Building the Digital Business: The 2016 CIO Agenda
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This presentation discusses how organizations can build a digital platform and business. It recommends that organizations think differently by creating a portfolio of algorithms, data, and patents to exploit network effects. It also recommends innovating through a bimodal delivery platform to drive speed and scale, and modernizing the core IT infrastructure with an open platform to capitalize on network effects. Recommended actions include investing in a bimodal delivery platform, connecting across delivery modes, and adding IoT and ecosystems to the core infrastructure platform to architect a digital business.
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Building the Digital Business: The 2016 CIO Agenda
- 1. This presentation, including any supporting materials, is owned by Gartner, Inc. and/or its affiliates and is for the sole use of the intended Gartner audience or other intended recipients. This presentation may contain information that is confidential, proprietary or otherwise legally protected, and it may not be further copied, distributed or publicly displayed without the express written permission of Gartner, Inc. or its affiliates. © 2015 Gartner, Inc. and/or its affiliates. All rights reserved. Building the Digital Platform: The 2016 CIO Agenda Donna Scott
- 2. 1 © 2015 Gartner, Inc. and/or its affiliates. All rights reserved. 42% 60% 77% Now In 2 years In 5 years CIO survey (n = 344) 16% 25% 37% 22% 31% 41% Now In 2 years In 5 years CIO survey (n = 609) CEO survey (n = 400) Digitalization Is Intensifying; Stakes Are Rising Private Sector Public Sector What % of your revenue is digital? What % of your processes is digital?
- 3. 2 © 2015 Gartner, Inc. and/or its affiliates. All rights reserved. Digitalization Is Still Quite Operational — The Potential Is Much Greater 941 CIO respondents selecting the top three digital impacts on their business, in order More Revenue From Better Operations More Business Through Digital Channels Tighter Partnerships Creating New Markets Engaging and Empowering Employees Changing the Basis of Competition Cost Reduction Expanding to New Geographies Crossing Industry Boundaries 2% 3% 6% 6% 7% 10% 10% 21% 34% Number One 9% 11% 39% 20% 40% 26% 37% 48% 66% In Top Three
- 4. 3 © 2015 Gartner, Inc. and/or its affiliates. All rights reserved. The World Is Moving Toward Platforms Business as a Platform Moments Products Services Markets Business as a System Products and Services
- 5. 4 © 2015 Gartner, Inc. and/or its affiliates. All rights reserved. Platforms Are Powerful Multidisciplinary by Design Dynamically Connected and Reconfigurable Semiporous Boundaries Continually Sensing, Learning and Reconfiguring PLATFORM ECONOMICS NETWORK EFFECTS
- 6. 5 © 2015 Gartner, Inc. and/or its affiliates. All rights reserved. Market Leaders Exploit the Economics of Connections The economics of connections describes the creation of value through increased density of interactions between business, people and things. GIVE — share data, patents, algorithms to amplify their usage TAKE — utilize all the other data and resources in the digital world MULTIPLY — encourage peer to peer connections across the digital mesh to accelerate and amplify the scale
- 7. 6 © 2015 Gartner, Inc. and/or its affiliates. All rights reserved. Digital Visionaries Are Building Platforms Throughout Their Businesses Focus Areas of This Presentation
- 8. 7 © 2015 Gartner, Inc. and/or its affiliates. All rights reserved. Create a Bimodal Delivery Platform Exploit and Explore
- 9. 8 © 2015 Gartner, Inc. and/or its affiliates. All rights reserved. Simply put, bimodal recognizes that there are areas of the enterprise that have more certainty, objectives are clear, cause and effect is understood, we can predict and plan — Mode 1. In other areas, requirements are unclear and changing, the relationship between action and outcome is uncertain, and things are less well-understood at the start — Mode 2. Bimodal Helps Deal With Uncertainty in a Complex, Digital Business World
