Executives need digitally different thinking

Digital technology is on the mind of every executive from Sales and Marketing to IT and Operations.    Executives concentrate many of these thoughts center around issues of responsibility, authority and budget rather than looking at what is possible, profitable and the other potentials of digital technology.  It is a narrow mindset driven by the language of finance rather than the logic of value.

So how should people ‘think digitally’?

Not the way they have thought about IT and other technology.

Executives think about IT as sterile

IT technology is sterile as executives view it.  Sterile in the medical sense as it describes a state where no bad things exist.  Executives and CIOs apply IT and corporate technologies to sterilize their operations.  Sterilizing a business involves killing off things like cost, variance, duplication, and inefficiency to make the company safer for shareholders and support customers in the marketplace. 

Removing problems, like removing germs, is a way of thinking about technology that drives strategies based on automation, integration and consolidation.  These strategies assume that it is possible to create value via subtraction. 

Getting better by getting rid of bad things makes sense in a financial way of thinking.  If you have a bundle of good and bad things, you can increase the value by removing the bad things.   In an accounting sense the logic is right. Innovations that support elimination are welcome and quickly climb the corporate adoption curve.  These have been the three letter ‘management’ systems like CRM, ERP, SCM, etc.

The only problem is that in a world where Supply > Demand, doing fewer things wrong is no guarantee that you are doing anything right.  Customers choosing your products, services or brand because you make fewer errors, or are generically better will easily move to someone who ‘sucks less’ than you do.  You can do the ‘not wrong’ things, think of major retailers but still lose out to the Amazon’s of the world. 

Your only response is to invest in a race to the mundane bottom of generic, dependable, repeatable processes that deliver consumer utility that is about as exciting as many see corporate IT today.  A death driven by PC-Beige, process consistent mediocrity of trying to just be better than everyone else.

If executives apply the same mental models to digital technology (DT) as they have to information technology (IT), then we will all miss a tremendous opportunity.    Because digital technology is generative, but only if thinking digitally means thinking about how to create good things rather than just remove bad things.

Digital Technology is Generative

Jonathan Zittrain, one of the better thinkers about the digital world captures the ethos of thinking about technology as generative.  Generative in the sense that solutions build from the bottom up, gets better the more you have, etc. 

Technology creates generative value by creating combinations that expand the range of possible solutions.  Look at smart phones and the combinations it has created from location-based services to apps to remote sensing etc.  Generative sources of value that expand the value pool and encourage further investment to create even more value.    

Generative thinkers concentrate first on creating things, combining them, realizing new positive goals before they think about consolidation, streamlining and scale efficiencies.  Generative thinkers are not Pollyannaish; they know that creating often involves destroying and introducing new ‘problems’ into the system.  But they are not hung up on what can go wrong, so much as they recognize the potential to expand, grow and build new sources of value. I am not talking about just creating ‘ecosystems’ but in creating truly new and innovative solutions, where the value created outweighs the bad things it introduces.

The future is all in how you think about digital technology

Digital technologies like mobile, big data, analytics, social and cloud are neutral technologies.  They are neither good nor bad.   They remain neutral until you start to think about how to apply them, then they take on relative values.

It is possible to see emerging digital technologies as new ways to sterilize the world.  That is the essence behind predictive analytics for example and the notion of preventing crime in the movies.  It is a way of thinking about digital technology as a substitute for today’s IT technologies.  Digital substitution is a strategy of decanting old strategies and encasing them in new digital bottles.  It's a viable strategy, but probably not desirable if you want to move the organization forward.

Rather than thinking of using new technology to remove old errors, problems and inefficiencies, innovators think about all the new opportunities these technologies create.  Opportunities to democratize the organization, drive engagement of customers and associates alike, raise human ability, influence human behavior, etc.  There is a world of possibility out there, much bigger than the Internet as a channel, if only we open our minds to that possibility and realize that the other way to create value is by adding more than you take away.

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.