Have CIOs Failed?

CIOs who don’t see the strategic use of information as their main job should relinquish the title

I have to admit it – I’m baffled. In all the research I’ve done in the past year, business leaders again and again say they believe the CIO is the right person to lead digital innovation. And yet, again and again, there’s a gap between where everyone – CIOs and their business partners included – think the CIO should be and where they actually are. CIOs just can’t seem to break out of the technology service provider role.

In the Harvard Business Review Analytic Services study, “Business Transformation and the CIO Role,” 94% of respondents said CIOs would add the most value to the business by either leading business technology transformation or, even better, leading IT-driven business innovation and strategy. Only 6% voted for the CIO to focus on running the IT function to support business operations. And yet the vast majority – 70% – said that’s exactly where the CIO spends his or her time.

I’ve also had a number of conversations lately with strategic CIOs who view their role as helping their business leverage information – they frame the digital opportunity in that context. Sure, they need technology to do that, but that’s not where the value lies or how they define their role.

Finally, you’d think, the title chief information officer is going to live up to its name! And yet, some companies are hiring chief data officers to focus on that while the CIO keeps running IT, according to a recent article from Computerworld.  “The role isn’t – and shouldn’t be – about implementing IT systems,” the author writes. She quotes KeyBank CDO Ursula Cottone as saying, “Implementing tools does not [by itself] drive business value…. They created this role knowing what was needed – a blend between business and technology and the ability to bridge the gap.”

Does this sound familiar to anyone? What’s happened here? Do we really need another C level executive to focus on how to leverage information for business value?

Personally, I think if we do, then CIOs have failed. They’ve failed to get their IT houses in order so they can lead digital innovation – which is all about new ways to exploit information. It doesn’t matter if you’re talking about mobile, social, collaboration, databases, storage, business ecosystems or the internet of things. The technology is just the conduit; it’s the information that matters. And if that’s the case, I have another title for you: CITO. CIOs should relinquish their title and assume that of chief information technology officer. And the 70% who are still focused on just running the IT function should give up the “C” as well.

Commercializing IT – the CIO’s Role in Driving Revenue

CIOs today need to understand and push IT’s contribution to the top line, not just the bottom.

Back in the 1990s and into the early part of the 2000s, we ran an awards program at CIO magazine called the Enterprise Value Awards.

There are many ways IT contributes to the top line today

This was a unique and truly outstanding awards program that scrutinized the work being done by CIOs and their business partners – and the results being delivered – through the use of information technology. Every nomination had to have a CIO and a business leader as joint sponsors. They had to prove claimed financial value by having the company’s CFO sign off on the numbers. Every finalist received a site visit from an experienced reviewer who met in person with company leaders and users of the system to vet the claims being made. These review board members then presented their findings to a blue-ribbon panel of CIOs at a day-long meeting in Boston. The winners were recognized at an annual Enterprise Value Retreat.

As you can imagine, this was a very expensive program to run. For years it was underwritten by various sponsors, but we had to retire the program as the economy contracted in the early 2000s. Before we did so, however, we began to notice a trend.

We had defined a number of different categories of IT-enabled value. These included financial, customer and strategic impact; we even recognized social impact (typically awarded to a non-profit). We did not accept vendor submissions; that is, a technology vendor could not submit its product or service for consideration. But after the turn of the millennium, applications began cropping up that confounded our neat categorization.

The first was with a trucking company that had developed such a great system for running its own logistics that it was licensing its use to other companies. That year the judges tried to focus on the internal value derived by the company’s own use of the system, discounting the revenue from the sale of services to other companies as a “product” and therefore not qualifying for this award. You see, it was novel; we didn’t really know what to make of it.

While that was the first, it certainly wasn’t the last. In the next few years, more of these hybrids surfaced, and we realized something new was going on. IT was contributing the top line in some very direct ways.

