Competitive Strategy, Digital Transformation, Marketing Strategy

Digital Transformation 2016 – The Pressure Is On

Beautifully-timer-vector-material-50157In business and technology, change is a constant. But if the CEO puts pressure on IT leadership to deliver business results in a time of extreme change, interesting things happen.

So what’s up?

In 2016, the CEO wants the organisation to be customer-centric and agile, so that the company can respond swiftly and adequately to changing market conditions, competitor moves and new opportunities.

Digital Transformation is to bring in the key success factors: (big) data insights, organizational alignment and collaboration, increased time-to-market. Costs go down, value and speed go up.

The expanding digital universe
The first time the magnitude of the issues ahead dawned on me (I am not very smart or fast), was when I looked into IDC’s Digital Universe research (sponsored by EMC) – somewhere in 2011. (The latest update to the program was published in 2014 – here.) Here’s a video from that time starring one of my personal favorites, Chuck Hollis, then EMC’s Global Marketing CTO, now an SVP with Oracle:

The conclusion of that research is simple (and not surprising): Data in the digital universe is outgrowing the number of IT professionals by about 1000x. Most of the growth is machine-generated and in the cloud. The growth ratio may well accelerate over the next decades as more machines come online. But we manage this 1000x growth with about 1.5x of IT professionals. At best. Classical Catch-22, right?

Not just about staffing
This is not just an IT staffing issue though. This is also about the role of IT. Because it’s not only the amount of data we’re generating. How we deal with data and systems is also changing. We virtualize, we cloudify, we share, we analyze. We open up our systems and networks to the outside world and expect IT to (help us) stay on top of things. To keep improving our user experience when dealing with data and systems. To be accountable and auditable.

Leadership teams are responding. They call for Digital Transformation all around, the #1 IT theme for 2016. In an attempt to embrace Digital Transformation and not be left behind, CIO’s and CTO’s are joined by Chief Digital Officers and Chief Customer Officers. Marketing leaders compete for IT’s budgets.

So let’s do Digital Transformation then. Pressure’s on!

New demands of IT
It’s not easy. IT organisations struggle to understand the right way of dealing with these new demands of IT delivery. Surely the lights need to stay on as usual, and innovation has to be embraced – but these two functions or “modes” of IT seem to be conflicting at times. One is focused on supporting day-to-day business, governance, risk, control and cost-efficiency. The other is focused on building the new, get crazy, test and fail over and over – which calls for an entirely different mentality, dynamic and skill set.

At Gartner Symposium/ITxpo Europe last month, Gartner SVP and Head of Research Peter Sondergaard cautioned his audience of 5,000 senior IT leaders. “External forces are changing the world, and you must change your world. You must build an innovation competency.”

Sondergaard said that CIO’s feedback on what’s keeping them from innovating has been consistent for the last 5 years: Lack of innovative culture, alignment, funding, skill sets, and legacy technology challenges keep them from accelerating the digital transformation program.

Screen Shot 2015-11-29 at 10.15.02 PM

See Sondergaard’s excellent keynote here – the section I refer to starts at around 32 minutes into the video).

Legacy OT
With legacy technology that’s keeping businesses from transforming and accelerating, we’re not referring to Windows 98. We’re not even too worried about Lotus Notes. We’re talking about old logistics systems, service management systems, warehousing systems, industrial manufacturing systems, systems used to manage up and downstream in the Oil & Gas business. Systems generally referred to as Operational Technology (OT) that were never designed to integrate with other systems, to talk to other machines, to learn. They once were fit for purpose, but now old and isolated – destined to be decommissioned one day. But when and how?

Screen Shot 2015-11-28 at 10.24.51 PM

The issue with legacy technology of the OT kind oftentimes is, that it cannot simply be ripped and replaced. It’s either too business critical and deeply embedded into the operational process to touch, or custom-made and impossible to mimic with a modern platform, or both.

I asked an IT leader at one of the largest retail organisations in the Netherlands why they’re not adopting the responsive interface of ServiceNow’s latest platform release. He said: “I would love to, but we can’t because we interface with a wide range of prehistoric applications, which can’t deal with triggers by modern technology like your platform.” A clear example of how legacy technology is putting the break on innovation.

Transform or Die
At Gartner Symposium/ITxpo, our speaker Christopher Wroath of the NHS Education of Scotland compared it with a crust that’s forming around your legs. You try to move forward, but the harder you try, the thicker the layers of legacy crust around you grow – legacy skills, technology, culture – until you come to a stand still. Legacy is a swamp. For many of our customers, especially the large, established, brick and mortar enterprises out there, the question is not if they’re going to transform. Not even when. It’s do or die. The question is “Do what, how?” to break away from the inertia.

Bi-Modal IT
And it’s been like this for 5 long years, Sondergaard said. That’s why in their 2016 CIO agenda research, Gartner throws in the towel and introduces the notion of Bi-modal IT:

“Bimodal IT is the practice of managing two separate, coherent modes of IT delivery, one focused on stability and the other on agility. Mode 1 is traditional and sequential, emphasizing safety and accuracy. Mode 2 is exploratory and nonlinear, emphasizing agility and speed.”

Gartner expects 70% of all IT groups to be organised along these 2 modes by 2017, and cautions those who haven’t started moving in this direction yet: “Furthermore, the data suggests that one of the worst things a CIO can do is to delay bimodal. Those who are planning to move toward bimodal, but have not taken steps yet, were at the bottom in terms of digital performance.”

But it’s not easy.

Be brave. Build the new.
In recent conversations with customers about modernization and transformation of the IT function, I noticed they started using phrases like “don’t be afraid”, “it can be done”, “be brave” – to coach their peers. Because the level of change IT organisations are going through today is without precedent. And it’s unlikely to go away any time soon.

Automate, Govern and Analyse

The only thing IT can do to adapt, is interface with the business, build a plan without further delay, create a governance framework, automate on all levels and understand the data.

Nevertheless, many traditional businesses will respond too little, too late and perish. They will be replaced by small, agile start-ups, who just switched on the lights.

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