A New Playbook for Enterprise IT: A Get Out of Jail Free Card

You cannot successfully transform your company into a true digital enterprise if you keep your IT Group under house arrest.

Image showing hands on bars in jail

The pace and magnitude of digital transformation disruption mandates that your company must figure out how to deploy technology-enabled innovation as a critical driver of new revenues and profits. This doesn’t mean you need to be the disruptive innovator in your industry, but it does mean that you need to figure out how to neutralize the disruptive innovation’s impact on your business/operating model quickly.

If you just look at your IT Group as a source of cost optimization whose primary role is to keep the lights on, then you miss the opportunity to leverage technology as a change-the-business tool in the new world of digitally mediated customer engagements. Simply put, you have to let IT play offense not just defense.

McKinsey & Company Survey Results:

That said, I found the dichotomy presented by the results of McKinsey & Company’s latest survey of business and IT executives both validating and troubling. Their findings strongly validated that when CIOs play an active role in shaping a company’s business strategy IT’s overall performance significantly improves. However, when business executives were asked how well IT supported key business activities such as entering new markets and driving new revenues, only 35% agreed IT played that role in their company down from 57% in the same survey two years ago.

If actively engaging the CIO in helping to shape a company’s business strategy works, then why are so many companies not doing it? My answer is that they haven’t found a way to free IT from the legacy mindset of its past. To do that successfully, I want to propose a prototype for a new playbook for enterprise IT which is highlighted below:

faq
Over the past 3 years, I’ve had the opportunity to talk to well over 200 CIOs and senior IT leaders about the different operating and cultural challenges they face in gaining a seat at the business strategy table. Their input and ideas have contributed to helping me develop a Collaborative IT Governance model, a series of IT thought leadership forums and communication programs, a process to identify and redeploy trapped IT value, as well as other tools to help them evolve IT from a cost center support function to a strategic business partner role.

These multiple conversations along with some early use case studies have gone into the design of the prototype playbook model above. It is by no means exhaustive or complete but rather suggestive of the variety of capabilities, services and deliverables that represent the new business value IT can deliver across any enterprise. It is designed to enable IT to carry out its core “run the business” functions while still being freed up to deploy “change the business” functions.

Each component of this new playbook will contribute to allowing your company’s enterprise IT function to evolve from a cost center/support function to a service provider to a business enabler to eventually a full partner in shaping and guiding your business growth strategy.

What I have learned over the past 3 years is that to successfully create 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 most cost effectively. This is about changing the role of IT from follower to leader. This is about changing outcomes by changing legacy attitudes, behaviors and actions. Simply put, this about choosing results over rhetoric.

These discussions and dialogues will continue in the months and years ahead and I invite you to participate in them and contribute your ideas and potential solutions. These challenges are bigger than any one company or any one CIO can solve. But I strongly believe that as a community of open minded, forward thinking IT professionals we can collectively find a way to get out of jail.

get out of jail

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.

Unlocking trapped value to fund critical new IT investments

picture 1
One of the resounding truths of the past few years is that more and more companies are tightening their IT purse strings and mandating that CIOs and their teams better optimize the costs and returns on the company’s technology spend. Some of this belt tightening is understandable as 80% of most corporate IT budgets are still allocated each year to maintaining a company’s systems of record. While they need to be maintained, every dollar invested in SOR supported systems and software produces virtually no ROI as 95% of the lifetime value of these investments has already been received and as such no longer delivers competitive differentiation.

Unfortunately, many CIOs and their teams have just responded to this new mandate with a series of cost reductions which only reduces the available dollars for critical new IT investments, and thereby, IT’s ability to help drive new revenues and profits for their company.

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Start by asking some core questions

While a number of CIOs are resigned to their new fate, I have run across several who have taken the bull by the horns and figured out a way that they can self-fund critical new IT investments. They are starting this new process by asking some core questions:

1. Where is the trapped value in our company eg: maintaining systems of record
2. How can we identify and unlock this trapped value?
3. How can we redeploy this trapped value against critical new IT investment priorities eg: the development of new systems of engagement?
4. Where is the ROI going to come from?

