Digital factory strategy needed to support omnipresent IT

In their efforts to become digital enterprises, companies can start with the low-hanging fruit, but researchers at the MIT Sloan School of Management caution they can't afford to rest on a couple of pilot projects. Developing a successful digital business model will require many companies to radically rethink their IT and business operations.

One concept that could help businesses advance beyond the pilot stage is the so-called digital factory, a cross-functional, incubated group that uses new technologies and new workflows to overhaul business processes.

Joe Peppard, principal researcher at MIT's Center for Information Systems Research, called the digital factory a contemporary business process re-engineering strategy -- one the IT organization participates in but does not lead. And he pointed to it as an example of how the IT function is changing to meet the demands of the modern enterprise. 

Next month, Peppard will go into more detail about the future of the IT department at the MIT Sloan CIO Symposium, where he will host a panel on the topic. In this Q&A, he talks about the IT department as a relic of a time past and how new models, such as digital factories, are the beginnings of a pervasive IT movement. This conversation has been edited for clarity and brevity.

Your panel is titled 'Mapping the Future IT Unit,' a topic you're currently researching. Can you provide a glimpse into what you'll be talking about?

Joe Peppard

Joe Peppard: When you look at the IT organization, it has evolved over the years. So, an IT organization today in most companies looks very different from the one 10 years ago. One of the objectives is to look out at the next five to 10 years and get a sense for what it might look like in the future. That's one aspect of the research -- trying to get a better sense for how we organize for the success of IT or digital.

One of the propositions that I'm working with is maybe the IT unit is a legacy of the past and that, in today's digital world, it's irrelevant or less relevant. Organizations may still feel the need to have an IT department, but maybe it's not what we understand an IT department to be today -- maybe we need to reimagine that for a digital world.

What might IT look like reimagined?

Peppard: I'm working with this concept of a pervasive IS organization. And by that, I mean, essentially, the boundaries of the IT unit are actually the organization itself. Today, with data-driven decision-making, you, as a user or an employee, are using data in your day-to-day activities in terms of where it's moved, in terms of tools, for example, to the point where there's a lot of activities and tasks and competencies that would have existed in a separate IT unit that I think are now pervasive.

I think we need to move the conversation away from alignment to what I refer to as coevolution. ... I also think, if we look at the IT unit, what we're seeing is a move away from being that function, the dominant organizing mode, or of being kind of a hierarchy, more toward a network structure. You think about the historical origination of an IT function or an IT department or, as it would have been called in the early days, your computer department -- it existed to make sure that the computer systems continued to function and continued to run. And that was really what the IT function was all about.

The role of technology was nowhere near what it is today. It was very much peripheral to the activities of the business. But, obviously, today, technology is so embedded in the day-to-day activities of organizations and so embedded in their strategies that few organizations could exist without their IT units. So, we're seeing the role evolve. It's now not just about keeping the computer systems running, it's about helping the organization, and I use this phrase, to generate or optimize value from digital, which is quite different.

The CIO, then, as the head [of that team] moves from being a functional manager -- which, in the early days of computing, that's what they were, a functional manager -- to being in the 80s, 90s and, more recently, a boundary spanner, to today being very much an orchestrator. Quite different roles.

Are there models out there of this reimagined IT department?

Peppard: What I see a number of organizations doing as part of their digital transformation initiative is they've built what I call a digital factory. I'm thinking of two examples, in particular; both companies are large multinationals. The digital factories are used to reimagine customer journeys. In the past, the activities they're doing would probably have been done in the IT function, but these two companies have created a separate entity and called it a digital factory. And the whole idea is to build digital assets that may be shared across the full organization.

What is the role of IT in a digital factory?

Peppard: It's sort of analogous to what IT organizations would have done 20 to 30 years ago with process re-engineering, where companies would have looked to redesign processes using the capabilities of technology -- very much driven out of IT units. I think what we're seeing here is that this is not being driven out of IT units; it's being staffed by quite different competencies in terms of people with design skills, design thinking skills, [user experience]-type skills. There are people with technology capability skills as well, as part of the team -- but only as part of the team. And the digital factory is very much a separate organization outside of IT.

Editor's note: In part two of this SearchCIO interview, Peppard delves into the evolution of IT, how the role of the CIO is changing and why companies shouldn't hire a chief digital officer.