CDO: Consultant, Fund Raiser, Change Agent, Technologist

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Time will tell if the CDO is the White Knight, or next Career-Is-Over Victim

It’s still early days for the Chief Digital Officer (CDO) role. At first glance, it might seem to be a rebadging of the CIO’s or CTO’s job, but maybe it’s something quite different, possibly more like a business architect or transformation consultant. Is it a permanent or transient role?

Here’s a perspective on what CDO might do, drawn from my experience in a traditional bricks-and-mortar firm, with over 100 years of history:

The CDO lives and breathes the business vision: he or she shapes and re-shapes the vision and in parallel, makes it reality

The CDO keeps a finger on the pulse of the current business ‘Center of Gravity’ and is ready to adapt to changing business circumstances.

The CDO must be comfortable with uncertainty and, at the same time, be able to establish projects that deliver incremental change; he or she is always searching for ‘no regrets’ increments that act as proof-points for hypotheses and strategies. Such projects are designed to cope with the many Rumsfeldian ‘Known Unknowns and Unknown Unknowns’, the blockers for decision-making, and the often quoted excuses for inactivity.

The CDO’s projects and programs are designed, from the outset, with regular course-correction in mind. The CDO must also be prepared to make more radical changes in direction: pivoting strategy to take advantage of emerging opportunities or combat new threats.

The CDO role walks the fine line between management consultant and technologist

The CDO is a master of business change first, and a technologist second. That said the CDO must be adept at spotting useful technology-based patterns, and encourage experimentation: new uses and sources of data, the tools to manipulate or visualize it, and new technical design patterns that suit the highly distributed, autonomous digital world.

The CDO is a passionate fundraiser for, nimble, ‘safe-fail’, projects that encourage bold ideas and nurture innovation.

The CDO is also a champion of architectures that design in the expectation of change from the outset. The days of the Big Up Front Design are over. Digital strategies must embrace the notion of organic, emergent behavior. CDOs with an appreciation of economics, complexity science, and systems theory will have a distinct advantage. They understand that the digitally enabled world is, by nature, adaptive. The old, deterministic, thinking behind traditional ‘ERP-like’ systems, are too fragile, ponderous, and closed-loop in nature. They simply don’t work in a world of massive-scale dynamic interactions between people and their digital agents.

The CDO thinks about: values, trust, services, information, and technology – in that order

The CDO should be able to deliver concise distillations of complex matters. He or she must be a great communicator: an engaging and ‘trust-winning’ storyteller and consummate networker. CDOs don’t necessarily have to be the smartest person in the room. They surround themselves with a strong network of innovators and experts. They possess strong facilitation and active-listening skills, they nurture and amplify ideas and insights from others.

The CDO assesses the impact of the democratization of data, information and knowledge

Today, everyone in the business has a duty to become tech-savvy; those who aren’t will soon become sidelined. So a large part of the CDO’s role is as a coach in technology-literacy. He or she also encourages his colleagues to think about the ‘What’ before the ‘How’ to avoid the rush-to-solution pitfall.

CDOs are also naturals at abstraction who can focus attention on the value-delivering services required. Above all, they champion the dissemination of data, information, and knowledge, internally and externally. This requires regular context switching between stakeholders’ perspectives: those of customers, shareholders, regulators and other ‘duty-of-care’ communities.

‘Going Digital’ affects the whole organization: front, mid and back office. The CDO is a passionate silo-buster; a joiner-of-dots. He or she has a strong grasp of Enterprise Architecture and how to balance pragmatism and short-term goals with the longer-range: stakeholder values, organizational & technology structure, business services portfolio, and their lifetime Total Cost of Ownership (TCO). He works hand-in-hand with the CEO, CMO, COO, CIO and other C-levels to minimize ‘initiative’ misalignment.

What the CDO isn’t

Maybe the best way to describe the CDOs role is to say what it isn’t:

  • A technology cost-center director
  • A marketing/communications director
  • A corporate strategist
  • A project/program director
  • An IT architect
  • A compliance specialist
  • A cyber security specialist
  • An industrial engineer/BPM expert
  • A business analyst
  • A data scientist
  • A social media/web/mobile channel expert.

The CDO must have a well-rounded knowledge of the above disciplines. He or she, however, works with subject experts to make business change happen: herding them all towards the new digital Business-as-Usual.

The CDO is expected to see the world through a fresh pair of eyes and be an agent of change; he weaves ‘digital’ mindfulness into the fabric of the business and its customers and suppliers. His or her mission is to implant, and then grow, an enterprise-wide, data-rich nervous system, which will allow the business to compete by making best use of its digital and physical assets.

I’m sure there are many CIOs and CTOs out there who would claim they’re already acting in that role. In the end, of course, the label doesn’t matter – it’s all about the outcomes.

The question is: will the aspirations of this role prove too challenging for ‘CDOs’ within traditional business? Will the brave individuals in this role become yet another victim of ‘career-is-over’ mentality born from businesses’ frustration with all things ‘IT’?

Business leaders and managers must wake-up to the fact that their world is now digital. They can’t expect an individual to somehow sprinkle ‘digital foo-foo dust’ over the business and believe all will be well. Those companies that are so-called born-digital (Amazon, Google and others) get this. They know that everyone in the business, from the CEO down, is in part a ‘CDO’.

I suspect the CDO position might indeed be transitory. Those companies that truly understand the scale of the transformation will succeed by embedding ‘digital’ in the corporate mindset, and most importantly within the decision-making of the executive team. Those that don’t, will play lip-service to the role until they fall back into old habits: ‘it’s that IT guy’s fault’ blame-game (regardless of how many times we say the CDO isn’t an ‘IT’ role).

Or worse, they wake up too late; asleep while the world changed, their customers took their digital agents to play elsewhere.

This article draws on the author’s experience of working, over the past 8 months, with a ‘Digital Transformation’ director in the Energy sector.

Have the business leaders and managers in your organisation taken ownership of their digital environment? Or can we expect the CDO (or a “CDO like” role) to become a permanent fixture in many organisations?

Inside-Out versus Outside-In

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Providing the social tools and IT environment the front line needs

In my last article, What to Do When Your Business Model Changes, I concluded by stating I would define the emerging focus and need for ‘platforms’ to provision and manage the use of technology within an enterprise in a later article. However, first it is necessary to add one more demand, or requirement, that is linked to the change in business models and relates to another of my articles, Free Your Users (or They Will Free Themselves). The subtitle for that piece is The Vexed Issue of Social Media and BYOD in the Workplace, which leads to this article about the biggest driver for change – people – and the manner in which they are using technology to work in new ways.

An important element in the article on business models that I want to build on is the concept of “Inside-Out” versus “Outside-In”. These terms define the difference between internal business processes focused on supporting some degree of external web access, Inside-Out, versus externally focused cloud, mobility solutions, apps, and of course, social tools (all which need restricted internal access), Outside-In.

After over twenty years of optimizing internal processes and workflows, the manner in which people work inside the business is fully understood. Linking the business activities of the back office with the Inside-Out focus of technology helps to bring technology and business together.

The disruptive technologies of cloud-based applications, delivered through browsers and apps to a variety of devices, are all part of the external environment and linked to the role of front office. New business models are focused on taking these external capabilities and redefining how to find, win and deliver new forms of competitive offerings.

Front office environments are focused on people who create value through external interactions to win and deliver business, people working Outside-In. This is unlike the back office where the focus is on process removing people and cost.

Outside-In technologies enable the people in the front office to find and share the resource they need to improve their performance within these new business models. “The Future of Work” is a term used to describe the manner in which these new technologies are deployed in new optimal ways.

Much of the confusion about the increasing use of social tools, Bring Your Own Device (BYOD) programs, and trend to bypass the IT department to use external cloud solutions, arises from the disconnect between the Outside-In work practices of the front office and the Inside-Out practices of IT’s traditional back office deployments.

Understanding this and refocusing on the new working practices of the front office is a necessary break through in reacting to the inevitable changes already under way in most enterprises.

