Must the Business Always Bypass IT When It Wants to Innovate?

How the IT department can best engage and influence Line of Business managers

iPad

Quite a few years back, in fact I have trouble remembering exactly when given the pace of technology change and the rate of uptake by the general population, I used to ask audiences a few questions. I asked them for a show of hands from all those who had a better PC and Internet access at home than work. I could be guaranteed to see an overwhelming majority. I’d ask if they had ever actively chosen to go home because their home PC enabled them to do a particular task more effectively than their work PC. Another overwhelming majority would put their hands up.

This shows that even ten years ago that many Line of Business (LoB) managers were already finding the constraints of “enterprise IT” a challenge to be bypassed.

Come forward to around two years ago and I was asking a similar question about ownership and use of Apple iPads (and for the business community this is overwhelmingly the tablet of choice). LoB managers couldn’t get their hand up fast enough. Unless they were in the finance or IT departments, where all their work was going to be internally focused on the enterprise IT systems.

Add a question to see if they were using their tablet for business use, and the simple answer was that the iPad enabled them to access information and services that IT didn’t, or couldn’t, provide.

At this time the iPad almost certainly was not in any way intended to be “connected” to enterprise IT. It posed relatively little risk (or even, from the perspective of IT, maybe no risk) and therefore a LoB manager felt that it had nothing to do with the IT department.

At this point two things should have become clear.

First is that this is unlike the introduction of mobile phones where the focus was on email, as email required an interactive connection into enterprise IT.

Second is that these users are deploying a new generation of technology and devices for a new generation of business requirements. These solutions provide a completely different set of capabilities, capabilities that the existing generation of client-server based enterprise IT applications does not provide.

Now throw in the key question to our audience: do you have online banking and are you able to manage your own budgets and financial matters more simply and easily than before? The answer is of course “yes”. But now try asking: are you using this to bypass your enterprise’s financial systems? The unanimous reaction is “definitely not”. The fiscal management of an enterprise is recognized to be a professionally managed and legally defined responsibility.

Now move the discussion towards how far the LoB managers should be allowed to take their use of technology. The discussion will initially position the IT department in the role of technology support, and the LoB managers’ ability to be able to use these new consumer technologies without needing this support.

The reality we need to bring the discussion towards is the role IT plays in providing an auditable and compliant enterprise operating environment that underpins operations across the business, just as critically as the financial systems, systems which after all depend on IT anyway!

Yup, thought provoking isn’t it?

LoBs instinctively recognize the financial no-no, but equally instinctively have a first reaction that it’s okay to do what they are doing. That is until they really start to think about the implications of all LoBs across the group adopting this behavior, or how reliant they are on common, shared trusted information rather than the challenge of “trash and treasure” in “Big Data” usage. And that’s before we get to the point of auditable traceability!

The CIO role in the new business model of the early 1990s

CIOs of a certain age and with long memories should at this point cast their minds back to the adoption pattern of PCs around 1990, back when the enterprise computing service was based on mainframes and minis running terminal-based applications.

In those days, when PCs represented the new and disruptive technology, business managers also bought their own PCs, even their own departmental networks, all for exactly the same reason as now. Namely, to use a new generation of technology to deploy a new generation of business capabilities that lay outside the capabilities of the existing enterprise data center with its mainframe/mini computer terminal-based systems. At first these were also standalone applications, as a younger generation of LoB manager introduced spreadsheets and other simple applications, and shared data via discs and then local area networks, LANS, etc.

Not surprisingly, given the benefits obtained within a matter of a few years, the enterprise was soon full of PCs, small separate departmental networks, and many, many applications, all bought from LoB manager budgets. These solutions were mainly incompatible and resulted in spiraling operating costs and, most important of all, obscured the overall understanding of the enterprise operation, to the chagrin of auditors.

There was a tipping point in most enterprises when so called “safe standalone working” had become a confused mass of activities. Even more concerning were the multiple copies of key data spread around these desktop PCs, leaving little trust in the integrity of any enterprise level results.

The huge business benefits that the early adopting LoB managers had gained in their individual work or departmental activities were becoming insignificant as, at an enterprise level, the stability of the entire business was being called into doubt. The good news was that the early adopters had accelerated the understanding and the ability to create value using these new technologies by being able to move quickly with relatively minimal constraints. The bad news was that as momentum and scale of use had built up, making the new technologies and business functions mainstream within the enterprise, professional management was sorely needed.

So how was it all resolved? How was the CIO role created? And how was the way forward to the adoption of ERP created?

The answer didn’t lie in the technology. It lay in the business’s adoption of a different organizational model; one designed around the use of PC client-server systems. Organizations were redesigned around business processes that run across the business, rather than as a string of separate departments: Business Process Re-engineering (BPR).

BPR was as big disruption to the operational models of the time. This is similar to today’s teaching on business model innovation that introduces the idea of constant reaction to external opportunities and circumstances. But BPR also introduced the necessary definitions of roles, responsibilities, and operational methodologies that made ERP the competitive necessity to create the enterprise as we know it today.

The role of the CIO, and of the enterprise IT department as we know it, is based on the business model of BPR. It’s a role designed to administer and automate internal business operations through best practice. At the heart of this is transactional data integrity built around the structured data created and managed internally by recognizable, auditable business processes protected inside the firewall. Not surprising neither the role, methodologies nor even the responsibility/authority works for or fits with the new disruption in technologies and their business use!

