How is the CIO role changing?

In today’s world, many CEOs forget they the must be CEOs (Chief Enabling Officers!) and act like CEOs (Chief Execution Officers!).  But that is not part of our topic now. We will save it for a rainy day.

We also see two important developments happening in the realm of CIO:

1. Technology and business boundaries are getting blurred. Either of them cannot be stand alone!
2. Business strategy is not decided independent of technology rather the latter is a critical component in formulating a plan.

In other words, the era of business-led / technology-enabled CIOs has ended; a new one technology-led / business enabled has begun!

What kind of battle is waged by the CIO? A three-pronged battle:

1. Drive / Enable business strategy harnessing the power of technology in a secure way
2. Battle with monolithic systems of records and data and inflexible, technical-debt ridden architecture
3. Maximize value

Where does that leave the CIO? Here is how I see the role changing:

There will be a huge metamorphosis of the role possibly eliminating a dedicated CIO. Parts of the role may manifest in other areas. For example, the resources (including technology, required infrastructure, cloud, network, end user computing, devices) might be controlled by the COO. The enabling aspects of this would be owned by the line function leaders who are responsible to customers or business stakeholders.

The first view point is that the CIO role would disappear. Whilst this may take a while, things will become difficult for the CIO in the coming few years. Certain steep changes will be the order of the day.

#1. CIOs who are experts in technology – legacy or digital can expect to be pigeon-holed. Those who use to to bamboozle the rest of the organization with fancy architecture and buzz words will recede into the background. They need to invest in soft skills. They need to seamlessly align with the organization business strategy and business line function. Every project that originates from the CIO office will be relentlessly subject to CBA (Cost Benefit Analysis). Can the CIO stand up and articulate what, when and how he plans to stay relevant and important to business? Even this won’t do; they should be skilled at spotting new business opportunities and be able to influence their ideas. They have to become more human and partner with others in order to maximize their value to business. This partnership can be internal or external. Nurturing and harnessing a good eco-system will help.

#2. Continuous realignment of the organization, teams, skills and outlook will be required even to stay afloat. What do I mean by this? IT world is ransacked by new trends and terms like agile, DevOps, DevSecOps, Continuous integration/deployment. More trends and methodologies will start coming in. We are already talking about a low or no code IT that can be bought, scaled up or down and customized / enriched. The CIOs should reflect on how and what this means for the team? We used to have specialists in IT like SQLServer expert, Oracle DBAs and Network engineers. Whilst some roles will continue, they need recalibration as the IT world changes. Does it pay for a separate testing category to be developed? Perhaps an automation tester is required. A developer should also be a capable tester. To what extent soft skills and business skills are to be embedded within IT? 

A recalibration of the IT team that is not compartmentalized but can be assembled to deliver digital transformation of the business is the need of the hour. And the IT team members should be prepared to don different roles in different teams! Towards this, the CIOs should be prepared to and implement redefinition and rebaselining of skills, recalibration, training and enablement etc. And the team identification, deployment and delivery should, subsequently, follow these new ways.

#3. A CIO should transform into being a change agent of the organization. They will have to become value creators and for that they should transform into change instigators. Status quo is no longer an option. Even if a CIO continuously maintains the estate well and runs a tight-knit disciplined shop, that won’t be enough. Most of the normal health parameters have been pushed into the very bottom so much so that they don’t require special oversight nor reporting. Today’s tools / products come with self-healing and self-reporting properties. In order to transform a business operations and drive value, they have to remain restless (in a positive way!). I would go to the extent of saying a controlled panic will do a world of good now and then!

To conclude:

• Tomorrow's CIOs will have to drive, innovate and execute with the first two as the dominating functions

• They need to enable a high-performing environment, business-oriented and flexible teams with multiple skills.

• The operational responsibilities will not go away but take up less and less time allowing them to act more as leaders, communicators and innovators.

• Quite a few organizations are taken aback by the lack of clear definition of “Digital.” A few CIOs and their direct reports, I met, are constantly worried by the lack of uniform definition of "Digital." Why worry? Instead, the CIO (whether it is a digitally-born or digitally-aspiring organization) can take this to his/her advantage. This is because any digital transformation is less about a digital technology or strategy but more about a successful business in the digital world.

How to transform the organizational DNA into an "Innovative" one?

How is innovation driven in your organization? 

What is the role of your CEO? 

How do we push this into the DNA of the enterprises? 

