Transform the Core: What Digital Business Models Require

The C-suite has acknowledged the undeniable trio of uncertainty, volatility, and rapid technological advancements as a prevailing reality. That means organizational agility—the ability to turn on a dime and rapidly scale change—is a necessity. The fastest route to agility? It’s one we’ve all heard of: digital transformation. 

While digital transformation is perhaps the most often cited business goal in recent years, the reality is many organizations’ technology investments fail to achieve intended benefits—and often don’t go far or deep enough. There’s a huge amount of waste happening: Just 26% of organizations will achieve the targeted ROI associated with their digital transformation investments, according to IDC’s white paper, “Adaptable Architecture: The Backbone for Digital Business Models,” which details the value of digital models and obstacles to change.  

The agility today’s business leaders need demands a business model supported by digital technologies across all processes, both internal and external facing. That digital-first model requires an “intelligent core” tech architecture defined by adaptability—along with new ways of thinking and working. Those are the central findings of IDC’s research.

Most organizations can’t take a “greenfield” approach, building an entire digital stack from scratch; they have legacy systems and technology debt. In fact globally, 85% of organizations have an outdated core IT platform. Just 15% have an adaptable technology architecture that acts as a backbone for digital business models. Far more common, IDC finds, is an “islands of innovation” approach involving stand-alone digital innovation projects or a “sidecar mode” (think two parallel tech environments, one of which is customer-facing and nimble, the other traditional and enterprise-facing).

While those latter two approaches can deliver benefits, they’re ultimately insufficient, blocking organizations’ ability to rapidly scale digital initiatives and be truly digital first. In the end, there’s no shortcut. Getting to scale requires an intelligent core—an agile backbone that can respond to market changes on a dynamic basis. Reaching this point  may not be effortless, but it’s certainly worth it. Digital-first organizations are twice as profitable and grow revenue eight times faster than non-digital peers in their industry, IDC research highlights.

Let’s take a closer look at what a future-proofed IT core looks like, as well as how processes and structures—and leadership—needs to evolve to support it.

Intelligent at the Core

An adaptable IT architecture designed to navigate complex, rapid change and support digital business models has three core attributes, IDC notes.

1. Open: It enables data to flow seamlessly across the value chain to deliver real-time interaction across the ecosystem, enabling collaboration. 

2. Intelligent: It can transform data coming from both internal and external pipelines into useful insights that support rapid development of new products and services.

3. Extensible: It provides the capabilities to build new use cases, increase scalability, and handle never-before-seen workload demands, delivering competitive advantage in industries where all organizations have best-of-breed technology.

These three attributes enable businesses to shift away from “traditional, linear processes that start and end in the organization toward data-driven value chains that link seamlessly to the external ecosystem,” the IDC report states. The ability to rapidly change requires breaking down walls between back-office systems and front-office applications, and, more generally, jettisoning the idea of an IT environment being confined to the four walls of an organization.    

As an example, to maximize profits from a day of heavy sales and discounts that follows the Thanksgiving holiday in the U.S., Black Friday, a retailer should be able to gather and analyze real-time data spanning weather, geopolitical events, and other external factors impacting demand, as well as internal data streams related to inventory and workforce availability. An intelligent core could help the business forecast its exact seasonal labor needs, and then—with integrated automation capabilities—design and launch a global recruitment campaign and streamlined onboarding activities.  

According to IDC, digital business models operate with an outward focus, demanding the seamless flow of real-time data across all organizational processes. To accomplish this crucial feat, the core IT infrastructure must undergo modernization, evolving into an intelligent and dynamic core.

Shifting Mindsets, Rethinking Structures

Anyone with experience executing large IT infrastructure projects knows that success requires much more than just the right technology. One key ingredient: a change-ready mindset. Building an adaptable IT core designed for agility requires a dramatic shift in mindset, in both the IT department and beyond. Work processes and structures need to transform as well to seize opportunities in the digital-first age.

The IDC report recommends three things in particular.

1. New mindset: Instead of technologies, projects, and resources, teams need to focus on business outcomes, products, and talent. That requires all key leaders steering the digital strategy—technology leaders, but also finance, operations, human resources, and other leaders—to focus on use-cases and use business (not tech) language.  
2. New processes: Business processes “define the way we work,” the IDC report notes. For any industry, becoming an agile digital business requires an engaged and empowered workforce. But if employees feel handcuffed to outdated processes and organizational hierarchies, change will be stifled and good talent will head for the exit.
3. New structures: The IT department needs to evolve beyond its traditional design and focus. As the entity responsible for the intelligent core, the department should be focusing on agile teams empowered to deliver products directly linked to business outcomes. These should be “in line with the use-case journey outlined in the digital roadmap,” IDC says.

The Stakes of C-Suite Alignment

Many CIOs are understandably hesitant to embark on a huge IT core modernization journey. They’ve been burned in the past while upgrading or implementing new enterprise applications, watching projects fall behind schedule, go over budget—and then ultimately realize their full promise. But the new reality is unavoidable: A rapidly changing world demands an adaptable core built for agility.

To successfully orchestrate the organization’s digital transformation, CIOs also need to change, looking beyond technology and operations to play more strategic, even disruptive, roles. Specifically, IDC argues, CIOs of the future need to embrace five new personas: trust enabler, business advisor, digital innovation evangelist, diplomatic negotiator, and proactive communicator. An overarching goal is to help members of the “digital dream team” understand what new technology enables, aligning key stakeholders around prioritized use cases.

But while the CIO should be the change conductor, that change should occur within a carefully integrated enterprise-wide digital strategy. Such a strategy requires the involvement and buy-in of the CEO, who is uniquely able to ensure all members of the C-suite are on board with the strategy and ready to move the business forward.

When it comes to leading the charge to transform the core, no CIO can or should go it alone. But if the entire C-suite understands both the risks of inaction and the benefits of evolution, the case for change becomes self-evident.