Long gone are those days when technology was just a supporting role for business strategy. We had an exciting journey from “business supported by technology” to “business enabled by technology” to “technology driven businesses”. What is Next?
In the old, industrial world; companies were categorized based on what they sell. If you sell food, you are a restaurant; if you sell white goods, you are a manufacturer etc.. With this outdated and conservative definition of the industry; than today Amazon would be categorized as a retailer, Facebook and Google will be seen as an advertiser, Netflix as a media company and Tesla as car manufacturer. Yes, they mainly operate & compete in those industries, however this doesn’t change the fact that they are a Technology Company.
In the new digital world, it is not correct anymore to categorize companies by what they sell but there is a need to look them from the refreshed lens of what they work with and how they work. This perspective rightly puts all companies mentioned before into Technology Industry, which is the right positioning. And it is not only these companies but incumbents in any industry who are destined to survive digital revolution will evolve into a technology company too. GMs, Volkswagen’s and Toyota’s are evolving into technology companies rather than automotive companies. That doesn’t necessarily mean that Google and Apple will evolve into automotive companies with their efforts in autonomous driving though. Industries are converging with technology at the center which will also lead to the idea of “Every company is becoming a technology company.” So we need to have a refreshed perspective: Rather than looking the roles technology played in business in the past, today’s new perspective is: “Technology is the Business and Business is the Technology, in every Industry”
What does this mean for incumbent businesses in any industry? This is a very broad topic as the incumbent need to evolve their culture, organization, strategy, offerings..; but in this article I will focus on a narrow perspective with three sub questions: 1- To drive innovation and transformation agenda, What are the main steps incumbents go thru? 2- How incumbents businesses are evolving their internal technology organizations and strategies? 3- What are the components of a holistic partnership with their technology partners? These three questions are critical to move any company into a technology company.
Lets start with the transformation journey businesses go thru. As in many innovation journeys, businesses go thru a cyclical process for transformation driven by technology. They are getting “inspired” by what technology can do for them, they “ideate” about the new business models, value streams and new offerings like products, services and experiences which can be realized with technology and they go into the “implementation” and GTM phase to bring them to the world, which brings them to the start of the cycle again. Each of those 3 step cyclical transformation & innovation journey of Inspire, Ideate, Implement require though a convergent and divergent process of its own in order to be successful.
The journey starts with a state of “Unmet Needs and Business Priorities” which kicks off the divergent phase of Inspiration step with ideas to identify Industry and Technology Trends, Business Priorities and Needs, and Cross-Industry Transformations. The divergent phase of Inspiration step leads to convergent phase of identifying Incremental (H1) innovation ideas and Breakthrough & Transformative innovation ideas (H2, H3).
The new state is a well-defined of a Innovation/Transformation portfolio -answering What- which initiates the second step of the cycle – Ideation step -to answer How. The divergent phase of Ideation step to start with going deeper into emerging and strategic technologies, evaluation of existing technologies and deeper look into industry scenarios and use cases in current or adjacent industries. This step converges with a well defined solution strategy & roadmap and targeted enterprise architecture.
In this new state, incumbents have already moved from H1 and H2/3 plan to a solution portfolio and roadmap. This new state initiates our third and last divergent/convergent step before the cycle kicks off again. In the third and last step of the journey-Implementation; divergence phases brings questions including transformation delivery options and adoption plans which converge with well defined project management and change management plans to bring to a final state of business priorities and values being realized.
As transformation never stops, neither does this cyclical transformation process and cycle starts again going thru Inspiration, Ideation and Implementation steps. This cyclical, simplified process brings the question of diversity of capabilities required in each step, especially from technology and business/industry perspectives. Looking from technology perspectives, Inspiration step requires very broad spectrum technology understanding/scouting internally and externally vs implementation step requires deep technology understanding and implementation capabilities for narrow set of technologies. From business, industry perspectives; Inspiration step requires a good understanding of Industry Transformation, cross-industry pollination and as well as start-up ecosystem scouting; the ideation step requires more capabilities in business value of technology and corresponding architectural capabilities with Implementation step requiring a focus on Business Value realization. These completes my first question. In order to transform themselves into technology companies and position themselves in converging industries with the technology at the center, businesses go thru a cyclical process of inspiration, ideation, and Implementation requiring different capabilities at each step which leads to second and third question: How do the businesses evolve their technology strategy and organization and how their technology partnerships are evolving.