Well, here are some thoughts:

Today, every enterprise is subjected to more triggers and disruptions than ever before. To me, the critical ones are:

• Impact of digital / new technologies in business (diminishing margins, eroding of competitive advantage etc.) as well as in employee workforce (changing skills, automation, type of jobs that are going to be generated etc.)
• Learning space has undergone a rapid change. Take MOOCs. Today, the very concept of going to university to acquire skills is being keenly debated. Give a laptop with an internet connection. People can start business or provide value. The barriers to traditional thinking and the required infrastructure have gone out of vogue rapidly.

Before answering the innovation related question, we need to understand how to interpret “INNOVATION”. First and most important point is to differentiate this from INVENTION. Innovation implies an invention that is commercialized. ISO defines this terms as “Ideas that are implemented and deliver value to customers and enterprises.”

Innovative companies are always, a few steps, higher than the rest. This manifests in two forms mainly – higher profits and/or higher growth. Innovation triggers could be many – New technology, New business model, Gen Y skills and Digital disruption, Market opportunities etc. 

• Innovation can never be serendipitous or accidental. Every enterprise must understand the factors responsible for an innovative organization and try to set up and sustain.
• Two key factors are important for nurturing this – CULTURE and STRUCTURE. If the underlying cultural issues are not addressed, no amount of fancy INNOVATION OFFICERS can bring any tangible benefit. The structure is a powerful enabler of innovation. 
• Innovation can happen incrementally or radically across multiple dimensions. Here is a quick table to visualize this.

Innovation Dimension	Level (Incremental)	Level (Radical)
Business Model
Process
Product or Service
Management System
Production

• Another way to look at the innovation is to understand the type of changes and the market.

New Concept / Process / Technology	Disruptive Technology	Breakthrough Innovation
Existing Concept / Process / Technology	Incremental Innovation	Disruptive business concepts
	Existing Market	New Market

• We can also look at strategic innovation, open innovation, value innovation etc. In the best seller Blue Ocean Strategy, we hear “Value innovation” that aims to make the competition irrelevant as compared to the traditional red ocean strategy that aims to be one-up.
• Open innovation brings the organizations and external parties together with tremendous improvements in business model or new services or license fees. This can be outside-in.
• Another way to see this is a PUSH or PULL type. PUSH type means the organization has uncovered a new technology / product or service and it tries to find how to successfully use that to differentiate. PULL starts with customer need.
• Innovation cannot be assigned to one pocket of the organization and hope pinned on it. IT has to permeate the entire organization. Yes, a specific office / roles / KPIs are a must to kick-start the process.
• In order to assess the current innovation footprint of the organization, look at the following aspects:

o   Products & Services

o   Customer Insights used / experience given / engagement

o   Learning capabilities

o   Process

o   Value propositions / platform / capture

• Look at the capabilities across the innovation management:

o   Ideation

o   Selection

o   Development

o   Commercialization

• After the assessment, suitable action plan for creating or strengthening the innovation management system, across the enterprise, is to be formulated with specific KPIs to understand their progress and impact. The aspirations should be matched with capabilities.

Implementation

It is this area the most enterprises struggle. Focus on the following:

• Leadership style of the CEO (doesn’t have to be fixed. Should be adaptable). You have to be an explorer at some point in time or a climber. Explorer doesn’t demand short term profit or growth. Climber builds on strengths never losing sight of the overall goal. There are various other styles.
• Who is responsible for innovation? Never assign this to a few people and close your eyes. Your eventual goal, as CEO, is to embed this as part of DNA. You may still need to identify few people as the shakers or movers to give the required fillip.
• Be clear on the KPIs – short / medium and long term. Different types of innovation with different time horizons call for suitable understanding. Let’s say, a CEO wants to open a new office in Antarctica. What should the centre be known for? Is it just another location diversification with no meaning? Are you prepared to give some time once you commit the resources? RoI / Profit can help in reinforcing and expanding the current business. But new business / innovation opportunities call for new metrics such as NPV based on prototyping, Strategic option value etc.
• To get some incremental innovation, a major change to the structure and culture may not be essential. But, they are the very mechanisms that can teleport a company into the field of radical innovation.
• The workforce learning culture needs to reflect the hunger for innovation. There are organizations that allow their employees to work on BAU as well as strategic initiatives. The latter would call for new skills to be provided for through training and prototyping.
• If we take a look at the standard business maturity S curve (Emerge, Grow and Mature), it comes as a S curve. We start with a competitive advantage, utilize it to the full before it loses lustre and the margins start to diminish. The innovative organizations must start inventing a new S curve whilst riding high on the current one.

 

Business Growth & Innovation Curve

If your CEO is too busy and lives from one quarter to another but dishes out all the right terms, the market wants to hear, frequently with no genuine on-the-ground-movement, it is a sure sign of “Decline” setting in.