Whether it’s called BYOD, Shadow IT, Business-Technology, or Consumer IT, there is a common change in the younger generation from around 35 years of age down who have grown up with technology and see it as a lifestyle tool. This is markedly different to the generations before whose relationship with IT was most likely forced on them, directed to use a locked down enterprise PC with a narrow selection of relatively unfriendly monolithic applications. The difference in approach to technology can be broken down into nine common attitudes to different aspects of work.

 

Source: Adapted from IBM report ‘Driving Workforce Productivity by Enabling Social Connection’ (June 2009)

Of course nobody is an exact fit to all the nine behaviors but this table goes a long way towards explaining some of the internal tensions in an enterprise.

Front office roles tend to employ younger people whilst senior people controlling the enterprise through its back office processes tend to be in the older two groups.

Most of the senior management will have reached their current level through the business model revolution called Business Process Re-Engineering during mid 1990s when Enterprise Resource Planning (ERP) was developed to make integrate the disruptive technology capabilities that networked PCs introduced into the mainstream of the business.

Business process engineering and the redesign of a firm’s business processes, workflows and the technology that supported them highlighted the need for a new form of enterprise communication along the new processes, the introduction of email! The redesigned business processes deliberately crossed and broke up the old departmental management structure substituting a process based management structure in its place. Email was seized on as the replacement for the office memo and an efficient means to communicate with the known and named people in each process.

Today email has become one of the most significant tools used to manage an enterprise.

Actually, we should probably say “manage back office defined processes” because as many front office staff would be quick to point out it doesn’t help them to try to find answers to external questions, events and opportunities. The ‘structure’ of email and the mapping to names, rather than knowledge, is exactly what Inside-Out back office needs. A senior manager will want to know who is responsible for what in the core processes. However, for a front office worker the limitations of this are severe; after all if their role is externally focused they simply will not know who they should send which question on what topic to if it doesn’t fit with the enterprises internal processes.

The new Outside-In business models, supported by social tools and collaborative working, need answers to questions based on their topic or content, without having to determine which person to address an email too.

The issue is to integrate these tools and work practice into a business in accordance with the nine characteristics of the ‘technology conscious generation’. This almost certainly requires the front office staff to adopt BYOD and the Outside-In model.

At this point it should be clear as to what, where and why a change is taking place in the tools being used by employees. The strategic nature of this change, from an enterprise point of view, should also be clear.

The new focus for an enterprise is to reform the front office capabilities to enable it to support new competitive market demands. As such, the adoption of new working practices will be a given.

More particularly, it should enable a thoughtful CIO to decide when and how to accept the introduction of new technologies, using the concepts of Inside-Out and Outside-In as the basis for technology separation.

Its been a big topic to cover but hopefully it brings out the key issues, relating them to the immediate tactical needs to address the issues being raised by the use of new technologies by employees, usually backed by their younger business managers. However, it also raises some very critical issues about enterprise management and the governance of its technology empowered employees. This is where “platforms” enter the equation.

Creating a new business platform is the strategic answer, a platform that will enable the management of people and their use of apps and devices in enterprise business activities, all in accordance with business rules established by management. That’s the topic for the next article, bringing together all the elements of my previous three.

As a closing thought, this is the beginning of a longer journey that will see radical change in the manner in which an enterprise functions. Businesses will become truly driven by the need to find optimal responses to external market events, opportunities, and requirements. Thought leaders are already actively providing research papers and presentations that really address a whole redesign in what and how we work in the long term. To understand exactly where this may take the future of work, listen to John Seddon make a series of logical connections that make it hard to deny the manner of the change.

Design Anthropology and the IT Leader

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Leveraging the synthesis of design practice and the study of human culture and behavior

Who is responsible for design in your IT department? If your answer is your Architecture or Business Analyst teams then you may be missing a vital factor. Take a moment to reflect on what design really means and who utilizes the outcome.

Design is led by the individuals and groups that populate your organization’s ecosystem; in internal departments, trading partners, service providers and customers. They grapple daily with sets of increasingly complex information. Where they may have once begrudgingly accepted what was offered, modern consumers will not sit idly by if presented with systems and processes that are increasingly misaligned to their needs.

This shift in behavior means how you manage design (in particular, your service design) must change. Now is the time for the CIO of the Future to consider design anthropology – a powerful, emerging practice that blends the study of humankind with design thinking.

Why the old ways aren’t working

Business problems are often resolved with the materials and capabilities that are on hand. This makes sense if operating in a steady state. Leveraging existing assets means that organizations can make the most of what they have already invested in.

The problem is that an organization does not operate in isolation. Their operating environment is influenced by changes in the competitive landscape, the emergence of new technology and shifts in social behavior.

These changes are not under your control. As a leader you will find yourself increasingly unable to respond to such chaotic and fluid influences with binary and linear solutions. A direct technology or process response will be insufficient. Relying on history (doing the same things you’ve always done) or adopting best practice (copying what others have done) will burn a lot of energy and resources with an ineffective result.

The “I” in CIO is not solely about the provision of information. It is about how it is gathered, shared and applied for the best outcome.

Consider the following trends:

These trends create a major challenge for the traditional practice of design. An isolated, once-off exercise undertaken at the beginning of a project will not produce a sustainable and effective result. This is where design anthropology comes in.

Introducing design anthropology

Systems analysis and design is generally recognized as a defined set of processes followed by individuals or small groups who work in relative isolation from consumers. They produce a concept or specification that is then handed off to engineers to be built. This rigid, closed-door approach results in design outcomes that are no longer meeting consumer needs.

In contrast, design anthropology brings together the dynamic study of people and their behavior with the practice of design. According to Design Anthropologist Julie Cook, key aspects of this practice are that it is:

  • Multi-disciplinary; the diversity of perspective and behaviors is critical
  • Group and socially inclusive; opinions matter strongly and must be identified and captured
  • Critical that participants and leaders embrace ambiguity
  • Taking a holistic, systems view of the organization
  • Beyond “design thinking” and goes to the origins of consumer action and response
  • Radical, in the sense that it is transformational and revolutionary

Supporting this approach, Cook says, is the application of the social science of ethnography – the “collection of data about people through direct observation and interaction”.  This change of focus – from what people say they do to what they actually do – is the ignition point for true innovation. Without this, leaders will be faced with a growing gap between what the consumer desires and the solutions being offered to them.

Expanding the concept of the “consumer” to include the wider workforce of an organization results in a shift in thinking. Team members are no longer seen solely in their role as a “utility” where the most productivity can be yielded, but as consumers of the data, tools and processes that they work with. This is increasingly the case in service-based organizations where people, to put it bluntly, are an organization’s raw materials and processing machines rolled into one.

If the creativity and curiosity of employees is constrained by traditional management methods in the workplace, then it will find ways of manifesting elsewhere. Ideally you want that energy to be directed inwards, to your organization.

Applying the principles

It takes a fundamental shift in how you lead your team to introduce and support the principles of design anthropology. There is no fixed recipe, however Cook provides some essential guidance:

  1. People and coaching. The ability to lead people through change is an increasingly sought after skill. Changing the way things are done consumes considerable time and effort. Your people will be watching you, and taking a cue from how you are seen to support their design approach. They have an emotional value system that is influenced by their consumer experience. Be aware of organizational norms that may have a negative influence on them, such as feeling the need to conform to a set of pre-existing rules and patterns of behavior.
  2. Systems thinking. Design thinking and the impact of consumers cannot be pinned down to a single process or department. Any organization is a set of interdependent systems. Influence mapping tools together with open and critical brainstorming help to uncover the impact of new ideas on far reaching aspects of your organization and the environment it operates within.
  3. Data valency and the missing context. In chemistry, valency refers to the number of bonds or connections an atom can make with another to form a molecule. Valency is an important concept to consider with collections of data. By itself, the data forms an incomplete view of a particular, often narrow, aspect of your business. Go looking for how this data can be joined with other sets and experiment with combining them. Fresh information will emerge as a result, similar to that of a chemical reaction. Use this to explore different outcomes that a single set of data is unlikely to reveal.
  4. Measurements. In a traditional process measurements are made on an absolute (it fits the criteria/tolerance, or it doesn’t) basis. Most organizations will expect formal measures to support the investment required to achieve the outcome. However this must be complemented by measuring consumer sentiment, design success and emotional values. This is especially the case as a result may be many factors removed from the original problem being studied. Observation of how consumers actually use the resulting solution, together with conversations which capture their delight, displeasure or disinterest in the outcome are also important.
  5. Embracing workaround. As frustrating as they can be for a CIO, the implementation of workarounds, also called “shadow IT”, is on the rise. Cook advises that CIOs should fight off their initial reactions to shut them down, as they can be an indication of what people really want. In some environments it may be necessary to do this for compliance and control reasons. However, in effect what has been created is the voice of your consumers saying “this represents what we want.” The CIO of the Future has a role to play in ensuring a continued dialogue as well as supporting initiatives that produce and sustain new insights in an organization. In the emerging workforce where team members cannot recall a time before pervasive internet and personalized devices, this will be an increasingly tough battle for a command-and-control CIO to fight. But it is not a declaration of war; it is a conversation starter about what is desired and needed.

