If you are working in a mid-sized organization with between 50 and a 1000 IT users, chances are you will be surprised by this bold statement. It sounds wasteful, impractical and outright utopian.
If you have this strong reaction, then all I can say is “good, you are at least curious and willing to find out more”! It has taken us five years to come to this conclusion and I cannot wait to share our reasoning in this article.
At the end, whether you agree or disagree, I would really appreciate it if you could leave a comment and contribute to the much-needed discussion on how to make digital transformation a reality for many more mid-sized businesses.
But let us start at the beginning and ask the obvious question.
Why Do We Even Care About It Leaders?
Technology is driving change at an ever increasing rate and business leaders everywhere are exposed to two types of messages that, as it turns out, are two sides of the same coin.
On the one side, we are hearing about digital disruption and how technology is permanently changing every single industry, including the industry your company is working in!
On the other side is an enormous opportunity that this realignment brings along for organisations willing to transform how they do business.
In a very comprehensive study by Capgemini Consulting and MIT Sloan large enterprises (here called Digirati) that committed deeply to digital transformation were on average 50% more profitable than companies that were only in the starting blocks of their transformation.
We have not found a similarly authoritative study for mid-sized businesses.
Considering, however, that there are so many technology-driven startups that begin small and make it big in no time, there is no reason to believe that mid-sized businesses would not see similar successes when employing digital technologies.
Whether you are more receptive to the fear or opportunity theme is not important. What is important, however, is that we stop ignoring the implications of information technology on our businesses.
Even though questions have occasionally been asked about the continued significance of specifically the CIO role (here is a recent example), one of the strategic IT leadership roles, very few people nowadays really question the need for having capable IT leaders to help steer our organisations through these turbulent times.
Going Digital and the Standard Maturity Roadmap
Marketing departments quickly saw an opportunity to help us understand the scope of the challenges ahead and, in true marketing style, put a simple label on the required activities:
Businesses need to go digital.
Since everybody, however, seems to have their own interpretation of what “going digital” really means I suggest we use the following definition from McKinsey for the remainder of this article:
It’s tempting to look for simple definitions, but to be meaningful and sustainable, we believe that digital should be seen less as a thing and more a way of doing things. To help make this definition more concrete, we’ve broken it down into three attributes: creating value at the new frontiers of the business world, creating value in the processes that execute a vision of customer experiences, and building foundational capabilities that support the entire structure.
Brilliant definition … but only if one is already comfortable with the topic. For everybody else the concept remains quite nebulous.
To add a little bit more depth let’s (re-)introduce the concept of an IT maturity roadmap as used by leading IT companies such as Gartner, IDC and Microsoft for the better part of two decades.
As in most maturity frameworks, the lowest level denotes a state which is highly disorganised and reactive (which is where most companies start) and the optimisation goal is to get as high up the ladder as possible in the shortest amount of time.
As the organisation and its use of IT matures, it transitions through levels 2, 3, 4 and ultimately aims to position itself at the 5th level of maturity.
Transitioning from one level to the next usually requires major mindset changes, but is usually accompanied by significant increases in productivity and business value gained from IT investments.
At Xuviate, the company I have co-founded, we have started to call levels 2 to 5 the 4 Value Propositions of IT. We define them as follows:
VP 1: Reliable, Cost-Effective It Platform
The next level up from the ad-hoc stage brings us a well-managed IT platform with appropriate supporting IT processes (e.g. ITIL). If delivered well, IT costs are under control and the business users can generally depend on the platform to be available as and when they need it.
VP 2: Automate and Optimize Business Processes
After having established a reliable and cost-effective IT platform, attention usually turns to employing technology to first automate and then continually optimize business processes across the organization.
VP 3: Differentiation in the Market
Once the low-hanging fruit of business processes optimization have been sufficiently exploited, new opportunities open up to leverage technology expertise and differentiate in the market. Coming in the form of marketing or product innovations and usually involves significant step-changes that improve the overall competitiveness of the organization.
VP 4: Business Model Transformation
The last and by far the most difficult state to reach also has the biggest upside for the continued health of the organization. Organizations that have reached this level of maturity deeply understand that the days of having one business model for the lifetime of an organization are over and that technology provides an effective toolkit for continuously reinvention at the business model level.
Now, integrating the McKinsey definition with the IT maturity roadmap one quickly comes to recognize the compatibility of the two models.
We can now state the following:
Digital businesses create value for themselves by effectively harnessing modern technology and focusing intensely on improving customer experiences across all points of interaction. They achieve this by systematically upgrading their IT maturity through the Value Propositions of IT.
The Essence of the 4 Value Propositions of IT
Best-selling author and entrepreneur Faisal Hoque introduces the transformation triangle in "What Companies Do to Truly Perform"
AGILITY, INNOVATION, AND OPERATIONAL EXCELLENCE FORM THE TRANSFORMATION TRIANGLE. WHETHER YOU'RE FLIPPING BURGERS OR MANUFACTURING DURABLE GLASS FOR IPHONES, YOUR COMPANY NEEDS ALL THREE TO SURVIVE AND THRIVE.
