Winning strategy is IT Strategy

Many of you are likely familiar with the Pareto distribution. Within one organization I worked in, we commonly called it “The Hockey Stick”.  It’s also referred to as the Power-Law distribution and is related to that commonly referred to 80/20 rule (80% of our revenue comes from just 20% of our customers). Just as is found in nature, many aspects of business seem to follow this curve. This shape is an actual statistical distribution, kind of like that all-too-familiar normal distribution curve, but in reality far more common to come across in business. There are not too many business cases I’ve experienced that followed a normal distribution.  One that I have experienced and is still very applicable today is the Technology Adoption Life Cycle shown below.

Although I’ve experienced this adoption behavior first-hand through the technology products I’ve been involved with, the overall timeline from the beginning to the end of this curve continues to grow shorter every year. These days, much less like mountains, the normal distribution can feel more like small, quick speed bumps in succession.

Why talk about the Pareto curve? It’s a basic logarithmic curve that also represents the increasing rate of change we all are experiencing in technology, business, and even personal life. And guess what, there’s no big surprise here, things are actually speeding up! A HBR article written in 2019 entitled “The Pace of Technology Adoption is Speeding Up” (kind of gave away the punch line there, right?) shows graphically how adoption of new consumer technologies has quickened in the U.S. over the last several decades.

It took 30 years for telephones to reach 10% adoption but less than five years for tablet devices to break that milestone. Similarly, it took 39 years for telephones to reach 40% penetration, yet smartphones accomplished that mark in under 10 years (and that’s if we define a smartphone as the introduction of the BlackBerry, which may be questionable).  Wherever you look, for any subject that has to do with technology, you see this curve over and over again. How about the share of the population using the Internet? Or mobile cellular subscriptions? There may be slight variations in the slope and when the adoption began, but the Pareto curve is obvious clearly present.

OK. I’ve made my point and I’m sure I’m not telling you anything you’re not already aware of, sometimes painfully so. How many times have you looked over the shoulder of your daughter or son as they navigated through some piece of software or a website faster than you could keep up? Faster, faster, faster… It’s hard to believe that it wasn’t very long ago that basic Microsoft Office technology experience was listed as a bonus or “preferred” for new hires as opposed to it being basic table stakes today. Many young adults graduating from college today have superior Microsoft Office skills compared to many of your colleagues. (By the way, that’s not going to play out well for them.)

It’s all okay, right? Technology is making everything easier to deal with, correct? Well, maybe not so much. Of course, there is much that has been simplified, but along with a broader and deeper level of functionality and capability, there is an associated complexity that underlies much of the technology forcing it’s way into every aspect of our lives. Good news! The new HR system puts all of our organization’s personnel management functions in one centrally located cloud service. We can retire those three legacy systems and plethora of unsecured spreadsheets floating around! But (there’s the proverbial “but”), then there’s the bad news, or at least we’ll call it “reality check”. First, we have to import all our data correctly, with all the fields cleaned and organized, and that data is coming from six different locations. And once imported, we need our operations management system and our payroll system to be integrated in real time. And our cloud service provider was just purchased by another firm and we’re being forced to migrate to another system. And the executive report we once relied upon is not available in this new system so we need to hire a third party technology consultant to customize the output. And, and, and…

This complexity is great news for the technology professionals in the world. Yea! There’s nothing quite as calming as job security. (Don’t get too comfortable programmers, AI is just around the corner and has its sights on your job) These complexities can be more daunting for those in charge of making critical decisions, responsible for the growth and health of the organization, as well as the very fine people doing their part to realize the organization’s vision and mission. 

On top of the complexities themselves, it seems like the entire environment is changing faster than some can keep straight. We used to buy software and install it on our employee’s computers. Now we subscribe to cloud services and everything runs over the internet. (You’re telling me we have to purchase more bandwidth, again?!) We used to have regular phones that connected to the world through “phone” systems. Now everything runs through the same computing networks our desktops are connected to. (You’re telling me that our upgrade of the firmware in a closet switch took down our entire call center? )

Cloud. It’s a word that’s almost lost it’s meaning due to overuse. Should all your servers be in the cloud? Which cloud provider is the right one? Or better yet, is there any difference between them at all? (You’re telling me we have to re-write the application we just developed 6 years ago to run completely from cloud micro-services?) As-a-service is also very popular nowadays. Software-as-a-service. Infrastructure-as-a-service. Platform-as-a-service. Can we buy sanity-as-a-service yet? 

As fast as adoption of cloud services has been, let’s not loose sight of the fact that we’re still very early in the pareto elbow. Here’s a fun fact to ruminate upon. In 2019 the cloud services market was valued at $264.8 billion (yes, that’s a “B”). It’s expected to grow at a CAGR of 16.4% reaching $927.5 billion by 2027. Wow. What can you say? But just wow.

One would be completely remiss in the discussion of complexity if the topic of cybersecurity was not generously sprinkled on top. The following data can, quite honestly, be terrifying to the aware business owner. I’m not trying to fan the flames of fear, just simply highlighting how fast our world is changing and introducing new, complex challenges.  You’ll see that pesky Pareto curve in play again in the number of data breaches in the US as well as the total damages in dollars by year.