Our LoB managers are not using PC based client-server technology on internal enterprise applications. They are using tablet-based browser-cloud technology externally to be part of an environment that has been created by consumers via the mass adoption of cloud-based solutions.

At the stage this mostly means that the solutions they are using are not transactional but interactional. As long these solutions are completely separated from enterprise client-server systems they are reasonably safe. The challenges are when some degree of integration is requested, or made demanded. Importing traditional structured data into these solutions, or integrating internal and external data as part of Big Data analytics, challenge the integrity of the internally managed structured data.

This is the point where CIOs are right to express serious concern.

Right now in most enterprises early adopters are blazing the trail to find the winning and losing propositions, and expectations are rising for the opportunities that these new solutions will bring. Most importantly, these activities are taking place at a scale where they are still contained enough to be “standalone” and safer outside of IT.

That is not to say that you should ignore them. It is to say that you should accommodate them via a policy that apportions an appropriate level of responsibility to the LoBs, a policy that has been agreed with the CEO.

The CEO and the new Digital Business Model

The CEO is becoming the key to managing the shift to a new (IT) operating model. Business school teachings are recommending that CEO take direct responsibility for their enterprise’s digital strategy, and with it the redesign of their business model.

This is the much talked about, and little understood, topic of business model innovation; a topic that, together with business strategy, has been exercising the minds of business school professors for some years.

Today business model innovation is well-developed set of principles (defined by Mark W. Johnson) taught to business managers that explain nineteen prospective business models that can be used to position a product or service with customers, as shown in the table below. Think of it as the new BPR to suit the capabilities of new technologies deployed outside the firewall, and outside the internal processes of IT. Business model innovation brings with it a new set of business values focused on taking new products to market, wining new customers, increasing market share etc. None of which are justified around internal cost reductions. All of which could be expected to be funded from budgets other than ITs.

Nineteen-business-models

Source: Mark W. Johnson (2010), Seizing the White Space, Harvard Business Press

So where is the CIO in this brave new world?

The choice of the phrase “outside the role of IT” was deliberate. It doesn’t, however, mean “remote from IT and the internal business processes”.

There will at least need to be alignment across lines of business and, as the new business model develops, there will need to be integration to allow interactions and connections to take place on an end-to-end basis across the enterprise. A customer engagement should result in a customer order, and that requires integration to be managed successfully.

When will this occur? There are two distinct answers.

The first is as business-as-usual, with no new business model applied, hits a natural barrier and the law of increasing chaotic cost of operation starts to consume the new technology’s benefits. This point was identified for the PC client-server era in the book “Crossing the Chasm” by Geoffrey Moore, when the rising curve of expectations hit the trough of disillusionment as enterprise wide operational issues revealed the serious challenges to be faced. To cross the chasm meant to adopt new levels of maturity in what products and methods were used to deploy the new environment. In short, it’s the moment when the second answer below becomes unavoidable!

The second answer is for the CEO to understand the need for an enterprise to consciously understand the opportunity that digital business will bring, and to set out to redesign the business model before hitting the tipping point. To address this properly will mean clarifying how technology will operate across the business and outside the business, and how the IT department be involved in the business activities.

It’s a huge shift and a big responsibility as by now the auditors will have woken up to the need to be able to follow and understand how the digital enterprise actually functions, who has what responsibilities etc.

It’s a return to the time for professional management of technology, its use, its purpose, risk management etc. This is a big organizational role requiring a mix of business and technology understanding as well as knowledge of the enterprises current systems and compliance obligations. It’s also a role the CIO should be the right choice to fill, based on their experience and profile.

Current Realities for the CIO to address at this stage?

Sadly there is no magic bullet to immediately gain “control” of the LOB managers, their technology and business deployments. As they currently stand the CIO and the IT department are neither equipped nor empowered to solve this problem in this new environment. But that doesn’t mean blocking or stopping deployments; that’s simply not commercially feasible in the face of the increased competition and customer demand for digital based business.

Instead the answer is to work on ensuring that the separation and isolation of the new deployments from the IT environment is understood and fully observed.

LoB managers who want to be early adopters should be encouraged and supported to grasp that the real risks that they are accepting. Risks stemming from the manner in which their people use the technology and their ability to commit the company to unintended consequences. Organizing “awareness” training and guidelines for “online” behavior and hazards are both practical assistance and will create relationships that allow monitoring of what is happening to build experience.

This approach also allows for clarity in who is responsible for the impact and behavior, and that means not only for the CIO but also for LoB managers. It even means the CEO and CFO.

More importantly, it formalizes an enterprise wide management involvement that will be required as the organization develops an understanding of the good and bad impacts that the new digital environment is creating. In time this will be the group that reacts to the possible tipping moment and creates the business model and management changes necessary for the mature adoption and integration.

Are the lines of business in your organization experimenting with browser-cloud solutions? Has your organization already hit that natural barrier when the increasing chaotic cost of operation consumes the new technology’s benefits? Or has your business already set out to redesign its operating model before hitting the tipping point?

Image Source: Sean MacEntee

About the Author: Andy Mulholland

Andy Mulholland is retired. He spends his spare time at Reading University's School of Informatics, Henley Business School, British Computer Society and The Open Group. Previously he was Global CTO at Capgemini, and founded (and sold) two startups.