What does digital mean?

Digital is a loaded term rapidly joining the pantheon of words with diverse and shifting meanings.   In another blog post on the differences between digital, digitize anddigitalize, I concentrated on the different applications of the term.  This post looks to be more basic definition of the meaning of digital.

Digital is ambiguous and often misleading term.  Particularly when it draws attention to a specific class of technology – like mobility rather than the underlying influence and change in the nature of resources those technologies enable.  

Today digital means more than the technology you run on.  Digital represents a new source of customer value and business results derived from a new type of resource – a digital resource.  That resource can be defined by two conditions:

A digital resource is one whose value is information and connectivity intensive.

These conditions sound too basic to be meaningful.  But the have to be basic in order to be extensible to the range of current and future digital resources.  The figure below illustrates these conditions.

It’s the combination of information and connectivity with physical resources makes today’s generation of digital different.  The business potential of digital rests in creating unique and valued combinations that drive growth and results.

Digital is different from enhanced IT

Legacy IT systems, a prior instance of digital, concentrated on transactional information with the goal of improving management of the business based on that information.  That is why major legacy iT systems all end in an “M” like Supply Chain Management, Customer Relationship Management, Content Management etc.   IT was oriented to automating and integrating back office transaction management functions.  Nothing wrong with that and in fact such management is a prerequisite for more sophisticated forms of business – digital business.

Digital resources create digital businesses

The big deal in digital is the resource rather than the technology. Mobility, analytics, big data, social, cloud, sensing etc. go beyond new levels of back office automation and coordination to transform the nature of resources throughout an organization and its trading partners.  The iPhone is an expensive MP3 player without the information provided by apps and the connectivity to put that information to use.  It is not the phone that is creating value, it is how the phone changes the performance of the resource using it – in this case you.

Technology creates digital resources by extracting information and enabling new connections, applications and interactions that embody new combinations of the digital and physical aspects of business.

The resource change is what matters because without changing the nature of the resource, all we have done is substitute old technologies for new ones. That type of digital substitution drives digital tragedy rather than digital strategy as blind information and connectivity increase commoditization and destroy competitive advantage.

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Creating sustainable business value rests not the technology, but what the technology does to an organization’s resources and how those ‘digital’ resources change customer value or operational results.

Consider a piece of construction equipment.  A backhoe’s immediate value rests in its physical characteristics – its operational capacity, capability and functionality.   Add information to the backhoe and its value expands to encompass availability, total cost of ownership, safety record.  Add connectivity and the value expands further toward providing new service levels, greater asset utilization or an enhanced customer experience.  The backhoe is still a backhoe but it does more because of the information extracted and the application of connectivity.

What does digital mean?

Thanks for reading this far in what is a rather academic sounding post.  Resources, abilities, extraction etc. all terms that sound like esoteric concepts.  They are to some extent but discussing the difference matters.

It is easy to engage in digital association where having something as the same as being something.  Many organizations feel digital because they can point to major technology investments in cloud, analytics, etc.  But those organizations will not ‘be digital’ until they think about how technology changes their resources and how those resources lead to value and results.

Thinking digitally requires more than substituting todays legacy assets and IT technologies for a predefined list of technologies like mobility, cloud, social, analytics etc. 

If digital were only that simple, then being digital would be a matter of creating different versions of things we already have – for example figuring out how to run ERP on your mobile phone.    We already tried that a decade ago – remember when people thought mobile commerce was running SAP on a WAP enabled Nokia candy bar phone?

A different definition of digital will help use avoid replaying that game and getting to the outcomes that create value for customers and results for our clients – the value that comes from creating a digital business.

What do you think?  Is this all semantics? Or does it really matter in the way we define and think about digital?

12 Things every business leader should to know about IT -- #1 IT is Horizontal

"If only the business understood IT, then the company would get move value out of IT." This statement is a common belief among IT professionals. Understanding begins with the basics, framed in a language that is acceptable to the audience rather than the teacher.

A company has difficulty understanding IT in the language that IT speaks: applications, databases, technologies, etc. But, what language do executives and managers use to understand something and its role in the company. The answer is straightforward, think back to the last time you were at a party and someone asked you/or you asked someone "What do you do?" Chances you talked about your job title, role and position in the organization.

Talking about IT using the language of organization, its role, what it does, position, etc provides a starting point for teaching the business about IT. Using this staring point here are a twelve things that every business leader needs to know about IT.


1. IT is horizontal

Look at any organization chart and you will see vertical oriented vertical organizational teams each with a specific focus and revenue stream. IT may appear as a separate vertical group on the organization chart, but works horizontally across multiple business units.

Legal, finance and human resources are other horizontal organizations, often bundled together in a ‘corporate services group." IT can be organized into such a group, but IT is different because is a hybrid organization which is the next thing.

So What?

