Risk In The Digital World

Wednesday 28th February, 2018

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Before we begin to talk about Digital at all, it’s always worth trying to define what we mean by ‘Digital’ as there’s plenty of mythology that builds up about it. When we at Coeus talk to our clients about ‘Digital’ we use the following definition:

"‘Digital’ represents an attitude to technology, business and customer engagement. It is a will to re-define business models, processes and interactions across all aspects of a business in a way that exploits technology and the growing inter-connectedness of the world in the 21st century."

What does 'risk-averse' mean in 2018?

When we hear that a company is risk-averse we take that to mean they are relying on traditional business models or revenue streams that have served them well in the past. Sticking with the status quo. Playing it safe. And yet would we say that will avoid risk?

In the Digital era, the biggest risk to your business is to play it safe. In this environment, there is no such thing as risk-averse: if you’re doing nothing to adapt to the Digital world then you’re effectively asleep at the wheel. Circumspection used to be a watchword for prudence in business; it is now a luxury you cannot afford. Too many companies are still complacent, still milking another year out of traditional value streams and hoping this will all blow over. Even gradual evolution doesn't work if other companies are revolutionising around you; sooner or later one of them will get it right and leave you standing.

This all starts with the pace: technology now moves at such a pace that traditional IT delivery methods cannot keep up with it. A big programme of work in a big company can take years to deliver, and by the time it’s done, the world has moved on, the business drivers have changed, the technology has improved, the competitive landscape - even the whole industry - may have changed. The chances are what you were delivering is already near the end of its usable life before it’s even arrived.

Once you start to drop off the pace you’re into a downward spiral. If you have technical debt this will become technical bankruptcy quicker than ever: the pace of change represents a kind of hyper-inflation on your technical debt, and so it follows that the interest you are paying on that debt is going through the roof. You effectively can’t service your debt. Technical debt becomes technical bankruptcy.

So rapid iterations are mandatory: you’ve got to be able to deliver quickly and efficiently. Agile is the key to this – not necessarily agile with a capital ‘A’, but some form of rapid iterative delivery that allows you to turn on a sixpence and always be working on the highest priority item for your business. Agility forces all the component parts of change delivery to keep pace with the fastest-moving, unlike more traditional models where everyone moves at the pace of the slowest part.

By speeding up, the appearance of new risks, and higher levels of risk, are unavoidable. Think of it like negotiating a road: on a small, busy high street full of traffic lights, zebra crossings, cyclists, school-children, of course you can’t drive at 70mph. That’s why we have motorways, that remove all those things from the way of the driver. Imagine that your business requires you to travel at 70mph all the time, and you need to start clearing the way ahead in such a way that mitigates that risk.

If you wait for certainty, you're too late

The trouble with risk is that many businesses are still hard-wired to avoid failure. There are business concepts that are just a little too ingrained into conventional thinking, and for all but the most progressive and forward-thinking companies you are going to push them out of their comfort zone with any suggestion that failure can be a good thing. The difference in the Digital age is this: the pace of technology is such that if you wait for certainty before you start anything you will undoubtedly miss the boat every time. You therefore need to experiment, and that means that inevitably some things will fail in the experimentation stage. Here’s where a business will really show its Digital credentials. If your business still thinks ‘failure is not an option’ then you have to ask yourself whether they will ever truly be able to compete in the Digital world.

So you need to be able to break this cycle: ‘fail fast’ is obviously the way to do this – experiment quickly and at low cost and then nobody minds the failures quite so much – and yet even this isn’t enough for many companies. It’s easy to say you’ll abandon something that isn’t proving its value and yet in all but the most abject failures they tend to get kept, running in production despite not meeting their original objectives, all the time racking up operational cost and adding to the legacy. You have to be ruthless with what makes it into your IT estate; you have to set clear pass and fail criteria and stick to them irrespective of perception and egos. Are you really going to be able to do that?

Two-speed IT: what are your goals?

Many large companies recognise they’re too big to change all at once and will spin up a separate ‘Digital’ function within their organisation, usually kept away from the regular organisational constraints and with the freedom to break the rules. This can be a great way to prototype the right behaviours and accelerate some change, but equally, like any good prototype there’s got to be an end-goal to it. Too many big companies start down this path with no plan to resolve this two-paced approach back into a single operating model again in the future, and if that happens then you’re into all kinds of problems: allowing some of your organisation to break the rules and fail whilst holding others to higher standards just breeds resentment and internal competition, and if you’re not careful you’ll create an irreparable divide within your company. So if you’re going to do this, again, be clear on how you will consider this prototype a success or a failure, and how you will act based on that.

Of course, the beauty of the 21st century is that there are ways to make this far easier upon yourself. If you’re going to move at pace then take advantage of the many tools that are available to you now – tools that will help you automate your testing, builds and deployments; tools to aid continuous integration and continuous delivery; better monitoring tools, better code analysis tools, and most of all better data and analytics capabilities: if your business is really hurting from having to move at pace then take advantage of all the wisdom that good data science can bring you and start to learn in a different way. You may not have time for a full market sector analysis or customer panels before you embark on your new proposition, but you might learn far more from monitoring your customers’ behaviours on your website and learning what they want as a result. Use of the cloud might mean that you can spin up a sandbox environment for your developers that lets them prototype at a fraction of the time or cost they used to.

As well as looking at your engineering practices, look to your architecture: kill your legacy with renewed vigour and pro-actively break down the large, tightly-coupled stacks within your estate; only by separating out your components can you operate at pace without creating the kind of friction that comes from code changes that ripple out across a wide area. Only by setting high standards in architecture, and pro-actively governing against poor design (and doing so without causing the pace to drop!) will you keep up your agility and keep down your workload.

Where do you start to change your organisation?

It’s more than just technology and its delivery: look to everything in your business that still requires paper and change that. Look to everything that takes a lot of people or takes people a lot of time: change them. Look to your costs: do you need high street stores and branches anymore? Do you need a big expensive office in a city centre when the Digital world is so location-agnostic?

If you are a Tech leader in your organisation, ultimately it’s up to you to lead this culture change, to shape this attitude that defines what it is to be ‘Digital’. Half of the major companies in the world ten years from now will be ones you haven’t heard of today, so there is no room for complacency and your company’s size or history will not protect it in the way it once did. How do you change long-established attitudes? You challenge them, daily, highlighting the dangers of not changing, but also championing the benefits of embracing the new world. It’s not enough for Tech leaders to look after their IT department any more: they need to be taking the whole company by the hand and leading them into a Digital future. You’re the one your non-technical colleagues are looking to for guidance in what is a confusing new world, so model the right attitudes and challenge the ones that belong in the past; you might just start the movement that protects your company’s future.