Digital transformation merges agendas of CEOs and CIOs
"Digital transformation is permeating and changing our company like a force of nature" remarked Matthias Gohl, Head of Digital Innovation Partners at ZEISS, the large optics and optoelectronics company.5 Feb. 2020
"Digital transformation is changing things like our value creation, business models, the way we interact with customers and business partners, our market approach and penetration, our staffing and HR development, corporate culture and forms of collaboration. So digital transformation is prompting us to rejuvenating our operations from the ground up, and we are holistically working on building digital ecosystems consisting of devices, data and applications," says
His team is supporting the company’s business divisions in a variety of different ways, e.g. with digitalizing their product ranges, innovating their business models and processes and rolling out new approaches and ways of working.
Based on this kind of positioning and strategy, ZEISS can be considered a leading example of digital transformation in German industry. The company and its products stand for precision and quality. ZEISS is known primarily for its eyeglasses and binoculars, but, with consumer sales of just over 1.2 billion euros, that segment actually accounts for just a fifth of the company’s overall sales of 6.4 billion euros. In the business-to-business segment, ZEISS supplies medical technology, industrial measuring technology and semiconductor production technology based on its optical, and in particular, microscopic processes. And herein lies the first key to digital transformation, because imaging processes are becoming more and more digitalized: The creation, storage, distribution, analysis and evaluation of images is increasingly data-based. And the volumes of data generated in the process are growing exponentially – for example, for high-resolution, three-dimensional moving images,.
While digitalizing core products and pooling all the data already yields huge benefits for customers, that’s just the first step. Next up on the digital transformation agenda is horizontal integration of value creation across a company’s entire product range, as well as the development of corresponding portal and platform solutions. These include "hygienic factors" like access to software updates and maintenance information for the relevant products, but also networking platforms like "Apeer" for microscopy users from the research community, who can configure standardized, and thus reproducible experiments using modular software components, with just a few clicks. The supreme discipline is the development of entire ecosystems which integrate both hardware and applications through multilateral data exchange, thus creating bounteous added value.
The third key to digital transformation consists of changing corporate culture. This is primarily based on introducing forms of cooperation across various hierarchies and departments, commonly known as "new work" , including agile development methods and a broad opening to cooperation with outside parties – i.e. customers, development partners and researchers. Matthias Gohl says this is an important focus for his team. Only when products, processes and people are thought of in such an integrated fashion can digital transformation make tangible progress. And achieving this hinges to a large degree on the right mindset, skillset and toolset.
Paths to organizing digital transformation
McKinsey calls this approach a "fenced-off digital factory", i.e. the creation of a separate department within the company which, as a partner to its business units, participates in and drives the digital innovation of products, processes, business models and cultural innovation. But this is not the only way to organize digital transformation. Some companies set up departments completely outside the existing corporate structure, far away from the usual decision-making processes, in order to protect the innovators from paralysis – but this can also limit their impact inside the company.
One variation of the fenced-off digital factory consists of the accelerator, i.e. a department in an established business unit which modernizes it from the inside out. For organizations with strong independent departments, this is a viable approach which allows the relevance of innovations to business operations to be quickly felt.
Regardless of the path which organizations decide on, given their origins and previous innovation processes: If this type of department is to be able to achieve its goals and not be pushed aside by the overall organization, it requires a clear commitment to digitalization at the top of the organization. And this applies to sales, technology and innovative executives.
This is why two agendas are increasingly merging: that of the CEO and the CIO. While the Chief Executive Officer, the Chairman of the Board or the owner have so far concentrated on managing the company as a whole, the CIO has generally focused on the technologies involved with the company, including its products and services and its data and information processing capabilities. Digital transformation dissolves this mental barrier. To the extent that digitalization permeates products, processes, business models and working methods, technology and its mastery are evolving into a key component.
Recognizing mutual strengths
This makes the job even harder, so that a division of labor continues to make sense. But, even more than in the past, based on a mutual understanding of each other’s strengths. After all, a CEO without significant technological expertise is just as lost as a CIO who is uninterested in business strategy. How digital transformation inside the company should be organized needs to be jointly decided, as should investments in technology architectures or purchases of software and development capacities, and even more so the long-term technology strategy, which is increasingly becoming the actual corporate strategy.
Business and technology are Siamese twins. Same, but different. Different and inseparably linked. Business strategy and technology or development strategy have never been as closely intertwined as they are today. They are mutually dependent. Achieving business goals is less and less conceivable without technology. And technology development detached from corporate goals is a luxury that only a few can afford. As a result, the agendas of the business and IT departments in companies are converging. Here, CEOs and CIOs are called upon to join forces.
The fundamental change in the importance of IT departments cannot be stressed enough. The classic task spectrum of CIOs was – and in many cases continues to be – on the one hand, providing high-performance, secure and frictionless IT systems that are cost-effective and efficient. On the other hand, CIOs are supposed to be drivers of innovation and thus growth, but this has always taken place largely behind the scenes. With technology making inroads into nearly every corporate business process, this is now becoming clearer and, above all, measurable. Above and beyond process innovation, this is creating legroom, but at the same time also generating expectations about the contributions being made to business-model innovation, making the job even more strategic.
CIO’s job more complex than ever
As was recently demonstrated at the Handelsblatt IT Management conference in Munich in January, the job is more complex than ever. Among others, Christiane Vorspel, Head of Information Technology at the Landesbank Baden-Württemberg, spoke about her range of duties, including the design of digital customer relations, sustainably efficient internal IT and the development of new products that support the digital transformation of customers. CIOs are increasingly finding themselves in this triangle or even pentagon of forces. According to McKinsey, as the partners Anusha Dhasarathy, Isha Gill and Naufal Khan recently wrote, the transformative CIO is also a "business leader, change agent, talent scout, culture revolutionary and tech translator."
In 2011, IBM wrote something similar in its study titled "The Essential CIO – a Midmarket Perspective" for IT managers in medium-sized enterprises: Their mandate is to use lean IT operations to improve the efficiency of the organization, thereby improving business processes and collaboration, strengthening the value chain through new types of relationships and, above all, generating radical innovations in products, sales markets and business models. Back then, the view of business managers on IT was still strongly influenced by the expectation that IT should primarily provide orderly and cost-effective technology services. Today, CEOs are much more aware of the strategic value of technology and are therefore increasingly raising the responsibility for technology and innovation to the level of top executive management.
In family-owned companies, this becomes clear when looking at how the issue of succession is handled: The example of heating manufacturer Viessmann from Allendorf is quoted many times. Here, father Martin initially transferred responsibility for innovation and digitalization to his son Max, then, together with him, turned the company into a heating service provider and has since transferred operational management of the company to Max and his co-CEO Joachim Janssen – a prime example of personally letting go and giving space for technology-driven business model innovation.
This is a prime example of how business and technology agendas are not only converging, but have long since become inseparable. Particularly in the " Business Management " area of TWENTY2X, the new digital trade fair for small and medium-sized enterprises, which celebrates its premiere in Hannover from 17 to 19 March 2020, there will be numerous suggestions, applications and solutions that will provide the best possible support for this convergence. A source of inspiration for CEOs and CIOs who, together, are shaping the future of their companies.
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