Today this is becoming commonplace. In a recent research project with Harvard Business Review Analytic Services, 28% of respondents said their company has commercialized internal IT initiatives. Companies with a sustained commitment to innovation were at 40%.

The #1 means of commercializing IT was to make the company’s own products/services “smarter” and to sell information services around them (think embedded sensors in manufacturing control systems or automobiles); two-thirds of commericalizers were doing this. This was followed by offering an internally developed capability as a cloud-based service to others in their industry – named by 37%. A quarter were making their analytics capability available to their customers for a fee; another quarter were redefining part of their product value chain as a service to sell to other companies (remember the trucking company I mentioned).

This presents a huge opportunity for CIOs. Finally … finally! you have the chance to redefine IT not as a cost center but as a profit driver. That completely changes the game. And it changes business models. According to CIO David Guzman, IT has been central to a dramatic shift in revenue at his former employer, health products company Owens & Minor. When he left, close to $4 billion of its over $8 billion in revenue was coming from services such as logistics, supply management and analytics – not the devices and other health products they sold. (Guzman is leading a similar transformation at HD Smith.)

If you’re a CIO today, opportunities for commercializing IT abound. Helping your CEO and line of business leaders decide which opportunities are best for your company is absolutely the CIO’s job.

Digital Leadership and the Cloud – Highlights

I just had my first highlights reel made and I’m pretty excited. I delivered the opening keynote at the Oracle Cloud World conference in Boston in December 2014. Oracle did a great job filming it in the first place, and my friend the very talented videographer Craig Kimberley at Skyprop Media did a great job editing it down to a couple of minutes. This shows both my onstage work and the kinds of (very visual) slides that I create. I hope you like it!

To discuss a conference booking or to learn more, conctact me at abbie@lundbergmedia.com

Three Secrets of Digital Innovators

Creating the conditions for and harnessing innovation isn’t easy, especially for large organizations. Innovation Accelerators – companies that are committed to innovation across the enterprise – take a managed, structured approach. That may seem contradictory – after all, isn’t innovation supposed to be creative and spontaneous? Creative, yes, but if you rely on spontaneous combustion to light your innovation process, your results will be uneven at best.

This is the time of new products, new services, new business models. Digital makes all of that possible. That means both opportunity and disruption for existing organizations. To make the most of this (and not be blind-sided), Innovation Accelerators do three things that others don’t.

1. They use a big funnel, tapping company employees and customers for new ideas. “We don’t prejudge who might be able to solve the problem,” said a department leader at a large U.S. government agency that uses both internal and external crowd-sourcing to tackle technical challenges.
2. They have mechanisms to bring all those ideas to the attention of the right people to evaluate, prioritize and act on. A regional grocery chain that finds itself competing now with the likes of Walmart and Amazon uses an enterprise social networking/collaboration tool to move ideas quickly from the edge (store managers, associates and customers) to the center of the organization. All executives receive a daily digest of posts culled from the tool; the contents are discussed at executive staff meetings. Similarly, many companies have set up innovation hubs – online forums where employees can post suggestions and ideas to be evaluated and prioritized by an innovation team or, sometimes, by the employees themselves, through voting mechanisms and “likes.”
3. They value diversity of thought. Innovation Accelerators know that problems and opportunities are best tackled when viewed from multiple perspectives. Some companies have instituted cross-functional digital innovation boards to evaluate and prioritize the ideas they have collected in that big funnel. These are no ivory-tower groups with their heads in the clouds. They’re made up of front-line business leaders who deal with the daily needs of customers and the business.

Diversity of thought and perspective is valuable at the project level as well. A consumer goods company with an IT budget of less than 1.5% of revenue runs “innovation challenges” in which a cross-functional team works together for four or five days to solve a specific business problem. Sometimes the teams include customers. As ideas show promise, they earn more investment. When I spoke with the company’s director of sales and marketing technology, about a third of the challenges they’d run had yielded commercial products. An important side benefit was that it had taught people to work differently, and that had carried over into their everyday lives.

