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Established companies are facing two transformations involving digital technologies: becoming digitized and becoming digital. The platforms enabling these transformations are fundamentally different in their purpose, target state, success metrics — and especially, in the key responsibilities of senior leaders. Because of these differences, companies will need to apply new rules new roles, processes, metrics, and norms — to the new digital platform. To develop new rules leaders should (1) separate the teams working on the digital platform, (2) allow digital platform leaders to experiment with new rules, and (3) identify new leaders and coach them to succeed with new rules. Given the time it takes to establish new rules, companies need to start breaking old rules now.
The modern industrial corporation encompasses a myriad of different software applications, each of which must work in concert to deliver functionality to end-users. However, the increasingly complex and dynamic nature of competition in today’s product-markets dictates that this software portfolio be continually evolved and adapted, in order to meet new business challenges. This ability – to rapidly update, improve, remove, replace, and reimagine the software applications that underpin a firm’s competitive position – is at the heart of what has been called IT agility. Unfortunately, little work has examined the antecedents of IT agility, with respect to the choices a firm makes when designing its “Software Portfolio Architecture.”
We address this gap in the literature by exploring the relationship between software portfolio architecture and IT agility at the level of the individual applications in the architecture. In particular, we draw from modular systems theory to develop a series of hypotheses about how different types of coupling impact the ability to update, remove or replace the software applications in a firm’s portfolio. We test our hypotheses using longitudinal data from a large financial services firm, comprising over 1,000 applications and over 3,000 dependencies between them. Our methods allow us to disentangle the effects of different types and levels of coupling.
Our analysis reveals that applications with higher levels of coupling cost more to update, are harder to remove, and are harder to replace, than those with lower coupling. The measures of coupling that best explain differences in IT agility include all indirect dependencies between software applications (i.e., they include coupling and dependency relationships that are not easily visible to the system architect). Our results reveal the critical importance of software portfolio design decisions, in developing a portfolio of applications that can evolve and adapt over time.
In 2013, Royal Philips was two years into a daunting transformation. Following declining financial performance, CEO Frans van Houten aimed to turn the Dutch icon into a "high-performing Company" by 2017. This case study examines the challenges of the business-driven IT transformation at Royal Philips, a diversified technology company. The case discusses three crucial issues. First, the case reflects on Philips’ aim at creating value from combining locally relevant products and services while also leveraging its global scale and scope. Rewarded and unrewarded business complexity is analyzed. Second, the case identifies the need to design and align multiple elements of an enterprise (organizational, cultural, technical) to balance local responsiveness with global scale. Third, the case explains the role of IT (as an asset instead of a liability) in Philips’ transformation and discusses the new IT landscape with its digital platforms, and the new practices to create effective business-IT partnerships.
To remain relevant and mitigate disruption, traditional companies have to engage in multiple fast-paced experiments in digital offerings: revenue-generating solutions that leverage digital technologies to address customer needs. After launching several digital offering initiatives, reinsurance giant Munich Re noticed that many experienced similar challenges. This briefing describes how Munich Re addressed these common challenges by building a foundation for experimenting more systematically and successfully with digital offerings. The foundation has enabled Munich Re to become a serial innovator of digital offerings.