Acting on opportunity

Acting on opportunity

The recession has deepened CIO understanding of and commitment to business beyond IT, as the annual State of the CIO research reveals.

You thought you knew what business-IT alignment was. But fighting the dark forces of recession has really taught the lesson. To some of you, anyway.

At a truly aligned company, all cylinders firing, every executive, every manager, every employee works on one goal: winning customers. In the past, CIOs saw their role as, say, installing business intelligence tools so that the marketing group could analyse customer data. Or upgrading enterprise resource planning software for the supply chain guys to improve order fulfilment. Vital work, of course, but inwardly focused and a few steps removed from living, breathing, money-spending customers.

But now, we find in our 2010 State of the CIO survey, top technology executives increasingly see bringing home the bacon as their job, too.

This year, nearly one-third — 30 percent — of the 594 IT leaders we polled say meeting or beating business goals is a personal leadership competency critically needed by their organisations, up significantly from the 18 percent who said so last year. Eighteen percent also named “external customer focus” as a critical skill, double last year’s 9 percent. Double.

Meanwhile, 22 percent cited “identifying and seizing on commercial opportunities” — more than triple last year’s 6 percent. Yes, triple.

It’s clear the recession has deepened CIOs’ understanding of and commitment to business beyond IT. CIOs are interacting with customers directly and working side by side with product engineers to build IT into new goods and services. It isn’t every CIO, nor even most of you, but it’s the way the profession is going, says Chris Potts, corporate strategist at Dominic Barrow, a consulting firm in London.

Shifting attention to outside the company will kill the CIO job as we know it, Potts says. “The CIO role is going away from worrying about IT specifically,” Potts says. “It can’t happen too soon.”

Focus on the top line

While aligning IT initiatives with business goals continues to be the most frequently cited CIO activity in our survey, fewer CIOs than in previous years place it among the activities taking up most of their time: 64 percent, down from 71 percent last year and 82 percent two years ago. Hilton Sturisky, SVP for information and communication technology with the $14 billion BCD Travel, thinks that’s because progressive CIOs have made such headway in the past few years that they can turn attention elsewhere.

And to where? To customers.

For several years, we’ve asked CIOs which leadership traits are critical to their personal and company success. Although each year some have said it’s important to understand customers and drive revenue, not many CIOs actually made that a priority.

That’s changing. It had to. Corporate anxiety about the economy created an atmosphere in which if what you’re doing isn’t generating revenue, you need to stop it right now. About two-thirds of CIOs, or 62 percent, have cancelled or postponed projects during the past year as a result of unfavourable economic conditions, according to the survey. The projects they have focused on are those that can enhance their company’s products and spur sales.

Mark Baker, head of MIH Consulting, says in the past 12 months, he has observed enterprises he is working with getting the technology people involved more than ever in making commercial decisions. Baker sees this as a positive move against the “historical approach”, wherein enterprises develop a product, or offer a service, and then inform or work with IT people on this. “By involving them [the ICT team] from the outset, you have a better chance of getting a relatively low cost, relatively low risk outcome,” says Baker, who was CIO and then general manager and programme director at Foodstuffs in Auckland before turning to business consultancy a year ago.

He says the ICT staff can tell the other business teams whether the product or service is possible, and the time it can go to market. He traces this shift to the growing practice of applying agile systems development. “In the last couple of years, people are applying that thinking to the way they run business, not just the way they do their systems development.”

Then, there is the economic crunch that has prompted business to step up their processes. “In a recession you have got to think quickly and be able to respond quickly,” says Baker.

Technology priorities reflect this commercial shift, amplified by the recession. For example, among the projects CIOs cancelled or postponed in the past year, most were infrastructure upgrades (39 percent), followed by enterprise software rollouts (31 percent), unified communications (21 percent) and network upgrades (20 percent). Projects that did get funded, on the other hand, included those that improved end-user productivity (63 percent), improved the quality of products (53 percent) or helped create new offerings (39 percent).

No doubt the urgent, “all hands on deck” atmosphere triggered some of this shift. But it also comes in part from the evolution of different types of CIOs, our survey finds.

The numbers are equalising among three kinds of CIOs: those focused on IT operations — “keep the lights on” types — those who specialise in large-scale company transformation and those who, removed from the daily fray of running IT, help to set corporate strategy.

Last year a clear majority of respondents — 52 percent — fell into the transformational category. Thirty percent were operations-oriented and just 18 percent were strategists. This year, the proportion of transformational CIOs dropped to 45 percent and the other two categories grew: operations-focused IT leaders account for 34 percent and strategists for 21 percent.

