In the Transition to Digital, Information Technology Must Adapt to Survive


Most organizations are well on their way to transitioning to the digital economy, and IT is at the center of these changing business models. This transition has put significant pressure on technology leaders: Pressure to transform their function, the enterprise, and its role in the industry. All of which are pressures that challenge IT’s core capabilities and organizational structures. The shift to digital places increasing demands on the IT organization to shift to new approaches that require new capabilities. The old world systems and processes are still there and can be all-consuming but that leaves IT being perceived as the problem, not involved in the solution.

The shift to digital places increasing demands on the IT organization to shift to new approaches that require new capabilities.

Going digital means something different to each organization—it can mean a significant transformation of a business model, execution of new business opportunities that span the digital and physical worlds, or simply using a digital solution to effect incremental changes throughout the business. With external and internal forces changing the landscape, today’s leading organization needs to embrace an adaptive approach to IT, one that focuses on the specific drivers and constraints of performance and adaptability.

WHAT’S CHANGING

Force #1: Accelerating Business Cycles

Demand for new services and digital functions is changing at a faster rate than ever before. In fact, more than three-quarters of business leaders say their top priorities are developing new products and services, entering new markets, and complying with regulations.1

Meanwhile, agile approaches to development, which emphasize collaboration and quick iterations, are not a silver bullet. IT leaders are battling perceptions that they cannot respond quickly enough and don’t have the competencies necessary to speed the development and introduction of new products, services, and capabilities called for by the business. CIOs are facing pressure from their boards to roll out projects at increasing rates. In fact, 63% of business leaders say the pace of technology change is too slow at their organizations.2

63% of business leaders say the pace of technology change is too slow at their organizations.2

Force #2: A tsunami of data

The unprecedented access and availability of data is also overwhelming traditional IT systems. With this influx of information comes new technological challenges in combining data sources and harnessing them for meaningful insights. Sophisticated and specialized practices are needed to take advantage of competitive opportunity, protect against external threats, and improve internal operations.

Force #3: IT model morph

IT models are changing. With the blurring of boundaries between IT and digital, companies no longer have the resources to supply the depth and breadth of skills needed to deliver services and adapt to rapid changes in technology. As a result, developing and managing an IT sourcing “ecosystem” has become one of IT’s core competencies. In addition, IT service management has given way to end-to-end services that combine information, technology and business activities. Value creation has shifted toward information-rich services as companies broker services through interfaces that deliver breakthroughs in cost, flexibility, capability, and speed of delivery. At the same time, automation, orchestration, and integration at mass scale are leading companies to collaborate, build, and deliver services through more open, externally connected business models.

The end result? IT leaders are increasingly being left out of strategic decisions in the digital transition. While CIOs say they are driving 47% of digital leadership, only 15% of CEOs agree that they do so. Where the decisions go, so the money flows: 38% of total IT spending is outside of IT already, and Gartner predicts that by 2017, it will be over 50%.3 Although the business needs IT to support company-wide strategy, less than 50 percent of business-line managers believe IT is delivering on this responsibility.4

While CIOs say they are driving 47% of digital leadership, only 15% of CEOs agree that they do so.

WHERE WE NEED TO GO

The shift to digital has put IT relevance in the crosshairs. To thrive in this fast-paced new world and prepare for the next wave of digital transformation, technology leaders need to develop three core capabilities.

With all eyes on IT investments, these capabilities are focused on driving outcomes that are closely tied to the organization’s key goals—the kind of outcomes IT needs to remain relevant.

1. Adaptive Strategy

Gartner’s 2015 CIO Survey found that nearly 85 percent of CIO planning is still based on a two-year horizon. Moving away from the traditional process of pairing a multi-year strategy with annual budget reviews allows an organization to move more quickly. Adaptive Strategy is more evolutionary in nature and involves stakeholders from throughout the enterprise. It focuses on building capabilities that improve the organization’s ability to adapt. Reviewing and re-prioritizing on a more frequent basis allows IT to better respond to—and anticipate— the organization’s changing needs.