Leaders in design anthropology practice include the Mayo Clinic, Xerox, IBM and Intel, in particular through the work of Genevieve Bell.

How would you go about applying the principles of design anthropology to your organization? Have you seen examples of where it has produced surprising results?

 

New Business Models Need New Approaches to IT

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How regulation may redefine the role of technology in business

I’ve been watching with some interest the discussion around who will “own” information technology within the emerging digital businesses: those new businesses created in response to ubiquitous IT, communication networks and social media. Many of these arguments have a strong feeling of a turf war, positioning different areas of the business as the most obvious group to own and manage IT across the business or advocating the creation of a collection of new technology-based C-suite roles to paper over perceived limitations in the skill set of established IT departments and CIOs.

Both of these arguments, however, seem to be only addressing the symptoms and not the cause of the problem.

The role information technology plays in business has changed. In the past IT was a tool to reduce costs and help a business grow. These new digital businesses use technology to create value, to engage customers and partners and to work in new ways. Information technology has become a capability that is woven into the fabric of a business, rather than an asset we deploy to achieve scale. We’re not moving around responsibility for IT: we’re building new business models that use IT in new ways.

Instead of focusing on who the new owner of IT might be, the question we should be asking ourselves is “How does a digital business consume (govern) information technology?” This is an important question, and one that we need to delve into more deeply. (Indeed, I like to keep posts fairly compact but this one post was roughly 2,000 words by the time I was happy that I’ve had covered the issue.)

The major point that the debate has been neglecting is that, in the long run, governance and not perceived importance nor the size of an existing group’s budget IT, will determine how information technology will fit into a digital business.

Government regulation for financial, anti money-laundering (AML) and counter terrorism-financing (CTF) reporting will drive both public and private business to create governance models that will enable them to show auditors that they can trust the transactions that flow through the heart of their digital businesses. It is these governance models that will determine the future role of IT in business.

The end of the IT department?

Ubiquitous consumer computing and communications technologies – such as the smartphone you probably have in your hand – are changing what it means to be a well-managed business. The best way to think about this change is to consider it as an expansion in value space for IT.

We used to define the value of IT in terms of cost savings, net present value (NPV) and time to payback. This is the world that established IT departments have developed deep expertise in: IT as a tool to drive scale and reduce costs by automating data collection and processing.

New technologies, however, are more focused on enabling companies to engage with customers, employees and partners in new ways. This might be the table touch-application that consumers use as a second screen while watching a sports event, or it might be the smartphone application that blurs the line between the online retail and in-store experience. It might also be tight integration into Facebook or other third-party systems, or even the development of a public API, to allow customers to interact with the company across a range of platforms, many of which the company does not own nor control.

These new technologies don’t provide cost savings, nor can the benefits that they bring can’t be captured by a NPV calculation. They’re best thought of as creating new sources of business value.

Traditional IT budgets are in decline, driven down by the migration to cloud and other on-demand solutions. Most IT departments also have little experience in the new digital business technologies and struggle to fit them into their existing software development and service management processes. At the same time the marketing and sales teams, the parts of organizations that interact directly with customers, are rapidly ramping up their IT spend, leaving the IT department behind as they experiment with these new technologies.

This raises the obvious question in many peoples’ minds. Will the role of the IT department expand to include these new technologies (technologies which many IT departments clearly struggle with)? Or will the ownership of IT in business shift to a new group in the business (either the marketing department, who are on track to overtake IT as the largest spender on IT in the business, or will a new department be created, one that subsumes the existing IT department?).

The future role of IT

As Andy Mulholland pointed out in a previous post on CIO of the Future:

The fundamental question we need to ask ourselves is not “What is the role of the CIO and the IT department?” This is something that is already well defined and understood. The question we need to ask ourselves is “What role should technology be playing in the business?” 

The traditional role of IT is in decline. The IT department was created to procure and maintain the expensive IT assets that many businesses needed to grow into the global corporations that we know today. Now these assets are being swapped for on demand services, services that many lines of business feel comfortable procuring on their own. At the same time new technologies are being used in new ways to create value, rather than to simply reduce costs.

The challenge facing most IT departments is what to do about this decline.

The challenge for all businesses is to understand what the change means for the business as a whole.

IT is no longer a monolithic asset that will be managed by a single entity in a business, so it’s silly to wonder who will be the “owner of IT”, who will make all decisions on how IT is procured and used across the business. The value space has expanded, and we’re using IT for a lot more than simply reducing costs. Different lines of business use technology in different ways, requiring different skills and different techniques to define and measure value.

The question we need to understand is: How will the management of IT fit into future governance structures across the business?

The failure of (many) Chief Innovation Officers

It’s often thought that seats at the C-level are created for those things that a business deems most important. Finance is obviously important, especially for a public company, hence the CFO. If information technology is important then, by extension, a company will have a CIO, and so on.

While this trend might be true in the short term, in the longer run being seen as important is not enough.

There have been many roles created at the C-level, such as the Chief Innovation Officer, which have come and gone in many companies. They failed to find something to anchor themselves in the organization, something to provide these roles with the authority they need to last beyond the preferences of a single CEO or the latest trend in business management practices.

The thing that anchors a senior role in an organization for the long run is governance, having decision rights over and being accountable for a resource or asset essential to the operation of the business. The CFO is the most obvious example, with the regulatory requirement for a published and externally audited set of accounts forcing the vast majority of public businesses to hire a CFO.

The failure of many Chief Innovation Officer roles can be attributed to a lack of decision rights: they didn’t fit into the governance model for the organization. Other members of the C-level simply worked around them, as the Chief Innovation Officer didn’t control any the resources or assets the other members of the C-level needed to be successful.

What will determine the role of IT in business?

So what governance requirements are going to shape how IT fits into a business? What forces will determine if IT will have one owner or many, and who this owner might be?

Two examples spring to mind:

  • Existing regulations for public companies to publish externally audited financial reports
  • Emerging regulations for public and private companies to support government and international AML and CTF programmes 

External Audit

External audit is an obvious candidate. With marketing departments going rogue often there’s only a tenuous link between what’s happening at the coalface and a company’s chart of accounts. One day the auditors will come knocking, and they will want to be able to trace a transaction all the way from the point of purchase (which well may be for a non-standard product procured via a widget in a social media platform) through to the company’s general ledger.

One great example of this challenge is from a large fast food chain in Europe.

The chain found itself confronted with increasing customer disloyalty and declining revenue. The firm’s old business model wasn’t working anymore as consumer behavior had changed. Rather than its brand being a beacon used to consumers to plan their day – “hey, let’s grab a quick snack there before hitting the clubs” – it had come to represent a predictable and consequentially uninteresting experience. Consumers were turning to recommendation services, accessed via their smartphones, to find somewhere more interesting to meet for their pre-club snack.

The firm’s response was to renovate its restaurant to create a more pleasant café-like atmosphere and to introduce a sandwich of the month to make the menu more dynamic. Consumers would find the new ambiance more to their liking and desire to try the latest sandwich would draw them in.

This is a situation that would make any CIO sit back for a moment. Every month there would be a new product on the menu for customers to try. This implies changes in everything from the till back through the supply chain to the new collection of suppliers required to support the new offering. This sort of constant business process churn will put a spanner into the works of many core systems, causing the CIO to push back.