Recognize the unique organizational capabilities within IT and its role as the only corporate wide function with direct operational responsibilities. Take advantage of ITs ability to recognize and work across the business units to raise performance - for example moving proven best practices between operating units. Invest in IT management capability and business skills to take full advantage of its unique role. Demand that IT raise its business impact and deliver enterprise level performance.

CIOs and IT executives need to stop harping that "IT is different" because every organizational unit within the enterprise is different. If there were no differences between units then the organization chart would be a single blob - everyone reporting to the CEO.

Instead of highlighting the differences CIOs must explain how those differences create unique value and contribution to the company and its ability to execute its strategy. Engage the business across business units because you can and show the enterprise that the sum is more than its parts.

What is the second thing that every business leader needs to know about IT?

IT is a hybrid organization -- that is the focus on the next post.

When centralizing avoid the “same mess for less” approach

Centralizing the IT organization and operations is a common action as enterprises look to cut IT costs. Moving disparate IT groups, data centers and applications together increases ITs critical mass and potentially opens the door to scale and consolidation efficiencies.

Centralization initiatives can easily become internal versions of outsourcing contracts with the corporate CIO in the position of the outsourcer and making the promise that I can deliver the same service to the business units for less cost. This ‘your mess for less’ proposition has not worked for external outsourcers and chances are it will not work for the CIO as internal service provider.

CIOs at the receiving end of an IT centralization initiative need to take a fresh view on what they are receiving. John Johnson, the former CIO at Intel who completed a major IT transformation in 2008 put it this way. “You need a fresh perspective, you need to look at this in a new way. Our team decided to walk out of the building and stand in the parking lot for a few minutes, then walk through the door with the mindset that we had never worked for the company before.” Adopting a fresh perspective give the CIO and the team an opportunity to do things differently rather than aggregating current activities into a single management structure.

Centralization is an opportunity to restructure the IT organization and establish new cost drivers, organizational structures, processes and results. This means that centralization is more than redrawing the organizational chart. Centralization is more than meeting with the BU heads to let them know that everything will be ok and that you promise the same service levels as before. Centralization means more than putting the majority of IT spend in a single cost center for the CFO to stare at and manage.

Sure putting everything into a single organization will cut some costs. If the gains from centralization of contracts, purchase decision and investments are sufficient to achieve your company’s goals then congratulations success is managing the ‘mess for less.’ However, if the goals go beyond managing an aggregated spend then this requires restructuring IT through the context of centralization.

Centralization is a unique style of transformation that changes the operation without making significant capital and operational expenditure. That entails an approach organized around the following principles and steps:

• Keep the company running. This is the primary objective during the transition period. Notice the idea of keeping the company running by concentrating on current operations and services. Notice it says nothing about executing current investment projects or road maps. Those may change, but the business cannot go ‘down’ during the transformation process.

• Put the right people in the right roles. The first step in centralization is organizational. Do not be shy or overly respectful for tradition, you have a new pool of talent and new opportunities to get people in the right positions.

• Centralize and reform IT governance. I know that sounds like a broken record, but the context for IT and the IT behaviors across the enterprise have changed. You need new, more senior IT governance as you will soon find yourself arbitraging requirements across business units as you have demand from multiple places and a single set of centralized resources. (See an earlier blog entry on this)

• Centralized IT means consolidated IT governance bodies into a single group that provides a unified list of IT demand grounded in principles that outline ITs role and decisions regarding the level of shared versus BU-specific infrastructure.

• Avoid establishing overlay roles and processes meant to coordinate across disparate IT groups. They are indicative that you do not have the right governance or that you simply consolidated IT teams into a common reporting structure rather than recognized them to achieve new performance levels. Besides these process and roles add non-productive cost to your operation without an apparent offsetting increase in productivity or throughput.

• Getting the right organization and governance is a start, but cost management requires addressing IT cost structure and that means consolidating data centers, servers and applications. Tools like virtualization and new hardware will help in the effort, but it’s important to manage a consolidated IT footprint.

• Have an active ‘end-of-life’ program for retiring duplicative applications and operations. Set a goal for retiring applications and make the goal public. Remember each application retired not only reduces your cost structure, but also increases the consistency and value of information across all systems.

• Improve IT processes. With the resources in place and properly focused, the goal shifts to getting the work done and that involves process improvement. IT is in essence a process across operations, services, infrastructure, maintenance and delivery.

• Manage for throughput. What you accomplish is the primary concern customers have when centralizing IT. Often expressed as ‘how will you deliver me the solutions I need?’ The business units are asking for throughput – defined as the number of completed projects performed with the same resources. Manage IT for throughput by eliminating bottlenecks in IT processes, concentrating IT resources on doing fewer projects faster.


Centralizing IT is a common response to tough economic times. Gathering IT resources and budget into a single entity gives the CIO and CFO greater visibility and focus. It also increases the size of the IT target. CIOs on the receiving end of centralization face a choice, they can run the current operations for less, or they can restructure the IT organization and its costs. The option to do more than run the ‘same mess for less’ offers the CIO an opportunity to reposition IT’s value and role in the enterprise.