Technology transformation is often similar to replacing an airplane’s jet engine while flying at 39,000 FT in the air. Past approaches to technology transformation took too long and often didn’t create immediate benefits. By the time the transformation was finished, not only the technology chosen was already obsolete again, and business was also still frustrated with the pace of technology changes. A new approach to technology transformation is required. Here are the 7 levers that will allow companies to accelerate the transformation.
While digital transformation often focuses on leveraging technology to change business models, products & services, and go to market strategies, technology transformation or IT transformation focuses on the underlying technology changes that are required to enable the digital transformation and make technology more centric to a company. Technology transformation is full stack that goes from applications to infrastructure to underlying people and processes that are required to develop and deliver the technology capabilities. For most companies, technology transformation would also mean to replace or upgrade the systems that have been in place for years and even decades.
Given the scope of changes, technology transformation is a tricky journey. As a number of CIOs have pointed out, technology transformation is often similar to replacing an airplane’s jet engine while flying at 39,000 FT in the air. The transformation often takes years to complete and the probability of success is not high.
With today’s speed of technology advances, companies can’t afford to take years to conduct a technology transformation. So what can companies do differently so that they can not only ensure the success of a technology transformation, but also accelerate the pace of such transformation?
Having worked with many companies globally on this subject over the years, I have identified 7 key levers that companies can pull to accelerate the technology transformation. I am not going to talk about typical transformation levers such as setting the right goals, communicating across the enterprise, changing the KPIs, etc. I assume that these have been incorporated already. Instead, I will focus solely on the unique levers that are related to technology transformation and can help companies accelerate the transformation. The seven key levers are:
- Anchor the transformation on a catalyst
- Rebalance IT investment portfolio
- Adopt a multi-OS approach
- Parallel Processing: Go after the low-hanging fruit but also place bets everywhere
- Celebrate mistakes or “detours”
- Build a transformation partner ecosystem
- Organize for success
Let’s go through the details of the levers one by one:
- Anchor the transformation on a catalyst
Technology transformation is a daunting journey. In a recent HBR article (https://hbr.org/2019/10/the-two-big-reasons-that-digital-transformations-fail), Accenture reported that most of the leaders they surveyed (representing 17 countries and 13 industries) reported poor returns on their digital investments. One of the two critical challenges was the unspoken disagreement among top managers about goals.
For most companies, it would be difficult to launch a technology or IT transformation purely driven by IT needs to change systems or moving infrastructure. Technology transformation can have an even harder challenge to align the goals among key stakeholders, given that technology is often indirectly linked to specific business objectives, especially with foundational technology enablers such as data platforms and Cloud infrastructure. To make the technology transformation objectives concrete and to make the job of aligning goals and expectations of technology transformation easier, it is critical to anchor the IT transformation on a business event to ensure enterprise buy-in and excitement.
Anchoring the technology transformation on a commonly understood business catalyst should be a critical first step of technology transformation. Such a catalyst will enable everyone in the company, both business and IT, to understand why the transformation is occurring and what are going to change.
Catalysts of business changes can have different forms and shapes. For a technology or IT transformation, there are a number of options for companies to consider:
- A new senior executive on board, e.g., CEO, Chief Digital Officer, Chief Information Officer etc. New leader brings new thinking and executive transitions can be a great catalyst for the company to rally behind. The new CIO at Target Corporation, for example, launched a transformation to change the way Target develops and operates technology.
- A new growth strategy is another great opportunity. New business growth in new areas often requires new investment and new ways of doing things. For example, MassMutual launched Haven Life to get into the direct to consumer term life businesses. Haven’s launch also allowed MassMutual to redesign its IT infrastructure and application delivery capabilities.
- Company restructuring can also be a great event to leverage. For example, Walgreens launched a major cost restructuring initiative in 2019 and it leveraged the business restructuring to also aggressively explore IT landscape revamping, including the migration to Cloud.
- Merger & Acquisition events are often perfect opportunities to shift the IT landscape to the new. M&A often requires significant changes to the IT landscape to consolidate systems and infrastructure and deliver on targeted synergies. The context of M&A is well understood and the investment for M&A can be a funding source to invest in technology transformation.
- Rebalance IT investment portfolio
A major challenge for technology transformation is that the payback often comes years later. Companies need to make upfront investment to be able to reap the benefits down the road. New technology tools such as software as a service and Cloud also require companies to shift their IT budget from capital investment to operating expenses which creates immediate impact on EBITDA. While the ideal situation is to secure additional investment for IT transformation, the reality is that companies often must self-fund the IT transformation. Hence it’s critical for companies to rebalance their current IT investment portfolios to free up funding to pay for the migration to the new.
