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?

 

Social Business Needs Social IT

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Using 4 Social Business principles enables you to create a more flexible and responsible IT department

Social Business is not just changing what the marketing department worries about. It’s changing how we run our businesses, and changing what we consider to be a well-managed business. Social Business can make your business more flexible, more agile, more open, and more future proof for the next revolution in technology. This is a revolution that is already taking place.

If the future of business is social, then the future of the IT department is social too.

Social Business

We need to stop thinking about the technology – the social tools – being something that we implement for others. The change that is currently happening in the marketing departments is working its way through business, and will hit the IT department eventually. It is the choice of the IT department to be part of this change, or to be outpaced by somebody who serves the business better. Price is not the competition, it is about value delivered.

Shift from thinking about Social Business as a new communication channel to implement, to seeing social as the starting point for that will lead to a big change in how you design and manage your operations, and it will lead to big benefits.

The future of business – and of the IT department – is more flexible, responsive, and more open. It is not about being more social, whatever that might imply; we never worried about being more SOA or more ITIL . Social is a design principle that leads you to these goals. It is not the goal itself, nor was SOA or ITIL.

Design Principles

The concept of Social Business, associated as it is with Social Media, is often treated as something isolated from other activities within organizations. It’s confused with channels – email, instant messaging, phone… – since it’s the channels that are the most obvious aspect of social, with their manifestation in the form of Facebook and Twitter.

Social Business, however, is changing how we manage and run our businesses. If you want to get the full benefits from Social Business you should not see it as a collection of tools or as something that is only concerned with customer service. Getting the most from Social Business goes beyond ‘being great’ on Facebook, Twitter and LinkedIn. It is a fundamental change in how businesses are being run, organized around how businesses and their stakeholders interact and think.

Social Business is a design principle. It is a logical design principle if you compare it to other design principles we use, such as open architectures, service orientation, and cloud. While Twitter and others might be the most obvious manifestations of social, they are only channels. Though these channels are not Social Business, they are designed with the design principles of Social Business.

What are the top four aspects of the social design principle?

  1. Privacy and trust
  2. Simple, flexible tools
  3. Flexible policies over detailed processes/rules
  4. Data driven ROI

Social IT

We all like change when change is something we do to others. However, if IT wants a role in the new social businesses then IT needs to apply the social design principles to itself.

1. Privacy and trust
With the rise of a PRISM society who can you trust? Is the CIO reading my email? To design for Social IT you have to ensure that there is complete trust between all stakeholders inside and outside.  This means that office politics have no place in social environments, and openness, connectedness and delivered value are valued over utilization and old boy’s networks. Participation is something that is valued, not something that is held against somebody.

2. Simple flexible tools
Open architectures, service orientation, and cloud are things you keep in mind while designing your processes and your applications. However Social Business is most often forgotten, it is added afterwards or it is introduced as a separate silo next to existing solutions.

3. Flexible policies over detailed processes and rules
IT cannot control every bit of IT a Social Business uses. It needs to move from detailed rule-based policies built on the assumption that IT owns the technology, and focus on flex policies that provide the business with the flexibility it needs to get things done.

Who knows what’s best for everybody? Most likely everybody knows what is best for everybody and with consumerization being a standard phenomenon in the enterprise you cannot enforce rigid policies anymore, since the ROI of enforcing would be so little compared to the ROI of letting go. People are not stupid by default, they don’t need lengthy rule books, they need guidance in the right direction.

4. Data driven ROI
What is the ROI of measuring ROI? What is the ROI of not changing? The beauty of social design is that it creates so many more data points that it is easier than ever to optimize ways of workings than it was before. Optimizing doesn’t mean making it more efficient, it is making it more value-adding for the company.

The assembly line is completely optimized, however what is the retention level of the people working on that line, what do they think, what is the cost per new hire?

Efficiency is a model that works in scarcity, not in the abundance driven world we experience in the 21st century. Information and knowledge workers aren’t scarce anymore, they don’t need to be utilized more as the precious steam engines in the 19th century did. They need to mobilized better so they can, will, and want to deliver a better ROI, an ROI that can be measured in absolute detail since every action they take is willingly and intentionally shared with everybody.

Conclusion

Thinking of Social Business beyond the implementation of a channel and treating it as a design principle will help you in designing different kind of solutions. This provides the advantage that the social transformation is coming from the start of the design, instead of after the introduction. This helps you and your organization to move the traditional enterprise to a more social business.

