A covenant is an agreement or a promise between parties. I think of covenant’s as being more than just a contractual term. Rather it is an agreement or promise that is foundational to a way of seeing the world, the rational for major decisions and the basis for the promises we look to keep. The terms of a covenant describe the understanding the parties have with each other.
The covenant between businesses and technology has evolved over the years as shown in the figure below:
Islands of IT
Automation represented the first convenient. Businesses initially invested with the promise of automating tasks and moving information from paper-based to computer-based systems. Leaders needed automation to handle internal functions and operations largely at the divisional level. This was the age of custom Cobol systems, flat file databases and the like.
Bringing everything together
Integration followed automation as individual systems connected with each other or replaced by larger solutions. This is the age of Enterprise Resource Planning solutions that started in the early 1990’s. The promise was that greater integration enabled businesses to further reduce costs, improve management visibility and management. See Michael Porter and Vic Millar’s 1985 article How Information Gives You Competitive Advantage. This is one of the articles that launched 1,000 IT projects and provided a business rational for IT investments.
Process overtakes Functions
Integration begat the Re-Engineering covenant just 5 years later as technology that was once integrated could be radically improved. Reengineering Work: Don’t Automate, Obliterate, by Michael Hammer. Hammer’s inditement of integration can be summarized as,
“The usual methods for boosting performance—process rationalization and automation—haven’t yielded the dramatic improvements companies need. In particular, heavy investments in information technology have delivered disappointing results—largely because companies tend to use technology to mechanize old ways of doing business. They leave the existing processes intact and use computers simply to speed them up.”
Technology’s covenant moved from doing work faster to toward distributing work, improving coordination, and empowering teams in ways that reduced waste, middle management, and cost. Technology made re-engineering possible through client-server and networked applications. The covenant between business and technology remained focused on internal efficiency, customer service and cost take out.
Digital – the Great Discontinuity
We currently live in a Digital Covenant, with a focus on customer experience, engagement, and revenue growth. The digital covenant rests in business investment in technology focused externally on customers, their journeys, experience, etc. Revenue is the return for that investment. This represents a discontinuity from prior covenants in the following areas:
- Revenue > Cost as technology’s primary job is drive revenue growth and differentiation rather than consolidating operations and costs.
- External Customer > Internal Process as technology directly touches customer and information intensive rather than being internally and business process focused
- Business Outcomes > IT Systems. Technology decisions increasingly made by the business seeking business outcomes, rather than finding the best fit between an IT product and company requirements.
- Information / Networked Technology > Owned and Operated Infrastructure. Cloud, Composability and Platform Technologies are less rigid, inflexible, and restrictive than the IT solutions that came before them.
The digital technology covenant is significantly different from its IT predecessors. Organizations, business leaders, CIOs and IT and technology providers are beginning to come to grips with leading based on the assumptions of the digital covenant. These are businesses that lead with technology. They represent about 30 – 40% of all firms and are the ‘best’ customers in the technology marketplace.