State of the CIO 2014: The great schism

State of the CIO 2014: The great schism

Digital strategist or traditional CIO? Our 13th annual State of the CIO research reveals the great career divide.

When you talk to leading CIOs about how they think and what they do, two major themes emerge: compensation and customers. Sixty-one per cent of CIOs in our survey have part of their compensation tied to a specific corporate revenue or profit goal. These CIOs also report having far different priorities and expectations than the 38 per cent of CIOs whose pay is not tied to financial performance. Those priorities and expectations fall into the category of strategic, outward-facing items, such as improving products and services, addressing increasing competition and enabling growth in emerging markets. In other words, the sort of endeavours discussed in private meetings of the board of directors.

Properly motivating CIOs, and all of IT, to get the most valuable performance out of them is a no-brainer for Chris Hjelm, CIO of Kroger, a $96.8 billion grocery chain. He and nearly every employee at Kroger earns bonuses based on the company's financial results. In fact, Hjelm's entire bonus depends on achieving such objectives. Doing so ensures everyone is working toward the same goal, he says.

And that goal, of course, is serving the customer.

While customer focus is a high priority, nearly half of the CIOs in our survey - 47 per cent -have difficulty getting their IT staff to be more business-oriented and customer-facing. This figure climbs to 50 per cent for respondents outside North America, significantly higher than the 42 per cent for North American respondents. CIOs who can't drag technical staff into this new world sometimes just have to replace them.

Hjelm tries to keep his staff laser-focused on customers. That's not hard in the grocery business because everyone shops. But he also strives to show even his back-office IT staff how their work affects sales, customer satisfaction and other corporate metrics. For example, an engineer in the data centre knows that systems availability directly affects revenue. "It's vital they understand," he says.

No CIO can succeed today without developing antennae sensitive to customer behaviour, says Cora Carmody, CIO of Jacobs Engineering Group, a $10.9 billion technical services provider.

Related: Rob Fyfe: The value of unfiltered feedback

No CIO can succeed today without developing antennae sensitive to customer behaviour.

Cora Carmody, Jacobs Engineering Group

Carmody meets regularly with customers, including recently with NASA and an Australian mining company. She does it to learn about their issues, but also to share her IT expertise. Recently, one of Jacobs' colleagues told her that his external customer was concerned about controlling IT costs, so Carmody offered to do a presentation on the topic for the customer.

"I've always done that," she says. It's a way to build IT's credibility within the company as well as collect sparks about potential new products and services, she says.

New ideas come from imagining what consumers go through, says Rick Roy, CIO of CUNA Mutual Group, a privately held company that provides insurance, asset management and other services to credit unions and their members. That's how a lucrative new mobile product was born at CUNA Mutual two years ago. At a car dealer, a consumer wants a loan but may not want to work with the dealership or head home to contact banks. CUNA Mutual came up with a smartphone app that lets customers get a car loan from their credit unions, then and there.

"If you work your way backwards from the consumer, you think about what kinds of things they're looking to do," Roy says. "How can we help?"

About $1 billion in loans have been secured this way so far, he says.

GAF goes even further. Adam Noble, CIO at the $3 billion privately held building materials manufacturer, last year started to send IT staffers to collaborate with external customers directly. Noble brought his internal experts in security, mobile and cloud to talk about, among other topics, why it's better to do business with GAF. "People buy your products, yes, but they also buy from you because you have service no one else offers," he says. "We [in IT] are collaborating directly with customers to help run their businesses better." GAF expects to expand a product offering and service this year based on this work, he says, but declines to provide details.

The experience has been a morale booster and an education for his internal experts. "Individuals in my organisation get to explore and get exposure," he says.

Step Up, No Excuses

One thing thriving CIOs have in common is that they continually strive to make the IT group indispensable in diverse areas of the business.

Don't wait to be asked into the business fray, Carmody says. Prove IT's worth by stepping into critical situations. Jacobs acquires a lot of companies, and Carmody has carved out a specialty for her IT group in those situations. When Jacobs recently submitted an offer to buy construction consulting company Sinclair Knight Merz for $1.2 billion, Carmody appointed one of her vice presidents to the due diligence team before the deal and another to lead the integration after.

At Kroger, Hjelm has set up a research-and-development group within IT that invents new technologies and new ways to apply established ones. This R&D team is behind one of the grocery industry's most visible customer innovations in years: Kroger's QueVision system, which uses analytics to predict the shopping rhythms of customers and then suggests how to staff checkout lanes to cut wait times. An infrared camera counts people coming into the store. Based on time of day and day of the week, a proprietary algorithm predicts how long each person will shop. A digital display at the front of the store shows how many checkout lanes are currently open and how many will be open in 30 minutes. The system has reduced the time between when a shopper steps into a line and when the check-out process starts from four minutes to 30 seconds.

"We are pushing the envelope on what's possible," Hjelm says.

Rearrange IT

Some of the most intriguing modern technologies move way beyond the IT group and encompass the whole company. For example, Gartner says a digital industrial revolution--3-D printing that will enable next-generation manufacturing - will redefine how companies compete. Crowdsourcing ideas online will become the norm in engineering, advertising, product development and other departments. These aren't discrete projects with defined borders; they are new ways for companies to operate.

The elevation of IT's importance will force CIOs to change the operating model of the IT group. That includes more outsourcing and more internal "islands of specialization," according to a recent study by A.T. Kearney. The consulting company predicts we'll see more nimble, autonomous teams of IT experts in fields such as mobility or customer experience starting to collaborate closely with business groups to move fast on new ideas.

Kroger has a team dedicated to mobile computing. "Iterative development requires a closer relationship between business and IT professionals," Hjelm says. That's especially true when you are tweaking your mobile app every six weeks. Next up: using grocery lists and store maps to help shoppers navigate the store as efficiently as possible.

CIOs must recognize that old IT structures may no longer work, says Mike Heim, CIO of Whirlpool. Since joining the $18.1 billion appliance manufacturer in May 2012, Heim has reorganised IT to better respond to business demands - he calls it "aligning our operating model to the business model." It took his outsider's eye to spot the need. Before coming to Whirlpool, he spent 33 years at Eli Lilly, the last eight as global CIO. Pharmaceuticals and appliances couldn't be more different, he says. Lilly is a high-margin business focused on corporate customers. Whirlpool is a lower-margin consumer business with quick product cycle times.

What he learned quickly about Whirlpool was that different parts of the world require different shapes, sizes and functions in their appliances, which means the giant global company is a surprisingly regional business, he says. Yet when he arrived, he found a centralized IT organisation that was slow to respond to local needs and too focused on internal IT processes and metrics rather than business metrics. IT defined itself as a supplier rather than an innovator, he says. "The model created IT scale but not competitive business advantage."

Heim moved e-commerce and applications to regional offices under regional CIOs. Now both nuances and broad differences in local markets get quicker IT attention and, therefore, faster business results, he says.

Next: Relationship problems

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