Smart advice for CIOs dealing with business model changes
WHETHER customers notice or not, business models are changing as a result of new and emerging technologies.
Be it a public organization, a private enterprise, an SME or a startup, digital maturity is a high priority for everyone aspiring to deliver on customer expectations in terms of convenience, comfort, and costs.
In fact, going digital and investing in digital initiatives has become something of a norm for businesses today — it’s a pursuit that ties with the organization’s revenue/business growth goals in terms of priority, according to Gartner.
The team of analysts and consultants at the global think tank, based on hundreds of conversations with business and technology heads, has found that 33 percent of businesses are now either scaling or harvesting/refining their digital agenda — which implies that they’ve come to a tipping point in terms of digital maturity.
As a result, most businesses in the region are exploring how they can/should change their business model.
Technology makes it possible for businesses to handle more customers, better personalize customer interactions, and reduce latency to shifts in consumer demand, among other things. As a result, it makes sense to change your business model — aim higher, think bigger, act smarter.
To support the new-age ambitions of businesses, CIOs must aim to facilitate the move to smarter and more innovative business models by strengthening the company’s capabilities in three areas:
# 1 | Volume
More consumers and more transactions are accessible via digital channels, so CIOs are investing in processing capabilities to support them.
# 2 | Scope
A consumer can perform a variety of different services and activities. Generally, the greater the variety of interactions that are available via digital channels, the more engaged a consumer becomes and the lower the cost to serve them. In addition, consumer engagement personalization offers a number of consumer engagement and economic benefits to the host firm.
# 3 | Agility
Agility means the ability to change fast. Consumers’ tastes change. Competitors find new ways of marketing. Government agencies have new political agendas and consumer demands to meet. Techniques such as agile development and continuous integration are useful here.
Business model changes could come from internal factors or be motivated by external opportunities, but it’s key for the company to be prepared to take the plunge once it has been identified.
IoT, for example, is helping companies such as Hewlett Packard and Rolls Royce to explore new streams of revenues by offering services that augment the product they sell to customers.
That’s an example of an internal driver forcing companies to look for new market opportunities — and according to Gartner is the top driver for business model changes among all kinds of business entities.
On the other hand, if we consider the development of chatbots and AI-powered investment advisors at banks and financial institutions, we’ll realize that they’re forced by external drivers — in a big to meet consumer demands and counter competitive pressures from disruptive technology companies such as Google and Alibaba entering the space.
In either case, there’s a strong role that CIOs play when it comes to transforming the business model. They’re the custodians of the organization’s IT architecture and infrastructure — and it’s their competence and preparation that can truly propel the company forward in the digital age.
Here are some recommendations from Gartner’s 2019 CIO Agenda: Securing a New Foundation for Digital Business for CIOs report to help prepare for business model changes:
# 1 | Stay active in business transformation discussions
Digital business is a team sport that involves the organization’s executive leadership. While you need to take an active role in transformation workstreams, it will also be necessary to build relationships with your peers who also lead in digital business.
Infuse business strategy with your understanding of information and technology (I&T) capabilities and possibilities.
# 2 | Spearhead a scenario planning exercise
If your enterprise has never or not recently done scenario planning, now is a good time to get people thinking about potential futures and enterprise states. Many business model transformations are triggered by scenario planning.
# 3 | Map business model changes to operating model capabilities
Any change in a business model will likely require a change in enterprise- and domain-level operating models, resulting in:
- Organizational and governance changes
- Refactoring of funding
- Normalization of work units (such as a shift from independent projects to integrated products)
- Different KPIs to measure progress toward new business model outcomes.
# 4 | Invest time, money and personal capital in removing barriers to change
Spend time with your peers, CEO and the board of directors to specify how technology trends support (or distract from) business goals.
Invest in culture change which, despite misperception, is more practical than mystical. There are a handful of concrete things that you as an enterprise leader can do to create a culture of learning, adaptability, and inclusiveness.
Finally, continue to invest in legacy modernization. It is a foundation for the new work to be done.