De Persgroep anticipated digital disruption

Foster the business as long as you can, but experiment in parallel

To anticipate further disruption, De Persgroep has a diverse strategy. “First and foremost: foster the business as long as it lasts”, Verbist says. No less than 90% of the publishing house’s turnover still comes from print indeed. “Secondly: create economy of scale. Since 2010, De Persgroep has doubled in size via acquisitions and it is now the largest publishing house in Belgium, the Netherlands and Denmark. Three, strive for operational excellence. Every editorial staff in Holland, Belgium and Denmark works with the same tools and follows the same business processes. Standardization helps to retain the margins you are losing somewhere else.”

Enterprise architecture as a platform for change

This business approach had a considerable impact on the organization of IT. To accompany the major change, Verbist hired an enterprise architecture specialist (also read this year’s whitepaper on EA with the case story by De Persgroep), and sketched a new business plan with the help of Peter Weill (MIT) – or at least his book Enterprise Architecture As Strategy . “His quadrant or enterprise architecture model was really helpful. You always have department heads or chief editors that refuse to play the game. With the quadrant, you can show them that they cannot enjoy the advantages offered by standardization and scale. If they want to maintain their old habits, that’s okay. But they’ll need more IT budget that they cannot account for. Eventually they’ll follow. Thank you, Peter Weill.”

The exercise resulted in a web services based enterprise architecture which is called the ‘digital newsroom’. Numerous centralized services are available for different output channels, for instance to drive automatic weather updates, mobile payments and the delivery of journalistic content. Within the CIOforum, about half of the member companies have already evolved to an EA, supporting the interaction between applications via web services. Still, only two respondents have more than 50% API-compliant applications. One of which being Melexis. “We have developed a lot of software the last decade, and had an EA specialist on board right from the start. That explains the somewhat higher score for us”, says Veerle Lozie, Group IT Manager.

“The EA with web or micro service capability is a stretch, but we couldn’t monitor such a large application portfolio otherwise. And we couldn’t launch new applications so quickly if everything needs to be rebuilt time and again. For your information: it took ING 5 years to make the back-end microservices enabled, and KBC 2.5 years”, Luc Verbist adds.

Erwin Verstraelen of AVEVE confirms that Peter Weill’s quadrant certainly helps. AVEVE evolved from a heterogeneous to a single company the past years and it often generated emotional reactions, he finds: “You impose a new IT strategy on the business, but it is a mere consequence of a reshaped business strategy you need to facilitate as IT. Weill helps to make that more tangible.”

Future (decisions) based on data

The big advantage for a media group is that it generates of lot of data. Big data. De Persgroep attracted new profiles like data scientists, data governance manager and consumer insight specialists that master big data sets or even can predict the future. Attracting new subscribers costs a lot of money, and therefore De Persgroep needs to make sure the existing ones remain on board. Verbist developed a few models to optimize certain business processes, around churn prediction for instance.

Automatic testing, continuous delivery

To support such a large organization and still be able to focus on functional development and business fusion, Verbist has automated the delivery and deployment of software. Testing is now fully automated, which saves times for application engineers. If you know that the content management software of De Persgroep’s websites is updated a few times a day for security reasons, automation is necessary. Such daily updates are not very common within the CIOforum: only two companies deploy consumer software on a daily basis. Most companies do this once per month or even quarter.

Bi-modal IT organization

Inevitably, the IT organization became somewhat divided between software development and back-end support. “Those are two totally different types of IT staff. The software guys are agile sprinters, close to the business for front-end development and working on projects with shorter cycle times. This agile approach gives more freedom and localized decision power. The editorial teams decide what they develop, but IT decides how they do it. The back-end fellows are marathon runners, and work on the centralized IT. They are traditionally good at long-term projects and are rather IT-centric.”

The dual-paced IT organization is not too common either. The companies that have evolved to an enterprise architecture have put it in place, but that still accounts for just 4 of the respondents of our internal survey. On another note, the average age of IT staff at De Persgroep is between 30 and 35: second youngest of the respondents. “That’s young indeed”, says Verbist. “And we coach and train them continuously. We organize hackathons for instance, to stimulate innovation. That’s been positively received by our staff. They have developed two things: an application follows and filters Astrid’s signal so that we only need to go out when there are very large incidents, plus an application to measure the efficiency of suggested headlines. This app predicts the number of shares an article will generate. It proves innovation doesn’t come from the Board, or solely from the Board.”

Innovation Board decides upon project portfolio, run by CIO and/or CDO

Speaking of board and innovation: it is an innovation board that evaluates every large project request at De Persgroep. Short projects are run by the dedicated IT teams within every department, as already mentioned. Verbist leads process optimization and infrastructure and software development projects. But De Persgroep onboarded a chief digital officer that leads product related projects: websites, design and so on. He has UX and product specialists in his team, designers etcetera. Within the CIOforum, only BASF and De Persgroep have such a digital officer.

