Reinventing IT to Support Digitization

Tech.

More connected consumers, automated processes, and sophisticated analytics place unprecedented demands on IT functions. Many companies are struggling to cope, and they seek to deliver on new demands by adding piecemeal elements to their existing operations. Yet what’s really required is the reinvention of IT entirely, which can help incumbents compete against digital attackers and even create a new strategic advantage.

This is easier said than done. Reinventing the IT function requires far-reaching changes, from talent to infrastructure, and takes multiple years to complete. Fortunately, companies can adopt an approach that delivers results quickly while still reshaping IT for the long term. This two-speed approach requires first building a “high-speed” IT function to work alongside the existing IT function, focusing on one or two valuable business areas such as web and customer relationship management. It enables the company to address its most critical IT areas within 18 months before scaling up to cover the remaining areas. Successful transformations avoid fractures between the high-speed and legacy IT functions and are driven by the CEO and business leaders who treat it as one of their top priorities, not just as an “IT effort.”

Many IT functions struggle to support digitization
Digitization changes the demands on IT in three principal ways. First, digitization requires increasingly sophisticated technology. Netflix’s recommendation system, for example, analyzes terabytes of data to successfully recommend 70 percent of customer choices. Booking.com’s proprietary search and caching system allowed it to become the world’s largest hotel site, searching more than 450,000 properties for consumers. Even coffee chains are now introducing sophisticated mobile-payment and loyalty apps.

Second, greater IT-delivery performance is needed across the board (exhibit). While efficiency was previously the most important performance measure for many companies, now everything matters. Time to market is critical as businesses compete on how quickly digital innovations get to consumers. Reliability is paramount in a world where downtime stops sales and where, unlike the physical world, no manual work-arounds exist. Security is essential because a broader online footprint drives new vulnerabilities and the potential for greater losses. Many IT functions that have historically optimized for efficiency lack the capabilities to scale up quickly, so it becomes even more difficult for them to meet these new demands.
Culled from: http://www.mckinsey.com

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