I reckon that for most large incumbent organisations (that is those born in an analogue age) going digital is a bit like embarking on a significant house renovation and extension. But first let me take you back to the beginning of 2004.
My wife and I decided to buy an old villa in Auckland. We were new to Auckland and needed a place for our family to live in. We knew where we wanted to live, loved period villas so when this smallish 3 bedroom villa came up we went for it and bought it. We were thrilled to get it, but the house was far from ideal for our family. To start with it was in 1970’s style. There were many 1970s features, but my favourite was the cracking orange vinyl walls around the 1970s breakfast bar finished with large brass rivets. Then of course there was the small issue of 3 girls having to share 1 room. Not unmanageable but I remember sharing a room with my two older brothers when I was younger. Not an experience I relish and something I was committed my children wouldn’t need to endure. Still it was a great location with lots of potential.
Even before we had moved in we began thinking about and plotting how we wanted to change the house. If we wanted to get 5 bedrooms, one each, we would need to go upstairs. The living space was way too small and perhaps we could extend out the back and open up the kitchen, dining, living. If we moved that wall back to where it was originally, we could put an on-suite in and maybe even make that small room a little bigger. And maybe we could extend the verandah out front. Well, maybe not. That might violate the heritage rules that applied to the house, we would need to get that checked. It was a wonderful time thinking of all the possibilities on how we could transform this old, undersized character home into our dream home. Then we moved in.
That is when we discovered all of these small and not so small issues with the house. We had owned several old villas before so we shouldn’t have been surprised that we found issues, we always have, but we were always surprised and disappointed at all the things that just didn’t work or were a significant issue for a young family. Rotting stairs we hadn’t noticed, old wiring that was basically exposed and a fire hazard, taps that leaked and an oven that didn’t heat properly. There were many many issues. All visions of the dream home vanished as we set about making what we had habitable, safe and comfortable (I exaggerate only a little).
After about 6 months we returned to the vision of the dream home. It didn’t take long to get agreement on what we wanted, we just needed to make it a reality. We retained the services of an architect to help us. We told him what we wanted, we listened to his suggestions, agreed to some, rejected others and used his ideas to come up with other alternatives. He did the sketches and we fell in love with the plan. We wanted it and we wanted it now. He then worked out the cost.
Without going into details the estimated cost was nearly twice the purchase price of the house and more than it would cost to bulldoze the house and build a brand new home (which we couldn’t do because of heritage restrictions). We were flabbergasted it couldn’t possibly cost that much. Then he explained, well the foundations are OK for a single level dwelling but if you are going to go upstairs then …..and the weight bearing walls will need to be reinforced here ….. and on and on and on. We were slightly depressed we really wanted that home. We were also slightly economically sensible and knew that if we did what we wanted then we would be seriously over capitalising the property. So we stopped and re-planned a much more modest series of changes. They were not our ideal, but they were affordable and they would create a great home that would represent value for us and any subsequent purchaser. The changes went well enough with only the normal renovation issues and we were very happy there, until we moved to another old villa and were surprised at all the issues we found.
If you have renovated a home before I’m sure this scenario is familiar to you and perhaps rekindled some interesting memories, but now it’s time to change tack. As a CIO and an adviser to CIOs and executives on how to deliver value from IT, I see many parallels between delivering value from IT and a house renovation and extension. Here are some of them.
There are lots of unexpected issues that need to be attended to. Unless you are buying a villa that has been recently renovated and being sold “as new” then you can expect to inherit lots of issues. Actually, even if you buy them “as new” there are likely to be issues. It’s the same with systems. Unless the systems have recently had a major overhaul you can expect that there are a heap of issues that need to be addressed and even if the systems have had a recent overhaul, just like villas, there is likely to be a lot of fiddly annoying things that need attending to. You need to get these things dealt with as quickly as possible to make sure your users are well supported and things just work. You need to make your systems and system enabled processes “liveable”.
Before you can do the cool things you will likely need to make sure you are structurally sound. For a house this is about taking care of the foundations and weight bearing walls. You don’t want to build the second level if the foundations and structure are not sound. It’s the same with systems. Your core transaction processing systems need to be robust, reasonably up to date, appropriately integrated and supportable. If they are not and you immediately try and build on top of an unstable platform, well, you may get away with it but don’t be surprised if it ends badly. Make sure your system foundations (core applications and infrastructure) and weight bearing walls (data and process integration between key systems and processes) are solid and fit for purpose.
