Enterprise IT, a multitrillion-dollar business, is in the midst of a historical disruption driven by the digital revolution, an elevated CIO mandate, de-globalization and the cloud business. Yet, the revolutionary aspect of these forces hasn’t been fully appreciated by many — while new capability development is a top executive priority in the digital arms race, management and cultural elements of digital transformation are visibly lagging.
Today, most enterprises rely on traditional IT management practices — like offshoring, outsourcing, rationalization, consolidation, centralization, specialization, cost allocation and capitalization — which were prudent choices during the industrial era, but became increasingly ineffective, if not counterproductive, in the digital age. The widening shortfall of these practices is causing business and IT executives to spend more money putting out fires, assume unnecessary execution risks and, frequently, dial-down their digital aspirations. With the prolonged use of outdated IT management practices, golden improvement opportunities remain scattered across the entire enterprise IT value stream.
In earlier articles, I’ve discussed how traditional enterprises could address the management and cultural innovation gaps of their digital transformation programs, and simultaneously produce a 9% to 15% increase in funding for new initiatives, a.k.a., lean IT. Although the business case for lean IT is strong, it would be premature to expect a fanfare for it; barriers to progress include a digital vision gap, organizational silos and management inertia. Furthermore, with more innovation becoming readily available from external providers, there is less pressure to innovate internally.
Back in 1950s, Toyota invented lean manufacturing techniques to counter the scale and scope advantages of the U.S. mass-manufacturers. GM, Ford and Chrysler all thought that the lean techniques were merely an evolutionary step in process improvement. Although they kicked-off numerous lean initiatives in the form of study groups, POCs, pilots, COEs etc., they failed to readily address the operating model and cultural aspects of the changing industry dynamics. Today, the same thought process seems to be prevailing within traditional enterprise IT, while Amazon, Google, Microsoft and the like are following the path of Toyota — they’ve proved their legitimacy within the enterprise space, built a spectacular growth momentum in the infrastructure domain, and established the necessary innovation capacity and management propensity to grow their share of enterprise IT beyond infrastructure into fit-for-purpose business solutions using technologies such as analytics, machine learning, IoT systems and robotics.
To stop history from repeating itself, here are practical recommendations for executives who are determined to address the widening innovation gap in IT management and culture by adopting lean IT:
1. Strategize your path to securing a C-suite mandate: This may sound lofty, but considering the magnitude of the ongoing disruption, it is a vital goal.
Lean IT has no single executive owner. CIOs and chief digital officers are first in line to get the ball rolling. It’s important to get CFO/COO endorsements before seeking commitments from business leaders. Business buy-in is a prerequisite for establishing a C-suite mandate formalized by defined goals, accountabilities and governance mechanisms.
2. Think like Toyota, not GM (of the 1950s): During the time of disruption driven by revolutionary forces, incrementalism is a threat to the future of enterprise IT.
3. Follow the business value, be agile: The best way to start is to mobilize a small task force to build a reliable fact base about the financial, operational and organizational aspects of the entire enterprise IT value stream.
- Assessment approach should be top-down, hypothesis-driven, evidence-based, and expert-led.
- Time-boxed sprints will work well for these types of assessments — accuracy improves with every iteration, and future iterations are approved only if sufficient value potential is identified previously.
- A well-guided program should grow commensurate to demonstrated business value potential, start generating value after six months and become cost-neutral within 12 months.
4. Stop overextending efficiency levers: Ideally, lean IT is not an add-on activity; rather, it replaces ongoing/planned activities that are tied to traditional practices with outdated efficient IT objectives. Key areas to look for replacement opportunities include location arbitrage, vendor consolidation, application portfolio rationalization, workforce optimization and shared services/COE initiatives.
During the time of transition from industrial-age to digital-age practices, what the business needs most is a renaissance of enterprise IT. This is an exceptional opportunity, a call for action, for CIOs and CDOs to spearhead the end-to-end transformation of the enterprise IT value stream through innovations in management and culture.