Macro trends in technology and shifting customer behavior are giving rise to the connected business — which is not defined by technology but is rather a new style of doing business. The responsibility for transforming a company into a connected business ultimately rests with the CEO, but the CIO also plays a central role. CIOs will be responsible for introducing technology solutions that help break down silos, boost cross-team collaboration, drive the end-to-end customer experience, and engage more deeply with customers. In order to succeed, CIOs must go beyond technology enablement and support organizational and cultural transformation.

It's easier to implement technology innovations than to change habits and culture. Technology is only the catalyst for cultural and organizational transformation. Or as Jeroen Tas, CIO at Philips, stated: “The core goal is to transform into a highly collaborative customer-driven organization, away from a functional business unit-led organization. This requires a complete cultural transformation."

We are entering the age of the customer, a cycle in which the most successful businesses will reinvent themselves to systematically understand and serve increasingly powerful customers across many different channels. The balance of power between vendors and customers is shifting in favor of the customer — and companies are beginning to acknowledge this shift. Laura Wade-Gery, director for multichannel eCommerce, Marks & Spencer, recognizes this shift in her organization and said: “M&S has got to put online and multichannel at the heart of what we do, because fundamentally there are huge shifts going on in consumer behavior."

Over the coming decade, business will be heading into choppy and uncharted waters. Business models will change in light of technology revolutions, which transform competitive advantages. The mobile mind shift, digital disruption, and big data will all disrupt business models. They will be impacted by long-tail economics, which create more but smaller markets, and mass customization, which decentralizes and customizes manufacturing.

The connected business is the response to changing business requirements. But the process of transforming into a connected business is evolutionary, not revolutionary. Only startups can jump straight to the connected business stage; all other businesses will go through the three distinct transformational stages illustrated in the enclosed figure.

The connected business goes through several stages of transformation

Unified Communications (UC) is the first step toward becoming a connected business. The impact of UC is to allow people to be reached by voice, messaging, and video any time they like. In stage two, the connected enterprise extends the reach of channels to external parties. Connected enterprises use information and communication technologies to establish collaboration and communication channels for their employees, irrespective of location, application, or device. In stage three, the connected business changes the style of doing business. Connected businesses exploit pervasive information exchange; data analysis and software-based solutions form the basis of customer and employee experience enhancement.

CIOs must navigate four dimensions of transformation

When defining their transformation strategy, CIOs need to evaluate challenges in four dimensions: culture, organisation, department, and ecosystem:

1. Culture
Cultural change is a prerequisite for the connected business. The connected business is ultimately is about doing business differently from a human perspective. Cultural change matters for the connected business, because the more customers embrace the connected lifestyle as defined by the macro trends, the more they will buy from a connected business.

2. Organisation
Organisational structures will focus on collaboration. Organisational adjustments matter, because the connected business depends on a quickly evolving business model. This will be a challenge for businesses that use a traditional management style, with ossified processes and functional silos.

3. Department
Departments need more agile infrastructure to enhance the work environment. Departments will shift their strategic focus toward a more flexible business setup, because the connected business depends on many departments working as one entity. This transition is a challenge for companies with rigid hierarchies and command-and-control management styles.

4. Ecosystem
Ecosystems are the steppingstone to the connected economy and society. Ecosystems matter, because "doing connected business" is a new engagement not only for business-to-consumer (B2C) firms, but also for the business-to-business-to-consumer (B2B2C) proposition — and ultimately for a connected community.

Make your transformation process a team effort

All CIOs aim to provide a stable, secure, and cost-effective technology infrastructure. But above all, the CIO of the connected business acts as a business innovation driver. Forrester believes that CIOs should be board members, report to the CEO, and launch the transformation process as a collaborative project.

For example, we recommend that you create a team with the task to develop a transformation strategy.

Bring the CIO, the chief strategy officer, and the chief innovation officer together and define the major technological and behavioural trends that affect your industry.

Another best practice is to conduct an inventory of your assets and capabilities. Allocate portfolio elements to separate digital domains or connected propositions and consider the respective roles that hardware, cloud-based software, data, and services play in these propositions.

A third recommendation is to determine which digital domains you want to play in. Consider whether your available assets and capabilities put you into a position to shape and lead a market or to play along in the market without having to lead it — or whether you should participate in that market at all.

By Dan Bieler