Let’s be clear, if you are embarking on a major “digital transformation” this is the equivalent of putting another level on your house. You don’t just plonk a new level on top of your house. You need to integrate this new level back to the house and reconsider whether your existing house will remain structurally sound. It’s the same with digital. You can’t just plonk a digital layer on top of your original business and expect it to work and add value. It simply won’t work. You need to integrate this digital layer back to the core of your business (the people and the process, not just the technology) and you need to revisit the structural soundness of your original systems to ensure they will be fit for their new purpose.
You might want to build a new house, or replace all your systems but most likely you can’t. In our case it would have been cheaper to build a new home but we couldn’t because of the local regulations. When it comes to systems, most likely throwing everything out and starting again isn’t feasible. It will cost too much, it will take too long and will likely end in disaster or an extended recovery period. Most organisations learnt this through the great ERP migration and systems have only become larger, more integrated, more critical and harder to change. In the end you need to accept what you have, refresh and extend as make sense. This is as true in houses as it is in systems.
To repeat myself, if you actually can afford to replace all your systems think carefully before you act. The industry track record suggests that mega projects like these seldom succeed.
Beware of over capitalising. It is very easy to get carried away with the dream home and spend way too much. It is very easy to get carried away with the latest technology, the new trend needed to react to that new thing your competitor did. Sure, it would be cool but can you afford it and can you get your money back from customers (or house buyers) who value it to at least the same level of cost you incurred to produce it. Your systems renovation or digital transformation needs to be affordable and it needs to be able to pay back. The research is clear. You, get payback on digital investments when you focus on enabling distinctive capabilities that express your uniqueness as an organisation. You don’t get payback if you simply follow the technology trends or the market or your close rivals in the market place.
It’s not about the individual rooms, it’s about the home. Sure we need the individual rooms to work and be appropriate for their desired usage but the value of a house is not primarily about the individual rooms, it’s about the house. In a great house all the spaces work together, fulfilling their function, while creating flow and an ambiance that is a home, more than simply an aggregation of the individual spaces. That’s why you begin by designing the house rather than by building a room. Even in an extension or substantial renovation you begin by doing the overall design and work from there. It’s the same with systems. It is not about the individual systems and what they do for you. Yes, the individual systems need to be fit for purpose but the systems need to work together creating a flow, a way of working, a way of engaging which is more than the individual systems. That’s why you should begin by designing your overall systems approach. Actually, ideally you begin by designing your overall business approach then design your systems to support that business approach. As with a house you need to start by architecting your business so to speak.
Once the structural things are taken care of you build the rest as needed. The order for renovations is pretty simple. Design the home, sure up the foundations and ensure that your home is structurally sound then you can build and decorate the individual spaces at your leisure, as time, money and need dictates. It is the same with systems. Design your overall architecture Build your foundations and ensure you are structurally sound. Once you have done this you build the individual systems and processes as quickly or slowly as you like based upon need, affordability and resources available.
A note here on the IT Hierarchy of Needs model. I use this model to describe the overall process of adding value from technology. Because I classically draw one hierarchy to illustrate the process people often interpret this as meaning you need to do everything at every level before you can move on up the hierarchy. This is a problem for many organisations who see the need to digitise now. They can’t wait for the two, three or four years it takes to clean up all the history before they invest in digital. They want and feel they need to invest now. You can, you just need to ensure that:
- you understand the overall end game and architecture so you can build to that
- you need to ensure that the foundations for that specific area are solid and you understand how this will integrate to the rest of the business today and over time (i.e. build your weight bearing walls).
For more information you may want to read my white paper Delivering Value From IT.
Do these two things and you can go hard in that priority area. I have a number of clients who are looking to take this approach especially around customer engagement. In this example:
- ensure your base customer systems are sound
- agree how customer data and transactions will integrate back to the rest of the organisation / systems and build that integration as needed
- and go for it, building distinctive capabilities for your customer.
So, what do think? Does the analogy work? Are there other parallels? I would love to hear from you.