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?
How to Surf Across a Burning Platform
By Colin Hope Colin Hope-MurraySucceeding 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.
In the Asian century, Australia is becoming Asian too
By Ross DawsonEarlier this week I gave the opening keynote at the Institute of Chartered Accountants/ Centre for Accounting, Governance and Sustainability Thought Leadership Forum in Adelaide.
The day’s theme was The Australian Accounting Profession and Asia, with a strong emphasis on education given the participation of most of the heads of accounting departments of Australian universities. As such in opening the event I was asked to speak on the broader theme of “Australia’s Engagement with Asia”.
In my keynote I started from the broader context of the ancient and modern history of Asia and Australia, looked at current trends including demographic shifts that are shaping our relationship, the most important intersections between our economies and cultures, and finally the leadership required for Australia and Asia to engage more deeply into the future.
In the course of my research for the keynote I looked at changes in Australia’s population, and generated the following very interesting chart:
Source: Australian Bureau of Statistics
Read more →
Availability in Europe in March and Latin America in April
By Ross DawsonI have a very busy travel itinerary coming up, with keynotes scheduled on 5 continents in the next 4 months.
While I often travel for a single engagement, I look where possible to fit in other client work when I am travelling.
I currently have availability in Europe the week of March 10 before the Congres Intranet in Utrecht, Netherlands, which is apparently the largest intranet conference in the world, where I am running a pre-conference workshop on Tapping the Power of Internal Crowdsourcing and doing a keynote on The Future of Work and Organisations.
Read more →
New Business Models Need New Approaches to IT
By Peter Evans GreenwoodHow 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 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:
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?
Keynote for Optus Business – Five driving forces of connected business
By Ross DawsonI recently completed delivering keynotes in six cities as part of a national roadshow for Optus Business. Optus’ annual client event was a morning event for its clients and prospects in Sydney, Melbourne, Brisbane, Perth, Adelaide and Canberra. The sessions began with my keynote on Surviving and Thriving in a Connected World, followed by Optus executives presenting insight and client case studies on mobility and IP convergence. Each event included an exhibition featuring Alphawest, the ITC services firm Optus acquired a few years ago, and a broad array of Optus Business delivery partner organizations.
Below is the key content from just one of the five sections of my presentation, on the Driving Forces that are transforming a connected world. The rest of the keynote describes in detail what connected business looks like, winning strategies for organizations in a connected economy, and finally the actions that needs to be taken to succeed.
The five driving forces of Connected Business are:
1. Connectivity
Increasing connectivity is an overwhelming force, shaping society and business. We have come a long way since the first mobile phones that weighed no less than a brick in the early 1990s and the birth of the graphic web browser in 1993. As we shift to pervasive connectivity, giving us access to all the people and information resources of humanity wherever we go, entirely new possibilities are emerging on who we are and how we live our lives. As messages flow rapidly between us, the people on the planet are becoming connected as tightly as the neurons in our brains, giving rise to an extraordinary global brain in which we are all participating.
2. Speed
We can think of it as the acceleration of everything. Our expectations for the time it takes people to respond to messages has shrunk from weeks to days to hours. The value of our knowledge is depreciating at an increasing rate. By every measure, from the number of science and engineering graduates globally, to the amount of information produced, and on to the number of patents filed, the pace of knowledge creation is increasing. Now the extraordinary visibility of innovation and new ideas is further accelerating the pace of change. In the video above XXX shows his idea for using anamorphic representation to create an “iHologram”. He doesn’t know how to do it, just what it will look like. However from the hundreds of thousands of people who saw the video, some will take the idea and do something with it. Ideas proliferate and spark new concepts and actions at an ever-increasing pace.
3. Fluidity
We are shifting to a fluid global economy, based on the ready flow of information and ideas across borders. Amazon’s Mechanical Turk enables companies to engage people across the world to perform simple tasks that can be done better by people than by machines. Business processes are being broken down into elements that are performed partly by computers, partly by people. Web services technologies continue to allow business processes to be broken down into smaller and smaller modules, each of which can be performed anywhere on the planet and then readily integrated. As business processes are distributed across the boundaries of IT systems, organizations, and countries, we are shift to a fluid economy that organizations must embrace if they wish to participate in the vast growth ahead.
4. Participation
Perhaps the biggest social shift in recent years is towards participation. I think it is an intriguing question whether the rise of enabling web technologies over the last years has shaped our social attitudes, or whether a transformation in social views has resulted in us developing the technologies to support these. Probably both are true, but either way there has been an extraordinary rise in participation, as illustrated in the diagram above (taken from our Future of Media Report 2008), accompanied by increasing expectations of openness and transparency. This massive trend changes not just how companies must engage with their customers, but also how they must organize to tap the degree of participation that their younger (and older!) staff expect.
5. Carbon
We are changing the climate of the planet. No-one knows quite what the impact will be in coming decades, however today’s social and political attitudes mean that every organization must focus on reducing their carbon impact. Not only will many customers make buying decisions based on their perception of how environmentally-friendly companies are, but there will soon be direct costs for carbon emissions. As improved communication technologies can increasingly replace not just many air flights but also legions of car commuters, carbon impact will accelerate the shift to connected business, driving video-conferencing, virtual worlds, work gaming environments, and richer forms of tele-commuting.
