Digital Maturity Model – A Framework for Planning Digital Transformation

A Digital Maturity Model approach for breaking legacy system 'innovation gridlock' and evolving the IT team from an operational to a strategic business capability.

The central challenge for large organizations and their ambitions for Digital Transformation is that their IT organization is mainly operationally focused.

From providing help desk support for printers and PCs through maintaining the legacy data centre servers and applications, most of their time and budget is consumed with ‘keeping the lights on’, there is little left for the new skills and new ways of working that Digital Transformation requires.

Digital Maturity

An ideal way to plan a route forward from this position is through the lens of Digital Maturity, comparing your current state to a progressing capability ladder and from that planning a step by step evolution.

MIT recommends shifting the focus from digital transformation to digital maturity, and with Deloitte describe how to Achieve Digital Maturity through Strategy Driven IT Transformation.

The Digital Transformation People describe the Digital Transformation Pyramid, a visual way to define the structures for connecting top level business model strategy through corporate change management and ultimately technology implementation, to understand what key corporate patterns may be weak or missing.

McKinsey explores Six Building Blocks for how specific sections can be quantified as major capabilities, and a number of maturity models are available for organizations to compare their current state and plan a roadmap for advancing towards this overall target operating model.

CIO writes an initial outline for how to adopt this approach and a mix of templates, service engagements and industry-specific models include Forresters DMM 4.0, EY’s Digital Readiness assessment, the Government of South Australia Digital Strategy Toolkit, the Open Roads Open Digital Model, the TM Forums DMM for the telco sector, the Digital Maturity Matrix for the voluntary sector.

Others discuss implementation approaches like MIT Sloan, Geoffrey Moore and Wardley Mapping. Cognizant offers a white paper detailing six stages of transformation, and ZDNet offers a model from a context of Social Business.

IT value transformation – breaking innovation gridlock

In 2010 HP identified the most commonplace challenge facing CIOs seeking to embrace digital transformation: “Innovation Gridlock“, describing “a situation where the IT organisation is blocked from driving new business innovation because the majority of funding is consumed in operating the current environment.”

With so much of their focus and resources consumed in simply maintaining the existing legacy estate then little is left over to deploy new innovation-enabling technologies, and so this gridlock is a constraint that needs addressed.

A headline resource from VMware to explain this in more detail is this study commissioned from the IT Process Institute, their white paper: ‘IT Value Transformation Roadmap‘ 3 (24 page PDF).

Specifically the paper makes the point that this evolution results in the CIO being recognized for delivering strategic IT value:

“What is strategic IT value? Strategic IT value is demonstrated when IT plays a key role in a company’s achievement of overall business strategy. In other words, when IT is keenly focused on business outcomes and plays a significant role in optimizing and improving core value-chain processes. Or, when the IT organization drives innovation that enables new technology-enabled product and service revenue streams. When IT is effective, results can be measured by improved customer satisfaction and market share gains.”

In contrast many CIOs can find themselves boxed into somewhat of an operational corner – Responsible for keeping the lights on but perceived as poor value-for-money and as a result unable to attract new funding to modernize the dead weight legacy systems, a paradox and trap.

The IT Process Institute describe how CIOs can break this constraint cycle and shift from a cost focus to delivering strategic value for the business, through this three-step progression, and by doing so, breaking the Innovation Gridlock.

In this document they offer a blueprint for a Cloud Maturity Model, a 3-Step evolution that begins with virtualization and grows into full utilization of Cloud computing across three stages of:

  1. IT Production – Focus on delivering the basics and proving value for money.
  2. Business Production – Utilize technology to better optimize business processes.
  3. ITaaS – Fully embrace utility IT as a Service, and leverage technology for enabling new service innovation.

This corresponds with an increasing maturity in the use of virtualization, SaaS and other Cloud architecture principles and external services, that begins with where many customers are now, mostly half way through phase one, completing their adoption of internal virtualization.

Technology is embedded in the firms value proposition

The same improvement steps are repeated in the IT Strategy Alignment work also from the IT Process Institute, where they build on previous research from McKinsey that describes three main ‘IT archetypes’, three distinct stages of assessing IT organization maturity:

  1. Utility Provider – The IT organizations is predominately operational, only responsible for running the common IT infrastructure, such as email or servers for the accounting software, but playing no role in defining how they are strategically employed. Typically they report to the CFO as a cost centre.
  2. Process Optimizer – Increasingly the IT team starts to engage more proactively with the business, at the individual department level helping them better optimize their business processes.
  3. Revenue Enabler – Technology becomes a core component of strategic planning, directly enabling product innovation and competitive advantage, reporting to the CEO.

This corresponds with the same end goal of Robert Golds matrix, where the pinnacle of maturity is that “technology is embedded in the firms value proposition”.

Smart Connected Products

It is eloquently described by the world’s most regarded management guru Michael Porter, who described that we are entering a third era of how IT can be applied to achieve competitive advantage, the era of the Internet of Things.

Previously technology wasn’t an integral part of products, it was used only to automate their surrounding operations like sales and distribution.

Now, through embedded sensors, processors, software and connectivity, technology is becoming part of products directly, and from this new opportunities for competitive advantage emerge. Businesses that integrate technology directly into their products, like ‘Wearables’, are achieving this ultimate position of technology maturity, embedding it into their firms value proposition.

Investing in cloud computing will build a platform for the IT organization to progress through these maturity scales, first enabling greater process optimisation and then ultimately becoming a strategic asset that underpins new growth for the organization.

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