Businesses may need to rethink on the suitability of Run, Grow and Transform approach to IT management in the digital era.
Run, Grow, Transform (RGT) is a classic model of managing IT in an enterprise. This approach would align with the way businesses have been traditionally managed and guide IT investments accordingly.
Gartner offers the following definitions of the three categories:
- Run-the-business and hence Run-the-IT is about cutting costs, improving price-performance ration and lessening the risk. IT Initiatives are aimed at essential business processes and more importantly ‘to keep the lights on’.
- Grow is about improvements in operations largely within current business models. IT initiatives are looked at in the areas of sales improvements, customer service and product development.
- Transform refers to reaching new horizons for the company that may include new markets, products and business models. These are large bets in business terms and IT initiatives will strongly align with the strategic direction of the company and transcend multiple areas of operations.
Businesses attempting to move up the digital value may have to rethink the suitability of this model, more specifically the IT management and cost allocation. IT organizations’ effort and budgets are typically split across these three categories. A classic problem of this model has been the disproportionate focus on Run as CIOs spend more time in running the legacy systems and tend to allocate upto 60% (if not more) of the annual budget on maintenance due to business demands and other legacy reasons. ‘Grow’ and ‘Transform’ are treated casually thus constraining the ability organization to be ‘future-ready’ and competitive.
Digital requires businesses to constantly innovate on their business models, make real-time changes to products and processes and place bets that are risk prone. In this refresh, technology becomes the driver to bring in new capabilities into the business operations. The continuous tweaking when pursued relentlessly, can result in transformative outcomes and even being disruptive. The risk of failure is equally high and in such cases, the companies would need to quickly pick themselves up, dust off the setbacks and continue the quest.
When companies acquire digital capabilities pursuing a larger goal to become customer-centric and achieve revenue enhancement, no longer will they be able to clearly distinguish the changes as Run or Grow or Transform as their attempts could straddle these three areas. This has implications for business functions and IT and more specifically, CIOs need to identify themselves with such pursuits and bring appropriate changes to their working methods, team structure and more importantly not constrained by pre-determined cost allocations. Companies need to allocate their budgets that should result in acquiring or enhancing capabilities for the organization.
An Alternate Model
Various models such as two-speed or multi-speed have been propagated by industry experts to manage IT for digital. They all have their pros and cons. As an alternate method, they can look at 3 key areas where IT spending can be channelized – Automation, Analytics and Artificial-Intelligence (AI) or 3A Model of IT Management.
Automation – Automation involves digitization of processes that are largely manual. Legacy enterprise systems such as ERP are tailored to typically cover the repeatable processes across functions thus leaving gaps in addressing less frequent situations. When these processes hit the business, organizations resort to ad-hoc or untested methods that may potentially affect customer experience and destroy the carefully cultivated image. Such occurrences will only increase due to ever-changing customer expectations and increasing competitive conditions. Organizations can prepare themselves to tackle such situations by continuously identifying gaps and improving the levels of automation, the implementation of which may require some form of the combination of extending enterprise applications, developing new applications and bringing in technologies such as the Internet of Things (IoT) to plug the gaps. A higher level of automation results in higher productivity and timely and error-free processes.
Analytics – With the volume of available data growing exponentially, organizations hitherto relying on mostly structured data coming out of their enterprise systems for decision making, can now build sophisticated analytics that can help them take more impactful and real-time decisions using technologies such as big data. To build traction, organizations have to acquire data management skills, enhance existing data marts, build prototypes and continuously look for potential data sources. These require launching and managing multiple initiatives across functions and level s and integrating them for management dashboards.
Artificial Intelligence – It may be early stages for AI to be an integral part of the digital agenda of the organizations. However, the advancements in the machine learning and robotics provide benefits that can result in a disproportionately higher level of overall organization performance by improving process efficiencies, becoming agile and enhancing the capabilities of the workforce. Though a general perception is AI / machine learning will eliminate jobs performed by humans, organizations can realize the true value by ensuring that AI co-exists with humans to achieve the desired business benefits.
Characteristics and Benefits of 3A Model
- The operating model of the 3A approach would encourage innovation and collaboration as it necessarily brings the business and IT together as decisions have to be made jointly on how technology solves specific business problems. In the RGT model, the IT would tend to operate largely in isolation as the main focus would be ‘to keep the lights on’.
- The CIO, thus need to become more visible in the organization as he/she has to involve the leadership and the lines of business in decision-making on business direction and overall performance.
- A major intent of following the 3A would to considerably shift the cost control focus to a revenue enhancement one.
- Automation, Analytics and AI investments span the RGT categories. The difference is in expected returns – investments in 3A result in improving the digitization levels and it would have to be tied to specific outcomes.
- While it is recognized that companies would still have expense heads such as AMCs and staff salaries that typically form part of the ‘Run’ budget, CIO’s should be conscious of incurring such costs that do not add appreciable value, a bugbear of ‘Run’ spendings, and attempt to relook and assess if such costs can be restructured to align with 3A model.
The RGT model restricts the ability of the organization to pursue a purposeful digital transformation as most of the costs invariably get allocated to bottomless pit of ‘Run’ that do not provide appreciable returns. Moving to 3A model dispenses with such a maintenance focus and shifts the decisions to technology investments that can add value to the business. More importantly, the model brings a collaborative approach between business and IT that is crucial in digital pursuits.