.

So some of you reading this may be saying “so what” this just seems like a better way for companies to leverage these new resources and tools to their competitive benefit. While there is a case to be made for that point of view, I think there’s a more compelling case to be made as to why this go it alone approach can result in serious consequences for the companies that allow it to spread throughout their organization.

  • The unsupervised growth of new apps and technology tools can significantly increase IT costs, infrastructure complexity and governance issues
  • CIOs are now confronted with how to incorporate these disparate resources into the company’s enterprise IT systems and platforms to enable secure and stable interfaces between systems of engagement and systems of record
  • Thus far, there is no comprehensive IT architecture model around which to plan how to design and deploy these new technology resources and tools
  • There is a lack of repeatable decision making processes and vocabulary to enable companies to make thoughtful cost/value IT expenditure trade off decisions

The Challenge for the IT Team

Enterprise IT teams are now challenged with how to build a stable and secure bridge between systems of engagement operating at the edge of the company with systems of record operating the core of the company. Allowing unfettered growth of multiple new SOES without figuring out how they can interact with SORS, will suboptimize their value in creating a strong and enduring customer engagement experience.

Bridge pictureIntroducing the Era of Collaborative IT

Instead of trying to stop or mitigate Shadow IT, I think there is an opportunity for CIOs and their senior leadership teams to introduce a new era of collaborative IT that involves the following:

Mindset change picture

This collaborative approach is designed to get all the key stakeholders at the table to talk about how to better align technology investment priorities with the critical business outcomes.

  1. How to use moments of customer engagement as a means of prioritizing future investments in systems of engagement
  2. How technology enabled innovation and tools can play a more direct role in generating new revenue and profits for the business
  3. How to work through a thoughtful cost/value set of trade offs
  4. How to ensure that the new SOEs can gain access to data and information stored in SORs in a secure and stable manner

By starting together and building a joint technology development roadmap, corporate IT and their business partners/users can collaborate to expedite solutions that maximize the ROI and competitive benefits of these critical investments.

A recent finding from IBM’s Institute for Business Value study with CIO’s and CMO’s re-enforces the scope and value of the collaborative IT model:

Key Study Finding:

“While Marketing has always been responsible for knowing the customer, now they are required to understand and respond to customers as individuals. Marketing can only do this if they can manage vast amounts of unstructured data, make sense of it with analytics, and generate insights that are predictive, not just historical – all on a massive scale.

To connect with individual customers at every touch point effectively, they need a system of engagement that maximizes value with each interaction. And they need each touch point to marry the culture of the organization with the brand to create authentic experiences that consistently deliver the brand promise. The way to achieve this unprecedented transformation is through technology.”

While many companies are putting an increased emphasis on using technology to help deliver increased competitive advantage, if this process is not carried out in a thoughtful and collaborative way I think it can cause more problems than benefits.

What do you think?

The Evolution of Enterprise IT

How Systems of Engagement Will Transform Enterprise IT
From a Support Function to a Strategic Business Partner

 For the past 30 years, major corporations have spent trillions of dollars to fund a series of transaction systems that supported the build out of their domestic and global business model. These Systems of Record are used to carry out a series of critical business functions including:

  • Order Processing, Inventory, Supply Chain Management, Human Resources, CRM and the company’s financials

The emergence of consumer-driven, social collaboration networks is now forcing companies to understand how they can evolve their enterprise IT infrastructure and platforms to layer in Systems of Engagement to support a new business model.

At the heart of this Evolution of Enterprise IT, is the fundamental shift from the old vertically integrated, hierarchically structured business model to a new horizontally structured business network model. This shift is being driven by an increased demand for:

  • Communication, coordination and collaboration both within the organization and with customers, supply chain partners and other key stakeholders and constituents.

0321_2013_Image1

A Case For Action:

The emerging reality is that every dollar invested in SOR supported systems and software produces a diluted return to the company in terms of competitive differentiation. The reason being is that 95% of the lifetime value of these investments has already been received and as such no longer deliver competitive differentiation.

By contrast, every dollar invested in SOE supported software and systems offer a much higher future revenue and profit stream because they will be the primary source of future competitive differentiation. Simply put, the sooner your company can begin to create and deliver SOE’s the sooner you can deliver both significantly greater ROI on your IT investments, as well as, competitively differentiated B2B and B2C products and services.

The BYO movement, which includes devices and collaboration tools, has crossed the chasm in most companies and CIOs are now confronted with how to incorporate them into their enterprise IT systems and platforms. Thus far, there is no comprehensive architecture model around which to plan how to design and deploy these new solutions. Currently, there is a limited talent pool to draw on for user experience design which is the cornerstone of all SOEs. Lastly, to date no enterprise vendor has stepped up to fill this void, so CIO’s and their colleagues are trying to ferret out on their own what few best practices are starting to emerge.

The Evolution of Enterprise IT:

What is ultimately at stake for CIOs is who will take the lead in defining and implementing the future enterprise IT agenda for their company. Over the last several years, there has been a significant increase in cases where support functions like Marketing and HR along with individual business units have bypassed the company’s development process and gone directly to outside technology vendors to find what they need. This has resulted in the emergence of a Shadow IT movement that has resulted in cases where enterprise IT budgets have been dramatically decreased over the past 3 -5 years while the company’s overall  technology budget has  significantly increased. This movement has not only dramatically increased the complexity and cost of integrating these new tools into the company but has also created significant governance issues over how to maintain the stability and security of the information and data contained on them.

To address this issue head on and regain leadership control of your company’s enterprise IT agenda, CIO’s and their senior leadership teams have to take the necessary steps to evolve from a cost center/support function role to becoming a full strategic business partner as the chart below illustrates. As part of this transition, the enterprise IT function needs to demonstrate how IT enabled innovation can directly drive new revenue and profits for the company. In future blogs, I will propose some specific actions to achieve that outcome.

0321_2013_Image2