September 2016, IDC #US41702516 INDUSTRY DEVELOPMENTS AND MODELS Leading in 3D: 100 Days to Set the Stage for Digital Transformation Serge Findling IDC OPINION For senior leaders in every discipline, much is written about "the first 100 days" of their tenure or of a project. Typically, this period is one during which a leader must evaluate an organization, establish authority, signal change, and begin to establish relationships. In the case of a digital transformation (DX) effort, the stakes are typically very high, and the challenges for senior leaders call for both leadership and management — implemented in a synergistic way. As they take leadership roles in a business' digital transformation, CIOs must formulate their response with acute regard for business needs. They must find ways to implement technology to accommodate a continuous transition from old to new, from unstable to stable, and from experimental to operational. Although many organizations have effective leadership, few leaders have harnessed the full potential of their organization's ability to produce DX value. But IDC's IT DX management approach, Leading in 3D (L3D), enables enterprises to support transformative innovation while driving operational excellence throughout the organization — incorporation. This approach depends on the art of integration: managing a continuous exchange of lessons learned and technology developments achieved. In the first 100 days, almost all of the CIO's activities revolve around the integration discipline. IDC provides CIOs a 100-day framework for an enterprise digital transformation plan. Findings of this study include: The first 100 days are critical for building credibility, engaging staff at all levels, creating wins, and setting the stage for the second 100 days. Leading in 3D — taking a disciplined approach to creating innovations that become part of the fabric of the enterprise's ongoing operations and insisting on creating structures within the organization to accomplish this — offers a clear path to a successful DX initiative that provides lasting business value. IN THIS STUDY This IDC study, written for CIOs and senior information and technology executives, lays out a plan for getting started in the IT transformation that is essential for the digital transformation of a business. This study leverages IDC's digital transformation leadership framework, Leading in 3D, which provides a comprehensive, process-driven approach to technology management: integrating — in a systematic fashion — innovation, speed, agility, and customer responsiveness with a predictable, optimized IT infrastructure. This study presents a 10-step approach and a 100-day plan to successfully launch an IT-based business transformation and implement the Leading in 3D model.
Transcript
September 2016, IDC #US41702516
INDUSTRY DEVELOPMENTS AND MODELS
Leading in 3D: 100 Days to Set the Stage for Digital Transformation
Serge Findling
IDC OPINION
For senior leaders in every discipline, much is written about "the first 100 days" of their tenure or of a
project. Typically, this period is one during which a leader must evaluate an organization, establish
authority, signal change, and begin to establish relationships. In the case of a digital transformation(DX) effort, the stakes are typically very high, and the challenges for senior leaders call for both leadership and management — implemented in a synergistic way. As they take leadership roles in a
business' digital transformation, CIOs must formulate their response with acute regard for business
needs. They must find ways to implement technology to accommodate a continuous transition from old
to new, from unstable to stable, and from experimental to operational. Although many organizations
have effective leadership, few leaders have harnessed the full potential of their organization's ability to
produce DX value. But IDC's IT DX management approach, Leading in 3D (L3D), enables enterprises
to support transformative innovation while driving operational excellence throughout the organization —
incorporation. This approach depends on the art of integration: managing a continuous exchange of
lessons learned and technology developments achieved. In the first 100 days, almost all of the CIO's activities revolve around the integration discipline. IDC provides CIOs a 100-day framework for an
enterprise digital transformation plan. Findings of this study include:
The first 100 days are critical for building credibility, engaging staff at all levels, creating wins, and setting the stage for the second 100 days.
Leading in 3D — taking a disciplined approach to creating innovations that become part of the fabric of the enterprise's ongoing operations and insisting on creating structures within the
organization to accomplish this — offers a clear path to a successful DX initiative that provides lasting business value.
