How do you radically improve business performance, especially in times of dynamic change or volatility? By being a composable business.
If you’re a CIO or you are simply interested in knowing how your industry measures up in terms of composability*, digitalization, IT revenue, budget expectations and allocations, look no further.
*What is composability? Composability is a term that refers to an organization’s mindset, technology and processes which enable them to innovate and adapt rapidly to changing business needs.
Think of a composable business as a number of Lego blocks that can be arranged, rearranged, and removed as needed. Or, as an orchestra composed of different instruments, creating beautiful melodies together. Being a composable business means you can do just that: build, compose and create as needed.
Composable technology is the infrastructure, storage and networking capabilities that have been rehashed from physical locations and managed through a software-based web interface. Composable infrastructure is the core of private and hybrid cloud solutions.
Gartner’s annual survey of CIOs and technology executives has found that business composability improves business performance, but levels of composability vary by industry.
Use this research compiled below to understand where your industry has composability gaps, and how to fill them.
The report consists of detailed graphs on the digitalization of different industries. This is useful if you want to assess where you are in your industry compared with others. To get the full report, please download it here.
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Does composability improve business performance?
“The Gartner 2022 CIO and Technology Executive Survey confirmed that business composability dramatically improves business performance, especially during periods of volatility”. Business composability is a way of planning, organizing and operating based on reassembling modular components into new business capabilities and workflows.
“Modular design, the key principle of composability, makes aspects of business that couldn’t have been changed easily in the past, now able to be adjusted readily to drive business value (or mission value for the public sector and nonprofits).”
What’s the role of a CIO?
Well, Gartner explains: “CIOs play a key role in making their enterprises more composable because composability applies to the business the principle of modularity that underpins many IT strategies.
“Moreover, technology makes business composability possible. Thus, the CIO can act as both an advisor and an operational expert to the CEO, institution leaders and other senior leaders for implementing business composability.
“The 2022 CIO and Technology Executive Survey provides data that CIOs can use to succeed in both roles.”
According to Gartner, CIOs should consider these three points:
- “Business composability works for all industries.
- “Each industry has exposed different capability gaps.
- “Highly composable enterprises invest in different technologies than other enterprises.”
Business composability works for all industries
You may wonder if it is relevant to even consider business composability for your industry.
Well, it is! Studies of 17 different industries based on the survey data have been produced by Gartner. Their most striking findings are:
- “Every industry includes at least some enterprises with high composability (except U.S. healthcare payers).
- “The respondents in every single industry trail the high-composability cohort (across industries) by significant margins in business performance and every other area we surveyed.
Thus, business composability is possible for every enterprise, regardless of industry, and the vast majority of enterprises are at a severe competitive disadvantage to highly composable rivals.
Let’s define what the characteristics of business composability are, and how we determine whether a business is composable.
“The 2022 Gartner CIO and Technology Executive Survey identified a cohort of respondents with high business composability (see Figure 1).
“They indicated that their organization practices the principles of all three domains of composability – thinking, business architecture and technologies – ‘widely’ or ‘extensively throughout the enterprise.’”
“Respondents with high composability reported beating their peers on four measures of business performance (see Figure 2 below). The more composable the enterprise, the better their business performance.”
Each industry has exposed different capability gaps
“The degree of business composability varies widely by industry, and so do the types of gaps in composability. Likewise, the percentage of high-composability enterprises varies by industry (see Figure 4 below).
“Not surprisingly, technology innovators like high-tech and communication service providers (CSPs) have the largest proportion of high-composability enterprises, while public service industries such as healthcare, government and education, which tend to be more conservative, have the lowest.
“But we also see some surprises. Industrial-era industries like oil and gas and transportation have above-average numbers of high-composability enterprises, and so does life sciences. Retail and consumer goods, where customer demand changes rapidly, have below-average numbers, as does healthcare payers.”
“The survey identified the nine actions respondents have taken that have the biggest impact on business composability – three in each domain:
“Composable thinking:
- “Practice adaptive strategy to spot and respond to opportunities and threats.
- “Promote a high-trust culture that empowers employees to independently make decisions.
- “Empower internal functions, product teams, external allies and/or business partnerships to work together through autonomous self-organizing networks.
“Composable business architecture:
- “Shape multidisciplinary teams to align on value, promote transparency, drive accountability and collaborate on demand.
- “Design business processes in parallel with technology capabilities.
- “Distribute accountability for digital outcomes beyond the traditional IT organization to other business units/business leaders.
“Composable technologies:
- “Establish continuous and effortless sharing of ideas and access to platforms, tools and knowhow across internal functions, product teams, external allies and/or business partnerships.”
What influences how composable an industry is?
Well, a “number of factors influence the potential for composability in an industry: commoditization, competitive (evolutionary) pressure, regulation and cultural inertia:
- “Commoditization. Oil and gas and transportation have a high degree of commoditization, which drives standardization and therefore composability even though they are asset-heavy industries. They have evolved global standards, such as the intermodal container, that create extremely composable infrastructure. Similarly, CSP and high-tech work in a standardized digital infrastructure so they can reach customers.
- “Competitive pressure. Competitive pressure drives companies to differentiate themselves by innovating on top of standards rather than taking on the cost and risk of creating new, fully integrated products. (This could explain why high tech holds the position as No. 1 in composability.) Exceptions to this rule usually require either a new market segment, a lot of funding or an existing monopoly.
