The year 2020 saw an unprecedented and transformative shift for the IT industry. The lockdowns forced us all to shutter our offices and work from home, which called for IT departments everywhere to rise to the occasion and use technology to become more agile, responsive, and resilient.
As we reach the end of the year, it becomes vital for us to look at how digital transformation is currently being implemented within organizations, and what businesses are doing to improve their IT infrastructure in 2021 and beyond. Constellation Research VP & Principal Analyst Dion Hinchcliffe explains the different models that organizations can adopt on their digital transformation journey such as online community or enterprise social network and what the future holds for the IT landscape.
Kevin Montalbo: Joining us in this round of cocktails is Toro Cloud’s CEO and Founder, David Brown. Hi David!
David Brown: Good day, Kevin.
KM: And our guest for today is an internationally recognized business strategist, enterprise architect, transformation consultant, futurist, analyst and in-demand keynote speaker. He is widely regarded as one of the most influential figures in customer experience, digital workplace, technology strategy, and enterprise IT. He is also the VP and Principal Analyst at Constellation Research where he heads up research and global client advisory into CIO issues, the Future of Work, and emerging technology in the enterprise.
Dion Hinchcliffe, great to have you on the podcast! Welcome!
Dion Hinchcliffe: It’s great to be here.
KM: You recently published the CIO outlook for 2021 through constellation research. And in there you found that CIOs will be using their budgets to prioritize digital transformation more than anything else in 2021, even going beyond cybersecurity. With things slowly normalizing and with the hope of a vaccine on the horizon, do you see the same things being prioritized for 2021, 2022 and beyond?
DH: I think the CIO that I surveyed understood that at some point next year, some of us might get back to normal. But it's going to leave behind shifts that aren't going to go back to the way that they were. So, we've moved here in the United States, 46 million workers moved in two weeks to remote work. They've built out offices, IT infrastructure adopted new tools and habits. Businesses realize that they're more productive. I've talked to almost 200 CIOs since this all started and to a single person, they've said that the productivity of workers is higher. Who's going to want to give that up? The customers have moved too and that's the part that's not going to change either. Customers, they expected to have a different experience after the pandemic began. They want to be served remotely. They want things delivered. They want direct service. That digital transformation is going to continue. We've seen everything fast-forwarded five years you know, between two and five years, but it was certainly some organizations you go ahead and had to go much farther overnight because all their customers moved where they wanted to be serviced.
DB: How are those CIOs talking about their productivity improvements, how are they measuring that?
DH: So, everyone's got their own measures, right? A lot of them I would say are by the seat of the pants, you can kind of get a general sense that things are moving faster, that the flows that you've been watching, and moving quicker. I've asked for data pretty consistently. Unless you've been using more advanced talent, analytics office 365 has amazing tools to tell you if your workers are doing their standard processes faster. You can tell because everything is instrumented in the cloud, everything's got an API, the API can be counted. You can go and look at and map those API calls to your KPIs. You can do things you never could before. We're still in the early days of doing things like that. Most of it is anecdotal.
DB: You mentioned that CIOs don't want to go back to the way they do business before, they're there seeing productivity improvements. You talked about customers also wanting to do business differently now in the future. What about employees? I think from my anecdotal conversations with people, they're also getting used to this whole remote workplace or flexibility at least in terms of remote workplaces.
DH: I think you have several personas. In my research, you have some people who really are more productive in an office environment, bouncing ideas off each other, getting plugged into the energy, having one place where that's the total focus and there's other people who created that flexibility, haven't been able to get it were forced to come into the office where they're getting interrupted all the time. Those people, the introverts, the knowledge workers that didn't have to do a lot of in-person collaboration, there are beneficiaries of this, and there are certainly losers here. There are certain people that did the opposite, this works better for, and I think the main office of most businesses is going to become more like the remote office. You go in one or two days a week when you need to, otherwise, you don't need to, but the people who really have to be there, they can be there. The people who don't want to, don't need to be there. This is the last kind of digital block that falls into place for us. The pandemic has forced us to say, let's actually do what makes the most sense. We don't have to do what we did before.