IN THIS STUDY
This IDC study, written for CIOs and senior information and technology executives, lays out a plan for
getting started in the IT transformation that is essential for the digital transformation of a business. This
study leverages IDC's digital transformation leadership framework, Leading in 3D, which provides a
comprehensive, process-driven approach to technology management: integrating — in a systematic
fashion — innovation, speed, agility, and customer responsiveness with a predictable, optimized IT
infrastructure. This study presents a 10-step approach and a 100-day plan to successfully launch an
IT-based business transformation and implement the Leading in 3D model.
No matter how you look at it, the world is moving faster. Product life cycles are shortening from
decades to years. Company life expectancy is dropping dramatically to little more than a product's life
expectancy. Increasing speed is simple for marginal increases but very complicated for any significant
increase. In that case, the traditional approach — which consists of increasing everything proportionally
— does not work anymore.
For example, in the first Indianapolis 500 road race in 1911, the winner's speed averaged 70.6mph.
One hundred years later, the winner's average speed is 170 mph. The game is the same, but what it
takes to compete and win is very different. In 1911, the driver was the car designer, and a mechanic
usually rode along with the driver. As a matter of fact, the 1911 winner was the only car without a riding
mechanic. Today, on average, each car has six mechanics and five engineers, along with a team of 8–
10 pit crewmembers and many data scientists.
Similarly, any organization competing for speed must go through a profound rethinking of everything it does and create a new structure that is directly aligned with providing technology at the speed of the business' needs.
Leading Digital Transformation: Essential Competencies
In the context of digital transformation, the CIO and IT executives must develop both their leadership
and management competencies. More complexity calls for more management, and more uncertainty
calls for more leadership. Both complexity and uncertainty are major attributes of the digital age; IT
must leverage a synergistic model of both management and leadership to succeed in enabling the
business. A 2015 Harvard Business Review Analytic Services survey of 436 respondents found that
companies that were rated highly in both digital leadership and management have better business
results than their peers, with stronger revenue growth and greater profit margins (see Driving Digital Transformation: New Skills for Leaders, New Role for the CIO, Harvard Business Review Analytic
Services. 2015, Harvard Business Review, hbr.org/hbr-analytic-services).
IDC's digital transformation leadership framework, Leading in 3D, helps CIOs and IT executives
provide both leadership and management while creating a critical integration between the two. Leading
in 3D allows enterprises to enable transformative innovation while driving operational excellence —
incorporation. This approach depends on the art of integration: managing a continuous exchange of
lessons learned and technology developments achieved.
Figure 1 illustrates the Leading in 3D framework and how it relates to leadership and management.
Integration is key to creating a virtuous cycle between innovation and incorporation. For IT, integration enables the needed synchronization between hierarchies and networks. Leadership and management
are not opposite; they are complementary: Both are needed at every stage.
Multiple perspectives — people, business, financial, and processes — will provide a good understanding
of what works and what does not, of both the challenges and the opportunities.
IDC has developed several IDC MaturityScape documents such as IDC MaturityScape: Digital Transformation (IDC #254721, March 2015) and IDC MaturityScape: Leading in 3D (IDC
#US40933616, January 2016) that provide valuable tools to systematically assess maturity.
2. Create a Sense of Urgency
Over the years, organizations establish written and unwritten rules that they live by, almost as second
nature. An organization won't change these rules without both strong rational and emotional reasons.
A sense of urgency is needed to trigger a reevaluation of everybody's habits and acquired business
behaviors. A sense of urgency can be based on a crisis such as a major competitive threat, a
disruptive business model, a major market loss, significant customer dissatisfaction, or an inability to
scale innovation. Crises can be manufactured by a new company strategy or by a broad
reorganization. In any case, creating a sense of urgency is about seeing a change as an opportunity.
The sense of urgency convinces everybody to get out of their comfort zone and act now, thus enabling
a major leap forward.
3. Engage an Executive Council Team
A team of senior executive stakeholders must be mobilized to provide both the authority and the
resources to fuel IT transformation. This executive council can be a dedicated committee or be part of
an existing governance structure — such as the CEO's staff or company executive council. In any case,
it must be at senior leadership level and cannot be delegated down. All recognized DX leaders for the
company should have particularly been considered or represented. To engage such an executive
team, a clearly articulated IT strategy is needed. Key components such IT principles, rules of
engagement, governance, and strategic initiatives must be articulated.
