Strategic, customer-focused innovation is not possible without investing in a flexible and resilient technology environment. Yet the legacy technology in many companies limits their ability to move quickly and effectively take advantage of market opportunities. The reality is that when innovating, it can be a significant advantage to start fresh, unburdened by legacy platforms with their inherent organizational and technological inertia.
Based on client work and research, Oliver Wyman has identified six key components that enable companies to create industry leading, innovative technical capabilities. Our Technology Dexterity framework outlines how an organization can meet aggressive goals in innovation by enabling cultural alignment across business and technology to effectively drive change.
1. Alignment of business and technology
It is a rare business that doesn’t materially rely on technology to deliver its products and services, and the pace of technological change is only accelerating. Understanding how to leverage technology to enable a business concept and where technology might create a new business opportunity are mission critical.
The emerging dominance of public cloud, and the flexibility it provides to quickly build and deploy infrastructure to enable new business capabilities, is one example of how technology can accelerate time to market and change the dynamic amongst competitors. The rapid acceleration of blockchain and adoption of digital assets in financial services is another.
It is critical that business strategy and technology work together to drive innovation, but the organizational siloes that exist in many organizations make this difficult. The historical approach of inviting the technology team into a business strategy conversation after the direction has been set is no longer viable. Full collaboration between business and technology leadership is the new normal, and an important driver of technology dexterity.
2. Optimized complexity
Excessive technology complexity in large companies can stop innovation in its tracks. Complexity is typically due to decades of systems-development entropy and a failure to invest in modernization. Such complexity is not inherently bad but must be managed so that innovation is not stifled.
Ensuring complexity is held to acceptable levels via formal governance and standards is an important aspect to achieving a path towards technology dexterity. A target level of complexity can be achieved by optimizing decisions regarding infrastructure, application architecture, and end-user experience to balance flexibility and risk. The key to attaining technology dexterity is to measure it, define a specific goal, and set a timeframe to achieve it.
For example, a global company had more than 1,000 data repositories and 50,000 management reports. Over time, data repositories and reports were retired and replaced with mandated standard options, dramatically decreasing complexity and operating cost.
The key to attaining technology dexterity is to measure it, define a specific goal, and set a timeframe to achieve it
3. Strategic ecosystem
The “build everything internal” strategy has become irrelevant, displaced by the imperative to engage with an ecosystem of suppliers, some of whom are partners and some of whom might be competitors, in order to move fast enough to compete.
As examples, hedge funds can now tap into an established platform ecosystem to quickly deploy everything needed to start trading. The products provided by public-cloud companies can be quickly snapped together to launch a new application or business, and SaaS companies can deliver entire functional stacks via pay-as-you-use models.
Organizations that aim to achieve technology dexterity need not only become experts at establishing and leveraging their strategic ecosystem, but also at effectively managing the risk that it can bring. What is required is an approach that embraces an interconnected environment where the boundary between suppliers, partners, competitors, and allies is fluid.
4. Change effectiveness
It is a common perception that most change initiatives are unable to accomplish the goals they set out to achieve, and many fail outright. Whether you believe the 70 % failure rate that is now corporate lore, or ascribe it to something more modest, there is significant room for improvement in change delivery in large organizations.
Technology change is often based on a “waterfall” approach dictated by annual funding cycles. This approach limits continual, iterative innovation and modernization. The result is that important change is often underfunded or a “side-of-the desk” activity, which causes the business to fall behind faster movers.
Organizations can do better. For example, one global bank devised a change methodology that was free from the yearly budgeting cycle. It defined roles, skills, incentives, and governance that bridged business and technology; it incorporated the best practices of both waterfall and agile approaches; and it formalized change roles and career paths via its job architecture. The result was a significant improvement in change delivery, innovation, and an increase in technology dexterity across the organization.
5. Risk management and resilience
As technology is increasingly embedded within society, we rely on it to keep us safe, healthy, and to run the world. When it fails, the ripples that result can cause significant secondary impacts in areas that seem unrelated to the area of failure. This dependency, and threats such as cyber-attacks and ransomware, has brought the importance of technology resilience to the attention of company boards, regulators, and governments.
Ensuring technology resilience within critical corporate infrastructure is complex but best practices are evolving. Companies are increasingly adopting holistic risk-and-resilience frameworks that consider their entire supply chains and define and measure risk versus performance metrics and “impact tolerances.” Chaos engineering, or the art of breaking things, is also gaining prominence in large organizations.
Ensuring technology dexterity involves evolving your architecture to safeguard risk management and resilience is “built in” from the beginning, and fully embedded. Resilience can no longer be an afterthought.
6. Employee experience and culture
The increasingly difficult challenge of attracting talent has made it clear that offering roles in which people can learn, grow, and advance their technical skills is critical. This can be especially difficult for organizations whose technology environment primarily consists of slow-to-evolve legacy technology.
Organizations need to expose their employees to cutting-edge ideas, technologies, and ways of working even as they slowly modernize their legacy technology. If they fail to do so, they will not be able to attract the talent they need to innovate and compete, and they will slowly lose the knowledge base necessary to keep their legacy environment operational. Giving employees the agency to change is an important part of achieving technology dexterity.
For example, a global organization with a large legacy-technology environment it was trying to modernize set aside four hours per week for every technologist to explore new skills. Retention and satisfaction scores shot up, as did the number of innovative approaches and ideas generated by the newly empowered workforce to address legacy modernization.
The returns of achieving technology dexterity
Creating an organization that achieves technology dexterity involves more than just deploying technology in a new way or modernizing legacy platforms. Companies that endeavor to improve in all six of these key areas move faster, are more innovative and competitive, and ultimately return more value to customers and shareholders.