Exponential IT

The 8 shifts in thinking for IT organizations and its leadership

This is the second article in my series on Exponential IT (click here to read the previous article).   The responses to the first article has been encouraging and positive. Here are a few quick disclaimers before you read the article:

1. Exponential IT is a collection of ideas and techniques curated from my experience of managing mid to large IT organizations for the past 15 years.  It is not a methodology or framework and it is definitely not a universal solution to all things IT.  
2. These articles are written with a focus on IT organizations. If you haven’t worked in or have had interactions with IT, these discussions may not resonate with you
3. The ideas in these articles are derived by implementing the exceptional work done by Salim Ismail (Exponential Organizations), Bob Emiliani (Lean Management), Eric Reis (Lean Startup), IDEO (Design Thinking) and many others in the context of IT. So the credit for the any good work goes to them and any misinterpretations of their ideas is on me.

I am looking forward to your comments, engagement and feedback is very much appreciated.

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Many of today’s successful Exponential Organizations (ExOs) were born Digital. This gives them significant structural advantage to drive innovation and achieve Minimum Efficient Scale rapidly by leveraging today’s cloud-based technologies and agile techniques. This makes them agile and helps them compete aggressively with significantly larger and more established competitors. As established organizations in all industries begin to transform themselves to compete in today’s Digital marketplace, they must realize that their success depends on their ability to deliver technology-enabled innovation and use technology effectively across their value chain to deliver agility in all aspects of the business. However, these incumbents are often saddled with IT departments that have organizational structures, management models, operational processes, workforces and systems that were built to solve “turn of the century” problems and not the challenges of the future.  Some of these organizations have dealt with this challenge by investing in and building technology capabilities within their business units to address emerging needs (commonly referred to in IT circles as “Shadow IT”).  Many others have embraced models such as Gartner’s Bimodal IT to operate at two speeds:  The first is a slower speed for all-things traditional, emphasizing reliability, accuracy and thoroughness and a second faster speed that is non-sequential, emphasizing agility and speed like a digital startup.  

In my opinion both of these approaches will have limited success because they are not focused on the customer centric models and are designed from an inward looking company point of view.  They are solutions designed to address the superficial symptoms of a more complex problem stemming from a hyper-competitive marketplace, emerging business models, tech savvy customers, nimble competitors, an increasingly complex regulatory environment and a rapidly evolving threat landscape.

Before I talk about Exponential IT, let me first talk about  “Industrialized IT” and the de-facto playbook that has been used by IT for the past few decades. In full disclosure, I was a proponent and practitioner of Industrialized IT in my first CIO role and all the way up to 2008. This model focuses on eliminating variability and IT sprawl through ruthless standardization, hierarchical organizational structures, command and control based management and centralized teams that are designed to drive economies of scale and optimize unit costs.  This model also depends on the availability of large numbers of skilled resources that are always in short supply around the world. This model was much needed and has been proven effective in solving problems such as Y2K conversions, large multi-year ERP implementations and large-scale systems integrations and migrations.   However, this model has also had several unintended consequences such as increasing time to market, reducing flexibility and stifling innovation.  It has also resulted in an increase in the use of outsourced labor to increase access to skills and reduce workforce costs through labor arbitrage. The result is that these businesses have inflexible and expensive IT and a workforce that has lost its ability to drive business innovation, costs too much and is slow to react to the changing needs of the marketplace.

Even the best run IT organizations struggle to keep up with exciting and sometimes chaotic needs of the marketplace using the proven Industrialized IT model.  This is because the main challenge that today’s IT organizations face in this new world is to deliver agility as a core capability to all aspects of the business.  Business Agility is the ability to sense changes in the marketplace and respond quickly and efficiently by adapting products, services and operations to capitalize on opportunities, mitigate risks and overcome challenges in the marketplace.  

Over the past six or seven years, I have continued to develop and implement a few new ideas for managing the business of IT in ExOs.  Exponential IT is a collection of these practical ideas for managing IT that aims to deliver Business Agility as a core capability and be extensible and adaptive to meet the evolving IT needs of today’s Digital Businesses. These ideas were derived from customer needs, influenced by business priorities and implemented by effectively utilizing the people and underlying culture of any organization.   This new approach is built on a set of fundamental “shifts” in the thinking, tools and techniques used by myself and other IT leaders for decades and adopting a new mindset more suited to today’s environment. These shifts are:

From Transactions to Experiences – Today’s successful products and services are built with and enabled by pervasive and always-on technology that give us the means to move beyond the transactional nature of most business interactions to a more experiential approach. This new model of interaction makes the customer a co-creator of their experience and lets them tailor their interactions to match their expectations.  It is all about delivering simple, secure, context-aware experiences in an always-on, always-connected world.