Looking again at our previous value proposition definitions we realize that Faisal has used more powerful words to describe the actual outcomes of IT value propositions 2, 3 and 4. Substituting “reliable, cost-effective IT Platform” with the more modern term of “Digital Foundation” we now have the following:
But this is not all we can learn from Faisal.
In his article he refers to the TRANSFORMATION TRIANGLE and the importance of having all three fundamentals.
Instead of seeing each of the value propositions as merely stepping stones for the next higher one, he instead argues that all are valuable building blocks in their own right!
Wow, this is a big idea with potentially massive implications!
Before diving in too deeply on what this means, however, let us first turn to the question of what type of skills we need to deliver on the Value Propositions of IT.
Each IT Value Proposition Supports a Unique Perspective
It is a fairly simple process to analyze the 4 Value Propositions of IT and map them to the core skills required to deliver on them.
Going through this exercise reveals how fundamentally different the skills are from one value proposition to the next.
The question that you may ask at this point is the following:
Is it really possible for a person to successfully transition from one Value Proposition to the next?
A good question indeed, but hold that thought for now. We will get back to it at a later stage.
Who Is Currently Responsible for Delivering on the Value Propositions?
To most people the Chief Information Officer, or better known as CIO, role is most closely associated with IT.
Depending on the size of the organization other titles may also be in use as an alternative to the CIO title: IT Manager, Head of IT and IT Director to name just a few. In this article we will stick to the CIO name.
Techtarget gives us a good definition of the CIO role:
Chief information officer (CIO) is an executive job title commonly given to the person at an enterprise in charge of information technology (IT) strategy and the computer systems required to support an enterprise's objectives and goals.
Using this definition, it is easy to see why CIOs in most organizations are usually responsible for delivering on Value Proposition 1.
But businesses require more and the Techtarget article goes on and adds to the CIO responsibilities:
To figure out how IT can generate business value, CIOs must grasp and quickly respond to a number of market forces, including innovations in technology, vendor product offerings, disruptive technology and, increasingly, a customer base that expects to do business across physical and virtual channels.
In other words, the VP 1 leader (CIO) is now required to also lead VP 2, VP 3 and to some extent even VP 4.
The article then adds, somewhat ominously for CIOs:
To prevent CIOs from actually burning out while still moving the digital transformation agenda forward, many large organizations have created the additional role of the Chief Digital Officer (CDO).
McKinsey also gives us a very good definition for this new type of leader:
The CDO is a “transformer in chief,” charged with coordinating and managing comprehensive changes that address everything from updating how a company works to building out entirely new businesses. And he or she must make progress quickly.
Jo Caudron and Dado Van Peteghem, authors of “Digital Transformation: A model to master digital disruption” wrote a very informative article about the digital transformation requirements within organizations and why this new CDO role is so important.
Although most of the information sources we reference here are from large organizations, our practical experience with mid-sized organizations strongly supports the need of having some form of dedicated change agent to drive forward digital transformation.
What Is Wrong with This Picture?
We have now made a case for having at least two IT leaders in any organization that wants to transform digitally: The CIO and the CDO.
The McKinsey article, however, continues to add something important to the mix:
Now we are back at square one. After the CDO has weaved his/her magic, the CIO is left with having to drive the deliverables for all 4 Value Propositions of IT!
When learning about the different skills required for delivering on a Value Proposition we asked ourselves whether it is really possible to effectively deliver on more than one Value Proposition at a time.
Instead of answering directly, let me invite you to a quick thought experiment:
Imagine you are in charge of running an organization. Unfortunately, there are some challenging times ahead and you, as the CEO, have to make some tough calls. As you carefully consider all options you suddenly realize that you have four functions within the organization who seem to be doing back-end only work and the idea pops up to combine all under one leader and outsource whatever you can. All that remains is to choose the one leader who is going to lead them all.
The areas to be combined are Business Strategy (probably headed by yourself), Marketing, Finance and HR.
It is at this point that you will probably call halt to the thought experiment.
Most of us intuitively understand how different the skill sets, mindsets and operating priorities of these 4 areas are and know how dangerous it can be to expect one person to simultaneously manage two or even more areas.
But then why do we expect this of IT?
The 4 areas are an excellent analogy for the 4 Value Propositions of IT. Similar to the back-end business areas in our thought experiment they pose fundamentally different optimization challenges and require very different approaches.
And with different approaches comes the need for different leaders who can focus on their specific deliverables.
In short, what we need is one IT leader for every Value Proposition of IT we want to activate in our business.
So, if the CIO should not also be responsible for VP 2, 3 or 4, who then?
To find an answer we need to reframe our thinking and move away from the concept of IT as infrastructure to IT as Information Technology (where-ever it is applied in the business).
Responsibilities Redefined: We Need at Least 4 Strategic It Leaders!
As soon as we accept the new mindset that IT is not synonymous with the IT function but in fact refers to the broader scope of Information Technology across the business we open up many new opportunities to fill the VP vacancies.
In most organizations we find that we already have strong role players delivering on the general business outcomes of Operational Excellence, Innovation and Business Agility. Some of the usual role-players/titles are shown below:
Instead of making the IT function responsible for delivering on VP 2, 3 or 4 we instead require our regular business leaders to become champions for the effective use of IT in their domains.
