In the Age of the Customer, big companies possess some significant business advantages over smaller ones. For one thing, big companies have lots of existing customers – along with years of customer data. For another, they have tremendous institutional expertise and experience in what makes customers tick. And, of course, they have massive financial and operational resources at their disposal.
Yet time after time, big companies lose out to smaller market disruptors that prove themselves to be vastly more adept at leveraging digital to differentiate their value propositions to the customer. That’s why companies like Sears and Blockbuster have seen their market cap fizzle to a fraction of what it was 10 years ago, if they manage to stay in business at all, while competitors like Amazon and Netflix grow by orders of magnitude.
While there are many reasons big companies fail, here are three major pitfalls that consistently undermine that ability of incumbent enterprise-scale IT organizations to meet the ever-escalating challenges of customer-facing digital engagement.
Pitfall #1: Cultural complacency
One common misconception prevalent at big companies is that green-field companies get most of their digital advantages from being able to operate without technology debt. This focus on technology masks the real underlying issue: culture. Agile and DevOps, for example – both of which are critical for making the shift from internally-focused to customer-focused IT – are at their core cultural and process transformations.
Green-field companies start from Day One with a missional IT focus on the customer. They recruit and incentivize their IT artisans based on this mission. IT organizations at big companies, in marked contrast, have almost invariably developed entrenched cultures that made sense back when IT was primarily about enabling internal operations, but that are too territorial and change-averse for the ever-intensifying demands of today’s digital customer.
The Fix #1: Become the Chief Inspiration Officer
As trite or New Age-y as it may sound, the primary role of IT leadership at big companies is culture change. CIOs must inspire people to transform ideas that genuinely matter into deliverables that genuinely make a difference to customers. This delivery must be done efficiently and safely, of course. But cost-cutting CIOs will always lose out to those who set worthy, ambitious goals for their staff, and then aggressively iterate toward even more ambitious goals using new methods and new metrics.
Pitfall #2: Multi-speed IT
Enterprise IT organizations have in recent years focused intently on delivering great customer experiences via web, mobile and social media channels. Because of this focus, it has become commonplace for CIOs to erroneously believe that they can manage different platforms at different speeds. That is, they think they can apply Agile disciplines to continuous improvement of front-end customer-facing apps, while allowing the mainframe to languish in traditional two-drops-a-year waterfall mode.
This is a fallacy. New customer-facing capabilities on the front end often depend on wisely engineered changes to business logic on the back end. In fact, the multi-platform enterprise can only be as nimble as its least nimble platform. So if you can’t quickly evolve your core applications and databases, you’ll only be able to make cosmetic changes to the digital value proposition you offer your customers.
The Fix #2: Single-speed IT
Agile across all your platforms is not an aspiration or an option. It’s an imperative. So is DevOps, since that’s what accelerates time-to-benefit for your inspired code. As Lean Startup visionary Steve Blank expressed it in the Harvard Business Review, “Innovation activities without a defined innovation pipeline result in innovation theater.” So if you want to succeed in a customer-focused marketplace, make sure your back end is as nimble as your front end.
Pitfall #3: Asphyxiation by KTLO
Innovation requires resources, and resources require finances. Unfortunately, most enterprises are forced to allocate too large a percentage of their limited budgets to “keeping the lights on” (KTLO), rather than their innovation pipelines.
Again, a lot of people want to blame this KTLO-heavy resource allocation on technology debt. But, in reality, much of the KTLO problem can be ascribed to massive distributed infrastructure that requires endless maintenance across the stack – including OS housekeeping, re-tuning of virtualization layers, storage refreshes, data center environmentals (especially power and cooling) and attempts to secure a hopelessly complex threat surface.
The Fix #3: Dump distributed
The most effectual way to slash KTLO is to simply eliminate as much on-premise distributed infrastructure as possible. There’s almost no reason to retain it. Most workloads running on distributed servers in the data center can get pushed up to the cloud, where economies of scale and consumption-based pricing rationalize infrastructure spending. Meanwhile, as a highly consolidated/centralized platform, the mainframe offers the lowest TCO/MIPS ratio of any platform on the planet.
Of course, these three fixes alone aren’t enough to win in today’s intensely competitive markets. Businesses of every size and in every vertical need creative product and service management teams. They need human capital management strategies that ensure their ability to attract and retain game-changing talent. And, they need C-level leaders who can make bold decisions, and fearlessly change direction when those decision don’t pan out.
But the three fixes above are absolutely essential for any CIO at a large enterprise seeking to level the IT playing field with disruptive, new, green-field rivals. Scale and longevity can be advantages, but only for enterprises that transform their IT culture, achieve single-speed IT across platforms and jettison the anchor of inefficient distributed infrastructure.