The average IT budget can be summarised in two categories: 80% keeping the lights on and 20% innovation. Although this practice has worked over the last few decades, it is now at odds with the growing pressure that CIOs and IT organisations face. When defining the value of IT, organisations have a tremendous decision to make: 1) become the minder of the back-office infrastructure that needs constant care, or 2) give the front office what they need to address customer wishes and requirements.
Is it possible for CIOs and their IT organisation to contribute more to revenue growth and create greater customer value, as well as responding to the traditional expectations of undisrupted operations and cost efficiency? After spending more than two decades of my career as a CIO and now CEO, I am finding that it is possible for the IT department to reinvent itself as an innovator of business and customer value. The key is to elevate the CEO’s perception of IT as a critical enabler of everything that the enterprise does.
Granted, reputations – especially long-established ones – are tough to change. To help ease the transition, here’s three tips that CIOs should consider undertaking to help kickstart the process.
1: Become an empathetic partner of the c-suite
It’s fair to say that many CIOs are missing from the boardroom. Although maintenance of the IT landscape is a critical part of running the enterprise, the rest of the company views such matters as white noise that offers no significant value to the bottom line. This perspective is cemented by the fact that IT doesn’t carry a revenue number nor line up with what’s happening in the enterprise.
What the boardroom wants is an IT expert who can take on the role of digital transformation influencer and strategic leader. Americas’ SAP Users’ Group member survey data on digital transformation found that a mix of executives are steering transformative efforts today (including the CIO) as well as a real opportunity for IT leaders to step up and lead. In short, CIOs have to prove that they also have a stake in digital transformation, instead of just being service that executes the wishes and needs of others.
This doesn’t mean that the CIO needs to partner with every business area, but they should collaborate with one or two functions. By empathising with business needs, CIOs can help executives see how their departments can better operate with greater visibility, faster processing, and more accurate insight. The key is to resist talking about software capabilities so that the conversation can focus on matching needs with technology by showing real bottom-line outcomes.
For example, a CIO and CMO can discuss customer segmentation and ways to reach customers more effectively. By focusing on the needs and wants of the marketing function, the CIO can better understand current opportunities and risks and how technology can address them.
2: Axe day-to-day maintenance operations to create strategic partnerships
CIOs need to treat themselves as the CEO of their own technology company. This mentality requires a trusted lieutenant to run daily IT operations with authority and expertise. Not only does this free the CIO to form partnerships with the rest of the C-suite, but also provides solutions to business concerns.
Don’t be fooled, though. Building these executive relationships is more than shaking hands and engaging in friendly banter. CIOs may have to research the functions they support, as well as competitors and industry peers. Otherwise, the CIO and IT will continue to be relegated as the implementer of someone else’s choices and investments. And worse, they will be the ones responsible for fixing any issues that may go wrong or break along the way – preventing the organisation from scaling operations to maintain the budget and drive cost savings.
3: Prove value as the resident technology entrepreneur
Increasingly, technologists from startups and headline-grabbing tech firms are being invited to join the board – instead of those who reside in the office of the CIO. For many businesses, these technology entrepreneurs are appealing as front-office, customer-centric specialists – not for their back-office experience.
For CIOs, this added competition for a seat in the boardroom is forcing them to reexamine how they get the attention of the C-suite. In addition, CIOs must help the CEO realise their value as an essential member of the executive team. But as long as the IT organisation is worried about operations and not concerned with innovation, this dream is likely out of reach.
It is possible that the future of IT is more of a bifurcated organisation. Two-thirds of the IT area may focus on cloud services and back-office support, while a smaller team drives innovation that can help the front office progress forward. Rather than developing shiny new toys and gadgets that may be impressive at first sight but are ultimately value deprived, the CIO can demonstrate that the organisation understands the business and knows how to drive its digital enterprise vision.
The new CIO agenda: Balancing revenue growth with continuous operational efficiency
Digital transformation is fundamentally moving technology away from the purview of the back office. Most companies have complex, global processes that need to be regularly tuned to market conditions and require a dedicated IT team keep them alive. At the same time, the growing influence of the internet and mobile devices are shifting technology from something that only big organisations can afford to do in the back end to the rise of a tech-enablement revolution in the front office – somewhere CIOs have never played before.
This is a very different world for CIOs as they move outside of their (and possibly the boardroom’s) comfort zone. However, to exist and succeed in this new world, CIOs have no choice but to think like marketers, sales people, accountants, or any other role in the business to shed their department’s reputation as a cost centre and build a foundation for technology entrepreneurship.
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Geoff Scott is CEO, Americas’ SAP Users’ Group
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