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CIO

CIOs Struggle with Gap in Digital Transformation Expectations and Delivery Capabilities | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

As part of our Pinnacle Model™ methodology and benchmarking, Everest Group recently conducted a study of over 200 companies on their digital transformation readiness. The study found companies’ boards of directors typically believe digital transformation is about technology, and they typically under-estimate the cost and expect results in months, not years. Those expectations are a huge gap away from the reality challenging CIOs and senior leaders leading the digital transformation. CIOs participating in our study revealed their companies were unprepared, under-funded and under-supported as to the tools, investment and commitment required to succeed. In this blog, I’ll share how to effectively communicate to your company the requirements for digital transformation to succeed.

Why Is There a Huge Gap?

The gap between expectations and delivery capabilities is because digital transformation is fundamentally different from companies’ past experiences with transformation. The technologies are disruptive and necessitate changing the organization, talent model, mind-sets, policies, processes and procedures – basically, the entire business model. Those changes are not easy. They don’t come all at once. They’re not completely known at the outset. And they unfold over a multi-year journey.

Peter Drucker advised, “If you want something new, you have to stop doing something old.” But the depth and breadth of necessary changes and the required commitment and investment for digital transformation are complicated to explain. They are hard to understand.

The digital journey requires far more resources, support, commitment and investment than anyone wants to believe. Digital technologies also take far longer to implement than people expect. For instance, in Robotic Process Automation (RPA) technology, a company can put a robot up quickly to create process improvement; but getting significant value involves more than that. Sure, a company can automate a function. But until the executives rethink the process that the robots will perform, they cannot create a meaningful improvement or breakthrough performance.

So, it’s no wonder that the boards don’t understand the extent of what is required to successfully complete a digital transformation journey. They also don’t understand that they need to fund IT transformation at the outset so that IT can successfully support the digital transformation.

As a result, most digital transformation initiatives fail (70%, according to a 2013 McKinsey & Company study. Many participants in Everest Group’s Pinnacle study revealed that, even when they understood the journey, they could not communicate it to their board, could not get funding, could not build support for it, and thus could not drive the change necessary to get it done.

How to Communicate Digital Change Requirements to Your Company

From our Pinnacle Model study, we developed an assessment vehicle (a 30-minute questionnaire) from which your company can compare its digital readiness against the broader population and against the market leaders (the Pinnacle Enterprises™). Together with a four-hour workshop, you’ll have the tools that will allow you to identify gaps, create learnings, understand what things you could do differently to improve your company’s readiness and performance and well as build road maps that allow you to systematically mature your digital readiness.

Learn more about our digital transformation analyses

Executives that have gone through the assessment and workshop tell us it created a great tool for communicating with their board of directors and the rest of the business about the support, resources and investment necessary to allow for successful digital transformation.

It is also a supporting budgeting tool that allows you to demonstrate the value against the cost, build support for the investment required to mature digital readiness and communicate the value that the IT organization will be able to achieve or support by increasing its digital readiness.

There’s a startling fact in the 2013 McKinsey study I cited earlier: Of the “successful” 30% that didn’t report their initiatives as failures, “success” was described as either breaking even or finishing the program but not delivering the anticipated business results. Of course, no company wants to undergo the challenge, effort, and expense of transformation only to break even or remain in the same relative competitive position.

Harvard Professor John P. Kotter’s study of 100 companies that underwent transformation initiatives found more than 50% failed in the first phase (getting organizational commitment and cooperation for the initiative). The Pinnacle assessment, workshop and communication tools are very helpful in addressing these issues.

Crucial CIO Skills for Digital Transformation Success | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

What do CIOs making the most progress with digital transformation have in common? They know how to nurture cross-functional collaboration.

All companies are vulnerable to the threat of a competitor’s ability to create new value for customers. That’s why most companies today are considering the opportunities for creating new competitive advantage through digital transformation and virtually all CIOs view digital transformation as a top priority. However, Everest Group’s Pinnacle Model research of more than 200 leading companies finds that only 10 percent of CIOs and their IT organizations are in a state of readiness for digital transformation initiatives.

Through our investigation into these companies’ digital journeys, we identified Pinnacle Enterprises – those that were best prepared for digital change and achieved superior business outcomes because of their advanced capabilities. The outcomes are compelling. Consider these examples:

  • In 86 percent of the Pinnacle Enterprises, the IT organization enabled the enterprise to serve a new market or new customer segment, versus 43 percent of the “unready” enterprises.
  • In 95 percent of the Pinnacle Enterprises, employee productivity increased between 10-30 percent, versus 54 percent of the other enterprises we studied.
  • Of the enterprises implementing Robotic Process Automation (RPA), the Pinnacle Enterprises achieved 4X more ROI (100 percent) than the other enterprises (40 percent) and achieved implementation 3X faster.

