Most large and midsized companies cannot reorganize their legacy IT system all at once. You must divide, prioritize and sequence your efforts or they will be too big and complex to manage. The IT modernization are organized by project. They are efforts of short duration. Framed by categories of conventional business software, budgeted and delivered by development teams that dissolve when the project is completed.
This leads to a short-term approach that can distract the efforts of the most important objective: to develop the capabilities that offer value.
What if you organized by capabilities instead? The most distinctive capabilities of your organization are combinations of systems, processes and functions. They offer value in a way that no other company can match. Think of your system modernization initiative as an opportunity to improve capabilities, taking advantage of your digital experience.
For example, Inditex (the Spanish clothing company Zara) has long had distinctive capabilities in customer perception. The design of cutting-edge products, the manufacture of rapid response and the consistent global brand.
In recent years, it has improved these capabilities. With an IT modernization that includes, among other things, the configuration of RFID tags for each item it sells. Now it also has an inventory capacity integrated online and offline. So any employee of a Zara store can instantly locate a garment in a specific size and color.
Have it sent directly to the customer, which gives the company advantages in the customer. Satisfaction that few, if any, other retailers can match.
Your organization’s customer-facing products and services are central in this approach (it’s sometimes called the “product management–based IT operating model [pdf].”) You logically group applications and infrastructure by the business capabilities they primarily support. Then you find the necessary applications and hardware needed to fill the gaps in those capabilities, and (better yet) to refine and expand your conception of those capabilities, staying steps ahead of competitors.
Organizing the IT operating model in this way offers many benefits. They include enhanced business–IT alignment, ability to deliver faster innovation and greater value, more effective investments, and a simplified vendor landscape. Consider procuring a managed services and solutions provider with which to partner; they may be more familiar with the newer technologies and thus able to deliver more quickly and effectively than you can.
When you organize by capabilities, you don’t worry about the different layers of the technology stack. They’re all in scope. Your IT organization is not linked to legacy concepts; it can help accelerate a digital transformation by applying principles such as mobile access, API-based design, microservices, cloud-based infrastructure, and modular IT structures.
Questions for organizing by capabilities:
- What are the most critical capabilities that differentiate our company and provide value?
- How will our IT modernization enable and enhance these capabilities?q
- What technological solutions and vendors fit best with these critical capabilities?