One of the benefits of this approach is that IT can have more direct influence and control over the process rather than just responding to a new cost reduction mandate from finance. The other benefit of this approach is that once CIOs and their teams demonstrate the impact and return of releasing and redeploying trapped value within IT they can then put together cross-functional teams with their internal business partners to get similar outcomes from their IT budgets.

Releasing trapped value within your business units can create high returns

The impact of SMAC ( Social, Mobile, Analytics & Cloud ) can present three different levels of disruption to either your company’s infrastructure, operating or business model as the chart below, which was developed by my brother Geoffrey, illustrates. These new forces are also all levers for reducing the cost of service transactions via systems of engagement, and therefore, present three different ways to identify and release trapped value and thereby create higher returns for your company.

picture 3

In the current IT resource constrained environment, in order to get these new SOEs developed and funded you need to tap into the line of business side of the organization. Part of this process is to work together with your internal business users and partners to demonstrate how the next generation of IT can dramatically improve productivity and ROI.

The good news

The good news is that every dollar invested in Systems of Engagement supported software and systems offers a much higher future revenue and profit stream as they will become the primary source of future competitive differentiation for your company.

So if you want to fund new investments in mobile devices or the cloud or analytics & machine learning or you just need new resources to shore up your privacy and security systems and protocols you have the ability to find and deploy resources that are already in your IT budget or your business unit partners IT budget, and therefore, don’t need to run the corporate gauntlet for approval.

There is no question that this set of exercises is hard work and necessitates some very heavy lifting which may explain why a number of CIOs and their business unit colleagues aren’t rushing to take it on. That said, from my vantage point, you really don’t have an option. As the old Fram Oil Filter television commercial said “pay me now or pay me later” and later always costs much more.

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.

Why a Good IT Governance Model Is Essential to a Good Digital Transformation Process

I have previously stated that the ability of CEO’s, C-suites and Boards to transform their companies from analog to digital business models will be the defining leadership challenge of the next 10 years. When tackling a challenge of this breadth and scope, it is often difficult to gain the necessary alignment, support and commitment to make the right trade-off decisions that will result in the desired outcomes.

At this point in time, many of the early adopters of digital transformation are focused on multiple trade-off decisions:

  • How do we best accommodate the BYOD needs of our employees while still maintaining secure and stable access to and utilization of critical customer data?
  • How do we create “friction-free” customer engagements from multiple mobile devices while still maintaining the security and privacy of those interactions?
  • How do we effectively evaluate the trade-offs between a public, private or hybrid cloud structure?

The chart below highlights a number of other “trade-off” decisions that are primarily being orchestrated by CIOs and their senior leadership teams.

The Hybrid Stack

From my vantage point, one of the major challenges CIOs and their teams face in helping to move their companies into a digital-based business model is to lay out a compelling business case to support the redeployment of resources away from systems of record in the left column in the chart above to systems of engagement which are in the right column. Without a good decision-making governance model, it is extremely difficult to make good resource allocation trade-off choices between “run the business options” and “change the business options.” In most well-established companies, the legacy mindset trumps the innovative mindset.

As it turns out, my early work in this area has provided firsthand evidence at how critical an IT governance model is to a successful transformation process. The new Collaborative IT Governance Model shown below has proven to be a critical foundational element to break down hierarchal, silo- based decision-making processes and convert them to horizontal cross-enterprise decision-making processes. Simply put, good governance equals good decision-making. It has also been a valuable component to help CIOs and their teams build the necessary support and commitment to take the critical actions required to implement the digital transformation process.

The Collab. ITFor many companies who are starting to put together a digital transformation strategy, there is a tendency to get caught up in a series of silo-based technology infrastructure and application delivery trade-off discussions without the benefit of a solid governance model to enable a collaborative cross- enterprise decision-making process. Absent this governance model, these trade-off discussions often break down into individual fiefdom fights which ultimately result in the wrong decisions or no decisions at all. Needless to say that is not an outcome that is in the best interest for the long term success of your organization.

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.

 

Technology-Enabled Innovation is the New Source of Competitive Advantage

Everywhere you look technology-enabled innovation is the driving source of new competitive advantage for companies of all sizes across all industries:

ubersmFrom 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

Airbnb_Horizontal_Lock_Up_PMSTo AirBnb redefining the lodging user experience by letting you “rent a room” through your PC or phone at far less than standard hotel rates

60To major pizza chains significantly increasing their market share by letting you order and pay for your pizza delivery or pick up by phone

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?

