Advisor Roundtable: A Dizzying Pace of Change (Part 2)

Posted: 09/13/2016 - 09:30

To read the first part of this article, click here.

Manish Khandelwal, PA Consulting Group: Organisations of yesterday needed to ensure that they deliver the best product at the best possible price point. While customer experience mattered, organisations could get away with it. Digital has put the focus firmly back on the customer engagement. Some organisations need to re-think their value proposition from a customer-centricity perspective, and it is not only about finding the right skills, it is equally about bringing a culture change in the existing workforce of the organisation. Those that embrace change will be the winners of tomorrow.

The ramifications for slow movers are significant. Digital has the power to consolidate the market place and create barriers that could only be crossed by innovation. Brands such as Amazon monopolise the market and the wallet share of the consumer making it harder for slow movers. For every new entrant, the challenge is to innovate, and that requires significant cultural transformation.

With regards to John’s points: while many organisations appreciate the need for transformational change, realities of legacy business means that many can only achieve incremental change – which given all the factors at play is necessarily not a bad approach. However, this does not take away the need to be clear about the overarching strategy. Making BPO and ITO decisions separately is commonplace and understandable, given implementing one itself is a significant change for the organisation. However, having an overarching strategy can only help to maximise savings.

Organisations that continue to be frustrated with their supply arrangements need to ensure that they have robust demand management mechanisms in place to begin with. The journey of simplicity starts with visibility, and many large organisations in particular remain opaque.

Finally, looking at Elesh’s points: budgets are moving away from the CIOs in many large organisations. There are many factors behind this shift, some genuine, some fictional. In some instances, it is the genuine need of the business to be closer to the supply chain whereas in others, it is just a case of IT departments failing to deliver to the expectations.

From the perspective of suppliers, this means investment on three fronts. Firstly, they need to work through an already complex maze of stakeholders and invest in building relationships beyond the IT organisations. Secondly, they need to invest in building and communicating solutions that appeal to the business. And last but not least, they need to build a skill base that is genuinely well versed with the challenges that today’s businesses face and solutions that technology could offer. This is more of an art than science and requires organisations to upskill their employee base.

Rob Mettler, PA Consulting Group: Digital opportunities will continue to force both the business and IT to work differently. The nature of digital forces the business to work not just closer, but more intimately and iteratively with IT. Agile is a key case in point, hiring scrum masters without training product owners misses the point – agile done well demands (and makes) business and IT work in synchronisation, with ramifications for governance, methodologies and sourcing required to make it work as well.

Too often we focus on the evolution of the CIO and the plethora of new roles appearing: CDO (Chief Digital Officer or Chief Data Officer – or are they one of the same?). The point is that all the roles of the executive are impacted by digital, and success needs all to respond to the changes – new leadership styles need to evolve, each with an element of disruption added to them. The CIO - if they are of the right mind-set, capability and with focus on value creation - can be in the driving seat, but it’s those elements that get them there, not the title alone. Personally the term “shadow IT” confuses me: it implies that those new services and initiatives procured by business owners are fake, when in fact they are often the very building blocks of the future business. The fact that they may be outside the grasp and control of the current IT department is often a reflection of the value IT is providing to the business.

Leadership is one of the critical success factors for delivering business success through digital transformation. Looking in the market, Andy Street (CEO for John Lewis), Angela Ahrendts (CEO for Burberry) and Jeff Immelt at GE have all been key catalysts for their organisations’ digital successes. PA’s Digital Barometer research confirms this: organisations whose CEOs lead the digital agenda are closer to achieving their goals than those that don’t. But they are the exception; tellingly only 28% of respondents to the Barometer agree their own leadership team understands digital, so what does good digital leadership look like?

Industry leader Jeff Immelt, CEO at GE declared the need for GE to become a top-ten software company based on the opportunities offered by the Internet of Things. This is not just about developing connected turbines and manufacturing equipment; it’s about creating the high-value data and software services that surround them. GE now describes itself as “the world’s premier digital industrial company”, the approach to getting there is one of build, not buy. Yes some of this has been done via acquisition and through software partners, but those partners start to become GE’s future competition necessitating the need to build new internal capability. New skills and resources have been brought into GE, in areas like software development and analytics, as well as new business skills like product owners and commercial people. Clearly this has changed not only the role of IT in GE, but every role in GE.

