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If CIOs are to prepare for, and ride out, a recession driven by the coronavirus, they will need to assess how to get the best value from their supplier relationships.
A report by analyst firm Forrester, Pandemic recession demands a digital response, recommends that CIOs make the most of cloud and outsourcing contracts in order to focus the business on core activities.
In the report, principal analyst Ted Schadler discussed the need for businesses to become lean and focus on their core, while making use of the resources of other business partners. He wrote: “To achieve this, your success is entirely dependent on how well you structure and manage your relationships with the universe of third-party resources and capabilities available over the cloud. We call this ‘innovation through ecosystems’.”
Schadler described “innovation through ecosystems” as the opposite of “not invented here”. In the report, he wrote: “This lean approach instead prods every company to ask, ‘What’s the least we can do ourselves and the most we can get out of partners?’ Tapping the resources and innovation of the cloud and orchestrating those resources has allowed firms to respond to the crisis in days, rather than years. These firms embrace co-innovation partnerships with a new level of engagement, alignment and executive involvement.”
Schadler suggested that each participant in the extended digital ecosystem should have a new part to play – with each contributing something toward a measurable business outcome. All parties are rewarded when the company at the end of the value chain accomplishes something they care about, he said – order taken, revenue increased, cost-to-serve reduced, claim processed, customer onboarded, and risk mitigated.
To achieve these results, Schadler advised CIOs and their procurement professionals to ask themselves and their providers to shift to a “value-realised” approach.
Along with building out an ecosystem of trusted suppliers to fill in the blanks in the organisation’s innovation strategy, Schadler urged CIOs to use outsourcing to accelerate the delivery of projects that add business value.
“You’ll acquire a sharp focus on what differentiates you,” he wrote. “You’ll improve your speed to market and your operational excellence – traits that serve you well in uncertain times and in growth times, too. Businesses that are committed to getting lean will spin up a flywheel of continuous innovation at the intersection of digital experiences and digital operations and embrace the habits of first movers.”
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The Forrester report recommended that CIOs scale up the use of agile methodologies throughout the business. Schadler wrote: “This is the opposite of waterfall approaches, siloed teams and risk-averse behaviours. It’s guided by frameworks like OKRs [objectives and key results] and creates a way of working that brings business, technology and operations teams together in an agile cycle.
“It puts outcomes and data at the heart of the transformation process, with metrics that align decisions, actions and teams.”
According to Schadler, agile at scale works only if CIOs are willing to manage projects with clear roadmaps and budgets, but with uncertain feature delivery dates. “This simple choice has massive implications on how you work with service providers, how procurement does its job, and how you explain your strategic goals and commitments to customers, employees and investors,” he wrote.