References:

https://en.wikipedia.org/wiki/Innovation

http://www.innoviscop.com/en/definitions/organisational-innovation

https://www.forbes.com/sites/kateharrison/2019/01/31/3-strategies-to-encourage-innovation-at-every-level-of-your-organization/#2c326b75701f

https://innovationmanagement.se/2016/04/01/13-practices-of-the-worlds-most-innovative-organizations/

https://www.innovationlearning.org/10-practices-for-organization-innovation/

https://innovation360.com/60-minutes-innovation-management-magnus-penker/

http://www.penker.se/

  

Is your CIO funding projects or business capabilities?

Context

Earlier, the CIOs tended to organize their teams and functions around specific projects. Wherever possible, consolidation was touted as the panacea! The seemingly good candidate is RTB (Run The Business) function that typically “Keep the lights on.” Support, both application and infrastructure, falls into this category.

As the rest of the units start aligning themselves to operate nimbly in an agile and digital world, what happened to the IT organization? Many CIOs have simply reorganized them using fancy terms but essentially retaining the same flavour. Ask them about the IT budget. They will talk about RUN and CHANGE. Drill them into more detail, for example the cost of introducing a new product and see their reaction!

In this blog, I share the experiences of working with CIOs and IT organizations around two important aspects.

• How to look at the IT budget and get answers quickly?
• How to align and develop an operating model?

Let’s understand the changing paradigms to the meaning of IT as organizations go digital and embrace new technologies:

Diagram #1: Emerging interpretation of IT in the digital context

In short, business strategy automatically becomes IT strategy. It is no longer possible for CIOs to emerge victorious when the entire business is going southwards! The CIOs are in the thick of things.

Funding Model

Diagram #2: IT Funding by Portfolio

Typically, the CIOs look at the funding by any of the three categories:

1. Type of focus - RTB (Run the Business), CTB (Change the Business) and Grow (Linked to Business Growth)
2. Budget (Cost of personnel, license, hardware, storage etc.)



Diagram #3: IT Funding by Budget

3. Financial accounting sense (Capex / Opex)

Diagram #4: IT Funding by Accounting

These types of funding keep the technological interdependencies and the business led IT aspects deeply hidden. The real cost drivers become virtually impossible to find quickly. In a way, this explains all the IT costs but presents an incomplete view. This may lead to investment silos and/or duplicates. The flexibility needed to understand digital investment is not the hallmark of these methods. Moreover, justifying the legacy refresh takes inordinate time.

Diagram #5: Allocation of IT Budget

Instead, allocate the IT budget by product line. For this, work with business to understand the strategic / relative importance of the product lines annually. Empower the PLMs (Product Line Managers) with the discretion to allocate funds to maintenance, technology refresh, innovation etc. They should have the wherewithal to reallocate the funding as priorities change.

In the diagram #6 below, an illustration is given. The key focus area is to build new business capabilities and ensure the business strategy is not impeded by IT. 

• New business capabilities (BC) are financed by respective business area budgets. Examples can be subscription based services like SaaS or getting third party services.
• New business capabilities are funded by IT to the extent of technology implementation or major changes/enhancements.
• Then comes the "Maintain to Operate" layer that focuses on licenses, upgrades, hardware/software maintenance, staffing etc.



Diagram #6: Shifting Budget Patterns



• Finally the digital foundation layer that addresses cloud / building new platforms etc. This directly mitigates operational risk.

As can be seen, the key differences to this type of approach are:

• Part of erstwhile IT budget for funding new products or building new capabilities is shifted to the respective business unit or area.
• Business area is the owner of the budget for introducing new capabilities.
• The funding that is required for digital foundation is separate from maintenance.
• The linkage of technology to the business capability is clear.

What comes out clearly is that enterprise wide view of technology spending covering business-led IT. This view complements the traditional views to gain quick insight into cost of transforming the landscape, cost of sustenance of new capabilities as well as introduction of newer ones. As the technology funding is clearly aligned to business, the ability of IT to influence and respond increases.

Operating Model

Let's start with what we aspects we should expect from the IT operating model.

• Faster time to market
• Greater business integration
• Flexible ways of working
• Improved customer experience

For this, we need to shift the mindset from projects to products. What are the differences?

Diagram #7: Redesigned Target Operating Model

How do we factor them in the operating model?

