Digital transformation gets faster every day, and no industry across the globe has been unaffected. Because this ongoing disruption of business models has been enabled mainly by technological innovation, organizations are forced to reimagine the role of their IT functions to stay competitive and relevant.
Specifically, key trends like the Internet of Things (IoT), robotic process automation (RPA), blockchain, artificial intelligence (AI), and virtual reality (VR) provide disruptive approaches. Unlike enterprises that are born digital, traditional companies don’t have the luxury of starting with a clean slate; they must build an architecture designed for the digital enterprise on a legacy foundation.
Gartner urges CIOs to craft a more nuanced IT strategy that is both highly standardized and highly flexible. The analyst firm proposed the concept of the two-speed IT, and recommends that, to maintain business-critical IT operations, strategic planning for an IT department should include a fast track that allows some projects to be implemented quickly.
Using the bimodal approach is a great tool to support a focus on new products, new experiences, and getting things out the door quickly, and there is evidence that this concept is already being widely adopted. As an example, a recent study in Switzerland by SwissQ Consulting showed that 50% of survey participants have established a bimodal IT or planning to do so.
The dangers of creating separate organizations
One of the major pitfalls of applying the concept is to distinguish between a slow and a fast IT – not only in terms of IT systems, but also for skills and culture – and even worse, to create separate organizations. It is common to start new kind of businesses with spinoffs, or at least with a separate organizational unit, to avoid overloading the entrepreneurs with mature, longstanding processes and administrative requirements from the old business. Silverstone Edge, an Australian consulting company, describes – as an example – the evolving complexity of required organizational models throughout the digital service transformation.
However, these approaches to distinct responsibilities and processes have a high risk of undermining all processes of evolving businesses, which still have dependencies and require an even more integrated architecture. As digital transformation brings the customer into sharper focus, many innovators must deal with customer-centricity. This focus is not limited to customer service, web shops, sales optimization, and marketing processes. A perfect front end cannot deliver customer satisfaction when service delivery is not managed to the same level of perfection.
Gartner’s view of the two modes is shown on the following chart and clearly demonstrates that integration is key.
Mode 1 ensures a reliable backbone, while Mode 2 allows highly adaptable and ideally innovative capabilities.
Most interpretations show that core finance processes fall into Mode 1 as the best known “systems of record” to secure funding and governance. But is this the whole truth?
Flexibility to support market dynamics
At least when considering rapidly changing organizational approaches like spinoffs, co-innovation, or collaborations, the backbone must be flexible enough to support the market dynamics. This challenge is one of the major criticisms published by Forrester Research. Interpretation of the stability of Mode 1 as fixed and carved-in-stone processes is therefore the wrong direction. Still, the backbone has to provide flexibility for M&A activities such as changing, merging, and splitting legal entities, yet still be reliable and compliant to act as a platform to deliver live business insights. Trust in the system and hence the numbers is key.
And as Gartner’s Mode 1 shows an arrow into the “systems of innovation” area, this is true for finance as well. The finance function in the digital age has an important presence in the front office. For instance, the finance operations process area with real-time receivables and payables enables immediate reaction to collection efforts and collaboration with business partners. “Live finance” data also supports all sales-related activities with meaningful insights about individual customer or evaluation of the company’s own risk profile while adding each new opportunity or deal.
So, Mode 1 and Mode 2 do not need to be reflected by organizations, but continuous organizational reengineering must be supported by those two modes. The challenge for the IT department is then to provide a flexible, yet reliable backbone with a separately managed, highly integrated front-office innovation platform.
The model company approach
The “model company” approach is one concept that can help. A model company approach helps customers simplify, accelerate, and enable digital transformation by providing a framework based on broad business process expertise and project experience. In particular for finance, the model company approach provides a jump-start to get a new business up and running within a short time frame – for example, a spinoff that requires only simple processes to start.
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