Next-Generation Competence Center (Part II)

Alfredo Mancini

The role of IT: Where business goes, IT follows

In this article, we’ll start by determining which moment your company is living—i.e., where is the business going, and consequently, what should the role of IT be?

To clarify the debates around competence center best-fits and how business needs and business strategy should shape the goal of an IT department, I modified this model from an MIT article published by Weill and Ross in March 2005:

I have used this model many times to advise customers in setting the right expectations with business and top management. This representation smoothly navigates the discussion on what an IT department or a specific competence center should do, bringing the required “either-or” attitude to the decision-making process.

If you show decision-makers this schema and have them label where they see their company in its current state and where they see it at a future state in terms of the different goals, it’s easy to derive the focus of the IT organization you are talking about:

  • Standardization is suitable for centrally ruled/managed/delivered processes and services, but it is not prone to change.
  • Competition mode encourages local initiatives, triggering innovation more than centralization.
  • Harmonization is the compromise between the two extreme situations or moments that a company may live in.

I use this next schema to help customers plan for IT changes and determine where to allocate decision-making bodies; it mirrors the three columns of Weill and Ross and offers illustrative combinations of IT governance elements fit for the selected “target state.”

 

Business decision authority (business or CC-owned) is the first thing to be sorted out to define the customer’s single point of contact/decision-maker for a given business process/topic.

  • If there is only one business process owner in the entire organization, then centralization is already there; if different BUs/countries have different equivalent roles, independence or coordination may be needed (committees, advisory boards, champions come into play).

Solution design authority (CC- or IT-owned) is the second thing to be organized:

  • Rarely does all expertise exist in one role or one person.
  • External consultants are needed to evaluate, review, and validate architecture.

The rest of the activities (organizational units and roles) can be located within CC, in the rest of IT, or outsourced.

  • Build and test is normally sourced to system integrators, internally for small changes, or to stable partners working with a master service agreement.
  • Adjustments and rollout are normally driven internally.
  • Support and maintenance, depending on support levels, can be sourced in different mixes.
  • Operations are likely to be mostly centralized, insourced, or outsourced.

Based on enterprise structure (business units, geographies, etc.) and organization constraints (business accountability for business, processes, and data), the IT mission is reviewed before IT governance and organization are designed consistently, considering global/central stakeholders and users versus local, national, and functional specific needs.

A competence center, as part of an IT department, inherits a portion of missions and goals of the organization it belongs to and therefore can be oriented toward cost-cutting or encouraging innovation (agility and flexibility).

If we forget the magic word—digital—we can see that some management practices are still fit for defining the rules of the game for a competence center.

In theory (with an unlimited budget, enough time, new systems, powerful tools, and skillful resource), any business need can be answered properly. However, this is hardly the case in the real world, especially for large enterprises.

  • Selection of changes worth investing in is a necessity, and sequence matters. Foundational changes enabling subsequent ones is a delicate art. Business processes and existing systems include many constraints and dependencies to consider and changes in plans are very likely.
  • Fully understanding and prioritizing business requirements and impacts requires modern IT professionals to be not only IT experts but also “business smart” and careful.
  • IT must be ready, fast, and skilled enough to be recognized as the best shop to check first (which means they must be agile).

If your department can meet these preconditions, you still may be stopped or slowed by other roadblocks, such as slow funding procedures more sensitive to financial indicators than to strategic outcomes and people’s natural resistance to change.

I have worked as both a CIO and a management consultant, so I’ve made and faced similar situations at different times from different angles.

There are only two exits at the “go/no-go” roundabout (three if you add deferred decision-making):

  1. Even the apparently secured budget (e.g., for IT revamping necessary changes that include hardware replacements every five years and upgrading out of maintenance software) is likely to be written off or postponed until the next “business-funded transformation train” is about to start.
  1. If business asks for and is willing to fund innovation, it’s easy; if the envisioned innovation can be monetized then it’s always possible to build a value case (a good story explaining the benefits, even if it lacks numbers) or a business case (with NPV, ROI, and all the indexes that please CFOs) and find the money and resources needed for any good ideas popping up.
  1. If there aren’t enough good reasons to proceed with a given change – and compliance with new regulations may not be enough – the proposed change will be dropped (or “temporarily deferred” for a long time until it is forgotten) and superseded by a more urgent one.

At the next roundabout, which direction are you willing to take?

Are you sure you have the right mix of people, processes, and technology enablers (read “competence center”) to move your IT organization to the next level?

I am always excited to start a new conversation, provided that the direction the customer wants to take is clear and there is enough accountability and commitment to kickstart a new transformation journey. Curiosity is king in finding new paths towards innovation exploration and IT excellence.

One of my favorite quotes comes from William Gibson, an author I used to read 30-something years ago before films like “The Matrix” popped up;  he coined the term “cyberspace” in his short story “Burning Chrome” and later popularized the concept in his debut novel, “Neuromancer” (1984):

“… The future is already here — it’s just not very evenly distributed.” -W. Gibson, on “Fresh Air”

For insight on digital strategy and business growth, see “3 Ways To Improve The Design Phase Of Digital Transformation.”


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.