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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 ).

  1. 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.
  2. 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).

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Some compelling examples

Here are some recent examples that caught my attention of how companies are trying to get better returns from their portfolios of technology-enabled innovation investments:

Burberry_logosmBurberry – When Angela Ahrendts took over as CEO in 2006, she envisioned how Burberry could remake itself into a digital brand. Her initiatives which tripled revenues during her tenure included:

80-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

walmart newsm@Walmart Labs – Walmart set up a separate “idea incubator” as part of its eCommerce division in Silicon Valley which helped the company increase its online revenues by 30% last year.

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.

starbuckssmStarbucks 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 pdmoore@woellc.com.

The Third Era of Enterprise IT: Why companies need to develop a new resource allocation strategy and game plan

The last 10 years have seen the emergence of consumer IT and its impact on how companies need to fundamentally change the way they engage with their employees, customers, supply chain partners and other key stakeholders. Driven by the oft-used acronym SMAC (Social, Mobile, Analytics & Cloud), these new models and tools are ushering in the Third Era of Enterprise IT as the chart below which was developed by my brother, Geoffrey Moore, illustrates.

image 1 ev of it infra The First Era was dominated by the massive build-out of the hardware and software needed to put the core enterprise IT architecture and infrastructure in place that ran companies of all size around the globe. This build-out resulted in a comprehensive, well-aligned hardware and software stack that supported all of these Systems of Record (SORs). As the chart below illustrates, these Systems of Record are used to carry out a series of critical business functions including order processing, inventory and supply chain management, CRM, HR and the company’s financials.

image 2 cl serv stack The Second Era was focused on optimizing the costs of maintaining those enterprise IT platforms and outsourcing a number of their maintenance and operating functions to achieve significant consolidation and productivity gains.

The Third Era is assembling a new stack of hardware and software tools that support the development and utilization of Systems of Engagement (SOEs) as the chart below illustrates.

image 3 cloud stack Two Core Challenges for IT:

  1. Resource Allocation Imbalance

The first challenge the emergence of this new stack presents to companies is that they have a significant resource allocation imbalance between maintaining SORs and developing and deploying in SOEs. A critical source of future competitive advantage will be a company’s ability to successfully leverage technology-enabled innovations that create powerful user experiences. As such, the more resources you can redeploy away from maintaining SORs and toward developing SOEs the better your ROI will be on future technology investments.

80% of Corporate IT Budgets Are Allocated to Maintaining SORs: 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 delivers competitive differentiation.

20% of Corporate IT Budgets Are Allocated to Developing SOEs: 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 SOEs, the sooner you can deliver both significantly greater ROI on your IT investments as well as on competitively differentiated B2B and B2C products and services.

  1. Building a Bridge to Connect SOEs And SORs

The second challenge is how to develop and deploy a stable architecture that organizes and manages seamless interfaces between human assets armed with SOEs and data assets managed by SORs. Systems of Record are transactional and organized around data while Systems of Engagement are behavioral and organized around user experiences. These are two very different kettles of fish.

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 CIOs and their colleagues are trying to ferret out on their own what few best practices are starting to emerge.

The New Hybrid Stack: What companies are now beginning to confront is how to efficiently and effectively allocate resources across the new hybrid stack that supports both SORs and SOEs as shown in the chart below:

image 4 hybrid stack

In the majority of discussions I’ve had with CIOs over the past 18 months, most have stated that they do not have people on their IT teams that can oversee the development and deployment of the SOEs in the right hand column. The good news is that we are in the early stages of the emergence of this new hybrid stack, and therefore, forward-thinking, open-minded CIOs still have time to help their companies take the necessary resource allocation steps to manage it.

How to Get Started: Historically IT has started with the technology the company has already in place and added to it. In order to gain competitive advantage from the deployment of systems of engagement, you have to start with the user experience you want to create for your customers and other key stakeholders. Here is a suggested approach:

Use key moments of customer engagement to prioritize future investments in systems of engagement:

  1. What are the key moments of customer engagement that define the success or failure of your business or company?
  2. Who or what represents your enterprise during these moments of engagement?
  3. How could a system of engagement make these customer engagements more powerful and enduring?