As the pace of technology innovation continues we’ll see AI, robotics, virtual reality and driverless vehicles moving from the research lab into the mainstream - each of these providing new business opportunities to those that recognise them; in turn the introduction of each will demand new changes to supplier and customer alike – organisations must design themselves for digital business and recognise it’s not just IT who’ll be needing to change.

John Sheridan, Aecus: So, going back to Rob's first piece: I think the problem starts well before any definition of "digital" – for me it’s a fundamental lack of understanding of what they are trying to achieve: what’s the business problem or opportunity? Businesses get carried along on a wave of expectation – fuelled by multiple and often conflicting messages and definitions (which we all contribute to in greater or lesser degrees) without really understanding where they are starting from, why they are going on that journey, and where they hope to end up. It's little surprise that so few achieve their ambitions – I would also probably question whether those ambitions were achieved by design or by good fortune. I think we (and the media and the supplier community as a whole) have a responsibility to educate better.

It’s a really difficult balancing act. Focusing too much on legacy will hold businesses back; not addressing it will ultimately destroy their businesses as their platforms grind to a halt. Any digital strategy (whatever that means!) must take into consideration the past, current and future, and deal with each of these (and all the places in between) holistically. The "softer" areas may be more critical to certain businesses, depending on their level of maturity and the scale of change/skillsets required.

One difficulty is that the focus seems to be on technology rather than understanding that it's business change enabled by the right technology, right people and right process that delivers true value.

With regards to shadow IT I agree with Rob’s comment – it implies something dark and dangerous, lurking in the corners. But we need to understand what’s feeding it and work with it rather than try to kill it. If ‘corporate’ IT expects the business to come to them rather than they going to the business then that gap will widen and the influence of the CIO will continue to diminish – shadow IT will prevail. Investment/spend in technology is increasing whilst the CIO budget/managed spend decreases – CIOs that understand why and work collaboratively as a true enabling business partner will survive and prosper.

I fully agree with Elesh that the role of IT and its relationship with the business has fundamentally changed: those that are successful will embrace that change – those that aren’t will resist it and try to retain control: technology for technology's sake – almost self-preservation. Evolve or die... We have moved away from IT as keeping the lights on to needing to be at the front of business change. If you can’t articulate and contextualise the value that technology can deliver to the business then what value can you ever hope to deliver?

As commented earlier I think there’s a reluctance to change/adapt – but this extends to the supplier community. New delivery models, technologies, ways of working, and changes in the way customers consume services threaten core revenue streams for all service providers – and despite the digital world, most service providers still cost their delivery models on an FTE basis (excluding tin, wires and the "net"). How they recover those costs through their charging mechanisms varies; the continuing black arts of commercial shaping keeps us all in a job to a certain degree.

Service providers that ‘get it’ and bring true and transparent solutions and commercial flexibility to the table will not only survive but will prosper at the expense of those that resist and become protectionist. A couple of years ago we could talk about automation and robotics and give an informed view of where we might think the market pricing could go. It was very easy for service providers to push back and theorise without committing. We are now seeing contracts that specifically include RPA, ITPA and other new ways of working as part of the documented requirement/solution – driving an ongoing year-on-year contracted step change in service charges and delivery models. We can now defend these positions on behalf of our clients because they are real, they are here: we have the evidence base, not just the rhetoric. Interesting times ahead methinks.

To read a response to the starter question by Paul Margetts of Capgemini, who attended the original roundtable, click here.

About The Author

Manish Khandelwal's picture

Manish Khandelwal is one of the IT Sourcing and Transformation leaders in PA Consulting Group. He has an extensive range of management expertise and practical experience of delivery, sales and consulting gained during 19 years of career spanning across three continents. He has led business units, managed global delivery, built and managed teams and delivered large sourcing and transformation programmes.