The response from the fast food chain’s marketing department was to go rogue. All the technology required to support the changing menu was implemented and maintained by marketing, away from the IT department. The only integration between marketing and core IT systems would be a spreadsheet capturing marketing’s monthly profit and loss that would be manually uploaded to the general ledger.

Many firms are finding themselves in similar situations: their marketing department is responding to (what it sees as) unstoppable market forces by implementing significant IT solutions away from the IT department.

At some stage the external auditors are going to come knocking. They’ll want a complete picture of how transactions for these new offerings are generated and managed across the entire business. The business will not be able to provide the auditors with information they demand.

Anti Money-Laundering & Counter Terrorism-Financing

Another, less obvious, candidate is anti-money laundering and counter terrorism financing regulation.

Recently there has been an explosion in the number of privately managed complementary currencies. Some of these currencies are used within social networks and games to purchase services and virtual products. Others, such as Bitcoin and similar “cryptocurrencies”, are designed to supplement or even replace sovereign currencies.

As these currencies have matured they have begun to attract organized crime. Korean police, for example, captured the leaders of a money-laundering group for a Chinese gold farming ring targeting Korean online games. The foreign affairs bureau of the Seoul Metropolitan Police Agency said in their press release: “We arrested two individuals; including the ringleader who is a 37-year-old man named “Jeong”. Jeong’s ring purchased in-game money in China … and then cashed the money through domestic game item brokerages. They then illegally wired a combined 38 million dollars from Korea to China.” Jeong and his ring reportedly sold the game money illegally produced in China using cheap labor and virus programs.

The anonymous, peer-to-peer nature of Bitcoin is also attractive to criminal groups. The FBI stated that “Bitcoins will likely continue to attract cyber-criminals who view it as a means to move or steal funds” while the Washington Post labeled it “the currency of choice for seedy online activities”. Services are also emerging which facilitate illicit activities, such as Bitcoin “mixers” (such as like Bit Laundry) where Bitcoins and cash are exchanged for “clean” ones, typically for a a 1% transaction fee.

As businesses, even privately held businesses, integrate themselves into this new commercial environment they find themselves increasingly subject to AML and CTF regulation.

Create a complementary currency for exclusive use by your customers (even a currency that is simply “points” that can be traded for “services”, or possibly even something as seemingly innocent as pre-paid mobile minutes) and you will need to prove that your business and your currency is not being used to launder money or finance terrorism. Integrate your business with a complementary currency provided by a third party and the same regulation may apply. Even simply accepting Bitcoins as payment (which necessitates integrating your business with the Bitcoin network) might subject you to these regulations.

The future shape of IT in business

While the final shape of IT in business might be up for debate, we can see that governance will have a large influence on what this future shape might be.

Regardless of how IT assets and services are purchased and managed, we can see that regulation is a strong driver to create a single C-level role which is responsible for ensuring that all technology across the business is used in a way that supports the firm’s regulatory needs. This is a role similar in nature to that of the CFO, though the domain of expertise will differ significantly.

All CFOs are accountable for a firm’s financial reporting, while good CFOs will also work across the business to ensure that all lines of business are extracting as much value as possible from the financial reporting and financial assets that own.

All members of this new C-level IT role will be accountable for the firm’s transaction reporting, while the good ones work across the business to ensure that all lines of business are extracting as much value as possible from the IT assets and services that they own. This is a different skill set to those required by the current CIO (IT asset management), CDO (web and mobile) or CTO (technology development).

Most businesses allow the lines of business to manage their own budgets, though the head of the line of business is expected to have the skills and expertise do this and they do it within a governance and reporting framework managed by the finance department.

A similar arrangement might emerge for governing IT. This suggests that the head of each line of business will need to acquire the skills and expertise they need to manage the IT that their department needs. It is unlikely that we will need to create a new set of C-level roles to manage different areas of IT.

How is your business coping with the transformation required to become digital business? Do you have a new IT governance framework in place? Or are you experimenting with different options, such as creating a CDO?

 

What to Do When Your Business Model Changes

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The role of technology in driving innovative business models

The fundamental question we need to ask ourselves is not “What is the role of the CIO and the IT department?” This is something that is already well defined and understood. The question we need to ask ourselves is “What role should technology be playing in the business?”

Digital Business

In previous articles I addressed the questions of Must the Business Always Bypass IT When It Wants to Innovate? and Free Your Users (or They Will Free Themselves): The vexed issue of Social Media and BYOD in the workplace. Both questions focus on the challenge of responding to new business drivers coming from outside the traditional requirements and role of the CIO (and of the IT department), as we would usually understand them, based on the role and experiences of the last 20 to 25 years.

This piece asks the question “What role should technology play in business?” This is a larger question than the one currently hanging over the role of the CIO and the IT department. This is a bigger question, a question that starts by asking what role technology is will play in the new “innovative” business models that are emerging. 

In short, we need to approach how technology will fit into what some call Digital Business, with fresh thinking based around a set of new and very different business requirements. At the core of this change is the pervasive nature of technology in society, which has resulted in people using technology to redefine their lives. This is not just shopping from a website; it’s a lifestyle change in where and how we find information and how we choose to act upon it.

This shift in our attitude to technology is frequently called “Consumer IT”. The reality is that people are driving the uptake and use of technology in business to do business rather than IT professionals. This was at the core of my last article, Free Your Users (or They Will Free Themselves).

In this piece I want to move on to the theme of “innovation”, currently a popular term with as many interpretations and mismatched understandings as the technology elements that go with it.

Innovation, but not as we’ve been doing it

Most IT departments pride themselves in being innovative and can rightly point to a track record in assessing and deploying year by year continuous improvements by “innovatively” adopting new technology. However that’s not what a business school would mean by their use of the term. Instead they would add two key words that provide some increased clarification: Innovation in Business Models.

This difference can be clearly expressed if we go back to the arrival of Amazon and compare it with the then US leader Barnes & Noble response to the emergence of the internet.

Barnes & Noble added a website enabling customers to order books online. For their existing business is concerned with increasing channels to market for incremental business, with the majority of the business model still being unchanged, focused physical locations carrying stock for walk in customers and browsing.

Amazon fundamentally rethought the business model of selling books and changed it from being based on bookstores with their overheads and limitations on stock carried.  Amazon took advantage of ubiquitous use of technology in the hands of consumers to allow them to browse and buy in a manner that opened up a whole range of new possibilities.

You can argue that the final point in the revolution was the advent of the Kindle and dropping physically printed books for electronic editions, that truly is an ‘innovation in the business model’.

Amazon still has an internal back office carrying out processes under the best processes of IT, but its business model to find, win, gain orders and more particularly create long term customer relationships with repeat business is based on using technology “outside” the “internal” focus of operating the business associated with IT.

New business models break old assumptions

In the first article in this series – Must the Business Always Bypass IT When It Wants to Innovate? – I provided a breakdown of nineteen recognizable core business models that are frequently used as references for the possible digital business options and their innovative business models.

Source: Mark W. Johnson (2010), Seizing the White Space, Harvard Business Press

There are a number of ways to define digital business. The major points are:

It is interactive between participants to shape what is achieved.

  • It is collaborative in the manner that people interact to share experiences and comment on products or experiences.
  • It depends on apps, browsers and clouds.
  • It occurs outside the firewall and away from the enterprises internal systems.

You can add a lot more to this list, but these main points tell us why the hard won experiences of delivering internal enterprise transactional processes safely isolated from the external world by the firewall on client-server technology simply don’t transfer well, if at all, to the new world and the support of innovative business models.

McKinsey tell us in a recently published report Bullish on Digital  that 30% of major businesses have, in recognition of this, appointed Chief Digital Officers (CDOs), though there are several other titles around that equate to the same role as well with Chief Innovation Officer being the main one. You can learn a great deal more about the role and actions of a CDO at their association website CDO Club.

Does hiring a CDO change anything?