DB: I'm seeing some organizations even adapting their office space before employees come back on mass to accommodate more hot desking and the like already right-sizing there.
DH: They’re rethinking how you use that space the best knowing what we know now.
DB: So, the CIOs’ response obviously was accelerated in terms of remote working or what were some of the biggest challenges though saying to you that they faced over the last six months when they had to respond so quickly they had in the pipeline for a while, all of a sudden they had to implement overnight?
DH: Well, yes, for sure. The biggest challenges were the physical, mental, and psychological toll that this was taking on their workforce. I heard so many stories of middle managers having to become psychologists and family mediators, and really trying to solve these problems and not being equipped to do that. Say, that's not the job I signed up for, and I don't know how to do that. So, we decided that the toll on workers was the number one challenge, and suddenly asked them to do so much more and work so differently. When that toll was being taken was a real challenge. I visited New York a short while ago. I went to the whole quarantine process and that entire state of New York is shell shocked. You know, talking to everyone just because they were hit so hard.
So, certain areas have it differently, for sure. In terms of the other two things, IT support has been severely challenged in dealing with a report on how remote work is going. Most workers, two thirds of workers think that IT doesn't have adequate resources to support them, given all the variability. There's several orders of magnitude, more endpoint, variability, and the local IT infrastructure in the house, the available bandwidth, the devices, they can use the apps they've been given, what works, the access to the data centers that they've got. That variability is bringing huge support challenges. That's getting better now, steadily we see the data is showing it. So, that's the number two item and the last one was the IT workers don't have the skills to handle such a big shift, both in having the transformed customer experience for the customers. You want to be served in new ways and workers who now need to be supported more intensively, supported a new ways coach through problems that never had before kept productive. That I've been hearing that the staffing profile is not, they don't have the people, they need to really service this new environment.
DB: It's interesting, isn't it? Because you haven't mentioned any sort of technical challenges. You talk, these are sort of human resource related issues, right, mental?
DH: At the end of the day, it's almost always a people problem before it's a technology problem. Cybersecurity is a really big issue in that now, every organization has a thousand times or so more points of attack because it's everyone's house now, too. The attacks are way up there. They're up 50% that we know of. I talked to certain industries like those in healthcare who are terrified of ransomware because what it will mean to their patients, if they get locked out of their systems. But they're also the ones that don't really work remotely. They're not getting the beneficiaries of all this. I always see cyber attacks are way up. But the big thing that CEOs are looking for, this is one of the cleverest signals other than this need for, I need to deliver on digital transformation of work and customer experience within the next six months.
That's what the data says, is a real focus on automation to be able to do more with less, to be able to tackle these problems very quickly. Whereas automation was nice to have, it was always on the backlog. If we're going to do automation when we can and as opportunities arrive now it's more than two thirds. The CIO said that is their top strategy for getting through all of this with staff reductions, all the challenges is because they have to automate IT support. They have to automate the business, they have to automate. So that's the other technology, RPA, AI workflow, all those came out really clear.
DB: Is it still a priority you think, as people get back to work and start going back to the office, or do you think that you know, automation priority becomes less?
DH: I don't know if you downloaded the actual study in the data, but most of the respondents and these are all top CEOs on handpicked. So these are high functioning organizations for the most part, I wanted to get clear data. I didn't approach the organizations, obviously circling the drain but they're either going, restructuring of the business or restructuring of IT or both, most of them. You have this perfect storm of, we're rethinking everything, we're restructuring, everything that we do. When I pressed on some of that, I circled around and tried to get some data about why that was. The thing is, we're running on fumes. We're sized and staffed and structured to be a much larger organization but our business is way down.
