McKinsey and Company recently posted an interesting presentation titled “The cloud, technology and innovation.” The premise is that while many companies are deploying cloud technologies, most are focused on reducing costs and improving IT efficiency rather than on thinking about how cloud could really change the business. The issue is highlighted succinctly in this graphic comparing current IT use cases vs “New IT’ use cases.
|Source: McKinsey and Company|
The thesis is that while CIOs and companies who deploy cloud technology focusing on current IT use cases will likely generate cost savings for their companies, they’ll miss out on the real potential of cloud solutions.
There are three reasons why cloud technology today is very different than just a more efficient form of traditional on-premise technology. First, companies like Salesforce, Workday, Google, Amazon, Cornerstone and others are innovating much faster and are past the point of feature parity with their on-premise counterparts. Second, platforms-as-a-service have made it possible to create custom applications many times more quickly than traditional platforms. Third, social and mobile have changed the way we interact with each other and cloud providers are bringing these innovations to the business as fast as they can.
So, what does it take for CIOs or IT departments to move from where they are today to using technology to transform their business? Appirio has worked with hundreds of CIOs who are transforming their businesses and we’ve noticed 7 consistent themes among them. At a high-level, CIOs who are running “Agile IT” are business-first (vs tech-first), user-centric (vs data-centric), measure value (vs just cost), focus on apps and business process (vs infrastructure and plumbing), seek to manage business risks (vs minimizing technology risks) and deploy new technology iteratively (vs multi-year big-bang efforts).
Let’s take each of the characteristics of Agile IT and discuss what it takes to make it a reality in your business.
- Business-first (vs Technology-first): As IT becomes more focused on driving transformation, it’s critical to understand the business drivers of any initiative and start with the desired business outcomes. This means IT getting engaged early rather than being brought to the table at the time of technology diligence or selection. In most organizations, this is a shift in both how business stakeholders perceive IT and in how IT perceives its own role. Many industry analysts are even talking about the CIO role evolving into that of the Chief Digital Officer. Others, including Appirio’s own Narinder Singh, have argued that CIO’s role may split into two roles (one cost-focused and one revenue-focused). It’s not just the leader’s role that will change but the entire IT organization, since being business-centric means adding new skills within IT, engaging differently with internal stakeholders and measuring success differently.
- Customer-centric (vs Data-centric): CIOs and their teams traditionally think about the data model, profiles and security, data transformation and integration, reporting and all the other data-related issues when building an application. All still important concerns, but of equal or perhaps greater importance are… the people who will actually use the system. Today’s CIO needs to spend more time thinking about personas, what users are trying to accomplish, on what type of devices, and the consumer-grade experience they expect. IT departments need to embrace consumer technologies, user-centered design and new interaction models. By keeping users (customers or internal) engaged, the CIO creates more value for the business.
- Value Metrics (vs Cost Metrics): Many IT departments measure themselves in terms of budget as a % of company revenue and CIOs are rewarded when this % falls over time. This is a classic treatment of IT as a commodity. Forward-thinking IT leaders are challenging this. If IT can be transformational, its effectiveness cannot be measured purely in cost terms. The transition to value metrics typically starts by looking at specific projects where top-line impact is clear. For example, we’ve worked with companies where technology created new product offerings or opened up new sales channels. In these cases, it’s easy to measure the initiative’s success based on top-line impact. Even in cases where the impact is a bit less obvious, measuring top-line impact is critical. For example, let’s say you’re investing in a project to replace a recruiting system. Rather than measuring the success of the project on the cost to implement and maintain the system, measure success based on how much recruiting metrics improve, e.g., time-to-fill open positions, and what top-line impact this has on the business.
- Apps (vs Infrastructure): Today’s CIOs can rely on cloud service providers to run the majority of their infrastructure. Rather than in the past where the majority of an IT department’s efforts was focused on keeping the infrastructure up, today’s CIO can focus on deploying or building applications that enable the business. The shift to mobile also increases the need for app-centric thinking. Technology today needs to be focused on the specific things that each user population is trying to do and enabling those actions with technology. Given that most IT departments today were designed to run infrastructure, the shift to apps is a big one in terms of structure, processes and skills.
- Process (vs Plumbing): When creating new solutions, many IT organizations and system integrators tend to focus on how and where data will flow rather than focusing on the business process. In the past, the “plumbing” was critically important to get right because it was hard to execute and even harder to change. In today’s cloud platform world, getting data in and out of a system is relatively easy. The challenge now shifts to enabling the business process. This becomes especially important with mobile and social applications. Tacking on mobile or social to a current business process probably won’t work as well as rethinking the business process entirely. For example, let’s take a typical process like creating and approving creative for an ad campaign. A traditional business process would rely on a file server to store files along with workflows, escalations and alerts to handle approvals. With a social business process, the alerts, workflows and escalations become less necessary since client stakeholders and agencies can collaborate directly and share feedback on what they’re working on.
- Manage Business Risks (vs Minimize Tech Risks): As IT organizations become less infrastructure-focused, the risk management equation also changes. As we have written in the past, technology projects used to be fraught with risk. You spent months thinking about every risk and mitigating against it but you still didn’t know whether your deployment was actually going succeed. Cloud solutions have eliminated many of the variables that made deployments so risky from a technical perspective. So, the focus shifts to whether the solution is going be adopted, whether it will drive the desired business outcomes etc. IT departments now have to manage the business risks rather than eliminating the technology risks. Traditional PMO structures, project governance processes, QA and review processes are all heavily oriented toward technology risk mitigation so this means rethinking all those core processes with an eye toward business risk rather than just technology risk.
- Iterative (vs Big Bang): Closely related to desire to minimize technology risk, the traditional technology deployment model focuses on documenting requirements clearly, getting “sign-off” on those requirements, going away for a few years to build the solution and then releasing it with a flourish as a complete solution. This is the approach that’s resulted in trillions of wasted IT spend. Since cloud solutions can be developed and shown to users within days or weeks, IT departments can now work iteratively with stakeholders and end-users to continuously refine solutions. The days of the big bang project that delivered something nobody needed are gone. Internal and external customers are part of shaping the solution not just until the solution goes into production but even after that. On typical Appirio projects, we “go-live” within 3-4 months but either we or our clients’ internal teams continue to deliver enhancements and new releases on at least a quarterly basis. We now live an age of perpetual beta and it’s time for IT departments to adapt to this reality.
As you can see, going from a traditional IT organization to an Agile IT organization requires rethinking not just technology but also every aspect of how your IT organization operates. In the coming months, we’ll explore each aspect of an “Agile IT” organization in-depth including structure, governance, resourcing, skills, metrics, processes and more. If there are certain aspects you’d like to hear more about than others, let us know in comments!