- “Regulation. Some industries (healthcare, education and government) are highly regulated to foster democratized access to the services. These industries execute civic missions and are people-intensive – both on the delivery and consumption sides. These high-stakes services fundamentally impact people’s lives and thus resist commoditization. To become more composable, these industries must enable mass-customizable services (algorithmic) or even mass-personalized (AI) based on complex data input.
- “Cultural inertia. Higher education epitomizes the cultural challenges of composability. The organization (departments and faculties) and its “products” (courses, programs) are composable. Moreover, The fast pace of societal and workforce change requires faster, lower-stakes learning that requires composability. Just-in-time insights and skills at scale require a composable approach to learning such as “stackable credentials,” “nanodegrees” and micromasters, which allow for smaller investments in time and money to enable faster evolution of skills.
- However, higher education remains at a relatively low level of composability because the content is put together, delivered and consumed in a unique manner that is highly dependent on individual professors, topics and students. No matter how composable other elements of the organization may be, composability cannot prevail without cultural change.
“CIOs must consider these drivers and inhibitors of composability when they fashion a proposal suitable for their enterprise and industry. “These challenges can be overcome by taking the nine actions listed above.
“CIOs should choose which actions to focus on first based on the particular barriers to be overcome and the enterprise’s current level of composability.”
The report consists of detailed graphs on how budget investments and changes for 2022, and how these will vary by industry. To get the full report, please download it here.
How do highly composable industries invest in tech? And, specifically, Gartner asks, “what emerging technologies do high-composability enterprises invest in?”
Not surprisingly, “they invest more in emerging technologies such as artificial intelligence (AI), business analytics and APIs than enterprises in most industries – for example, higher education (see Figure 8).
“These technologies help to automate the recomposition of business functions to meet new market conditions. For instance, public APIs allow systems to connect quickly and easily, and AI can detect new business patterns that can be exploited. CIOs who want to advance business composability within the enterprise should shift investments from legacy infrastructure and applications, and ERP to technologies that support composability.”
“High-composability teams can practice composability because they have digitalized both their business and their operations over the last few years. The survey asked respondents to estimate the percentage of their overall revenue (or budget for nonprofits) that is digital and the percentage of their processes that have been digitalized (see Figure 9). High- composability enterprises are about two years ahead of moderate-composability peers and over three years ahead of low-composability ones. Again, greater composability goes hand in hand with great digitalization.”
“Every industry trails high-composability enterprises in both dimensions to varying degrees. For example, the digitalization of life sciences is comparable to that of low- composability enterprises. But segments within a given industry can also vary.
“National and international governments have higher levels of digitalization than local or provincial governments.”
What learnings and action points does this study prompt for CIOs and other IT leaders in enterprise businesses?
- Business composability is not to be overlooked! IT leaders should count this amongst the essentials within and in complement to their digital transformation strategy.
- Even though your business may be digitalized, it does not mean that it is composable, this is not mutually inclusive. That is a further step you need to take in order to make it so.
- Being composable enables your business to be changed quickly in response to new and changing circumstances.
- As a poignant point of composability, “the pandemic demonstrated the value of composability for life sciences firms that had to quickly develop new vaccines, drugs and equipment to fight the coronavirus. But lack of digitalization may hamper efforts to become more composable.”
“Every industry trails high-composability enterprises in both dimensions to varying degrees. For example, the digitalization of life sciences is comparable to that of low- composability enterprises (see Figure 10). But segments within a given industry can also vary. National and international governments have higher levels of digitalization than local or provincial governments.”
The graph shows the average percentage of revenue in digital sales vs digitized processes.
The report consists of detailed graphs on the digitalization of different industries. This is useful if you want to assess where you are in your industry compared with others. To get the full report, please download it here.
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FAQ CIO and Technology Executive Agenda
What is composability?
Composability is a term that refers to an organization’s mindset, technology and processes which enable them to innovate and adapt rapidly to changing business needs.
Think of a composable business as a number of Lego blocks that can be arranged, rearranged, and removed as needed. Or, as an orchestra composed of different instruments, creating beautiful melodies together. Being a composable business means you can do just that: build, compose and create as needed.
Does composability improve business performance?
“The Gartner 2022 CIO and Technology Executive Survey confirmed that business composability dramatically improves business performance, especially during periods of volatility”. Business composability is a way of planning, organizing and operating based on reassembling modular components into new business capabilities and workflows.
“Modular design, the key principle of composability, makes aspects of business that couldn’t have been changed easily in the past, now able to be adjusted readily to drive business value (or mission value for the public sector and nonprofits).”
What’s the role of a CIO?
“CIOs play a key role in making their enterprises more composable because composability applies to the business the principle of modularity that underpins many IT strategies.
“Moreover, technology makes business composability possible. Thus, the CIO can act as both an advisor and an operational expert to the CEO, institution leaders and other senior leaders for implementing business composability.
“The 2022 CIO and Technology Executive Survey provides data that CIOs can use to succeed in both roles.”
Gartner, 2022 CIO and Technology Executive Agenda: Industries Perspective Overview; Jan-Martin Lowendahl, Andy Rowsell-Jones, Tomas Nielsen, Monika Sinha, Janelle Hill, Ian Cox, Nicole Sturgill, Mark Fabbi, 2 March 2022.
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