Lessons for CIOs from the software industry

by CXOtoday News Desk    Feb 12, 2013

software firm

IT software is increasingly playing a significant role in determining an organization’s performance and productivity. Today, software invades every aspect of an organization – including operations, products and services as well as strategies. The increased importance of software requires structural changes – both in terms of leadership and operations.

It also implies that CIOs have a greater role to play in the organization by leveraging the right software models that can lead to greater automation, integration, and standardization while at the same time lowering operational costs. So, how do enterprises boost their performance for their IT functions?

A recent article by McKinsey Quarterly states that one effective way CIOs can leverage IT software best practices for enhancing organizational productivity and ROI is by learning from the various business models employed by the software providers themselves. In other words, they should ask specific questions pertaining to the use of a particular software system, what they can learn from the operating models that these companies employ and finally how these models can align to their business needs and goals. Accordingly, they should consider incorporating and customizing these models for their IT functions.

From products to platforms
Google, Facebook, and Apple all went from single products to entire ecosystems. All enterprises need to think how to add value to their existing products and connect to their stakeholders effectively. Shifting into newer platform is innovative. Consumer major P&G, for instance, launched a “connect and develop” platform that secures over 1,000 partner agreements on innovative services. But again it depends on your overall business objective. According to the McKinsey Quarterly report, CIOs should ask themselves, what are the benefits of moving from products to platforms? This thought in itself will allow them to find out how can they align different parts of the ecosystem and integrate them in totality, how the company can encourage greater collaboration with their stakeholders and so on and accordingly adopt the most suitable model for their business.

Using innovative business models
Instead of going for a simple licensing model, software firms are developing different channel to generate revenue. This can be a best practice for companies where they can redefine their existing models by combining products, services, and features to create entirely new business model. LinkedIn can be a good example that introduced several paid options from privileged membership to recruiting services and keeps on adding new features to its existing platform.

However, CIOs should ask what business model should they adopt from the software industry to boost revenue? They should simultaneously assure how the change in approach would affect their pricing, company’s core business and whether the internal IT resources are equipped to handle such shifts.

Connecting with customers
CIOs are increasingly looking at software models that help them engage with their customers and partners to create a sense of community, build brand loyalty and help in solving problems. They are doing it with social software tools and a good example in this regard is crowdsourcing.

Coca-Cola used crowdsourcing to develop new designs for bottle crates in Germany and marketing ideas for Coke Zero in Singapore. GE has also crowdsourced green business ideas under its “eco-magination” challenge, says the McKinsey article. But before creating such a success story, CIOs should ask what is the right way for them to engage with and learn from their customers as the article mentions. This also brings up other questions such as what kind of product control will they have cultural changes they have to handle and what would be the new product development process.

Creating an agile enterprise
Agile has been the buzz for a while now, but it is only now that IT departments are realizing the need to adopt agile methodologies to boost transparency and achieve operational excellence. CIOs should find out the right software model to support a more agile, flexible business. They should also ensure the right techniques for increased collaboration, transparency, and new behaviors within teams by employing agile organizations.

By considering business and operating models from the software industry and customizing them to suit their business needs, organizations can lower operational costs, maximize performance, and leverage software into a competitive advantage.