More companies running innovation hubs alongside ‘analog’ businesses

Leading CEOs have told Gartner they expect their digital revenue to increase by more than 80 per cent by 2020.

Peter Sondergaard, senior vice president and global head of research at Gartner, says 125,000 large organisations are currently launching digital business initiatives.

Sondergaard, who spoke on the rise of digital business at the Gartner Symposium/IT Expo in Florida, says companies are creating innovation units running alongside traditional analog businesses.

“The business itself is bimodal,” he states.

“Organisations are creating separate business units, focusing on digital, separate from their traditional businesses (‘Mode 1’),” says Sondergaard. “They are trying new ways of reaching the customer, of running operations, of driving diverse innovation. They are acquiring and investing in digital technology companies, not waiting on existing suppliers to build capabilities because they have to start in a different place.”

Sondergaard says traditional organisations move too slowly when they build digital on old Mode 1 platforms. The solution is to create a type of bimodal organisation, introducing a new ‘Mode 2’ platform, with a different emphasis.

The Mode 2 platform uses more cloud than in-house infrastructure and applications.

“The new platform is less about data gathering, and more about intelligent algorithms to act on the data,” explains Sondergaard. “Platforms matter because business as a whole has gone bimodal. You need IT that supports a bimodal business.”

He says the latest Gartner global CIO survey finds over a third of CIOs have gone bimodal just within IT. These CIOs are “creating innovation units, running at Mode 2 to break out of the traditional, slow, but stable approach, which is Mode 1.”

Google goes bimodal

The Gartner report, Building the Digital Platform: The 2016 CIO Agenda, released at the conference, provides guidelines for CIOs on creating a bimodal business delivery platform.

The report notes bimodal is being misinterpreted by many as just the introduction of Agile tools and methodologies such as Scrum.

The defining characteristic of bimodal is having two differentiated approaches to IT (and ultimately the business), one suitable for more predictable work (including operations and development), and the other for exploratory work.

Each mode requires different subcultures, tools, approaches and metrics. The far end of the bimodal journey is separation between Mode 1 IT and other business function “factories,” and Mode 2 multidisciplinary teams that stay together for the long term, ever deepening the digitalisation of a particular aspect of the business (customer segment, product line or business process). Workflows between the two modes of bimodal are based on the need to exploit versus explore.

In the report, Gartner cites Google as having adopted this approach.

Google's announcement of Alphabet, which separates the company into parts that exploit its well-established business and parts that are more exploratory, can be seen as a broadly bimodal business strategy, says Gartner.

Another company, Ardent Mills in the US, has been creating in the past half year what a “backbone and Velcro” model for IT in the business.

This provides a platform that is tightly integrated to the application environment but also loosely coupled, allowing the company to select tools it wants from the marketplace and attach and detach them as rapidly as needed, just as if it were using Velcro, says Gartner.

“The CIO and senior business leadership team saw this bimodal approach as the only way to address the need for the rapid growth and innovation required by the business strategy,” note report authors Dave Aron, Graham Waller and Lee Weldon.

How to build a ‘bimodal palette’

Gartner lists 13 items to consider as ICT organisations move to a bimodal platform in the next three years:

• Commit to bimodal experiments
• Build a palette of iterative and agile tools that your team is capable of using
• Deploy more formal innovation management techniques
• Try working with startups/smaller partners
• Adopt adaptive sourcing strategies
• Experiment with crowdsourcing in Mode 2
• Use different funding/business cases for Mode 1 and 2 projects
• Use different metrics for managing the three subcultures (operator, innovator, guardian)
• Build a bimodal IT structure
• Create and nurture the three subcultures (operator, innovator, guardian)
• Use multidisciplinary teams in Mode 2
• Build a bimodal business structure
• Weigh the pros and cons of moving Mode 2 outside of IT.

Source: Building the Digital Platform: The 2016 CIO Agenda

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