A new generation of CEOs—not in age but in perspective—has embraced the notion of CIOs as strategic business peers. These CEOs compete in a world of massive complexity and global interdependency. Their companies engage with customers using technology, and social media is becoming pervasive. In this world, back-office-focused, tactical IT order-takers won’t cut it. “It has become critically important that the CIO be at the executive table, acting as a business person who can advise me and be trusted to help us come to the right conclusions about achieving our business strategy,” says Gregory Babe, President and CEO of Bayer and the senior Bayer representative in North America.
CEOs don’t need more golfing buddies; their embrace of a strategic role for CIOs is motivated by value. While systems effectiveness and efficiency are always required of a CIO, CEOs want IT leaders who are not only accountable for technology operations, but who also drive innovation, fuel growth, enable change and create competitive advantage. They expect IT leaders to focus outside the walls of the company—on markets, customers and sales opportunities—and then to suggest, develop and execute product strategies to take advantage of those opportunities.
Suzanne Woolsey is a member of the board of directors of Fluor, a $22 billion engineering, construction and project-management company. “It is absolutely essential for business competition to have somebody in the C-suite who is able to understand and articulate new ways of looking at the world that come from understanding how technology is changing,” she says.
“The user community is part of our CTO’s focus and always was, but it’s become more important to find how to make the experience much better for the end customer,” says Sam Ghosh, group CEO of Reliance Capital, a $1.6 billion financial services conglomerate with $4.5 billion in assets. Calling on distributors and retail customers is part of Reliance CTO Sandeep Phanasgaonkar’s job. Meanwhile, Ghosh employs key performance indicators based on surveys of Reliance’s retail customers to make sure his CTO knows whether those constituents are happy with his efforts.
Of course, CIOs have long argued that they could make more strategic contributions if company expectations and culture allowed. Gartner says that by 2012, the top 25 percent of companies in terms of earnings growth will be those with “entrepreneurial CIOs” who provide new or breakaway competitive advantages that translate directly into revenue, financial results and market share.
But conventional perceptions of IT leadership as reactive and business-challenged prove stubborn. Gartner’s CEO research has established every year for the past six years that more than 60 percent of CEOs see their IT organizations as a key constraint on the changes they need to make. Unless CIOs and their IT organizations break out of their internally focused, IT-centric mold, the future of the profession is at risk, according to members of the CIO Executive Council, a global peer advisory community of 500 top IT leaders founded by CIO’s publisher.
With so many technologies commoditized, consumerized and increasingly available as cloud services, the traditional CIO responsibilities of technology selection, procurement and management are becoming less and less relevant. “It’s imperative that we become, over time, more business strategists and transformation leaders than we are today,” says Louie Ehrlich, the president of Chevron Information Technology and CIO of Chevron who also serves as a leader of the Council and is a member of its board of advisors. To solicit the opinion of progressive CEOs for this article, the Council contacted member organizations representing a range of industries and company sizes.
For years, CIOs have asserted—mostly to each other—that they provide a unique, cross-enterprise perspective. Now, more CEOs appear to recognize the value of that perspective, and they expect IT leaders to share it with them. (Related: "Why CIOs Need to Think Like CEOs") “The CIO is the person who has the most exposure to all the ways that we take care of our customers and the best insight over how the whole company functions and what’s important to each individual department,” says Rodger Riney, founder and CEO of online brokerage Scottrade. Recognizing this, Riney and CEOs like him expect IT leaders to provide valuable counsel on business decisions and the impact they will have across the company.
Riney says Ian Patterson, Scottrade’s CIO and executive director of information technology, “has a monumental task in trying to educate 10 people (or a couple of dozen if you include directors), half of whom think they’re pretty good at IT because they have an iPhone they can tap on and make cool things happen. He brings us all down to earth and says that the iPhone is only the front end, and it’s what’s underneath it that counts. And that is a very, very complicated system with many interdependencies.”
Leo Kiely, CEO of MillerCoors, learned to appreciate the CIO’s cross-enterprise expertise when he was head of sales and marketing with Frito-Lay in the 1980s. Pioneering CIO Charlie Feld was running IT then. “Feld and his team actually understood how my team got work done better than I did,” Kiely recalls. Because of this enterprise knowledge, “I learned to believe back then that your IT leader sets the pace for the company’s ability to change.”
The pace of change has been set to “brisk,” he says, by MillerCoors CIO Jeanine Wasielewski. She developed the plan for integrating the former Miller and Coors organizations after the companies merged. “There’s an appetite for IT across my organization that is three times what I’ve got a budget for,” notes Kiely. “Jeanine’s got to advise us on what to invest in first so that we can rebuild our whole infrastructure in an orderly way.”
Entering New Markets
With their thorough grasp of enterprise strengths and gaps, strategically focused CIOs are in a prime position to prepare their organizations for new-market ventures. The need for a new technology platform that would support market expansion sent shipping company Matson Navigation shopping for a new kind of CIO. “We certainly wanted someone who could continue to keep the lights on, but [who] also was much more strategic in his orientation,” explains Matson president Matt Cox. The challenge: “Take a 125-year-old company, running on applications that were in some cases over 30 years old, into an era of growth.”