Stated differently, we should not so much focus on the current titles of our leaders but rather on the actual outcomes (VPs) we require leadership for. Once we have done this we can define how the various leaders are expected to contribute and, more importantly, how they need to collaborate to establish a digital mindset throughout the organisation.
Change such as this, however, is hard and requires the resolve of the most senior business leaders!
To get the digital transformation process off onto a good start, contracting an external change agent (such as our CDO) can be a highly effective strategy.
Which brings us back to our central thesis that every mid-sized organisation should have at least 4 strategic IT leaders, provided the business is serious about their digital transformation journey.
Common Implementation Challenges
Even if you cannot specifically see a flaw with the reasoning that led us to this point, chances are that you identify at least one major challenges that could make this approach impractical for you.
What follows is a list of 6 challenges we have identified and how one might overcome them.
Please add to, challenge or elaborate on any of these obstacles in the comments section below.
Challenge 1: We don’t want to focus on all Value Propositions
For whatever reason, your business doesn’t believe in some of the Value Propositions of IT and chooses to not focus any resources on achieving them. This is the most common concern we encounter and fortunately also the easiest to address.
Our response: Absolutely no problem as long as the business works on IT Value Propositions from the bottom up. There are many dangers in trying to focus on a higher Value Proposition when the foundation has not been properly established. As value is demonstrated and/or the need for complete digital transformation becomes clearer, additional VPs can be added to the list of deliverables.
Challenge 2: Why do we need so many leaders?
Most organizations have already made decisions about who is responsible for operational excellence, innovation or business agility deliverables and in many scenarios there is even more than one person. In some instances, and especially in smaller organizations, the individuals are just regular, knowledgeable employees.
Our response: Due to the complexity of IT, successful digital transformation requires close and continuous cooperation between all contributors to the IT value propositions. Having more than one leader per IT Value Proposition is usually impractical as it would require too many people to synchronize. Try and select one leader per Value Proposition with both authority and responsibility to lead the transformation effort. If this is not possible in the short term, at least understand the consequences and work towards such a state.
Challenge 3: Our leaders lack IT competence
This is a very real scenario for many organizations. The most obvious response is to try and force the CIO to rake responsibility for other Value Propositions of IT, a scenario we have previously seen to be fraught with danger.
Our response: Accept the reality and severity of this problem and enlist the services of an external change agent (such as a CDO-type person) to help find practical solutions. Another option is to look for more digital-savvy individuals when current leaders leave.
Challenge 4: Our CEO is responsible for a few IT Value Propositions
Some organizations are lucky enough to have a very IT-savvy CEO who ends up taking responsibility for many of the higher Value Propositions of IT. Not even the CEO, however, will be able to successfully wear all these many hats (in addition to leading the organization) and serious compromises will be made.
Our response: Ask the CEO, who is clearly an incredibly talented person, what else could be achieved if he or she could rely on capable VP 1, 2 and 3 leaders? Going down this route should set the company on a new growth trajectory.
Challenge 5: Why the rush, we have got enough time?
I remember the time about 5 years ago when we used to hear this question from almost every business leader we spoke to. Since then a lot has changed but we still occasionally hear that “everything will return to normal” or “my business is not really effected by digital disruption happening elsewhere”.
Our response: Unfortunately, there is really not much we can do to change such a perception. Our best advice would be to watch this excellent marketing video
from Deloitte about 10 times.
Challenge 6: We can’t afford to pay for all these leaders
And finally we come to our last and arguable most challenging obstacle. Whereas large organizations are quite used to “throwing bodies” at a problem, mid-sized businesses often cannot afford this luxury and are forced to make some difficult trade-off decisions… some of which involve having to require leaders to wear “multiple hats” at the same time.
Our response is a bit more complex and consists of three interdependent parts:
- Firstly we need to realize that we are referring to IT leader roles instead of actual positions. The IT-savvy CFO could potentially assume the overall VP 2 leadership role and assume responsibility for driving the digitalization of Operations across the entire organization.
- Some leadership roles, if properly mandated and defined could potentially be outsourced to a third party. Some MSPs for example are working with Reframe Your Clients to figure out how to evolve their Virtual CIO service to better deliver on VP 1 requirements while still fitting within the budget constraints of SMEs.
- There is a gold-mine of opportunities waiting for service providers who realize that most mid-sized businesses are clamoring for customized solutions to support them on their digital transformation journey.
SMEs Need to Find Their IT Voice!
I want to conclude by thanking you from all my heart for reading this rather lengthy article. It has taken 5 years of research, many hours of deliberation and lots of experimentation to arrive at these insights and there is nothing more I would like to see than you getting value from them.
What I wish for even more, however, is that everybody who is reading this article takes a moment to reflect on the arguments presented and adds their personal experiences to the comments section below.
Now just imagine your friends and colleagues involved with IT in mid-sized businesses seeing this as well … we could actually start a real movement and permanently change the way how business sees IT. But only if you pull in everyone you know and share this article as widely as possible.
Lastly, if you found value in this article and want to add your voice to the developing conversation, make sure you add your name to our mailing list.