In virtually every enterprise I visit, major plans and efforts are underway to digitally enhance the business. Frankly, most execs are tired of hearing how they’ll be disrupted by digital natives. They resent being told – again – about how Uber and/or Airbnb, which are wholely based on new digital technologies and data-driven business strategies, have remade markets and industries.
The latest McKinsey Global Survey suggests companies are making little progress in their efforts to digitize the business. Most likely, they’re stymied by trying to overcome the practical issues that are slowing their progress, narrowing the digital scope/scale and limiting their success.
My previous Cognizanti commentary presented six challenges that were hamstringing five enterprises early to the digital bandwagon. But in recent visits with C-suite execs, it appears that digital efforts have become mainstream for many organizations.
Identifying and then managing the pace of digital change is now cited as the most critical practical challenge. In a recent blog post on Digitally Cognizant, I identified the key elements of a pace-based approach and highlighted the approaches companies have taken to stay in sync. I’m now seeing five practical issues that businesses large and small are encountering in their push to become digitally enhanced. Based on these scenarios, I see potential remedial approaches that span the gamut from the pragmatic to the potentially game-changing.
Heading into the 1990s, most enterprises had formal processes for application renewal and maintenance, as well as adequate IT management. Then, with their promises of a bold new world around the immediate corner, the reengineering pundits told them to stop application renewal and cease wasting money on keeping the lights on. Within 12 to 36 months, pundits promised, they would be totally reengineered and have new systems to support the new utopian enterprise.
Unfortunately, reengineering proved daunting, and while good steps were taken, most companies awoke to aging, under-maintained legacy application portfolios and no-longer-effective IT management processes. Twenty-plus years later, the majority of companies I visit are hitting a brick wall that’s limiting digital progress: the age, quality, fragmentation, inconsistency and dysfunction of their run-the-business application portfolios and databases.
“We were promised a digital-first elixir by our vendor partners to ignore our ’keep the lights on’ legacy foundation and directly embrace digital,” noted a newly installed CEO of an oil field service company. So the company pursued Internet of Things (IoT), big data business analytics, robotic process automation (RPA), cloud infrastructure and software-as-a-service (SaaS) application suites. But after three frustrating years, it found it had dug a deep hole for its legacy parts inventory and work assignments data, applications and technology. “Almost every digital initiative collapsed without a healthy legacy foundation,” the CEO lamented.
Almost every digital effort cited by C-suite execs in my travels is either rooted in or must eventually tie back to legacy systems, technologies or, most critically, data. Rather than shifting resources to digital, the cold, hard need is to dedicate additional resources, plans, funding and formal programs to remediate the applications, technologies and data that can be associated with the overall digital effort. The usual suspects include inconsistent customer, inventory, parts and sales data; incompatible ERP systems; obsolete technologies; security risks; and the cornucopia of Excel spreadsheets used to run the business and provide reporting.
“We had to stop deceiving ourselves,” the CEO of a global medical device company told me. “We had shifted resources to Agile and digital efforts, and constantly found they were built or relied upon a legacy base that was quicksand.“
As an example, the CEO said his company had used AI and speech recognition to support web-based support of regional reps and customers. The ensuing mess impacted the company’s product database and resulted in total inconsistency of support practice systems, which drove users crazy.
“As other users joined on, we found our underlying ERP did not support many key languages,” the CEO noted. “What should have been a wonderful differentiator turned into a nightmare. Once we launched formal programs to rejuvenate our targeted legacy first, digital progress and success dramatically increased.”
“We can’t seem to get beyond initial, limited forays with digital,” reported the chief digital officer of a medium-size U.S. commercial finance business. “The functionality and use of our customer loan underwriting and support has been limited solely to our high-tech unit and customers. No other markets and units are adopting it.”
This is still the most common response I get when the question of digital progress comes up. While many of the C-suite execs I speak with say they view digital progress as a key goal, few organize, staff or establish ongoing processes for the holistic transformation needed to go beyond initial digital forays.
According to the CEO of an industrial supplier, a formal, four-pronged endeavor was required to accelerate digital progress:
Since adding Mode 3 skilled staff, the industrial supplier has realized great progress and increased sharing among its groups.
As I’ve suggested in previous Cognizanti articles, digital is just a different circus with different clowns. I’m now hearing that each digital circus requires and involves different types of clowns. The most common digital circuses and corresponding clowns cited are:
I keep hearing bumper sticker phrases such as, “With digital, we’re moving from projects to products.” “Our success with MVP has been great.” “We’re moving toward a subscription-based rather than a product purchase revenue model.” These all sound promising, but when I probe whether the organization has made the business model changes needed, the responses aren’t encouraging.
Enterprises and their IT functions are wed to a project-like, one-and-done model. Thriving beyond an MVP or subscription model demands a broad-based, holistic set of changes and enhancements to the business operating model. This requires ongoing, year-after-year funding, and continual refresh and support of that product/service. Competent brand, marketing, support, refresh and service managers must, of course, be dedicated. Overall, product/ service portfolio management must be commissioned, and proper processes deployed. A formal go-to-market and product evolution plan is mandatory.
When I mention this to the executives I visit, they say, “Oh, we sort of have that.” I then ask to meet the brand or service managers and see the multi-year financial plan/funding for the service. You’d think I’d asked to meet the company unicorn based on their body language response. The digitally enhanced businesses with the most success have made great strides in underlying business operating model changes.
My lead question is always, “You’ve been working on digital efforts for several years now. Why the slow progress?” After they hem and haw, I hear what should have been anticipated distractions. “We’ve had the merger, the divestiture, the management change, the activist investor demands, a business downturn or side turn, the reorganization, the regulators’ responses, the key staff departure, supply chain disruptions, normal day-to-day operating issues.” Geez, you’d think these things had never happened before.
To progress despite the distractions, the more successful businesses often:
If digital progress is as critical as companies tell me, they should be evaluating how well they’re addressing these five challenges by launching, supporting, adjusting and measuring the success of their programs. This will enable them to:
As I’ve repeatedly suggested, if you’re going to the future, bring money. Too many enterprises I visit are willing to spend on digital thingies, but not on the underlying transformational enablements required.
I realize the day-to-day business must be run and be profitable. Not all of these practical challenges and changes can be made at once. However, they should be assessed, priorities established and programs put in place. Otherwise, when I visit next year I’ll hear, “Gee, guess we haven’t made the progress we would have liked.”
Bruce J. Rogow is a Principal at IT Odyssey and Advisory in Marblehead, Mass. Known as a counselor to CIOs and CEOs on IT strategy, Bruce has for the last 25 years conducted independent, face-to-face interviews with thousands of C-level executives. Previously, he spent five years as Executive Vice President and Head of Research at Gartner Inc. Prior to that, he was Senior Managing Principal at Nolan, Norton & Co. Bruce can be reached at Bruce@ITOdyssey.com.
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