June LEADINGedgeforum. Outside-in BRM Turning Relationship Managers into Digital Leaders. Executive Summary. Kirt Mead Alex Mayall

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1 June 2014 LEADINGedgeforum Outside-in BRM Turning Relationship Managers into Digital Leaders Executive Summary Kirt Mead Alex Mayall

2 OUTSIDE-IN BRM TURNING RELATIONSHIP MANAGERS INTO DIGITAL LEADERS Our research shows that IT is now the primary driver of business change, altering the basis of competition in virtually every market sector. Technology has enabled the emergence of entirely new business models; it has encouraged companies to look outside their own boundaries for sources of innovation; it has empowered customer-facing functions such as sales, marketing, engineering and product development to develop and own their own technology-based offerings; and it has led to the rapidly expanding market for Technology-Enabled Business Services (TEBS). From a platform perspective, the use of cloud computing, Software-as-a-Service, open source software and social media has become routine, and the practice of employees using their own devices is increasingly accepted. In many firms, the combination of cloud computing, consumerization and open innovation communities is now the primary IT development environment. On a negative note, these very same internet forces have created unprecedented risks to businesses and governments through the potentially disruptive threats of hackers, fraudsters and other hostile agencies. Our survey research shows that CIOs and other senior IT leaders rate internet security as the single most important IT issue facing their companies. Such concerns won t go away anytime soon. These powerful marketplace dynamics, which we collectively refer to as Outside-in, represent a major transformation of the technology landscape. If the Enterprise IT function is to retain a vital, front-of-the-firm role going forward, it will have to raise its game and learn to operate effectively in an increasingly Outside-in world. Outside-in requires a different Enterprise IT mindset In traditional Inside-out IT, characterized by the patterns listed on the left side of the Janus figure below, Enterprise IT builds services and then delivers them to users, who are seen as passive. IT is responsible for providing and managing user devices, and there is a help desk if people have problems getting things to work. Due to the complexity of many internal systems, and the need to be integrated with key back-office systems, development of new applications is typically slow and costly. Inside-out Enterprise IT serves internal customers IT controls the use of IT Technology is focused on back-office support Technology is a business tool Enterprise architecture stops at the organization boundary Enterprise IT sources and develops solutions for passive users Business technologies are distinct from personal technologies Information assets are protected by the company firewall Outside-in Enterprise IT is focused on the external marketplace IT guides the use of IT Technology is at the front of the firm and is core to the offering Technology is the business milieu Enterprise architecture covers the wider business ecosystem IT co-creates solutions with business leaders and customers Business technologies merge with personal technologies Information assets are protected via company deperimeterization Outside-in requires a different Enterprise IT mindset

3 With Outside-in IT, shown on the right, external resources user content, sensors, smart products, cloud computing capabilities, open communities, and so on are the driving forces of change. As in most consumer IT, there is loose coupling, not tight integration. But because there is no company-specific firewall, Outside-in applications are exposed to the full range of internet security risks. This requires very different, more deperimeterized approaches to IT security. BRMs will have to be comfortable in this world if they are to be effective, and this represents a substantial cultural change. However, even as the two sides of Janus diverge culturally, they need to interact effectively. The most powerful company examples identified in our research typically involved integrating external technologies with the supporting back-office functions. Often, it is the BRM who is best positioned to address this integration and ensure that the disparate pieces work together. Thus, modern BRMs must be two headed in almost every conversation, comfortable on both sides of Janus. The Outside-in BRM deeply gets the new reality of business and IT Technology is no longer simply an add on to improve traditional ways of working and doing business. It has become the principal milieu of business today, resulting in a relentless series of shifts and disruptions to our received wisdom about how to operate and think about business. As the technology action shifts to the outside of the firewall, and as double-deep employees find that they can access many services from the cloud or the ecosystem, Enterprise IT will no longer control access to IT nor the choice of systems. Instead, the function, led by its BRMs, must learn to influence business colleagues towards appropriate choices and help them avoid the many possible pitfalls. Rather than remaining the internal sales force for Enterprise IT, Outside-in BRMs will need to think first of solutions that can be sourced directly from third parties over the web. Instead of desktop or PC solutions, they will have a range of mobile, even wearable, devices in mind. Most importantly, they will need to co-create solutions with partners or customers, and be able to imagine what services Enterprise IT can provide to the firm s market and ecosystem. Such Outside-in BRMs must be fluent in, and comfortable with, a world of increasingly open systems, communities and innovation. To develop these capabilities, BRMs must spend a significant share of their time outside the company meeting with the suppliers, partners, customers, regulators and advisors. This is the only sure way to stay in touch with the marketplace, anticipate new developments, and help their firm both extract value from, and deliver value to, its wider business ecosystem. Outside-in BRM skill requirements Below are some of the hard and soft skills that successful Outside-in BRMs must develop to play the expanded internal and external roles discussed above: Relationship and soft skills The ability to build empathy and trust with key players so that the BRM is in the loop and included in early meetings inside and outside of the firm. Fingertip feel for the ecosystem Understanding how the ecosystem and its service options are evolving, and which capabilities are important, both for the firm and its partners. Technology understanding Instinctive feel for what emerging technologies are likely to prove most important, and how they will affect the overall ecosystem.

