How good is your organization at finding “a path to yes” rather than “a path to no?” Disruptive change not only increases stress, uncertainty, and risk but it also enables individuals to retreat to what they know rather than explore what they don’t know.
Is your customer journey an enjoyable experience? According to a recent Epsilon study, 80% of consumers are more likely to do business with a company that offers them personalized experiences and 90% find personalization very appealing.
As I said in my previous blog, (link to August blog) the big “aha moment” for C-Suite leaders occurs when they realize that while power generates performance, performance consumes power. This means that if the company continues to overweight investments in current businesses to deliver short-term performance, it will eventually liquidate the company’s long-term power to grow.
As Clayton Christensen taught us in The Innovator’s Dilemma, a person doesn’t want a ¾ inch drill bit (product) they want a ¾ inch hole (outcome). Unfortunately, today most companies still talk more about…
As we embark on the new decade of 2020, it’s impossible to ignore the virtually unanimous consensus that artificial intelligence and machine learning will be the defining competitive differentiator for companies of all sizes across all industries.
A recent Harvard Business School study documented that “leading digital companies generate better gross margins, better earnings and better net income than organizations that have not adopted a digital-first business growth strategy.
A recent IBM study concluded that “no business can remain relevant by making tweaks. The only way to stay ahead of disruptive change is to embrace it, which means being able to develop and release new products and services within weeks or even days.”
One of the major implications of the unprecedented level of digital disruption is that companies must find ways to get a 10x compression in their product/application development release cycles. Simply put, how can they go from 6 to 12 months to 6 to 12 weeks to 6 to 12 days. Granted, not all releases have to get churned out in days, but those products and applications that are essential to delivering compelling and enduring customer experiences must find a way to meet this new compressed time standard.
Many companies have begun using different development processes and tools including Agile, Lean or DevOps to increase their time to value. While there have certainly been some improvements, there has also been continued resistance from long term developers who still prefer the more methodical waterfall approach. One would be tempted to “vote them off the island” only to discover that they are the only folks on the IT team who actually know how the systems of record work.
Using frustration as a motivator to change
Many CIOs I’ve talked with have complained at how frequently project priorities are changed in mid-stream leaving their developers angry and frustrated. One CIO who I work with has met this challenge head-on by limiting product development timelines to 90 days or less. He readily acknowledges that he will soon need to reduce it to 60 days and then to 30 days.
A core element of this new approach was to get everyone on his team and their internal end users comfortable with developing a minimum viable product (MVP) in that time frame and then make upgrades and changes based on end user feedback. He also has his developers go out on the shop floor and perform the work of their customers to see firsthand if the product or service is doing what it was designed to do, and, if not, what changes need to be made.
While he initially got some push back from his developers, they soon came to appreciate the fact that by taking this time compressed approach and making a fundamental commitment to rapid iteration, they could actually complete something they started rather than engaging in a series of false starts.
A 10x change requires new ways of imagining what’s possible
Most well-established companies have invested tens of millions of dollars in developing, installing and maintaining the systems of record necessary to operate their businesses. In many cases, these investments have served them well and enabled them to sail the competitive seas like the Queen Mary whose three to four-day trip from New York to Liverpool was the standard.
The new digital disruption from systems of engagement and systems of intelligence is not only turning the competitive landscape on its head but it is also forcing companies to reimagine how they engage with their customers, employees, supply chain partners, and other key constituents. Until the Hyperloop was recently conceived of, no one thought it would be possible to go from Los Angeles to San Francisco in 30 minutes.
The best 10x change example I’ve seen recently is the difference between NASA and SpaceX. When NASA launches a rocket into space, they have 450 people in their control room monitoring the flight. When SpaceX launches a rocket, they have 45 on their way to two – a pilot and co-pilot. NASA imagines itself as a space exploration company while SpaceX sees itself as a technology company in the space exploration business.
To compete in this new world of digital disruption, companies across all industries have to start to reimagine who they are, what they do and how they do it.
Organizing and prioritizing for maximum speed and throughput
Early adopters of the 4 Zones framework and tools as shown in the chart above have found it helpful to segment their new product and application releases in the following way:
- Are they sustaining innovations or disruptive innovations?
- Are they enabling systems productivity and cost optimization?
- Are they increasing business unit performance and revenue growth?
- Are they enabling business model transformation?
Each zone has its own time to value cadence and metrics but all of them require IT to be fast, adaptable and bring an enterprise wide perspective to the priority-setting process.
One way to move toward a 10x improvement in time to value is to strip away the multiple levels of decision making governance that bog down most IT project approval processes.