Scenario Planning – Strategy for the future of global financial services
By Ross DawsonFor my keynote at the Vision 2020 Financial Services conference last month in Mumbai I prepared some ‘quick and dirty’ scenarios for the global financial services industry landscape in 2020 from a technology perspective. Below is an overview of the content I used in my presentation. The complete slide deck from my keynote is also available, though it needs the explanation as below.
Scenario planning
Scenario planning recognizes that beyond a certain degree of uncertainty forecasting is of limited value (or can even be detrimental to good decisions). The process of creating a set of relevant, plausible, and complementary scenarios (more than the scenarios themselves) can be invaluable in creating and implementing effective, responsive strategies.
The heart of the scenario planning process is distinguishing between Driving Forces (consistent long-term trends) and Critical Uncertainties (unpredictable elements). Once these are identified, they are brought together to create a set of scenarios that reflect both what you know and what you don’t know about how the environment will change.
The image below shows a sanitized version of the process for a scenario planning project I ran for a major financial institution. This was quite a streamlined process relative to a comprehensive scenario planning project, however was designed to bring the insights directly into the existing group and divisional strategy process.
Below are the scenarios in detail:
DRIVING FORCES: GLOBAL FINANCIAL SERVICES
1. Economic shift
Economic power is shifting to the major developing countries. The BRIC countries (Brazil, Russia, India, China) together host close to half the world’s population, and their pace of economic development means that before long there will be multiple economic superpowers. In addition, global economic growth is shifting to the virtual, and developing countries will gradually wean themselves from primary and secondary industries to be significantly based on knowledge-based services.
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Keynote speech: Network to Win!
By Ross DawsonRecently, I gave the opening keynote at the 38th annual global conference of international accounting network Kreston International. Below are the slides for my presentation. Note that they are intended to accompany my speech, not to be meaningful in themselves.
Kreston are a very interesting organization. With revenues across the network of over $2 billion, they are the 13th largest accounting network in the world. The day of the conference they made the final step in becoming a network according to the IFAC (International Federation of Accountants) definition of a network. One of the critical issues in determining whether a group of firms is deemed a network is whether they have common quality controls. The appointment of a Global Quality and Professional Standards Director is a key step Kreston has taken.
I have long been fascinated by professional services networks. I wrote about them in my first book Developing Knowledge-Based Client Relationships, and in detail in Chapter 9 of Living Networks.
I am actively continuing to explore the nature of networks in professional services. How well they network very simply determines their success. As such I was delighted to be invited to do the opening keynote on the conference’s theme of Network to Win. It took the format of a participatory workshop run over two 45 minute sessions, getting the attendees to reflect on and discuss how they can best enhance the cross-firm networks that drive results.
The future of technology in health care
By Ross DawsonRecently I gave a keynote speech on The Future of Technology in Aged Care at the Aged Care Association Annual Congress. I took the audience on a big-picture journey into where aged care is going, which went down very well between the many high-detail presentations at the conference.
Below is a brief snapshot of the five key ideas that I presented:
1. Telemedicine
Health care is being transformed by connectivity. This ranges from simple applications such as monitoring medical data through to remote surgery, bringing the skills of the best doctors anywhere in the world. Accenture’s Online Medicine Cabinet is an example of how patients and the elderly can have their health monitored from home, and their medications managed effectively. Now robots such as the one in the video above can visit patients or do rounds in the ward, linking them directly by video to doctors or nurses.
2. Care robots
Japan is in the vanguard in using robots in aged care, being at the most pointed confluence globally of a rapidly aging population and a lack of health care workers. Increasingly the basic work and functions – both at aged care institutions and in people’s homes – will be performed by robots, or in some cases, such as in the video above, by people assisted by robots or exoskeletons.
3. Emotional robots
We will become increasingly emotionally engaged with robots. Paro the seal robot, which I first wrote about in 2004, is being used to help the elderly, people with Alzheimers and schizophrenia, and sick children. The first video above shows Paro being used in therapy, including of a Japanese Prime Minister. The second video reports on a recent study by St Louis University which showed that the robotic dog Aibo was as helpful as a real dog in helping seniors to feel good and engage with the world around them.
4. Connecting
While younger people have tended to take up social networks more than the elderly, most people underestimate how many old people are engaged in online communication with their family and peers. Over two years ago, 18% of Americans over 65 had shared content online, with photo sharing common in this demographic. The key thing that will allow elderly people to engage in technology is easier interfaces. As shown in this video, new interfaces such as that on the iPhone make access to technology far easier. We can expect social networks for the aged to grow rapidly, for example the Grandparents Network described at the Online Social Networking and Business Collaboration conference.
5. Getting better
Technology should not just ameliorate our problems, it should make us better. Technology, including games, can help us to keep our minds alert and engaged, which has been demonstrated to delay dementia. Beyond this, a whole array of new technologies will give us more possibilities as humans, especially in enabling our thoughts to get things done.
In the future we will have relationships with our homes
By Ross DawsonToday I was interviewed on The Daily Edition about the homes of the future.
Click on the image to watch a video of the segment.
The future of homes is a very rich topic that goes far beyond the usual chatter about internet-enabled refrigerators and integrated entertainment, and we weren’t able to cover much in a TV panel format.
However the main point that I made is that in the future we will have a very real relationship with our homes. Now homes are somewhere that we reside, and while we can shape them to our personalities, it is not currently a two-way relationship.
As we move forward, our relationship with our homes will comprise many elements.
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What to Do When Your Business Model Changes
By Andy MulhollandThe 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.
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?