Five big ideas to avoid doing stupid digital stuff

It is time for executives to go ‘back to school’ to learn how to drive transformation using new digital technologies

US President Barack Obama coined the phrase “Don’t do stupid sh*t” to articulate his approach to foreign policy. This has subsequently been sanitised by the Whitehouse PR machine to “Don’t do stupid stuff” … but the intent remains clear. His strategy is to avoid making the same stupid mistakes as his predecessors. Fresh thinking is required.

This mantra can also be applied to IT policy. “Don’t do stupid stuff” is a pretty good approach to digital transformation. What, however, is “stupid stuff” in the digital age? ‘Stupid stuff’ is stuff that perpetuates the failed approaches of the past and which ignores new approaches made possible by new technologies.

Many executives, particularly in the public sector, are in the midst of a crisis of confidence regarding IT. Product and service innovation and organisational productivity are becoming increasingly dependent on IT solutions, but the track record of delivering digitally enabled transformation projects is poor (i.e. too much ‘stupid stuff’ happens). The gap between the “art of the digital possible” and the IT capabilities of IT departments is wide, and appears to be widening.

Cloud services have emerged at the intersection of web services, cloud computing, smartphones, digital multimedia, social computing, and advanced analytics technologies. The cloud services model is becoming proven in both the consumer and enterprise markets, and there is emerging evidence of successful adoption. Many governments are now adopting “cloud first” strategies to promote cloud services adoption.

Although cloud services are not a panacea for all IT maladies, they are appropriate for many applications, categories of data, and organizational situations. They can and do work. More importantly, they can provide a useful catalyst for getting IT onto a new track and rebuilding executive confidence in the leadership of digitally enabled transformation.

Successful cloud services adoption, however, requires some fresh thinking and new approaches by executives. We believe five big digital leadership ideas will help executives to understand how best to approach cloud services adoption as a catalyst for driving innovation and productivity.

1. Cloudy is as cloudy does – as-a-service delivers as per the label

The defining innovation of a cloud service, in comparison to previous ways of sourcing IT capabilities, is that the service already exists, at scale, and is being used by a large numbers of customers to realise economies of scale and the pooling of resources. The service is a shared resource with tightly defined functionality, which is delivered in a standardised manner to all customers equally. The service has a label, and does what it says on the label – no more, no less. The more mature the offering and the larger the customer base, the greater the economies-of-scale benefits and the confidence that an as-a-service offering will perform according to the label – because it already does so for other customers.

Although implementation risks still exist for cloud services, these are considerably reduced by two key changes in the dynamics of supply and demand. First, the fact the service is already available for consumption. Second, the fact that customers necessarily must bring a different set of expectations to the consumption of cloud services. The service needs to be valued for what it is and consumed as per the label. Cloudy is as cloudy does.

2. You can’t make a silk purse out of a sow’s ear

Centralisation, consolidation, and standardisation have been dominant strategic themes in IT strategy for the past decade. The “holy grail” was the pursuit of operating efficiencies and better integration of processes and services via operational aggregation of IT activities to create shared services. The implementation of both application consolidation and internal IT shared services, however, has not necessarily created good outcomes – particularly in the public sector. Many billions of dollars and countless person-years of effort have been wasted as governments have failed to implement common systems and shared services well enough to meet the expectations of agency executives.

The phrase “you can’t make a silk purse out of a sow’s ear” arises from observing that shared services attempted to reengineer building blocks of systems, processes, people, cultures, and organisations designed to serve single businesses into new assemblies designed to serve multiple businesses. The problem is that the business-specific, outdated and inflexible building blocks were not the right raw materials to build a world-class best-practice IT services organisation. In theory, the transformation is possible, but in practice, it is a very high-cost, high-risk exercise.

In this context, we need to look at cloud services as a better, lower-cost, lower-risk alternative to internal IT shared services.

The gap between the 'art of the digital possible' and the IT capabilities of IT departments is wide, and appears to be widening.

Dr Steve Hodgkinson, Ovum

The key difference is that cloud services have been created from fresh new Internet-age building blocks. They are the combination of state-of-the-art technology and state-of-the-art business and operation models. A mature and trustworthy cloud service is a shared service which is proven to work on an arms-length basis in an external capitalist economy. It delivers real and sustainable economies of scale. Its customers have opted in voluntarily because the service delivers compelling functional and commercial benefits. If customers decide to stop consuming the service, the exit costs are (relatively) low.

Executives need to appreciate the unavoidable costs and risks of trying to make a silk purse out of a sow’s ear, as well as the attractions of buying a silk purse. As cloud services mature they become an increasingly compelling and trustworthy proposition, while the challenges and risks of creating a comparable internal IT shared service remain unchanged.

3. It takes two to tango

The combination of “cloudy is as cloudy does” and “you can’t make a silk purse out of a sow’s ear” means that executives need to bring a new mindset to thinking about expressing their requirements for digitally enabled transformation.

