Businesses that lead in the digital world can pivot within days, hours or even minutes as new threats and opportunities emerge. In contrast, laggards often fall victim to a technology function that need months, quarters or even years to adapt.
By now, most large companies are using digital technologies to do things such as launch apps, build e-commerce solutions and harness data to learn more about their customers. But these “quick hit” efforts inevitably fall short of their goals when they must contend with legacy IT systems and data that can’t interface with new digital apps and architectures. Data is scattered across the company, rendering it useless. Outmoded and sluggish IT operating models slow the company down.
The companies that take digital to its full potential learn to integrate their front-end digital solutions with their aging legacy stack. They build technology functions that are flexible, fast, collaborative and creative—hardly the adjectives most companies use to describe their IT departments. But unlocking the true potential of technology can be transformative. Consider two examples:
The first involves Facebook and its Open Compute Project. After building new, cutting-edge data centers, Facebook in 2011 made the controversial decision to release its hardware designs to the rest of the world as open-source material. While most companies closely guarded their server designs, Facebook realized that its core strength was creating innovative social media products, not building servers, and it stood to gain more by fostering collaboration in the engineer community. Collaboration led to vast upgrades of Facebook’s state-of-the-art servers, further reducing the company’s energy demands and leading to more than $2 billion in cost savings in the first three years. The Open Compute Project has also served as an incubator for other initiatives, such as the Telecom Infra Project, which will reduce the company's dependence on traditional telecom providers, while increasing global Internet connectivity.
The second example might lack Silicon Valley swagger, but the results are just as impressive. It involves HM Revenue and Customs (HMRC), the UK tax authority that years ago set out to shift from a clunky paper-based system to one that allows customers to complete most transactions online or through integrated software. Hamstrung by inflexible legacy systems and a lack of in-house knowledge, HMRC started by reconsidering its governance and decision models, putting the right inner-game mechanisms in place so that it could tackle its outer game. HMRC then invested in developing new digital capabilities and an IT operating model that supports the company’s digital strategy and ambitions. These steps helped the organization move a large portion of its systems to faster, cheaper and more stable cloud-hosted platforms. All told, this digital transformation is expected to improve the customer experience, increase revenue and reduce costs by 25%.
As companies look to reboot their IT capability to make it more responsive to the needs of a digital enterprise, we find they typically need to focus on four key areas:
- How technology work gets done: Digital leaders make IT move faster by proactively changing ways of working through concepts such as Agile product development methods and DevOps. They also generate speed by adopting governance and decision models that prioritize opportunities and quickly pivot resources when necessary. They excel at effectively allocating scarce IT resources between business-as-usual IT, modernizing legacy IT and investing in new digital capabilities.
- How IT works with others: Leaders also use Agile, DevOps and product vs. project development models to change how IT engages with other parts of the business. The key is to create a more collaborative, team-based approach to designing and building technology solutions, as well as supporting and eventually decommissioning them.
- How technology fits together: Gravitating toward adaptable enterprise architectures will increase the probability that the many pieces of a complex technology puzzle will fit together in the future.
- How to navigate a journey that is affordable and achievable: Orchestrating this level of change requires clear prioritization to guide investment in the few initiatives that are both practical and potentially valuable. But it also relies on self-funding of some critical initiatives through continuously removing unnecessary complexity in the IT function and trimming costs from the legacy IT environment.
Linking this inner game IT transformation to the company’s outer game objectives will provide the best road map for what will be a challenging multiyear journey. To get started, organizations must:
- Define the major technology implications of the company’s overall digital strategy.
- Determine what components of the legacy IT environment must be modernized to support this vision.
- Launch Agile pilots to begin to test and learn, using this important new way of working to build winning solutions prototype by prototype.
- Define the relative priorities of funding business-as-usual, modernizing legacy infrastructure and investing in new digital initiatives.
The inner game is about addressing the technological, organizational and ﬁnancial impediments that get in the way of speed and execution. Given the blinding pace of digital innovation, companies can no longer afford a technology function that takes months, quarters or years to react.
Rudy Puryear leads Bain & Company’s Global Information Technology practice and is based in Chicago.