How CIOs Can Keep In Step With CEOs
May 1, 2013 Editor 0
We know there’s dissonance between corporate IT and the C-suite. New research, conducted with HBR, The Economist, CEB, and TNS Global, reveals that CEOs believe CIOs are not in sync with the new issues CEOs are facing. CEOs also tell us that CIOs do not understand where the business needs to go and how IT should support strategic goals. The dissonance is due to the changes in the business world, and the resulting second- and third-order effects on IT. CIOs need to be aware of these changes in order to keep in step with their business leaders:
- Goods and services are becoming rapidly commoditized. The natural cycle of products through diminished economic frictions and supply/demand curves approaching equilibrium are causing decreasing margins, so executives desperately seek new ways to differentiate their company, products and services. But even though they know they must innovate in response, they don’t know how to do so in the complex global market.
- Traditional products are simply becoming windows into information-based, services-delivered value. The value of a cell phone is more based on its app ecosystem than its function and features. Running shoes are differentiated by their sensors and supporting web analytics and user networks. 3D printers email themselves updates which they then print out for their user to install. Toys become total ecosystems of innovation, collaboration and adaptation.
- Barriers to entry have been destroyed. The same diminished economic frictions, along with new business models, organizational structures and enabling technologies, have accelerated the appearance of new, unanticipated competitors with new value propositions or the old value propositions presented faster, better and/or cheaper. So business leaders relentlessly drive down costs to maintain share.
- Value is becoming highly individuated. This is a consequence of introducing the horizontal enablement of social media, where value is a function of time, place, participants and other factors beyond the control of supplier individuals or organizations. Value is not just financial; it is also social and emotional. The transaction is less about money exchange than it is the co-created experience and engagement. Witness the “apps marketplaces” with apps that generate thousands of new, instantaneous value creation events and profits through collaboration (e.g. the “liking” on Facebook of a new restaurant may cause five friends to visit it for lunch that day).
- The nature of competition is changing. With the evolution of cloud computing, even the smallest, least-funded organization in an out-of-the-way town can appear and deliver like the largest global entity. Today, I can have a new idea, sketch it out using world-class design software via the cloud, find and route it to the best possible prototype manufacturer anywhere in the world who will produce it using 3D printers, and have it delivered to my door via FedEx. If it turns out the idea has legs, I can do everything from crowdsource business plans to turn my customers into a superior support organization through companies with self-service web sites–from the comfort of my desk and with my personal credit card. The companies enabling these capabilities, such as InnoCentive, Tongal, 99designs, TopCoder and Kickstarter, are being used by organizations large and small. This is great for the consumers of world: Any need or demand can and will be met faster than ever. It is challenging, to say the least, to existing enterprises.
- The nature of the workforce and management is shifting. The business and economic landscape has shifted from industrialization and its focus on reliability, predictability, discipline, alignment, control, repetition, scale, and efficiency, to value creation and its focus on originality, adaptability, innovation, engagement, collaboration and efficacy. As a result, the nature of work and the workforce is changing. Many of our assumptions about what motivates and dissuades people are wrong-especially when knowledge, creativity and innovation are desired. Management is trying to adapt to these new realities of the workforce.
As a reaction to these business changes, the enterprise is beginning to respond in a number of ways:
- Outsourcing services. We are at the early stages of seeing large organizations outsource specific services such as HR, accounting, payroll, and IT support while breaking themselves up into smaller, more agile enterprises to address specific markets, geographies, or customers. Interestingly, even employees are starting to pursue this path, preferring to be independent and focused on delivering value rather than feeding an organizational structure.
- More partnerships. We are starting to see more relationships among organizations (and even among competitors) in order to better serve customers. Think of the interesting ecosystem among Apple, Google, Amazon, Yahoo and even Microsoft with their mobility businesses, apps and services sharing each others’ capabilities in order to better engage and serve customers. It is better to be highly focused and utilize other, highly focused firms (even your competitors and other customers) to service your customers’ needs rather than to try and do it all yourself. Otherwise, you lose flexibility, agility, adaptability, and even scale economics begin to reverse. Finding other enterprises that can add value to my value (and vice versa) is the key to responsiveness, individualization, and meeting the market’s needs in the moment.
- A focus on customers. Organizations are starting to realize that they should zero in on what creates value for customers, and what they are better at than anyone else. Then become someone else’s customer for everything else. As Peter Drucker said, “There is nothing quite so useless, as doing with great efficiency, something that should not be done at all.”
- Structural changes. Future successful enterprises will be socially enabled, and they will operate as digital business ecosystems–very different from contemporary hierarchical, fixed, integrated, transactional structures of today. Both of these characteristics are necessarily, but not sufficiently, driven by the CIO.
CIOs must be aware of the changes in the business world and the enterprise, and how these changes are affecting the roles in the C-suite and their own leadership role. How we run companies today can best be described in a phrase I have heard many times from many sources: “Maximize efficiency by minimizing deviations from standard practices.” But to succeed in the new business environment, enterprises must be more than well-oiled machines; they must also be adaptive and innovative. How to get there is the next topic.
Many organizations are approaching the tipping point being described in this series of blogs. Stepping into the role of strategic visionary and business driver requires CIOs to have a completely new conversation with their C-suite colleagues. To begin the conversation, Dell, HBR and CIO magazine are sponsoring a Harvard Business Review panel discussion, “Change the Conversation, Change the Game,” through a webinar, broadcasting live from The CIO Leadership event in Boca Raton, Florida May 5-7, 2013.
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