However, you are reading this as a CIO so thus far this is not an encouraging message! Let’s recognize that the CDO is effectively just another manager in the business who needs technology to make their operational and strategic requirements to happen. Okay, so they are a technology literate manager with a strong grasp of the topic, but the question is how to define roles and responsibilities within an enterprise to make it coherent and operational successful.

A little over two years ago I wrote in my CTO blog on the Capgemini site about this topic around the title “Inside-Out” versus “Outside-In”. The ideas in the post appeared in a full Capgemini white paper at the beginning of 2012 entitled The Cloud; Time to Deliver which is available on Slideshare. Rather than rewrite the paper here, can I suggest that this white paper should help you to understand and build a realistic approach that combines both.  More recently an interesting update on Inside-out and Outside-in, linked to SAP and ERP, has been posted on the Capgemini Capping IT Off blog site.

Innovation in technology vs. innovation in business model

So let’s end with a summary of what this means and the link to the opening paragraphs of this blog about “innovation” in the IT operations versus “innovation in business models”.

Firstly “Inside-out” defines the traditional role of IT in providing the systems to support the “internal” or “inside” the firewall operations, with a secondary focus on providing a limited and controlled set of accesses externally, or “outside” the firewall. The new business models depend on using technology externally or “outside” the firewall, with a secondary concern to provide limited access internally, or “inside” the firewall.

If we now apply this to cloud technology “innovatively” then its role in conventional IT in “Inside-Out” is to improve the virtualization and flexibility of computing resources by enabling greater efficiency in operating Client-Server enterprise IT.

Conversely cloud computing in “Outside-In” is the ability to obtain and use flexible computing resources that exist outside the firewall and are safely separated from the enterprises own systems. In addition the role and type of use required is unlikely to be client-server based; instead it will use the browser and app model.

The first is innovation in using technology to enhance the current operations and business model and the second is innovation in the business model based on being able to use technology in entirely new ways than was previously possible.


Source: Andy Mulholland

In the next article I plan to go into this more deeply by introducing how Enterprise IT should be planning, deploying and operating an Enterprise Platform to successfully underpin an Outside-In Digital Business with an auditable set of management tools. To wet your appetite for this I suggest you might like to take a look at the Open Group who are widely respected for their work in developing the TOGAF (The Open Group Architecture Framework) architecture methodology for Enterprise IT, and are now starting to address the need for what they call Platform 3.0. Why 3.0? To differentiate from the term Web 2.0, which was popular some years ago.

What role do you think technology will play in the new digital businesses that are emerging? What role do you think the IT department will play? And what opportunities do you think that this creates for technology professionals?

 

5 Tactics to Deliver More By Doing Less (and Doing Better)

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Your future service delivery model is simpler than you think

It’s good to be popular. Interest in technology and how it can help your organization continues to grow. There are increasing pressures on you and your team to respond to business change while also playing an active role in transforming the company. There is just one hitch – you need to be able to do this with a reduced budget.

This is not a new problem for CIOs. Each budget cycle finds your operational and capital costs robustly challenged. This dilemma – mounting business demand with a shrinking supply of resources – is not yours alone. It is a whole-of-business problem.

The opportunity for you is to use this dilemma as the basis to establish five practices which will allow you to do something that seems to defy logic – deliver more, of better quality, by doing less.

1. Refresh your city plan

In 2000 The McKinsey Quarterly published an article titled “The Paris Guide to IT Architecture” which used city planning as a metaphor for enterprise architecture . This concept was simple to understand and powerful as a communication tool throughout the business.

Like the city you live in, enterprise business systems have:

  • History (legacy systems).
  • Precincts (groups of solutions serving particular functions).
  • Building codes (solution architecture standards).
  • Preferred materials (the right technology for the right job).

When facing spending pressure refresh your city plan and use this as a conversation piece to discuss what parts need to be refurbished, reused or rebuilt. With this improved understanding of your organization’s existing solutions and services you will be able to lead an informed discussion on where future investments should be made.

2. Using scarcity and necessity to your advantage

Both scarcity and necessity are cited as drivers for creativity. The HBR Blog network published opinion pieces in 2011 arguing the case for each. This article states that “deliberately imposing scarcity” was a catalyst for creativity. However, a complementary view is that innovation is most likely to be effective when there is a clear problem to solve.

As a CIO the problems for you and your team to address are not always well defined. Your challenge is to make them clear.

Lead your team and C-level peers through cycles of refining demands and reducing these down to a discrete, achievable set of goals. Challenge your team to respond with solutions which use the technologies and capabilities already at their disposal. Take a leaf from the Apollo 13 playbook – figure out how to fit a round peg into a square hole. You will enable your team to deliver against a more focused set of requirements by leveraging existing investments.

3. Standardize your skill sets

Standardized work practices and continuous improvement are the basis of lean manufacturing. In manufacturing this leads to reduced task time, streamlined work sequences and reduced inventory. In a service delivery environment – such as IT – the opposite approach is more common. Efficiency improvements in IT often rely on the introduction of new technology, the creation of more complex processes, or the duplication of data. These “improvements” are costly to implement and maintain.

Take the lead offered by best practice in materials management and apply lean thinking to your IT service delivery.

Reduce the number of technology platforms you support by applying architectural principles that encourage reuse and identify single solutions for common business functions.

Consolidate the technologies underpinning your business, such as database, infrastructure and client solutions.

Refine the skills and capability of your team members so that you are giving them the best opportunity to excel in their tool of choice, instead of having to relearn a new way of delivering services each time.

4. Don’t be too efficient

In 1984 Eliyahu Goldratt and Jeff Cox published “The Goal” which told the story of a manufacturing plant manager facing an ultimatum – improve productivity and profit, or go out of business. While he makes good progress on improving material availability and eliminating bottlenecks, the protagonist encounters an unexpected problem. The removal of gaps and delays caused the equivalent of peak hour gridlock. Productivity began to slide and targets were missed.

This can also occur in IT services and project delivery.

If the space between changes is too small, your team members are constrained as their work is too tightly packed. There is no buffering between major projects, and the minor changes that slip in between them.

To improve the flow, create space between projects and major production releases. Give things time to settle down. Bundle associated groups of changes into their own release. The result will be a consistent flow of delivery work that doesn’t get tangled by being full to capacity.

5. Dining on elephants

How do you eat an elephant? Easy – one bite at a time. It’s a classic kids joke as well as being sound advice for managing large capital budgets in the grown-up world of business.

Future budgets for major projects will come in irregular waves and will be hard fought. There will be high expectations of the projects that support the business trend towards austerity and controlling your non-discretionary “MOOSE” (Maintain and Operate the Organization, Systems and Equipment) spend.

With limited investment in new and improved technologies your portfolio of major projects will be under close scrutiny. Your response should be to design an approach to funding and implementing projects in a tiered, modular manner.

Break your portfolio into three levels – long term strategic programs, medium term tactical projects, and short term operational response initiatives.

Be ruthless in the governance and decision making that drives which projects get funding and which get set aside.

Break the projects into smaller pieces; each piece should deliver a positive business outcome, and should build upon the piece implemented before it.

In this manner you can control three things.

  1. Your peers can see evidence of progress being made and value added with each release
  2. Your team is able to be flexible, adapting to a changing business environment as they go, rather than having a fixed, long-term goal set at the start of a major initiative
  3. Limited capital funding resources are more closely managed, with financial benefits being yielded earlier

Delivering more with fewer resources, and to a better level of quality, may seem an impossible goal. However, this is exactly what will be expected of the CIO of the Future, and all of your C-level peers.

As you lead discussions with your colleagues, bring with you these five talking points to share:

  • What parts of our existing business systems landscape can we refresh, reuse or rebuild to get the job done?
  • Which are the critical issues that we face right now, and how can we use existing resources to respond to them?
  • How can we further consolidate, standardize and simplify our processes and systems to take advantage of our core capabilities?
  • Where on our project roadmaps are we scheduling time to allow changes to truly bed down and become a stable part of our operations?
  • Why don’t we break major projects down into realistic, achievable pieces?

In your experience what are the primary levers of doing more with less?
Are you expected to deliver more, with less? How do you go about this?

