When businesses appreciate the power of IT, their revenue grows.
Joe McKendrick is an author and independent analyst who tracks the impact of information technology on management and markets. Joe is co-author, along with 16 leading industry leaders and thinkers, of the SOA Manifesto, which outlines the values and guiding principles of service orientation.
Over the past couple of years, businesses of all types and sizes leaned hard on their information technology teams — not only to get them through COVID-related curveballs, but also to give them hope for a brighter future. That means now.
Wonderful things happen businesses appreciates the power of IT. This is now evident through a report published by PwC, which shows positive correlations when IT and business professionals put their collective heads together.
PwC’s survey, based on the responses of 1,040 business leaders and 210 IT leaders, reveals that “Digital IQ leaders” were more likely to invest in cloud technologies, including enterprise applications, infrastructure, and development platforms. These Digital IQ leaders account for about one-fifth of all surveyed tech execs; PwC defines them as leaders “who see eye to eye with their business peers.”
“[Digital IQ leaders] also invested significantly in process automation, putting tools in the hands of employees in order to accomplish tasks faster, leaving more time to dedicate to value-driven and insights-based work,” reports Jenny Koehler, partner with PwC and author of the report.
Digital IQ leaders 65%
All others 33%
Adopt new technologies for internal use
Digital IQ leaders 40%
All others 25%
Digital IQ leaders 40%
All others 33%
Digital IQ leaders 28%
All others 19%
These investments paid off, as the PwC survey shows. Digital IQ leaders are more likely to see improving financial performance, as well as greater innovation and productivity.
Revenue growth of more than 5% over the past three years
Digital IQ leaders 35%
All others 27%
Time spent on innovation
Digital IQ leaders 68%
All others 54%
Digital IQ leaders 77%
All others 57%
Create better customer experiences
Digital IQ leaders 79%
All others 64%
Improve business continuity
Digital IQ leaders 67%
All others 53%
Another way IT leaders can step up is to help shift their organizations to a platform strategy, which opens up value creation beyond the walls of the enterprise. In the 2020s digital world, more value is coming from the outside of the enterprise — from partners — made possible through the right technology structure, write Marshall W. Van Alstyne and Geoffrey G. Parker in Harvard Business Review.
This emerging model, which the co-authors call an “inverted firm,” is built on a platform strategy. That means “providing the tools and the market to help partners grow. By contrast, incumbents typically use digital transformation to improve the efficiency of their current operations.”
How can that be resolved? “Digital investments must set the firm up to partner with users, developers, and merchants, at scale, with a focus on value creation, which is the foundation of firm inversion.”
Van Alstyne and Parker point to a study of 179 firms that confirms the efficacy of this inverted model. The firms that employed Application Programming Interfaces (APIs) to open up services to outside partners or customers “grew an average of 38% over 16 years.”
“As interface technology, APIs allow firms to modularize their systems to facilitate replacement and upgrades,” Van Alstyne and Parker explain. “APIs also serve as ‘permissioning’ technology that grants outsiders carefully metered access to internal resources. These functions not only allow a firm to quickly reconfigure systems in response to problems and opportunities but also allow outsiders to build on top of the firm’s digital real estate.”
Advancing in the digitally driven 2020s means IT executives, managers, and professionals will be taking clear leadership roles within their companies. Their business leaders expect no less.
Based on the results of these surveys that reflect the gains IT teams can deliver, industry analysts make the following recommendations:
“Technology leaders should proactively engage their peers,” PwC’s Koehler urges. Bring in “CFOs, operations, risk and tax leaders. Initiate dialogue with security and risk leaders at the earliest stages so that security, compliance and governance are embedded into the fabric of your cloud transformation, enhancing trust with your customers.”
“Among inverted firms, the network effects that arise when partners create value for one another are a major source of growth in intangible assets,” Van Alstyne and Parker state. “Adding the ability to coordinate value creation and exchange — from user to user, partner to partner, and partner to user — is one way that traditional firms transform. It also provides means to scale. Transforming atoms to bits improves margins and reach. Transforming from inside to outside magnifies ideas and resources.”
“Align on the promise of cloud with your business stakeholders reflective of the industry you’re in and where you are on your journey,” says Koehler. “This requires making specific choices about how cloud will help differentiate the business — what digital and technology capabilities you’ll develop, the customer problems you will solve, and the role your company plays in the industry or other ecosystems.”
The technology department’s strategic moment is here; but is it ready?
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