Most IT technology in organizations focuses on helping to improve the efficiency of the organizations. However, as digital transformation takes hold, we can now see that a significant portion of these new IT investments focus on building technology platforms that allow organizations to compete for customers. These new “growth-focused” investments behave differently than their efficiency-focused cousins. They create a more dynamic relationship between technology and the business and evolve at a faster rate, often in less predictable ways. This new relationship between the business and technology increasingly calls for a different governance, investment, and management philosophy.
Efficiency-focused technology and the governance and management approaches that evolved to accommodate its needs shaped budgets and organizational philosophies. These approaches, while continuing to evolve, are still relevant and appropriate for managing, investing, and governing the large technology estates that dominate the enterprise IT landscape. However, they are increasingly inappropriate for handling the growth-oriented technology platforms and, if not addressed, constrain their success and thus destroy value.
This places companies on the horns of a dilemma: they now face the prospect of needing two different governance approaches or attempting to operate a single approach, which will prove inappropriate and unhelpful for one or the other of the operating environments or, in the worst case, will prove poor for both.
The Traditional Efficiency-Focused Approach
As companies evolved their IT management, investment, and governance philosophies and approaches, they viewed IT as an investment that allows them to operate more efficiently. This, in turn, evolved approaches to regulate the expenditure on IT, investments, and new initiatives while ensuring high reliability and resilience. The efficiency philosophy percolates through an entire IT organization with a constant eye to improving IT return on investment while ensuring silent running.
The history of most, if not all, enterprise IT is one of laying down continuous layers of technology, sometimes replacing previous investments but most often sitting on top of or beside earlier investments. This sedimentation of technology then requires ongoing efforts to integrate and create data pathways across the stack.
As business organizations learn and use this technology stack, they conform or reconcile their business structures and processes to leverage the functionality and capabilities of the combined technology stack. In doing so, they extract value from the combined technology stack but also create significant barriers to changing it.
The effort and cost to maintain and evolve this environment become predictable, and the current process of annual budgets for both maintenance and development evolved as useful and appropriate governance approaches.
Hence, as we look at the state of IT governance, we see that it evolved to deal with the challenges presented from managing, funding, and overseeing a technology stack and associated organization focused primarily on supporting a company’s efforts to operate and become more efficient.
One of the defining attributes of technology focused on operational efficiency is the rate of change in the technology stack. Several factors dictate this rate of change, such as the amount of change the broader organization is willing to undergo and the level of funding available to support that change and the rate of change of the broader technology market.
Consequently, companies get into a rhythm where they spend significant money on procuring or developing and implementing technology but then only need to spend a fraction of that amount to maintain/support it over time, with layers of technology acting somewhat similarly to rock being laid down in a sea over time. Each year a company lays a new layer of technology over the existing base and builds up a sedimentary infrastructure.
This analogy is far from perfect as companies replace technology from time to time. However, replacement technology often fails to completely replace all the functionality; consequently, companies leave some or all the legacy applications in place. Just like with sand sediments that are laid down over time, which turn to rock, layers of technology that have been in place for many years can be hard to dislodge. All these attributes contribute to the forces that shape and maintain today’s IT organizations.
The Growth Framework
As digital transformation took root, companies increasingly build technology that actively helps them compete in the market through interacting directly with customers, improving customer experience, and attracting new customers.
Technology developed and implemented from this growth helps IT anticipate customers’ needs, changes the way those needs are fulfilled, and delivers exceptional customer experience, which then allows the company to increase market share.
Technologies (platforms) built to enable and drive growth have a much deeper intimacy between customers and technology, employees and technology, and the business itself. The relationship between the technology and the business becomes much more intimate and dependent on technologies than it does with efficiency-focused technologies.
How Investment Differs In The Two Frameworks
The way companies invest in platforms differs from efficiency-focused tech stacks. Investment drivers in the growth framework are a need to respond to become more competitive in the market. Increased customers and market share and/or increased employee satisfaction is the return on investment. Because of the crucial need to improve competitive capabilities, the growth framework makes companies much more willing to invest in platforms.
Platforms evolve at a rate that is orders of magnitude faster than efficiency technologies. Because of the need to continually provide functionality that differs from competitors (which invest in their own platforms), the pace of change in platform technologies is much faster. It requires far more iterations and thus much more change management in the business. It creates a much more dynamic environment.
How The Technical Debt Mindset Differs In The Two Frameworks
Another significant difference is the mindset around technical debt. Technical debt accumulates over years, and it is not unusual for companies to have layers of efficiency-focused technology that is 30 or more years old. In contrast, companies cannot tolerate technical debt for platforms because they must continually reinvest in components already in place. For example, digital transformation for the purpose of competing in the marketplace is nearly always based on cloud and SaaS platforms, which are inherently dynamic.
Platforms constantly expand, extending into new areas and absorbing new functions. Companies use platform technology to push into new frontiers while keeping existing components up to date. Thus, companies on a growth trajectory take a much more aggressive view toward retiring technical debt than those on the efficiency trajectory.
How The Talent Model Investment Differs In The Two Frameworks
There also is a significant difference in the talent model between the growth and efficiency frameworks. In the efficiency framework, it may take 100 programmers to develop an application and five to maintain it. The company then deploys the other 95 programmers to other projects. The company can bring in third-party resources later, if needed.
But in the platform world focusing on constantly increasing competitive capabilities, companies do not redeploy the initial 100 programmers and engineers that build a platform. They are a persistent team that continues working on that project to evolve the technology. Because of the exponential work in evolving platforms, which sucks up resources, a company may need to bring in another 100 engineers in addition to the initial 100, who already conquered the learning curve of the technology and the business.
The continual multiplication of resources necessary for the growth environment of platforms means that a company will continually invest in that environment, as opposed to the efficiency-focused environment that allows keeping budgets constant.
How Service Partnerships Differ In The Two Frameworks
Finally, the two frameworks differ greatly in the way they partner with third-party service providers.
The growth/platform environment increasingly focuses on selecting a service provider that will invest in bringing more capabilities to evolve the platform faster.
In contrast, partnering with third-party service providers in the efficiency framework focuses on lowering the cost to operate.
Platforms are exploding in importance, size, and consumption, and that is not going to slow down. Every company, especially large ones, needs to understand how its investment practices and philosophies must change as they shift from an efficiency-focused mindset into a growth mindset and platform world.
NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.
Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.
“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”
Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.
Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.
Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.
Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.
In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.
The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.
And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
