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?

IT Is a General Business Skill, Not a Specialist Skill

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The IT monopoly is over, and managers must now be responsible for their technology decisions

Technology is woven so tightly into the fabric of business today that it’s risky to make a judgment call without a firm grasp of both the technology and business issues involved. Managers are struggling with the sudden rise of the empowered consumer, forcing them to experiment with new tools and new technologies as they race after consumers who are skipping across channels and between times. Managers are also smashing together supply chains to support pop-up stores or, along with digital product development processes, to speed the introduction of new products and services.

While these managers have a firm grasp of the business issues involved, technology (for many of them) is something that they’ve used, not something they’ve managed. There’s a difference between having experience using solutions, and in understanding the opportunities and risks inherent in the technology that underpins those solutions.

The success of all businesses now rests on their ability to astutely use technology to engage customers and nimbly craft solutions. Managers that can successfully straddle both business and technology are thriving. Those that can’t are struggling, and their firms are suffering with them.

CIOs, too, are struggling to define a role for themselves and their IT department in an age when everyone considers themselves to be an IT expert. However, there is a clear need that remains unfilled in many businesses. Someone, some group, needs work across the business and bring sense to the chaos.

While the IT department can no longer claim a monopoly on IT knowledge, it is still the group best positioned to work with the lines of business, across the organization, helping stakeholders to step back and see the broader context, and to ensure that the solutions the lines of business are using enable the firm to meet its compliance and reporting obligations.

Technology is not someone else’s problem

I’ve heard more than one CEO claim that “the reason I hired a CIO is so that I don’t have to worry about IT”. In their view technology was something to be dealt with by technologist, allowing the CEO (and the rest of the C-level) to get on with the challenge of running the business.

The most recent version of this seems to be the announcement of a newly hired Chief Digital Officer (CDO), someone who will come in and transform the business, tossing out all the old and crufty non-digital stuff and replacing it with shiny new digital stuff. McKinsey is so bullish on the idea of hiring a CDO that they published a recent report called “Bullish on digital” which concludes that firms need to “Find the right digital leaders. Leadership is the most decisive factor for a digital program’s success or failure”.

Setting aside the question of why the CIO or CTO isn’t leading the transformation, the rise of the CDO hides a bigger problem that executives need to address.

Hiring a CDO might be a symptom, rather than the cure

Technology is now a general business skill, and not a specialist skill like it was in the past. Going forward, all executives will need a solid understanding of technology, along with how it can be used to create opportunities, and its limitations. If not, then they should find a replacement who does.

We live in the age of the empowered consumer. Consumers have grabbed control of their relationship with merchants. Wielding their smartphone with both thumbs they can buy what they want, when and where they want, and obtain the best price. They can also use social media to peer into a firm’s operations, and they’ll take their business elsewhere if they find something objectionable.

Firms are scrambling to respond as they watch their traditional revenue streams leak into other channels. A key strategy is to take a holistic and customer-centric approach that enables the firm to follow consumers as they skip between places, times and trends. Doing this means investing in programs who’s benefits are not easily qualified. These programs are either enabled by, or rely heavily on, technology.

We don’t have “digital programs”: we have “programs”, since they all use digital technology. Similarly we don’t want “leaders” and separate “digital leaders”. We need “leaders” who understand both the business and the digital worlds, as the two are the same.

Amazon, for example, was born digital. Technology is not treated as something separate from business; interactive and social media are commingled with traditional media, and the merchandising team is responsible for wholesale, stores and web.

How we measure value has changed

Managers trying to paper over knowledge and experience gaps by hiring in the expertise will soon find that it’s not enough. The person accountable for a firm’s (or a department’s) performance will need to understand the trade-offs they’re making. Increasingly these trade-offs cannot be captured by return on investment (ROI) or net present value (NPV) calculations, as the key factors in the trade-off are intangibles. Tim Cook has even famously disparaged “bloody ROI” when he explained at a shareholders meeting that Apple does “a lot of things for reasons besides profit motive”.

Trying to make judgment a call without an intuitive understanding of the trade-off being made is fraught with danger. If the factors that will sway the decision are not easily quantifiable then it can be challenging (if not impossible) to separate the technical and business expertise.

Management need to straddle business and technology

Management, from line management on the shop floor up to the executive and the board, need to have both a firm understanding of the business the firm is in, and the technology that is woven into the fabric of the business. In the lower ranks the focus is on identifying opportunities and solutions that can drive up firm performance. Higher up, the executive through to the board will make the judgment calls on where to direct resources. They must also be capable of defending these judgment calls to the owners.

