Recently a key question being increasingly asked by many of the IT leadership teams we speak with is “What is the best way to organize IT to continuously deliver the most value to my business?” Underpinning this question are other related areas of concern such as:
- Understanding our customers and their experience of IT to better shape our IT strategy rather than just executing it?
- Leveraging the advantages of speed, flexibility, and scale offered by the (multi) cloud service vendors, while managing the cost and sprawl in these services?
- How do we respond in our ways of working to provide direction on managing the ethical questions brought about by disruptive new technologies such as generative AI for content and code creation in the organisation?
- What is the best way for us to lead on the digitisation of business processes, increasing the automation through Machine Learning and Low/No-Code platforms to enable the business while maintaining the governance and controls needed?
- Focus on Business Outcomes: Delivery of end-to-end, outcome-based services driven and enabled by IT focussing on creating, building and maintaining business value.
- Are there ways we can improve our speed of delivery, delivering better, more innovative and intuitive technology and services faster and cheaper to the business?
Our customers are seeking to address the above challenges while also promoting and facilitating inclusive, engaging, and collaborative approaches with their teams.
This insights article is updated from our previous insights article on why organisations should focus on adopting a Flexible IT Operating Model.
An IT Operating Model (ITOM) defines how an organisations IT functions will deliver value to the broader organization and how they will operate on a day-to-day basis. The operating model encompasses the structures, culture, policies, and processes that enable the delivery of the necessary technology services.
In todays complex IT world this means that the IT Operating model also must support multi-modal speeds of service and solution delivery through Waterfall and Agile styles of Project Management, while also encompassing multi-cloud service management and other shifts in technology, including supplier management and SIaM Ecosystems.
Importantly the ITOM supports building a common understanding of the IT organisations overall design and desired ways of working, allowing people to visualise how the organisation works from a variety of different perspectives across the value chain as every significant element of business activity should be layered against the model to ensure it is fit for purpose
The outcomes of the IT Operating Model are to improve efficiency, deliver exceptional customer experience, reduce operating costs, and enhance business value.
A flexible and adaptive operating model design must ensure a closer collaboration within the Business. To achieve all its outcomes a flexible IT Operating Model will require blending practices, processes, tools, structures and governance models within it to provide for effective management of demand against the delivery and operation of systems, processes and data.
The Flexible Operating Model proposes a flatter organisation structure typically with no more than three levels and adopting self-organising teams, collaboration, steering, affiliations, professions, and Agile approaches.
There should be no boundaries between the Business and the Technology Department, and to support this the Flexible Operating Model suggests that the role names for the Business and the Technology Department are the same and only vary in content to acknowledge their sponsorship.
A good way to implement this structure is to abandon all existing role names, e.g., Service Delivery Manager and instead focus on capabilities that the role needs to perform to assure service delivery and excellence, i.e., Service Owner.
At the start of this article the key questions and concerns from our conversations with IT leaders are deeply rooted in pressures to respond to external changes, both in the ways of working and technology shifts which are stressing their existing operating models.
In the rest of this Insights article, we have expanded some of these key areas and influences facing IT organisations today that their flexible operating model will need to provide answers for in support of the desired outcomes.
A crucial element of the design is the governance model that focuses on the overall organisation structure, embeds oversight responsibilities, talent and culture, and infrastructure management. It incorporates meeting structures and charters, and controls and support function interdependencies.
It is important to the staff involved in the operating model that it should not be experienced as restrictive, but as facilitating, it should be clear how they work together and understand how and by who decisions are made, built using a principle of minimum viable bureaucracy within the governance model.
Governance should be seen as a vehicle that builds trust to obtain its buy-in across the organisation, this is key to its overall adoption and embedding into day-to-day responsibilities and operation.
Different types of organisations will often have a governance model which reflects the industry sector in which they operate, such as:-
- Centralized governance models typically used in Financial and Banking sectors, a centralised authority is responsible for determining the overall governance framework in the organisation as it needs to ensure control and consistency in all areas of the business.
- Federated governance models typically seen in Manufacturing sectors, are created using a combination of centralised and locally devolved governance structures. This allows for some level of localisation where different departments or business units have unique needs which are often dictated by the geographical regions of operations and the legislations of those regions.
- Agile governance models emphasise the need for flexibility and responsiveness and are often seen in the software houses and as-a-service delivery organisations. The model still needs to include appropriate controls, visibility of performance, shared accountabilities, and clear decision rights. These are often a friction point that needs to be continuously balanced to maintain these controls, while continuing to deliver at the speed desired by the business and its customers.
In creating the flexible operating model, it is important to remember the different purposes that Governance and Management forums in an organisation will each be responsible for to protect against over complication and reduce bureaucracy to a minimum.
- Governance ensures that stakeholder needs, conditions and options are evaluated to determine balanced, agreed-on enterprise objectives; setting direction through prioritisation and decision making; and monitoring performance and compliance against agreed-on direction and objectives.
- Management plans, builds, runs and monitors activities in alignment with the direction set by the governance bodies to achieve the enterprise objectives.
Aligning these within an organisation where traditional waterfall delivery models are operating alongside agile delivery models utilising sprint cadences for their delivery is often a key pressure from an enterprise perspective to be able to manage and direct the overall Portfolio of delivery within IT and reduce internal friction caused by the different ways of working within these teams.
A Flexible Operating Model will need to continuously respond to the needs for change to the ways of working across the teams delivering the products and services and will need to optimise its process and supporting workflow to provide the flexibility necessary to adopt change.