If you start designing your processes and applications as social by default, you’ll see that solutions are likely to become more flexible and connected. It will create more value than in the traditional silo approach and it will help to connect the dots between people, processes and systems. This is because social is not only about human interaction but also about the interaction between humans and systems and even between systems themselves.

You unleash the power of outside by thinking outside-in. However keep an eye on privacy, trust and mobilizing the social network around you, since those are important elements to create tangible value for your organization and for your customers. Social by design is two-way street, a street owned by your customer.

Is your IT department edging toward becoming more social? Are you experimenting with Social Business design principles to help integrate your capabilities into the business? Or is it challenging enough just dealing with business as usual?

 

How to Surf Across a Burning Platform

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Succeeding in a world of impermanence, ubiquity, transparency, and competitiveness

While most of the planet is welcoming the advantages of a fully digital age, the seismic changes to our everyday lives, communities and organizations are generating a series of tsunamis that threaten to engulf those who are unwilling or too slow to adapt to change. It was just over 15 years ago that the first significant wave of internet technologies and services hit the marketplace. At the time industry resounded to cries of “burning platform”. Old school approaches to adaptation and improvement were ineffective in the face of a faster and more agile competition.

Despite (or because of) the warnings, the casualties were smaller as most established businesses adapted, albeit slightly slower than their marketing advocates would have preferred. The waves were also considerably small and less frequent then than the ones we see today, and minuscule compared to the ones on the horizon, each a tsunami in its own right, swelling the surface of the internet ocean. Cloud Services, Social, Mobile, and Big Data are all transforming the business landscape. Unlike the 90s, time is now compressed and survival less certain if the cautious or risk averse path is taken.

Business, but not as we know it

The signs are clear and there is no reason to doubt that the business world is in the midst of more than just a major disruption. Like King Canute, we will be unable to withstand the onslaught of the digital tides that will engulf the slower, more conservative enterprises and endeavors.

Enterprises are becoming leaner and more dependent on external resources and actions in their quest for agility. We – as CIOs of the Future – need to adapt our skill sets and intelligence to exploit the opportunities and build the foundations of sustainable growth.

Before we can agree on the necessary configurations and vital components of the new industrial environment, it is important to lay down some projections on the nature of this developing marketplace.

Four characteristics will predominate.

Impermanence

Enterprises are moving away from pyramid-like hierarchies to become slender columns of business development. Middle management, also known as the go-betweens, will all but disappear and most management functions will become temporary and fulfilled by external resources.

Permanent employment by a single large company will become rare. Executives will be retained for as long as they remain effective and current with new technologies, business models and, most important of all, fully aware of global market competition.

C-level salaries will be contractually determined and measured against specific deliverables, probably resulting in a re-adjustment of salaries to pre-internet boom levels. Executive expertise will become as itinerant as designers, scripters, and testers.

Ubiquity

The work force will be globally diverse and distributed, available at any time of the day from any location that is connected to the internet. In other words almost anywhere.

Virtual teams will span geographies and cultures and may be the result of several layers of subcontracting. Even the traditional body shops will focus more on rapid resource identification and validation (skills, achievements and certifications) than building an army of contractors.

Expect gaming-type honor systems to emerge as the means of distinguishing skill sets and achievements.

Transparency

Private storage of data will be minimized as more and more information will be stored and shared in network clouds.

Our most pertinent data will be strongly secured. However, the information needed to exercise enterprise vision and operation will be increasingly public or semi-public to allow external resources ready and rapid access to comprehend and deliver on contracted tasks.

Volume and velocity of data will continue to grow exponentially and new services will evolve to identify and predict meaningful volatility. As one wit observed the needles are much smaller and the haystacks immeasurably larger.

Competitiveness

Innovation life-cycles will continue to shrink. The lifetime of new output will be measured in days and weeks rather than months and years.

We will move from a disposable culture to a constantly transient one.

Dealing with redundancy will become a major issue for governments and industry. However opportunities to compete will grow exponentially as entry barriers to any and every market will continue to be lowered.

Creativity, critical thinking, communication, and collaboration may be key

While all of these characteristics may not play out exactly as defined, they are most surely harbingers of monumental change. Change at a rate that is unprecedented in human history.

This means that for every enterprise, every organization, and every individual the critical challenge is to thrive in an environment of continual change. This is the ability to transition from where they are today to where they need to be tomorrow, and begin the next day with the transition from where they have just arrived.

