Successful digital transformation is fundamentally rooted in IT functions. Many of the traditional IT functions support organizational structures, management models, operational processes, workforces and systems that were built to solve largely outdated problems such as large enterprise resource planning (ERP) implementations or complicated systems integration programs. To compete in the digital era, established organizations need to modernize IT functions—shifting from the traditional, industrial IT model to an IT model that is agile and product-centric, meaning they reshape themselves into software businesses in order to deliver products to their customers.
The product-centric IT model takes an outside-in approach to innovating, defining and planning products, allowing organizations to continuously deliver meaningful experiences and value to customers. A product-centric approach can help organizations connect with customers, understand their needs and respond quickly through well-designed products.
However, when we talk about transformation versus implementing the necessary steps to actually execute a successful transformation, these look like two very different conversations. To successfully go from vision to execution, here are eight fundamental shifts every IT leader should embrace to modernize their organizations for a digital world.
Define your true north for IT
Where the industrial IT model places the highest value on an effective and efficient cost center, product-centric IT looks for a differentiator that accelerates the delivery of value to customers.
Restructure your organization for product development
One of the underlying tenets of the industrial IT model is the centralization of IT resources under a single, hierarchical structure. But the speed of technological change, changing competitive landscape and the emerging complexities of today’s marketplace require IT to have centralized control over a networked, organizational model to sense changes and rapidly take advantage of opportunities as they emerge.
Enable product-based funding over the product lifecycle
A multistage funding model can help you align funding with outcomes and empower your product value stream with the flexibility to drive towards committed outcomes. Plan your budget based on where each product is in the product lifecycle. As new products are added, group them into portfolios by customer, by business, by channel and by other categories to determine where investments are made.
Focus your delivery on differentiated customer outcomes
When products and services are built with and enabled by highly available technology, delivery can go beyond the transactional nature of most business interactions for a more experiential approach. Make your customer the co-creators of their own experiences so they can tailor their interactions to match their expectations.
Identify how meaningful value is delivered to your customers
Your value stream is how you identify the features, services and other behaviors and nonfunctional requirements that need to be delivered by the product. Map the processes, systems and activities that come together to form your value streams to deliver the desired outcomes. Value stream management can help reduce waste, minimize the friction of hand-offs, and manual steps, and increase the overall flow of value.
Measure your business outcomes by value flow
Traditionally, IT organizations have been viewed as cost centers and support functions. This mindset yields point solutions for increased efficiency, improved quality and reduced unit costs in all things IT. Product-centric organizations focus on speed and throughput, reducing the time to value for each product by allowing customers to pull value from the backlog.
Target value creation through customer needs and experiences
Established IT organizations typically govern the entire portfolio of IT projects using some form of a project management office (PMO) that uses the traditional tools and techniques of project management to keeps track of milestones.
Product-centric IT shifts this approach to a value orchestration group (VOG) to measure and monitor value creation. The VOG orchestrates how value flows to your customers by prioritizing and sequencing features in the product backlog and coordinating across product teams to resolve resource and schedule conflicts.
Tie your definition of productivity to business outcomes
In the industrial IT model, productivity is driven primarily through the automation of manual activities. Driving productivity and throughput in a product-centric model is closely tied to understanding the steps that drive a particular outcome, optimizing each value stream and eliminating waste, and digitizing processes using smart automation and intelligent workflows.
Changing IT models is no simple undertaking. The transformation requires committed leadership and sustained investments over two or three years for change to take hold and become sustainable in a large enterprise. While these shifts lay the groundwork, there are also cultural shifts necessary to cement the shift solidly in place. Stay tuned for my next article, which will focus on cultural shifts you can take in your organization to build the organizational muscle and habits required to sustain lasting change.
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