In next week’s post, I’ll talk more about the commercialization of IT.

Digital Innovation Drives Business Transformation

One of the most interesting research projects I’ve worked on in the past year was an HBR Analytics Services study sponsored by Red Hat as part of their Enterprisers Project. In it, we divided the universe based on respondents’ posture toward IT-driven business innovation – for simplicity’s sake, let’s call it digital innovation. There were three categories:

Innovation Accelerators: These respondents said that digital innovation is a consciously pursued strategy throughout the organization – it’s in their company’s DNA.

Ad Hoc Innovators: These companies have pockets of digital innovation, but it is not pervasive or replicated across the whole company.

Low Prioritizers: At these firms, digital innovation is not a priority; they focus elsewhere.

As you’d expect, about half of the respondent base fell into the middle category – basically average. Close to a third (32%) were Innovation Accelerators, while 18% put little focus on innovation.

Some very interesting findings emerged when we used these groupings to analyze the data. In this series of posts, we’ll explore how a commitment to innovation accelerates business transformation in many dimensions, and what this means for CIOs and their organizations. In particular, we’ll look at the innovation process, the commercialization of IT, and the characteristics of successful CIOs and their departments at Innovation Accelerator companies.

For today, here’s a look at the degree to which companies that are committed to digital innovation are transforming all aspects of their business.

As you can see, Innovation Accelerators lead in all, especially in areas with a top-line impact – the top three items outlined by the red box. We’ll focus on this top-line impact in the 3rd part of this series.

If you’re interested in reading the full report, you can download it from the HBR Analytic Services website – it’s called Business Transformation and the CIO Role.

CIOs Should Lead Digital Transformation

I’ve saved the best for last in this series of posts on responsive IT. In our survey of 750 business and technology leaders (around 200 from IT and the remaining 550 from other parts of the business), 42% of respondents believe the CIO is the best suited member of the C-suite to lead digital transformation. (Yes, I know this term has become overused, but this is what we’re talking about, so I’ll learn to live with the shame.) That’s more than twice as many as chose the CEO (18%). And that number shot up to 64% when we singled out the IT respondents. This is great news for CIOs, right?

Yes, but… when we look at the responses of general managers, things are less clearly defined. While CIOs still lead at 30%, there are also strong votes for the CEO (21%), LOB leader (17%), and COO (15%). This makes sense. As digital business becomes more pervasive, it is absolutely incumbent upon non-IT leaders to understand the opportunities and threats digital represents and to do everything in their power to drive their organization’s ability to compete. Some of them are becoming quite astute in this regard. It’s also true that even if the CIO is responsible on a day-to-day basis to lead this transformation, not much will happen without a clearly articulated vision from the CEO.

While there was little support for having the CMO or CFO lead digital transformation, they and other functional leaders need to be at the forefront, working with the CIO to ensure they are digitizing the right things for their part of the business. This requires new levels of collaboration between IT and other parts of the business.

So, do today’s CIOs have what it takes? A huge percentage of respondents – 83% – believe that digital business innovation requires a different set of skills, competencies and knowledge from running enterprise IT. And there was a big mis-match between the traits of their current CIO and the traits they believe would add the most value to the business.

CIO Traits that Add the Most Value

1. Innovative thinking
2. Change leadership
3. Technical knowledge, emerging technologies
4. Understanding of/ability to optimize business processes
5. Ability to develop new go-to-market strategies & technologies
6. Market/customer knowledge
7. Technical knowledge, integrating systems
8. Influential within the business and/or the industry
9. Negotiating skills
10. Risk management/security expertise
11. Budget/finance knowledge & skills
12. Technical knowledge, legacy systems

CIOs who want to play this leadership role must get serious about changing how they spend their time. (Bryson Koehler, CIO at the Weather Co., wrote a great piece on this.) Indeed, CIOs who lead responsive IT departments are more innovative, have greater knowledge of emerging technologies and integration, and are less focused on legacy systems than are other CIOs.

