Lessons for CIOs at legacy and digital native businesses

The Road to Reinvention (Leadership in the Digital Age) was a program that ran last week at the University of California’s Center for Digital Transformation. The event was chock full of digital leaders and shared many lessons for legacy and digital native business CIOs. Here are some highlights from an all-day program.

Alignment is essential in the digital age

Vijay Gurbaxani in his key note suggested that we are at a technology cross roads. He said digital businesses have the potential for big rewards and big risks. But the common theme amongst digital winners is they have perfected their data skills. This vanguard, he claims, knows that machine learning and AI are only as good as the data that you put into them. They understand that the way a legacy firm can beat the platform vendor including Facebook, Google, Apple and Amazon is with data and increasingly by taking their firm’s intellectual capital and codifying it in software. Nordstrom is the poster child example in how it has used integration, data, predictive analytics, and ‘secret shopper’ mentality to win against Amazon.

With this, Gurbaxani shared the Center’s research on what is needed for successful digital transformation. Gurbaxani suggested that six things are needed in lock step for digital transformations to succeed.

1. A shared strategic vision
2. Strategic alignment
3. A culture of innovation
4. Know-how
5. Technology assets
6. Digital talent

I know that CIOs want similar things from their organizations. But this list suggests something even bigger—CIOs must be more than aligned in the digital era. They need to be ‘a connection masters’ up, down, and across their organizations to facilitate realistic strategic vision and then turn it into reality. With this said, Gurbaxani said the list of risks to digital strategies are only increasingly. At the top of the list are security and privacy. Given these threats, Gurbaxani suggests the digital world needs governance to deal with an ever-increasing list of threats.

The importance of the right strategic vision

Qantas’ CIO, Susan Doniz, shared during her talk how strategic alignment has allowed her to put the appropriate attention upon ‘customer experience’. She said that historically Qantas was focused upon optimize the assets, the airplanes, but with the business now is focused around optimizing the customer experience. This has changed everything for her. Susan claims that with a focus on fixing the customer relationships, she has been able to go after improving employee experience and engagement as well. Clearly, leading edge organizations like Zappos and Virgin Atlantic have proclaimed that putting employees first allows their organizations to deliver superior customer service.

To enable these changes, Doniz decided that IT needed to do a better job at surfacing data and analytics for customers and employees. She said that they need to be more transparent to both. Her goal has become to enable employees to manage the customer journey. Microsoft’s Ada Duan echoed Doniz’s thinking on the importance of customer centricity in describing Microsoft’s transformation from a company that ‘knows it all’ to a company that wants to know everything about the customer. As a software company, she said that their moving ‘off the box’ to the cloud transformed how they release product and more importantly how they interact and keep customers. They now give customers the opportunity to participate in software beta releases and make suggestions for future releases.

Meanwhile, Kiva Allgood of GE ventures said that the pace change has really impacted General Electric at its core. They believe now that all of their businesses can be digitally disrupted. So, they ask a rigorous set of questions to business owners regularly in particular regarding technology change. Clearly, their success here is now question. Fortune Magazine, for example, has recently questioned the success of GE’s business transformation. Clearly, not all transformations will succeed.

What do boards want to hear from their CIOs?

The event moved interestingly to a discussion of the boards perspective on digital transformation. Dean Yoost, who is on the board of Union Bank and Pacific Life, said he does not want to see an IT budget discussion that is just a bunch of financial numbers. Instead, he wants CIOs to come in and discuss business capabilities and innovation. Business capabilities is clearly the language of PWC/Booz Consulting and Enterprise Architecture. Yoost claimed as well that CIOs should be pushing for their board of directors to create technology committees. Apparently, the number of organizations that have taken this step are small but it is nevertheless it is an interesting idea. Yost ended by saying that as a board member in banking, “quality of data is their business and without it, AI is useless.”

It was clear from the presenters that it is much harder to add new digital capabilities in legacy organizations. A big determinant of whether new digital capabilities work or not, said Yoost, is whether CIOs gets the ‘change management’ in place for a digital transformation to work. Another thing that can determine whether CIOs enable digital survivors is whether they stop customizations for systems outside their organizations core competencies. One presenter asked why do people customize their HR apps?

It seems clear that digital transformation requires much of organizations and much in terms of the capability to change. Success is not just on the CIO’s shoulders. This is clearly why Jeanne Ross of MIT-CISR found in her research that many successful legacy businesses are not clear on whether they will cross successfully the digital divide. It requires getting one’s data act together, but it also requires a culture that is an enabler of change. Otherwise, legacy organizations will surely experience a “Kodak Moment” when the next wave of digital disruption threatens their business model.