When considering the impact of digital technologies, Jeffrey Immelt, General Electric’s former CEO and chairman of the board, said businesses either embrace the future or they will find themselves not able to satisfy their customers. Today, US companies are changing their business strategies to focus on productivity improvements that enable organizations to run faster and create better products and services while continually scaling to handle growth. But the approach companies need to take to achieve these objectives is quite different and much more complicated than in the past.

To meet this productivity mandate, companies look primarily to hybrid cloud, agile / DevOps, more deeply embedded security and rethinking the end-user compute workspace. These are basically four big journeys. Over the next few years, companies will dedicate substantial focus and resources to ensure successful journeys in IT modernization and digital transformation.

IT modernization and digital transformation are occurring in companies at the same time but are driven by different stakeholders towards each other. The goal of IT modernization is to enable support systems to support the digital transformation. Digital transformation’s objective is to accomplish business goals at speed, and that speed requires IT modernization. Companies undertaking these journeys can build a foundation flexible enough to support new business models that deliver greater value to customers, employees and stakeholders.

Each of the four journeys require change that cuts across technology, people, process, talent and philosophy. Understandably, the enormity of change requires highly effective leaders to drive the business to achieve the objectives. Here are seven tips that are essential for these leaders.

1. Understand where to focus in IT modernization

As companies move to modernize IT, leaders must understand that this effort is quite different and much more complicated than transformation in the past. Historically, it was largely about implementing software and technology and scaling it up. As companies move into modernizing IT, they enter a fundamentally different world. Instead of focusing on unit costs as in the past, leaders today must ensure their companies focus on design and business model change or service model change.

Companies now must spend much more time and value on design. And it’s not just upfront design; it’s an ongoing journey of design. This is a key aspect of the leadership approach for driving change through IT modernization.

2. Collaborate with third parties

A significant change from the past is that the focus on design stresses the way companies interact with third parties in IT modernization. The normal large total contract value (TCV) where a company commits to a scope of work of three to five years must change to a much more flexible set of third-party relationships that align well with the DevOps / agile methodology.

No organization is an island. These transformations are very big, very difficult and require third-party assistance. But third parties must be more collaborative in the way they assist clients today, and the way clients procure services with third parties differs from traditional strategies.

Before, requests for proposal (RFPs) focused first on costs and service levels, which were based on a defined service at a low cost. This strategy breaks down in today’s digital world with agile journeys using DevOps teams. The traditional arms-length procurement process doesn’t work well in a digital context because a DevOps environment requires joint solutioning and deep, joint engagement on design.

3. Know that PMO management is a high risk

IT modernization is not an event-driven outcome; it’s a big journey. Thus, it changes the traditional use of a Project Management Office (PMO). Although PMOs are effective in tracking outcomes and directing resources and investments for projects, they are not known for orchestrating change. In fact, the track record of PMOs for successfully driving and achieving change in complex transformation initiatives is very low. Furthermore, a PMO lacks the ability to change a design.

In transformation initiatives where change impacts multiple parts of the company, having a PMO manage the initiative and vesting too much accountability and trust in a PMO carries a high risk of failure.

4. Ensure rethinking and integration

As companies automate and software-define their business, service starts to take priority over function. Leaders must reorganize their resources into cross-functional teams of IT engineers and business folks rather than functional teams focused on typical IT concerns such as servers, networks, security, apps, etc. The cross-functional teams in a DevOps environment ensures a high degree of integration across business services and goals.

I can’t overstate how important this orientation shift is. Focusing on functions doesn’t drive value impact. When a company instead takes ownership responsibility for a service, it can focus on what really matters in driving value.

Part of the challenge of a business model change is the dramatic change required to rethink the existing organization and align it with the new digital realities to meet the business goals. Leaders driving change must guide their companies through systematically reviewing old precepts and assumptions, many of which companies no longer realize they have in place.

5. Manage urgency and end-to-end disruption

At the same time as companies undertake a substantial modernization effort, many are also increasing commitment to drive digital transformation. Again, these are very big journeys. Digital transformation journeys focus on specific competitive advantage goals. They typically are anchored in some form of a customer experience (delivering more value and satisfaction), employee experience (the ability to attract and retain talent) or orchestrating more value in the ecosystem in which a company operates. The goals of these journeys are to improve the overall experience to create greater value.

Digital transformation journeys differ from IT modernization journeys only to the extent that they are driven by the business, typically by the CEO or the most senior members of the leadership team. These journeys include a business imperative and urgency.

Effectively, digital journeys reverse the importance of the criteria in IT modernization. Digital journeys begin with the business impact – the value to the company – and then quickly move to the speed (how to create that value quickly and effectively) – and finally deal with creating a cost-effective way to achieve the business impact.

Digital journeys use largely the same set of technologies and techniques as IT modernization uses, but they focus technologies and techniques relentlessly on the goals for customer, employee or ecosystem experience at speed. Once companies embark on such a journey, leaders need to drive change end to end. Developing a polished front end quickly calls for a retooling of the supporting systems, policies and processes throughout the company. Leaders must drive significant change, and this usually means managing company-wide disruption.

6. Manage through an iterative approach

One of the major differences in IT modernization and digital transformation journeys compared to transformation initiatives in the past is the amount of change the IT organization undergoes today. As I stated already, these are big journeys that drive extensive change. Consequently, the waterfall approach or the event-driven approach to initiatives breaks down. With so many massive moving parts and tight deadlines, leaders must take an agile approach and manage through an iterative journey.

An iterative approach, with phases focused on specific goals, empowers people to understand their roles in the big picture and helps them focus on the accomplishments rather than a mountain ahead of them. This agile approach (which is similar to the software start-up funding approach) has built-in mechanisms at each phase to allow for changes in the plan design.

An iterative approach also enables effective funding. Instead of budgeting up front for a long-term journey that inevitably will encounter necessary alterations, leaders gain upfront commitment for investing in the journey but use the funds only at the time they are needed in each phase.

7. Don’t use traditional change management techniques

Finally, leaders must ensure the company doesn’t overlook the necessity of aligning all operating aspects and services end to end with the new model. IT isn’t the only area of the business that needs to change its status quo to succeed on these journeys. Alignment may involve changes to policies, processes, talent models, budgeting, hierarchy, governing and more.

To succeed on these journeys, leaders must recognize that traditional change management techniques (such as assigning internal process owners with responsibilities for driving change) will cause the company to fall dramatically short of its goals in IT modernization and digital transformation. At the heart of making progress on these journeys is the leader’s responsibility to make sure the organization behaviors and decisions are aligned with the overall thinking around where the company is headed.

Certainly, there are leadership challenges in managing IT modernization and digital transformation journeys. But I see stunning successes in companies that use these seven tips as the foundation for mind-sets and decisions on these crucial journeys for creating and delivering new value.

Peter Bendor-Samuel, CEO and Founder – Everest Group

This article is reproduced from GAVS’ enGAge magazine, May 2018 edition.