Our businesses wouldn't be disruptive to some industries that have done well, but most of them in the middle are not doing well, and they're just trying to survive. They don't know how long they have to hang on. Automation is viewed as a way to hang on longer. The message that I got from some of my conversations is I can do more with less. I don't want to cut my best talent. I want to automate my least productive people and get rid of them. Keep the talent. I want to keep the irreplaceable people as long as possible. It is the message I'm hearing. There were a lot of studies from the last downturn that those who go talent too quickly, never recovered fully.
KM: So we also saw a lot of companies and CIOs facilitating their digital transformation efforts through collaboration tools. In one of your previous articles, you honed in on the importance of said tools, and you said that the online community or the enterprise social network is the most strategic model. Why do you think that's the case?
DH: The most collaboration tools are point to point or involve small groups of people. You can do email blasts for example, but it's still primarily, it's a one-way conversation. You're notifying a bunch of people, one to many. Enterprise social network has proven that on a scale like social media, you can actually involve thousands of people simultaneously in the conversation. We also know that those several thousand people can be highly productive in knowledge work. The proof point often uses open source software. These are online communities of people using social tools backed by a code repository where they collaborate on very sophisticated software engineering problems. They actually develop operating systems, databases, entire platforms. There are something like 80,000 open source software solutions that are in a state of maturity or advanced maturity, where they have a community of hundreds of thousands of people around them.
There's always a core commit group, but with the whole community collaborates on making that product better over time, we know this is a repeatable thing to do, and as the most cost-effective, most innovative way and also the lowest defect way of creating really high quality knowledge work outputs. In fact, enterprise social networks kind of came from that world saying, if we can do that, if it works with that, which is a really hard problem, we should be able to do anything with that. I wrote one sort of book called Social Business by Design, where I give a hundred examples of enterprises doing remarkable things to mass collaboration. It's just that non-technical people, not IT or not really familiar with these tools, or know how to use them. They didn't come up in our world. That's been the slow rollout. I mean, it's slowly but steadily getting out there. It's just taking time for the world to adapt.
DB: Not mass collaboration, you're referring to mass collaboration within the organization, or was it also extended with outside?
DH It's one continuum. Is this like you know, if email didn't allow you to reach just pretty much anybody, you wouldn't use it, you go, I can only talk to the people inside the organization. I'm going to stop using it. That's one of the reasons for abandonment of mass collaboration tools is that they're not artificially constrained for some strange reason. Now the industry fixed that, but too late as people sit gravitate back to noisy and unproductive, less productive channels like email. Email has several big problems. One that assumes that you have perfect knowledge about who should be involved, which we've learned now is not the case. You're leaving it, usually leaving out many important stakeholders. They often didn't even know about it. Then it's a very noisy and interrupted medium.
It's not really designed for people who come in and out of the conversation for these last a long time. And you've got that you have the, the BCC and the CC chains that just killed collaboration and large companies, especially. So these new tools do work better, but unfortunately in the early days they were constrained. It's gotta be everybody. You gotta be able to reach all these stakeholders.
KM: Interesting. How do you think the online community and ESN will drive technology and the way we work digital work forward?
DH: I'm not sure it's a solution. I have an alarm set. I don't get too caught up in the tools. It's what we're doing that matters. You can actually do a lot of these things without any of the tooling. Some companies have a famous company, WL Gore that makes a Gore-Tex, they're number one in their industry. For 30, some odd years now they've insisted on open collaboration that everybody has visibility into local work and everybody comes together to solve the problems. They ended up naturally gravitating to these tools that openly share knowledge by default. The big difference with email is that everything is not shared. It's only shared with the people that are on the email list, the recipient list and online communities, enterprise social networks, everything's shared by default.
