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It Was Already Important, But Now It’s Also Urgent

People | Process | Technology

It Was Already Important, But Now It’s Also Urgent

A big challenge for every IT leader is separating the urgent from the important, the tactical from the strategic. When new tech trends develop, when is the right time to invest? When does the tipping point arrive? These are critical decisions — get it right, and you can steal a march on your rivals. Get it wrong, and you may never catch up.

But where should IT leaders be focusing their attention? Among the competing tech trends that are driving technology adoption sits digital transformation. It’s an approach that allows businesses to solve traditional problems with technology and, in doing so, integrate it into every area of operations.

It’s up there with the big tech trends of our generation. And in many ways, it’s nothing new — most of us have been down this road before, with the most important recent example being the cloud. And for many, the tipping point for the cloud arrived some time ago, when investing in the technology became both important and urgent.

But in the case of digital transformation, organizations are embarking on a new wave of technology investment to improve everything from internal operations to customer service. And these investment levels aren’t tinkering around the edges of traditional spend, they are massive and sustained. IDC recently updated its forecasting of worldwide digital transformation spend, predicting that it will reach an eye-watering $1.97 trillion in 2022.

At the heart of this movement is rich, frequent software updates driven by DevOps, which for many organizations has already become an important part of their digital transformation strategy. But with the pace of change and disruption at such a high level, businesses that want to thrive in a digital business era need to add a sense of urgency to their efforts. Here’s why:

Change Is Inevitable

The rate of digital disruption is impacting everyone — size, reputation and history offer no immunity — causing the lifespan of large, successful companies to significantly decrease. The S&P 500 is a great indicator of this, with Innosight noting in a recent report that:

• The average tenure of companies on the S&P 500 will shrink from 24 years in 2016 to just 12 years by 2027.

• At the current rate of change, about half of the S&P 500 companies will be replaced in the next 10 years.

Another great indicator is the rate of innovation and success of Chinese tech businesses to understand the true pace of change. If you look at data published in MarketWatch, it shows that China had 9 of the world’s 20 biggest tech companies in mid-2018, compared to none in 2000. Staying where you are is not an option.

Granted, that’s the extreme end of the disruption scale. But for many other businesses, digital transformation projects that fail have an instant impact on reputation, customer loyalty and financial performance. The problems seen at TSB bank this year are a prime example.

TSB’s IT meltdown resulted in over 135,000 customer complaints and the loss of 26,000 customers, who moved to other banks. The compensation and repair bill had reached £176m back in July, resulting in a 2018 first-half loss of over £107m. That’s not a situation that took years to play out as digital disruption moved the goalposts; TSB was in serious trouble just a few hours after its software failure emerged.

And the impact always lingers beyond the point where the IT has been fixed. TSB’s major announcements, such as the arrival of a new chief executive in late 2018, are still framed in the context of the IT “fiasco,” as the BBC put it.

Innovate Or Die

For some, the practical implementation of digital transformation remains somewhat nebulous — how do you define a strategy around something so broad? Even if IT decision makers and business leaders understand the value of digital transformation, the challenge is still to convince executive boards to take on vast process changes.

The problem is that companies are not moving fast enough on their software journey. Satisfying your customers with rich and frequent releases of your products will be delivered — or at the very least enabled — by your approach to software delivery. But businesses don’t have three years to make an incremental transition to embracing digital transformation and building a future based on software.

It’s perhaps more practical, therefore, to consider just how important software is to the future of your business and your industry. The mindset for almost everyone must be that every business is now a software business. If you look again at the list of the top 20 tech companies in MarketWatch, would you classify Netflix and Uber as tech companies? What’s important is they are tech-led software businesses that have disrupted traditional industries on a massively successful scale, and there’s a lesson there for every other business operating in the digital economy.

At the recent Gartner Application Solutions and Strategies Summit, which I attended, Gartner hit hard on the importance of a “product line” organizational structure that is optimized around the customer instead of around internal development milestones. This evolution is a recognition of the importance of people and culture in driving toward a successful digital transformation.

Interestingly, they estimated that 72% of enterprises will have adopted this IT product line management structure in 2018, indicating solid progress in organizations building the corporate infrastructure that is so critical to making the adoption of new processes and tools successful. This statistic, however, also indicates that if you are part of the 28% not this far along, you are already behind. Businesses that don’t get off the fence will undoubtedly lose their competitive edge, and their CIOs might be out of a job.

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