Hiring in technical expertise will allow a firm to modernize its infrastructure and operating model. It will not, however, solve the more significant challenge of constantly evolving the firm’s business model in response to the evolution of the technology environment around it. Companies that have made this cultural shift do not have, nor will they probably ever hire, a CDO. Nor will they see IT as something they hire a CIO to worry about. Younger firms, such as Amazon, achieved this by being born digital. Older firms, such as Burberry, have hired or developed digitally savvy executives.

IT is not the high priest of technology anymore

As I’ve pointed out before, the role of the IT department is not carved in stone. The growth of empower consumers has also given rise to the empowered manager, a manager who understands technology, knows what they want, and (thanks to Software as a Service) has the ability to source it without the help of the IT department.

IT is a general business skill, and not the specialist skill it was in the past.

However, business, your business, still needs someone to play the role of intellectual bumblebee. Someone who can buzz between stakeholders and cross pollinate ideas, and someone who can ensure that the parts operate as a coherent whole.

The IT department can no longer monopolize IT knowledge. Nor can it expect to monopolize IT management. (Shared services have a patchy track record at best.) The lines of business have grabbed control of the technology they use, which is as it should be. It’s the lines of business that have the problems which need solving and – as was pointed out earlier – solving these problems will require knowledge of both business and technology. They’re also choosing to use service providers that operate outside the four walls of the traditional IT department.

A new relationship between IT and business

The IT department, however, is the group best positioned to work with the lines of business, working across the organization, and make sense of the chaos.

Business stakeholders need help stepping back and seeing the bigger picture, and to understand the broader implications, of the technology choices that they are making. It’s great to improve consumer engagement and shift more product, but this needs to be done in an environment where solutions deployed by the the various lines of business work together, and not at cross purposes, and in a way that allows the firm to meet its compliance and reporting obligations.

While the IT department needs to stop acting like an IT monopoly, the flip side is that managers in the line of business need to also take responsibility for the technology decisions they make.

How far along the journey is your organisation? Is technology still something only the CIO worries about about? Has your organisation started to try and transform into a digital business? Or are you already there, and technology is a general business skill?

 

The Gamification Revelation

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Why are you sitting there working when you should be playing games?

Gamification has become big business since 2010, leveraging the success of marketing platforms built to grow customer engagement and brand loyalty to tackle problems inside the firm. So what is it?

Gamification is a broad term to describe the application of gaming mechanics to everyday problem solving, analysis and discovery. People across generations have been using games to compete, learn, communicate and solve problems. What has changed in the last few years has been the penetration of powerful mobile devices and a generation of technology users who cannot recall life before the internet. People are actively participating in computer games, complete with challenges, rewards, cooperation and competition. This acceptance has been fundamental to establishing gamification methods as a viable approach to problem solving and insight generation. But how does this apply in the workplace?

Organizations are turning to gamification to gain consumer insights and solve complex problems. Traditional methods such as surveys, focus groups and data analysis have their limits. These approaches are typically closed systems which impose limits on the evidence being gathered and the results that are generated.

Gamification offers a different approach that is rooted in human behavior, motivation, inclusion and creativity. The CIO of the future needs to consider the practical application of gamification alongside their toolkit of hard technologies, services and skills. With the worldwide gaming industry forecast to exceed US$80 billion in revenue from 2015, one thing is very clear – playtime is paying off.

An organization is a collection of interacting social groups. There are sub-cultures, behavioral norms and systems of operation that exist through and around any business. For a CIO this typically means the dilemma of satisfying some parties and disappointing others. This is usually because of finite resources rather than disobliging intent. Providing solutions based on gamification solves this problem by tapping into these social enterprises and the human emotive qualities available within them. It is a way of harnessing the energy and imagination of people who are driven by reward, social inclusion, peer competition and collaboration. More importantly, it draws on the influencing power of normative behaviors.

However, gamification is not a panacea for every business problem. If a problem is well defined, repeatable and has a linear logical solution path, then there is likely to be a practical, established method of solving it. If it does not meet these criteria then traditional approaches are unlikely to produce a satisfactory result. It is a matter of being pragmatic and choosing the best approach for the problem at hand.

