Toward an integrated technology operating model
·
Companies
may be able to get digital transformations off the ground by separating digital
from conventional IT, but that approach is not sustainable. Here’s a better
way.
Technology organizations
are now expected to
play a central role in helping companies capitalize on new digital
capabilities—connectivity, advanced analytics, and automation, for instance.
These capabilities can help them build deeper relationships with customers, launch
new business models, make processes more efficient, and make better decisions.
To a greater degree
than before, technology groups must focus on integrating these new digital
tools and approaches with existing legacy systems and methodologies—a task that
isn’t always as straightforward as it sounds. Companies have introduced costly,
complicated initiatives designed to deploy digital tools and approaches
organization-wide, only to see such programs fall short of their potential or
stall completely. The evidence? Rich data sets are accessible only to a few
groups of privileged users. Innovative processes used in one business unit are
never shared across the company, and the impact of digitization remains small
and isolated.
A critical factor in
these shortfalls is the lack of a common operating model for digital and IT
teams. The digital factory model that
most businesses tend to use to launch their digital programs can undeniably
speed up a company’s pace of innovation in the short term. Skunkworks digital
teams working outside the purview of a conventional IT organization can quickly
tackle pilot projects that they can then turn into innovative products or
customer experiences. For their part, most senior business leaders often decide
to stay the course with this approach, with separate digital and IT units
adhering to different operating and service-delivery models. They recognize
that a shift to the “pure play” model of digitization pioneered by the likes of
Amazon and other Internet companies might be overly ambitious or disruptive in
the near to midterm.
In our experience,
however, at least 60 percent of the highest-value technology projects companies
pursue require collaboration and delivery from multiple technology groups
across both digital and IT teams. The lack of a common operating model can
thwart such cooperation. What’s more, fragmented technology stacks can put
pressure on overall system stability, scalability, and resilience. The physical
split between digital and IT groups can create confusion among
business stakeholders about which team is handling which tasks. Even within
technology groups themselves, the culture can become bifurcated as employees
identify with either old or new ways of working.
Companies should
instead consider shifting to an integrated digital IT operating model in which
there is one operating model and one view of how technology capabilities are
delivered by both digital and conventional IT groups. Under this model, teams
organize around technology capabilities rather than specific technology assets
and functions, and they often use agile methodologies to speed up the provision
of IT services. According to our research, companies that pursue an integrated
IT operating model can realize greater process efficiencies, often through the
elimination of redundant roles and initiatives, and they can deliver products
and services to customers more quickly.
A plan for integration
The journey toward an
integrated model is neither easy nor quick. It can take years to complete
depending on a company’s starting point and digital aspirations. It therefore
requires a commitment from the business and technology groups (both digital and
conventional IT teams) to reconsider existing ways of working and collaborate
on devising a new path. Business leaders must show a willingness to “test and
learn,” and technology leaders will need to become active thought partners to
the business units.
Organizations will, of
course, need to address issues relating to core technology. For instance, they
will need to design flexible, perpetually evolving enterprise architectures, with lightweight connections,
that can support the development and deployment of new business capabilities.
They will also need to develop agile data-management practices—that is, centralizing the collection and storage of
data and allowing employees across the company to access critical business
information from multiple systems.
Perhaps the most
critical changes associated with making a successful shift to an integrated
digital IT operating model, however, are those relating to processes and
people—that is, rethinking the composition of the technology organization, the
methods for providing IT services, and the management of technology talent.
Let’s take a closer look at these three factors.
Rethinking the technology organization
To successfully pursue
an integrated digital IT operating model, companies should reconsider how
digital and conventional technology groups are organized and governed: What
processes does each group currently follow, and how could those processes be
standardized to ease collaboration? What governance structures do they use, and
what modifications could be made to improve decision making? Under an
integrated model, the digital and conventional teams would jointly pursue the
company’s digital agenda and may work under a single overall technology
leader—likely from the technology group—to ensure accountability at the top. They
would also need to take the following steps:
·
Redefine critical roles in technology leadership.
As part of the integrated
organization design, companies will need to redefine leadership roles
associated with the construction of products—for instance, product managers and
designers, engineers, data managers, and IT architects. New roles may be required.
Those in existing roles may need to develop new skill sets and areas of
expertise. The nature and extent of those redefinitions will depend on a number
of factors, including the company’s digital goals, its corporate culture, and
its existing technology capabilities. Many leadership roles will likely need to
become “hybrids”–incorporating both digital and conventional IT perspectives. A
large B2C company undergoing integration of its digital and IT organizations
created a role under the CIO called head of consumer technology. This
individual is responsible for the development of all digital and conventional
customer-facing applications regardless of the channel (online, mobile, and
stores).