 

Top 3 Priorities for the CIO of the Future in 2014

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Digital business leadership and increasing business productivity

Editor’s note: This article is the submission to our CIO of the Future – 2014 Project from Marco Orellana. We are delighted to get a global view from a Latin American perspective, given CODELCO-Chile’s role as the world’s largest copper producer.

From Technological Information Manager to Digital Business Leader

The CIO is becoming a business digital leader and his journey is based on the following points:

    • More Technology to the Core of the Business. Incorporating technology to the core of the business is more and more necessary, since nowadays the traditional relationship methods aren’t a clear competitive advantage, as opposed as technologies used in instances where they really add value.
    • More Education in Business Digital Innovation. Significant changes are required in the innovation of both business processes and products. These changes must enable non-traditional ways to approach business problems; today the technology is a distinctive factor that pushes organizations to develop new spaces in business relationships and interactions. The CIOs role is precisely to enable a digital technology-based innovation culture in order to make the company distinctive in an increasingly competitive world.
    • Moving From Chief Information Officer to Chief Digital Officer. The fundamental change we’re encountering is incorporating digital technologies throughout the business footprint. That’s why the new CIO must be immersed in the business he serves, where there should be not only traditional information technologies but also any kind of digital technology that helps corporations meet their strategic goals in a more effective and efficient manner.
  • Support the Business Strategy: Being the CEO’s Innovation Partner to Address Business Challenges. Today corporations’ challenges are ever-changing, subject to market ups and downs and with more and more government regulations. The CIO’s challenge is to enable the CEO’s strategies, becoming the company’s innovation branch and supporting the business strategies with ad-hoc solutions while meeting deadlines and budget constraints required by the business. A skilled CIO customizes solutions, aligning them correctly with the business strategies, at the right time and with competitive budgets.

Provide Real Support to Increase Business Productivity

    • Transform Technology into a Productivity Tool. Nowadays, digital technologies shouldn’t just automate the organization’s processes, they should be the tool that powers and guides its productivity everywhere, from strategy to operations. Businesses are under intense pressure to provide returns that are shrinking in markets that are increasingly demanding and competitive, making digital technologies exceptional productivity icons.
    • Enable Business Process Transformation: Deploy the Right Technology with Business Sense. The CIO’s job is not just providing the digital technologies required by the business. Today, there is a trend for CIOs to be immersed in business processes, redesigning them with a strong use of technologies that make the business more profitable, efficient, competitive and sustainable. Not only must technology follow the business, but also push it to find new spaces that were unthinkable in the past.
  • Use Business Intelligence to Analyze the Past and Create the Best Future. Digital technologies’ current role in information management is to let us know what has already happened. They allow us to understand very clearly what happened to us. But this is like driving while looking in the rear-view mirror. What is really needed today is to look ahead, towards the future from the present and that can be done with Business Intelligence, which gives us new ways to analyze the same information, finding key insights and modeling probable future scenarios which allows us to anticipate and make decisions today so we are still competitive tomorrow. Clearly the CIO’s role will be centered in this new generation of predictive information systems, which give the company access to new dimensions of the business.

Make the New Technology Wave Run The Business

    • From Social Media To Social Business: Build Social Culture with Customers, Partners and Staff. The same technologies used in social networks will be used in business networks. The CIO’s role in this context is that of a pioneer, championing the use and development of this kind of digital technology. Conversations and decision-making revolve around managing great quantities of unstructured information that must be massaged, transformed, interpreted and distributed. Here the CIO’s support is key to guide the adoption of best practices in managing these kind of technologies within the organizations and also in the relationships they have with their environment. The CIO will have to strike a balance between the information made available and the new intellectual or industrial property being generated.
    • Using Big Data and Business Intelligence to Create Business Knowledge: Real Time Predictions. These two components, Big Data and Business Intelligence, converge in the organization as two complementary trends that allow the generation of new knowledge within companies. This new knowledge allows the business to create new competitive advantages. Here the CIO is the main proponent of these new digital technologies.
    • Transform BYOD and Mobility into Business Opportunities. Another trend that the CIO must approach in 2014 is related to mobility and the users’ own devices. In both cases his role will be to provide safe, stable, reliable and robust mechanisms in order to transform both trends into business opportunities. Mobility enables new ways to carry out business tasks, basically anywhere and anytime. The key is that the access and associated security mechanisms are aligned with the business requirements and enable the digital worker to make use of all his skills, feeling comfortable with the technology that suits him best for his day-to-day job.
  • Create a New Cloud Perspective: The Business Personal Cloud. The business has become the sum of micro-businesses that interact among themselves in order to meet goals and execute the overall strategy. Each digital worker needs his own space in cyberspace to host his information, knowledge, tools and everything he needs to develop his role. That’s why, besides having a global strategy, the CIO must at the same time know each and every one of the usage profiles and must provide the virtual environments that enable this new digital way of conducting business.

 

Free Your Users (or They Will Free Themselves)

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The vexed issue of Social Media and BYOD in the workplace

In my last piece on CIO of the Future, Must the Business Always Bypass IT When It Wants to Innovate?, it was pretty clear that I believed that people, and I don’t mean just IT department staff, were a key factor in the issues that come from the introduction of new technologies and new business uses for technology.

I then posed the question as to whether Line of Business (LoB) managers must always bypass the IT department when they want to innovate, and suggested that this is both the right course of action as well as being acceptable from an IT departmental systems risk basis, providing the activities were indeed truly isolated from, and unconnected to, the IT systems. Why? Because these new externally oriented and innovative uses of IT have nothing in common with the use made of IT in the internal environment.

I stated, however, that there are new risks to be clarified and managed around what, where, and how an enterprise’s people actually use these new powerful and often publicly visible capabilities.

The new front office

We look to managers to add their personal value in the form of experience and knowledge that they bring to their role. These roles are those of the Front Office staff whose interactions outside the enterprise, principally with Sales and Marketing, but also with Service Engineers, Purchasing, and Logistics staff, allows new value to be created. By value we mean increased sales revenues, more market share, and new types of products, all of which improve operational results.

This is quite different to IT’s traditional role of enabling the Back Office to operate internal processes at lower cost and with greater efficiency. IT staff don’t readily appreciate this important difference, or why paying for this out of non-IT budgets based on very different justifications makes sense.

The old saying was that half of all marketing spend is wasted, but we don’t know which half. Today marketing spend is on building online, interactive relationships with customers and potential customers, so we no longer quite have this problem.

People are in these externally facing roles for their ability to optimize the outcomes from events that are outside the control of the enterprise, calling on their personal judgment and experience to make the difference. Two decades of IT focused on optimizing internal processes has been able to offer little to help them beyond using mobility to allow them to access internal IT processes.

All too often mobility for the IT department has meant the ability to deliver accessibility to selected enterprise applications from outside the enterprise firewall. In connection with this new external environment, using new technology for the front office ‘mobility’ has a totally different meaning. Cloud suffers from the same challenge in understanding too.

Mobility should mean allowing people to be able to truly work differently by using social tools, services and apps together with a variety of different devices, including BYOD, to achieve ‘mobility’ of purpose, activity, and circumstance.

The new role for CRM

CRM is an excellent example to help us understand the issues and why conflict and confusion occurs.

CRM was introduced initially to make better use of the data created by transactions in enterprise IT applications, and as an internal tool it helped IT to align Sales with the rest of the business.

CRM then moved forward with new capabilities based on increasing use of websites to help enable sales to identify customers buying habits better.

Now CRM is being redefined from the direction of the customer, or even potential customer, to allow an enterprise to hear what the customer wants and then to try to match the customer with its products and services.

Embedding consumer technologies in your organization

As society as a whole moves to become increasingly composed of Digital Natives many industry sectors and enterprises are seeing these new technologies as ‘embedded’ in their business model: think of music, travel, personal banking, etc.

The diagram below breaks the journey from automating the back office to empowering the front office into three stages – Aligned, Enabling, and Embedded – but it doesn’t bring out the dynamics that this reality introduces.

Source: Andy Mulholland

Most IT departments are organized to operate (indeed it is essential that they carefully maintain) the data-centric transaction integrity of core internal processes, but find themselves increasingly being asked to connect to the middle box in the diagram to support various online business initiatives and are rightly wary of the risks, and indeed difficulties of this.

