Since the 2008 economic recession, companies have looked to innovation to fuel growth. You see this in the wide range of digital investments for everything from mobile apps to business processes to financial products.
This has led to a significant increase in spending on digitization, but it’s often not managed as a whole. In an MIT CISR survey of over 2,000 CIOs, we found that only 39% of digital investment is in the IT budget. The rest is spread throughout the enterprise, creating as many as seven “islands” of digitization.
To better understand how companies are facing this digitization challenge, in addition to performing the survey, we studied ten enterprises and found three main approaches:
Convergence: This approach involves bringing all digitization investments together, usually under one executive. By extracting and standardizing what is common in products, you can then use these features in every product. This often requires creating a new organizational structure to consolidate people, data, infrastructure, skills, and management processes. The goal is to facilitate efficiencies and synergies across the company.
Commonwealth Bank of Australia is a good example of a company using the convergence approach. The company has combined operations and IT into a new unit headed by the CIO called Enterprise Services. As a result, the bank has reduced costs and become a leader in customer experience.
Coordination: Companies using a coordination approach retain their digital islands, yet build mechanisms or bridges to help deliver enterprise goals. Using coordination, BMW created two committees focused on digitization to meet specific company goals. As one of those goals was the design and delivery of a custom car within six days, the committees ensured that each island created and exchanged the necessary information to make that happen. This approach works particularly well when there are one or two company-wide goals like BMW’s custom car. For other companies, the goal might be meeting a new regulation, lowering costs, or improving customer experience.
Separate Digital Innovation Stacks: Enterprises that use a separate stacks approach focus on innovation and local management. Each separate stack—such as different product groups, business units, or geographies—runs its own part of the business autonomously to maximize its local value. These companies tend to have decentralized management and diversified businesses. You can see this at Microsoft, which runs Xbox differently (and separately) from Windows and Bing.
Total digitization is a significant opportunity and challenge, so it’s important for companies to find the right approach for their efforts. Which approach (or approaches) are you using for total digitization?
This is the first blog in a two-part series on total digitization by Peter Weill, a senior research scientist and chair of the MIT Center for Information Systems Research (CISR), and Stephanie Woerner, a research scientist at MIT CISR. You can read a related research briefing, “Managing Total Digitization: The Next Frontier,” with free registration on the MIT CISR website.