Time to Re-Focus IT for Competitive Differentiation

To fully understand these imperatives, Cognizant Business Consulting conducted a survey of CXOs from leading organizations across various industries in
the U.S. and Europe, which revealed several enlightening findings:

• Most companies expect IT to play a greater role in competitive differentiation and be a stronger agent for change to the corporate operating model.
• As globalization accelerates, companies are seeking new ways to advance the
• business through global collaboration and virtualization, and the CIO is seen as executive champion for these developments.
• However, companies are equally keen to achieve innovation without increasing their overall IT spend, by funding competitive differentiation through the savings generated by IT cost management and operational efficiencies.

For IT, this means moving beyond its operational mindset and working closely with business leaders to define what is core to the business vs. what is mere context, mapping out critical moments of customer engagement, and creating new platforms of organizational collaboration in a virtualized operating model that supports new value networks. Rather than "align" and "support," the new IT directive is "advance the business" and "enable meaningful change."

After enduring years of "doing more with less," CIOs are seeking clarity on how to lead IT in this new era. Based on our survey, two observations stand out:

Finding 1: Most companies expect IT to be a competitive differentiator and agent for change.
One-third of U.S.-based survey respondents said IT is the primary enabler for business innovation. Half of all respondents indicated IT should be focusing on nontraditional IT domains, such as improving the company's end-customer experience, extending its global reach, or optimizing revenue generation.

At the same time, many executives express doubts about IT's ability to deliver on these expectations. The CIO must change IT's "delivery and operations" mindset to be a sustainable agent for innovation and change, particularly in the way people and organizations perform work. CIOs must do a better job of managing expectations and expressing benefits in meaningful business language, such as ROI, time to market, and increased customer satisfaction.

Finding 2: Companies are seeking new ways to advance the business through collaboration and virtualization.
A majority of respondents in both the U.S. and Europe said they considered virtualized organizations as somewhat or significantly enhancing collaboration between the business and IT.

A first step toward creating a virtual organization consists of deconstructing business process value chains and identifying steps that may be executed by outside organizations or at locations where expertise is most easily obtained. Introducing a collaborative platform with a business process management tool, chat and blog functions, as well as document sharing repositories, could be a logical step.

However, innovation cannot be sustained with existing transaction systems, but through smart consumer-friendly systems that enhance the customer experience at key moments of engagement. CIOs must shift IT dollars away from maintaining systems of record, to creating more compelling systems of engagement.

Without substantial budget increases, business and IT must find ways to provide IT services more efficiently to enable new business models and approaches. This calls for a diligent review of all existing IT functions and services, followed by an honest and realistic "core vs. context" assessment. Contextual IT services should be contracted out to third-party providers that will—over time—perform these services better, faster and cheaper.

For example, Procter & Gamble already employs a model where "mundane IT services" are farmed out, saving $800 million over the last seven years. This leaves ample budget for P&G's CIO and IT department to focus on business revenue growth. Other CIOs should follow suit and virtualize IT service delivery as much as possible to free resources for technology-driven innovation that powers a more potent corporate operating model.

Re-Focusing IT for the Future
Of course, technology alone cannot power competitive advantage; the competition will catch up sooner or later (usually sooner). For sustainable competitive differentiation, business and IT leaders will need to think beyond adopting innovative technologies. Together, they need to design innovative operating models as well. IT will require new skills, organizational and governance structures, project workflows and sourcing strategies. Going forward, the IT organization will need to
re-focus along these dimensions:

1. Supporting knowledge sharing and collaboration: Historically, IT has been about transactional systems of record. However, the emphasis has now shifted to "platforms of collaboration" that enable knowledge sharing and teamwork across the enterprise. In fact, the "knowledge, collaboration and technology" department could be a more appropriate name for the IT department of the future.
2. Emphasizing a collaborative solution orientation: IT cannot deliver knowledge, insights and platforms of collaboration without people who deeply understand the business and its customers. CIOs need to shatter the stereotype of engineering specialists who think in linear and process-oriented models, disconnected from the unpredictable marketplace. While a process orientation will continue to be important, IT staff now needs to add creativity, adaptability and end-user orientation to every system they deploy. CIOs will need to embrace new tools and processes and acquire the right skills, collaboration capabilities, and sense of accountability to optimize new business and IT solutions.
3. Enhancing proximity to customers: In the past, IT's only customers were internal users; today these users can be true customers through Web-enabled channels that enable business insights based on customer preferences and behavior. IT must also address the "always connected" expectations of the millennial generation and the social networks they rely on for making informed decisions. Social networking and mobile technologies will bring organizations closer to the customer, and IT will need to step up with enhanced collaboration tools to help create market differentiation.
4. Defining virtualized operating models and ways of working: Virtualized models of collaboration are enabling real-time teamwork among project members regardless of time or place. Software as a service (SaaS), cloud computing, and Web 2.0 technologies are enabling new ways of working.

IT needs to identify avenues for realizing efficiencies and innovation based on these technologies. Moreover, IT will need to deliver a seamless experience across disparate IT landscapes to customers, channel partners and staff. Finally, IT will need to engage in social networking to distribute workloads and share collective knowledge among subject-matter experts.

Bottom Line: While some companies are still on the sidelines, others are ratcheting up the competitive stakes by renewing their investment in technology and focusing on how IT can be re-tooled to maintain cost efficiency while delivering sustained innovation through more virtual and collaborative ways of working. The era of IT delivering business value through cost-cutting alone is over, and a new era of business-IT collaboration has begun. It is time to re-focus IT, because the future of work has arrived.

Mark Livingston is a senior vice president and the global leader of Cognizant Business Consulting. He has 25 years of consulting experience at several leading consulting firms. Gary Kieffer is a director at Cognizant Business Consulting and has more than 20 years of management consulting experience.  The authors can be reached at mark.livingston@cognizant.com and gary.kieffer@cognizant.com.