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Organizational culture

In the age of digital everything, is it time to eliminate IT?

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As companies grapple with artificial intelligence, the “internet of things,” and implementing digital platforms, information technology departments are once again in the spotlight.

But could the IT department’s very existence — and the wall that is too often erected between technologists and the rest of the business — actually be the reason many organizations are having difficulties embracing digital opportunities? A new study from MIT’s Center for Information Systems Research by principal research scientist Joe Peppard and research scientist Nils O. Fonstad suggests this could be the case.

For years, chief information officers have focused on aligning IT investments with the business’s strategic goals, but Peppard and Fonstad argue that’s the wrong approach. Instead, they maintain that organizations should be seeking to “co-evolve” the investment portfolio in technology with customers and the broader ecosystem.

The pair found that as firms are shifting their focus to the needs of customers, they are empowering a greater number of cross-functional teams throughout the organization with data and digital technologies to better understand and address customer needs. In the process, they are integrating IT into the very fabric of the business as a whole. The result is that in some cases the responsibilities of IT are expanding, in other instances they are shrinking — and in some rare cases, IT departments are being eliminated altogether.

The researchers’ insights were drawn from interviews with 56 chief information officers and business leaders from around the world.

“It’s no longer about aligning IT with the business,” Peppard said. “That sort of sets you up to fail, because in many ways, it suggests that technology is subservient to business — that the IT unit is sort of an order-taker. It doesn’t recognize that today, in a digital world, technology provides tremendous opportunity to actually shape not just the strategic direction of an organization but meet operational ambitions too.”

Achieving alignment is built on the assumption that the business can specify requirements precisely, when reality is far more complex and uncertain, said Fonstad.

“The interdependencies are much richer,” he said. When technology is baked into the fabric of an organization and embedded in products, processes, work practices, and customer engagement, the focus is no longer on just the technology requirements of the business, they write.

“In an attempt to improve the situation, the temptation is to focus on the IT organization,” Peppard said. “The challenge is much broader and really about how best to organize for IT — and that’s fundamentally different. We’re beginning to see companies having no IT department, or working towards redistributing responsibilities that were previously seen as falling under the remit of their IT department. This can also mean establishing new roles.”

In creating new digital offerings, for example, instead of handing down directives, business leaders should instead ask: What do our customers want? How do we find that out? and What is our technology capable of offering them?

Fonstad and Peppard recommend shedding the traditional, linear product-development process and adopting a more agile, iterative approach that allows firms to shift technological capabilities and adapt to changing customer needs more rapidly.

“That whole linear kind of process doesn’t work anymore,” Fonstad said. The new approach is “much, much more iterative, cross-functional, and co-evolutionary. It involves multiple functions within an organization, and external stakeholders — most importantly, the customers. If we take co-evolution seriously, it’s going to lead to significant changes in the way work is done, and that’s what we see a lot of organizations struggling with.”

Peppard and Fonstad said organizations that want to shift their narrative on IT-business-alignment should:

  • See the digital strategy more as an agenda for persistent engagement with customers and their ecosystem rather than as a basis for a technology implementation plan.
  • More heavily involve customers in the development process by testing out minimally viable products or prototypes to see what works and what doesn’t, and harnessing complimentary data on customer behavior to draw out interests that the customers themselves may not have known they had.
  • Reward teams that are innovating to improve the customer experience.
  • Recognize that technology is not just an enabler, but a shaper as well, allowing companies to do things that are not possible without it.
  • Emphasize that digital is the responsibility of everyone in the organization, not just one dedicated unit, and adjust accordingly.

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