Digital transformation is far from a level playing field. For many small or medium businesses the path to modernization includes several barriers. These obstacles are often even more pronounced for that business in non-technology sectors such as logistics, distribution, manufacturing, retail, education, engineering services, facilities management, health care operations and professional services.
These barriers can usually be summarised in terms of the understanding of digital transformation by the existing executive team, and the subsequent capacity to engage in such projects.
Most of these organizations often fail to understand what needs to be done to become digital despite an insistent feeling that ‘they need to do something’. This often progresses to the realization that they need some form of digital leadership.
However, it is at this point that the most acute impediments can arise. Companies of this size rarely need a full-time technology or digital executive and many mid-market organizations cannot afford the luxury of a full-time CIO to guide the strategic direction of their business.
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Defining the current position
Typically, these businesses have an IT manager focused on ‘keeping the lights on’ and day-to-day IT management. By comparison, digital transformation mandates a technology strategy, modernization program and change delivery aligned to the business.
This is often beyond the scope of an IT manager, and so is either left undone or delegated to another board member who rarely has the necessary time, experience, or expertise to do the job.
In smaller, leaner, private-equity-owned businesses, the executive team often lacks the ability to define the need for digital leadership. Or they may often take an approach that change and investment are unnecessary if things are currently ‘good enough’ – which is to say within accepted parameters and profitable. Consequently, these business face acute issues in justifying a full-time technology leader to bring about strategic change.
Yet the relentless pressure to modernize remains.
In the wake of the Covid-induced rush to digitalization, these businesses find themselves in a digital no man’s land: They know they must evolve and embrace digital, yet they also know they do not fully understand it.
They don’t have the need for a full-time resource - yet they know they need contemporary enterprise-class digital leadership and expertise.
They have seen the commercial result of their lack of action as they begin to fall behind in a world that is increasingly digital-first, but struggle to find a way to make it commercially viable to acquire the skills to address this issue. It is in this gap that the ‘on-demand’ or ‘portfolio’ CIO has grown.
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Defining the process
For the purposes of our discussion, we use the term ‘on-demand’ or ‘portfolio’ CIO or CTO. This reflects the fact that they are an augmentation or partner to an existing team. They will likely work with several organizations at a time, before a permanent appointment is made.
Even this simple definition begins to suggest the benefits of an ‘on-demand’ figure. The selection and engagement of a portfolio leader is typically fast and agile and they have a breadth of experience. We have found that this expertise across sectors is highly prized by many medium-sized companies looking to embrace digital transformation.
Typically, these businesses are looking to either enhance or create a digital business and technology strategy, focused on sustainable and pragmatic solutions that align with wider business objectives.
As such the on-demand CIO functions as the technology IT leader within the business. Their role is to advise, assure and mentor, extending the capabilities of any in-house team. This approach and role is designed to be flexible, augmenting the executive team whilst still taking ownership of delivering the necessary business outcomes.
There is a clear process for ensuring the best result from this style of technology leadership.
The first step is a key engagement between the executive / c-suite and the portfolio figure to get a clear handle on the business strategy. Modern business IS digital and as such technology leadership needs to understand the reasons for making any changes. This creates a strategy that can define the technology roadmap that drives investment priorities and the changes that the business must undergo.
Even at this early point portfolio CIO or CTO must ensure full c-suite, shareholder, and employee engagement. This is typically the point of most resistance, and much of that reluctance can be mitigated by clearly communicating any planned new ways of working. For example, if employees are asked for input on existing constraints and details of the issues they face ‘on the ground’ – they are usually a lot more receptive to the measures put forward for improvement.
This is not to overlook or understate the input of the portfolio CIO / CTO themselves. They will often make recommendations on the priorities of investment based not only on research amongst staff and leadership, but also on their varied experience.
An external figure is often a better candidate to align technology strategy to business objectives but still be separate enough to bring in objectivity, innovation and where needed, disruption to ensure that maximum value is realized.
The next step is to mobilize the priority items on the roadmap and get the change underway. At this point reality bites. This may be in the details of establishing individual projects, conflicts over resources or the realization that the business has entered the most expensive part of the process and reality bites. It is critical that the digital leader has extensive experience in effective change and program management/collaboration with the COO / CFO.
Throughout the period of overseeing change, on-demand CIOs are typically well placed to assess unanticipated impacts of changes that the technology causes elsewhere in the business. This is equally true for situations where the business must make unexpected, additional demands ON the transformation project itself, such as acquisitions.
It is at this point, when the fullest possible understanding of the digital transformation project has been realized, that the portfolio figure is in the best place to advise on the likely specifications for a replacement, if the need arises. This is very dependent on the organization and even the progress of the specific digital transformation project.
Defining a replacement
Digital-mindset CIOs with a track record of digital transformation success are incredibly rare. They are usually found within progressive technology firms and to be frank, businesses in older disciplines such as manufacturing, engineering, or logistics; or with a more legacy-orientated mindset, can look unattractive by comparison.
These traditional / legacy organizations often do not know where to look for digital business leadership. They can be somewhat averse to change, or playing frantic catch up to the leaders in their industry that have embraced digital business and transformation.
This rarity can have a huge impact on salary expectations. Whilst an IT director or even CTO / CIO may be salaried around £150,000, these roles (especially in an enterprise) are closer to a truly digital business leader that is likely worth over £250,00.
It must also be understood that there is tension here for the incumbent CEO. A digital business leader may very well become the architect of the ‘future digital shadow’ of the company and ultimately be able to replace the CEO. However, this concern is usually countered by the immediate need is to ensure that the company itself does not become irrelevant.
This tension is most acute when the on-demand CIO takes responsibility for the assessment and demonstrating ROI. They may also make recommendations to evaluate anything that needs changing throughout the business to create the outcome(s) sought. Following any transition to a new full-time technology lead, the on-demand figure remains as an advisory to the executive team to steer the new digitally-enabled business.
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Jaco Vermuelen, CTO, BML Digital