The Knowledge Hub of IMD
Share
FacebookFacebook icon TwitterTwitter icon LinkedInLinkedIn icon Email
Developer and IT

Innovation

Digital transformation: building a successful relationship between IT and digital

Published 18 March 2022 in Innovation • 7 min read

Bridging silos between these often conflicting groups is essential to any successful digital transformation.

 

This article was originally published in our book, Hacking Digital: Best Practices to Implement and Accelerate Your Business Transformation, which focuses on how to implement and execute successful digital strategies. It features a compendium of insights that address specific, real-world challenges head on.

Over the last decade, traditional IT organizations and digital ventures have had a rocky relationship. Traditional (legacy) IT is often viewed as a major impediment to digital innovation, while digital is lauded as the engine of a better future. Truth is, the two must be closely coupled for a digital transformation to be successful. It takes the right mindset, a common vision of a better digital future, clear accountabilities, and proper governance mechanisms.

Why it matters  

Studies on digital transformations often cite archaic IT systems and applications as top obstacles, and organizations find it easy to point the finger at IT as the “Department of No” — out-of-touch, old-school, and bureaucratic. Although there may be some truth to this (in some organizations), the stereotype has encouraged various forms of separation between digital development and traditional IT. Regardless of whether the IT department is on the cutting edge, digital transformation can’t get very far without it.

Beyond isolated experiments or deployments of shiny new objects, digital implementation needs traditional IT support for enterprise-wide scaling, especially when digital must interface with existing back-office systems or extract data that represents the core value of so many digital applications.

With digital transformation, business and IT have become deeply intertwined. Unfortunately, duplicate responsibilities between digital initiatives and IT often lead to confusion, significant costs, and inefficiencies. We need a common front. 

Whatever the digital governance model (CDO, Digital unit, etc), it is important to clearly define scope, accountability and alignment between digital and IT leaders.

Without fail, a lack of alignment will lead to costly and painful integration down the road as digital efforts are scaled, which is a pre-requisite for obtaining a healthy return on digital investments.

“Duplicate responsibilities between digital initiatives and IT often lead to confusion, significant costs, and inefficiencies.”

Best practices and key insights 

Digital transformation is about balancing the old and the new. This is also true for IT management. Efficient IT organizations are still crucial for keeping the current business ticking via complex back-office systems and operational backbone infrastructures, whether this is handled in-house or outsourced. Companies still rely on these systems for the proper functioning of their traditional value-chain, from procurement of goods and services to manufacturing, distribution, sales and customer service operations.

But digital transformation has added new demands to the IT agenda, including rapid application development, innovative customer interactions, platform building, and the digitization of products and services. Effectively managing this dual agenda is paramount for digital transformation success, but it requires a mindset change for IT leaders because they must now align the demands of operational IT and innovative digital solutions. This dual agenda requires leaders to recognize and then manage a set of seven tensions.

Managing these tensions requires a commitment from leadership. A main component in aligning IT and digital programs is to first agree on a structure that allows for a clear division of responsibility and accountability. It also involves clearly mapping out the current system landscape and the target architecture that will underpin digital developments.

For example, the CDO-CIO team collaboration at CooperVision Inc, a manufacturer of contact lenses, used the approach of “decoupling front-end systems from back-end systems” to draw a clear division of responsibilities. CIO John Casella says that “decoupling” the customer’s digital experience on its website (as much as practical) from core enterprise systems gave the digital team more control and responsiveness while minimizing extra work for IT. This led to clearer responsibilities and less conflict.

Successfully aligning IT and digital ventures also depends on the governance model that has been adopted. In some cases, both IT and digital are within the same entity and reporting line, which allows a dual-mode IT model to be instituted. However, tight integration might come at the cost of incremental rather than radical innovation and slower time to market. In other cases, a CDO or other executive(s) is charged with overseeing the digital unit. In that case, the digital unit acts as a bridge between IT and the business for the delivery of digital solutions.

Starbucks adopted this model very successfully with the appointment of CDO Adam Brotman as a sparring partner to CIO Curt Garner, both reporting to the CEO. Garner describes the alignment: “We have tiger teams or SWAT teams that are assigned to specific projects and goals. We’ve been able to knock a lot of time and cycles off the work by having the thought leaders for digital and technology and their teams all together and working towards the same objective. Everything from inception and brainstorming through to the service delivery is jointly owned, team-focused and very collaborative.”

Sometimes digital units are set up as independent entities from traditional IT. The advantage is that this provides focus and accountability for digital transformation, but it needs to be managed very tightly as there is a risk of isolation from the core business, which could generate sources of conflict with traditional IT.

Lastly, alignment can be strongly enhanced by establishing fluidity of resources between IT and digital — by creating a joint team with a dual focus on digital delivery and back-office integration, or by dedicating key staff on each side to align objectives. CooperVision’s CIO John Casella describes how he assigned a senior enterprise architect to the CDO team: “This manager understood the CDO priorities and marshalled IT resources for projects so they didn’t have to work through the IT machinery.”

