Agility and Innovation Are Keys to IT Transformation

Steven ten Napel By Steven ten Napel on March 24, 2016

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As I pointed out in my previous blog (http://blog.comakeit.com/in-the-absence-of-organizational-transformation-technology-innovation-will-fail), organizational change must accompany technology innovation for a successful business transformation.

In this blog, I will outline the contours of IT change that is needed to facilitate technology innovation, and resulting business transformation.

Dilemmas of enterprise IT

To better explain the nature of IT challenges that traditional businesses are facing, I would like to narrate the case of a client, who happens to be a major European based engineering and construction company. They design, build, and maintain a variety of civil engineering structures catering to multiple domains.  To facilitate their maintenance function, they were collecting terra bytes of data on numerous factors through various devices like beacons, and sensors installed throughout their customer facilities. They realized that the data they have could be a treasure trove, but also understood that they lack the organizational abilities and IT skills to make intelligent use of the data that is being generated.

They were looking at building a solution on top of the data, which could help them generate predictive maintenance plans, based on past history and intelligent analysis of previous data. In a nut shell, they wished to build, and own software IP and were reluctant to share it with third parties.

This is the conundrum that businesses are facing with the fast changing technology landscape, which offers tremendous opportunities if you are innovative and agile. Data owned and generated by corporations is quickly transforming into building decision support systems, so unique for themselves that they want to build and own their IP.

Contours of IT transformation

How can these companies which have only used IT as a tool to facilitate their core business, but have never built any IP, develop this competency? This is at the heart of the IT transformation that I wish to address in this blog.

There are four important elements that make up the DNA of any enterprise IT setup, namely Culture, Process, IT mindset, and IT Governance. Let's examine each of these elements and identify the specific manner in which they will have to change to facilitate an IT transformation.

Cultural shift from Risk Aversion and Business Continuity to Value addition

The typical IT setup of any large enterprise is designed to maintain traditional infrastructure and services, including supporting currently running applications and SLAs that are critical for business continuity. Therefore the culture of these IT setups will be to avoid risk, and the focus is on ensuring 24 x 7 uptime for all mission critical applications, and supporting infrastructure. The emphasis is to avoid disruptions, ensure data security, and support core business functionality. Therefore the culture of the IT team in any typical large enterprise is usually aligned with the approach of “Risk aversion and Business Continuity”.

But as businesses face increasing competitive pressures to either innovate or perish, enterprises are increasingly demanding that their IT setups innovate, and play a key role in embracing technology innovation, support new revenue streams, and transform existing business models. This calls for a paradigm shift in the culture of the IT setup from “risk aversion” to “value addition”.  It is my submission that with the right approach they do not have to be mutually exclusive.

Process redesign to change from “Stability” to “Agility”

In a typical enterprise setting, the internal processes of the IT team are also aligned with the core goal of supporting mission critical systems and to ensure control and security at all times. This means that the process adopted for handling typical IT work, is designed with “stability” as the key goal. No change can be delivered without exhaustive testing, integration, and verification that there is no threat to data security and core business functionality. As enterprises move towards an “agile approach” to rapidly build, and deploy new software products and services, they have to adapt best practices, processes, and work flow to facilitate rapid IP development, which could be very distinct from the processes that are in place to support their core, mission critical systems. The redesigned agile IT processes must be based on speed, innovation, time-to-market, and capability to deliver tangible customer value.

Transition from an “IT mindset” to a “Product mindset”

The “IT mindset” of a typical enterprise will have the following characteristic features:

  • staffed by a core set of people in roles such as software developers, business analysts, and project managers and reporting to a CIO
  • focus on scaling, execution and serving the perceived business needs,  which could be vastly different from the real needs of the customer 
  • requirements are gathered, prioritized, and implemented in a roadmap
  • typically follow slow, waterfall processes

While this mindset can help you ensure business continuity and support mission critical systems, it is utterly incapable of innovation and serving the real needs of the customer. As Marty Cagan pointed out in Product vs IT Mindset[i], a “Product mindset”, is characterized by the following set of core practices:

  • staffed by a core set of people in roles such as UX designers, product architects, and product managers in addition to software developers, all with a passion for the product and the service, reporting to a product owner
  • focus on serving the direct, real needs of the customer
  • requirements or customer needs are discovered, implemented and validated with real customers in real-time, in a continuous cycle
  • typically follow agile, and iterative processes for product development

To withstand and survive the tectonic shifts in the business and technology landscape, enterprises must transform their “IT mindset” and develop a “Product mindset”

Remodel IT Governance

Another key element that needs to be transformed is the IT governance framework. As Gartner analyst Lydia Leong[ii] pointed out, the governance of a typical enterprise IT setup is based on

  • doing IT right
  • emphasis on efficiency, and safety
  • approval-based governance
  • price-for performance

While this governance structure is well suited for maintaining legacy, mission critical systems, it is utterly incapable of supporting innovation, and agile development which demands a governance framework based on:

  • doing IT fast
  • prototyping, iterative development and rapid delivery
  • continuous, process-based governance
  • value to business

To sum up, enterprises must adapt and acquire the cultural traits, mindset, process, and governance framework based on innovation and agility to fundamentally transform their IT setups. This will enable enterprises to leverage emerging technologies and deliver great customer experiences.

Adopt 2-speed IT strategy

Any enterprise which seeks to transforms its IT setup and change the various elements cited above will also need a 2-speed IT strategy to help it achieve its transformation goals. 

Companies like Facebook, Google, and Amazon are envied for the manner in which they deliver great customer experiences, which would be possible only with a complete alignment of their IT infrastructure and production environments with their business goals. Traditional companies struggle to achieve a similar level of alignment, as they are struck in a slower lane with their legacy systems and technology framework. To overcome these challenges, Mckinsey[i] suggested that businesses adopt a 2-speed IT strategy, with the following features:

  • Decouple the management of customer-centric front-end systems and applications from the management of existing transaction-oriented back-end systems
  • Deploy state-of-art digital practices for the front-end, consumer-facing applications

This 2-speed strategy will enable enterprises to build innovative products and services capable of delivering great customer experiences, without being constrained with the legacy of existing systems and infrastructure.

In my next blog, I will talk about the advantages of distributed development in enabling IT transformation.

 

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Steven ten Napel

CEO

 

[i] http://www.mckinsey.com/industries/high-tech/our-insights/organizing-for-digital-acceleration-making-a-two-speed-it-operating-model-work 

[i]     http://www.svpg.com/product-vs-it-mindset

[ii]    http://blogs.gartner.com/lydia_leong/2014/08/25/bimodal-it-vmworld-and-the-future-of-vmware/

 

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