Do not innovate, stay low and keep calm
It seems that in the world of today there is only one solution for your problems: Innovate! Sure, there are plenty of examples that show that IT innovation pays-of. For instance: WhatsApp was introduced in 2009. In only a few years it smashed the telecom business model. Less radical, but with the same impact is the up rise of Coolblue, an online retailer in the Netherlands which is specialized in electronics. Within a couple of years Coolblue managed to become one of the best web stores in the Netherlands and a threat to others in the same industry. So how do you survive the digital revolution? For some focusing on IT innovation might be the best but for too many innovating will not be the answer.
Disruptive IT has a huge effect on almost every business; we just do not know when which business will be hit. Depending on how you manage the company it may come in different forms. It can come as Nassim Nicholas, black swan crashing in to your window, or growth into one of Ansof’s big fat cash cows. It can hit you as a meteorite destroying the business or it can be the gold you are hitting in the ground while you were searching for iron. But if you think that innovation is the only answer to survive then think again, you might be wrong. It might be that focusing on simplification of your IT is the real savior.
Let’s be clear about the definition of innovation. Innovation is not just the introduction of a new idea, device, or method. It is the successful introduction of a change in the form of a product or service. Innovations are rare as most ideas fail. I’m sure that you and your colleagues have plenty of breakthrough ideas, but most fail in execution, according to the statistics. The likelihood that within your company the next Steve Jobs or Elon Musk will stand up is quite small. The probability that you will invent the next big thing is even smaller. Why focusing on something that will have a probability of 1 to 1000 to succeed?
The argument to focus on simplification is not because succeeding in innovation is less likely. It is because you can win much more with it than you probably think. So when should you focus on IT simplification instead of IT innovation:
- IT is not your core competence: If it is not a core competence, someone else can do it better. Why not focus on the things you are good at?
- Your IT complexity is high and product margins are low: Let’s be honest; IT is not complex, humans make it complex. Mergers, new laws and reorganizations are examples of events that can turn IT into a nightmare. Even a simple ERP system can turnout in a monster after ten years or entering data & adjustments. Complex IT is expensive and in low margin industries it can be the bottleneck.
- Legacy IT is one of your major IT issues: A common mistake is to build a new digital function on top of legacy IT. It is complex, expensive and limited. Building IT innovations on top of legacy IT might be a good idea at first glance but it does not solve the problem in the long run, it just conceals it for a while. While the first and second arguments are not against innovation, this third argument is. Building innovations on top of legacy platforms makes IT complexity higher and thus more expensive.
You might conclude that all of the above is true, but that you do not have the luxury to postpone certain innovative IT tooling. If that is so then you surly do not have the luxury to keep IT complex and expensive. Keep in mind that simplifying your IT organization is not only a matter of savings. It is helping you to reduce implementation time and increases your possibilities. The solution is simple, but not nearly as sexy as innovation:
- Clean-up your IT function: Start with rationalizing your application landscape, optimizing processes and shutting down systems. Remember when you first bought a house. Ten years later, isn’t it stuffed with products that you do not need? And isn’t it the same in your business? The real challenge is not only to clean, but make sure it stays clean. Life cycle management is important to keep applications at a minimum.
- Outsource IT that is not (affiliated with) a core competence: After the big clean-up, only essential IT is still running. The question that remains is how it should be operating. If it is not part of your core competence the chances are that another can run it better, cheaper and faster.
- Build a solid relationship between your IT organizations, the business and the client: The first and second step create a healthy IT function, the third step creates a healthy business. You have IT suppliers, an internal IT organization, business demand and customer demand. All of those have to be aligned. The IT organization will increasingly perform a control function between the business and IT partners.
Roadmap towards success
The title of this article needs some clarification. Yes, it can be best to focus on simplification instead of innovation in the short run. No, you cannot survive in the long run without innovation. The world is changing fast and you need to keep up, reacting fast and adequate. To do so you will need a simply and lean IT function.
The three step solution in this article will help to realize a sustainable business. Your organization has a simple and efficient IT organization after step one. After step 2 the organization as a whole has a better focus. Step 3 is completing your simplification journey making you ready to innovate! After creating a simple and focused IT function it is much easier to innovate and digitalize. Just remember that it is much easier to change without carrying the IT burden of the past.