In order to successfully deploy this approach, it will entail both reassigning current employees, along with the appropriate training, to take on the new challenges of developing and implementing SOEs, as well as recruiting outside talent that already has these skills and capabilities and integrating them into your company’s culture and operating processes. Part of this process should also include a complete review of the job descriptions for your senior IT leadership positions to make sure their skills and capabilities are a good match for this new process and environment.

What this is leading to next is a new User -Centric IT design model which is in its early stages of development. I will write more about its development in future blogs.

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 Role of IT in Big Data & Analytics: Myths, Realities & Practicalities

By: Peter D. Moore President Wild Oak Enterprises, LLC

There has long been a challenging relationship between IT and its key internal line of business partners and other key stakeholders. Everywhere you look today someone is trying to undermine the CIO and the role and value of corporate IT:

  • 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.

A recent study by IDC and the SAS Institute had shed new light on this issue through the lens of Big Data and Analytics and will be the focal point of a May 15th webcast http://go.sas.com/qgw6fr. The study states right up front that “success with Big Data requires enterprise-wide data coordination and cannot be performed by individual departments or shadow information technology.” It also highlights the continuing disconnect between IT and lines of business with regards to analytics. “While IT sees itself contributing to and guiding analytics strategy, LOB is more likely to see it as a roadblock.”

The core thesis of the study is supported by four key findings that debunk commonly-held analytics myths. What follows is a three part review of these findings with my POV added on the Practical side of the equation.

Myth #1:

IT controls all things data

Reality #1:

Analytics is finding a home, but not in IT

Practicality #1:

As a practical matter, companies must come to the realization that in the new era of digital interactions their customers and employees are now asserting their desire and role to control direct access to and utilization off data and data analytics. As such, both IT and the LOB’s need to see the value and benefit of letting go of a silo based control model and jointly support a cross enterprise access and utilization model.

At the core of the new digital business model is a company’s ability to leverage and deploy big data and data analytics 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.

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
Big Data & Analytics are not yet friction free

Here are some examples of companies who are working to deliver friction free customer engagements:

Charles Schwab – Remote Deposit Capture
FedEx – Re-Route Your Package Delivery Location in Transit
Hyatt Hotels – Eliminate Lobby Check-In

Myth #2:

Technology poses the biggest challenge

Reality #2:

The greatest stumbling blocks are organizational mindset and culture


Practicality #2:

I agree completely with the IDC finding. The legacy mindset about IT that “it takes too long, it costs too much and it never gives me what I really want” is a major roadblock within most organizations. To overcome these stumbling blocks, IT and its business partners to a find a way to work together to align future technology investment priorities with critical business outcomes.

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.

Myth #3:

Everyone understands the value of analytics

Reality #3:

Businesses have trouble articulating the value of analytics


Practicality #3:

I think IDC’s finding is very true. If you look at the whole area of big data and data analytics and you talk to someone who is not a data scientist most of them do not have a clear understanding of what you are talking about. So we need to create a common vocabulary and set of terms and definitions that allows IT and LOB executives to have constructive dialogues about how best to leverage big data and data analytics for the competitive benefit of the entire enterprise. I think we have to make it easier for people who aren’t “experts” to be able to consume, discuss and utilize data in a way that’s very different than they have in the past.

Myth #4:

You can’t have analytics without IT

Reality #4:

IT is part of the problem, not the solution

Practicality #4:

As a practical matter, you can’t have analytics without IT because they are the keepers of the critical data that is stored by the company either on premise or in the cloud. That said, IT also has to let go of their old silo mentality where they wanted to control everything. They wanted to make it. They wanted to own it. They wanted to control access to and utilization of it. That is no longer possible.

As I said above, in order for companies to provide “friction-free” customer experiences, they need to enable them to have direct access to and utilization of data and information when they want it, where they want it and how they want it.

Going forward, I think IT has the opportunity and I would even say the responsibility to act as a catalyst to breakdown the old silo mentalities within their organizations and foster the utilization of a new collaborative, cross enterprise model to engage with their LOB executives and other key stakeholders.

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.

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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.

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