Five Questions To Diagnose Your Company’s Transformation Problem

The 1990s was the decade that the first PlayStation was sold. The world’s first complete open-source operating system, Linux, was released. Larry Page and Sergey Brin registered the domain name Google.com. It was also the decade we saw the role of Chief Information Officer (CIO) come together.

Now in the decade of AI, data, the metaverse and accelerated digital transformation, it is the CIO that will need to take the driver seat to bring technology to the forefront of business. As technology reshapes the way we work, live and play, its strategic role in business is increasingly acknowledged. I’ve seen this in my own career when I became the first technologist to sit on the board of EY.

In these complex, dynamic times, the market moves fast and throws unexpected things at us every day. To match this pace, organizations are using technology and data to power their businesses and futures. At EY, we see technology on par with capital and labor as a factor of production, driving strategic growth. Used properly, technology is more than an enabler: it’s an engine for growth.

Yet for many, there’s a problem in making this vision a reality. Too often, the operating model for technology is stuck in the 1990s. It’s time for an upgrade: an approach to IT that recognizes its shift from function to business, and the role CEOs play in changing this paradigm.

Role of the CEO in the business of technology:

In EY’s 2021 CEO Imperative Study, 68% of CEOs said they planned a major investment in data and technology over the next year. In my experience, whether these investments succeed or fail depends on whether the organization views technology as a function or as a business.

Viewed as a function, IT is an order-taking cost center. Technologists work in a silo, separated from the rest of the organization. And in my opinion, in the coming years, organizations following this model will stagnate at best, go out of business at worst.

The alternative is to view IT as a business. In this model, IT is tasked with executing business decisions that are core to the growth and survival of organizations, such as leading digital transformation. This necessitates a different approach, one that is focused on (and demonstrates) the value that IT adds to the organization.

So what should CEOs be doing? How can they reposition IT in their organizations to realize its full potential?

Here are five questions to ask to evaluate where your organization may be on this transformation journey:

1. How are you using technology to drive value for customers?

Organizations that are digital at the core and use technology to get closer to customers are reaping the rewards, particularly those that embraced digital transformation and customer experience during the pandemic. In the new, post-pandemic reality, it is true that “business is technology and technology is business”. Technology is to be treated on par with labor and capital in the business models of the future.

We only need to look at what befell some of the apparel retailers that filed for bankruptcy recently. These established companies failed to use technology to adapt to changing customer trends and preferences. Contrast this with the success of Nordstrom, which accelerated its end-to-end digital transformation during the pandemic and now generates over 50% of sales online. More importantly, it does not just fall to CIOs to drive technology to the forefront. The CEO and other board members need to be invested and have a better understanding of the value of technology to revenue, brand and margins.

2. Does your investment model enable the business value that technology brings?

This may be the most important, and possibly most challenging, question to address because it involves operating models, mindset and culture. But getting it right changes everything.

The old mindset of technology investments drawing from a fixed annual budget is broken. When technology is designed to contribute to business growth, it should be evaluated on that basis. By separating revenue-generating technology from enablement technology (ERP, office networks, billing systems, etc.), you can adopt a value-based approach to tech growth investment. For example, I recommend using zero-based budgeting with a product mindset. Before investing, ask: what’s the business case for this product? Who are its users? What’s the likely P&L? And after investing, determine whether the product delivered on its expected benefits.

It often isn’t easy to break out of an ops view, and of course some resistance can be expected. In truth, it’s almost a band-aid. At some point, it needs to be ripped off. And once people understand that making the change means more money for growth initiatives, they’re onside.

3. Is your brand communicating the value of technology?  

Great care should be taken to ensure technologies deliver an integrated and cohesive customer experience across all online and offline channels. Technologies that power these omnichannel strategies help build better brand experiences and drive customer acquisition and retention. For example, an apparel brand that leverages mobile augmented reality to deliver a “try-it-on” shopping experience is perceived as a relevant consumer brand, not as tech company.

Another example is Domino’s, whose recent media strategy (the Domin-oh-hoo-hoo ads) and technology investment has reinforced the value of “group ordering” through multiple channels, offering a seamless customer experience.

In short, technology can help to reinforce brand values – whether those are caring for people and the planet, prestige and luxury or delivering food people love – and engage customers.

4. Are you truly leveraging technology ecosystems?

The strength and long-term success of any business is determined largely by the strength of its ecosystem. In recent EY research, 91% of business leaders agreed that ecosystems have increased the resilience of their business and 71% said ecosystems are very important to their company’s current success.

The cloud economy has dramatically lowered technical and operational hurdles to successful technology implementation. Cloud-based architecture minimizes time spent on software selection and streamlines architecture decisions, but it also means technology decisions (some critical) are effectively outsourced to cloud providers. On balance, I think this is a positive. For example, a cloud CRM tool implemented in three months that may not be 100% bespoke but works well enough is usually preferable to waiting two years for a perfectly tailored platform.

Technology ecosystems free the CIO to act as internal consultant for technology and develop the organization’s vision instead of focusing on tactical execution such as “Should I use product A or product B?” Increasingly, CIOs will need to represent the intersection of the business and technology on the Board.

5. How do you solve for talent in an uncertain world?

We’re all aware there’s a scarcity of talent, particularly following the Great Resignation. Hiring the right people to fully leverage technology is a key differentiator. From what I’m seeing, the two most sought-after skills are cloud architecture and product management.

In this talent landscape, young tech pros, like so many of their generation, are prioritizing being part of a purpose-led enterprise with values aligned to theirs. That means just offering the newest tools and flexible work options won’t be enough. Execs must focus on the aspirational mission of the organization and how employees can help make an impact to attract and retain the best of the best.

The current landscape also provides an opportunity for organizations to lean on the technology ecosystem to address talent scarcity. The fluidity of the technologists within an ecosystem developing and innovating across organizations will lead to exponential benefits and thereby lead to better retention and recruitment.

No business without technology

The way we have been transformed by technology is unprecedented, and we haven’t even touched on the metaverse or quantum computing. It is the responsibility of CEOs to make the business of technology a boardroom agenda and priority. To do so, it’s imperative that CEOs use these five questions to evaluate and accelerate the journey of today’s IT function becoming an integral part of the business that supports strategic growth.