Digitalization’s and business strategy becomes more and more complicated.
I have been working with digitization and change management for the past 15 years, I see increasingly more and more corporate boards and senior executives lag behind in terms of the technological shift that we are engaged in.
Leading companies will not survive technological change. They see change coming, but cannot handle it in a good way. We are talking about large corporations, such as Nokia, did not survive when the smartphone came, Kodak when digital cameras came on the market etc. Digitalization has come to stay and it is going to change most of our future more than what we can imagine.
As change consultant, I see that there is a greater distance between IT departments and senior management. Often, I see that key business processes and decision support systems do not interact. Quite often I see the organization’s business strategy is rooted in a holistic enterprise architecture, which create many loose ends and small efficiency and utilization of the potential. This is primarily due to lack of expertise on the board level and senior management level.
So how can we facilitate and reap the benefits of digitization? Perhaps the most important assumption is that the required digital skills in management and board. Disruptive innovation, technology or business models. Disruptive technology often come from challengers to the established with a completely different approach. Suddenly they turn upside down the whole market situation and growing exponentially and takes over “sudden” established markets. Amazon has made it with bookstore. Wikipedia has made it encyclopedia. Google has done it with marketing. Netflix … Facebook … Twitter … Uber and Airbnb to name a few. For example, as has Airbnb has become one of the world’s largest hotel chains without owning a single room. The examples are many and only continues, we are going to see a technological development in the future the world has not seen withers to, it will revolutionize mostly we imagine.
As mentioned above, I often find that business processes and decision support systems do not interact. This is because as mentioned earlier lack of competence on the board level and senior management level. Therefore, organizations need much more widely to attract expertise in this area, preferably yesterday. Today’s business strategies contain significant elements of IT – both as a strategic driving force and prerequisite. Meanwhile, we see a growing trend that the business side has budget responsibility for major IT investments and therefore are expected to play a central role in technical decision making. Which demands this to the manager’s competence, and how do you handle one “communication gap” between business and IT? Business leaders need to set the agenda in IT-related decision-making, but this obviously requires that they have the expertise, if they lack this expertise they must either acquire it or hiring the expertise.
A business strategy articulates the organization’s objectives and how they will be realized, providing the basis for the business direction and priorities. An IT strategy to ensure effective implementation of business strategy. It is the instrument to control and manage the organization’s use of IT and provide the basis for planning and prioritization of procurement, development and ongoing operations.
Digitalization’s is a prerequisite for strategy realization which in turn opens up disruptive innovation and innovations for new business opportunities. It is therefore important to tie a closer association between business and IT, with greater interaction and communication. As change consultant, I see a significant need in the procurement process of strategically important technology that cooperation with the board of directors, senior management and IT are in place.
Effective decision-making related to IT presupposes that handles the communication gap between business and IT. However, I see in organizations of all sizes that academic barriers and diverging objectives begets suboptimal decisions. I do not think you can eliminate the problem, but handling of the communication gap can be made more effective if one is willing to work with the underlying causes.
The communication gap is due to both cultural and structural conditions. The cultural background can be explained by different academic grounding. Especially in larger businesses see that the employees’ career path is often restricted to certain functional areas like IT or marketing organization. Only a small percentage of today’s “knowledge workers” has wide experience in both business and IT. At management level, this is even rarer. The result is often the major cultural and conceptual differences between communities and a problematic relationship to each other.
The structural explanation is usually that decision making is organized within functional areas, not across functions, departments or divisions. The consequence is often suboptimal decisions – based on each area’s objectives. In addition, the lack of interdisciplinary processes that different cultures, concept devices and decision rules will emerge.
Measures to close the communication gap must be directed toward creating the most effective “interface” between the two areas. Here resorted many businesses typically structural measures. Structural measures in the organization, however, must always be combined with cultural restructuring. I believe that the individual decision participant’s interdisciplinary understanding is the key factor to close the communication gap. Only through a wider IT strategic understanding of business management – and business understanding among IT – will a business could hit investment decisions that are strategically more optimal. Professional capacity building for business and IT leaders is one of many possible measures. Even more important is to encourage cooperation between regions over time through adaptation of objectives and incentives.
The bond between business strategy and IT is becoming stronger, and business management involvement in IT-related decisions is important to ensure that business and IT are working toward the same long-term goals. Communication gap between business and IT is a constant challenge, and both cultural and structural measures necessary to facilitate an efficient interface between the two camps. A key condition for dealing with the communication gap is that both their objectives and incentives adapted to each other and to your company’s overall strategy.
Effective decision making requires a common understanding of a system’s life cycle and how the system cost structure evolves over time. Often the long-term costs in administrative phase will be significant, and it is particularly the system’s functional and technical flexibility eventually affecting the cost picture. A businesslike assessment of the need for flexibility is therefore important to make the right decision. This includes a careful consideration of how business markets, products, pricing models and processes will develop in the future.
The meeting between business strategy and IT is evident in decisions related to major IT investments. Tool to ensure strategic optimal decisions is important. In practice recommended structured decision processes where different technical options considered in relation to a comprehensive catalog of both commercial and technical criteria. Cooperation between business and IT both in the formulation of criteria catalog and in the subsequent evaluation of solution alternatives is crucial for a coherent decision.