Metrics and dashboards are also critical: creating a baseline and announcing clear quantified
objectives must come up front. However, managing technicalities is the easier part. Building great
rapport and offering a compelling reason for each executive to join the team are the most difficult
tasks.
4. Create a Strategic Vision for DX
A strategic vision for DX will allow the organization to rally the troops and give a sense of purpose to
the whole organization. Digital vision is not about IT but about the enterprise. The digital vision must be
supported by the entire leadership team; IT may contribute significantly when creating that vision.
When creating a digital vision, key questions must be addressed:
What does digital mean to your business?
Does digital transformation change the business you are in or should be in?
Does your target customer change with digital technology?
Does your added value change?
How can digital technology enable you to differentiate?
Does digital technology enable new competition or new entrants?
However, these questions are difficult to answer. Because digital transformation is essentially
disruptive, most new business models are not obvious and often come as a surprise. The business
models only become clear once they approach mainstream. Some enterprises may decide to wait,
see, and follow another company's lead. But this can be a very risky approach; once a disruptive
model takes off, it may be impossible to react. Alternatively, organizations may want to be more
proactive and design a path for success. They must think out of the box and focus on creating a
transformative vision. Here are three steps that can help:
Imagine the impossible. Setting aside all barriers, imagine what you could do if you had to
redesign your business from scratch with no time constraints, no cost constraints, and no resources constraints. How would you change the game? How would you use all your aces to change the game?
Paint the end state. Envision how the end state could look and how each part of the organization could contribute. Think cross-functionally. Define the playing field, and then
narrow the scope and the solution to the most compelling element. Model the solution, focusing on the "what" versus the "how." This may seem counterintuitive, but if a solution to a problem is easy and known, then the barrier for competitors will be low. On the other hand, if
you discover a new solution and don't know how to create this solution, then you have a gold nugget that may bring a competitive advantage.
Identify adjacencies. Looking at your model, consider how you could expand the benefits to a larger domain. Think holistically, consider adjacencies, and think about the complete business. Identify who contributes and who benefits. Identify leadership requirements and potential
This initiative focuses on creating the best digital capabilities at the enterprise level. An important
aspect is to define what the common denominators are versus what should be customized. What is
common should be designed to add value, and guardrails should be added to create a safe
environment. Constraints may be a consequence but must not be the objective. In the digital world,
platformization is a key element of success. For IT, this means focusing on a high-performance
platform and ensuring that competencies and resources are available. The goal is flexibility, speed,
and scalability. Specific platforms must enable experimentation. An important aspect of platforms is
openness: platforms deliberately encourage everybody to add their own contribution to the platform in
the form of apps, data, or knowledge sharing. And platforms offer a safe environment to do this.
Within the enterprise, this step means that the platform should enable a federated organization where
distributed IT or business teams can leverage critical common infrastructure, information, and services
and easily extend them with value-added differentiation and custom functions. This is in strong
contrast to traditional IT approaches that focus on common standards and limited variations
constraining the domain of possibility for simplification purposes.
Create Strong Information Governance and a Sound Information Architecture
Leaders in information transformation will need to treat data and information as they would any existing asset, investing in a range of technology and people to distill insight into monetary value and investing in the establishment of organizational competencies focused on leveraging data. With data and information growing exponentially, the number of consequential data quality issues has also skyrocketed. Companies cannot ignore the significant risks of system failure or the financial impact of poor data quality. In many cases, the impact of poor data quality is less obvious and more difficult to assess. Strong governance, encompassing data, information, and knowledge, is needed. Governance is the set of structures, stakeholder accountabilities, procedures, policies, and processes supporting all the enterprise needs to manage and protect these valuable assets. Data integration is the combining of data from different sources to provide a unified view of this data. Data integration traditionally targets data at rest; today, data in motion, the velocity of data creation, and the need to update a new dimension of data synchronization in real time have created the need to accelerate the timeliness of this integration.
