Closing the gap between executives and digital transformation

The two groups that must come together and bring their organizations into the digital future -- technology and business leadership -- tend to have divergent priorities and inclinations. How can we resolve this?

Many organizations today are findings themselves at the digital crossroads: They have an enormous stake in how the business operates today, yet the world is changing at an all-time fast rate, requiring ever greater commitment to change, often down multiple competing paths. The frustration is knowing which are short-term fads and which actually represent crucial long-term shifts in the technology market that organizations simply must invest in.

For example, betting everything on IT usage shifting to say, tablet devices, would have turned out to be unwise, while not seriously investing in private cloud, in preparation for the next key step to hybrid and public cloud, almost certainly would have been the right move. As we struggle with priorities, the candidate list for key emerging technologies for our businesses continues to grow and now consists of hundreds of entries, well-summarized by Gartner's yearly Hype Cycle.

Recent examples of technologies that turned out to be both fads and solid bets include social marketing/CRM, data science, gamification, Internet of Things, 3D printing and a number of others. Some of of these indeed became crucial to our organizations, such as data science, and others ended up being more important long term (social marketing/CRM or Internet of Things), and occasionally not very much (gamification.)

Priorities between IT executives and business executives compared: CIO, CEO, CMO, COO, CFO

After looking at dozens of digital transformation efforts over the last year, it's clear that IT departments still have the upper hand when it comes to what I call small to medium-sized digital transformation. That's because IT departments still have most of the technology resources and know-how, as long as it doesn't propel the business into entirely product categories or markets. Even now, the CIO still has the biggest technology war chest, even if the budget growth just isn't there to support more than few small -- or perhaps one or two medium sized -- attempts at in-place transformation.

That's not to say that the business side isn't pushing into the latest forms of digital business as well. The business understands the core business better than IT, and often feels the urgency of customers more acutely. However, the lines of business in most organizations often have to achieve digital improvements through a service-provider that typically offers a one-sized-fits-all solution. For example, this might be a Mashery or Apigee that can turn the business into a digital platform so that thousands of 3rd party developers can build on it to create a Apple-like ecosystem. Unfortunately, this is also the dreaded 'bolt-on' model of digital transformation with limited integration or market differentiation. The business is often forced to buy a digital capability because it did not have either the expertise or ability to execute closely with IT.

Another common strategy at the top-level of the enterprise is to buy into digital innovation through the acquisition of smaller but more technology savvy companies. While McKinsey & Company has pointed out that this can be a valid and highly successful strategy from a P&L standpoint, it's safe to say it's also not real transformation either, as it typically leaves your core business increasingly stranded on the proverbial non-digital ice floe. In this model, the organization hasn't done the hard work of genuinely re-imagining the business by making it digital through applications and services that properly extend the company into the requisite new channels, new business models, and high-scale new markets.

As Michael Krigsman observed in his recent analysis of PwC CEO survey of technology needs, the the IT department today must go well beyond operations and security and:

...enable technologies that support strategic advantage. Although technology stability and cost control are important, they do not create ultimate value. Innovation and adapting to change are where CEOs prioritize future investment.

What's interesting about the CEO priority list is that it's so starkly different from the CIO priority list. Other than security, there is almost no commonality. The technology departments of most corporations are struggling mightily just to keep applications operating and modernized, never mind extending the organization into new digital frontiers -- from collaborative economy services to open APIs -- that the contemporary enterprise simply must be engaged in today to be competitive.

Getting Aligned, Closing Digital Gaps

As I look at the differing agendas of the technology and business teams of most organizations, it's clear there is a wide gap in both priorities and inclinations. Business teams want maximum impact to the customer while having ground truth in real-time to what's really happening with their customer base and in the marketplace, well before their competition. The IT department is still focused on overseeing the whole unwieldy package of old and new technology: Consolidation and optimization, managing a fast-growing and often decades-old portfolio of legacy applications and systems, getting service delivery right, all while keeping everything highly secure.

The mismatch between today's Herculean task of back office IT lifecycle management and the needs of the business to swiftly enter into, and if necessary, safely out of, vital new digital business arenas -- as easily and inexpensively as possible -- is why a hybrid model of the cloud IT is, in my opinion, nearly inevitable in most organizations. The cloud is required simply to have the necessary agility, scalability, plasticity, and sustainability need to grow and survive.

But technology is never going to be the solution to digital transformation by itself. For that, we must look at where we're seeing some progress on the ground.

The problem as I now see it, when examining compelling examples of next-generation IT -- albeit often incremental, while still pushing the envelope -- from organizations such as Staples, L'Oreal, GM, or AstraZeneca, is that even if you add up the combined competencies of the technology team and the business teams, and then aimed them at genuine digital transformation, they are collectively still missing key skills at the strategic and execution level. These are skills that are in abundance in Internet startups, but not nearly as much in the corporate world, especially the farther you are away from the technology industry.

When I look at what organizations are collectively missing to close the gap and execute well on digital transformation, it seems boils down to these essential points:

  1. Ruthlessly acquire the requisite new digital competencies. This is a laundry list of skills and abilties which most organizations have already to some degree, but usually not in the right place in the organization, nor at the right level. These include a rapid innovation program based on the latest models of IT, technology and design skills for large-scale digital efforts, change enablement that works well and repeatably, a culture of willingness to disrupt what they're already doing today, entrepreneurial business skills, consumer-grade user experience (UX) talent, the skills to re-think and digitally platform the business, and adopting agile and devops across not just IT, but the entire business.
  2. Develop and communicate an organization-wide digital strategy that everyone can execute against. The best strategies for change in large organization makes the shifts clear to everyone, and helps them understand their own part of it. Large organizations have enormous assets and resources they must fully marshal to drive sufficient change. A strategy that is co-created by both IT and the lines of business and kept updated based on the latest lessons learned appears to work best. Walmart's storytelling approach to digital strategy communication is a particularly relevant case example.
  3. Establish a new type of change capability that is suited to the unique nature of digital transformation. The change capabilities we have been traditionally using have not proven very effective. For years we've seen strategic initiatives and Centers of Excellence for just about every type of technology come and go, with many failing or greatly underperforming. The good news is that there are now new models emerging in organizations that I am seeing enable both the acquisition of new digital competencies while tapping into the passion and know-how of change agents across the organization that are literally chomping at the bit to modernize and re-imagine the organization.

This then is collectively the strategic canvas that the two major constituents of digital transformation in any organization must both come together and share. Doing so will likely require active support and enablement by most organizations' board of directors, along with close backing by the chief executive.

The key point here is that digital transformation -- an endless process of reinvention now for most organizations -- cannot be achieved through simply coming together across IT and the business: Organizations must invest significantly and close the gaps in skills, technologies, capabilities, and competencies. The digital business debt most organizations have accumulated over the last decade is significant and will require sustained effort to pay down. You will know which path your organization is on, when you see these start to arrive in earnest.

Additional Reading

Digital transformation at the Metropolitan Museum of Art

The new CIO mandate

The new digital workplace: How enterprises are preparing for the future of work

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