Why Business IT transformation requires a new CIO mindset

To accelerate and sustain transformation, CIOs need to change the way they approach technology, engineering and operations. And that means shifting the focus from projects to products.

The average age of an S&P 500 company has now shrunk to less than 20 years, down from 60 years in the 1950s – and this is largely down to widespread technological disruption.

From FinTech to ManufacturingTech and even BeautyTech, established organizations today recognize that they need to be technology-first in order to keep up with digital-native companies, as well as drive agility in how they develop new products, capture new markets and acquire new customers.

And this is as much of a mindset shift as a technological one, as some giant organizations would attest. Take automobile giant BMW, which strengthened its technology posture to compete in the driverless future, or Ford, which increasingly sees itself as a mobility company. Leading global bank ING, meanwhile, believes it has become a technology company that holds a banking license.

Much of this change is being brought on by new technologies such as Artificial Intelligence (AI), Blockchain, and Internet of Things (IoT), which are increasingly gaining traction and moving from proof-of-concept (POC) stage to mainstream applications. As agile development and continuous delivery cycles become the new norm that powers this digital transformation, new operating models are emerging. 

The shift from project to product IT is key to success in the new paradigm.  This enables enterprises to move their focus from project-based operations and technology outcomes to enabling customer-centric business outcomes.

Moving to the Product IT Operating Model

You may be asking at this point – what is Product IT? Well, this can be explained as an agile-driven operating model, which embeds DevOps, lean and automation in the DNA of the flow-oriented enterprise software delivery. Or in other words, it is about applying a “continuous everything” mindset to how Business and IT work together.

I think of Product IT, in the simplest definition of the construct, as aligning end-to-end IT capabilities to specific business KPIs. To take a specific and common example from e-commerce, ‘Cart to checkout’ is a business-IT product, delivered by an end-to-end integrated team of business product owners, developers, designers, testers and operations engineers and focussed on improving the cart-to-checkout metric and thereby the revenue.

This shift to Product IT is already under well way; according to Gartner’s CIO Agenda 2019, 55% of IT organizations are making the shift from project to product. And this is impacting the role of the CIO in a big way too.  From being providers of reliable IT services, CIOs have emerged as strategic partners in driving speed at scale for business transformation. Modern-day CIOs are driving business innovation and identifying opportunities for competitive differentiation, not delivering siloed IT services.

They need help in achieving this vision though; moving to Product IT requires foundational capabilities in Design, Agile, DevOps, cloud and automation among other areas.

Early adopters of the product IT operating model are already tasting success. Take  ING that embarked on its agile journey in 2015 in response to changing customer expectations. Even though the company was performing well, the leadership at ING realized that succeeding in the new digital reality would require them to stop thinking traditionally about IT and start understanding customer journeys instead. The bank achieved this by taking an end-to-end approach that involved multi-disciplinary teams across marketing, IT, and product development among other functions.

Spark New Zealand, meanwhile, realised its historically profitable revenue lines would be unable to hold ground in an economy of Netflix and Spotify – and so shifted to product IT operating model. Approximately 40% of its employees were transitioned into cross-functional teams comprising people from IT, networks, products, marketing, and digital. The aim was to take agile transformation to all parts of the organisation – a feat the company has achieved and is maintaining to date.

Three steps to making the leap

Transitioning to a Product IT Operating Model requires enterprises to embrace the shift along three key dimensions:

• What organizations do: This requires breaking the silos between Business and IT, and across different IT functions to embed agility at the heart of the operating model. The aim is to enable integration across the business ecosystem to improve flow of communication and data across the enterprise. Working with our own customers, Mindtree has realized that defining what “products” are is a critical first step.

• How they do it: This change is across multiple different areas – architecture, tools, automation, skills and roles. For architecture, this involves transformation of IT systems’ architecture to replace complexity with simplicity, modularity and flexibility. A shift to microservices creates the ability to accelerate innovation through smaller change size and ability to independently build, test, deploy and manage components. Scaling Agile and DevOps capabilities can help reduce cycle time and improve quality. Organizations are also adopting meta-platforms for value stream management that drive end-to-end product lifecycle integration – from ideation to planning, build, testing, deployment, and execution. People-related change is most significant and involves developing skills for new roles such as product owner, full stack engineers, SREs, and also change in ways-of-working, primarily focused on increasing flow and making teams more self-sufficient and autonomous. Several organizations have adapted the Spotify model for structuring teams into tribes, squads, chapters and guilds.

• How they measure success: This involves moving away from the traditional practice of setting different goals for each team to implementing shared goals across the entire product team. The idea is to get the whole team collectively working towards the larger organisational goals, including superior customer experience, increased adoption, faster time-to-market, making business processes friction-free, and harnessing data for insights and decision making.

Why Productizing IT marks a paradigm shift

Productizing IT is as much about business transformation as it is about technology. It requires organizations to adopt a growth mindset – one that is open to change. This can come only from driving effective change management that puts people at the heart of everything. Think autonomy and two-way communication, reskilling employees to equip them with next-generation skills, changing team structures to accommodate new agile principles, and even budgeting differently – shift from financing projects to funding teams, instead.

The goal is to create Value Stream Networks within and across the organization, wherein end-to-end activities are performed to deliver value to a customer through a product or service.

In essence, productizing IT is a large-scale exercise that requires change at every level of the organization – from business to product owners, c-suite executives, managers, and service professionals. It is a top-down transformation – one where the change starts from the highest level and trickles down to the lowest while percolating in every layer in between.

CIOs can play a significant role in leading this transformation from the front by reimagining their own role and the technology organization.