Rebalancing of the IT investment portfolio would also allow companies to reduce investment into the old and limit the degree of further addition to current technology debt. It also allows companies to free up leadership and staff capacity and shift the most knowledgeable people to work on the migration to the new.
For example, at a major healthcare company, my team and the client worked aggressively to conduct scenario planning on IT investment. We jointly created three different scenarios: 10% shift to the new, 20% shift to the new, and 50% shift to the new. By pushing the envelope and challenging the status quo, we were able to identify a number of levers and significantly shifted the IT investment to the new opportunities.
- Adopt a multi-OS approach
In the book “Accelerate: Building Strategic Agility for a Faster-Moving World”, author John P. Kotter described the dual operating systems approach to drive faster changes. The same approach could be extended to technology/IT transformation. Instead of a one-size-fits-all approach trying to change everything all at once, a multi-Operating Systems (multi-OS) approach could allow companies to isolate changes to where most needed and accelerate the impact generated. Furthermore, the Operating Systems here for a technology transformation would include not only people and processes, but also the technology stack.
Given that the technology transformation will include the legacy systems that have been in place for years and decades, while it is sensible for companies attempting to replace such systems as a part of the technology transformation, the pure effort of such system upgrades often distracts companies from other technology priorities. It may even discourage the business since the business is often looking for quicker turnaround of new business requirements and new capabilities. Thus while a single-OS technology transformation approach makes sense on paper, it is often more sensible for companies to take the multi-OS approach to create two different technology stacks to support the business strategy and/or digital transformation.
A number of companies have adopted this approach to make changes happen faster. One of the major consumer electronics retailers started its technology transformation with the online channels. Given that the ecommerce channel competes directly with pure online competitors such as Amazon and Newegg.com, the retailer must be able to offer the same speed and agility to be able to compete effectively. It built separate public cloud based IT infrastructure, launched new online customer experiences, and deployed new underlying application development processes. This multi-OS approach allowed the retailer to quickly ramp up online sales and then cascaded the role model of ecommerce channel to the rest of the company.
Another example is a major healthcare company that allowed IT organizations for each one of the business units to launch their own technology transformation programs. Each IT organization can decide which applications to modernize, what cloud infrastructure to leverage, and what types of business and IT collaboration model they would adopt. To avoid the potential chaos and inconsistency, the Group CIO spent a significant amount of time working with the BU CIOs to set up the guardrails to ensure applications, data, and processes can still integrate across the whole company. The CIO succinctly summarized the multi-OS approach this way – “I can either spend 5 years to fight the methodology war or the cloud vendor selection war, or I can pick the battles and move the needles first. Guess which approach I will take?”
- Parallel Processing: Go after the low-hanging fruit but also place bets everywhere
Parallel processing is a computing terminology that means instead of one computer doing the calculation, break up the tasks into smaller chunks and use multiple computers to conduct the tasks in parallel simultaneously. Similar to its ability to speed up computing, parallel processing can be a powerful way to speed up technology/IT transformation. Instead of a single thread linear transformation roadmap, breaking the initiatives into smaller threads and allow the whole company to mobilize and embark on the transformation.
Specifically, parallel processing for technology transformation means:
- Top down AND bottom up execution: Instead of the traditional top down approach that goes from strategy to prioritized actions, parallel processing also means bottom-up participation where staff might find opportunities on their own and embark on the experimentation and execution. This way everyone gets a chance to participate and push on the technology transformation, vs. just a few lucky one that are chosen to work on the transformation initiatives.
- Strategic bets AND incremental improvements: Transformation is about strategic bets. However, to accelerate tech transformation, incremental improvements should also be a part of the execution. Incremental improvements can become quick wins and the wins and results can become the catalyst for further strategic bets and major changes.
- Organic AND inorganic: Lastly, companies should explore both organic and inorganic means to change. While organic transformation would change the underlying fabric of a company and make the transformation much stickier, inorganic transformation with M&A could be a catalyst and a speedier way to show outcomes. For example, Walmart famously acquired Jet.Com as a way to accelerate Walmart’s own digital transformation.