From Specialization to Full-stack  – One of the direct consequences of rapidly changing technology is the dramatic reduction in technology lifecycles. A technology that is introduced into the marketplace today will most likely be obsolete by this time next year.   These reduced technology lifecycles have a serious impact on how we recruit, source, develop and sustain our leadership and technical skills. At the same time the tools, infrastructure and instrumentation available to software developers, engineers and managers have significantly improved productivity and changed the “art of the possible”.  IT organizations today must focus on building sustainable and flexible workforces made up full-stack software development and full-stack management skills.

From Application Centric to Data Centric – Data and information have been at the center of our thinking ever since the early days of the use technology in business.  This is evidenced in the vernacular we used to describe what we do in IT - Electronic Data Processing, Management Information Systems, Information Systems, Information Technology etc. However, the primary focus of IT departments has been on building and maintaining applications with the underlying assumption that applications own the data.   This way of thinking has had the unintended consequence of promoting data silo. Which in turn has required a whole new set of technologies and techniques to handle the additional downstream activities to decouple data from applications and transform it for reporting, business intelligence and advanced data analytics. Exponential IT requires a shift to thinking of critical data/information flows within and outside an organization and the supply chain of data from the point it is created to the point it is consumed. In this model, applications are viewed as instruments that inspect, interact, enrich and transform these flows.  

From Efficiency to Throughput – IT organizations have traditionally been viewed as cost centers, support functions and enablers.  This mindset drove point solutions that increased efficiency, improved quality and reduced unit costs (faster-better-cheaper) in all things IT.  However, these point solutions fall short of delivering Innovation and Business Agility. Exponential IT applies Systems Thinking, Lean Management (the Toyota Production System) and other modern techniques to those IT functions that provide value to customers.

From Scale to Speed – Scale has always been considered an advantage in the marketplace. Large companies have always been measured by their scale – the number of people they employ, the number of assets they own, the number of countries they have offices in etc.  This advantage has resulted the emergence of large, global corporations in every industry.  However, as is the case for individuals, sometimes your significant strength is also the biggest weakness.  These large companies with their established processes are slow to sense and respond to changes in the marketplace. They also develop an “immune system” that fights change or neutralize variance from the norm through standardization and assimilation.  To succeed in today’s asset-light, technology intensive and rapidly changing marketplace, it is necessary to embrace innovation and speed over scale.  This was also highlighted by Peter Thiel in his best-seller Zero-to-One -  “Globalization is moving from one to N copying existing products. That was the 20th century. Now in the 21st century we move into a world where zero to one and creating new products will increasingly be a priority for companies due to the rise of Exponential technologies”.  

From Centralized to Networked Organizations – One of the underlying tenets of the traditional model for IT has been the centralization of IT resources under a single hierarchical, command and control structure.  On any given day, we see several articles with the same underlying theme of centralization including how large global companies setup centers in Silicon Valley to spur innovation, implement CoEs within their organizations to drive best practices or standardize technologies to increase the negotiating leverage.  The speed of technological change, changing competitive landscape and the emerging complexities of the marketplace require a different approach to organizing IT.  One that centralizes control where it matters and federates control over a networked organizational model to increase the ability to sense changes and rapidly take advantage of opportunities as they emerge.

From Products to Platforms: In the past, leaders in the technology marketplace provided technology products and services that were built and supported within a tightly coupled and closed ecosystem.  Scale and competitive advantage was achieved through customer lock-in and annual revenues through software and hardware maintenance fees. In contrast, today’s technology leaders such as Apple, Google, Facebook, Amazon and Microsoft have focused on building open ecosystems. They have leveraged Platform Thinking to help companies of all sizes achieve minimum efficient scale without requiring the volumes that are required to drive efficiency.   For example, consider the cloud platforms provided by Amazon and Microsoft. These platforms and their set of open standards have fostered the development of a broad and powerful open ecosystem that delivers benefits to all the participants in the ecosystem. Exponential IT organizations can enable innovation, increase security and improve speed by architecting Multi-sided Platforms (MSP) around these existing open ecosystems.

From Scarcity to Abundance - Rapid advances in computing (Moore’s Law), networking, storage, the internet and cloud have opened up an era of abundance where access to computing is cheap, access to data and information is democratized and connectivity from any part of the globe at any time is now possible through mobile devices.  This abundance of resources leads to a different way of thinking that leads to innovative ideas, exploring possibilities and a higher tolerance for risk.   In contrast, the traditional IT model was created to preserve, protect and defend the status quo in an era of scarcity where computing was expensive, skills were hard to find and information was contained in islands and access restricted to a privileged set of companies.

I will cover more on each of these shifts in my future articles. Please feel free to provide your comments and thoughts on Exponential IT. Please also share this article and the rest in the series with others that could benefit from it.