Every company today is a software company. All companies, no matter what industry they’re in, will have to compete with businesses that use software to scale in unprecedented ways: Amazon in retail, Airbnb in hospitality, LinkedIn in recruiting, Netfix in TV and flm — the list goes on and on. Vijay Gurbaxani, a professor at University of California-Irvine and the Director of the Center for Digital Transformation, points out that “the current business environment requires all leaders to view their companies as software businesses — and think like software executives. Companies face major risks if they fail to recognize this new context and the diferent economic rules that govern it.”
Business and technology strategies are now so intertwined that today’s CIO needs to be attached at the hip with the CEO. CIOs are the key players who enable organizations to respond to the disruptive forces impacting all industries — mobile, IoT, SaaS and AI, among others. However, many CIOs are viewed by their organizations as the order-takers for technology projects, and they often don’t have enough visibility or say in technology decisions outside of IT. Splunk provides an example of a good relationship between a CEO and a CIO.
Splunk’s CIO, Declan Morris, told me, “If the executive leadership team doesn’t know where they’re going, then IT has no way of knowing where it’s going. Splunk’s CEO Doug Merritt has been crystal clear and consistent in his messaging for what our vision is to get to $2 billion in revenue in the next three years. It makes my job, frankly, a lot easier.”
This e-book will show why it’s important that CEOs and IT organizations embrace this new way of thinking about IT. By employing a new IT operating model, one that distributes the IT function throughout the business in a secure way rather than concentrates it in a single team (and creating roadblocks in the process), companies can exponentially increase the capacity for technological change. This will give them the uptick in speed they require to gain competitive advantage. Envisioning the IT function as a platform for the business will make the process of digital transformation much easier.
Have we been doing IT wrong?
Within the past year, three Fortune 500 companies have appointed former CIOs as chief fnancial ofcers. Goldman Sachs, Norfolk Southern, and most recently GE are signaling to the market that IT is a strategic asset worth investing in.
This comes on the heels of major market shifts, including the globalization of digital capabilities, agile entrants disrupting traditional businesses, and radically changing consumer expectations. Every industry is being impacted by disruptors, from Amazon to fintechs, altering consumer expectations and the competitive playing feld. A recent MuleSoft report, for example, showed that a quarter of European respondents would consider using Amazon, Google, Facebook, or Apple rather than a traditional bank in the future.
In a world where Facebook could soon become our primary bank and Amazon our primary grocery store, traditional businesses can no longer play defense. It’s putting signifcant pressure on these companies to undergo digital transformation, likely explaining why more frms are adding IT chiefs to corporate boards. With everything turning digital, traditional companies need to change the way they operate and rethink their five-year strategy.
The changing value of IT
As companies increasingly tap into cloud, mobile, IoT, and AI technologies, more of the value companies provide to customers, partners, and employees are through digital products and services. Therefore, if what an organization sells is digital and if an organization’s employees rely on digital services to do their jobs, shouldn’t these digital capabilities be treated as assets the company continues to invest and divest in based on the value they add to the business?
The short answer is yes. Yet it’s worth considering how that changes IT and the relationship between IT and the business. For example, if data is an asset, how should CIOs package it for broad consumption? Or, how should CIOs measure the leverage gained from applications and services to determine future investment?
In the past, IT was a way of getting one-of projects delivered as quickly and cheaply as possible. It resulted in undesirable short-term behavior, leading to a ball of complexity growing at the core of the IT organization. Consequently, future projects slowed down, and shadow IT crept in as business users risked data security to download their own tools to move at faster speeds.
For IT to make the shift from a tactical function into a strategic business partner, CIOs should embrace three concepts:
1. Culture first, technology second
Contrary to what one might think, digital transformation relies frst and foremost on a culture shift, not technology. In most organizations, teams work in silos and build each new project from scratch or buy a cheap solution. This habit needs to change, and CIOs are responsible for educating the business on why the old mode doesn’t work and why it is critical to create reusable assets that others can leverage. It frst requires a mindset change to assume that what we need already exists and to then have a central marketplace for discovery.
2. Reuse is king
In order to move IT away from a project order-taker, CIOs should package up data and capabilities as reusable assets and expose them in a central marketplace so a broader range of consumers can self-serve. APIs have become the de facto way of packaging up and exposing valuable data, as evidenced by Twilio, Expedia and Stripe. In addition, as more assets are added to the marketplace, they can be seamlessly composed and recomposed, adding further agility to the business as assets can be quickly plugged in and out as market conditions change. These APIs and the marketplace are the application network that enables the discovery, self-service, and management of assets that are used to build all products, applications and processes going forward.
3. KPIs set the stage
To determine what IT assets to invest and divest in, CIOs need to defne production and consumption KPIs. Production KPIs measure delivery capability—such as how long it takes to build an API, microservice, or integration—providing more insight into where bottlenecks reside. Additionally, production KPIs can measure the quality of individual components to provide insights on where improvements are needed. Consumption KPIs, on the other hand, measure how much leverage assets are driving. For example, how many consumers are using a specifc API or how many developers are accessing an enterprise’s assets? These metrics indicate if APIs are being used or if more investment is needed to improve functionality. Together, these KPIs measure the value of IT assets.
If done right, IT has the power to change the way organizations win. Goldman Sachs, Norfolk Southern and GE certainly think so. What are you waiting for?