Information requirements and sound information cannot be an afterthought. A strong information governance and a sound information architecture are needed, starting at experimentation. Data preparation is often the biggest cost when experimenting. Avoid waste by providing platforms, rules, tools, and expertise: this can set new solutions on a better path while speeding up results and allowing for reuse.
Bolster Organizational Structure and Talent Capacity
Enterprises often spend a great deal of time on reorganizations, because they know that organizing
talent is very potent in creating change. Too many of these reorganizations create unproductive stress
and protective behavior that staff adopt to cope with feelings of insecurity or adapt to elusive and
continuously changing objectives. Very few enterprises take a holistic, global view with a long-term
perspective. IT organizations must be designed with a goal of providing stability, a sense of belonging,
and the opportunity for personal growth. While flexibility is important, it does not mean that everybody
and everything should move continuously. Some parts must be solidly anchored. A federated model
with clear communication and checks and balance is needed. And IT executives must be assigned to
missions or jobs for a long-enough period to deliver visible results. However, once in place, the IT
organizational structure should continually evolve as needed.
In 1968, Melvin Conway uncovered a great insight: a system mirrors the structure of the organization
that designed it. In other words, the architecture of a solution is very much influenced by the
organizational structure of the development team. One of the key reasons for that is how team
members communicate and collaborate: collocation, collaboration tools, and level to which people
know each other. With good communication, a single consistent powerful module is created. With
limited communications, several separate modules get created.
For this reason, effective development work can take place only where limited communications or well-
understood communications protocols can be in place. Further:
Collocate and utilize a single team when high speed and high-level communication is needed.
Distribute when tasks are loosely coupled and need different expertise or approaches.
The thinking is similar as when designing an IT network where bandwidth, throughput, and latency are
considered. Any time a module is developed by a distributed team, invest in strengthening team
communications: allow people to travel and meet in person and invest in collaboration and
communication tools. Value streams can also help you understand the level of intercommunications
implied by an organization structure.
Organizational Structure Principles
Empowerment: The fundamental rule for organizational design is empowerment.
Empowerment means managing people by results while allowing them to figure out how to produce these results. Authority and accountability must match.
Easy and effective inter-team cooperation: Ensure information and resources sharing in pursuit of a common goal. Cooperation means proactively aligning calendar, offering visibility, and asking for input.
Constructive tension to drive excellence and growth: Ensure checks and balances between IT teams and business teams, focus on critical decisions points, and enable peer reviews.
Togetherness: Evolve from a management view of making compromise to a leadership perspective of providing win-win and superior results. Further:
The trade-off is between risk and velocity; the goal is to reduce risk by increasing speed.
Agile must create a more stable environment.
Common solutions are not opposite to unique solutions; what is needed is architected
solutions.
Increase speed to save on cost.
Self-Perceptions of CIO Reports: Who Does What?
A 2015 survey by the Society for Information Management led by Leon Kappelman provides many
insights about the structure of IT organizations in U.S. companies. For 312 CIO respondents, the top
skills they need for themselves are leadership, people management, and strategic planning.
The survey also asked CIO reports at levels 1, 2, and 3 to evaluate their own skills. Figure 6 shows the
results. For starters, all IT managers have collaboration in the top position.
Source: Society for Information Management's Trends Survey, 2015
After the shared high ranking of collaborations, the respondents' skills ranking provides an interesting
indicator of the organization they lead.
These results confirm IDC's findings that:
The CIO must focus on leadership and strategic management and delegate most other
management activities.
Direct reports to the CIO lead alignment with LOBs and functions and must be business
leaders with technology knowledge. Major transformation initiatives should assign an IT executive at this level.
Executives and managers one level below the CIO focus on people management, communication, and problem solving. Many of these second-level managers are the coordinators/node of the networks.
Third-level managers focus on getting the work done.