- 10. 9 © 2015 Gartner, Inc. and/or its affiliates. All rights reserved. Engage Bimodal Partners to Drive Digital Performance Blue bars show average answer to: "How effective is your business at factoring digital considerations into strategy and planning?" (1 = very ineffective; 7 = very effective), isolated based on answers to bimodal discipline questions. Orange bars indicate position with respect to bimodal adoption. Enterprise Ecosystem Enterprise Ecosystem Ecosystem
- 11. 10 © 2015 Gartner, Inc. and/or its affiliates. All rights reserved. Shared Goals, Shared Values, Coherent Metrics, Collaborative Culture StrategyONE ONE Organization ONE Team Two Modes "We are not splitting into two, but we are building a new capacity beside the old one. An API platform design is the glue that keeps the teams working in harmony." – Kenneth Verlage, CIO, PostNord Source: "Building the Digital Platform: The 2016 CIO Agenda" (G00292133)
- 12. 11 © 2015 Gartner, Inc. and/or its affiliates. All rights reserved. Digital Visionaries Are Building Flexible and On Demand Infrastructure Platforms Agile Infrastructure Required IT Must Renovate the Core
- 13. 12 © 2015 Gartner, Inc. and/or its affiliates. All rights reserved. The Technology Opportunity: Monetize Big Data, Underpinned by the Cloud %# # Priority 2016 2015 2014 1 BI/Analytics 39% 41% 50% 2 Infrastructure and Data Center 27% 31% 37% 3 Cloud 25% 27% 32% 4 ERP 21% 26% 34% 5 Digitalization/Digital Marketing 21% 17% 11% 6 Mobile 20% 24% 36% 7 Security 15% 13% 11% 8 Networking, Voice and Data Communications 10% 12% 12% 9 Legacy Modernization 10% 7% 7% 10 Industry-Specific Applications 9% 9% 10% 11 CRM 9% 11% 8% Note: Percentages represent the proportion of CIOs citing each priority as one of their top three areas of new IT spending.
- 14. 13 © 2015 Gartner, Inc. and/or its affiliates. All rights reserved. Cloud Computing Should be Used for All Application Services Requiring Speed or Frequent Updates Systems of Innovation Systems of Differentiation Systems of Record - + Governance + - Change Mode 1 Required Reliability (ITIL, CMMI, COBIT) But over time will also increasingly use Agile, DevOps, Automation, Reusable Mode 2 Accept Uncertainty (Agile, DevOps, Automation, Reusable) Systems of Innovation and Differentiation are typically cloud native, use continuous integration/delivery and are born in the cloud. Systems of Record are typically mission critical and transactional and many will be redesigned over time for cloud.
- 15. 14 © 2015 Gartner, Inc. and/or its affiliates. All rights reserved. OpenStack at the Core of your Digital Business Infrastructure Platform eCommerce Payments Digital Marketing Film Production SaaS Internet TV Connected Cars Scientific Research
- 16. 15 © 2015 Gartner, Inc. and/or its affiliates. All rights reserved. Think Differently — Create a portfolio of algorithms, data and patents that could be exposed to outside consumers as new sources of value, including people, business and things. Exploit the economics of connections. Innovate — Infuse new culture and process into the organization to drive innovation. Invest in bimodal delivery platform. Connect across delivery modes for speed and scale. Modernize — To capitalize on the economics of connections you must renovate your core IT infrastructure platform. Add IoT and ecosystems to the core infrastructure platform. Recommendations: Architecting Digital Business
- 17. 16 © 2015 Gartner, Inc. and/or its affiliates. All rights reserved. Recommended Gartner Research Building the Digital Platform: The 2016 CIO Agenda Dave Aron, Graham P. Waller and Lee Weldon (G00292133) Hit the Bimodal IT Highway Now — Considerations for Structuring and Staffing Diane Berry, Lily Mok and Mark Coleman (G00276019) Digital Business Give Rise to the New Economics of Connections Betsy Burton, Don Scheibenreif, Hank Barnes, Michael Smith and others (G00292457) Architect Your Business to Sense, Respond and Create Business Moments Betsy Burton (G00269234) Support Digital Business and the Nexus of Forces With Application Architecture Innovations Anne Thomas (G00266394) What CIOs Need to Know and Do to Exploit Cloud Computing Donna Scott (G00310075) For more information, stop by Gartner Research Zone.