Our research also identified the enablers and capabilities of Pinnacle Enterprises to achieve desired outcomes and accelerate timeframes. A notable enabler: We found 95 percent of Pinnacle Enterprises (vs. 58 percent of the other enterprises we studied) built a culture that is effective in collaborating across functions in an organization.

Read more in my blog at The Enterprisers Project

How Cloud Impacts APIs and Microservices | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

Companies considering moving workloads to cloud environments five years ago questioned whether the economics of cloud were compelling enough. The bigger question at that time was whether the economics would force a tsunami of migration from legacy environments to the cloud world. Would it set up a huge industry, much like Y2K, of moving workloads from one environment to another very quickly? Or would it evolve more like the client-server movement that happened over 5 to 10 years? It’s important to understand the cloud migration strategy that is occurring today.

We now know the cloud migration did not happen like Y2K. Enterprises considered the risk and investment to move workloads as too great, given the cost-savings returns. Of course, there are always laggards or companies that choose not to adopt new technology, but enterprises now broadly accept both public and private cloud.

The strategy most companies adopt is to put new functionality into cloud environments, often public cloud. They do this by purchasing SaaS applications rather than traditional software, and they do their new development in a Platform-as-a-Service (PaaS) cloud environment. These make sense. They then build APIs or microservices layers that connect the legacy applications to the cloud applications.

Read more at my CIO Online blog

Success Factors in Driving Digital Transformation at the Social Security Administration | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

The digital transformation at the Social Security Administration (SSA) is remarkable for its approach to ensure a successful outcome. Shifting the process of retiring into a digital world required overcoming a resistant culture, managing multiple stakeholder groups’ needs, surmounting organizational structures and ensuring leaders didn’t lose sight of the end outcome and focus too much on process. The SSA transformation initiative faced the same challenges that commercial businesses face.

Frank Baitman, SSA CIO at the time, recalls the agency experienced management challenges due to its structure using 1,300 field offices across the US. Its 40,000 field workers spent most of their time assisting people going through the retirement process, which didn’t give them enough time to effectively handle disability determinations and claims, and address a backlog in disability case processing. Disability, a more complex process, required far more human attention and support than the relatively simply retirement process.

Design thinking approach

This was a key consideration in the transition plan. The agency involved employees in the design thinking process so that the new business model would satisfy their concerns. As a result, the website includes a validation process so SSA employees can check in with individual retirees, and make sure they made well-informed decisions when using the online system.

Read more at CIO Online blog

The Tyranny of Service Providers’ Global Rate Cards | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

As their enterprise clients move to digital business models, which are clearly superior in productivity, business alignment and speed, legacy service providers seek to shift their offerings to the new digital world too. Seems like a great match, right? So, what’s the problem? The problem is the service providers are accustomed to a very profitable offshore factory delivery model. Inconveniently, the new digital business models don’t align well with this old tried-and-true mainstay. Even more disturbing for the service providers is that the new delivery models look to be less profitable than the mature offshore talent factories. I foresee increasing pressures on margins and some potentially unrecognized consequences that will impact clients.

Two reasons for the margin paradox

 
As the services industry rotates from the old labor arbitrage model to digital business models, service providers expect to achieve higher margins than their typical 40 percent gross margins. Why? Because the digital models deliver a higher level of value. They are better aligned against clients’ business results and are delivered at a faster rate. So, why are providers shifting to digital not getting even close to maintaining the margins they enjoyed in the labor arbitrage space? 

One reason is the price of digital talent. The skillsets for the disruptive technologies are rare and command a higher price. Plus, there is a scarcity of talent with skills and experience in implementing the new models.
  
A second factor is the difference in teams doing the work. The digital world requires persistent teams that remain over time and are located onshore; the arbitrage world depends on low-cost labor in offshore teams that churn over time.  

Read more at my CIO Online blog

Digital Transformation’s Impact on IT Shared Services | Sherpas In Blue Shirts

By | Sherpas in Blue Shirts

Enterprises realized value in IT shared services organizations for the past three decades. Over the past two years, I’ve delved into the nuances of capturing the promise of digital transformation. As I think about the impact of digital transformation on shared services, it becomes clear that shared services are in for substantial changes.