While there are still significant differences in how these different types of IT leaders spend their time, the data suggests all CIOs may be shifting toward a more business-focused role. For example, more operational CIOs appear to have divested themselves of one day-to-day responsibility — that of managing security. With only 13 percent citing security as a major activity (compared to 18 percent last year), they’re on a par with transformational CIOs. A handful more operations-focused CIOs are also spending time on leading change efforts, a core activity for transformational leaders. Meanwhile, the percentage of transformational CIOs involved with identifying opportunities for competitive differentiation — a focus for the majority of strategists — grew from 20 percent last year to 24 percent today.

Such evolution comes naturally to CIOs with diverse backgrounds.

For example, Denise Coyne, CIO of Chevron’s corporate departments and services companies, was previously CIO of the oil and gas giant’s marketing group as well as manager of 200 Chevron gas stations. She would go to conventions to talk up the company’s point of sale system with gas station operators.

“I found out what they wanted,” she says. Her MBA and nine years in marketing have shaped how she approaches IT, assessing projects from finance and business perspectives, for example.

Robin Johansen, CIO of Beca Group, says as an engineering consulting firm, his IT team has built quite a lot of expertise in the business around IT and systems. Their colleagues at Beca, which handles engineering consultancy contracts around the globe, have increasingly been asking his team’s help in building systems and software for their customers. “It comes from the ethic of wanting to deliver better service to our clients, and so more and more we are finding ourselves in the front line with clients,” says Johansen. These can range from setting up a system to allow clients to view progress on how their projects are progressing, or how to manage electronics and software around baggage handling systems in airports. “They are dealing with Beca, because Beca deals with airport pavements and buildings,” says Johansen. “So we have got a track record of adding value to our client. They turn to us and say, can you help me with this?”

Johansen has helped set up two divisions at Beca which are now working with external clients. But he still continues with his CIO role. “I spearhead the new activity, but then bring other people with me and quickly pass it to them. I step back from the operational role, and take on a governance role.”

Think like the customer

Still, most CIOs have no P&L duties. According to our survey, just 9 percent head up a line of business. And although we see impressive jumps in the numbers of IT leaders concentrating on customers, the majority of respondents still don’t spend their time with any.

That’s a mistake, says Bill Deam, CIO of Quintiles Transnational, a $2.7 billion medical research company. Starting in 2007, most of Quintiles’ top executives, including the COO, the head of corporate development and Deam himself, were assigned one key customer account. Deam says he tries to cultivate good relations with senior managers at his assignment, a $15 billion biotech and pharmaceuticals firm. Quintiles helps the biotech firm conduct clinical trials for medicines in development.

Deam reviews the account with an executive at the customer company every Friday and visits every six months. He hopes his efforts not only produce closer ties but also more business between the two companies. But that takes time. “They want to make sure that all the work we do for them is performed excellently, without issues,” Deam says. “Then we can go to the next phase of the relationship.” He sees his role as that of an advocate for the customer within Quintiles, asking a lot of questions. How is each clinical trial going? Is quality high?

Has anything happened in the past week that needs fixing? “This is very much about the business side,” he says. “If all you ever see of the relationship is at that order-fulfilment boundary, you don’t understand how to develop new services.”

Deam and Quintiles’ other “executive sponsors” get together every few months to discuss common issues. They don’t talk about customers’ confidential business, he explains, but about general ideas for how Quintiles can improve. Quintiles’ account team likes the arrangement. They see Deam as an ally who can get things done for them internally, he says.

Doing sales calls is a relatively simple way for a CIO to learn about customers. The CIO’s presence also adds weight to what the salesmen claim. Having a CIO on a sales call isn’t uncommon, but it’s especially important now, says Sturisky of BCD Travel, when so many products and services rely on IT.

BCD manages travel for big companies whose employees use BCD’s web technologies to, for instance, book flights and hotels.

Special services, such as tools for analysing your company’s travel data for ways to cut costs, are also available.

CIOs should also stay involved with any social media experiments their companies may try, Sturisky says, because of the business potential and the big risks. For example, BCD has a relationship with TripIt, a service that broadcasts users’ travel plans to social sites such as LinkedIn. But privacy concerns mean BCD, which serves many Fortune 500 companies, will go slowly in this realm, he says. “Maybe a CEO doesn’t mind publicising that he’s attending an industry conference but doesn’t want it getting out that he’s going to Brazil next week,” he says.