By example, one company I’ve talked with has a three level governance model that includes:
- IT Governance Board
- IT Steering Committee
- Six IT Operational Councils
Contrast that with another company I’m working with that has one Executive Product Prioritization Committee that meets once a quarter and agrees on:
- What IT will deliver in the next 90 days
- What are the 3 key strategic business priorities IT needs to support for the next 90 days
Moving at the speed of trust
Another way to get step change improvements in time to value is to breakdown hierarchical, silo-based decision-making processes and convert them into horizontal cross-enterprise decision-making processes. In order for CIOs to facilitate this shift, they need to establish or regain a high level of trust with their internal business partners that IT merits a seat at the business growth discussion table. Once this level of trust is in place, speed to market goes up and costs go down.
What does it take to make this new trust based process work? Here are some criteria to consider:
- An agreement that all the key stakeholders must participate from the beginning to the end of the development cycle
- A mutual desire to get something done quickly
- A willingness and desire to learn, grow and change while on the journey to the final outcome
- Plan Long – Execute Short
- A common understanding of what needs to be done to deliver the ultimate user experience to customers, employees, supply chain partners or other key constituents
- Replace inside-out user interface thinking with outside-in user experience thinking
- A mutually understood vocabulary and taxonomy to discuss and resolve, build, or buy trade-off decisions
- A series of metrics that align future technology investment priorities with critical business outcomes
Early practitioners of this process have significantly increased their time to value and have greatly reduced the costs of do-overs or extended release schedules driven by unclear or changing requirements. These results suggest that moving at the speed of trust is one way to achieve sustainable competitive advantage in the new digital world.
As always, I am interested in your comments, feedback and perspectives on the ideas put forth in this blog. Please e-mail them to me at firstname.lastname@example.org.
“How much value is IT adding to the business?”
This is the one question that most CIOs I talk with struggle to answer. For many organizations, IT’s value is only measured by its ability to reduce costs and optimize the capital expense depreciation of large hardware and software licenses. For others, it’s based on their ability to provide applications and services that enable employees to be more productive. In some cases, IT is seen as valuable resource and contributor to enabling business units to meet or exceed their revenue and profit targets.
Regardless of where your IT group falls across this spectrum of business value there is one unifying theme – IT is not very good at telling its business value story. Part of the problem is that much of today’s story was built on the old Plan, Build, Run model complete with its time consuming requirements process and waterfall development cycles which are now completely out of cadence with the fast-cycle marketplace. This approach has resulted in a large percentage of the annual IT budget being allocated to run the business activities, with a much smaller percentage allocated to change the business activities. This imbalance is only exacerbated by the typical 2% annual budget increases.
How to change the narrative about IT business value
CIOs and their senior leadership teams must make creating and communicating IT’s business value story a mission critical priority. It all starts with a solid framework that defines the multiple ways IT contributes value to any organization. The framework should be realistic, but also simple and capable of being expressed in language that business leaders will recognize and support. The new 4 Zone IT Investment Portfolio is one framework that meets these criteria.
The 4 Zone model enables CIOs to construct an IT Investment Portfolio that apportions the business value of IT in four investment categories. It depicts IT’s spending allocations and provides a clear visual aid for discussing changes to those allocations. For example, based on your organization’s 2016 strategic and operating goals and deliverables, is the weighting of the IT investment allocation aligned with those goals? In this context, most if not all business executives will not only understand the type of value IT investments are targeting, but they will appreciate the challenge and imperative of making smart IT investment choices going forward.
A four zone business value story
Not unlike a personal investment portfolio where risk and return are spread across multiple investment options, the IT investment portfolio is designed to deliver value and returns in four different categories.
Productivity Zone value is created by providing secure and stable operations and maintenance of the company’s systems of record. While most of the ROI from investments in these SORs has been realized, they are still an important and necessary component to the successful operation of any organization. CIOs can deploy our trapped value audit tool to periodically review and identify opportunities to optimize the costs of maintaining and modernizing SORs while also reducing the amount of technical debt. These resources can then be redeployed against new value creation opportunities in the performance and transformation zones.
Performance Zone value is created by delivering a series of user-centric tools, services and solutions e.g. Social, Mobile, Cloud and Data Analytics that enable the company’s businesses to better engage with customers, supply chain partners and other key constituents. CIOs can use our Collaborative IT Governance model to better align future IT investment priorities with critical business outcomes. By contributing directly to creating valuable and enduring customer experiences, IT can demonstrate its ability to help accelerate customer adoption and utilization resulting in new revenues and profits.
Incubation Zone value is created by IT’s help in identifying, testing and validating next generation product, service and business ideas and leveraging technology enabled innovation to deploy them. This zone also acts as a staging area for all IT projects and provides a prioritization process to determine which of the other three zones would benefit the most from the ultimate value of the project. A rapid agile development approach will enable IT to significantly increase its speed to market and throughput for all IT investments.