Editor's Notes
- We are now knee-deep in the era of digital business, with many companies reimagining their business and operating models based on digital capabilities. The 2016 Gartner CIO Survey reveals that leading businesses must shift to platform thinking in terms of their business models, delivery mechanisms, talent and leadership, in order to survive and thrive. We would like to thank the many organizations and individuals that generously contributed their insights and experiences to the research, including: • The contributors to our interviews and case studies: Jeff Schreiner, Ardent Mills (U.S.); Jing Wang, Baidu (China); Claus Hagen Nielsen, COWI (Denmark); Bruno Cocchi and Cristina Cocchetto, Grupo Coin (Italy); Chris Saul, Hitachi Consulting (U.K.); Kotaro Takada, Huis Ten Bosch (Japan); Rence Damming, Irene Vanderkrol and Dennis Groot, KPN (Netherlands); Tobias Hjärtsjö, LFV (Sweden); Alberto Campos, Localiza (Brazil); Paul Clarke, Ocado (U.K.); Kenneth Verlage, PostNord (Sweden); Tan Kah Chai, Sime Darby (Malaysia); and David Brinkman, Whirlpool (Italy). • Other Gartner colleagues: Peter Andersen, Marcus Blosch, Frank Buytendijk, Freud Carvalho, Youn Choi, Jeff Cole, Jan Eriksson, A.J. Goldsmith, Alan Goon, Shannon Greene, Carina Hansen, Robert Heselev, Heather Keltz, Kathy Kenny, Kazunari Konishi, Poh-Ling Lee, Changhua Li, Venecia Liu, Jack Mason, Jennifer Mitchell, Rika Narisawa, Else-Marie Ostling, Paul Proctor, Claudia Ramos, Guido Repaci, Alistair Tipple, Charlize Wang, Melissa Rossi Wood and Guang Zhou. • Other members of the CIO and executive leadership research group: Suzanne Adnams, Jim Browning, Owen Chen, Ed Gabrys, Partha Iyengar, Jorge Lopez, Eiichi Matsubara, Alvaro Mello, Mary Mesaglio, Simon Mingay, Tomas Nielsen, Mark Raskino, Andrew Rowsell-Jones and Ansgar Schulte.
- In "Taming the Digital Dragon: The 2014 CIO Agenda," we introduced the impending wave of digitalization, and asked CIOs to think about renovating the core, building bimodal IT capability and creating powerful digital leadership. In the 2015 CIO Survey, we confirmed that digitalization was coming to all enterprises, and in "Flipping to Digital Leadership: The 2015 CIO Agenda," we advised CIOs to adopt radically different approaches to information and technology leadership, value and risk leadership, and people and culture leadership. Data from the 2016 CIO Survey and the 2015 CEO Survey (see charts) shows that we are now deep in the era of digitalization, and getting ever deeper, with the average CIO expecting digital revenues to grow from 16% to 37% in the next five years. Similarly, public-sector CIOs are predicting a rise from 42% to 77% in digital processes. Trends in the 2015 Gartner Board of Directors Survey reflect similar results.
- Survey responses in this figure show that the top impacts of digital are still relatively operational for most businesses: driving revenue through better operations, using digital channels more and forming tighter partnerships. Much of this may be about doing the same thing digitally rather than reimagining the possibilities in the light of digital capabilities.
- Businesses and government agencies are looking less like fixed "systems" and more like platforms. A systems view of a business envisages it as having a very clear inside and outside, with suppliers providing inputs, and internal people, assets and capabilities creating products and services through "step-fixed" business processes — fixed in the short term but changeable over time at significant cost and risk — and delivering the products and services to customers. The function of the systems business model is to deliver value to the customers and retain some of that value as profit. A platform provides the business with a foundation where resources can come together — sometimes very quickly and temporarily, sometimes in a relatively fixed way — to create value. Some resources may be inside, permanently owned by the company; some will be shared; and some can come from outside. The value largely comes from connecting the resources, and the network effects between them. Customers choose the value that they experience, and the business model focuses equally on generating value and learning.