To avoid internal rivalry, it helps to create a shared sense of ownership, for example through secondments and employee exchanges between digital teams and traditional IT departments

Hacker’s toolbox 

Get the setup right. Organizations may choose one of many different models to anchor their digital efforts, and this setup may change as the organization continues their digital journey. Whatever model you decide to pursue, don’t forget to plan alignment accordingly. For example, if you implement a central digital group to push your digital agenda forward, make sure that the IT department is both informed and proactively involved. It’s a good idea to use tools that create transparency and clearly show responsibilities and accountability, like the RACI mapping (Responsible, Accountable, Informed, Consulted) to clearly delineate the scope of work between IT and digital.

Create regular touchpoints. Successful digital leaders are well aware that successful alignment goes beyond lip commitments, and requires real and tangible touchpoints. To make sure that alignment becomes part of the daily practice, put processes and roles in place that facilitate ongoing information sharing and increase trust between digital and IT teams. Similar to business-IT liaison roles, digital-IT relationship managers can help to ensure ongoing adjustment and coordination. Information sharing can also be increased through physical proximity or regular shared events. To avoid internal rivalry, it helps to create a shared sense of ownership, for example through secondments and employee exchanges between digital teams and traditional IT departments.

Grow together. Alignment is not a static event or one-time task; it is a continuous process that evolves as the digital journey continues. Alongside increased digital revenues and responsibilities, power struggles and political conflicts may arise between digital and IT departments. While it may be impossible to avoid these struggles altogether, digital leaders can avoid break-downs by continuously reaching across the aisle and sharing both success and failures. IT and digital leaders should be responsible for regularly, and jointly, reporting on digital transformation progress, and openly raising organizational, capability, or resource sticking points, so they can be addressed.

Self-reflection questions  

  • Are you seeing close cooperation and trust between your IT and digital leaders?
  • Are your IT leaders buying and actively supporting the digital strategy and the transformation required to implement it?
  • Is the scope of activity and accountabilities between IT and digital teams clear to you and the rest of the organization?
  • Are you receiving joint IT/digital progress reporting, or are you getting differing feedback from each side individually?  
  • Are you confident that your digital transformation is being implemented at the right pace, or are you sensing that it needs structural or leadership changes? 

Authors

Michael Wade - IMD Professor

Michael R. Wade

Professor of Innovation and Strategy at IMD

Michael Wade holds the Cisco Chair in Digital Business Transformation and is Director of IMD’s Global Center for Digital Business Transformation. He directs a number of open programs such as Leading Digital Business Transformation, Digital Transformation for Boards, Digital Execution, Digital Disruption, and the Digital Transformation Sprint. He has written ten books, hundreds of articles, and hosts a popular management podcast. In 2021, he was inducted into the Swiss Digital Shapers Hall of Fame.

Didier Bonnet

Professor of Strategy and Digital Transformation

Didier Bonnet is Professor of Strategy and Digital Transformation at IMD. Professor Bonnet’s research, teaching and consulting interests focus on digital economics, digital strategy, disruptive innovation and the process of large-scale digital transformation for global corporations. For the last 10 years, he has also led a joint research program with the MIT Initiative on the Digital Economy (IDE), at the Sloan School of Management, focussed on researching the impact of digital technology on business models and society. He has more than 30 years’ experience in strategy development and business transformation for global clients and has worked in over 15 countries.

At IMD he is program co-director for “Digital Transformation in Practice” (DTIP) and “Leading Customer Centric Strategies” (LCCS). He teaches strategy and digital transformation in several open programs such as “Leading Digital Business Transformation” (LDBT), “Digital Execution” (DE) and “Digital Transformation for Boards” (DTB).

Tomoko Yokoi

Researcher, Global Center for Digital Business Transformation, IMD

Tomoko Yokoi is an IMD researcher and senior business executive with expertise in digital business transformations, women in tech, and digital innovation. With 20 years of experience in B2B and B2C industries, her insights are regularly published in outlets such as Forbes and MIT Sloan Management Review.
Nikolaus Obwegeser

Nikolaus Obwegeser

Professor and Director at Institute for Information Systems and Digital Transformation

Nikolaus Obwegeser is a professor and director of the Institute for Digital
Technology Management at the Bern University of Applied Sciences (BFH). His areas of expertise include digital business transformation and innovation. A scholar and author, Nikolaus has had his research published in numerous highly regarded academic and practitioner outlets, including MIT Sloan Management Review, Technovation, and the Journal of Product Innovation Management. Before joining BFH, Nikolaus was a research fellow at IMD and an associate professor of information systems at Aarhus University (Denmark). Apart from his research activities, Nikolaus regularly provides advisory and consulting services for public and private organizations in the area of digital business transformation.

Related

Learn Brain Circuits

Join us for daily exercises focusing on issues from team building to developing an actionable sustainability plan to personal development. Go on - they only take five minutes.
 
Read more 

Explore Leadership

What makes a great leader? Do you need charisma? How do you inspire your team? Our experts offer actionable insights through first-person narratives, behind-the-scenes interviews and The Help Desk.
 
Read more

Join Membership

Log in here to join in the conversation with the I by IMD community. Your subscription grants you access to the quarterly magazine plus daily articles, videos, podcasts and learning exercises.
 
Sign up

You have 4 of 5 articles left to read.