Flexibility increases resilience: How to harden your IT function against environmental change

“The only thing constant in life is change” (Heraclitus)

The recent COVID-19 lock-down revealed in an extreme way how important it is for companies to react swiftly to changing environmental conditions. A company's flexibility is key to its performance during changes or crises and allows for a sustainable development not bound to the status quo.

A company's IT function is crucial for their flexibility and therefore its success. IT leaders therefore should not only seek to minimize IT's own inflexibility or optimize their IT function for a status quo, but build in inherent flexibility to cope with external changes. This is not an easy task. As we observe at our clients, they often face setups – which may have been a valid choice at their heyday – that are for today's standards rather static, e.g., consisting of an indiscriminate monolithic application architecture, a specialized workforce, or long-term sourcing engagements, which do not allow short-term alteration.

We believe that in today's digital and data driven world change will be omnipresent and difficult to detect in its width or depth at an early stage. Hence we encourage IT leaders to invest in flexibility to broaden IT's ability to respond to whatever change may occur and therefore become a reliable partner of your business department and a driver of innovation.

What flexibility pays off? Four must-have areas to improve

We strongly believe investments in flexibility will pay off as IT's ability to adapt to change will increase - leading to a successful, striving, and resilient company. This success can be measured in higher revenue growth rates or shorter time-to-market.

Establishing a flexible IT function should therefore be the guiding principle for any investment, e.g., in training of your workforce or modernization of your application landscape. To our belief to be truly flexible you have to excel in four areas.

To better understand each of those four areas let us look at, what constitutes their flexibility, what are the benefits of flexibility and what are exemplary levers to achieve those benefits. 

Flexibility in IT demand management

• Key objective: Set up demand management to be able to (re-)prioritize initiative portfolio to meet volatile business requirements
• Top benefits: A flexible demand management shortens the time in which your IT can provide tangible results, it helps to align your portfolio towards customer-centricity, and it boosts your employees' engagement.
• Prime lever to achieve benefits: Embrace an agile portfolio management approach. An agile approach to portfolio management makes use of shorter and smaller projects allowing you to impact the direction of your portfolio in a much higher frequency and therefore improve portfolio's effectiveness. It also aims to involve a wider group of stakeholders and elevates therefore attention, contribution and appreciation.

Flexibility of the IT workforce

• Key objective: Set up an IT workforce that can be redeployed quickly to adapt to a change in requirements
• Top benefits: A flexible IT workforce comes along with the development of your employees’ competences, increases their internal mobility, and eases facilitating a location-independent collaboration
• Prime lever to achieve benefits: Shift to a skill-based organization. Leaving focus on rigid roles behind enables your IT workforce to develop and apply their skills more easily wherever needed. T-shaped skill profiles should be the new normal rather than fostering an overspecialized role model. Your people experience a greater appreciation, resulting in higher commitment, stronger ownership and greater identification with your company's brands, products and values

Flexible IT architecture

• Key objective: Build a modular IT architecture that is set up for change rather than static optimization
• Top benefits: A flexible IT architecture shortens your development time, is your foundation for ubiquitous access to data, makes it easier to react to customer behavior, and therefore amplifies customer-experience
• Prime lever to achieve benefits: Embrace a digital and data architecture. The modularization of a digital and data IT architecture gives you the means to be fast, where you need to be fast (e.g., serving quickly changing customer online behavior) and powerful, where you need to be powerful (e.g., for real-time data crunching, potentially by using external services). A healthy mix of standardized COTS applications for your lean and non-differentiating core combined with custom built differentiating digital enablers combine cost effectiveness and an ability to quickly innovate

Flexible IT cost management

• Key objective: Build up an IT cost structure that can be quickly influenced rather than having your cost position dominated by long-term commitments
• Top benefits: A flexible IT cost management gives you short-term cost control, eases the contractual scaling of infrastructure, services or skills, and tears down barriers of usage
• Prime lever to achieve benefits: Balance your share of pay-per-use purchases. Though you do not get to enjoy any term discounts, the advantages of paying only for real usage, avoiding upfront cost and preventing vendor lock-in makes pay-per-use purchases a valuable IT cost management tool – the best tool in case changes in usage behavior and volume are common

We like to highlight, that the presented benefits do not play out their strength only in changing environments, but enrich companies' relationships with clients, employees, external partners and vendors also in normal times.

Implement flexibility and talk about it 

We at BCG Platinion strongly believe, that transformations can only be successful if success can be defined in a measurable way. It allows you to take action, observe results based on your defined KPIs and adjust your path going forward accordingly. Also, good KPIs are a great way to communicate goals and rally your people to a common cause. To promote the importance and the impact of flexibility make it a closely observed part of management dashboards of any level. Here are KPIs that specifically target the measurement of your IT's flexibility:

1. Idea-to-action: Average time taken from a prioritized business need to the start of work on it
2. T-shape ratio: Ratio of employees with a T-shaped skill set, i.e., employees with deep knowledge in one respective area accompanied by a broad base of general skills (to be assessed via regular skill surveys)
3. Time-to-development: Average time taken between a requirement being included into the prioritized portfolio and its availability in production
4. n-months cost elasticity: Ratio of IT spend that can be reduced to zero within n months, with n=1, 3 or 6

Standardization and automation of the underlying data is a crucial prerequisite. Getting this and the KPIs right, will be the key to communicate your ideas of flexibility throughout the company.

If you want to be prepared for external change not predictable in its forms, flexibility of your IT is a must-have. This flexibility requires investments, which are rewarding over time. The reward manifests itself in different ways: It will serve the idea of being better safe than sorry, allows business to quickly bring innovations to the market and let you adapt to the external changes to come.

If you recognize challenges of your IT in this article, please do not hesitate to contact us to discuss your way towards a more flexible and resilient IT function.

About the authors

Jens Schiffer is a Senior Consultant in the Cologne office of BCG Platinion. He is a member of Platinion's Insurance Practice Area. Jens focuses on the areas of IT controlling as well as cost and complexity analysis.

Antonino Campione is a Manager in the Milan office of BCG Platinion. He is specialized in large scale implementation projects and in designing strategic business and IT landscapes for energy clients.

Sebastian Ley is an Associate Director in the Cologne office of BCG Platinion. He is leading the Agile Chapter of BCG Platinion in the CEMA region and is part of the Leadership Group of Platinion’s Consumer and Retail Practice Area.