Competitive intelligence and personal privacy issues would vary for different BCD customers. “But that’s a strategic business question that I as CIO have to be on top of.”

Alex Liffers, CTO/CIO of YourASP, says when he started with the company in the late 1990s, his role was technology focused. But after he helped set up the basic platform up and got it running, “it was about making the services work” for their clients.

“My role has evolved,” says Liffers. YourASP works with 400 resellers and a couple of thousands of users, so he and his team get requests from sales for back up service to help in working with their customers.

“Sales people are very good at quoting a brochure and setting pricing,” he says, but then, come to him and his team when working with clients for security and other operational issues.

Hamish Grant says having a commercial focus was not really in his brief when he joined EziBuy three years ago as manager — technology. He had come from the UK, having worked in the ICT departments of retailers including Littlewoods and Barclays. “My initial brief was to bring technology up to date for the business. Since doing that, it has opened a lot of opportunities,” says Grant. “As a good CIO, you need to be commercially thinking about what other revenue opportunities you can drive by enabling technology.”

Grant looked at existing processes of Ezibuy and how to re-engineer them for cost savings and efficiency. The company, which retails clothing and home wares in Australia and New Zealand, has since replaced its legacy system with SAP. This provided a stable and flexible core solution and allowed them to integrate with other systems and provided the core for reporting, removing the problem of having ‘islands of data’.

EziBuy also set up a state of the art distribution centre in the company headquarters in Palmerston North, which “we can now leverage with other commercial opportunities”, says Grant. The centre now has contracts to distribute goods for other companies. “They send us their sales orders, we commercially charge them and ship their products across New Zealand and Australia,” says Grant.

The bigger picture

In addition to smarts and impeccable logic, it also takes guts for IT leaders to prevent faulty ideas from rising high on the decision tree. Matt Rogish, CIO of The J Peterman clothing company, thinks he succeeds by staying up to speed with new technologies, but not wasting energy on the latest IT fads. “I’ve grown up with the internet. It’s not that I’m better or worse than anyone else,” he says, “but it’s a different kind of mindset.”

No matter the generation, though, CIOs who want to focus on external customers may have to deal with internal resistance. The way to overcome that, says Coyne of Chevron, is to be visible. When she is trying to change how people work, for example, she meets in person as much as possible with colleagues above and below her. At “Dining with Denise” lunches, she talks with lower-level employees about corporate change. At meetings once or twice a year with Chevron’s senior most executives, she explains the value of IT. In between there are monthly meetings with departments and governance boards.

All the while, it’s her voice, her face out there. “Blogs, email, town halls, dining. The objective for me is to continuously remind everyone of the bigger picture.”

Sidebar: The Future State CIO starts here

Louie Ehrlich, CIO and president of IT at Chevron and a board member of the CIO Executive Council in the US, discusses why an external focus is the right way for IT leaders to stay relevant:

"The fact that the 2010 State of the CIO survey shows an increased focus on the commercial aspects of the business is a great sign for the future of our profession. It’s perfectly aligned with what a CIO should be doing and must do more of to stay relevant and valuable.

I believe the economy has played a significant role in increasing our focus in this area. In a typical down period we are asked to reduce IT spending. But this has been such a profound recession that CIOs have been asked to use technology to make the company more efficient overall, including the processes that drive revenue. This has put a spotlight on the critical importance of building and maintaining an understanding of the commercial and customer side of the business.

I hope this shift is more than a reaction to the challenges of the economy; that it becomes a permanent part of our profession’s DNA. Many core technologies are becoming utilities. Developments in cloud computing, virtualisation and software as a service, for example, are making the CIO role, over time, less about selecting, implementing and running systems and more about strategically enabling business success through information and technology.

Meanwhile, IT is becoming more pervasive and critical than ever. There is more competition, broader global integration and the continuous creation of new value chains. The CIO brings a uniquely comprehensive understanding of this complexity. All of these developments point to the CIO shifting from primarily running IT operations, toward enabling and influencing business strategies through knowledge of IT capabilities married with an understanding of business needs.

I would like to see our profession build on 2010’s increased emphasis on the external and commercial. Let’s create a future where CIOs not only can play a strategic external and commercial role, but are also called upon by CEOs to do just that.

To this end, I will be working with the CIO Executive Council this year to continue to develop the journey toward what we call “The Future-State CIO”. Please join us."

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