2. Adaptive Delivery

An adaptive delivery approach addresses the reality of mixed systems environments and different delivery approaches, whether waterfall, Agile, or Rational Unified Process (RUP).

Applying automation to technology provisioning, process integration, and execution within the enterprise or with external business partners reduces the time-to-market for any initiatives that require a change, integration, or migration of IT systems. Shifting to a product-centric planning and delivery model allows organizations, both business and IT, to adapt in real time to changes in the business environment.

3. Adaptive Architecture

The simplification of IT components sets the stage for continuous evolution of the organization’s technology platforms, enabling rapid delivery of new solutions and ongoing reductions in operating costs. Simplification involves much more than the traditional view of rationalization and consolidation. Simplifying the architecture on which business solutions are built and deployed also means evolving the technology architecture to enhance the speed of delivery, and adapting to changes such as mergers and divestitures or integrating a new business partner. It is an architecture that is highly integrated, modular, and loosely coupled.

Together, these capabilities make up Adaptive IT, and together they make tech a strategic player in the digital game. Each capability is required in order to solidify IT as a vital partner in bringing business solutions to life; any one on its own will fail to deliver sustainable change.

HOW WE GET THERE

To effectively achieve Adaptive IT, North Highland recommends an approach that focuses on the specific drivers and constraints of performance and adaptability. These are the KPIs an Adaptive IT team is constantly monitoring and improving against.

North Highland recommends an approach that focuses on the specific drivers and constraints of performance and adaptability. 

Financial Metrics

How is spending on IT distributed between different business units, vendors, and discretionary and non-discretionary requirements? Does the budgeting process contribute to developing enterprise capabilities and sustaining multi-year initiatives? Does spending distribution contribute to adaptability or increase the firm’s technical debt? An adaptive development process allows the organization to capitalize more of its costs, but many are being too cautious, slowing the development of products and services due to the effect on OpEx.

Operational and Organizational Efficiency

What are the organizational capabilities that contribute to IT operating speed, cost efficiency, or waste (organization, workforce and skills, processes, technology)?

Risk Management and Compliance

Does the technology portfolio provide a secure platform for conducting business in today’s internet-connected environment? Do systems contribute to meeting rapidly changing regulatory requirements?

Effectiveness

Are the services you are delivering to the business and end customers of high quality, within budget, and delivered in the time required? Are major stakeholders in the delivery of IT services satisfied? Are they a promoter or detractor of IT?

These are critically important issues. As the pace of technology change accelerates, the ability to sustain relevant enterprise-wide technology capabilities depends on clarity of strategy, funding strategies to sustain multi-year improvement efforts, and a motivated, highly skilled workforce that is continually adapting.

These challenges do not lend themselves to a one-size-fits-all approach, and North Highland maintains a strict focus on our clients’ needs to help realize the potential of performance improvement. “Best practice models” provide valuable guidance, but to make a difference, performance improvement plans must be tailored to the realities of each organization’s capabilities as well as its goals.

The speed by which IT is able to adapt is the measuring stick by which the performance of technology leaders is being judged in today’s enterprise. Improving IT agility delivers clear returns, with high-performing organizations delivering 2,555 times as fast as low-performing ones and spending 22 percent less time on unplanned work and rework, providing a powerful competitive advantage.5 By developing capabilities to adapt that produce clear performance outcomes now and improved responsiveness for tomorrow, CIOs and tech leaders will be well-poised to deliver true IT excellence.

            

1. How CIOs Can Ramp Up Their IT Clock Speed As Pressure Grows.

2. MIT Sloan Management Review.

3. Flipping to Digital Leadership: The 2015 CIO Agenda.

4. InformationWeek Research CIO Effectiveness Study.

5. 2016 State of DevOps Report. Puppet Labs.



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