As enterprises concern themselves with the companies that have been disrupted over the past decade, new competitors are rising. According to a study by Washington University’s John M. Olin School of Business, 40% of the Fortune 500 companies from 2014 won’t exist by 2024.

While Fortune 500 turnover has been the result of mergers, acquisitions, and bankruptcies, the driving force behind these changes has been failure to adapt to disruption.

Emerging disruptors have the freedom to leverage technology to capture market share. Meanwhile, many incumbent executives are failing to recognize their blind spot for the speed with which technology is changing business.

Even the companies that recognize a need to change face challenges. Changes in the marketplace, competitors coming into the market from new angles, new product strategies - things are moving too quickly for enterprises to always build new technology internally. Instead, they turn to mergers and acquisitions or try to work differently with partners to incorporate new capabilities in their organizations.

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The problem with this approach to change is that it creates discontinuities in business operations - both today and in the future. Each piece of technology was built with a specific set of business operations in mind. Stacking them on top of each other increases complexities that become so intertwined that it’s almost impossible for enterprises to reach their intended operational future.

CIOs can’t just solve these multifaceted problems by implementing more technology on top of old technology or planning a single project within the course of a budget cycle. It takes time to unravel the complexities and realign enterprise technology to achieve ongoing success with digital transformation.

Solving the operational discontinuities and enterprise technology complexity requires a strategy that is more deliberate and ongoing compared to the typical short-term approaches executives take.

Instead, CIOs should develop integrated, multi-year roadmaps that simultaneously address both complexity and disruptive innovation as a way of life. This mindset has implications on everything from business renewal to budgeting to architecture to software development.

Recognizing the Need for a New Enterprise Technology Strategy

Start-up disruptors have an inherent advantage over their incumbent competitors - they are unhindered by enterprise technology complexities. If enterprise executives could spend their money on innovation rather than dealing with these complexities, it would be easier to spot the white space available to earn revenue, rather than thinking of how to increase profits in the existing market.

The reality of enterprise technology complexity forces CIOs to go on the defensive, addressing only urgent symptoms and easily-fixed operational problems with new technology, thus adding to the ongoing issue. It can be difficult for CIOs to get their business partners to recognize the need for a new enterprise technology strategy - these partners want quick wins and fast results, not a 3-year plan for massive investment.

Education and timing is very important to obtaining the buy-in necessary for changing the way IT strategy and innovation is done. From a timing perspective, many scenarios exist. But some of the most common are:

Mergers and Acquisitions

As discussed, mergers and acquisitions for short-term tech capabilities lead to long-standing complexity. So many enterprises are still using mainframes, client server systems, or are still largely in a web environment because those were the technologies that were state of the art at the time of the acquisitions. However, tech is now cloud-centric and trending toward micro-services.

During periods of organic growth, it’s easy to see the wisdom of just stabilizing and scaling. But mergers, acquisitions, consolidations, etc. represent some of the best catalysts for resetting the strategy for transforming the enterprise landscape. These are great opportunities for attacking operational complexity, preventing technology sprawl, future-proofing against ongoing disruptions and capitalizing on faster innovation cycles.

New CIO Hired

When a new CIO is hired, he or she may be from outside the company and must quickly come to terms with what they’ve inherited. For example, amidst rapid business change, CIOs can face two types of challenges - concrete organizational challenges and softer challenges surrounding culture and talent. Meanwhile, business partners want a quick fix to their problems, which are often caused by the lack of attention to complexity in the years leading up to the exit of prior CIOs.

An outsider perspective could be the perfect time to recognize the macro-level issues and educate the business partners on how instrumental they are to addressing root causes.

Eroding Margins

CFO’s often look at the technology function as an indirect or SG&A cost. So when margin pressures force a cost reduction exercise, the technology function is scrutinized for excessive expense. Salaries, bonuses, travel, training, software licenses, etc. are all on the table. The CIO’s challenge is to demonstrate an alternative: that is, the role of technology in driving out costs in the rest of business, which should be a force multiplier compared to straight up budget cuts.

Are you building a technology roadmap with a financial roadmap?

The first step is to establish the relationship between excessive business operations complexity (and cost) and technology spending. The CIO is often the only executive that has visibility into existing redundancies and inefficiencies since they are always manifested in duplicative systems. The second step is to establish the benefit of reducing this complexity - not only in terms of business costs, but also in terms of technology leverage.

Attacking this complexity in the technology function frees up incremental IT investment spending for disruptive innovation. Incremental funding for new areas may still be required, but it’s important to exploit every possible avenue for turning the technology function into an operational lever instead of being a consumer of corporate expense. And the inverse is also true. Incremental funding by itself cannot eliminate the sources of complexity. It requires a business/technology partnership.

The bottom line is that enterprises must understand that what they think they want (silver-bullet technology to fix an immediate problem) is what causes the macro-level complexities that hinder digital innovation.

There will always be tactical problems, which is why a business-driven technology strategy isn’t just a 3-year strategy to invest heavily in on overhauling enterprise technology - it’s a multi-year plan that lays out both tactical and long-term expectations.

If you want to understand more about our methodology behind a business-driven technology strategy that will evolve your IT strategy and drive innovation within your organization, download our free guide, Enterprise Technology for Business Outcomes.

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