Everyone can see everything unless you've created a private group, which is bad. Generally speaking, in my work we've discovered what those things are if we recreate the problem. It's how we work. When I wrote my book, Social Business by Design, I created and defined 10 principles, but principle number one was in any process, anyone has to be able to participate. Maybe the group won't accept that participation, right? We do see this in open source communities. If you have a bad idea and you can't convince the community, they won't let you, they won't let that code check-in stay. That's a good thing, but everyone's allowed to participate. They at least get tracked, have a chance to convince their stakeholders. That's a good thing. This is a good idea. That's gotta be the principal. We discovered open innovation models have shown us that that is the model that works by far the best is gather all of the innovation and then decide what you’re going to do with it.
DB: It's a real mindset change though, to adopt this kind of approach, isn't it like, what prevents companies adopting this community approach?
DH: One of the biggest ones is that's not how we've raised our managers and leaders in business school. This was not taught until pretty recently. Now you see, companies that do this tend to be very high performance. You look at WL Gore or Zappos, which is the big shoe mini shoe store online, again, number one in their space, or you look at Valve, the video game company, they're often number one and are very highly leading. They also have the same model where there's no managers. It's a meritocracy of ideas. Everyone decides what they want to work on. If your community around you likes it, you get to stay right. You know those organizations tend to have much higher performance.
So, we've seen this even with very large companies and bureaucratic parts of the world like Bosch in Germany, they use a set of principles very much like this online community managers can get, have a pay grade of all the way up to the CEO. Right. It's very interesting. Some people are doing this and they tend to be higher performing organizations and the rest of us don't really get that. But what it is is largely, we don't know about it. We don't see it. We're not taught it. It's taken a while for us to learn this from the technology world.
DB: Does it get frustrating for you consulting, and you can see what works and you're telling management: "This works guys." and getting adoption is difficult.
DH: I'm dating myself, but I've been a consultant for 35 years. One of the things you learned early on is, is it's almost always a people problem. So, now I'm used to it, right? What's exciting is that these two open tools for communication and collaboration actually allow you to drive the change. One of the things I insist on now, I've learned to just require, if you want to work with me and you believe that this is important, then we're going to run this project this way. We're going to drive change in the organization. You must do this whole change effort for the future of work in an online community. Anyone in the organization can participate, help out, learn. Since I started doing that, the efforts have gone consistently much better and faster because everyone can see it. They can all learn. They can complain and they can get all their objections off of their chest. Then they can begin to see how other parts of the organization are doing it better. It just works better. It becomes a vehicle that goes by itself if you start it that way.
DB: So whilst iPaaS, we'll sort of have a whole of organization type community approach, presumably for a larger organization, once they're adopted, they can start on a project basis, like some small isolated program.
DH: You can always start. In fact, I would say, because these are largely perceived as optional communication channels. It's difficult to get more. I've seen very few organizations that get over more than about half of their organization, really active in these channels. That's okay. It's about having the right people using the right tools for the job. It’ll tend to be projects. It'll tend to be efforts like, you know, big RFPs and sales, big operational situations and ops big projects inside the organization like Bosch has this great piece of data, but when they moved the relocation of an assembly line from the traditional way into the enterprise social network, setting up a production line dropped from, I think it was four weeks to six days. They said, wow. It was evidence that they were on the right track. Because the data's out there just taking a while for the management theory and our education and our mentoring processes to catch up.
DB: Great. All right. So your book, which you've mentioned a couple of times, this elaborates on this whole concept and goes through the data and some of the case studies associated with this?
DH: Yes, it goes through it, and it has a framework for doing it. It's based on a number of the early projects that I worked on that were successful in that regard, as well as that took everyone else in the community that had a success story and captured those as well. There's a hundred of high-impact case studies, each one with data of some kind in them. I wanted to say, if this is going, if this is happening, we should see lots of people doing it. I was able to find that now there's a lot more, it's amazing. I'm contacted by these big companies. They're just now catching onto it. You know, so it is happening out there. It just takes time to change millions of people.
KM: Let's talk about your post pandemic playbook. I thought it was an interesting read. What's your advice to CEOs as we now transition towards this new normal world?