- Economists have noted that even the biggest and most successful companies in the world are looking more like platforms and less like product factories. Marshall Van Alstyne of Boston University and MIT, a leading thinker on the topic of platform businesses, has said that "platforms beat products" and that 14 of the top 30 global companies are in some sense platform businesses, with their value being driven by ecosystems. Platforms require different economic thinking, and are potentially very powerful, in that their network effects can create tremendous momentum, lending considerable value to first movers.
- Note: Need to check and clean-up this visual for consistency with other Gartner positions in peer review – particularly Don Scheibenreif and Steve Prentice
- Not every business is ready to be a platform business due to its economic model, but the concept of platforms is important to all businesses — public or private sector, large or small, information-intensive or physical-asset-heavy. Key aspects of a platform business that distinguish it from the more traditional systems view of a business are as follows: • Creating value through connections and interactions rather than ownership of individual resources • Flexible, dynamic connections rather than fixed hierarchies • Semiporous boundaries rather than hard delineation of inside and outside, exposing components that are not yet products to the outside, and allowing resources to be accessed from the outside • Supporting continuous learning and change rather than focusing on "running the machine" with expensive step-fixed change Technologists have long understood the notion of platforms in terms of internal architectures (buses, APIs, object orientation, modularity, reusability, etc.) and technology products and services. The challenge is that sometimes these platforms have been designed for technical elegance rather than business value. Technical platforms are a view from the bottom; platform economics is a view from the top. The change happening now, and the insight gained from this year's CIO survey is that platform concepts need to penetrate, and are penetrating, all aspects of the business. Specifically, the CIO survey results and case study interviews reveal the need to exploit platform effects in managing talent and delivery, and in executing leadership. The rest of this report shares powerful practices, case examples and action plans around exploiting platform effects in these layers of business.
- The need to innovate is driving penetration and deepening of the bimodal construct. Bimodal captures the platform characteristic of continuously building and refactoring capabilities for the future.
- Not every business is ready to be a platform business due to its economic model, but the concept of platforms is important to all businesses — public or private sector, large or small, information-intensive or physical-asset-heavy. Key aspects of a platform business that distinguish it from the more traditional systems view of a business are as follows: • Creating value through connections and interactions rather than ownership of individual resources • Flexible, dynamic connections rather than fixed hierarchies • Semiporous boundaries rather than hard delineation of inside and outside, exposing components that are not yet products to the outside, and allowing resources to be accessed from the outside • Supporting continuous learning and change rather than focusing on "running the machine" with expensive step-fixed change Technologists have long understood the notion of platforms in terms of internal architectures (buses, APIs, object orientation, modularity, reusability, etc.) and technology products and services. The challenge is that sometimes these platforms have been designed for technical elegance rather than business value. Technical platforms are a view from the bottom; platform economics is a view from the top. The change happening now, and the insight gained from this year's CIO survey is that platform concepts need to penetrate, and are penetrating, all aspects of the business. Specifically, the CIO survey results and case study interviews reveal the need to exploit platform effects in managing talent and delivery, and in executing leadership. The rest of this report shares powerful practices, case examples and action plans around exploiting platform effects in these layers of business.
- The top areas of new technology spending (see figure) make it clear that significant spending and opportunity continue in various aspects of big data and analytics, and that cloud continues to have significant momentum, As has always been the case with business intelligence, the key to big data is to point it at opportunities to harvest real business value from insight. Infrastructure and data center spending continues to be very high on the list, confirming the large amount of expenditure it continues to represent. Note that enterprise approaches to digital are more varied and unique than approaches to traditional IT. The top five priorities represented 55% of the priorities mentioned in 2014, only 47% in 2015 and an even smaller 44% in 2016. This implies that the pressure is on to be smart and selective in choosing digital focus.