Only 42% of IT transformations are generating the level of agility that organizations expected to see, which begs the question of whether IT is misaligned with the business or doesn’t have the right practices in place, according to Forrester. The pandemic made it abundantly clear that organizations that are not adaptive to the pace of transformation risk losing competitive advantage, said principal analyst Gordon Barnett.
Traditional tech models are based on resource pools of skills such as enterprise architects, application developers and project managers, when they should instead be built around a network of work-based operating units of products, services, customers or platforms, according to Barnett.
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As a result, CIOs have struggled to meet business needs and expectations in times of volatility and change. These organizations should avoid the so-called “dysfunctional trap” and build an IT operating model that adapts to changing demands, Barnett said.
To help CIOs develop the adaptive IT structure, Barnett recommends adhering to five design principles:
- Adaptivity rather than scalability. Adaptability is based on the ability to move assets and resources to points of need. By contrast, scalability means making something existing bigger. The mindset should not be rigid but flexible with the ability to move around and reconfigure things easily.
- Networked activities over individual jobs. This refers to a whole ecosystem delivering value rather than focusing on individual skills. It focuses on a network of people working together to deliver value to the customer. “It doesn’t matter if someone did a good coding job if the other people [on a team] didn’t deliver,” Barnett said. The value is when the whole network delivers a product or service.
- Autonomous over directed control. This approach advocates for giving teams autonomy in how they work rather than someone in the network coordinating or controlling the work, he said. “Autonomy is when you empower people closer to the work to actually execute it … and taking away the constraints of speed,” he said.
- Multiskilling over single-skilling. Today, when someone is recruited for a job the company is looking for certain skills that can be developed. This is a very individual focus. Barnett believes in the future, it will be more important to focus on a team having a set of skills so if an individual leaves, the team can still perform. “So you want fungible teams rather than being dependent on individuals,” he said. In a multiskilled environment, the team is working together, and multiple people have the same skills, he said.
- Evolution over target state. Historically, goals are set for where a project should be at a certain time and a team works to meet that goal. That is a target state. The evolution approach focuses on having an aspirational target that evolves for dynamic flexibility, Barnett said. “You don’t want to be rigid and say, ‘We’re going for this’ and then assume it will happen.” Customer demands and competitors “are moving at the speed of light so an assumption today may no longer be valid in three months so you have to evolve to that environment.” This requires constant flexibility, whereas a target state ignores what’s happening in the environment.
IT has a choice to make—does it use an outsourced model, shared services, be aligned to business streams or does it stay focused around traditional IT, Barnett said. “We see a combination of all of those.”
The CIO needs to choose the model in the context of how its organization operates—not based on “what a consultant or white paper says you should do.”
Most importantly, remember that at the heart of an IT operating model is the customer the organization is serving. “So you must know your customer,” he said. “Many IT operating models don’t understand the people they’re serving and treat all internal employees as one-size-fits-all.”
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When the customer is considered, the CIO can make sure IT is delivering the right things that meet the needs of both internal and external customers to deliver value, he said.
“That’s your operating model strategy: What is the market you’re going to play in and how you’re going to win,” Barnett said. If the CIO knows that, they can then ask what capabilities they need to be able to deliver services. The focus should be on competitive advantage capabilities that generate the most value.
Then the CIO can think about structure and what they have to do to execute and deliver value to the customer. Part of the operating model involves deciding what should be automated and outsourced to a provider.
“The operating model is focusing on the core work you need to do, and you’ll design around it and create cross-functional teams that will execute the work,” Barnett said. “Now you have consistency of operations.”