For business leaders, the two most disturbing data points regarding security risks are the continual rise of insider threats and the rising costs of cybersecurity protection. It’s a stark reality that regardless of how much a company spends on hardening their internet facing environments against the faceless bad actors that plot against us from their bedrooms 5000 miles away, the biggest risks to a company’s valuable customer data, financial information, and corporate IP lies in the hands of your trusted employees. To make matters worse, it’s not even the disgruntled or malicious insiders that are the primary concerns, although they are certainly a concern, but it’s the well-intentioned yet uninformed and untrained employee that accidentally falls for the well-formed, well-timed spear phishing attack.

In one firm I was working for, a mid-level employee in the accounting department received an email from what appeared to be the president of the company (with only one wrong letter in the domain name) asking her to wire money to a specific account for one of our biggest customers. Let’s say there was a ‘sense of urgency’ expressed in email. There you go. That was all it took. A few clicks later, tens of thousands of dollars had been wired to a fraudulent bank account. In another instance, another tenured and committed employee accidentally followed a fraudulent link they believed was taking them to Amazon and inadvertently unleashed a ransomware attack on their computer and one of the primary shared drives. This resulted in two days of intense attention from valuable and costly network and security professionals to contain the infection and ultimately restore the damaged files. It happens every single day in thousands of companies around the world.

The security costs for organizations continue to rise and I have no doubt that either your IT staff or your third party suppliers are asking you for increased budgets. They can easily justify these requests by explaining the growing risks and paint a fairly daunting picture. The fact is, though, that no amount of spend can ever guarantee any company absolute protection. Just ask Adobe, Sony, Target, Equifax, Marriott, Yahoo, NASA, US Department of Defense, 7-Eleven, and the list just goes on and on. These companies had large cybersecurity budgets and plenty of skilled staff.

The answer cannot be to do nothing, obviously. The challenge quickly becomes a classic risk cost benefit analysis problem. Some amount of risk in inherent in the system, so how do business leaders make the right decisions on this spend? Large companies with CIO’s, CISO’s, and skilled finance executives can dive deep into quantifying risk and benefits to help inform leadership budgeting decisions, but this analysis is costly and out of reach to many mid-sized companies.

But enough about risk and cyber criminals. How do things look if we simply turn our attention to our immediate competitors and industry? Surely the view will be a little more comforting? Don’t hold your breath as a little thing called creative destruction is alive and well and on the increase. The 33-year average tenure of companies on the S&P 500 in 1964 narrowed to only 24 yeas by 2016 and is forecast to shrink to just 12 years by 2027. If this is not a loud enough warning, let’s state it this way. About half of the current S&P 500 will be replaced in the next 10 years.

This is not only true for the largest companies but extends all the way down to small businesses. There are certainly instances where entire industries are disrupted by an unforeseen force. COVID-19 has had that effect on so many in retail, food services, transportation, hospitality, and the meetings and events industries. But just as much, if not more, disruption is occurring naturally from proprietary advances and innovations that have drastic implications within a competitive environment. These changes are very often sparked or fueled by technological innovation or effective and timely implementation. These are the types of changes that can be under your control. One study from Innosight found that 80% of executives agreed or strongly agreed that their company needed to transform – that is to change their core offerings or business model in response to rapidly changing markets.

What is critical to address this very complex and dynamic business environment is to have a strong technology strategy thoroughly integrated with the business priorities. In fact, I hesitate to use the word ‘integrate’ in that sentence as it indicates that technology strategy and business priorities are separate and must come together. That is old-school thinking about technology. Today, any business’s strategy must contain, if not be built upon, a strong technology foundation.

All too often, the answer to these critical leadership questions will be based in technology.

·       How will we grow? 

·       How will we differentiate ourselves from our top competitors? 

·       How will we attract the best employees and keep them engaged? 

·       How will we control our costs while upgrading our capabilities? 

·       What is our next product/service line?

·       How can we serve our customers better and increase retention?

·       How do we best protect our reputation and brand?

·       What’s the best way to ensure reliability and scalability of our services?

There is good news awaiting within this challenge. There is plenty of professional and experienced assistance available. Just like so many functional specialties have branched out of the corporate environments to become entire service industries unto themselves, such as accounting and finance, marketing, sales, customer service, software development, and managed service providers, so now too has strategic technology leadership reached its time and calling. Driven by market demand and intense need, IT executives with decades of experience are now starting their own consulting firms or joining established firms to provide the strategic and operational execution required for today’s organizations of all sizes.

These professionals can be engaged at the exact level that is custom-fit for any specific need or organization. They can join your leadership team on a fractional basis, quickly come up to speed on your competitive pressures and opportunities, understand your growth strategies, help expand the technology vision to support the objectives, and then ensure the right team members are engaged effectively to execute successfully. These engagements could begin as a handful of hours every month to several hours every week, but what’s important is that it doesn’t require these growing small or mid-sized companies to hire a fulltime executive at this level right off the bat.

Hopefully, after some time of effectively growing their organization, there will be a time where a full time CIO or CTO may be the right strategic investment, but until that time, these challenges are simply too important and critical to not leverage a life-time of experience that is available. For many years, the markets for fractional CFOs or CMOs has existed and has become common practices for growing firms and now the CIO function has joined those ranks.

A complete, experienced, highly functional leadership team is every organizations best chance to stave off these fierce winds of change, to identify the hidden opportunities lurking around the dark corners, and to be one of the few remaining companies years from now that look back at their journey in proud amazement at the pivots and transformations in which the company not only survived but thrived. It is my hope that you are able to experience being a part of an organization in that enviable position.