Priority on business process automation for digital first companies
In my last article I recommended the ISO27001 standard for establishing a level of IT-security, which really reduces the IT risk profile of your company instead of only introducing documentation policies and an ISMS alone (https://www.dhirubhai.net/pulse/it-security-vs-compliance-only-andreas-engler/?lipi=urn%3Ali%3Apage%3Ad_flagship3_publishing_published%3BCH8omcVWSa%2BiS4KPy%2FseKA%3D%3D).
Many controls in the ISO27001 target the best practice implementation of the most relevant IT processes in regards of software-engineering and IT operations in your company.
Interestingly, these processes are sometimes still not automated to the extend possible, if the companies core business isn’t IT serivce or software development even the company is a digital first company. Digital first companies are companies which todays products or services will become near 100% digital in the near future (for example most of the finance products, retail and logistic besides the actual logistic part, many consultancy or analysing services, etc.).
I discussed this situation with a fellow director of an IT consultancy company specialized in the finance sector. We agreed upon, that my recommended solution to a typical challenge present in many of these digital first companies would not sell well as it is too basic and simultaneously too disruptive to convince the typical C-level decision maker.
Letz start with the challenge, which goes like this:
A company, lets call it GreatInsurance, is a billion dollar revenue insurer in the EU-market. They have around 2000 employees in the IT who develop and maintain still some customized legacy software, ensure the ongoing IT operation for the around 20k employees working in other departments and part of their external sales staff used software. Historically, they developed their own now used legacy software and especially in the 1990s and 2000s they didn’t invest in their software development and IT more than necessary and therefore never shifted their old legacy stuff to newer frameworks. The reliable IBM host sends regards. For sure the existing IT staff has no free resources to do more than maintenance and delivering new digital innovations takes typically years.
Each year GeatInsurance loses customers and especially younger customers demand more user centric digital UX, self-service possibilities and faster reaction times. New startup competitors entered the market and do provide all these things and therefore not only grew in revenue but also in number of customers (for example: Wefox, Lemonade or ManyPets).
For one decade now GreatInsurance decided to execute on the IT strategies sold by the typical management consultancies out there and my fellow director works for. Their goal was to fulfill these younger customer demands while staying in their core finance value chain. More often than not they did not succeed besides spending more than a billion dollar on these projects even the business is running well otherwise (https://versicherungswirtschaft-heute.de/unternehmen-und-management/2020-10-12/alle-lieben-die-versicherer-nie-gab-es-eine-groessere-zufriedenheit-mit-den-unternehmen/).
My fellow director and I agreed upon, that the typical strategies well sold in the past and even now are superficial and most of the time one of these examples:
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In each case the delivery in regards of anticipated customer demand and/or the financial product business case needs to be in focus. The IT is always a tool in the background and the existing staff and legacy is always the obstacle for which some shortcut needs to be established to deliver the business goals on a short term even the legacy IT is fucked up.?Most of the time while increasing the complexity and not touching the existing legacy foundation more than necessary.
I have seen many of such projects in my career. Internally the projects are mostly marketed as successes as the strategy was successful executed on. However, I recommend a shift in strategy not well suited for consultancy.
Extrapolate to a world where the digitalization of your business processes is successfully done. Think about where your usp will be generated. If the answer is higher and better automation than the competition or best in class user experience in interacting with these digital processes your business will shift to be more of a software development company. The finance product will become a commodity sold with a software product. For example VW or Amazon will sell the insurance in their eco-systems. Think about this. If you license standard software, outsource part of the IT value stream in regards of your digital processes or rely always only on external digital experts you give away the possibility to distinguish your business from competitors using the same software and/or give away the most critical knowledge of your future value streams. The control over your business is then shifting to the IT-operation distributor owning the skill or the software company providing your company and 20 others with the one software solution for your sector. If you don’t believe me, think about SAP and the decision to move from S3 to S4/Hana. Most likely the companies using SAP did not had any choice/saying in it. The same is true for the Microsoft product line. It just didn’t happened yet for certain areas of finance and insurance business software because of the heterogeneous legacy software and while the digitization has not reached this state yet. Amazon will not need your brand or finance service product, the moment a 90-95% percent automated standard software can successfully deliver the service to their customers. Who you wanna be? The partner delivering these end-to-end software services to Amazon or one of the customers of the software company delivering this solution also to Amazon.
My recommendation therefore is a mind shift. As a CEO/investor of a company with products/services, which will be completely digitized or which usp is coming from software in the near future, think about your company as a software development company right now and shift your automation priorization. First automate and digitalize your IT operation and software development processes before you further automate as they will become your core business processes in the future.
You can optimize your existing IT processes or build new on the side track. Start by running projects on automated advanced testing to free up the existing QA-staff and speed up development and deployment. You can introduce CI/CD and therefore reduce bureaucracy, manual coordination effort and introduced errors while speeding up the deployment. You should talk to your existing teams. The people doing the work at the end of the food-chain normally knew the real problems for years and how to optimize on them. You can rearrange the teams and responsibilities so independent small unities are established which are responsible from demand up to deployment of the software instead of big IT departments not able to establish a new feature or get a bugfix to production on their own. Introduce new open-source frameworks in your tech-stack which reduces manual effort for your existing IT staff and empower them to become experts in this new tech on the relevant projects in your company. Don’t separate the CTO/CIO from a CDO as both need to work together (if you need a CDO at all).
While I don’t believe this is the only option to be relevant as a digital first service company in the future, companies, which incorporated at least parts of this recommendation in their strategy seem not to regret it so far (for example: ING-DiBa, Trivago, Rewe with Rewe Digital or for example many of the Sparkassen).
However, my friend and I see many problems with my recommendation. It is
But even small steps in automation and renewing of your IT processes will normally be directly positive business cases in one to two years. You can easily incooperate them with the IT security tasks at hand, as most of the time modernization in these areas overlap with the requirements of ISO27001.
You would also expect a good cook to sharpen his knive before the cutting of delicate food.