For each of the ideas and initiatives that are being “parallel processed”, companies should take an iterative sprint driven approach. Instead of multi-year projects and programs in the technology transformation roadmaps, the swimlanes and initiatives in the transformation should be short 1-3 month sprints. At the end of a sprint, the managers can decide if the initiatives should proceed to the next sprint and what adjustments are necessary to the plan for the next sprint. This iterative sprint approach allows companies to adapt quicker to market changes and technology advances. It will also allow companies to adjust quicker to internal lessons learned.
- Celebrate mistakes or “detours”
This acceleration lever is probably not as intuitive as some of the other levers. IT started as the underlying foundation to automate transaction processing. IT downtimes often meant lost revenue and may even bring regulators breathing down CEO and CIO’s necks. Thus even though many companies have been pushing agile adoption and trying to “fail fast” more, in reality, failure is not tolerated at most companies. To avoid failures, companies instead get into analysis paralysis to make sure they don’t make any bad decisions. This will no doubt result in slow transformation.
What companies should do instead, is to celebrate mistakes, or as one of my CEO clients said, the “detours”. Celebrating mistakes would allow companies to push for bigger ambitions and more importantly it reduces the amount of decision-making time that it would typically take in a big company.
Many companies are already aggressively celebrating mistakes and “detours”. For example, Intuit established a special award for the Best Failure and held “failure parties”. As the co-founder Scott Cook said, “At Intuit we celebrate failure because every failure teaches something important that can be the seed for the next great idea”.
- Build a transformation partner ecosystem
Changes are hard. Technology changes are even harder. In addition to the traditional change barriers, technology transformation requires companies to experiment with new technologies that they haven’t had experiences with. While many companies are pushing to insource technical skills so that they can create the human foundation required to become a technology company, to accelerate technology transformation, companies should explore the establishment of a formal transformation partner ecosystem to secure the various areas of expertise it needs.
There are four key roles in the transformation partner ecosystem that companies should consider: 1) Transformation Architect: Someone who can help create a transformation roadmap and orchestrate the transformation; 2) Technology Architect: Someone who understands the strategic technology direction and can help the companies design the technology migration path; 3) Development Resources: Someone who can augment current technical resources and provide the elasticity and expertise needed for the transformation; and 4) Transformation Value Assurer: Someone who can objectively assess where the transformation is going and be willing to call the audible to shift the transformation back onto the right path if needed.
A core part of the transformation partner ecosystem is actually the customers of the companies themselves. Co-creating with customers during the technology transformation allows companies direct access to customer inputs and feedback. The direct customer engagement also creates a sense of urgency that internal initiatives often can’t match. For example, a medical device company engaged my team to help them design and develop a new data platform. My team and the client took the co-creation approach to directly engage pilot hospitals in the design and development of the data platform. The engagement with the pilot hospitals provided first hand requirements of how the data platform will work in real life and also settled a lot of internal theoretical debates among the business and IT.
- Organize for long term success
Lastly, similar to any other types of transformation, technology transformation also requires the right organization set up. Technology transformation does have a number of unique requirements that other types of transformation don’t always have:
- Multi-disciplinary: a technology transformation will require collaboration between various stakeholder groups, for example, business and IT, application and infrastructure, data and analytics. Thus it’s critical that the organization set up for a technology transformation provides the flexibility to support such multi-disciplinary collaboration.
- New skills and capabilities: as expected, technology transformation will bring in a lot of newer technologies and would require companies to have the ability to acquire and absorb such newer technologies.
- Short term and long term liquid staffing model: while a technology transformation will take years, the iterative sprint based approach to handle individual initiatives would also mean that people will be rolling on and off the transformation. The set up for a technology transformation must accommodate such a liquid staffing model.
To accomplish these goals, for a technology transformation, companies should explore the following design considerations:
- Subject Matter COEs (centers of excellence) so that core skills such as design thinking and data/analytics/AI can be effectively cascaded across the enterprise
- A flexible staffing model should be established so that people can easily roll on and off the transformation initiatives.
- A central transformation office should be established. As we discussed in a prior blog about new C-Suite roles in IT, there needs to be a dedicated leader managing the technology transformation. While some may argue that the CIO should be the dedicated leader for this, the CIO often doesn’t have enough capacity to manage this on a day-to-day basis. Thus it will be necessary to have a Chief Technology Transformation Officer and a transformation office supporting the Chief Technology Transformation Officer accordingly.
Just like any other transformation efforts, technology transformation or IT transformation is hard. The seven levers described above came from my years of experience working with companies globally to embark on such transformation journeys. Pulling these levers will allow companies to significantly improve the odds of success for their technology transformation efforts.