According to Verbist, it’s a hard to find profile: “He has to understand IT – so that he doesn’t contradict you with regard to feasibility, turn-around times and budgetary questions, but he also has to be a product thinker. He needs to be able to have functional discussions with chief editors or business owners.”

At BASF, the CDO leads two types of projects. “Customer-oriented digital transformation projects are reported to the CEO. For process improvement and operational excellence projects like the Internet of Things or Industry 4.0, he reports to the CIO. Those often are related to information security, networking and big data,” says xx, CIO at BASF Belgium.

Governance model mandatory to avoid overspending

Before a project is approved or not by the innovation board, the project management office checks if it fits in the project portfolio, high-level budget and if resources are available. If they have been approved by the CEO-led innovation board that meets once a month, projects are then dispatched to a ‘CDO’ programme manager or a ‘CIO’ programme manager. Very often, a digital project aims at new revenue streams, IT projects aim at reducing expenses. The business owner needs to justify the financials of his project.

“If you let the business decide and you don’t put this in place, you’re going to spend a lot of money”, Luc Verbist warns. “We cut away two-thirds of the requests. Luckily, it is the CEO and the innovation board that bring bad news. Otherwise the CIO is the eternal bad cop.”

Ready for digital transformation

Most CIOforum members decide upon prioritization and approval of projects on board level, or at least in a specific commission. For three respondents, it is the CEO that has the final call. Almost all respondents have formalized the approval procedure for change projects.

“Strangely enough, boards on average have little knowledge of IT. Whereas it is becoming increasingly important, at least for our company. That’s quite a shock for a traditional print company. With the CDO-CIO set-up and the measures we have taken, we have put everything in place to master the digital transformation.”

THE CIO NEEDS TO STEP OUT OF HIS SILO TO LEAD THE DIGITAL TRANSFORMATION

We can certainly learn from De Persgroep’s story and the digital transformation the media has undergone or is undergoing. How much time before it will impact yóur business? Will you, the CIO, lead your company’s way through it? That will most likely depend on the individual. But you can certainly anticipate the change yourself. We need a plan!
If you want to know how to build that plan in detail, read the first chapter of ‘Digital Transformation’ by Dado Van Peteghem and Jo Caudron. It explains the methodology you need to apply and master the change project. In short, you first have to analyze that potential change and the impact of the digitizing trend on your business.
Dado and Jo use a scorecard to map companies out: “Orange means you’re ok with the change, but you’ll need to invest in what we call drivers for transformation. Red means you’re incapable to make the necessary changes to cope with digital transformation. Green means you are already up to it but – honestly – almost no-one is.”

Invent different potential futures

Caudron advises to invent radically different futures towards which you can work, aided by a digital agenda or roadmap. Companies often treat digital transformation as an IT project, which they shouldn’t. He gives the example of a well-known retailer who installed screens to facilitate in-store shopping. Alas, the screens weren’t used very much.
Why? The programme was run as an IT project: they thought about connectivity, security, UX and son. No branding, no remarketing special collections via the screens. And what about incentives : would they be for the web or the store team? “A digital programme is business and IT fusion par excellence. It involves the entire company. You need to think about new business model, not technology”, Jo Caudron says.

Who is the digital lead?

Let’s return to De Persgroep. Luc Verbist said they are fostering the old business but experimenting in parallel with newer business models. Caudron is very clear about it: “Every CEO should accept that his traditional business will go down one day. The companies that will survive are the ones that are able to create side-tracks, where profitability is not required. The legacy business pays for the failures. As a CEO you first need to recognize you need this two-pace economic model.”
The question remains: who would lead that digital transformation? “Successful companies today have CEOs that think digital: Amazon, Tesla, De Persgroep Publishing. People who know that it’s not about selling cars anymore. It is the CEO who should be in the lead. He almost never is, we only have a handful.”

Step out of your tech silo

Well, then. Do we have a future, as CIOs, in this transformation? “If you can step out of the silo, yes you can become that digital officer leading the transformation in your organization. A Chief Digital Officer is a general manager that can drive change. As Sean Cornwell, the CDO of foreign exchange specialist Travelex rightly puts it: the CDO is what a CIO should always have been doing and that’s marrying technology and business.”

Agile, but not a sprint

Most of us CIOs are traditional captains of traditional businesses. How are we to apply our traditional models to digital channels? “You shouldn’t. You need new business models all over. Digital transformation is about ‘garage disruption’. About failing fast/cheap, not about managing a project management office. Gartner says 75% of IT organizations will have bimodal capacity by 2017. Who are they fooling? You need a transformation fleet that is thinking new biz and not three guys in a garage to claim bimodal capability. Big ships cannot change courses immediately. You cannot become a digital native industry in five years’ time. This transformation takes a decade before you have you new models on the performance side. Create an ecosystem around your legacy that is digital in the core. Companies that are not good at it, should take stakes in start-ups or set up a process for internal disruption.”

Caudron’s team is soon having a corporate bootcamp at valve and HVAC specialist Danfoss. The bootcamp will allow the CIO to create business models and find new so-called agile zodiacs for his big ship Danfoss.

Yes, you can lead the change.

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