In the increasingly digital world, the pace of change, of both technology and business, is accelerating. The speed at which businesses need to respond is also increasing. Most IT functions are stuck in the first gear. They are just not able to keep up. Many businesses are side-lining IT during digital projects.
Many IT approaches and processes designed in the pre-digital era are just not capable of delivering the types of speed that businesses are demanding. Often, the result is that the digitisation effort is kept separate from IT. Businesses bypass IT due to concerns about ability, governance and IT processes. Often it is faster to complete projects with third parties than use internal IT. The obvious downside of excluding IT is fragmented solutions and the difficulty of integration.
An IT transformation is needed to meet the demands of the business in the digital era. Most businesses have a significant investment in pre-digital systems and applications, which do the bulk of the heavy work. However, they struggle to cope with the demands of connected customers, automated processes and analysis based on vast amounts of unstructured data.
Reinventing IT is not a quick fix. It would take years to make such a far-reaching change. A new approach termed as ‘two-speed IT’ is providing a ‘second gear’ to many organisations. Two-speed IT enables quick results while the long-term change is being implemented.
Why do IT functions struggle to support digitisation?
Digitisation changes demands on IT in three different ways. Firstly, digitisation requires newer and more advanced technology such as technology that can analyse large amounts of data rapidly and make it available in real-time via consumer apps (e.g. recommendations or loyalty apps).
Secondly, while efficiency was the greatest performance measure for IT in the past, in the digital era time, security and reliability are also important. Time to market is critical in delivering innovations to consumers. Reliability is important because there are no manual workarounds. Increasingly online data security is critical to the business survival. IT functions that are optimised for efficiency, lack the capabilities to meet these demands.
Thirdly, the way IT engaged with business and the way projects were done, don’t assure success in the digital realm. Digital projects typically demand more oversight from senior managers as a lot at stake. These also demand greater business savvy from the project team. Typically IT provided dedicated teams or generalists and has relied on internal resources. Now projects demand specialist skills and leveraging of external technology ecosystems such as a social media platform, mobile operating platforms or external cloud services.
Need for Two Speed IT
Companies like Amazon and eBay are ‘digital natives’. They don’t have the burden of legacy systems and operations. There IT is both a support and leadership function playing a larger role in strategic direction and investment decisions. Amazon invests five times more in IT as a share of revenue than traditional retailers.
We are not suggesting that all business need to emulate Amazon or eBay. But they do need to adjust their support model to the new realities. Part of the change is to recognise the need for a two-speed IT for service delivery. The first, which Boston Consulting terms as ‘industrial-speed’, is the traditional way IT delivers service to business. The second ‘digital-speed’ is the speed necessary to drive the company’s digital agenda. The figure explains the different purposes.
Getting the ‘Second Gear’
Reinventing the IT function for the digital speed is a mammoth challenge. It would be smarter to create new ‘digital IT’ as a stand-alone entity within the IT function which is solely focussed on the digital initiatives. This acknowledges the significant differences in approach, ability and demands between the industrial and digital delivery speeds. In industrial-speed IT efficiency and not flexibility is important. Lead times are long and requirements are predictable and functions work in a silo-environment. Digital-speed IT is characterised by unpredictability, need for flexibility, speed and collaboration. There are different trade-offs between cost and quality.
McKinsey suggest addressing seven key areas to build digital-speed IT ability.
- Clear Strategy – Businesses need a clear strategy for obtaining value from their digital efforts. This should include agreement on use of customer data, web platforms and other digital-IT assets. Creating a digital ‘Centre Of Excellence’ (COE) to drive digital strategy and resolve competing priorities is often beneficial.
- Right talent – Digital teams need all-round people who have not only good technical skills, but also have business functional knowledge. They would help quickly create prototype solutions and challenge business where necessary. New specialist IT talent may also be needed. Creating a start-up style environment and culture may help attract such new talent.
- Governance – New governance models that encourage flexibility and controlled risk taking are needed. Fast-develop and fast-fail approach can deliver speed and cope with the unpredictability of consumer reactions. These need to be supported via a suitable governance model. More flexibility in costs and investment funding may also be required.
- Keeping Corporate Data Secure – Digital efforts that need connection with corporate data may need support from industrial-IT, especially when key data is being changed. The need for high-quality secure data would stay. The CIO needs to play the vital role as the keeper of the data and to manage its proper use.
- Agile development – Delivering at digital-speed would need new ways of working that include agile development, rapid releases, automated testing and deployment. A ‘test and learn’ approach to changes will be needed, not only in IT but also in the business.
- Rapid innovation architecture – Several IT enablers, such as fit for purpose services that can be used as building blocks, would be needed. These services may be joined to form components and platforms to support different channels. Standardising on web and mobile platforms would improve reuse for these components improving speed in the process. Scalable cloud infrastructure shall have a role in such architecture.
- High-quality integrated data – Sophisticated uses of data need high quality corporate data. Joint business-IT efforts to find high priority data and guide efforts to improve data quality would be beneficial.
Digital speed needs top-level commitment
There’s no other way to get this done: the CEO and entire executive team have to make reinventing IT a top business priority. The benefits of digital and the potential risks of failure make it essential that they shape and oversee the program. Most importantly, CIOs must gain the early support of business leaders by laying out a road map that delivers value quickly.
Capturing the advantages offered by the digital age demands changes throughout the business. IT organisation needs to reinvent itself. Developing a second ‘gear’ is a key aim of that reinvention.
Industrial and Digital Speeds a comparison