After 110 years on the Dow Jones Industrial Average, the last of its original members is out. This past June, General Electric was removed from the famous index, the bellwether of the US economy. GE, a giant of the industrial age, is no longer a prominent player in the American economy.
GE’s plight is not unique. Many enterprises are struggling to survive the transition to the ‘Age of Software’. Just when tech giants like Google, Facebook, and Amazon are finding it exceedingly easy to enter new markets, traditional businesses are finding it exceptionally hard to adapt to a new reality, one where software is responsible for a greater and greater share of the value they’re providing.
If “software is eating the world”, the road to success unequivocally goes through solving the challenges of software delivery. And the CIO is fast becoming the most important executive at the table.
But for CIOs who came up through the ranks of traditional businesses — not startups — the issues plaguing software delivery may feel insurmountable. Despite a lot of investment in accelerating and scaling software delivery, internal customers still complain IT is not delivering value fast enough, compared to the nimble newcomers nipping at their heels.
So what can CIOs do to turn software delivery from a liability to their strongest asset?
Developing and delivering new software products is, undoubtedly, the most important part of a CIO’s job if their company is to thrive in this new era. Thanks to the research of Dr. Nicole Forsgren, Co-founder, CEO and Chief Scientist at DevOps Research and Assessment (DORA), we know that high performance of any company’s tech organization is a strong predictor of its commercial success and ultimately, its survival.
Dr. Forsgren presented her research to an audience of tech and business leaders at a recent DevOps Enterprise Summit in London. She found that enterprises with high performing tech organizations are twice as likely to meet or exceed commercial goals of productivity, profitability, market share and number of customers. They will also achieve 50 percent higher market cap growth over three years.
How does a tech organization become a high performer? Through transformational leadership and vision. Transformational leaders do not wait for grassroots initiatives to bubble up and request funding. Rather they themselves have the vision and understanding of the organization’s long term goals, and they can communicate, inspire and support their teams to execute on that strategy.
And one of the top goals of any organization today is to accelerate value creation through software delivery.
Over the last decade, most CIOs have allocated some budget towards Agile and DevOps implementations. One can only imagine that these CIOs have also sat on the steering committee of a digital transformation initiative.
However, the reality remains that beyond a few isolated pockets of success within software delivery, as a whole IT is still not delivering fast enough. As a result, the business is still unable to achieve the velocity required to truly break away from competition and escape the threat of disruption by startups and tech giants.
There are three things holding IT back. If the CIO addresses these core issues, she can right the ship and sail her company through these turbulent times. They are:
1) project-oriented thinking
2) disconnected value stream networks
3) outdated managerial frameworks.
Most traditional IT organizations are still running in project mode, a recipe for failure. Budgets are allocated annually, projects are run against fixed timelines and milestones, there’s little flexibility for changing priorities, and no long-term thinking about the customer. Not to mention that come November all activities grind to a halt as projects wind down. Staff is soon reallocated to a new project, with barely a chance to ramp up, stabilize and specialize before moving on to something new altogether. Carmen DeArdo of Nationwide Insurance, recently described the inadequacies of this mode of operation at a Fortune 100 company going through its digital transformation.
In contrast, tech companies never fund ‘projects’. They fund and staff long-lived product-oriented value streams and measure them against business outcomes. Empowered, high-performing teams work to delight their customers by generating more and more value over the entire product lifecycle, instead of over the course of a single fiscal year.
Tech giants such as Google and Microsoft have invested hundreds of millions of dollars in creating in-house toolchains that provide end-to-end flow across the software delivery process. That’s what provides them with the efficiency, visibility and control they need to deliver the right things at breakneck speed.
Granted, traditional businesses cannot be expected to build their own integrated software delivery toolchain — nor should they. After all, it’s not their core business. Nonetheless, it’s a mission-critical capability they must have.
An end-to-end integrated software delivery toolchain is an essential infrastructure investment organizations must make in order to have bandwidth to accelerate their core mission-critical activities, as expressed so eloquently by Jeffrey Snover, Technical Fellow and Chief Architect at Microsoft.
Finally, traditional businesses are still applying managerial frameworks from previous ages, over-applying manufacturing principles on software delivery. But what was applicable to assembly lines is not applicable to the creative and iterative processes of rapid design, development and deployment required in software.
Digital natives know this intuitively. All of them have business-savvy techies at the helm, many of them engineers themselves, who deeply understand how to manage complex software delivery organizations against business outcomes.
Traditional businesses have equally smart and devoted leaders, but often lack the same intuition or experience. They need some help in the form of a prescriptive managerial framework to manage their software delivery organizations like the tech companies. Such a framework would help them correlate the flow of value through software delivery with measurable business outcomes, as described by Dr. Mik Kersten, CEO of Tasktop. To enable the extraction of end-to-end flow metrics, though, the technical infrastructure supporting value creation must be fully connected, abstracted and modeled.
Traditional businesses need their CIOs to lead them through this critical transformation. In the right hands, software delivery can transform from an IT liability to the company’s biggest asset and growth engine. And a visionary CIO, who delivers the business results of a high performing tech organization, will be heavily rewarded and emerge as one of the new winners of this transition period.