written by Carsten Linz, Global Head of SAP Center for Digital Leadership
Somewhere between the battle against one-person startups and giant conglomerates, IT leaders in small and midsize businesses are caught in sweeping digital disruption. Lines of business within the company is adopting cloud computing, mobile apps, analytics, and a variety of other technologies with unprecedented savviness and ease. And slowly but surely, the technology budget and decision-making power are shifting to business areas outside of IT.
Although it appeared IT responsibilities were becoming less strategic beginning a few years ago, digital transformation is marking an era that requires, in contrast, more IT leadership. In fact, The Economist Intelligence Unit study “Digitising IT: Catalysts for Growth” recently revealed that 44% of senior executives from firms with annual revenue between US$250 million and US$500 million prefer IT to devise and implement a digital transformation strategy. The report also indicates that there is much work to be done since 60% of the senior company leaders are dissatisfied with IT’s contribution to digital initiatives so far.
The message is clear: IT leadership has a distinct opportunity to take on a greater role in digital transformation and drive value and differentiation. But is it possible for IT to stop operating as a cost center that keeps the lights on and to emerge as a digital innovator that drives revenue and a competitive edge for the organization?
In search of relevance in a digital world
In many small or midsize business, IT still wants to control centrally every piece of technology introduced into the organization. However, this desire for such heavy-handed governance is often counterproductive to the company’s overall direction, especially in a digitally aware culture where achieving greater speed and flexibility can be pivotal.
This new environment requires transformational leadership with an entrepreneurial flair for innovation, which can encourage a new breed of digital leaders. As new methodologies are applied to implement, scale, and realize value from digital technology, IT organization must become knowledgeable about approaches such as design thinking, agile development, and lean start-up to keep pace with growing business needs and new rules of employee engagement. And last but not least, opportunities from several breakthrough technologies hitting scale together – including in-memory computing, exponential device growth, hyperconnectivity, robotics, 3D printing, virtual reality, and artificial intelligence – must be converted into relevant customer use cases and offerings.
How IT leadership can regain relevance in a digital era
IT alone cannot drive digital transformation. To bring outcome-based leadership to the table, IT leaders should engage executive peers in deep conversations about the opportunities and risks of the digital world. Then they can advise on how to drive the business based on real-time insight and digital capabilities within the scale of budgetary and resource limitations – strengthening the firm’s innovation pipeline and overall competitiveness.
To demonstrate the value and relevance of the IT function, there are four things IT leaders should do consider when digitally transforming their small and midsize businesses:
Play the field.
Transform with IT expertise and business acumen.
Drive platform-based innovation:
Place bets strategically: Stop projects if they only aim at digitizing incremental improvements of existing businesses. Focus instead on pilot projects that generate new revenue streams. “Shoot for the moon” when cutting-edge use cases, such as the transformation of the operations or business model.
Digital transformation gives IT leaders an opportunity to empathize with nontechnical needs, tap into the experience mindset of customers and consumers, and become the translator between digital technology push and next-generation market pull. Done right, IT leaders can ensure every digital initiative is strategic, secure, and scalable enough to drive future growth and competitive edge for the company.
To learn how your business can embrace the promise of the digital economy, check out The Economist Intelligence Unit’s recent report “Digitising IT: Catalysts for Growth.” Be sure to check every Wednesday for new installments to our blog series “Leading Through Digital Transformation,” to explore the various leadership roles in today’s growing small and midsize companies.