What kind of CIO’s will transform businesses?

In a previous post entitled, The Evolution of Today’s CIO, I discussed the increasing pressure on CIOs to deliver beyond traditional roles, and become more of a strategic asset for CEOs. Due in part to the market conditions I outlined in that post, today we see CIOs evolving well beyond the domain of strategic information systems.

More and more strategic business decisions these days are being made based upon direct input from CIOs. CIOs are being asked to think beyond IT value and TCO, and contribute directly to creating competitive advantage, strategic innovation, expansion of services, and bottom-line metrics.

This is not just speculation, or an isolated phenomenon. According to a report on CIOUpdate.com, 47% of CIOs indicated they have broadened their roles to absorb some form of business responsibility. Interestingly enough, 35% of those responding indicated that they come from a business background. This shows a fascinating trend that says CIOs are coming in with a business background, instead of trying to learn it on the job. That is certainly one strategy to acquire business acumen in IT. I would suspect that trend will continue.

With regards to how broad organization-wide decisions are made, we are seeing changes as well. Gartner states that 16% of CIOs are sitting on Boards of Directors. And McKinsey reports that nearly three-quarters of IT and business executives feel that IT should be tightly integrated with business strategy—but only 27% saw it happening in their own organizations.

As you can see in the following image, there are a number of elements supporting this hypothesis. In the middle of the image, you see that CIOs will continue to manage demands from an IT perspective, but that strategy, value drivers, and the operational and delivery models will be driven from a business perspective. Business demands will not replace the IT demands, but rather they will balance them. Certain characteristics (tiled across the top of the diagram) will manifest and drive the behavior of the CIO with respect to the business and IT demands. This evidence is borne out by industry analysis we see from sources like CIO Executive Counsel, IBM, Gartner, Corporate Executive Board, and McKinsey.

As shown above, this shows us that the CIO is now at the core of nearly everything that drives business. Clearly, the opportunity here is significant.

What kind of CIO do you want to be?

Based on market research, industry trends, and my own experiences with the Microsoft Enterprise Strategy program, I see that some common patterns are emerging. IT customers are expecting—not hoping—for more business acumen in IT.

Upon distilling information from a variety of sources, I came up with a set of common profiles that can be applied to current and future CIO aspirations. There are three main types of CIO, and the strategic goals of each are very different.

Which one are you? Below are the three core profiles that start emerge:

The Optimizer

1. Business and IT Alignment – Focusing on alignment of IT priorities to business priorities

2. Operational Excellence – Determining what architectures will enable effective IT Services.

3. Reduce Complexity and Simplify – Implement/eliminate IT solutions that allows for reduction of unnecessary cost overruns

4. Reduction of Cost per Solution per User – Bring solutions and services to customers at a lower cost

5. Risk Management and Security Controls – Ensures proper controls are in place

The Transformer

1. Business Partner – Advancing the business relationship to a true partnership.

2. Trusted Partner – The business will look at the CIO as an enabler and trusted with fundamental IT services.

3. Expert of Industry Solutions– Understand, rationalize and recommend industry solutions that meet the demands of the business.

4. Optimize Business Processes & Value Chain– Transform the business through optimizing the business process through the lens of the needs to the customer.

The Innovator

1. Innovation Center of Excellence – Incubate, recommend and deliver innovative solutions to real business problems.

2. Understand Business Models – Understand how competition affects the company and find new sources of revenue through an innovative IT lens.

3. Strategic Big Bets – Understand, rationalize and recommend solutions based on emerging technologies that are directly in line with the business goals.

4. Transform Business Products & Services – Taking existing products & services innovate.

Looking at the Bigger Picture

So with the rapid evolution of traditional CIO roles to include more all-up business strategy, what kind of CIOs will make their marks in transforming businesses in the future? By nature, a CIO brings a specific set of skills to the boardroom, and to ensure that the high-level business decisions they are now fueling are the in the best interest of the overall strategy, a CIO must broaden their scope. But how best to accomplish this?

The challenge for CIOs that fit within the Optimizer profile is that it's very much business as usual. It's all about operational efficiency of the servers, networks, and applications. While this is still very important to all parties, the evidence shows that this isn't enough.

CIOs can only drive real change by thinking very differently in terms of overall strategic goals and business value. Moving forward, the CIOs that will make the most impact, which I call the Transformers, will be the ones who actively adapt the mindset of a CEO.

Building on being a Transformer, the next stage is the Innovator. This is the natural next stage after a successful partnership—actually being able to own key aspects of a company's strategy. Technology is only getting more ingrained into the daily lives of consumers and enterprises, and the need for strategies to be built by experts in this space will be critical for differentiation.

Does this mean that the CIO will replace the CEO? No. It does mean, however, that there is more opportunity for the CIO to be a pivotal role for companies in the digital information age. And after all, who else would be better to do it? Certainly not the CFO or CMO!

This will, of course, mean some fundamental changes in the hardwiring of the CIO. It means looking beyond the existing business relationship, and advancing it to a true partnership. With this model, the CIO must understand their new role as a business enabler, and be able to understand, rationalize, and promote solutions that meet the strategic goals of the business.

Key things to consider

Another critical shift for the CIO will be to transfer the focus from implementation to agility and time-to-market. While the traditional CIO is primarily interested in solutions that are “built to last”; the Transformative CIO must focus on establishing a business foundation that is able to scale and flex. This concept of “designed to change” will enable the Transformative CIO to see beyond static resources, and explore the outcomes that would be possible if these resources were deployed in alternative ways.

Finally, the CIO will also need to become more customer-centric, re-orienting business process to provide better value to the customer. This involves more than just optimizing customer service; Transformative CIOs must think about tailoring all business streams, from supply chain to demand generation, to focus on the cost, benefits, and value for the customer.

A Change in Headspace

There are a couple of primary ways that CIOs can start to get their heads into the CEO mindset:

#1 – By redefining how they think about IT

· A complete overhaul of the IT strategy may be an overwhelming thought, but in the near-term, a number of incremental shifts can ease the transition for a Transformative CIO:

Embracing enterprise architecture – EA is one of the most important and effective tools a CIO can leverage to provide a business-centric, efficient environment

Basing IT operations on a utility model – By simplifying processes and streamlining costs, IT can better meet organizational expectations

Investing in cloud/mobile computing – Demand for availability, access, and interactivity with customers is high, and growing steadily; being prepared with strategies for virtualization, app development, and hand-held and tablet devices is critical

#2 – By aligning with the CEO

A recent Gartner survey found that innovation and organizational flexibility are big concerns for today’s CEOs, and securing a seat in the boardroom will require literacy in a number of issues:

1. Maintaining existing customers, and attracting new ones

2. Drawing and retaining highly-skilled employees

3. Building a responsive, flexible, and efficient organization

4. Streamlining costs

5. Fostering innovation

6. Promoting collaboration and interactivity with customers

7. Designing both long-and short-term strategies

As I stated earlier, the opportunity here for the CIO is significant. Once the agenda of the CIO becomes better aligned with that of the CEO, the advances in innovation, growth, and strategy will be undeniable.

By revolutionizing the role of the CIO, we focus on closing the gap between IT and business strategy. Given the expanded role and responsibilities of this new breed of CIO, we have to wonder about how business priorities will shift as a result, Next up, I’ll examine the outlook for IT and business strategy in the coming years under the watch of the Transformative CIO.

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