·
Centralize IT-architecture and IT-infrastructure teams.
In an integrated organization,
common resources for digital and IT teams, such as technology architecture and
infrastructure, will need to be centralized. By combining the teams managing
these resources, companies can eliminate redundant tasks, facilitate standardization
of processes, and deliver benefits more broadly to the business units. For
instance, one manufacturer is convening an end-to-end technology
IT-architecture function that would be responsible for making critical
decisions relating to both digital and conventional IT assets. Senior leaders
believe this new structure will help prevent system proliferation, a perennial
issue for the company, and that it will ensure that new technology capabilities
are acquired or built based on company-wide needs, rather than according to
business-unit or functional needs.
·
Deploy agile, user-centric product-development teams.
Technology staffers should be
encouraged to move in and out of cross-functional product or project teams.
These self-organizing teams would come together to offer specific customer- and
end-user experiences or capabilities and then disband when objectives have been
met. The leaders of these teams would work directly with business stakeholders
to jointly define priorities and identify areas where technology could
significantly enhance business processes. The technology team at an online
retailer came up with an idea for enhancing payment processes, and it
collaborated with the business team to find funding for the project and to
design and build the prototype software that would support the process change.
Pilot tests were mounted quickly, with frequent input from the business, and
the full process change was implemented within six months.
·
Revisit funding and
portfolio-management processes.
IT organizations’ funding and
portfolio-management processes would also need significant changes under an
integrated model. Staged venture-capital-style funding could be applied to
projects that involve both digital and conventional IT team members. Funding decisions
for those projects could be contingent upon the integrated teams successfully
meeting certain milestones during the development cycle. They could also be
tied to business outcomes. Meanwhile, business and technology leaders should
jointly review all technology initiatives under way—meeting quarterly or
biannually—to ensure balanced investments in initiatives that are critical for
supporting day-to-day operations as well as those needed to fuel business
innovation and growth. In this way, foundational technology investments, such
as the modernization of aging IT platforms, which are nonetheless relevant for
supporting end-to-end digital capabilities, wouldn’t get lost in all the
conversation about cutting-edge technology pilots and experiments.
Rethinking technology provision
IT organizations
typically manage three major archetypes of work: purely digital projects
(creating a mobile application interface, for instance), purely conventional
projects (making enhancements to a mainframe application, for example), or
hybrid projects that affect both digital and conventional assets (developing a
self-checkout application for in-store customers, for instance). When digital
and conventional IT teams’ systems and mechanisms for providing technology support
remain separate, hybrid projects may be particularly compromised. Such
initiatives can be delayed and deadlines missed when conventional IT teams do
not anticipate the number and frequency of changes made by digital IT groups,
which are typically operating under the test-and-learn principles of agile
development.
An integrated delivery
model would ensure joint planning on such projects—involving both digital and
conventional IT teams at the very start of the life cycle of a project—which
would help reduce delays and create more transparency. Companies could take the
following steps to help digital and IT groups find common ground and deliver
products and services more efficiently. Some of these actions may seem obvious,
but it is surprising how many companies take them sporadically, or not at all.
·
Conduct regular planning
sessions to ensure that
digital and conventional IT groups are aware of their commitments to project
objectives and deadlines and that all potential risks have been evaluated early
on. The IT infrastructure team within a conventional IT group, for instance,
could agree to allocate some capacity each quarter to address just-in-time
requirements from digital teams (working them in between maintenance tasks).
·
Designate a
decision-making body to help remove
bottlenecks for hybrid projects. This is not unlike the job done by a
traditional project-management office, which imposes standards and processes to
ensure that projects stay on track. Indeed, some companies may choose to rely
on their existing project-management offices to meet this need. But others may
install a steering committee of stakeholders from the business units and from
digital and conventional IT groups to meet and decide periodically on primary
issues and risks associated with hybrid projects.
·
Encourage partnerships
among IT-support teams to
address the business units’ requests more dynamically. In both conventional and
digital IT groups, there are teams whose sole purpose is to support development
efforts—focusing on quality assurance, infrastructure management, and
production efficiencies, for instance. When these groups adopt an agile
mind-set—collaborating early in development phases, for instance, and sharing
feedback on product and process iterations—they can reduce the turnaround time
expected of them in hybrid projects. One company’s digital IT group welcomed
representatives from the conventional IT group—members of the infrastructure
team—in daily meetings associated with the development of a new web feature.
