Up until recently, the IT organizations in large enterprises were generally able to react to the needs of the business units they support in a timely manner. A business unit would determine a new strategic business approach, and they would work with IT to determine which parts of the new business plan the IT infrastructure could support. This typically led to one of two outcomes: either the business unit scaled back their goals to a subset that could be supported by the IT infrastructure; or the business unit struck out on their own, creating “shadow IT” functions to enable their business strategy.
Many organizations have been working through a digital transformation – a change in the people, processes, and technologies that drive the customer experience they want to offer to their markets, enabled by the evolution of digital and IT capabilities. This digital transformation has been occurring at a rather slow pace as it is difficult and expensive. However, the current pandemic and its impact on organizations’ business models have accelerated many businesses’ push for digital transformation as a means of survival.
How can executives work together with their IT counterparts to transform their business? We’ll explore the market drivers, how IT has traditionally responded to support business needs, and how some IT leaders are “Doing IT Differently”.
Andrew Annacone describes “Digital Transformation” as having four components: Business Process, Business Model, Domain, and Cultural/Organizational. The underlying data that businesses can gather, the analysis of that data, and the application of machine learning and other technologies to that data has transformed many business processes to a “just in time” model. These new business models are focused on the fundamental building blocks of how value is delivered to the customers in the affected industry. This transformation has redefined the products and services that are being delivered, blurring the boundaries between industries and creating entirely new sets of non-traditional competitors. To enable this digital transformation, organizations must evolve. Doing IT Differently requires agile workflows, a bias toward testing and learning, decentralized decision-making, and a greater reliance on business ecosystems.
While the need for digital transformation has been driven by trends such as globalization, innovation, and the ever-increasing risks of cyber breaches, the recent market uncertainty is accelerating the push. The uncertainty in the markets is being driven by the global pandemic and the changes in business models and consumer habits that result from the new normal (work from home, order online for delivery, etc.). Specifically, the explosion in e-commerce is a result of changing consumer habits. In the U.S. alone, online sales were up 45% in the second quarter, year over year.
The traditional responses to these challenges by IT organizations have tended to be reactive in nature as IT is often behind the technology curve required to enable new business models. Insufficient budgets and resources, coupled with the trend to outsource IT functions to reduce operating costs, have restricted the IT organization’s ability to innovate, and to drive change alongside the business units they support. Maintaining and securing the existing IT infrastructure takes precedence over digital transformation.
We are, however, seeing signs of transformation in both traditional and newer organizations. In some cases, the changes were focused on novel ways to increase production to meet demand. In other cases, transformation came by way of a pivot to a new market. Some examples of organizations successfully transforming their businesses include:
- Lysol (Reckitt Benckiser), whose antiviral products were already well known for safety and effectiveness, transformed their manufacturing process and their supply chain to meet demand. Sales for Lysol disinfectant products are up 70% for this year. Reckitt Benckiser’s (Manufacturer of Lysol) IT organization quickly adapted the ERP system to adapt the traditionally lean global supply chain to a hundred-year plague, increasing capacity from new contract manufacturers and new suppliers that will allow it to sell as much Lysol as retailers want by the spring.
- Keurig pivoted their marketing and packaging to disrupt the business of Starbucks and Dunkin. The ability for Keurig customers to custom blend their own coffee at home has taken a significant portion of the market share from the store-based coffee shops. With the launch of the K600 Coffee Brewer, Keurig’s IT organization developed a connected app which allows consumers to both control the coffee machine, but also to blend the coffee grind to match their tastes – at that moment in time.
- Tractor Supply kept their stores open so that their client base could have a sense of normalcy during the pandemic, but at the same time acerated their e-commerce push to make sure that their products could be ordered online and delivered to the home, the store, or anywhere else their customers wanted them. Tractor Supply’s IT organization was ramping up innovation efforts well before the pandemic, largely by embracing the blur that shopping is today and seeing the customer as the channel. This included improved e-commerce platform, enhanced mobile-enabled shopping and expanded delivery options, ready to expand once the impact of the crisis became clear.
- Netflix was perfectly positioned as an entertainment provider when people found themselves with excess free time on their hands. Netflix has historically relied on Amazon Web Services, but it also operates its own content delivery network entirely within its own infrastructure. Their IT organization had to adapt to allow content creation in a distributed fashion, and to leverage partners like Equinix to get connectivity beefed up in certain markets.
What do these organizations have in common? They are Doing IT Differently. And they have IT Leaders who have turned the old IT support model on its head and are delivering Digital Transformation to their organizations. Doing IT Differently requires IT leaders to take a long view of their organizations’ needs and capabilities. They need to partner with the business leaders in their organizations and reach a shared vision for how IT can drive new business and new business models by getting ahead of the innovation curve. And IT leaders need to have one or more strong IT partners who can help develop strategies, architectures and roadmaps to realize those goals, taking into account the accelerated pace of innovation and market disruption.
In a word, it takes leaders. Leaders who are not afraid to push the boundaries of traditional IT and are willing to take risks to drive the required change in their organizations. In future installments of this series, we will be interviewing IT Leaders who are Doing IT Differently and changing the nature of the businesses they serve. We will be asking these IT Leaders to talk about how they are Doing IT Differently, and what the results have been for their organizations.
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