Digital Digest: Four Must-Reads for CIOs
“Digital is tearing at the very fabric of many companies.”
–Jeroen Tas, CEO, Informatics Solutions and Services, Philips Healthcare
The pressures created by the digital expectations of customers, digital efficiencies of competitors, and digital innovation of disrupters really are tearing at the very fabric of many companies. With too little support, the CIO is usually held to account for alleviating this emergent pain.
People who came of age in the enterprise mastering client-server systems, developing innovative ways to create efficiency, and defining cost control are now being challenged with modernizing the legacy systems their predecessors put in place to solve the business problems of the last decade. What can the CIO do?
The Apigee Institute helps CIOs answer this question by focusing on helping them and their enterprises bridge the gap between yesterday’s IT and their future as a digital business. To that end, on July 22nd we will host a virtual roundtable featuring Heather O’Sullivan a leader of Target’s IT system, one of the best in retail. Please sign-up here (these events are usually only for Institute members, but we’re opening it up to a larger audience this month).
We’ll discuss your experiences, Heather’s experiences at Target, and the research we and other organizations have done. A key focus will be “outside-in” IT. According to several recent publications (and our forthcoming research), the most important thing a CIO can do is shift the IT department’s mindset and processes from “inside-out” to “outside-in.” Outside-in IT orchestrates resources across functional units within the firm in combination with partners and vendors to deliver the digital experiences necessary to compete in the market.
In contrast to outside-in, the most extreme manifestations of an inside-out mentality turn the capacity of the IT function into the sole source of—and constraint on—digital capabilities. While IT organizations have traditionally benefited from the efficiency created from an inside-out organization (where, control, risk avoidance, and predictability are overarching priorities), the speed, agility, and collaboration necessary for digital business turn exclusive reliance on traditional strengths into a major liability. To help CIOs make the shift, here are four critical reading recommendations on incorporating outside-in principles in IT.
1. Orchestrating Value in IT Outsourcing—BCG Perspectives
While BCG does not invoke outside-in in this paper, it provides a roadmap to one of the toughest parts of the outside-in shift: moving traditional IT responsibilities to vendors or business units. The paper seeks to address a frequent problem for IT departments building an ecosystem of vendors to create value: maintaining and strengthening critical skills within the retained IT organization.
"To ensure that they can execute their vital role with regard to IT outsourcing, retained IT organizations must essentially do two things. One, they must manage their various responsibilities, capabilities, and personnel in a highly coordinated fashion. The analogy to an orchestra conductor is apt. The retained IT organization must ensure a coordinated performance from the entire “orchestra”—meaning both vendors and internal delivery groups. It must design a “repertoire” (that is, a portfolio of IT services) that meets the desires of the audience (that is, the business). And it must execute that repertoire at a caliber that satisfies the audience.
Two, retained IT organizations must confirm that they have the necessary capabilities in five principal areas: strategy and governance, supplier management, talent management, demand management, and delivery management."
2. Digital Transformation: Re-imagine from the Outside-in—Accenture Interactive
This paper earned a must-read review back in March but it’s important enough to include here too. It provides a holistic overview of the shift to an outside-in enterprise. The report focuses on outside-in as a tool to reorient business toward maximizing great customer experiences. While this doesn’t strictly provide a game plan, it is comprehensive enough for you to share with other executive leaders to help understand the outside-in journey you’re going to lead at your enterprise.
"Digital transformation is not for the faint-hearted. It pushes companies to take stock of who they are—and what they could become. That alone is hard work. But amid the inescapable realities of new customers, new competitors, new partners, and new technologies, success cannot be left to serendipity.
The business imperative for all is to achieve enduring customer relevance at scale through a customer-focused digital transformation. Whether companies perceive digital as a threat, a challenge or an opportunity, those that ignore it do so at their own peril."
3. Reinventing IT to Support Digitization—McKinsey & Company
In this brief, McKinsey & Company lays out the new requirements for IT in one concise if deeply unsatisfying sentence: “While efficiency was previously the most important performance measure for many companies, now everything matters.” The authors argue—and we agree—that the answer to this shift in expectations for IT is a reinvention of how IT runs, prioritizes, and hires. The authors make seven concrete recommendations for the CIO who is trying to make this shift. Specifically, they recommend:
- Clear, central business leadership on digital
- Elite IT talent
- Sourcing arrangements to scale the workforce rapidly
- Agile development and rapid releases
- Rapid innovation architecture supported by stable services
- Scalable cloud-based infrastructure
- High-quality integrated data
4. Building your Firm from the Outside-In—Leading Edge Forum
Ultimately, the best recent take on this subject is the comprehensive paper by the Leading Edge Forum all about building an outside-in enterprise. The paper, written by David Moschella, digs into the key differences between inside-out and outside-in thinking, the implications for enterprise IT, and security innovations for those who worry about their data control. The paper is not a quick read, but it certainly provides a very strong base to evaluate your own enterprise and IT department.
"In 1937, the British economist Ronald Coase (who recently died at the age of 102) wrote ‘The Nature of the Firm,' which is now widely viewed as a seminal article. Coase argued that the reason large firms exist is that their internal transaction costs—for people, planning, producing, etc.—are lower than they would be if the firm acquired similar services from external individuals or firms. He went on to suggest that companies should become ever-larger until this ceases to be the case.
More than 75 years later, Coase’s work has never been more relevant. Information technology is now fundamentally altering business transaction economics. External transaction costs— whether for people, services, innovation, or computing resources—are falling rapidly, while internal costs—such as fixed-asset rigidity, cultural inertia, and resource obsolescence—are rising. As a consequence, the balance between internal and external dynamics is shifting ...The most important new business forces are taking shape outside the walls of the firm.
Responding effectively to these changes requires a shift in mindset from inside-out to outside-in."
If you're a CIO at an enterprise challenged by digital demands, these readings are only a start. Coming up, we’ll provide a guide to help convince the CEO/board of the urgency of transformation and steps to move forward with IT as a technology leader at your enterprise. In the meantime, please contact our Digital Transformation Services Team if you would like a digital diagnostic, or a workshop to work through your particular issues.
Also, remember to sign-up for our virtual roundtable on July 22: Managing Modern IT: Outside-In, Agile, Effective featuring Heather O’Sullivan from Target. To sign-up for the Apigee Institute to receive notice for future events and a monthly newsletter, click here.