As your business becomes more digital – whatever that means for you – job 1 is to figure out how to minimize or offload the things that are not central to this transformation as quickly as possible. Only then will you have the space to focus your time and attention – and your team’s – on the things that will really make a difference.

This is the third of a three-part series.

Digital Business Is a Team Sport

IT has become integral to many aspects of business, from marketing and customer engagement to new product design. This requires a new way of organizing and engaging across functions.

Digital business is a team sport

How important is this cross-functional engagement? It’s huge. Seventy-five percent of the 750 respondents to our global survey (see “The Leadership Edge in Digital Transformation,” from HBR Analytic Services) say that their company’s survival depends on their ability to effectively exploit IT, and almost all – 90% – said that collaboration and communication between IT and other stakeholders in the business is essential to their ability to do so.

There’s a lot of room for improvement. Forty-three percent said their organization has a poor track record of collaborating across functions. That shoots up to two-thirds (66%) at companies with slow-to-respond IT departments.

Some best practices to address this challenge are starting to emerge. These include:

• Establish a cross-functional business IT strategy board at the highest levels of the organization – Emerson has a great model for this
• Encourage job rotations into and out of IT
• Appoint business relationship managers – IT staff that “live” in the business
• Physically co-locate IT developers with their business counterparts
• Have dual reporting to the CIO and another function leader for areas that are heavily IT enabled

The CEO has to push this dissolving of silos and greater collaboration, and certainly LOB and functional leaders have to buy in. But leadership to make it happen falls to the CIO. One of the biggest challenges CIOs face in this regard is coaching their own teams to come out of their IT bubbles and engage effectively with clear communication and a positive, can-do attitude. Collaboration between IT and other parts of the business is a necessary condition for digital business. Companies that are good at it will move farther, faster.

This is the second of a three-part series.

Digital Advantage Comes from Responsive IT

In a digital age, business survival depends on responsive IT. That is one of three key findings from a recent global survey of 750 business and technology leaders that I led for HBR Analytic Services (“The Leadership Edge in Digital Transformation”). Almost half of respondents (47%) said their organization had missed opportunities because IT was too slow to respond. While it’s reasonable to expect some misses, companies with slow-to-respond IT departments were much more likely to say this at 64% than were respondents from companies with responsive IT (only 27% said they’d missed opportunities).

As the Red Queen said to Alice, it takes all the running you can do just to stay in the same place.

Companies with highly responsive IT (let’s just call them the “Leaders” for brevity’s sake) have gone faster and farther in making the transition to digital business than their competitors. This proved to be the case across many dimensions, starting with the ways in which they engage with customers: 68% of the Leaders said their customer engagement had been transformed by their use of new technologies compared with only 33% of Laggards. The delta was even greater when it came to business model transformation, with 62% of Leaders transformed compared with only 24% of Laggards. This translates directly to competitive advantage.

So what can IT leaders do to be more responsive? Some of the things that came out of our in-depth interviews with survey respondents as well as a series of CIO roundtables hosted by Oracle, the survey’s sponsor:

1. Simplify the IT infrastructure, with an eye toward more of a services approach
2. Make better use of fewer partners who will commit not only to your success but to your customers’ as well
3. Exploit the cloud – the greatest benefit of which is business agility
4. Focus your teams on innovation (doing more of the first three will free them up for this)
5. Foster innovation across and beyond the enterprise, engaging employees on the front lines of the business as well as customers
6. Make collaboration between IT and other parts of the business a top priority

These are not quick fixes. Companies that invested in simplification, efficiency and innovation during the economic downturn have definitely stolen a march on their competitors. Still, only 20% of survey respondents fall into the Leader category today. It’s by no means too late to turn things around. It will, however, require a concerted effort involving technology, process change and people.

Next week I’ll write about the second key finding — the fact that digital business requires a high degree of collaboration across organizational silos. The week after that I’ll cover the third: Who should lead digital innovation?

