Management: Time to embrace digital disruption

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Chief information officers must feel they live in a world in which the ground is constantly shifting under their feet. Their traditional focus was on picking the technologies that were most likely to result in improved internal operations. Company executives bought software if they thought it could deliver a return on investment – or they waited for the next development.

So-called digital disruption – when technology changes so quickly it interrupts existing business models – was something information technology suppliers inflicted on their competitors, not their customers.

But, in today’s frenzied environment, IT leaders must not only deal with internal transformation but also identify which, if any, technologies – such as mobile, social, cloud and analytic capabilities – they should be turning to.

James McQuivey, an analyst with Forrester Research and author of Digital Disruption: Unleashing the Next Wave of Innovation, says the use of such technologies will allow companies to develop products and services that will help them “undercut rivals, get closer to customers and disrupt the usual ways of doing business”.

Corporate information chiefs should play an active – if not leading – role in their companies’ strategies for creating opportunities out of digital disruption, he says.

“When I talk to a chief information officer, I find a clear sense that their business won’t survive the external threats from other disruptive businesses if someone doesn’t enable it to take advantage of data and digital tools,” he says.

“Since they are often the people in their company who best understand the data it holds and how it can use new tools, there is a clear role for them there.”

Many technology executives are held back by old ways of thinking about procurement, Mr McQuivey says. “Their job has always been to spend money in the smartest ways possible, so they are wrapped up in thoughts of vendor management, procurement best practice and approval processes,” he says. That makes it difficult to support fast, short, low-cost experiments in new ways of doing business.

Also, many of the tools that might underpin the most disruptive products and services – or at least enable companies to explore their possibilities – are now available in ways that do not fit traditional IT procurement methods. Simon Orebi Gann, a former chief information officer at BP and other companies during his 30-year career, says: “Sometimes wholesale shifts take place that so completely change the ground rules that companies can take advantage of technologies they would never have had access to before.”

The proliferation of third-party data centres, which allow companies to tap into sophisticated IT resources without having to own or manage the equipment themselves, is one such shift. “The technology and the timing have come together in ways that represent a step-change in opportunity for businesses,” Mr Orebi Gann says.

Beyond that, hardware and software resources are now made available by some suppliers on remotely hosted servers – the cloud – on a totally on-demand basis, making experimental prototypes of services easier to model and test at low cost.

Customers, meanwhile, are more accessible to companies, thanks to smartphones and tablet computers, and are comfortable giving feedback via social networking sites, creating rich sources of “big data”.

Information coming from connected customers and devices increasingly can be analysed using open-source software running on cloud-based hardware, rather than costly on-site information storage and analysis systems.

But access to such tools is only part of the picture, says James Woudhuysen, professor of forecasting and innovation at De Montfort University in the UK.

“There is a real danger that in all this talk of disruption, what gets neglected is the research and development work necessary to deliver anything that might truly be considered new and that really meets customers’ so-called ‘needs’,” he says. “There is a process of searching and sieving and judgment that needs to be conducted.”

Researchers at McKinsey, the consultancy, echo his view. In a study released in August 2013, they found that while business leaders are “bullish on digital”, with 65 per cent of the 850 senior executives surveyed saying digital technologies would increase their companies’ operating income over the next three years, technological challenges were considered a minor factor in the success or failure of these deployments.

Factors thought to be more important were senior management interest and attention, programme management and the compatibility of an organisation’s structure and goals.

Such findings underscore the shift in the responsibilities of IT leaders, as a report this year from IT research company Gartner noted. “Digital technologies provide a platform to achieve results, but only if chief information officers adopt new roles and behaviours to find digital value,” wrote analyst Mark McDonald.

“Without change, chief information officers and IT consign themselves to tending a garden of legacy assets and responsibilities.”

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