The Partnership for 21st Century Skills (P21) is a US organization that advocates the need to move beyond the 3 R’s (reading, writing and arithmetic) of our established education in an effort to evolve towards a better equipped and contributing citizenry. They have identified 4 “C” skills that are essential for growth and survival in the coming decades: Creativity, Critical thinking, Communication, and Collaboration.


Image Source: P21 Framework for 21st Century Learning

The burning platforms, casualties of the burgeoning internet, and forecasts by pundits in the mid-nineties are a reality. It’s just that the first decade was more of a smouldering than a conflagration. By the end of this decade the fire will be all consuming, we need to adjust our thinking, our behaviors and the skills to use the much smaller platforms or surfboards that will enable us to ride the tides change.

Do we know how to recognize and develop these skills?

Share your thoughts and comments below on how they may be used to address the challenges of the digital global environment, or identify other skills that will be needed to succeed.

 

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?

 

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.

 

Cloud Can Simplify and Empower Enterprise IT

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Migrating our applications to the cloud creates the opportunity to do something meaningful for our customers

It looks like cloud computing is taking over. So if cloud is the future, then what might our future technology landscape look like?

The two largest centers of gravity in most IT departments are their back-end ERP and front-end CRM platforms. It’s clear that both of these platforms are migrating from the datacenter to the cloud. Organisations moving to using CRM and social-enabled front-end cloud platforms to engage with our customers. There’s a similar story with our HR and EPR backends that manage our firm’s transactions and help ensure compliance.

Each of these major cloud platforms swaps modules-that-we-customize for apps-that-we-download. The shift to apps allows business units to configure cloud platforms to their liking without much (if any) help from the IT department. Bought a CRM and need it configured to support a sales methodology? Just turn on Holden or Miller-Heiman, for a small additional fee. Want advanced analytics on that HR database? There’s an app for that.

Where we can’t find an app we can pick and choose from the growing number of cloud-delivered point solutions that solve all manner of problems. These solutions might be focused on our vertical, or they might represent general cross-industry capabilities. Need workforce management to support you consulting team? Or scheduling, supply chain planning and asset management to manage logistics? Or inventory management and planning for retail? There’s (probably) a cheap and cheery solution out there just waiting for you and your credit card.

Solutions are also morphing into services. Rather than buying a project and portfolio management solution we’ll buy Project Management Office (PMO) as a Service. We’ll get the tools we need, the methodology and training we need to get the most from the tools, and admin support to help us manage the tool and ensure compliance, all under a single fee structure.

Integration between these cloud-platforms will be treated as a feature to turn on (or as an “integration app” to buy) rather than as a major integration project. The application installation and customization work that used to be the bread and butter of many IT organizations will dry up.

There will, however, continue to be some custom build that we either do ourselves or with a partner. We’re not at the stage where there’s a solution to every problem we have. Nor would we want to push everything out to an external cloud provider, as there are some solutions that are central to the products and services our business provides.

The future IT landscape will be much simpler that those that we’ve struggled with over the last couple of decades. The complexity that used to consume so much of the CIO’s (or CTO’s) time is being hidden inside cloud platforms and app market places, a problem for the vendor to manage, not the CIO. However, as I’ve pointed out before, the CIO will still be accountable if these services are not working. When email stops working it will be the CIO, and not a cloud vendor’s service desk, that the CEO turns to.

But if the shift to the cloud means leaving behind many of the engineering-based skills and competencies that we worked so hard to develop, then why would we do it? Because, as Zach Hicks (Toyota’s CIO in North America) said:

“if I’m screwing around worrying about what version of mail I’m on, it’s wasted effort. It’s a lost opportunity … to do something more meaningful for our customers or our business,”

What do you think? Is moving everything to the cloud a bridge too far? Or do you relish the day when you can roll up your sleeves, get out of the back room, and get involved at the coal face of the business?

 

[VIDEO] The Intersection Between Enterprise Technology Trends and Leadership

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How governance for transformation can drive value and support the humanity of organizations

I recently gave the opening keynote at the SAP Australia User Group Summit on Leadership in Enterprise Technology. After my keynote Inside SAP did a brief video interview of me. The video and a rough transcript are below.

Some of the key themes are the idea of governance for transformation, how technology can support the ‘humanity’ of an organization, and of course leadership in enterprise technology.

Transcript: The intersection between enterprise technology trends and leadership

What will the future of enterprise technology look like?