Normally, the digital team would have relied on a ticketing system to
communicate with the infrastructure team and set work-flow priorities. Instead,
it was able to prioritize and convey its requests directly in the meetings. In
doing so, the digital team was able to launch the feature quickly, and service
completion time dropped 30 percent.
·
Adopt DevOps
capabilities to reduce digital
teams’ wait time on components from conventional teams. DevOps is a phrase from the world of enterprise software
development used to describe the agile relationship between a company’s
software-development and IT-operations teams. The methodology advocates for
better and more frequent communication and collaboration between these two
groups. Under an integrated operating model, the conventional IT team could use
DevOps capabilities to gain easy access to the critical assets needed to
automate processes for building, testing, and deploying new products and
services. The conventional IT team could make its software code available to
the digital team quickly and frequently to match its release cycles, thus
increasing the speed of development for hybrid projects.
·
Use microservices to increase the technology
organization’s ability to provide cross-unit and cross-application functions.
Microservices refers to the development of software applications as a package
of independent components, each of which can be deployed on its own or in
tandem with others, and each of which runs a unique computing process. Through
the use of microservices, conventional and IT groups could take advantage of
applications and assets previously available to only one group or the other,
and could improve their collaborations on hybrid projects that involve both
groups’ assets.
Revitalizing your talent strategy
The increasing rate of
digitization in companies means nearly every business today must make a radical
shift in its talent-management strategies. Companies will need to adapt their cultures in
ways that will appeal to both next-generation digital workers, who can bring
fresh perspectives and innovation to companies, and conventional IT workers,
who often carry with them years of valuable institutional knowledge.
Specifically, business and IT leaders should focus on making changes in the
following areas:
·
Attracting talent.
Companies will need to evaluate
their pools of digital and conventional talent and identify any skill gaps that
could hinder the pursuit of their digitization goals. As they begin reaching
out to possible job candidates, hiring managers will need to work with
recruiters to create tailored roles and customized candidate-vetting
experiences. Some companies have established standard hiring archetypes (based
on the type of talent being targeted) and then crafted ideal requirements and
development journeys for people who fit each personae. Thus, the recruiting and
onboarding experience for a developer who is fresh out of college, for instance,
would be structured differently from that of an IT architect with more than ten
years of experience. Companies may also need to make certain cultural changes
to attract a millennial cohort that seems to perform best in less bureaucratic,
more innovative environments.
·
Retaining talent.
Companies need to ensure that they
have the right elements in place to motivate and retain members of the
integrated technology organization. The majority of the technology workforce
may perceive digital work to be more desirable, making it difficult to keep
conventional IT teams motivated. To keep both sides engaged, businesses may
want to establish incentives that reward employees based on the scope of their
influence within the technology organization, the impact they are having on
business outcomes, and their ability to collaborate across teams. In this way,
both digital and convention IT staffers will be motivated to do their best to
ensure high-quality customer experiences and successful business outcomes. At
one company, for instance, digital and conventional IT teams jointly created a
real-time analytics product that helped to streamline the customer-purchasing
experience. Members of both teams were rewarded equally for their success with
this hybrid project.
·
Building capabilities.
One of the core benefits of
establishing an integrated technology organization is that employees of all
stripes, working side by side under one operating model, will gain a greater
appreciation of their colleagues’ work. They may also find new advantages and
opportunities in both digital and conventional areas—thereby expanding the
company’s talent pool while ensuring the free flow of ideas. Companies can
augment this dynamic further by creating skill-development opportunities where
expert practitioners can train and coach workers in real-world assignments.
Such programs can go a long way toward reducing the cultural friction between
the digital and conventional technology groups.
For those incumbents
that are trying to catch up to digital-native companies, digital transformation
of core products and processes is essential. But the transformation cannot
succeed or sustain momentum when the digital technology group is not integrated
with the rest of the technology function. The digital factory model will only
take companies so far, especially if they aspire to bring all their technology
assets to bear in building innovative customer experiences.
Companies must instead
pursue an integrated digital IT operating model. Regardless of the rollout plan,
the overarching goal should be to minimize the divide between digital and
conventional IT groups, thereby assuring business stakeholders that the
integrated teams are supporting common strategic objectives and that they are
investing in the systems, processes, and talents that can ensure future
success.
By Naufal Khan, Gautam Lunawat, and Amit
Rahul October 2017
https://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/toward-an-integrated-technology-operating-model?cid=other-eml-alt-mip-mck-oth-1710&hlkid=9d26ca9061114ce38ba90148824b0e82&hctky=1627601&hdpid=9f59e575-b14e-4917-9ee5-d1fe290e7319
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