by Chris Potts

May 2012

Consumerization, Clouds, and Consequences

A ‘perfect storm’ is happening in the world of IT. On the one hand, the IT market has consumerized and, on the other, IT suppliers are pursuing cloud-based delivery. Enterprises, their strategies and business models float in the middle of it all. How should IT leaders best treat these developments in the Boardroom and beyond? Which, if either, is the best opportunity to move executives’ focus onto the next generation of strategy, and to enhance the contributions of their IT leaders? This article explores the strategic choices facing today’s IT leaders, and their potential consequences.

The Perfect Storm
The CIO and IT leadership team are the enterprise’s chief strategists in IT-related matters. How they steer, and participate in, Board-level conversations about IT sets the context and direction for everyone else. Over the years, as the IT market evolves, executives learn to position IT differently in their thinking and decision-making. In the past decade or so their dominant focus has been on IT spending, sourcing, and delivery. With the major developments taking place in the IT market, it is time for today’s generation of IT leaders to decide whether that focus is still best for the enterprise, its strategies and business performance, their own contributions and careers.
Over the years, IT has become ever-more integral to being a business, and to doing business. With IT consumerization, technology has also become deeply integral to people’s lives and relationships, and to the way market ecosystems work. Any Boardroom that still treats ‘IT’ as a separate subject from ‘business’ is becoming increasingly remote from market realities, and will be making skewed decisions as a result. Add ‘cloud’ to consumerization, and we’re looking at a perfect storm of IT-related developments, with enterprises, their business models, Boardrooms and IT leaders floating right in the middle.
So, with everything that is happening, what strategic conversations should CIOs and their teams now lead in the Boardroom and the wider business?

IT Spending is the Wrong Conversation
If executives still want to talk about IT spending and delivery, then all the potential opportunities and risks of IT consumerization won’t feature very much. The technology that your consumers are using doesn’t appear in your IT budgets or change projects. If there’s any chance that IT consumerization could affect your enterprise’s strategies, business models, or investments in change, then the consequences of a focus on IT spending would be a major Boardroom blindspot.
Boardroom conversations about IT spending and delivery also miss the most significant strategic aspects of ‘the cloud’. If, as has already happened in recorded music, cloud-based services revolutionise how a market works, then executives who focus on how cloud could affect their IT spending are clearly looking in the wrong direction.
Instead, the strategic questions to consider about consumerization and cloud are: what they mean for your enterprise’s markets and business models; how they affect the economics of creating value from change, for example by shifting investments from capital to operating costs; and, what the IT suppliers’ battles over cloud will mean for the enterprise’s future options for sourcing IT.
How much the enterprise spends on IT is now, strategically, of marginal relevance. In fact, with the emergence of consumerization and cloud, today’s IT conversations need – paradoxically – to stop being about IT at all.

Consumerization + Cloud = ?
Because IT has become so deeply integral to businesses, markets, and people’s lives, Boardroom conversations about IT developments such as consumerization and cloud cannot simply be about IT. The conversation that IT leaders now need to drive is about the consequences for the enterprise’s strategies, business models and investments in change, and what executives need to do as a result.
The challenge facing today’s generation of IT leaders is to articulate, with authority and credibility, the potentially far-reaching business consequences of IT-related developments, not the consequences for IT itself. Never mind that these developments are coming from the world of IT, if executives end up having IT-specific conversations then the strategy isn’t working. IT leaders must drive conversations, decisions and actions that are not about IT.
In truth, nobody knows for sure what the future consequences of consumerization plus cloud will be, but we know enough about them already to build and assess scenarios. As a result of exploring those scenarios, executives can decide what to do with their strategies and business models, and where next to place their bets for the enterprise’s investments in change. If executives are used to their IT people bringing them roadmaps, switching to strategy scenarios may well be a surprise and a challenge, but should also be a refreshing change. It’s the kind of thing that will demonstrate to executives that they are in a new generation of IT leadership.

Forging a Next-Generation Strategy
For any Boardroom that has become used to talking about IT in terms of budgets, spending and delivery, consumerization and cloud do not make those conversations redundant, but they are no longer strategic.
Should IT leaders just stop talking about spending and delivery, and start talking about something else? That’s unlikely to be a wise move, either practically or politically. Instead, they can use those previous-generation conversations to facilitate executives’ understanding of what they should really now be talking about. Turn a discussion about IT budgets into one that’s about the economics of creating value from change, now that consumers have IT. Turn a conversation about IT architecture into scenarios for the future structure of your enterprise, and of the markets in which participates. Turn a discussion about IT delivery into one about the future of IT sourcing, and the IT suppliers’ battles over the cloud.
With effective leadership from their IT specialists, executives will rapidly grasp the new conversation they need to be having. Many will find it more tangible, challenging and enjoyable than talking about IT itself.
For the CIO and IT leaders driving this conversation, there is a strategic choice to make before starting. Will a visible preference for talking about either consumerization or cloud help to reinforce their leadership credentials in the Boardroom? Is cloud the bigger strategic opportunity, or consumerization?

CIO: Consumerization is the Opportunity
Given the potential consequences of consumerization plus cloud, executives needs to be primarily concerned with how changes in consumer behaviour, using IT, could impact their strategies and business models. Changes in how IT is delivered are a significant part of the story, but that is not where the enterprise creates its value.
For many years, IT leaders have been looking for opportunities to drive the Boardroom conversation about IT to be about value rather than cost. With the consumerization of IT, consumers can create value for themselves and the enterprise, using technology that costs the enterprise nothing. Cloud computing, on the other hand, is about how IT is delivered, who pays and how much. For the IT leaders who want the Boardroom conversation to be about value rather than cost, consumerization is the opportunity.
And they need to make sure the Board knows that IT consumerization is about consumers and market ecosystems, not employees and internal processes. Because enterprise IT came before consumer IT, executives are used to thinking about IT in terms of their employees. While there are decisions to be made about what employees can do at work with consumer technologies, if that becomes the central focus of the conversation then the main strategic story is missing.
Whether today’s IT leader’s decide to focus more on consumerization or cloud, or both equally, there are some essential tools for success.

Essential Tools for Success
To guide executive discussions and decisions about the ‘perfect storm’ of consumerization plus cloud, there are three essential tools today’s IT leaders needs.
The first of these is the enterprise’s portfolio of investments in change. As events unfold in the market, new investments will be needed, and some existing ones may need to be redesigned or stopped. Changes that would have been a success had the market not evolved can become redundant or even damaging.
The second is a set of strategy scenarios that articulate alternative impacts of consumerization plus cloud. They need to consider the structure of each market your enterprise participates in, the structure of the enterprise itself, the business models that generate its value, and the economics of creating value from change.
The third tool is the strategy itself, articulated in whatever ways that executives can best understand and participate in – the outcome it is promising to achieve, the principles its is founded upon and the main tactics for success. It’s always worth remembering that, at its heart, every strategy is about a pattern of behaviour. So, while IT leaders will find ways to express it with words, numbers, and pictures, the ultimate articulation of the strategy is the behaviour of the IT leaders themselves.
When there are major inflections in the IT market, such as consumerization and cloud, executives can expect to see a radical change in their corporate strategy for IT, and in how their IT leaders behave. They need to know the potential consequences of the IT developments they read and hear about, and build them into their decisions and actions. Some of those consequences will be far-reaching, uncomfortable and challenging. Executives will expect to see the IT leaders demonstrate both practical and political wisdom, to make sure the strategy succeeds.
The consequences of consumerization and cloud? The next generation of corporate strategy for IT, and the next generation of IT leadership.