CIOs, talk about the business, not the operating model

CIOs, talk about the business, not the operating model

Dr Marcus Blosch of Gartner on why CIOs need to rethink their role as organisations push through with digitalisation programmes

CIOs need to be involved much more upfront in the strategy process, and develop skills and competencies to be like an internal management consultant

Dr Marcus Blosch, Gartner

When Dr Marcus Blosch, executive vice president for research at Gartner, talks to CIOs, he always asks them: “Explain to me the business model of your organisation.”

“A lot of CIOs are very comfortable telling me about the operating model,” he says. “How it all works, what technologies they have got… They are talking about plumbing.”

He advises that “Whatever industry you are in, get yourself comfortable about talking about the business model of the organisation.”

“Talk about revenue streams, customer segments, what is your offering, what is the value proposition? What capabilities do you need to support that model? That should be your vocabulary, that should be where you start.”

“Change the conversation,” says Blosch, who spoke about how CIOs can think differently about their role and the ICT organisation’s functions, at the recent CIO50 events in Auckland and Wellington.

IT is like the fashion industry

Technology has to be part of the business model, he explains.

But for Blosch, “technology just does stuff.”

“The real question of any technology is what capability does it bring to your organisation? How can that influence the business model? You have to bring the two together.”

And this, he says, is the kind of discussions CIOs should have when they start “engaging the business in business transformation. ”

To highlight how critical this shift is for CIOs, he points out the latest Gartner CEO survey.

Around 62 per cent of CEOs report a management initiative or transformation programme to make the organisation “more digital. ”

“Our ICT industry is driven by fashion. In the past few years, the fashion was ‘digital everything’. So what the hell is that?”

“Digital is really about innovating the business model and operating model with technology,” he says. “It is as simple as that.”

Traditionally, he adds, CIOs tend to get involved in the execution phase, when the business has defined the initiatives and projects.

According to Bosch, If you are interested in digital transformation, CIOs and IT organisations need to “shift left.”

What he meant by this is that, “CIOs need to be involved much more upfront in the strategy process, and develop skills and competencies to be like an internal management consultant.”

Some questions CIOs need to be involved with are: “What are the disruptors; What are the opportunities with technology?”

They are advising, giving guidance to CEOs and business leaders what the opportunities of technology are and how they transform the business and operating models.

CIOs need to ‘shift left’ and support the discussion on their organisation’s business model
CIOs need to ‘shift left’ and support the discussion on their organisation’s business model

Blosch says the latest Gartner CIO survey shows 47 per cent of CIOs in the Asia Pacific region are already working on business model change.

For him, this is critical as “technology has transformed every industry.”

TransferWise, a currency exchange site, is one example. When someone wants to send money to the US, they match this person with someone from there who wants to send money to New Zealand. Both parties receive the currencies.

“What TransferWise has done is innovate the customer side of the business,” he says.

There is no complicated backend process, so “they can absolutely trash the banks in terms of currency matching.”

Amazon, he cites, has also disrupted the distribution channel side by taking out all the intermediaries, while providing a high level of convenience.

Spotify disrupted the revenue stream of the music industry wherein customers were required to buy an album in order to access the music. “With Spotify, you pay the subscription and you can access it all,” he states.

Blosch explains that, “What you see in each of these cases is the technology is innovating the business model. That is why they have been successful.”

Innovation doesn’t just happen, you need a clear process

Dr Marcus Blosch, Gartner

“It is a very simple formula,” he points out. “The technology, plus the business model, equals success.”

“If you just have the technology without the business model, where is this going?” 

Organisations are going to need a different skill set to help transform the business using technology, he stresses.

CIOs who plan to be involved early on in their organisation’s business model strategy need to ensure they and teams have expanded their skills beyond traditional ICT.

“You need people who can do AI, but who also have design thinking and UX skills,” says Blosch.

“Start thinking about talent in the organisation that can talk about business design and engagement. Build that capability within you and your team.”

He says one of the biggest problems around any digital transformation or creating new business models with technology is not the technology. “It is the problem of creativity.”

Blosch explains that, “Many of the organisations really struggle with having the imagination to think about how they could do things differently. What are the different ways we can do with this business model? How do we change the way we make money from it?”

Dr Marcus Blosch of Gartner: “It is a very simple formula...The technology, plus the business model, equals success.”
Dr Marcus Blosch of Gartner: “It is a very simple formula...The technology, plus the business model, equals success.”

He suggests that, “When you try to innovate, to transform, you want to make ‘fail safe’ experiments. Do it in a way that allows you to innovate, to try it out, before you find the right answers.”

According to Blosch, this is why startups are better at innovation. “They can take risks, and do take risks.”

“Look to build that creativity in your teams,” he says.

“Start with the customers,” he advises. “Really understand the customer and build those design skills into the IT organisations.”

‘Innovation doesn’t just happen’

Blosch discloses a major point which comes out in all their research at Gartner is that, “Innovation doesn’t just happen, you need a clear process.”

He notes there are different types of innovation.

One is operational innovation, where “you do what you do, but better.”

There is also transformational innovation, where you are doing something completely different.

“Interestingly, the expectation that innovation happens over and above your operation day-to-day is completely misguided,” he states.

Many organisations undergoing digital transformation will say, ‘use 80 per cent of your time on BAI and 20 per cent of your time in innovation.’

“Forget it, it is never going to happen,” he says and adds that if it does, it will be incremental, not transformational innovation.

“If you really want to drive digital transformation, you would have to create an innovation process that is outside of your day-to-day operations and give it the resources and teams it needs.”

He cites one such process developed by Gartner, with the acronym STREET.

“It doesn’t matter which process you have, but make sure you have a clear innovation process that involves business and IT.”

He says these types of processes also require a different culture, a different style and types of people involved.

Use iterative, experimental approaches, he advises, the likes of design thinking, lean startup, and agile.

Get these iterative experimental approaches that you can try something and move on. “It is lower risk as well,” he states.

Start with ideas, then a series of iteration. “Refine, knock out; refine, knock out.”

“Move fast, learn fast.”

Wanted: Collaborative cross functional teams

Aside from having the non-traditional IT skills, Blosch advises that to be really successful with digital transformation, “you have to blur the boundaries between business and IT.”

“We see the rise of product teams,” he says. These teams are driven by the business, and they bring together different skill sets, from designers to technology, into one team that can consistently drive back through innovation.

“We are seeing this as many CIOs and IT organisations are working with the business,” he says.

Again, these teams are business centric, collaborative, and allow consistent innovation.

So where to start? For CIOs, he suggests to look for areas of your business that change very fast.

“Many organisations have services around customers. That is probably a great area to start. Get the collaborative approach working there, and then broaden it out.”

Build different skill sets particularly around customers, ecosystems, business models, and service design.

“The business model is underpinned by the operating model,”  explains Blosch.

“Make sure the operating model is moving forward in a way that it can support change within the business.”

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