We now have a truly connected world, where computing can literally happen anywhere. Where individuals have access to extraordinary technologies and dictate how they want to be able to use their technologies. It creates an entirely different landscape in which Enterprise Technology needs to take a leadership role. It is being subject to buffeting forces in where technology is coming from.

How can companies overcome barriers to innovation?

Organizations need to become more agile, adaptable, able to change what they are. This changes the nature of the organization itself. This is far more a cultural shift than it is technology or structure. I do believe that the idea of governance for transformation is fundamental.

We do need governance to be able to put structures around some of the risks as well to be able to understand the benefits emerging, but governance must be an enabler of transformation. So when we are looking at innovation efforts, be they explicit strategy innovation or product innovation, or they are simply creating organizations that can respond better to environment, I believe that governance from the Board of Directors down to the organization is a fundamental enabler of being able to drive effective innovation.

Which technology trends are particularly disruptive?

Vast computing powers are going into the hands of individuals. There’s processing power in terms of connectivity, and mobility is fundamentally changing the dynamic of enterprise technologies. Providers of technology and the consumers of technologies will often already have better technology in their own hands.

It applies differently across every industry, but the rise of the amount of data available and what can be done with that, the whole idea of big data which is now becoming ‘staggeringly enormous data’, changes the whole nature of what the organization it is, how it makes decisions.

What impact does technology have on organizational culture?

What is more important today than ever before, is not just technology as the enabler, but how technology relates to the humanity of the organization, to the culture of the organization.

I think social media is just one aspect of that. But on a deeper level technology is becoming enmeshed in the humanity in the organization, which was never the case before.

How will the role of the CIO change?

One of the aspects of the CIO is they are moving from managing infrastructure to hopefully managing the strategy of technology, being at the heart of strategy inside the organization. It is a shift in role to be truly in the C suite of the organization.

We’re seeing diverging paths. In some organizations technology is becoming marginalized. It is viewed as a commodity which needs to be done well and done cheaply. There are other organizations where it’s seen that technology is truly at the heart of strategy, at the heart of what the organization is becoming. The role of the CIO is to demonstrate the importance of technology being the heart of the organization. Those CIOs that are not doing that effectively are really abrogating their responsibility to that organization in creating a successful future.

Cloud has Moved from “Should We Do It?” to “How Do We Do It?”

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IT investment has shifted from virtualization to private cloud as CIOs prepare to go public

A recent survey of IT budgets shows that the focus for many IT departments has moved beyond virtualization and consolidation. They’re working to hard to realize the flexibility and agility that cloud promises to bring to their organizations.

The report found that:

  • The worldwide cloud computing market is predicted to grow strongly with a 36% compound annual growth rate (CAGR) through 2016.
  • Spend is flowing away from the virtualization and consolidation that has been the focus in many IT departments for the last few years.

Image source: Forbes.com

It’s not surprising that a shift to private cloud is at the top of the list. CIOs are, by nature, risk adverse as the role still carries operational responsibilities. The current boom in private clouds probably represents a try before you buy mentality. CIOs are using private clouds as a tool to understand the operational impact of moving to the cloud.

The fact that cloud provider assessments slot in at the second position, closely followed by Infrastructure as a Service (IaaS) and Software as a Service (SaaS), shows that the private cloud boom might be a short one. CIOs are already using what they have learnt from private clouds to evaluate cloud providers and then invest in their services.

The report also found that the biggest roadblocks are organizational or – that old bug bear – security challenges, and not the technology itself.

Image source: Forbes.com

Cloud radically changes the dynamics of our IT departments. The shift to cloud means that we’ll spend less time managing IT assets, and more time managing external service providers and knitting together end-to-end processes. This change takes time as teams and individuals must adapt to new roles and responsibilities, and new ways of working.

Where are you on the cloud-adoption journey? Have you experimented with private cloud? Or have you leapt into a public cloud? And what challenges did you need to overcome on the journey?

 

Three Rules to Survive in an Age of Tight Budgets

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We’ve done the obvious things to save money so now we need to find smarter ways to deliver solutions

Money is tight and many industries are feeling the squeeze. Budgets are being trimmed – if not outright slashed – and we need to do more with less.

We’ve done the obvious things. We’ve eliminated waste by disposing of unused licenses and assets. We’re moving fixed costs to variable costs so that services will flex with the business.

All of these tactics are backwards-looking though. They’re one-time savings resulting from trimming the fat and tightening our belts.

