Executive Briefing: The Future of the IT Organisation

Savannah Group and Leading Edge Forum recently hosted a breakfast briefing at Savannah’s offices in London to discuss “The Future of the IT Organisation”. Bill Murray of LEF presented key findings from a recent LEF research report, with a subsequent roundtable debate with fifteen CIOs/CTOs and CDOs on whether there will be an IT Organisation in the future.

This is a question that LEF have been asked multiple times in the past five or so years. In response, Bill and his colleague Glen Robinson interviewed senior technology leaders at a number of organisations renowned for advanced technology operations such as Netflix, Amazon, Capital One and Williams. The output is a report called ‘The Renaissance of the IT Organization’, examining what the technology capability of a future organisation will look like, what the stages are that technology groups evolve through and what tools and techniques can help manage the transitions.

What is perhaps surprising about even the most modern and advanced “technology” companies is that many were once legacy businesses with typical enterprise systems. Netflix was a logistics business for ten years with an offline DVD distribution service, and it was clear through speaking with them that they struggled with the same pain points that many IT leaders are facing today.

The Three IT Eras

 

LEFs research suggests that there are three main IT era’s; Enterprise IT, Cloud IT and Matrix IT. Enterprise IT is where most companies are, or have evolved from with traditional systems and structures, while companies that have moved into the Cloud era are taking advantage of evolving technologies and new ways of working. In the Martix ers, companies will need to develop a new mindset focused on realising advantage from disruption and positively embracing technology change.

In order to help understand them, Bill used the analogy of automobiles.

Enterprise IT Era

The example in this era is a 2013 Volkswagen Golf. It has 2,000 moving parts, and every 15,000 miles or so the customer takes it to the dealer where diagnostics are done by the garage and replacement parts are fitted.

Cloud IT Era

The example in this era is a 2017 Tesla Model S. It only has 20 moving parts, meaning a dramatic reduction in mechanical complexity. Rather than driving to a dealership, updates happen digitally at a point that is determined as the most convenient to the user by the AI.

Matrix IT Era

The example in this era is a concept car by Mercedes. It only has around 7 moving parts, reducing mechanical complexity even further. It has a modular design meaning the customer is able to change between a convertible, estate or a saloon whenever they want to, simply by driving in and out of a bodywork pod at a Mercedes dealership. In this era, the car isn’t owned by the customer.

Similarly, IT organizations have very distinct characteristics which define where and how they operate in the different eras:

 

Most organisations are currently 70% Enterprise IT and 30% Cloud IT. LEFs data and research indicates that it takes approximately seven years to move from the Enterprise era to the Matrix era. The single biggest factor in moving between these eras is not money but regulation.

Bill’s presentation sparked a discussion among the CIOs and CTOs in attendance about the challenges senior technology leaders face when trying to move their organisations IT structure out of the Enterprise era and beyond.

The Business is IT

One CIO commented that it is less about something happening to IT and more about something happening to the business. IT isn’t becoming different – the business is becoming IT. That presents a challenge as the business sets the agenda and dictates the pace, not the IT function. He commented that IT still can influence the business and that is what they should be focused on doing. In other words “The tail can’t wag the dog, but the tail can tickle the dog to help encourage it to move.”

Managing The Transition

There was agreement that it would be good to move to Cloud IT and jettison legacy technology, but that isn’t the brief from the business. Most businesses want to keep extracting value from their legacy systems, so CIOs and their teams keep sticking plasters on them to keep everything turning over. For businesses that bring in CDOs, they often get the shiny new stuff while the CIO is expected to keep looking after the legacy systems.

There’s a balancing act when driving an organisation forwards – the balance between the push and the pull. If it becomes too radical too quickly then the business will reject it. So how do you find that balance?

The Push-Pull Of Technology Innovation

One CIO was keen to look at whether machine learning could help identify what would likely be a successful product. This however was creating internal friction, as there is a considerable faction in the business that believes judgement of a successful product in their industry is more to do with intuition, and that a machine could never anticipate this purely through a data lens. The evolution that needed to happen therefore wasn’t technological but a shift in the employee mindset.

On the other hand, innovation can sometimes bind the organisation together. In one company, IT were developing experiments and involved the organisation within them. Within twelve months, the Marketing function had moved into the same office area as they related to the type of innovation and experimentation and wanted to be part of it. This in turn drove more interest in the IT function and helped facilitate the mindset shift needed to adopt new approaches.

It’s Not Just Technology Evolution – Its Business Evolution

With Amazon and Netflix it’s not all about the technology. It’s the customer experience – that’s what those companies really excel at. You can have all the apps you want, but if eighty percent of the organisation is going to stay the same then the end user experience isn’t going to be any better. It’s unlikely that technology alone will make a fundamental difference to the business.

Instead, sit down and analyse how you make your money. From that, develop the technology that makes the most sense to your future business state. The conversation is with the board about ‘what are we going to be when we grow up’, when we become the company that will survive in this digital era. A common problem in the IT function is focusing on the engineering inputs rather than taking a step back and asking what the business is trying to deliver. Doing this not only elevates the conversation but can unearth opportunities that might otherwise be overlooked.

For example, one business had formed a partnership with a ‘traditional competitor’ – something they wouldn’t have done in the past. It was a symbiotic relationship as they had the insights from being in the industry for a long time and could combine that with the technology that the business they were partnering with brought.

CIOs/CTOs Need To Be More Value Focused

Cathy Holley, head of the Digital and Technology practice at Savannah Group commented that when you read a lot of CVs of senior Technology leaders, under key achievements many of them have five bullet points that are all internally focused…. ‘We reduced data centres from 705 to 10’, ‘we rolled out SAP or re-engineered our supply chain’, ‘we changed the culture of our team and became more global in our approach’ etc.

Cathy said that if she then asked the CEO what that person delivered they would say (for example) that they developed an application that made the user experience better for their online store, increased repeat sales, and enabled them to open an office in Shanghai that serviced 3 million more people. Those five CV bullet points therefore reflected the internal focus that many Technology leaders have, and those types of people sit firmly in the Enterprise IT bucket. Technology leaders need to be more value focused.

What Next

It was clear that many of the challenges discussed are not going be quick fixes, and to truly accelerate technological innovation requires both the support and understanding of the business and an appetite from people within the business to evolve and refine their own processes . It is unlikely that a business will jettison a significant part of their technology legacy all at once, so managing the transition between stages while keeping forward momentum is perhaps the technology leaders biggest challenge. For businesses that get the balance right however, it can open the path to new collaboration or innovation opportunities that will be vital in the digital era. If you would like to find out more about “The Future of the IT Organization report”, then please contact Khal from Leading Edge Forum on khal@leadingedgeforum.com.

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