I blogged before about SaaS and SaaS-like products driving the collapse of the IT technology stack (server, operating system, middleware, applications, etc.). For those of you who have not read or can’t remember what I wrote, the following is a quick recap. Much of the innovation in technology over the last few years has been aimed at integrating and automating the IT stack. For example, SaaS combines the infrastructure middle layer of the database and applications layer into a single consumable product. In doing this, it automates and integrates many otherwise automatous components, resulting in lower TCO and tighter alignment with business functions. It may be less clear that this same collapsing IT stack will inevitably set in motion other significant changes in both the enterprise IT organization and it business model.

Related: Learn more about Everest Group’s Shared Services Center capabilities

Enterprises created IT shared services organizations to centralize IT functions, professionalize services and sell high-quality services back to the enterprise at lower prices. The concept worked well improving the reliability and performance of IT, lowering unit cost of IT components and creating a professional team of technology experts for the wider organization to rely on. These enterprise IT functions naturally aligned around the technologies they supported broadly organized by infrastructure, middle ware, application maintained, application development, security, project management and so forth. Each functional team organizes around creating high quality functional services which are then resold to the broader organization. All of this makes a great deal of sense until we consider the collapsing stack which now integrates and automates much of what the functional teams currently do.

Read more at my CIO Online blog

Browse all my blogs at peterbendorsamuel.com

Google Touts Programmers 10 Times More Productive | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

Are you looking to increase productivity at your company? Google believes that its engineers are 10 times more productive than a typical engineer or programmer. On its surface, that sounds astounding. Yet, Google believes this to be the case. Is it that the people Google hires are 10 times smarter? That doesn’t make sense. We know the distribution curve of IQ means there is no such thing as someone 10 times smarter. So, something else is going on here. What is it?

Let’s take Google’s claims at face value. Here’s how they make their claim a reality. Google hires smart people and then puts them into an environment with accelerators (such as cloud, automation, integration tools and agile product disciplines) that enable them to be 10 times more productive. The results are astounding both in impact and cost to operate.

Let’s compare this this impact to the other most important factor that shaped the market for the last 20 years: labor arbitrage. If you can move work offshore to a third-party service provider, they can pay workers between 20-60 percent of what is paid to onshore workers. After taking into consideration service provider profit margins and overhead, on an hourly cost comparison, this realizes savings of 20-30 percent. If we just compare the cost savings to Google’s claim of 10 times greater productivity, the benefits dwarf those of the arbitrage model.

Read more at my CIO Online blog

Why a Hackathon May not be a Good Strategy for Your Company | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

Hackathons, or hackfests, are getting a lot of buzz for being a collaborative, crowdsourced way of generating new product or service ideas. Sometimes they’re even touted for ideas that drive change and create a competitive advantage. But if that’s what you have in mind for a hackathon at your company, prepare for a letdown.

The buzz isn’t all hype. Entirely new companies (such as GroupMe, which was acquired by Skype) have been birthed from hackathons. And Facebook’s “like” button originated in an internal hackathon at Facebook. Some hackathons resulted in government entities capturing new ideas on how to improve government services. And an increasing number of companies find hackathons to be an effective strategy for improving employee engagement.

Read more at my CIO Online blog.

A Fundamental Flaw in Approaching Digital Transformation | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

What makes digital technologies so different and disruptive is their potential to enable very substantial business benefits. “Enable” is the key word. Too often, executives see the power of a technology and reason to themselves, “This technology will create significant benefits, so we need to implement it and learn how to use it to our advantage.” The problem is this is a fundamental flaw in approach that almost always ends up in a digital transformation failure.

Technology does not drive change; creating substantial business value requires changing the business model. And a business model change requires many changes in operations, not just new technology. Yes, those changes are cross-functional, usually end to end, and always disruptive. But without changing other operational aspects than technology, the transformation initiative will fail to deliver the anticipated outcome.

Read more in Peter’s CIO online article.

CEO Mandate is not Enough for Success in Digital Transformation | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

If you’re a CIO or other executive tasked with leading a digital transformation project, chances are high that you’re left-brained oriented — you’re a logical thinker and are very good at solving problems. But be careful when you develop the approach to the transformation. Inevitably you’ll be asked “What’s the solution?” and “What does the road map look like?” Speaking for myself here, we folks with dominant left-brain characteristics are often “stupid” enough to answer those questions. Unfortunately, thinking we are bright enough to know the answers is a mistake that usually motivates passive-resistance to change and can even lead to a failed initiative.

Some leaders driving transformation initiatives have a natural tendency to go right to the problem, figure out the solution and start working on it. This is especially the case in organizations where there is a mandate from the CEO to make the transformation happen. Everyone understands they must get on board with the mandated change.

Read more at Peter’s CIO online blog