Transformation Zone value comes from ITs ability deploy new disruptive technologies to enable the company to launch and scale a material net new line of business. An organization’s ability to leverage technology enabled innovation is becoming a critical source of competitive advantage with the emergence of digital enterprises.
This 4 Zone investment portfolio approach provides a structure and common vocabulary to resolve risk reward discussions between IT and its internal business partners across multiple investment options. It also enables the CIO to characterize and justify IT’s investment recommendations, whether at the C-Suite or Board level, augmented by specific business cases that highlight the ROI from each one.
An investment approach that is aligned with the new consumption economy
In today’s subscription-based consumption economy, the value of IT’s products and services are measured by customer/end-user adoption and utilization. To deliver the maximum business value of IT, CIOs need to effectively articulate how each investment will directly contribute to the successful deployment and utilization of each product or service its supports. As such, IT investments must be able to generate immediate returns which accelerate with increased usage. This means that IT has to significantly increase its speed to market and throughput.
The fast cycle cadence of the consumption economy will require IT to replace the old Plan, Build, Run development process with a new Co-Develop, Assemble and Consume process. This new process puts a premium on making a series of investments and getting market feedback on them quickly so leaders can make the needed changes that will drive further adoption and utilization.
Get started with a current state investment assessment
As a first step, CIOs can use the 4 Zone model to do an assessment of how their budget and resources are allocated across their current pipeline of projects and deliverables. This assessment would allocate each project into one of the four zones and create a baseline of where you are making your IT investments today. You can then ask questions like:
- Is the current weighting of investments by zone aligned with our corporate strategy and goals?
- Do we have the appropriate risk reward ratio across our investment portfolio?
- Are we delivering the desired ROI from our portfolio of investments?
- Are we making the right level of investment to accelerate customer adoption & utilization?
- Does our portfolio of investments maximize the business value if IT across our company?
Creating and effectively communicating a compelling IT business value story is not an easy task. Overcoming legacy mindsets about the role and value of IT requires a strong framework; a well-balanced risk vs. reward investment strategy aligned with corporate goals and deliverables; a new development process that is in sync with the fast cycle market cadence of digital enterprises and a new set of consumption market metrics.
Armed with those tools and that approach, CIOs should be well prepared to make the business case for the value of IT.
As always, I am interested in your comments, feedback and perspectives on the ideas put forth in this blog. Please e-mail them to me at email@example.com
From Strategy to Implementation: Common Drivers & Expected Outcomes
Like any new strategic framework and set of tools and processes, the 4 Zone Model’s value can only be realized through implementation and execution. I have outlined below how some early adopters of the model have deployed different elements of the playbook to address critical issues and opportunities.
The 4 Zone Model is built upon several drivers common to enterprise information technology functions:
- A need for innovative approaches to enable organizations to address five disruptive technologies: Cloud, Mobile, Social, Data Science and Internet of Things.
- A need to evolve from lengthy waterfall-based technology implementations to the more rapid agile development approach. The Plan, Build, Run model will be displaced by a Co-Develop, Assemble, Consume model.
- A need to embed a trapped value assessment process to identify opportunities to shift resources and funds from maintaining legacy systems of record to developing new systems of engagement.
- A need to utilize new methodologies and tools to identify, develop and reinforce the relevant new skills and capabilities necessary to lead and manage a digital enterprise.
The motivation to adopt the Four Zone Model playbook encompasses a number of expected outcomes:
- Higher percentage of IT resources allocated to change-the-business outcomes.
- Significant increase in speed to market and throughput of all development initiatives.
- Strong alignment between future IT investment priorities and critical business outcomes.
- Increased ROI from the portfolio of IT innovation investments.
- More impactful IT presence at the business strategy table.
To respond to these drivers and expected outcomes, the Four Zone Model playbook affords technology teams’ processes and tools which enable them to maximize the business value of IT across all three levels of their organization.
The Starting Point: Mission-Based Teams
In order to move expeditiously, the 4 Zone Playbook begins at the “starting point” with mission-based teams specifically assembled and empowered to attack prioritized desired outcomes. These mission- based initiatives all start from the “Incubation Zone” and seek an exit path to one of the three other Zones depending on the desired outcome.
IT Executives leading mission-based initiatives begin the process by asking three key questions:
- Should we do it? Does it align with and support critical business outcomes?
- Can we do it? Do we have the relevant skills/capabilities, tools and capacity to achieve the outcome?
- Did we do it? Do we have the right metrics to measure the achieved outcome vs. the desired outcome?