Digital Innovation and the CIO

Business leaders anticipate dramatic change in all aspects of their operations over the next three years, according to recent research from Harvard Business Review Analytic Services (you can download a copy of the report I authored, Business Transformation and the CIO Role, at the HBR website). Some companies are accelerating this change by committing to IT-enabled business innovation as a core strategy. To understand just how massive the changes will be, consider this: 70 percent of these “innovation accelerators” (about a third of respondents) expect the ways in which they engage with customers to be transformed in three years, rating it eight or higher on a 10-point change scale. That’s right: 70 percent. Transformed. Sixty-four percent anticipate that same degree of change in their products and services, their business models and the ways employees work.

As we all know, organizational change isn’t easy, and it doesn’t happen quickly. So what sets these Innovation Accelerators apart? We identified some common characteristics.

1. Their commitment to digital innovation starts at the top, with the CEO. That’s because this is not IT innovation we’re talking about, but IT-infused business innovation. It goes to the very heart of the issues that matter most to business leaders today. If you don’t have a CEO who believes in the value of IT, it will be tough to get much done.
2. These companies’ CIOs are significantly more likely to spend their time on strategic activities – developing and refining business strategy, driving business innovation and identifying opportunities for competitive differentiation, for example. They have worked hard over the past few years to reposition IT from a group that focuses on supporting operations to one that drives value and actively contributes to the corporate innovation agenda. But make no mistake, this is heavy lifting – simplifying IT infrastructures, shifting out non-value-adding work to external providers, redefining and building new skills and capabilities, resetting expectations – and most CIOs still have a ways to go in this regard.
3. Innovation accelerators take a structured, managed approach to innovation – 79 percent said so – but they value speed over perfection and cut through bureaucracy. They start with a big funnel, using internal and external crowdsourcing to bring in new ideas. They use social tools to give executives a clear line of sight to the edges of the business, hearing from field employees and even customers themselves. And they are way more likely than others to use cross-functional innovation boards to evaluate and prioritize ideas. These are not ivory-tower, isolated groups; they’re made up of stakeholders from marketing, operations, IT and other parts of the business who will look at a challenge or opportunity from multiple perspectives and together figure out how best to operationalize a solution.
4. They value diversity of thought and experience. This manifests in a number of ways, including job rotations into and out of IT and co-locating IT staff with marketing “creatives” and product developers. Some companies bring together cross-functional teams for scrum-like “innovation challenges” – concentrated short-burst efforts to address a specific opportunity or problem quickly.

So here’s the “but” (you knew it was coming). The need for collaboration and higher levels of engagement make communication skills critical. But not even Innovation Accelerators give their IT departments high marks when it comes to communication, with only 38 percent rating their IT colleagues highly in this area (and of course the rest scored even lower). This should be a major concern to CIOs. I’ve given a lot of thought to this problem, which so often gets dismissed as some inherent quality of introverted geekiness in people who pursue careers in IT. Nonsense. It’s actually quite a complex issue, with communication being a component of building credibility, relevance and trust. But that’s a topic for another day.

Innovation is not just about being creative and developing new ideas; it’s about being able to roll them out and evaluate them quickly against multi-dimensional criteria, then either adopt or discard them and move on to the next thing. This is a team sport, but in too many organizations, the teams are function or LOB centric, pitted against each other rather than working together to out-innovate the competition. Building that capability should be a priority for any organization that hopes to survive the shift to a digital economy.

This post originally appeared on Hellersearch.com

New Content Coming Soon!

I have been completely MIA from my blog the past year, but that will change soon. Starting in January I will start posting updates more or less weekly, with new articles for business and technology leaders; highlights from my research with HBR Analytic Services and MIT CISR, and observations from my travels speaking at conferences and hosting dinners and roundtable discussions with CIOs. Sign up to get notifications so you don’t miss anything!