DH: My post pandemic playbook, easy to find by those words, it's one of the top ones out there. I sent it to all of our CIO contacts and I had many of them that said that they used that as a basis for their plan and the start of their plan. They had to add in all the things that they had to do.
I think you have to do two things. One, you need to have a recovery effort. So, a team consisting of members from as many parts of the organization as you can get to work on just surviving, and then getting things back to some semblance of normal. And then you need a growth team, that says, “All right, so the world has changed. There's all new opportunities. There's a lot of things we shouldn't be doing anymore and I have to change. We're wasting time and money on things. What are those things?" All the money you save can be driven back into growth. Then you put that funding into what you're going to do.
So I'd say that's the macro picture. But if you zoom in, we gotta retrain the workforce to work differently. If we're on email and video calls, I'm going to have people that are losing their minds because they're stuck in 12 hours of Zoom calls a day. Zoom fatigue has set in. It's so funny now, hardly anyone turns their cameras on. I don't know if you guys are running into the same thing, even people for people you haven't met before, right? They're like, “Nope. I barely got out of bed today. This is what you get".
Big mass collaboration tools that are much more efficient. Thousands of people can meet without stepping on each other. They can all be productive at the same time. You put someone on a conference call and one person is talking, a few people are checking emails but that's not productivity. You have one person doing the talking, everyone doing the listening. Whereas if you're working in these channels, you can have a thousand people all working at the same time, all working together with each other at the same time, that's the magic. There's these better channels for this more remote, more asynchronous way of life that we have now. Start retraining the workforce.
Then we saw all of our 2020 digital transformation goals got thrown right out the window. All of our plans got thrown out, but the data, many data sets show that the one part of the IT budget that hasn't been cut in 70 to 80% of organizations is digital transformation because everyone knows that's the future. The world has suddenly changed. And now if we cut our budget on catching up with those changes, we're really going to get far behind and we might not make it. That's been a really encouraging, I think, a sign of sanity otherwise insane year. It makes sense to me. We see this desire to invest, but what we're seeing from the survey is that they don't feel like they have the talent. We're seeing new approaches to talent, like on-demand staffing, gig economy. I have this new gig economy for IT shortlist. You can find it by that name. There's all these startups that have sprung up in the last couple of years, mostly before the pandemic to say, “Oh, you need a dev ops team that knows all about analytics. We have the whole team ready to go. You want to work for two months and then you don't need them anymore because the solution is there. That's fine".
There's Gigster and Topcoder, all these companies out there that now can provide this rarefied, increasingly specialized talent because IT is getting more complicated. It's creating all these rarefied buckets. We don't need a whole person to do AWS outposts, we just need that person for a few weeks so the code will run there and then we're good from that.
On demand talent is where I see this a lot of interests and this is to allow IT practitioners to create designer careers. They only have to work on the projects that sounded very interesting to them. Because they're in high demand, they can turn down whatever they want. It's creating a very interesting new designer IT career model. It's all sprung up in the last couple of years, but I see this, it's taken over professional services. Forty percent of staffing and professional services is part of this model.
DB: That's really interesting. I mean, it sort of leads to where the future is going. Where do you see the future of digital transformation initiatives over the next 10 years is? You talked about the lack of skills and in the development organization. Is it about low code application development? Is it about machine learning or microservices and dev ops? Is it robotic process automation? Where is it going?
DH: Automation is going to be the foundation. What I can say is by 2025, 90% of everything in IT will be automated just to tread water. You'll be able to cut any head count, right. So much more IT will be around. A lot of that will be low-code. The organizations that can effectively roll out low-code to a lot of workers are going to beat up the organizations that can't right there. You're able to do a lot more digitization, a lot more change, a lot more automation without costing, much more because they're going to get most high functioning knowledge workers in the organization who can learn how to become low-coders now. The platforms are really quite good, and I use them now because they're so effective and the world will catch on.
