“Digital” may have technically been around since the invention of the transistor, but we’re still in the early days of a new economy. We’re moving from digital that’s fun (sharing photos on social media, listening to algorithmically selected music) to digital that matters (extending banking services to the unbanked, treating patients remotely).
At the center of this shift is software – but not software created with industrial-era methods like waterfall development or that’s been jerry-rigged from the industrial economy. Think about much of the software you encounter every day, whether in your own company or businesses you deal with. That airline ticketing application, banking platform, financial and accounting toolset, or point-of-sale system may have a modernized coat of paint, but its software likely has roots going back to the Reagan administration or beyond.
Software created explicitly for the digital economy, on the other hand, can serve as an activator of business growth. Consider that Betterment, a platform-based wealth management system founded in 2008, recently announced it has $10 billion of assets under management. Blue Nile, founded in 1999 as an easier way to purchase an engagement ring, was recently acquired by an investor group for half a billion dollars. Amazon, Google and others are making machine learning, AI and cloud infrastructure available for pennies.
Making the Digital Engineering Shift
For many experienced business and technology leaders, the shift from old to new software engineering approaches can feel a bit terrifying. While most people have heard a lot about DevOps, Agile development, continuous integration/delivery and minimum viable products, it’s something else to actually move in this direction.
It’s also tempting to look at Facebook, LinkedIn and Netflix and say, “Let’s just be like them;” however, most companies don’t have the luxury of hitting the reboot button on their entire technology architecture – and they don’t have to. A more realistic strategy is to apply lessons learned from digital natives to the enterprise.
Here are four “no regrets” steps business and technology leaders can take to put digital engineering at the center of their business strategies.
- Make software an enterprise concern (not just the CIO’s problem). Software today is not just e-mail and storage; it’s how businesses grow revenue and create/deliver new products, services and experiences. That’s why shifting gears into digital engineering isn’t just an IT mandate; it involves the entire enterprise. Business leaders probably already know that software is increasingly important, but they likely aren’t fluent in the concepts behind new digital engineering and development models. They don’t all need to learn to code, but everyone needs to have an understanding about how new approaches to building software is changing business.
- Partner with the CFO to create the economic argument for building modern software. Many finance departments continue to view IT as a fixed cost to be hammered down. As a result, many CIOs find their budgetary resources insufficient for funding anything beyond legacy maintenance. To resolve this, CIOs can use financial data to make their case for driving new digital engineering approaches. Our research shows that companies behind the curve in digital investments are paying an annual “laggard penalty” – the difference in both cost and revenue performance due to technology. The penalty varies by industry, but it can add up to hundreds of millions of dollars per year. Establishing the business case for software built for the digital economy is an operational imperative. Moreover, modernizing legacy IT often frees up resources that can be applied to innovation in other areas.
- Put humans at the center of software. Industrial-era software was largely designed with technology at the center. That’s why loads of enterprise software – and even some consumer apps on iTunes or Google Play – are rarely or never used. In these cases, the developers have not taken the necessary steps to truly understand human wants and needs. Without deeply understanding users on their own terms – ideally leveraging social science research techniques like ethnography – software designers are sure to miss the mark. Every bet on business is a bet on human behavior. To maximize your investment in digital engineering, start by putting humans at the center of the code.
- Forget what you know about software engineering. Traditional methods, team structures and philosophies just won’t cut it when building effective software for the digital economy. DevOps, cloud and Agile approaches are essential, even in traditional sectors such as healthcare, insurance, banking and financial services. Colocated teams of programmers and business workers are now continuously developing and integrating small chunks of code at unprecedented velocity. Instead of months, design cycles need to take place over a few weeks max. The new rules of digital engineering have a different rhythm and structure, and it’s time to learn them.
The bottom line, literally, is that companies hoping to wring a few more years of productivity out of their industrial-era software are taking a high-risk path. Now is not the time for analysis-paralysis. Early winners are already taking the steps necessary to win with code in the digital economy.
To learn more, visit the Digital Engineering section of our website.
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