Games people play

Where to start? The type and structure of gamification platforms is broad, clever and often deeply engrossing. Consider the following game types:

Recognition – If you have ever completed a ‘Captcha’ or similar text recognition challenge, then you have played a recognition game. The outward intent of the game is to prove that you are human (also known as a Turing test). It takes advantage of the faculty that humans have to derive recognizable shapes – in this case a string of letters and numbers – despite them being skewed, incomplete or with significant background ‘noise’. Behind the scenes, Captcha style games have been used to perform character and word recognition on scanned documents that are unable to be recognized by computerized optical character recognition systems. For example, if 90% of people recognize a twisted character as an “h”, it is likely to be an “h”.

Creative – British media agency The Bank of Creativity taps into the imaginative, witty and sometimes outrageous minds of the Twitterverse with their regular “One Minute Briefs” competition. This combination of crowdsourcing, community and creativity is game playing on a worldwide scale. Participants are asked to submit (via Twitter) a rapidly produced advertisement on the topic of the moment, with the entries scrutinized and voted on by a jury of peers. The results are often hilarious, intelligent and nail the intent of the brief in a matter of hours. It is lightweight gaming that is 99% human and 1% technology. It also provides a model that can be used over internal social media across a large enterprise. Traditional creative processes cannot compete. Want to instantly tap into the imagination of thousands of people across your organization when a client throws you a creative problem to solve? Put out the call and watch the results roll in.

Optimization – Waze takes commuting to a new level by combining the insights of drivers – both passive and active – to provide a real-time, location-aware traffic navigation service. Drivers are provided a platform that extends beyond simple turn-by-turn navigation. It takes into account the speed of other drivers, user-lodged reports of accidents or hazards, and also allows for the editing of maps and routes to reflect recent changes. Posting alerts and logging miles earns experience points, increases the users’ credibility rank, and attracts gratitude from other drivers. The result is an optimized journey time that is both faster and more accurately calculated than non-gaming methods. It is a method of gaining real-time, contextual telemetry on a complex system compounded by ever changing speed and congestion. If applied to logistics or emergency services, it would save money and more importantly save lives.

Hunting – EteRNA, a crowdsourcing game that allows players to fold RNA combinations that make up ribosomes, has been shown to beat supercomputers running similar algorithms for both speed and accuracy. Not only does this leverage the human capacity for pattern aesthetics – it also means that the players are able to describe their problem-solving workflows, which can then inform future algorithm design. Back in the lab, this means more rapid drug development and more effective clinical trials.

Economic – Game theory has literally been part of economics since the early 18th century as a tool for the study of strategic decision making. Massively multi-player online role playing games, such as World of Warcraft and EVE are a step beyond the logical forms and decision trees that typify economic game playing. They are a true representation of incredibly complicated, chaotic systems that generate and destroy value. Their impact is not purely of interest to economic theorists who analyze the cross over between in-game and real-life economics. In many cases, an online universe simulation may exceed, in value or complexity, the gross national product of countries. There is no better way to combine and experiment with supply and demand, consumer behavior and the art of war. Just be careful of corporate pirates – they exist both online, and in real life.

Play by your rules

In your organization, go looking for a problem to solve through gamification. Start small. Find an executive peer who will champion this with you – someone who has an unusual problem at hand, and is willing to have some fun solving it. Begin with defining the problem and then work backwards to ideate how you’d go about solving it. Discuss the examples listed above to get your creative juices flowing. Be experiential – play some games yourself, and encourage your team to do the same. When designing the game play, keep in mind the problem to be solved, the data you want to collect, the target segment of people you want to attract, and the intrinsic rewards that will keep players coming back for more. Make it fun, and ensure it is healthily competitive.

If the CEO drops by and asks why all of your team are playing games, tell them it’s OK – they’re hard at work solving problems through gamification. If they’re still not convinced, then challenge them to a game. They didn’t get to be CEO without being competitive. Besides… what’s a good game without a Boss to fight at the end?

Does your organization use gamification to solve problems or gather data? What are some of the best examples you’ve seen?

 

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.

5 shifts that will shape the future of IT

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How empowered consumers and the consumerization of technology are shaping business

It’s not often that a week goes past when I don’t hear a new story of a company being ripped apart as it struggles to deal ever more demanding and fickle consumers. Marketing and sales, it’s usually said, have gone rogue leaving finance and IT to pick up the pieces. It’s obviously important to keep selling (and to keep generating revenue), but it’s equally important to do so in a safe and compliant manner (so that you’re still in business next year).

This situation has become bad enough that the analysts are now suggesting that a shift in operating model will be required to solve the problem. That sounds about right, and it looks like the trigger for the shift will be external pressure from regulators.