Historically, most IT projects have been created using an “inside-out” requirements logic. The assumption is that the solution will be built to suit inwards-looking business-specific requirements – irrespective of the costs and risks of doing so. This approach creates a focus on an internal view of business processes and system requirements, which are documented in great detail and used as the specification for a customised IT procurement. The result is lengthy projects implemented in a waterfall manner (one step flows to the next and no outcome is delivered until the final step is completed – perhaps 12–24 months later).

A cloud service, however, has substantially pre-existing functionality and is provided as a shared service to many organisations. It can be configured to some degree, but cannot necessarily be customised fully enough to meet all business-specific requirements. The inside-out approach is inconsistent with the logic of the cloud services model.

Successful adoption of cloud services requires more of an “external-in” requirements logic - adapt requirements to align with the pre-existing functionality of a cloud service. “External-in” implies that the first step is to explore solutions that are available from the market and then assess how these solutions can be applied to achieving business outcomes. This approach leads to shorter projects implemented in a more agile manner (the solution is implemented quickly and then iteratively refined with outcomes delivered at each iteration – perhaps 3–6 months later). This more agile delivery of outcomes is possible because of the ability to leverage substantially pre-existing solution elements – or even a complete system – which can be implemented with only minimal configuration.

“Cloudy is as cloudy does” means that cloud services do, as a matter of empirical fact, work for their existing customers. Making a cloud service work for your organisation, however, involves new mindsets. Executives need to be prepared to exercise more agile thinking about the way requirements are defined and more outcomes-oriented pursuit of the sweet spot between what they need and what affordable pre-existing solutions can do. The key is to be more pragmatic about benefit, cost, and risk tradeoffs in IT procurement. It takes two to tango.

4. Every dollar invested in a cloud service strengthens a solution that can be reused by others

The cloud services model is a good vehicle for the promotion of common applications across an industry sector. Cloud services, by definition, are technically and operationally architected for sharing. Their arms-length commercial-delivery approach ensures that the services are exposed to competitive market pressures for innovation and efficiency. The cloud services model creates a virtuous upwards spiral where increasing adoption strengthens the revenues of providers and hence their capacity to invest in new functionality, which further increases adoption. Once a sustainable critical mass is achieved, the service is reliably available and continuously innovating. Competitive pressures both exert discipline on pricing and incentivise ongoing investment in service innovation.

This model is a significant step forward for the creation of sustainable shared services and common-use applications, compared to past failed internal approaches to IT shared services. The reality is that every dollar invested in the purchase of a cloud service strengthens a solution that can be reused by other organisations – in theory and in practice.

5. Compounding organisational learning is better and safer than “big bang”

We all learned at school that it is better to invest $1 a month in a bank account than to deposit $12 at the end of year because of the benefits of multiple cycles of compounding interest. This simple logic also applies to organisational learning and change management. It is better to implement change in an iterative stepwise manner than in a single “big bang” project. Unfortunately, multi-year projects and “big bang” delivery is usually the preferred approach for IT projects in many organisations.

Large, long-term, IT projects are a consequence of traditional funding, governance, and project management approaches – where capital funds are deployed to buy, build, and implement IT infrastructure and customised applications. This approach is necessarily high cost and high risk because the projects become very complex and there is no certainty that the solution will work until it is finally made operational. The project is an experiment – too often with unexpectedly adverse outcomes.

Cloud services can provide an alternative, more agile path. This can reduce the costs and risks of solution implementation because a working solution can be implemented quickly, refined iteratively, and scaled up as demand grows. This more iterative implementation approach stimulates compounding organisational learning. Staff are able to see and experience the solution earlier, assess its effects, and refine their views and expectations about process and requirements needs and expectations accordingly.

Establishing the conditions for compounding organisational learning is a key ingredient of the “it takes two to tango” mindset. The cloud services model itself requires some “unlearning” of outdated existing skills and methods and the acquisition of new Internet-age skills and methods. The transition to cloud services itself should not be regarded as a “big bang” exercise. Compounding organisational learning involves starting early with initiatives that are relatively straightforward and “safe,” learning through iteration, and then tackling more mission-critical areas of policy and service delivery transformation once skills and confidence grow.

So … what is “stupid stuff” in the digital age?

• Buying IT ingredients and then trying to make them work when proven as-a-service offerings are available.

• Trying to build a service by reengineering outdated building blocks when the better option is just to go out and buy a ‘shiny new’ as-a-service offering.

• Failing to change your behaviour in order to become a more intelligent consumer of as-a-service offerings.

• ‘Flying solo’ with IT investment rather than buying a service which creates economies of scale by pooling the investment of many organisations.

• ‘Big bang’, ‘mad experiment’ projects when there are more agile and less risky alternatives.

Dr Steve Hodgkinson is a Chief Analyst for global IT research & advisory firm Ovum, based in Melbourne.

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