Next-Generation Competence Center (Part I)

Alfredo Mancini

A Competence Center (CC) is the portion of a company that organizes and leverages business and IT knowledge for a specific purpose. People with the right competence, using documented processes and supported by appropriate tools, should be able to provide most (not all) of the answers that the internal or external customer may ask, provided that this is within the domain that the CC “owns.”

Instead of digging into evergreen definitions of CC functional models and recent updates (such as operation control centers or innovation control centers), I want to step back to explore a simple truth: the more ambitious the mission, the more organized and unique the CC should be.

Digital innovation: a new, business-critical imperative

“Every business now is a digital business,” according to Accenture’s Paul Daugherty.

If digitization is the process of changing from analog to digital (think of music in MP3 format), digitalization is the use of digital technologies to change a business model and provide new revenue or value.

IT can play a significant role in this game, but it’s hardly in the driver’s seat. IT cannot pretend to have all the competencies needed to envision an appealing target state and to identify, provision, and deliver all the enablers and the solution mix required to sustain a complex transformation or innovation project.

Imagine you are a potential or newly hired digital innovation officer that is expected to satisfy business C-suite digital wishes.  Ask yourself: How can this company reshape its current IT department and build a CC that can be in the driver’s seat of high-impact business changes under the umbrella of a multi-year digital transformation initiative?

Without incorporating the latest emerging technologies such as artificial intelligence or blockchain, imagine that a selected digital use case has been approved after a brilliant idea on how to streamline and automate a certain end-to-end business process (e.g., predictive maintenance). Put yourself in the role of a traditional CIO or in the shoes of the IT operation or IT infrastructure manager:

  • How difficult is it to predict the ideal “system sizing” of each new/existing component in a hybrid landscape, where some systems are locally spread (IoT sensors), others are centrally controlled (MES and/or ERP), and others are managed by business partners in the cloud (SRM or CRM)?
  • Who’s going to predict expected business volumes and translate business concepts into meaningful, elementary IT concepts (e.g., transactions, documents, records) across complex information systems not under the direct control of a single owner?

Accountability for innovation is sometimes located within businesses, where the business drives and IT follows and supports. But sometimes, it is the IT organization that stimulates and drives such initiatives. Often, organizations split IT departments into two: IT operations and a project-focused CC. However, in the end, many IT team members play both sides, sometimes unofficially.

In some situations, the smartest resources are moved to the newly defined innovation team and the rest stay in their former role. The truth is that to make things work, you need multiple competencies; and in the end, silos and layers may overcomplicate a dialogue that was more productive and effective earlier.

If it’s about standard skillsets and best practices, the best option is to check who on the market can supply what is needed for a reasonable price. Outsourcing is always the fastest – not necessarily the cheapest nor the best – option. This concept, known as sourcing strategy, is necessary, but not the only ingredient of a next-generation CC. It also calls for the desire to foster specific roles and skillsets because you believe that they can deliver high-impact results and leverage innovative solutions in the near future.

Let me give you a clear example of how a high-level ambition, such as leveraging artificial intelligence to increase customer profiling, can be better articulated into grades of basic to advanced enablers and capabilities that may or may not be built internally or outsourced:

  1. Business intelligence: Combine the power of the Big Data platform and human actions.
  1. Rules-based automation: Trigger actions based on predefined policies and predetermined rules.
  1. Machine learning: Advanced algorithms, or a model trained with historical data and adjusted by experts, to learn to provide insights or trigger appropriate actions.
  1. Artificial intelligence: Use self-learning models, policies, and business rules to go beyond human imagination.

A CC may need different technologies (owned platform/external services) and expert roles (with the desired sourcing mix) to target and move up into the “BI-2-AI” ladder.

In the next article in this series, we’ll step back and try to see the forest instead of focusing on a single tree. Get ready by asking yourself three key questions:

  • Which moment is my company living?
  • Where is the business going?
  • What should be the role of IT?

Before addressing the “what” and the “how,” it is best to focus on “why” a change is needed, carefully weigh the options, and then craft a plan.

Part II of this series will outline how to balance conflicting objectives like process standardization and harmonization (cost efficiency) vs. business model/process innovation (effectiveness).

Take a look at what’s ahead in the new year: My Five Favorite Digital Predictions For 2019.

About Alfredo Mancini

Alfredo Mancini is Business Transformation Services (BTS) chief at SAP. He works closely with CIOs and business executives to assess and reshape their organizations and to assist them in their digital transformation journeys. He joined SAP BTS in 2010, acted as CIO for three years in a financial startup, and spent more than 12 years in IT management consulting. He began his career at Olivetti in 1990, where he concentrated on researching and practicing artificial intelligence. Always curious and continuously refreshing his IT and business transformation knowledge, he crafts accelerated approaches aimed at the quick delivery of tangible outcomes. His natural playground is IT strategy and IT governance.