4 Business understanding Deep understanding of how the firm and its partners make money, and how IT can threaten or strengthen competitive positions. Political understanding Knowing how to get things done both inside and outside of the firm, where there are few rules and many large egos. Personal power The ability to be effective and influential in fluid situations where strategies are evolving and competitive tensions are often present. Managing external risks and constraints Our research has shown that pursuing an Outside-in agenda can require the rethinking of a firm s information security strategy in order to manage the related risks. In earlier times, the limitations of the technology made it relatively easy to restrict access to sensitive information. In today s world, however, the default expectation is one of open access, anytime, anywhere, and this makes the risks of both cyber-attacks and the misuse of data by disaffected employees all the more pressing. The BRM should have the responsibility indeed the duty to support this critical risk management agenda. A less dramatic but equally onerous area of external constraints is that of regulation. Sectors such as financial services and pharmaceuticals have of course always had to work within strict regulatory regimes. But over recent years, other industries that previously benefited from light-touch regulation have increasingly felt the burden of measures such as Sarbanes-Oxley. Outside-in BRMs need to assess the effects of regulation on their organization to ensure that the business is not disadvantaged. As more and more work moves to the cloud, the importance of regulatory issues will only increase, especially as the laws and regulations relating to cloud privacy, data management and services are often unclear, still evolving, and can vary greatly around the world. Such vagaries could considerably slow the overall Outside-in movement. From relationship managers to digital leaders The shift from Inside-out to Outside-in affects virtually every aspect of the modern firm, but especially Enterprise IT, which, with its traditional focus on complex, back-office systems and infrastructure, is often the most Inside-out part of the firm. But while these internal activities remain necessary, the BRM role will have to expand significantly in the years ahead. Technology is transforming the value proposition in just about every organization, and thus there is a huge need for leaders who both understand where IT is headed and can make things happen in the marketplace. Essentially, BRMs must grow from being relationship managers to true digital leaders. As part of this expanded role, BRMs must also help the Enterprise IT organization to evolve. The function must shift from mostly building and commissioning systems to leveraging external resources. This has enormous implications for both hard and soft skills, as well as for security, governance and risk management. However, there is a real risk that many IT groups will remain focused on their still-pressing internal challenges and budget pressures. This is a sure path to a diminished, back-office future. By addressing head-on the challenges described in this report, and by playing an active digital leadership role, powerful and ambitious BRMs can enable Enterprise IT to avoid such a fate.

5 OUTSIDE-IN BRM TURNING RELATIONSHIP MANAGERS INTO DIGITAL LEADERS Our Outside-in BRM education programme The LEF s popular BRM education programme has been updated to provide intensive, experience-based coaching for aspiring Outside-in BRMs. The course content and case studies have been enhanced to embrace Outside-in technologies and ecosystem capabilities, as well as their profound business impacts. A major thrust of our BRM education programme has always been to develop relationship skills so that BRMs are able to build robust partnerships with their internal business partners. Strong relationship skills will be even more important in an Outside-in world where BRMs will often be working with people they don t know nearly as well as their internal colleagues. Here, first impressions are often critical. For the right candidates, the experiences, case studies and role-plays of this programme will go a long way toward creating not just relationship managers but powerful digital business leaders.

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