The challenge is not just making our existing IT solutions a little more efficient. We need to find ways to create the new solutions that the business needs without breaking the bank. We need to find a low-cost approach to enterprise IT.

IT is no longer an engineering profession

The success of many business used to rest on the on the quality of its tools. If the tools – a business’s IT systems and processes – broke then the business would fail. We spent our time engineering capital intensive, complex IT solutions that would withstand whatever the we threw at them.

Today, though, reliable solutions can be purchased as-a-service.

The success of many businesses now rests on their ability to respond to changing market conditions. Our challenge is to furnish the business with a set of tools that it can use to quickly adapt to the ever changing market.

The old capital intensive, complex, IT solutions are the legacy that is dragging many IT departments down. Legacy thinking is our albatross.

What are the new guiding principles?

But if enterprise IT is no longer an engineering challenge, then what sort of challenge is it? What are the guiding principles we should use as we craft solutions to the problems that our business has?

We don’t need to look any further than the low cost consumer industries for our inspiration.

  1. Keep the core solution simple
  2. Provide sensible options
  3. Only pay for what you use

Rule 1: Keep the core solution simple

Reduce the complexity – and thereby the cost – of the technology you use. All those fancy options take effort to implement, and this effort must be paid for. If you can keep your core requirements simple then you can use a cheaper solution, and you can (largely) avoid the expense of customization.

Most solutions on the market today are more than capable enough for many organizations. We don’t need to spend our time trying to find the “best of breed”, knowing that the best might only just be good enough.

Apple stripped back the smartphone, simplifying how we interact with it, and created a more satisfying experience in the process. Zara develop a constant stream of fashionable but simply constructed clothes and revolutionized the fashion industry.

Basecamp, from 37signals, did something similar for project management. They realized that most projects don’t need the complexity typical project management tools brought with them.

This trend toward simplification has grown beyond small teamware tools to include tools to support managing small organization. The trend is moving upstream to larger and – traditionally – more complex solutions. First project management. Next email and desktop automation. Today CRM & ERP from SaaS vendors such as Salesforce and Workday.

It might be wise to consider which solutions deliver the outcomes that your organization needs, and then change how your organization works to match the tool. Rather than trying to (re)configure the tool to support unique processes.

Rule 2: Provide sensible options

Provide a small but logical set of options so that teams can tailor solutions to their needs by selecting the options that they find the most suitable.

Avoid the “one size fits all” problem where all stakeholders are forced to use the one, monolithic, expensive solution that tries to cater for every eventuality. This results in you needing to either overcharge the smaller users – often discouraging them from using the solution in the first place – or let them ride on the coattails of the larger users.

Building one large, complex solution was right approach when creating an enterprise application was akin to launching a rocket to the moon. You only get one chance and you need to make it all the way to your destination so you better pack everything you’ll need for the journey. Saber – one of the first, if not the first, airline reservations systems – is a case in point, with the final solution including everything from back-end mainframes and applications through networks to the terminals the staff would use to access the solution.

Unbundle your products and services – just as the low-cost airlines have – and provide a small but logical set of options that the business can use to construct their own end-to-end solutions. They might have bought the flight, but do they need the meal?

These days there’s an app for that. If we need something small to add onto our CRM or ERP then we can often buy an app or module from the marketplace provided by our platform.

You’ll need to work with your customers to understand what options they need.These options will also change over time as the business and the market around it evolves.

Rule 3: Only pay for what you use

The last and possibly the most important point as it ties the other two together. You might have provided simple base solutions with a reasonable set of options, but if the price is not connected to the choices the business makes then it’s all for naught.

Encourage consumption-based models using sensible business drivers – per seat, per … – so you only pay for what you use. This is the key to the low-cost model.

Three rules to bind them

The persistently tight margins we seem to be experiencing mean that it’s time to move beyond belt tightening.

Luckily we don’t need to look far for inspiration. The low cost consumer industries can point us to three key principles that we can use to help the business optimize.

  1. Keep the core solution simple
  2. Provide sensible options
  3. Only pay for what you use/li>

If the base solution is simple then you get a  low starting price. Providing a sensible set of options allows the business to adapt the solution to meet their changing requirements. A consumption-based model can help you ensure that you’re never paying for anything that you’re not using.

What do you think? Is the current belt tightening a passing fad? Or do we need to find new and smarter ways to procure the technology that allows the business to do more with less?