• Diagrams 7 and 8 give an overview of how to visualize these changes in the model and consequently the organization of the teams.
• Choose products or business capabilities over projects.
• Each capability is a vertical tower that comprises all IT operations pertaining to it. RTB and CTB work will come under this.
• The product line manager is empowered to organize his teams, allocate budget and change funding.
• These operations are done on the product lines in an agile / DevOps / CI manner.
• Everything cannot operate in a vertical stack. IT has to spot scaling / efficiency opportunities wherever possible. What is not common to each capability but to the entire organization is (1) the building blocks of application and (2) Cloud based scalable infrastructure. These may include shared applications, shared ERP, shared platforms, shared BI and shared data centre etc.

Diagram #8: Team Organization

Conclusion

It makes immense sense to appreciate the paradigm changes in the way IT is viewed and linked to the business. This should logically flow into the way the IT teams are structured and funded. 

What are the advantages of reorganizing the IT along these lines?

• Business knows easily the respective IT to discuss/contact.
• As the IT services each business capability, the skill sets / knowledge of understanding of the business grows within that unit. This means informed resources that have the ability to respond to changes.
• IT supports the business more efficiently in terms of understanding the cost components and come up with answers to question like – what will be the time taken / savings in IT if a product line is killed? what will be the incremental cost of introducing a new product in a particular market? Etc.
• The IT landscape becomes less complex and easier to understand/operate.
• The portfolio metrics, at each capability level, make direct sense to the business head as well as the CIO.

On a lighter note: If a CIO's lingo becomes as close to the business and everyone understands the CIO's response in the first instance itself without seeking further clarifications, latch on to that CIO for God's sake!

How much business value is added by your IT division?

You are the consumer of IT services in your organization. How do you ensure you get the maximum business value from them? Of course, it is second nature to think of IT adding lot of value. But, how do you see it? It is likely that you get a set of huge reports from the CIO showing metrics and other related things, most of them almost always green. Have you taken time to sit down with them and ask them to explain why there are important metrics and how they relate to you?

There are the three broad dimensions in terms of adding business value:

• Speed of delivery
• Quality of delivery
• Customer experience (# options, # value added services, Ease of operating a channel, Omni-channel, service offerings etc.)

If your IT is to become a value-added partner to business, it should:

• Assure the business that security is not compromised, the applicable regulatory changes are adhered to and ensure there is a plan B always in terms of disaster recovery. This is the bottom-most layer and a sine qua non today.
• Promote innovation and be a true partner to business.

 It is the latter that we are discussing in this article. Here are some pointers to get around this:

Pointer #1: If you don’t question and understand your IT’s output,

your customer will do so in no time consequently leading to more costs. Do not accept metrics or any report from IT without a sitting. Good metrics, however good they are, do not tell much about business. High uptime of an ATM is good. Imagine the loss of ATM for a minute on an important occasion like boxing day. If your IT team is able to resolve all the issues within the agreed time (SLA – Service Level Agreement), very good. By themselves, all these metrics may not mean much. Do not be afraid to dig deeper and learn further. At the end, you as well as the IT must be convinced there is merit behind the metrics. Usually, the clue is to have a few meaningful metrics that can be directly or indirectly correlated to your or business KPIs.

Pointer #2: Whenever you have a meeting with IT, are you getting inundated with technical mumbo-jumbo too often? Perhaps, there is a problem. It is not uncommon today for everyone to exhibit how “digitally aligned” they are. This is ok to start with. If someone, from IT, including a thorough-bred architect cannot explain in plain English whatever proposals they are acting on and their corresponding business benefits, chances are that they require more meetings to unravel the mystery.

Pointer #3: Before you can question the IT, have you spent time with them articulating your business goals and priorities? Have you taken them into confidence? Do they know your KPPs? Do they know the direction you are planning to take? Do they understand where you are trying to invest? Share with them transparently. Make them understand what you are doing. If you change your priorities, let them know.

Pointer #4: Leave the management of the IT to the CIOs and do not get into too much nitty-gritties. Giving them the required freedom is essential. At the same time, do not allow yourself to be outmanoeuvred by the CIO that the IT reports are bound to be voluminous as the IT is outsourced to many vendors. The last thing, you want to be afraid of is the fact that there are n vendors supporting your IT portfolio. Whether your IT is insourced or outsourced doesn’t eliminate the need for your IT to present a single view to you. Demand from them.

Pointer #5: We should use IT and technology to see how they can add value to the business process. IT can be a great enabler to open new channels. They can help you to cut costs. If you happen to call them only when you have a break-down or an irate customer, perhaps you are not making use of IT to the full extent. Remember, in today’s world, more strategies are designed keeping IT in mind. The more they participate and the more freedom they have, the better they can come up with alternatives. But agree with them upfront on the “definition of success” for each important business initiative.