Managing IT's Changing—& Competing—PrioritiesBy Guest Author | Posted 01-06-2015
Managing IT's Changing—& Competing—Priorities
By Jean Holley and Suketu Gandhi
The role of technology is changing again. Over the past 25 years, technology has evolved from just keeping track of accounting, to handling transactions, to being primarily a mechanism for transactions and controls, as well as a function that allows companies to run their business efficiently.
Yet these roles—each more important than its predecessor—are small compared to the significant role technology is now taking on. With the force of today’s digital technology behind it, not only does IT have to run all these transactions efficiently, but it now must also serve as a key component for enabling the company’s evolving business model.
This dual role of technology—on the one hand, delivering the essential IT needed to run the business efficiently and, on the other, delivering the differentiated IT that enables the evolving business model—has forced two competing and completely different priorities for the IT function.
Focusing on delivering essential IT requires technology that's tailored toward cost-efficiency. Focusing on delivering differentiated IT requires technology that's directed at delivering the company’s new capabilities and customer experiences. Doing both at the same time is difficult.
Driven by the need to deliver both essential IT and differentiated IT, the information technology organization in many companies is struggling. For the most part, it does not know how to manage this major change in technology’s role. But it must learn quickly.
If IT is to continue to be relevant and hold C-level attention, it must fundamentally reframe how it thinks about what it does, and it must become flexible and agile in delivering products and services. It can start by addressing these four key IT challenges that, if not managed well, will undermine its future success: allocating capital, ensuring the right skills, delivering new capabilities and building the IT-business engagement model.
Four IT Challenges
These four challenges are underlined by a core issue that directly affects how IT approaches its work. With an essential IT project, the IT function works with a known-known problem: The company defines the problem, and IT designs and implements the solution to achieve the desired end-state.
With differentiated IT projects, IT does not know the end-state upfront because the user has defined the problem, which for IT is either a known-unknown or an unknown-unknown problem. Hence, IT has a limited ability to put a box around it and resolve it with a traditional approach.
Allocating IT capital: To better manage the allocation of its capital, the IT function needs to work with corporate leadership to create a new business model that specifies the percentage of IT dollars assigned to each part of the company’s needs: essential IT projects or differentiated IT projects.
Right now, most models are biased toward running the business—with about 90 percent of IT funds used for essential projects, and only 10 percent used for evolving business needs, such as developing new capabilities. But most companies need a different business model. Ideally, IT would spend about 30 percent of its funding on essential IT and 70 percent on differentiated IT.
To start building this business model, IT needs to take two steps: First, develop a clear understanding of where the company’s revenue comes from today and where it will come from in the future. Second, IT must learn how the company will operate differently in its evolving model.
Ensuring the right IT skills: Most IT functions today hire specialists—people who can optimize existing processes. But the workforce IT needs is dramatically different: It needs to hire people who offer more than an understanding of the business and an ability to solve known-known problems. They need renaissance people who are comfortable working backward from the users’ perspective to design products and services that give users the experiences they desire, rather than the experiences the company wants to force on them.
Basically, companies need employees who have an anthropologist’s understanding of how people live and work, combined with the skills of technologists who are deeply into social media, the cloud, analytics and other new technologies. This skill set will enable IT to solve the problems users face—even though, for the company, these may be known-unknown or unknown-unknown problems.
Companies should also hire IT people with cross-industry skills, which are proving to be much more valuable today than in the past when companies hired primarily within their own industry. And they might want to hire IT people with the ability to fill roles outside of IT in other functions. This reverse-flow-of-talent trend is opening new career paths for IT leaders, while enabling companies to attain significantly more value than the traditional flow into IT of people without technology experience.
Managing IT's Changing—& Competing—Priorities
Delivering new IT capabilities: What process is best for delivering new IT capabilities? The answer depends on whether the company is struggling with a known-known problem (essential IT) or with a known-unknown or an unknown-unknown problem (differentiated IT). The difference between solving these two types of problems is vast and requires separate, distinct types of IT processes. And since both essential IT problems and differentiated problems must be solved now, IT needs both processes.
When the problem is known, the function needs a traditional process for gathering requirements, creating the design and rolling out the solution. Often this work happens over a long timeframe—from six to 12 months, typically.
When the problem has an unknown component, a much more iterative approach is needed. With it, the IT function basically designs the end goal in a short amount of time (perhaps two weeks), and then, over a much longer timeframe (perhaps 12 weeks), works with the user, gathers feedback and ensures that the business value is realized.
Then the process starts over again. This work is ongoing, never-ending and repeated every few weeks in a continuing cycle of rapidly delivering new capabilities.
Building the IT-business engagement model: The IT-business engagement model must be different in today’s digital world than it was only a few years ago. Previously, the company’s leaders would tell IT what they wanted and would be confident that IT would deliver it.
Now, however, leaders don’t know what digital technologies can do for the company, so they don’t know what to request or what to expect from IT. Therefore, they must change the way they work with IT. They must replace their old, fragmented or cyclical business engagement model with one that allows constant, ongoing engagement with IT.
Most companies are still coming to terms with the changing role of technology. But a few understand how significant the change is and are addressing the four challenges that would otherwise undermine their future success.
Financial services companies are leading the way. They are making changes—such as enabling customers to deposit checks merely by taking pictures of them with their smartphones—that are completely redoing their approach to business and to delivering IT services.
Other companies are also altering the way they do business. One restaurant chain has stated that it no longer just offers food; it also gives customers a digital experience that's second to none. Since the digital and food requirements of this restaurant’s many customer segments vary, it adjusts both its menu and digital offerings for specific times of the day and week to best meet customer demands for what they want to eat and do digitally while in the restaurant.
Among the lessons these companies have learned is that IT must rely heavily on analytics at every level, so it knows exactly what is required to deliver a specific product or service. IT has to measure everything it does internally and then use the information from this measurement to optimize how it delivers products and services.
Furthermore, using analytics to measure every external aspect of the project is no longer an option. Instead, it is a core element of how the technology organization must work if it is to deliver differentiated IT and play a role in enhancing the business.
These companies have also learned that the IT function must address all four of these IT challenges at the same time if it is to be successful in the future. It can’t, for example, allocate additional funds to handle projects relying on new technologies without also adding employees who have the skills to work with these technologies. Without overcoming all four challenges at once, IT will be less capable of delivering either essential IT or differentiated IT.
IT stands today at a critical crossroads, and the road taken will determine whether the function remains relevant in the future. One road—that of delivering only essential IT, as it has done in the past—will certainly lead to the function’s becoming downsized or even outsourced completely.
The other road—that of providing both essential IT and differentiated IT—will make the function more relevant to the company’s leadership and establish its role in helping enable the company’s evolving business model.
The choice seems obvious. But choosing the second road requires flexibility, agility and the ability to manage the changing role of technology.