The Line of Business managers are working from a totally different perspective. They are coming from the top right box, driven by the need to compete innovatively in new ways in a market that is synonymous with, and can only exist because of, new technologies.

The new front office is focused outside the business

In Must the Business Always Bypass IT When It Wants to Innovate? I focused on why innovation could happen in this Embedded environment. Rapid experimentation is reasonably safe providing it remains isolated from the aligned environment.

The current conflicts occur when either or both sides try to move together into the enabled zone.

Both sides have good reason for their entrenched positions and both are currently almost irreconcilable, though in time new middleware and integration products and methods will come into play to allow this necessary scaling step in reintegrating an enterprise to occur.

But, and it’s a big but, this reintegration will occur around a different business model. This is an outside-in model, the so called ‘innovative business model’, which tries to match the operating model with how with how customers and clients want to buy and consume the company’s products. This is opposed to the BPR model of ERP that emerged in the early 90s, using technology to design the business model from inside out to restrict variation in favor of reducing costs and improving efficiency as the means of increasing competitiveness.

Inside-Out, referring to the role of IT inside the enterprise and firewall with a limited secondary role outside, versus Outside-In meaning that the new front office is focused outside the enterprise and its firewall with limited access to the IT systems inside. It’s a key point to fully grasp and understand, but do so and most things become clear.

Social Tools and BYOD are key tools for embedding IT in the business

Social Tools and BYOD? These are the key elements that support people-focused embedded businesses, and as such they are the tools that free users from the necessarily constrained environment of IT.

Let’s illustrate this by remembering that email was introduced to support the business model change that PC-based Client-Server introduced as Business Process Re-engineering. As the business processes changed to flow across the enterprise, rather than being contained in departments, a new model was needed to communicate with the people along each process: email! Now we are adopting an event-responsive business model we need a new communication model that frees the constraints that process based email imposes; that’s the role of the collaborative social tools.

It’s hard to let go of users and the mentality that goes with it. But it’s also necessary to understand who should be set free, and why. Failure to do so proactively and properly, merely means that they will escape anyway.

So the lesson is that a controlled and managed release of people equipped with the right training, risk management and indeed using new discovery tools to dynamically understand is the best method to ensure risk and security of the existing systems stays intact, and that your enterprise has people trained to make the most of powerful new technology to innovate with a reduced risk.

Otherwise your users will escape what they will see as the ‘dead hand’ blocking much needed moves to compete. And the problem with escapees is that nobody knows who they are, where they are, or most of all what value or risk and cost they pose!

 

Must the Business Always Bypass IT When It Wants to Innovate?

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How the IT department can best engage and influence Line of Business managers

Quite a few years back, in fact I have trouble remembering exactly when given the pace of technology change and the rate of uptake by the general population, I used to ask audiences a few questions. I asked them for a show of hands from all those who had a better PC and Internet access at home than work. I could be guaranteed to see an overwhelming majority. I’d ask if they had ever actively chosen to go home because their home PC enabled them to do a particular task more effectively than their work PC. Another overwhelming majority would put their hands up.

This shows that even ten years ago that many Line of Business (LoB) managers were already finding the constraints of “enterprise IT” a challenge to be bypassed.

Come forward to around two years ago and I was asking a similar question about ownership and use of Apple iPads (and for the business community this is overwhelmingly the tablet of choice). LoB managers couldn’t get their hand up fast enough. Unless they were in the finance or IT departments, where all their work was going to be internally focused on the enterprise IT systems.

Add a question to see if they were using their tablet for business use, and the simple answer was that the iPad enabled them to access information and services that IT didn’t, or couldn’t, provide.

At this time the iPad almost certainly was not in any way intended to be “connected” to enterprise IT. It posed relatively little risk (or even, from the perspective of IT, maybe no risk) and therefore a LoB manager felt that it had nothing to do with the IT department.

At this point two things should have become clear.

First is that this is unlike the introduction of mobile phones where the focus was on email, as email required an interactive connection into enterprise IT.

Second is that these users are deploying a new generation of technology and devices for a new generation of business requirements. These solutions provide a completely different set of capabilities, capabilities that the existing generation of client-server based enterprise IT applications does not provide.

Now throw in the key question to our audience: do you have online banking and are you able to manage your own budgets and financial matters more simply and easily than before? The answer is of course “yes”. But now try asking: are you using this to bypass your enterprise’s financial systems? The unanimous reaction is “definitely not”. The fiscal management of an enterprise is recognized to be a professionally managed and legally defined responsibility.

Now move the discussion towards how far the LoB managers should be allowed to take their use of technology. The discussion will initially position the IT department in the role of technology support, and the LoB managers’ ability to be able to use these new consumer technologies without needing this support.

The reality we need to bring the discussion towards is the role IT plays in providing an auditable and compliant enterprise operating environment that underpins operations across the business, just as critically as the financial systems, systems which after all depend on IT anyway!

Yup, thought provoking isn’t it?

LoBs instinctively recognize the financial no-no, but equally instinctively have a first reaction that it’s okay to do what they are doing. That is until they really start to think about the implications of all LoBs across the group adopting this behavior, or how reliant they are on common, shared trusted information rather than the challenge of “trash and treasure” in “Big Data” usage. And that’s before we get to the point of auditable traceability!

The CIO role in the new business model of the early 1990s

CIOs of a certain age and with long memories should at this point cast their minds back to the adoption pattern of PCs around 1990, back when the enterprise computing service was based on mainframes and minis running terminal-based applications.

In those days, when PCs represented the new and disruptive technology, business managers also bought their own PCs, even their own departmental networks, all for exactly the same reason as now. Namely, to use a new generation of technology to deploy a new generation of business capabilities that lay outside the capabilities of the existing enterprise data center with its mainframe/mini computer terminal-based systems. At first these were also standalone applications, as a younger generation of LoB manager introduced spreadsheets and other simple applications, and shared data via discs and then local area networks, LANS, etc.

Not surprisingly, given the benefits obtained within a matter of a few years, the enterprise was soon full of PCs, small separate departmental networks, and many, many applications, all bought from LoB manager budgets. These solutions were mainly incompatible and resulted in spiraling operating costs and, most important of all, obscured the overall understanding of the enterprise operation, to the chagrin of auditors.

There was a tipping point in most enterprises when so called “safe standalone working” had become a confused mass of activities. Even more concerning were the multiple copies of key data spread around these desktop PCs, leaving little trust in the integrity of any enterprise level results.

The huge business benefits that the early adopting LoB managers had gained in their individual work or departmental activities were becoming insignificant as, at an enterprise level, the stability of the entire business was being called into doubt. The good news was that the early adopters had accelerated the understanding and the ability to create value using these new technologies by being able to move quickly with relatively minimal constraints. The bad news was that as momentum and scale of use had built up, making the new technologies and business functions mainstream within the enterprise, professional management was sorely needed.

So how was it all resolved? How was the CIO role created? And how was the way forward to the adoption of ERP created?

The answer didn’t lie in the technology. It lay in the business’s adoption of a different organizational model; one designed around the use of PC client-server systems. Organizations were redesigned around business processes that run across the business, rather than as a string of separate departments: Business Process Re-engineering (BPR).

BPR was as big disruption to the operational models of the time. This is similar to today’s teaching on business model innovation that introduces the idea of constant reaction to external opportunities and circumstances. But BPR also introduced the necessary definitions of roles, responsibilities, and operational methodologies that made ERP the competitive necessity to create the enterprise as we know it today.

The role of the CIO, and of the enterprise IT department as we know it, is based on the business model of BPR. It’s a role designed to administer and automate internal business operations through best practice. At the heart of this is transactional data integrity built around the structured data created and managed internally by recognizable, auditable business processes protected inside the firewall. Not surprising neither the role, methodologies nor even the responsibility/authority works for or fits with the new disruption in technologies and their business use!

Our LoB managers are not using PC based client-server technology on internal enterprise applications. They are using tablet-based browser-cloud technology externally to be part of an environment that has been created by consumers via the mass adoption of cloud-based solutions.