Let’s start with the second question of becoming a Technology Company? How should incumbents rethink their technology strategy and evolve their technology organizations? Technology model and strategy evolved a lot over the last years. The days when CIO was a functional leader rather than a strategic business leader and CIO just managing IT are gone. In other words, businesses are struggling with their old, classical CIO-led technology approach. The expectations from technology leaders in the organization is completely moving into a much elevated position, being the strategic driver of the business. How can this be achieved? McKinsey synthesized them into a “tech forward” model for successful technology transformations which highlights three interconnected vectors:
- Reimagine the role of technology in the organization: Technology enabled business models and offerings, integrated business and technology management, new customer experiences
- Reinvent technology delivery: Agile, next generation IT services, automation, engineering excellence..
- Future-proof the foundation: Modular platforms, advanced cybersecurity, advanced analytics..
All three vectors can be thought as three legs of the stool, each of them need to be strong and aligned in order to achieve the successful technology transformation. This brings us to the second half of this question of how technology leadership should be structured to cover all the vectors above. When we are talking about technology, we know that technology can mean a lot of different things, from internal IT systems to emerging and strategic technologies related to the core of the business. And hence, we are seeing organizations enrichening / differentiating roles in Technology Leadership. Organizations are bringing CIO, CTO, CDO and CInO roles to drive technology and innovation agenda. But how do these roles differ from each other? It will be much easier to look them in a matrix of 3*2 (McKinsey model) where the rows are Business, Products and Technology and the columns are internal and external focus. Putting all the roles into this matrix gives us clear clarity on roles and responsibilities in becoming a technology-led business. For example, whereas a CIO is more internally focused in technology/products, a CTO is more focused externally are technology and products levels. A Chief Innovation Officer being more focused externally in Business layer, and a CDO is very centrally focused both internally and externally across the stack. Of course R&R for different Technology CxOs in different organizations might differ slightly, the main idea is the complete coverage across business-product-technology stack with a balanced internal and external focus. In order to become a Technology company and drive three vectors of transformation in parallel, businesses need to relook their technology leadership and empower and enrichen the technology leadership organization across the matrix.
So we covered the cyclical journey business go thru in their transformation, than we covered the second question of how do they change their strategy and technology leadership to succeed in this journey. These bring us to the third and last question. What do they look for in their technology partnership? As businesses were evolving themselves, their expectations from their technology partners are evolving as well. They are not looking for vendors but they are looking for partners which walk together with them in the Inspiration-Ideation-Implementation cycle; which work together with them across three vectors of the technology transformation and which can partner with them across the 3*2 matrix of Business-Product-Technology vs Internal-External. Business’s expectations from digital business transformation partners are evolving significantly; to find the right transformation partner, digital business transformation customers look for providers that will offer partnership across 5 pillars in 3 layers (Forrester Model). How does that look like? The first layer and pillar is Business Strategy and Innovation Strategy, everything starts from there. The second layer is Transformation Layer and includes three pillars: Organizational Transformation (People), Operational Transformation (Processes) and Technology Transformation (Technology). The third layer and pillar is Transformation Delivery. Any partnership missing a pillar or layer above is not complete or holistic enough, that is how digital business transformation partnerships are evolving for a complete Technology Transformation.
We came a long way from technology being a support function to a model where technology itself is the business- in every industry you can think of. With a refreshed definition what an industry means ( not what they sell, but what they work and how they work); it is becoming obvious that we are moving to a new world: Industry lines are blurring and every company is becoming a technology company. Technology is becoming the core of every industry and company. Great years ahead full of innovation and transformation. The question is not whether or when this will come -it surely comes/will come earlier than we assume-, the question is whether you are ready to transform?