Surveying the "new normal" it landscape

As economies emerge from the downturn, a restructuring of the economic order, a "New Normal," is being defined. With persistent uncertainty, tighter credit, lower consumer spending and greater government involvement predicted, what does the New Normal mean for IT leaders?

 

A new McKinsey report predicts CIOs and IT leaders will have to make the IT function dramatically more productive, use IT more effectively to meet larger company goals, and embrace disruptive technologies that will shape the new economic terrain. 

The report goes on to says that overcoming challenges that have limited IT’s performance in recent years will be first and foremost for IT executives and CIOs:

• They must promote a much closer alignment between IT and the business units by embracing new organizational models that call for joint decision making. IT leaders will need better business skills, not just technical know-how.
• IT productivity efforts must leap beyond cost cutting at the margins. CIOs will have to make fundamental changes in the way IT operates and campaign for technological improvements that will transform cost structures and operating models throughout the enterprise.
• IT leaders must join with their business counterparts to seek out and implement technology based innovations that will give companies long-term competitive advantages in a tough economic climate.

While many experts point out hopeful signs of a turn in the recession, only 42% of executives expect to perform better in 2009 than 2008, so overall cost pressures on companies will remain unrelenting for some time. IT organizations will have to do their part in reducing budgets through productivity savings, as well as self-funding investments in everything from new servers to improved IT architectures.

Making business processes more efficient and effective is at the top of the list for many executives and they will require IT to make dramatic enterprise-wide improvements in processes. At many companies, the IT function and the business side fail to coordinate their activities sufficiently, which makes organizations less efficient and effective and impedes the collaborative effort needed to adopt and apply game-changing technologies.

To meet the new demands, CIOs and IT leaders should start with efforts to tear down the remaining walls between IT and the business in order to focus on ambitious targets such as upgrading IT operations and enabling IT to improve corporate performance. The new normal brings more urgency to finding a solution to the imperfect relationship between business managers and their IT counterparts—one that will demand better governance, as well as a broader range of management skills among IT executives.

A flexible and focused IT organization will be better positioned to enable top-line growth and more open to innovative technologies and the new business models they imply. In the new economic landscape, customers will wield more power than before and IT systems can provide the interfaces (such as online self-service) for reaching them. It is essential for IT managers, at all levels, to understand the needs of the business’s customers—not just those of IT’s internal customers—and to think creatively about how to help the business serve them.

McKinsey calls for companies to choose IT leadership carefully, “it must recognize that technical skills alone are no longer sufficient. To be valuable partners for business unit leaders, their IT counterparts must not only be well-grounded in strategic planning, finance, and executive level communication but also have deep industry knowledge and experience.” Recruiting remains critical to filling talent gaps but companies can develop capabilities across functional areas by rotating IT leaders through business roles and business leaders through IT roles. Special expertise can also be leveraged with consultants who bring subject matter expertise and strong consulting skills.

Companies are advised to develop their ability to identify transformative opportunities, along with a heightened awareness of the competition’s possible disruptive maneuvers. They must foster and reward experimentation by role modeling the new mind-set, clearly communicating  the new objectives, investing to give executives and staffers alike higher-level skills, and creating new incentives.

McKinsey concludes that, “The traditional IT mind-set aims to capture the value of technology through top-down planning, formal structures, and clearly defined processes. In the New Normal, the mind-set for success will emphasize a bottom-up search for value through experimentation with customers and partners. Winning CIOs and IT leaders in this new era will view uncertainty and an extremely demanding operating environment as opportunities to challenge prevailing assumptions about the role of IT.”

Contact Software Consortium or call 1-877-850-9393 for a copy of the full McKinsey article or to discuss how to leverage our top-level talent to empower your business.

 

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