Mission-based teams are appointed for work which has been identified as a priority for movement from the Incubation quadrant to another Zone within the Model. Expectations for success can be high given the following critical elements:
- Alignment at the leadership level that the work commands sufficient priority to be implemented. Alignment must occur not only within IT but also with all other key stakeholders including internal business partners and shared services partners.
- Formation of the mission-based team includes careful appointment of team members to ensure they have the appropriate skills and competencies necessary to achieve the outcome.
- The initiative must be carefully scoped to fit within the Model’s timeframe boundary conditions (namely pilot initiation to go live within 30-90 days especially for productivity and performance zone projects).
- Active collaboration and critical thinking processes must drive the shared discovery, problem solving and solution adoption. The focus of the team and their work is deliberately narrow, user centric and intentionally innovative.
- Measurement is expected to occur throughout the discovery and design process as well as at the conclusion of the team’s work.
The Outcome is Worth the Journey
What we have learned over the past 12 months is that to successfully introduce and deploy this playbook is a leadership challenge not a management challenge. This is not about just doing what IT has always done better, faster and cheaper. This is about transforming the role of IT from a cost center/support function to a business enabling strategic partner. This is about changing outcomes by changing legacy attitudes, behaviors and actions.
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 firstname.lastname@example.org.
Everywhere you look technology-enabled innovation is the driving source of new competitive advantage for companies of all sizes across all industries:
From Uber redefining the taxi user experience by utilizing the GPS function on your smart phone to find you rather than you finding a cab and then billing you afterward so you don’t need cash or a credit card
Technology-enabled innovation is not only disrupting the competitive landscape, it is redefining the user experience value proposition across a multitude of industries. It is also putting companies on notice that if you can’t successfully engage your customers in this new “digitally mediated world” you are on your way to your very own Kodak moment.
SMAC – Social, Mobile, Analytics, Cloud
These four disruptive models are completely altering how people connect, communicate and discover information. What these individuals are looking for are “friction-free” user experiences that delight and inspire them. These new tools affect how customers make decisions which affect their entire “customer journey” which ultimately affects their customer lifecycle. Simply put, it defines the differences between the traditional customer and the new connected customer.
Redefining IT as a source of innovation rather than a constraint to innovation
In a recent study on IT innovation, 90% of CIOs said that technology-driven innovation is crucial for achieving competitive advantage. Yet, on average, just 14% of IT budgets are earmarked for innovation and only 23% of companies report very positive results from their IT innovation efforts. Why the disconnect?
Historically IT has been viewed as a constraint to new ideas and innovations as CIO’s primary focus and responsibility was on building and maintaining secure and stable platforms and tools that “keep the lights on.” While it is still essential to securely maintain these systems of record, it is now a competitive imperative that IT evolves to a business enablement role that leverages technology innovations which deliver new revenues and profits for the company.
A Framework for Organizing and Implementing IT Innovations
In his recent book, Escape Velocity – Free Your Company’s Future From The Pull Of the Past, my brother, Geoffrey Moore, put forth a three part innovation framework that is designed to significantly increase the ROI on innovation investments. At the core of this framework are three distinct innovation playbooks (see chart below) that clearly define the mandate and desired outcome for each one. Here are the key diagnostic questions that clarify those mandates and outcomes:
- Have we differentiated our offer enough to gain real competitive separation?
- Have we created a truly unmatchable offer?
- Have we neutralized offers with enhanced features from our reference competitors in a timely manner?
- Have we gotten to good enough fast enough?
- Have we optimized our opportunities for gains in resource utilization and cost reduction?
- Have we reclaimed unproductive resources and redeployed them against differentiation or neutralization opportunities?
Two Rules of Thumb
There are two key rules of thumb that can keep you from making the mistakes most companies make and result in most innovation initiatives not achieving their desired goals and outcomes (see chart below ).
- Never tie differentiation and neutralization innovation programs to the same release schedule. Differentiation is all about how far while neutralization is all about how fast. Combining the two dumbs you down and slows you down.
- Best in class is appropriate for optimization innovations only. It is too low a mark for differentiation (goal is beyond class) and too high a mark for neutralization (goal is good enough).
-A new website (Art of the Trench.com) that featured customers as models
-A more robust e-commerce catalog that matched the company’s in-store inventory
-The digitization of retail stores using RFID tags
P&G Decision Cockpit – To improve the “clock speed” for new innovations at P&G, they set up a single analytics portal called Decision Cockpit. This tool provides real time data across brands, products and regions to more than 50,000 employees globally.
Starbucks optimizing back-office functions – In 2013, 1/3rd of the 100 active IT projects at Starbucks were focused on customer or partner facing initiatives; 1/3rd were focused on improving efficiency and productivity away from the retail store; and 1/3rd were focused on improving resilience and security.
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 email@example.com.