The role of IT in business
We’ve all heard about digital disruption and digital transformation. But what do they mean and what is IT’s role in disruption and transformation?
Disruption is about how the world and your competition work. Transformation is about how you work.
John Hagel in his book “Scaling Edges” talks about the “dark side” of technology. He is not referring to the dark web or hacking. Rather he is talking about three effects that technology has on business. He says that technology intensifies pressure on executives – to compete harder and more innovatively, accelerates change – businesses must be agile and more rapid in their response to customers, and Hagel talks about how connectivity can change a small event somewhere in the world into having a global effect – a new online business in Alaska can threaten a business in South Africa.
In this explanation of the dark side of technology, Hagel encapsulates disruption: Customers, suppliers and competitors use technology and the pressure is on you to use it effectively if you want to remain competitive. Technology acts as a multiplier of the speed of change. “Me too” becomes “me now”. Customers can search for a new supplier and switch within hours if they can’t get what they want from your company. This rapidity and universally available information has removed customer loyalty from the equation. The new customer loyalty now depends on you meeting their needs quickly and efficiently. Finally technology has enabled businesses to achieve what Erik Brynjolfsson calls “scale without mass”. When a business can source product from anywhere and supply it to anywhere, without building warehouses and logistics fleets, they have achieved scale without mass. The simplest example of this is e-books. Online book stores don’t need bricks and mortar shops which have an inventory of between 10 000 and 20 000 books. An online bookstore has millions of titles, which are easily searchable, bought, and with e-books, are easily deliverable. There is no printing, storage or delivery cost. This has halved the cost of e-books.
That’s disruption. When the world, your customers and your suppliers are operating with a different paradigm, you have been disrupted.
Transformation and digital transformation is something different. Largely it occurs internally, and yes, it is probably disruptive. Organizations need to transform the way they interact with their customers, develop or upgrade their products, manage their capabilities and culture, and put in place platforms that allow them to move quickly and comprehensively to meet any challenge. Much of this transformation is enabled by technology, which is why it is called digital transformation. But not all transformation is digital – your culture and capabilities require something more than a technical approach.
Technology increases competition, the speed of change, and the effects of small changes. It enables you to scale without mass.
And this is where the role of IT is changing. In many large forward-thinking organizations, the IT department is responsible for three things: The technology, of course – running it, acquiring and maintaining it, implementing new technologies and identifying technologies which will be useful or critical to strategic success. But IT now has a role which is deeply business focused. They look at customers and their needs, and drive the changes needed to meet these needs. They look at processes and workflows and drive the changes needed to optimize these. And they look beyond the IT platform – to the entire organizational delivery platform – the branches, the logistics, the staff. Finally, IT has a new leadership role. It is about scanning the environment and identifying challenges and opportunities that will affect the organization. Then they need to draw the attention of the entire organization to what they see and how they interpret it. Finally, IT has a role in affecting the culture of the organization – how quickly it moves, how close it is to its customers, suppliers and yes, its competition.
The new IT role involves running the technology, driving business change through technology and providing leadership in what you do and how you do it.
The new role of IT is not to become the CEO or the new fix-all for the organization. They do not do marketing (although they help a lot), they don’t do HR, they don’t do finance and accounting. But to each element of the business they bring a unique perspective: They ask, because they are qualified to do so, “How can technology improve this function, interaction, product, and service.
With the new role, IT has a problem. If they think that most of their activity should be in operating and delivering IT services, they will not have enough time, capacity or mental space to focus on their new roles. So they have to do what most organizations are doing successfully. They need to think about the ecosystem that they need to provide all the services that the new role demands. Who can they outsource to? Who can they partner with? Who can do what they can’t or won’t?
The new IT function should be an ecosystem rather than a unit.
The new role of IT requires a rethink of what IT is, how it should operate, and what its deliverables should be.