The problem, then, is to form a sensible picture of how this to-be operating model will function.

Coming up with some general statements about that nature of this new model is fairly easy: it will be more collaborative, it will favor services over assets, innovation will be important, and so on.

What is more important, and much harder to do, is to develop a picture of how the shift to a new operating model will change the roles and responsibilities within a business. How will we heal the rift between the front office – sales and marketing – and the back office – finance and IT?

This is not a question of tweaking the role of the IT department, for example. The IT department’s role – as has been pointed out elsewhere in this publication – is already well defined. IT is the part of the company that is responsible for procuring and maintaining the IT assets a business requires. This isn’t changing. Many businesses need for this role is, however, diminishing.

Nor can the problem be fixed by creating new technology-based roles outside the IT department, such as the Chief Digital Officer or Chief Marketing Technology Officer. While these roles might help the lines of business use technology more effectively, and they may work closely with the CIO and the IT department, they don’t address the root cause of a disconnect forming between the front and back office.

The interesting question then, is “What’s the role of IT in business?” How can the entire business consume and manage IT in a safe and compliant way while still meeting the needs of today’s empower customers?

To answer this question we need insight into who will make the decisions on what IT will be used where and how it will be knitted together. We need some understanding of the drivers behind the current transition in how we consume IT in business.

5 drivers for change

The easiest way to identify these drivers is to consider the shifts we can already see in how we’re managing the technology we have today. We’re not interested in changes in the technologies themselves. Nor are we interested in how the business uses individual technologies. We’re interested in how technology is managed across the business: who gets to decide what and how are conflicts resolved.

First there’s the shift in where technology comes from, and who is responsible for the infrastructure it relies on.

IT has expanded beyond the IT department. The development of on-demand IT (such as Software as a Service, SaaS) and the consumerization of enterprise IT (the use of consumer technology in a business context) mean that businesses, and the lines of business, no longer require the deep IT infrastructure skills that they did in the past. Nor do they want IT to act as a gatekeeper, selecting and procuring the technology to be used by the business.

From this we can identify two obvious trends shaping enterprise IT:

  • Driver 1: Enterprise IT is no longer an infrastructure problem, it’s not an asset we own
  • Driver 2: Consumer trends drive enterprise IT, rather than enterprise IT driving consumer trends

Next, is the impact of these trends on how we manage technology within a business.

Many business stakeholders today feel empowered to make their own decisions on what technology to use where, a result (for many) of a childhood steeped in technology. They’re using new technology in new ways to solve new problems, creating new business opportunities in the process. They don’t want the IT department mediating access to the technology they need, and slowing everything down. Many IT departments are finding themselves on the back foot, unable (or unwilling) to support the business as technology moves out of an automation and cost focused role.

This gives us another two trends:

  • Driver 3: The old core IT skills are not as valuable as they used to be
  • Driver 4: How we define the value of IT has expanded (it’s a lot more than ROI now)

While the previous four trends show us the how IT governance might flex and adapt to changing needs in the business, it is the external constraints that will determine the final role of IT in business.

So what external governance requirements are going to shape how IT fits into a business?

Audit is an obvious candidate. With marketing departments going rogue, often there’s only a tenuous link between what’s happening at the coalface that the company’s chart of accounts. In some instances the only link between sales and the general ledger is a spreadsheet containing the P&L for the new initiatives that is manually uploaded once a month. One day the auditors are going to come in and they will want to see a clear trail of evidence from sales by the new division through to the general ledger.

Another example is anti money-laundering and counter terrorism financing, which is receiving more attention from government as complementary currencies – such as Bitcoin and the “points” used to purchase virtual assets and services in games and social services and which are sold for cash – grow in popularity and attract organized crime. As businesses, even privately held businesses, integrate themselves into new commercial environment they find themselves increasingly subject to AML and CTF regulation.

Consequently our final trend is:

  • Driver 5: External obligations – such as financial reporting, anti money-laundering and counter terrorism financing – will trigger the transition to new operating models

The future role of IT

The future role of IT, as well as the role of the IT department, is not carved in stone. Both are likely to change as businesses find new ways to use IT to create value for them and their customers. The challenge is to understand what is driving this change and which, consequentially, will shape the role of IT, and the role of the IT department, in the future.

What trend do you think will shape the future role of IT and of the IT department in business? What are the drivers that we should be paying attention to?

 

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 ClinicXeroxIBM 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?