Juha Kauhanen
Feb 23, 2015

Business-IT Operating Model 4.0 - Surf the Digitalization Wave

Introduction

The thoughts in this article apply in particular to an enterprise which is or sees the potential of being IT driven: providing services and offering products that are based on leveraging digital capabilities that recent technological advancements make possible.

The digital economy 4.0 and the Internet of Everything (IoE) are here.  The pace of innovation in new communication technologies that have disruptive effects on business models is growing exponentially. The only constant is change.

Disruption can sneak up on enterprises unexpectedly. How will enterprises know that disruption is coming before it is too late? Will you know your competitor in a local or global market that may disrupt existing industry & country boundaries?

Information technologies are integrated into everyday life in society and business environments by the digitization of everything that can be digitized, sensed and connected. Most enterprises are not fully prepared to face the challenges the digital economy poses and the opportunities it creates. This digital economy – run on IoE – requires a different mindset from business about IT.

This article focuses on the constraints of current IT operating models and discussed thoughts on the concepts that are rooted in the foundations of effective business-IT Operating models in the digital economy.

Everything most businesses do is enabled by IT. Many companies have effectively already transformed to IT companies when measuring factors that enable growth. They just happen to deliver pizza or publish the news. IT is then the new monetizing machine, from creating opportunities to providing a delivery channel for the products (except for those pizzas).

The term “business-IT operating model” used in this article refers to the increasing convergence of the IT and “the business”. Business and IT functions become more and more inseparable and interdependent. For many of these enterprises, the IT operating model evolves to becoming effectively and in practice their business operating model – a business-IT operating model.

 

Summary in brief

The Problem

Addressing the digital economy where everything is more and more connected is putting businesses and their IT operating models on unfamiliar, quickly shifting terrain for which most companies still have unmatched business and IT shoes for solid footing climbing the peaks ahead of competition.

The Analysis

To tackle these challenges and embrace the opportunities unleashing unexposed value, companies and other stakeholders must collaborate in new ways that focus on converging the IT, the business and the wider value network.

The Solution

The business centric and customer facing IT operating model 4.0 must focus on doing the rights things and doing those things right, by rethinking how to best organize internally and externally:

  • Autonomous business-IT teams entrusted with the capability, local decision making power and commensurate reward system that more effectively motivates employees, aligned with their intrinsic sources of motivation and personal growth
  • Rethinking how to leverage the ecosystem more effectively and openly
  • Preparing for the exponentially growing volumes of data generated by the connected environment
  • Re-innovating the customer value propositions – with IT often being the leading factor and indicator of direction
  • Optimizing the risks – minimizing required assets by limiting wasteful processes and harvesting opportunities by sharing and transferring risks with partners

The choices and solutions how to best set up your business-IT operating model should be:

Aligned with and influenced by company goals: Through convergence of business and IT via self-organizing and authorized business teams with inherent IT capabilities and competencies.

Robust: The choices that self-organizing teams make complement the ones made by corporate IT and business executives, and vice versa. There must be internal consistency. This again is made possible by the convergence of IT and business, the new data, information and knowledge management capabilities suggested in this article.

Self-reinforcing: The model sustains its effectiveness over time by fending off imitation, slack (organizational complacency) and substitution. This is made possible by continuously re-innovating the market value proposition and optimizing risks by having a solid vision and mission statement, robust core operating principles and a simple baseline strategy. Execution of this plan is left for the extended internal and external organization, which evolves strategy based on demand and market feedback, building upon successes and learning something new every moment.

 

Read the full article here

 

Juha Kauhanen, February 2015

 

References

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2.      C. Dilmegani, B.Korkmaz, and M. Lundqvist, McKinsey Insights: Public-sector digitization: The trillion-dollar challenge,http://www.mckinsey.com/insights/business_technology/public_sector_digitization_the_trillion_dollar_challenge

3.      C. Feser, F. Mayol, R. Srinivasan, McKinsey Quarterly: Decoding leadership: What really matters,http://www.mckinsey.com/insights/leading_in_the_21st_century/decoding_leadership_what_really_matters

4.      https://www.abiresearch.com/market-research/service/internet-of-everything/

5.      Henry Chesbrough, Business Model Innovation: Opportunities and Barriershttp://www.sciencedirect.com/science/article/pii/S0024630109000569

6.      http://www.enterprisecioforum.com/en/blogs/jdodge/glass-law-gets-more-relevant-data-volume

7.      M. Iansiti, K. R. Lakhani, Harvard Business Review: Digital Ubiquity: How Connections, Sensors, and Data Are Revolutionizing Businesshttps://hbr.org/2014/11/digital-ubiquity-how-connections-sensors-and-data-are-revolutionizing-business

8.      G. Hamel, Harvard Business Review: The Core Incompetencies of the Corporation https://hbr.org/2014/10/the-core-incompetencies-of-the-corporation

9.      G. Hui, Harvard Business Review, How the Internet of Things Changes Business Models https://hbr.org/2014/07/how-the-internet-of-things-changes-business-models

10.    Gartner, 2014 Hype Cycle for Emerging Technologies,http://www.gartner.com/newsroom/id/2819918

11.    Gartner, Top 10 Strategic Technology Trends for 2015:http://www.gartner.com/newsroom/id/2867917

12.    Sven C. Voelpel Marius Leibold Eden B. Tekie: The wheel of business model reinvention: how to reshape your business model to leapfrog competitors

13.    M. W. Johnson, C. M. Christensen, H. Kagermann, Harvard Business Review: Reinventing Your Business Model: https://hbr.org/2008/12/reinventing-your-business-model/ar/1x

14.   M. E. Porter and J. E. Heppelmann, Harward Business Review November 2014: How Smart, Connected Products Are Transforming Competition

15.   https://hbr.org/2013/04/using-the-crowd-as-an-innovation-partner/

16.   Bundesministerium für Bildung und Forschung: Zukunftsprojekt Industrie 4.0,http://www.bmbf.de/de/9072.php

17.   The Economist: The Internet of Things business index: A quiet revolution gathers pace, http://www.arm.com/files/pdf/eiu_internet_business_index_web.pdf

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