IT and Digital Strategies are inherently and inextricably linked to the business strategy and are more important than ever to enable organisations to compete and deliver their strategic objectives. This is particularly salient as IT shifts from being a transactional back-office function to becoming front and centre to every business strategy. 77.3% of CIO’s rated digital transformation as the top priority for 2021, pushing cybersecurity down to second place.
A digital strategy is the foundation of an organisation’s digital transformation and underpins the company’s vision and direction in how to achieve customer centricity, optimise its operational efficiency, develop new digital business models, and digitally empower its employees. the COVID-19 pandemic has shone a light on the challenges faced by CIO’s on how to enable its workforce with flexible digital workplace technologies and other capabilities to extend their productivity and ability to adapt to the unprecedented changes many organisations have experienced in 2020.
From my experience, the discipline of creating, planning and managing an effective IT & digital strategy which is regularly refreshed is not commonplace in many organisations. In fact, according to Gartner 2017 CIO survey only 23% rated their organisation as effective or very effective at business strategy and planning. There are many factors for this, but key is that CIO’s, as well as being strong technologists, need to have a deep understanding of the business and the various levers that would drive business revenue. They also need to be at the top table and integral to business decision making. This is not the case in many organisations. Gregor Hohpe (ref LinkedIn Blog) says that the separation into “business ” and “technology” within organisations has become outdated in the digital world because technology drives the business. organisation mindset needs to change. Digital companies use IT in quite different ways. They do use IT to operate efficiently, but more importantly to provide unique market differentiators and opportunity, i.e. top line revenue. The CIO reporting line chart that he produced (below) is a helpful indicator of the focus, common strategies and levers organisations attach to IT.
This article is not intended to be comprehensive but provides some useful considerations to help CIO’s develop their IT strategies to provide a consistent vision and direction to enable digital transformation within their organisations. In my view these are key:
Develop the IT Strategy with the business
As stated, the CIO needs an in depth understanding of the business and its strategy. This needs to be at a detailed level with clearly defined outcomes that need to be achieved and how they are going to be measured e.g. KPI’s on customer NPS, launch of new Products, GWP growth, reducing the ratios (COR: expense and loss) etc. It is important to get the buy-in from key stakeholders and the Board. CIO’s need to influence them so that they see this as a collaborative and a co-creation exercise where they will feel part-ownership and thus will support the CIO in its delivery.
Maximise IT impact to enable digital transformation?
It is important to focus on customer outcomes and what capabilities to provision to enable delivery of the digital strategy. Examples include consistent and optimised customer interaction capabilities, claims automation, partner integration, STP processing and cognitive automation, data insight, AI/ML/analytics, innovative products etc.
Economies of speed matter, so the strategy needs to develop clear plans and an implementation roadmap for the delivery of these capabilities (mapped to business capabilities) with frequent deliveries that realise value incrementally and an in Agile way. With effective EPMO disciplines established, it is important to align investment available to business and IT priorities.
Address legacy and technical debt head-on
CIO’s need to deal with the drag of legacy and technical debt. This is a complex topic and not easy or quick to address. Legacy challenges are common in many insurance companies where systems had evolved and mushroomed over decades with proliferation of technologies and with severe limitations to enable a modern digital and data operation. Legacy can be a real issue and in my experience, organisations go through a 12-18 months process (sometimes longer) before they bite the bullet and make a decision to decommission legacy and replatform their systems, why?
- Very disruptive to business
- Complexity of systems, integration, processes, knowledge etc.
- Requires significant investment
- Takes years to complete
- Legacy systems tend to be cheap to run (but not change) and thus constructing a compelling ROI can be difficult
- Real inhibitor to running a digital business
- Does not have modern capabilities to deal with today’s data requirements
Organisations need to consider whether you have a burning platform that can be existential to the business. If not the company needs to determine when this condition would arise and why. This is important due to the lead time required to replace these systems. There is a well-trodden process to asses the AS-IS landscape and map to an insurance capability model. Focus on developing a Target Enterprise Architecture blueprint that is future proof. Ensure that going forward everything that IT invests in will take you one step closer to the target. Make it difficult (through policy or process) to continue to ‘throw’ money on increasing technical debt that is divergent from the target etc. Build a Roadmap can will capitalise on specific functional clusters, company drivers or events, incremental benefit etc
Take some decisive and bold steps to resolve endemic legacy issues. Develop lasting rather than palliative solutions but recognise that to eradicate will take time. If legacy is holding you back to create the bandwidth to transform then consider ring-fencing, locking down or even outsourcing.
Ensure IT is a fine-tuned machine to deliver digital Transformation
What is your IT cost ratio? How does it benchmark? What percentage of your IT budget is spent on Change (Grow & Transform) versus Run (keep the lights on)?
What is the sourcing strategy especially where it relates to digital development? Co-location is important at the start of an Agile Transformation journey but not critical to make the model judging by how companies had to adapt to during the COVID-19 pandemic. Focus on in-house capabilities and ways of working – adopt Agile & DevOps practices. Is there an appetite to adopt a cloud-first strategy? Is it clear what is involved in migrating to the cloud and ultimately the inherent and future benefits?
In my experience it is very valuable to embark on an exercise to assess your organisation structure and define an optimal Target Operating Model for IT and Digital that meets the company’s 3-5 year objectives.
There needs to be an increasing focus on improving overall change maturity rather than simply executing projects on an ad hoc basis. Building effective change capability is not only necessary but also, can be a competitive advantage to your organisation. More mature organizations are able to respond to market forces and implement strategies faster and more effectively. Therefore maturity of Change is a serious consideration. This ranges from the establishment of an effective EPMO to using the right delivery methodologies and best practice. Many organisations have embarked on a wholesale transformation to Enterprise Agile whilst others have contained this to within IT. In general, Agile Transformation can yield significant productivity and other benefits but this is a subject in its own right which I am not going to cover here.
Your strategy should carefully consider partners and suppliers you want to work with and why.
Finally, I would raise a point about Culture. This includes an organisation’s expectations, values that guide employee behaviours, leadership alignment, ways of working, collaboration, empowerment, interactions within (e.g. through silos) and with the outside world etc. The only reason why I mention culture is that many transformations fail not because of process or technology but because of culture.
Author: Jacob Abboud – Chief Information Officer | Digital, Data & Agile Transformation | IT Cost Optimisation | M&A | Innovation | NED – FS