What do we do after that? We chase our customers and we're going to give them one-to-one customized experiences. That's the end game. Over the next 10 years, everyone is going to begin to get a truly personalized experience from the companies they work with. I already get it now from certain companies. They're telling me what they think that might be interested in and they're often right. Anticipating the products that I want and giving them to me, not waiting for me to ask. That's happening, it’s just slow, it'll take 10 years, at least for the average organization to get around to doing this, but that's what they're going to aim at when they automate a lot, they're gonna be able to free up a lot of talent to say, all right, what's the highly competitive.
I want to hold my customer really close by giving them what they want before they even ask for it. They just keep paying me. This is a very anticipatory, personalized, customized demand curve that you're going to ride with every customer one-to-one. That's the end goal that we see and the companies that can get close to that. No one's going to achieve that truly in a really meaningful way, except for maybe like Amazon or Apple in the short-term, but long-term, you have to be trying to crack that nut – get closer and closer. That's the end game, creating the ultimate customer experiences for our organizations. We have to automate everything so we can free up enough creativity and capacity to actually start delivering on that.
DB: Exciting times. What's going to prevent companies doing it? What's going to come? What's going to be the number one thing, achieving it, is it coming back to the people?
DH: It's interesting. For a long time, I saw pro coders and people who actually professionally code for a living were really against low-code and still really looked down on it. But they now look at it. I've seen a shift now where they kind of see that, “Hey, this actually frees me up to do the really only keep the really exciting projects" and only pro coders can do it. There's a lot of things only pro coders will be able to do for the foreseeable future. But business application is not one of them. But I need very few people who love coding business applications. From that standpoint, you're still gonna have a lot of people in IT that are going to be against these new ways saying, “How are we going to manage a thousand new end-user coded applications and keep them secure and private"?
Well, that's actually, the job of IT in the future: it’s putting guard rails around all of this user generated IT, which is where things are going. We already had it. We just don't recognize it. Forty percent of what we do in our organizations is run by spreadsheets, which is a terrible model for how to run an organization right now. All of that should be moved to these new tools that have real application, life cycle management, and configuration management and all those sorts of things.
But it’s getting a mature user generated IT process for a significant amount of IT. Let's see another 30 or 40% of IT is going to come from this new user generated model over time and managing it and securing it, putting the guard rails on it. We have to put all that infrastructure in place. It’s finally just now IT service management tools understand, “Oh, I got to manage load low-code and all I gotta manage shadow IT even though I didn't buy it, I still have to manage it". So getting all of that in the place, automating that 90% of IT, that those are the challenges and talented is having the right talents. We need new talent sourcing models. Those are now here though, but it's just getting everyone up that understanding curve. There's so much learning that we have to do to make that happen.
DB: Dion, you developed excellent playbooks and practical strategies for companies to adopt and embrace these changes. Where can the listeners find out more about you and find these resources?
DH: Well you can search for my name on Google, all the right places, my ZDNet column, my personal website, dionhinchcliffe.com. My Twitter handle is probably the very best place to get a constant feed of everything I'm working on in real time. That's a dhinchcliffe and pretty much will let you catch up with everything I'm working on.
DB: Brilliant. Thanks so much for your time. So knowledgeable, such interesting insight into what's going on within organizations. Thank you very much.
DH: Thank you.
KM: Thank you very much, Dion Hinchliffe, for being with us. To our listeners, what did you think of this episode? Do you have any predictions for the future of work? How are you implementing your digital transformation strategies? Let us know in the comments from the podcast platform you’re listening to. Also, please visit our website at www.torocloud.com for our blogs and our products. We’re also on social media, Facebook, LinkedIn, YouTube, Twitter, and Instagram. Talk to us there, we’ll listen, just look for Toro Cloud.
Again, thank you very much for joining us for a round of cocktails today. This has been Dion Hinchcliffe, David Brown, and Kevin Montalbo at your service for Coding Over Cocktails.
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