How to address the Top 3 Issues in the Business Transformation to Digital

Recently I had the pleasure to moderate the discussion of a group of CIOs gathered in Dublin at the latest CIO Europe Summit. The discussion was around the main issues and challenges for CIOs when leading a business transformation to digital. Several industries and professional backgrounds were seating around the table. Nevertheless, despite small differences in the flavors the business transformation to digital were assuming in each industry or company, we were almost unanimously in agreement on the top three issues for a CIO when leading the business transformation to digital. The identified issues are:

– Business Engagement

– Cost of Digital Initiatives and Return on the Investment

– Two-speed IT and Digital Skills

Let’s review the approaches being adopted in the attempt to remove or reduce their effects.

– Business Engagement

In the majority of the examples brought to the table clearly emerged the difficulty for the IT department to be either taken into account in business-driven initiatives or to be considered as trusted and effective provider for the purpose of contributing to the design of a new digital business.

Companies have ramped up their technology in an effort to keep up with the relentless pace of digitalization. In many situations it happened as consequence of many projects delivered without having in mind a coherent digital strategy. Usually it is the result of single-direction interaction between Business and IT where the former asks to have new things delivered and the latter struggles to cope with capacity, skills and governance required to deliver.

Where the business hasn’t yet reached a proficient level of digital maturity, today’s CIOs must leverage their leadership and change management competencies to lead the process of identifying the red wire that correlates and links the digital initiatives to a common, accepted new digital normal for the business.

Possible actions and approaches for the CIOs to strengthen and make more effective the interaction with the business include:

• Creativity and Proactivity in regularly proposing relevant ways to change the business through technology rather than waiting for the business requirement. Isn’t only sharing the idea. It is to bundle the technology with the business visibility to come out with projects which are strongly supported by a clearly defined qualitative or quantitative return on the investment. It helps to gain trust with the business and change the perception they might have of considering the IT department as a PC, laptop or network cables provider.
• Matrix Organization: IT and business should have mixed organizations with common resources reporting to both IT and business leaders. It helps to align possibilities with expectations and start having one single conversation about what the technology can do for the business.
• IT-Business joint events: IT and business should have regular joint events to assess the latest available technology to jointly evaluate whether it represents an opportunity. An approach here could be to have the CIO arranging IT-Business jointly workshops with selected technology partners with the objective to review and evaluate the applicability of real cases of technology applied to the business. It helps to trigger the business creativity and put the CIO in the role of true technology advisor.

– Cost of Digital Initiatives and Return on the Investment

When dealing with new technologies it is not always easy to identify both cost of adoption and business benefits. Though it is not extremely difficult at least to guess whether a new technology may bring benefits to the business operation, customer engagement or be fresh air for the sale channels, the risk with digital is to invest money without clearly having identified the figures of the costs and, more importantly, of the benefits as they will be reflected in the bottom line. Therefore before investing millions in a new digital initiative and waiting 12-18 months to discover that the outcome is not quite business relevant, it is savvy to quickly proof the initiative as delivering in value before scaling it to the whole business domain. Examples of how it can be achieved are:

• Explore the new through Proofs of Concept or Proofs of Value – A Proof of Concept or Proof of Value project is a much more effective experience when identifying and assessing new technologies and business partners before extending it to a larger scale.
• Hackathon events – it is a straightforward access to creativity and latest skills and technology with a relatively reduced investment. A good way then to quickly evaluate an idea or technology and collect elements to better assess the possible effects on the business.
• Continuous Iterations – Adding complexity through iterations it is an effective way to scale up a new digital initiative. Business and IT should cooperate in an Agile framework to better identify business needs and ways to address them through the digital technology.

To an extreme investing money in digital initiatives it is like when funding a start-up. The capability to quickly identify the failure or success of a new initiative is strictly linked to the return or lost you can expect from the investment. If a new digital project has to fail, better to make it failing when it is still small and it has not yet burned a significant amount of money.

– Two-speed IT and Digital Skills

The transition to the digital business is not immediate and requires keeping in the IT department old and new skills, roles, responsibilities. While likely in the medium term it is not an effective approach, at the same time the so called Two-speed IT is recognized as an adequate short-term transition model for the IT department to full transform and migrate to digital roles, skills and operating model.

Nevertheless the shorter the transition process the better for the CIO and the whole company. Two-speed IT puts companies at a significant disadvantage in the war for digital talent. The IT team is effectively split into two parts, each with its distinct culture. There is the “cool” group, which is seen as doing all the exciting work. And there is the “old” group, which is viewed as the traditional work, dealing with the old (but still necessary) legacy systems. It’s not hard to guess which group everyone wants to join.

Reducing the time required to the IT team to fully transform into a single digital team requires promoting an Agile culture as operating model.

Agile is not only for new digital platforms. Agile can also be applied to legacy systems if a service-oriented architecture is in place. A service-oriented architecture in which applications, infrastructure, and data interact through standardized interfaces like APIs and microservices allows teams to work more independently of one another. A clear and well communicated path towards a digital culture is a pre-requisite to acquire and retain in the organization people with digital skills.

Companies should be taking these steps to improve their responsiveness and accelerate their transformation towards a digital culture. CIOs have responsibility to the lead the transformation by acting with their teams as example for the whole organization.