Using Lean principles to ensure that processes can deliver their expected outcomes while reducing waste due to inefficiencies in the existing ways of working and taking advantage of the same technology shifts as the rest of the business is key to enable a flexible model.
Reducing the number of unnecessary steps and bureaucracy in process flows, in conjunction with the use of digitalisation and automation technologies within these process flows will support the ability to accept and manage change to the ways of working needed.
Making sure that these flows are integrated and layered against the Flexible Operating Model and the end-to-end Value Streams they facilitate as part of ongoing review is a key aspect to be able to optimise and then sense and respond to changes needed in these parts of the operating model.
Building data capture points through the process flows to be able to obtain the necessary analysis and performance oversight using the service and technology platforms is often a balancing exercise against the need and desire for data against the operational overheads of capturing it as part of the process interactions as they interact with these platforms.
Increasing the use of automation within process flows does not reduce the need for these data points to be captured but will often require additional work in the automation platforms themselves to still update and present the data points in supply to the single source of truth for this data in the organisation.
Artifical Intelligence and Machine Learning
Machine Learning and Generative AI technologies have been a significant inflection point leading change for many organisations.
According to a recent survey by McKinsey 1, one-third of their respondents said their organisations are using Generative AI regularly in at least one business function. This survey also revealed that 40% of its respondents stated that their organizations will increase their investment in AI overall because of advances in Generative AI. The expected business disruption from Generative AI is significant and will bring additional challenges to be embedded within a flexible operating model.
1 - https://www.mckinsey.com/capabilities/quantumblack/our-insights/the-state-of-ai-in-2023-generative-AIs-breakout-year
The ability of Large Language Models and generative AI to enable individuals and organisation to meet increasing demands and provide a more attractive place to work by reducing mundane and manual tasks needs to be balanced against the ethical considerations in the use of these technologies.
Considerations for the introduction and use of these technologies and their governance requirements in areas such as data protection and privacy will need to drive clear policies for embedding across the operating model.
The current pace of change and adoption of these technologies is seen to be one of the largest driving factors for the need of a flexible operating model in IT organisations. For IT leadership these technologies could very well become the next generation of ‘shadow IT’ growth within organisations.
Low Code platforms and the rise of ‘citizen development’
Low code platforms are empowering business users to be able to build their own digital solutions, Shell as an example has around 800 citizen developers in its manufacturing teams who have developed 75 DIY applications with 200 more in the development pipeline. 2
Once created like any other software-based solution there will be ongoing maintenance and security profiles to be maintained by the teams responsible for them, and in many cases, there will be integrations/interfaces created between these apps and existing line of business applications to be managed.
The proliferation of low code platforms has empowered “citizen developers”, enabling innovation throughout the organisation. The ITOM must deliver the appropriate controls & standards around the use of these platforms to realise the benefits and avoid a complex and difficult to maintain IT environment.
Managing the introduction of these DIY applications and the shared understanding of the support wrappers necessary for them in the operating model will be an area of focus for IT leadership to engage with the business units to empower them to further unlock benefits from these platforms while providing stable, reliable solutions.
2 - https://www.microsoft.com/en-us/industry/microsoft-in-business/business-transformation/2023/03/28/companies-innovate-with-low-code-and-fusion-development
Enterprise Service Management
The expansion of Service Management best practices into other service areas of the business, commonly referred to as Enterprise Service Management (ESM), has seen service management capabilities, previously part of IT’s back-office functions and costs, turned into a capability leverageable from the investments made in IT services across the wider operating model of the organisation.
Managing Partner and Supplier Ecosystems
The Flexible Operating Model acknowledges that the modern Technology Department must rely on a multitude of suppliers and these suppliers need to be managed carefully to ensure that the business gets the best value from them all.
Where a supplier is a Tier 1 supplier, i.e., a strategic supplier / partner, then that supplier needs to be considered part of the Technology Department and be involved in the strategy, innovation and solution development in a way that is not just responding to a statement of work or request for purchase.
This is what makes it a true ecosystem, a community of components working together in an integrated way that makes best use of the strengths of the individual components whilst creating a single technology platform.
Effective management of the Sourcing Strategy (internal and external), Supplier Tiering (focus on value add not spend), Vendor Management (as an integrated purchasing, contract management and performance management capability), and Collaboration (within defined rules) all become essential aspects of governance.
SIaM is a framework that can support managing and orchestrating multiple vendors and suppliers of services as part of the overall operating model. The framework facilitates the adoption of service integration roles and activities for managing outcomes across these external organisations to ensure a coordinated IT organisation is seen to be providing the services.
IT leaders need to be able to continuously re-wire their IT structures, culture, policies, and processes that enable the delivery of effective, efficient, and economically viable products and services, delivered not only to their end customers but to the internal consumers as well.
A Flexible Operating Model will help the Business, IT organisation and its supplier ecosystem work together as a single entity while supporting the pace of change that is empowering organisations to move faster and innovate new solutions and services while safeguarding the ongoing need for reliable delivery of any existing services and solutions.
Ultimately, the adoption of a Flexible IT Operating Model will improve efficiency, deliver exceptional customer experience, reduce operating costs, and enhance business value.
In our experience no single body of knowledge, framework or toolset can answer these requirements of a modern IT organisation. Our Modern Service Management practices incorporated into a Flexible Operating Models blends our own consultants’ years of delivery experience with frameworks and standards such as ITIL®, CObIT®, IT4IT® and ISO to create flexible operating models that are tailored to support the evolving needs for delivering IT services within their organisations .