At the stage this mostly means that the solutions they are using are not transactional but interactional. As long these solutions are completely separated from enterprise client-server systems they are reasonably safe. The challenges are when some degree of integration is requested, or made demanded. Importing traditional structured data into these solutions, or integrating internal and external data as part of Big Data analytics, challenge the integrity of the internally managed structured data.

This is the point where CIOs are right to express serious concern.

Right now in most enterprises early adopters are blazing the trail to find the winning and losing propositions, and expectations are rising for the opportunities that these new solutions will bring. Most importantly, these activities are taking place at a scale where they are still contained enough to be “standalone” and safer outside of IT.

That is not to say that you should ignore them. It is to say that you should accommodate them via a policy that apportions an appropriate level of responsibility to the LoBs, a policy that has been agreed with the CEO.

The CEO and the new Digital Business Model

The CEO is becoming the key to managing the shift to a new (IT) operating model. Business school teachings are recommending that CEO take direct responsibility for their enterprise’s digital strategy, and with it the redesign of their business model.

This is the much talked about, and little understood, topic of business model innovation; a topic that, together with business strategy, has been exercising the minds of business school professors for some years.

Today business model innovation is well-developed set of principles (defined by Mark W. Johnson) taught to business managers that explain nineteen prospective business models that can be used to position a product or service with customers, as shown in the table below. Think of it as the new BPR to suit the capabilities of new technologies deployed outside the firewall, and outside the internal processes of IT. Business model innovation brings with it a new set of business values focused on taking new products to market, wining new customers, increasing market share etc. None of which are justified around internal cost reductions. All of which could be expected to be funded from budgets other than ITs.

Source: Mark W. Johnson (2010), Seizing the White Space, Harvard Business Press

So where is the CIO in this brave new world?

The choice of the phrase “outside the role of IT” was deliberate. It doesn’t, however, mean “remote from IT and the internal business processes”.

There will at least need to be alignment across lines of business and, as the new business model develops, there will need to be integration to allow interactions and connections to take place on an end-to-end basis across the enterprise. A customer engagement should result in a customer order, and that requires integration to be managed successfully.

When will this occur? There are two distinct answers.

The first is as business-as-usual, with no new business model applied, hits a natural barrier and the law of increasing chaotic cost of operation starts to consume the new technology’s benefits. This point was identified for the PC client-server era in the book “Crossing the Chasm” by Geoffrey Moore, when the rising curve of expectations hit the trough of disillusionment as enterprise wide operational issues revealed the serious challenges to be faced. To cross the chasm meant to adopt new levels of maturity in what products and methods were used to deploy the new environment. In short, it’s the moment when the second answer below becomes unavoidable!

The second answer is for the CEO to understand the need for an enterprise to consciously understand the opportunity that digital business will bring, and to set out to redesign the business model before hitting the tipping point. To address this properly will mean clarifying how technology will operate across the business and outside the business, and how the IT department be involved in the business activities.

It’s a huge shift and a big responsibility as by now the auditors will have woken up to the need to be able to follow and understand how the digital enterprise actually functions, who has what responsibilities etc.

It’s a return to the time for professional management of technology, its use, its purpose, risk management etc. This is a big organizational role requiring a mix of business and technology understanding as well as knowledge of the enterprises current systems and compliance obligations. It’s also a role the CIO should be the right choice to fill, based on their experience and profile.

Current Realities for the CIO to address at this stage?

Sadly there is no magic bullet to immediately gain “control” of the LOB managers, their technology and business deployments. As they currently stand the CIO and the IT department are neither equipped nor empowered to solve this problem in this new environment. But that doesn’t mean blocking or stopping deployments; that’s simply not commercially feasible in the face of the increased competition and customer demand for digital based business.

Instead the answer is to work on ensuring that the separation and isolation of the new deployments from the IT environment is understood and fully observed.

LoB managers who want to be early adopters should be encouraged and supported to grasp that the real risks that they are accepting. Risks stemming from the manner in which their people use the technology and their ability to commit the company to unintended consequences. Organizing “awareness” training and guidelines for “online” behavior and hazards are both practical assistance and will create relationships that allow monitoring of what is happening to build experience.

This approach also allows for clarity in who is responsible for the impact and behavior, and that means not only for the CIO but also for LoB managers. It even means the CEO and CFO.

More importantly, it formalizes an enterprise wide management involvement that will be required as the organization develops an understanding of the good and bad impacts that the new digital environment is creating. In time this will be the group that reacts to the possible tipping moment and creates the business model and management changes necessary for the mature adoption and integration.

Are the lines of business in your organization experimenting with browser-cloud solutions? Has your organization already hit that natural barrier when the increasing chaotic cost of operation consumes the new technology’s benefits? Or has your business already set out to redesign its operating model before hitting the tipping point?

 

Creative, Intelligent, Funny, Passionate – Could This Be Your IT Team?

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Your IT group has some surprising traits, and it’s not what you (or many others) expect

Blessed are the geeks, for they shall inherit the earth. In August 2013 Inferno, a U.K.-based advertising agency, released the results of a survey which suggest that twice as many people associate the word “geek” with being “cool and chic” rather than “boring and unattractive”. This finding is important as it affects how you lead your team.

Behind the stereotype of the nerdy, bookish engineer are often individuals with the ability to engage and influence people across the organization. Your role is to nurture the potential of your team, supporting, protecting and promoting what they can do.

Issuing creative license

Creativity. Is this something that comes to mind when you think of your IT team?

Consider what they can achieve. Engineers are designers and crafters. Watch them at work as they turn a (frequently vague) set of requirements into a functional, enduring and often-beautiful solution. Furthermore, during the process they will have refined and tuned the resultant product.

Nurture creativity by laying down appropriate boundaries when setting goals. Explain to your team the “what” (the objective) and the “why” (the strategic goal or operational imperative) while leaving the “how” (the method of achievement) up to them. Respect them for the creativity and talent they bring, not just their output.

The solution will be superior and the team will feel valued for what they produce.

Applying brain power

Intelligence. It may be taken for granted that the members of your IT team are smart. However, their collective brain power may be assumed to be good only for tasks such as churning out working code or load-balancing web servers.

Challenge this assumption with a simple exercise. Take members of your team to a problem solving session being run by another department. Ask them to come up with their own way of addressing the problem.

You’ll find that they adapt quickly as they are used to being challenged with matters outside of their functional domain. An IT professional will look for patterns and cause-and-effect. They will break a problem down to its component parts. They will experiment, ideate and collaborate with others in the organization.

It is not just what they can do, it is the different angle they take which makes them effective.

Comic relief

Humor. How funny is your IT team?

Watch a few episodes of The Big Bang theory and you’ll get the drift. Humor is endearing; it makes your team more approachable. As Jacquelyn Smith noted in her March 2013 article in Forbes, a good sense of humor promotes teamwork, reduces stress, increases productivity and boosts morale.

As their leader you will need to maintain an environment that balances their humor with the quiet, focused solitude that they need to work their craft.

Feeling the zeal

Passion. Few kids grow up wanting to be an accountant, compliance auditor or project manager. Technology is another story. Initiatives such as Robogals and Code.org are a response to the fascination that technology holds for many people from an early age.

Your team can be evangelists for positive, break-through change in your organization. Encourage this by coaching them on how to inspire and communicate with their peers in plain language. Show them how to focus their energy outwards to their professional community, and watch as it becomes infectious.

If you love them, set them free

As your team continues to mature and interest in their achievements grows, keep in mind three things:

  1. Other department leaders will see what your team can do and will coax individuals to leave your team and join them. Don’t stand in their way. It is their career, not yours. Welcome the fresh insight and energy that new team members will bring.
  2. You still have services and solutions to deliver. Set clear goals for scheduled work while carving out time for your team to generate ideas and experiment.
  3. Promote what your team is able to do. Find ways to showcase the tangible outcomes of the work, linking this to the behaviors and capabilities of team members.

As the credibility of your team and their ways of working grows, so does your own reputation. It is a significant stage on the journey of the future CIO – growing as leader of a clever and humanistic team that your company recognizes as vital to its success.

What are some of the behaviors that your team shows that could really make a difference in your company?