Digital Contexts Require New Approachs to IT

As enterprises adopt and adapt digital strategies, new capabilities are required. Digital is challenging the existing information and technology (IT) operating model, which has been optimized for efficiency and internal service levels but now needs a redesign for agility, speed, and innovation. These characteristics become crucial in the digital.

No longer confined to the IT organization, the design, engineering, and exploitation of IT span the enterprise, including its value proposition and offerings. An operating model that centers on the activities of only the IT organization or otherwise constrains itself will be inadequate for executing a digital strategy. It places new demands on the IT operating model regarding scope, the capabilities delivered, and how it should be optimized.

IT leaders and teams can proactively lead the design of a new operating model encompassing all enterprise activities related to I&T.

Digital context is driving IT operating model changes

The use of IT has been spreading across the enterprise for many years. The advent of digital embeds I&T-related capabilities throughout the organization and builds them into the enterprise’s offerings. The traditional IT operating model can no longer handle digital strategies. The growth of I&T activities driven by functions outside of IT, with the increased benefit of an integrated approach to these activities, requires an operating model that reflects an enterprise-wide perspective.

Although the primary change will vary by enterprise, most case studies have identified ways of working, financials, or talent as their starting point. The most common primary change involves adopting agile and product management practices within the “ways of working” component. Other changes frequently observed in our research include the following:

? Flattening the IT organizational structure and establishing smaller, self-managed teams.

? Delegating decision rights relating to product roadmaps, prioritization, and spending to business units and/or product teams.

? Colocating business unit and IT staff.

? Allocating product funding to business units, with IT as an investment advisor.

All the components of the I&T operating model need to be synchronized. Therefore, after identifying the primary change, all components should be reviewed to identify the changes necessary to design a complete and coherent model.

What is an I&T operating model?

An I&T operating model sets the parameters and principles for nine interdependent components. The business model, strategy, and elements of the enterprise operating model, such as governance and culture, provide a context for the IT operating model in guiding and shaping choices made about IT.

An I&T operating model describes how the enterprise will deliver the information and technology capabilities required to successfully execute its strategy. This model sets out the approach, parameters and standards in areas such as resources, skills, structure and working methods. In short, it is a high-level description of “how things get done” in terms of information and technology.

Historically, how things got done in this respect meant solely within the IT organization, as no other functions were material to the management of information and technology. Nor was there any benefit in a more integrated approach to managing technology. What came to be known as the IT operating model was optimized for efficiency and met internal service levels, reflecting IT’s traditional focus on back-office activities.

Digital contexts, technology convergence, fragmentation of I&T-related spending, and changes in skill sets and what is expected of employees, have altered what is required of the operating model in terms of scope, the capabilities delivered and how the model should be optimized. With information and technology activities increasingly driven outside of the IT function, and greater benefits to be gained from an integrated approach, the scope of the operating model needs to extend beyond the IT organization to cover I&T activities across the enterprise.

Increased emphasis on building digital products and services has changed the IT capabilities the enterprise needs to succeed. Similarly, the need for agility, speed and innovation has replaced efficiency as the primary focus, which in turn demands a learning and collaborative culture.

The need for change

Senior business leaders and boards of directors are increasingly aware of the threats and opportunities of digital business. They are responding by changing their business strategy to incorporate digital, which in turn places greater emphasis on the role of information and technology. These changes in business strategy will inevitably change what is required of the I&T operating model.

The figures below and on the top of page 12 list examples of triggers and the IT operating model changes that may be required in each instance. Note that sometimes there may be multiple triggers — for example, creating digital revenue streams while generating internal efficiencies.

The full impact on the I&T operating model

The IT operating model is a complex system of interdependent components. With a change in one component having an impact on other components in the model, the need for changes across the system must be considered when changing one or more components. This ensures that the model remains balanced and the components synchronized.

The business model and strategy, with elements of the enterprise operating model such as governance and culture, provide context for the I&T operating model and should therefore be used in design decisions concerning the model.

Organizations that limit their design effort to a subset of the nine components experience issues when trying to deploy their new operating model. They uncover the full extent of the required changes only during implementation, resulting in a piecemeal approach. .In contrast, enterprises that assess and synchronize changes to all of the components before starting their implementation face fewer challenges during deployment.

A enterprise operating model assessment

A key change to the enterprise operating model observed in case studies is that the business unit became jointly accountable with IT for I&T outcomes integral to the unit’s business objectives. Aside from changing the respective roles of IT and the business units, the shift to joint accountability involves a significant change in how these groups work together to deliver business and I&T outcomes. This illustrates why an integrated and enterprisewide perspective of I&T is necessary when designing the new operating model.

Taking the I&T perspective ensures that changes to business unit activities in areas such as ways of working, places and organizational structure — which must mirror and support changes in the I&T operating model — are also identified. In some cases, these changes can have a significant impact on the wider enterprise in terms of how business units plan, operate and manage their activities.

Leaders should assess wheter the operating model is ready for digital.

Summary

In summary, to benefit from the IT operating model perspective, IT leaders must consider the wider enterprise operating model — determining where it needs to be adjusted to enable or support the exploitation of information and technology as part of a digital strategy. The enterprise operating model provides a context for the IT operating model. If the enterprise operating model is not ready for digital business, it can constrain the IT operating model. IT leaders must be prepared to lead change across the enterprise to support this new approach to I&T.

From Gartner's article "Redesign the IT Operating Model to Accelerate Digital Business"