Cox credits Vice President and CIO Peter Weis with enabling Matson’s entry into the Chinese market. The move depended on new technology, including Matson’s first major commitment to voice over IP, anticipating the communications needs of trans-Pacific shipping. IT also ensured that Matson’s strategy of growth through acquisition would be cost-effective by keeping platform proliferation to a minimum. Because he is involved in acquisitions from the start, Weis can keep platform needs and challenges visible as transactions unfold, says Cox.
In 2005, when new AXA Equitable CIO Kevin Murray convinced fellow executives to rebuild the company’s annuity platform, the business goal was faster time to market. But Chairman and CEO Christopher “Kip” Condron says the insurer couldn’t have survived the recent financial crisis if not for the revamped platform, which made it easier to adapt to changing market conditions. “We had to pull products off the shelf, put new ones on the shelf, take risk out of the portfolio—all while driving at 60 miles per hour.”
Using the old systems, it could take six weeks just to change the interest rate offered on an annuity, he says. “Now you can do that in a nanosecond.” The new platform simplifies the identification and application of the complex rules that govern new financial instruments, reducing the time it takes to bring new products to market from as many as nine months to two. The company wants to be able to move even faster. “Kevin promised that capability in his vision, and we got to witness it and stress test it in the crisis.”
Condron also credits Murray with thinking ahead by designing the annuity platform with flexibility for local regulations and languages. Those capabilities helped AXA establish an annuity business in Western Europe. “I’ve worked with far less visionary CIOs who saw their jobs as ‘Tell me what to do and I’ll do it,’” says Condron. Those leaders hurt the company, Condron says, by not advising him to spend more on IT. “We doubled our development budget to build that annuity platform, and there’s not a single person in the company who regrets it.”
A Top-Line Focus
Growth needn’t come from risky new-market ventures; a competitive edge in an established line of business can drive up the top line as well.
For universities, corporate-sponsored research is a major source of growth, but during recessions, such funding becomes more scarce. Purdue University President France A. Córdova looked to Vice President of IT and CIO Gerry McCartney to shore up its portfolio. To make Purdue more visible and attractive to sponsors, McCartney’s team created Web-based research hubs (there are 20 so far) that scientists worldwide can access to find information and expertise, and to collaborate with Purdue researchers on such topics as biofuels, earthquake engineering and nanotechnology.
“The hubs have helped leverage research grants from many agencies,” Córdova notes, including funds to build and enhance the hubs. For example, the Environmental Protection Agency will be funding a new hub on environmental modeling.
Student academic performance also affects a college’s growth potential by influencing its reputation: The more successful the students are, the more attractive a school is to potential enrollees. So McCartney also develops tools to help students achieve their best grades.
His team adapted the familiar decision-support dashboard into an online system called Signals that informs students (and their professors) how well they are doing in their classes and suggests resources they can tap to do better. Another system, Hotseat, allows students to use social media tools to post questions and comments to lecturers inside and outside the classroom, generating discussions. “These were developed by our CIO, working with the professors,” says Córdova, “They’ve improved student retention and are an important differentiator.”
At Reliance Capital, CTO Phanasgaonkar has developed portal-based services to boost competitive advantage with its insurance distributors and retail customers. But in India, where Reliance is based, the Internet doesn’t reach every potential customer. So IT has developed and deployed laptop applications that salespeople can use to collect data and upload it from Internet cafes. Employees can also use text messages to relay customer leads and collection data. These technology workarounds enable Reliance to do business in places where it would otherwise cost too much.
Fluor CIO Ray Barnard helps his company differentiate its services in an unusually direct way—he participates in the sales process as an account executive sponsor. By working directly with his assigned clients on sales and conflict resolution, Barnard can more easily come up with ways to deliver projects faster and less expensively, says board member Woolsey. “In our business model, you negotiate the price with the client, then once you get the project, you look through every possible way to be more efficient and share that savings with the client.”
The customer connection also boosts Barnard’s business credibility, which helps him when challenging engineers to change how they work, says Woolsey. “Engineers tend to think in very straightforward, linear ways,” Woolsey explains. “Ray has the ability to get outside their mental model and articulate the alternative well enough so that they listen.”
The CEO Coach
Clearly, there are some CIOs who fit the mold that forward-thinking CEOs are creating for them. The problem is, there aren’t many of them—yet. “There aren’t a lot of CIOs who have that magic combination of strategic vision to see the big picture and the execution skills to deliver it,” says AXA Equitable’s Condron. Our 2010 State of the CIO survey found that only 21 percent of respondents are primarily engaged in activities that would categorize them as business strategists—leaders who are mostly focused on finding ways that technology can enable business opportunities. The remainder were focused primarily on either running the IT function (34 percent) or transforming enterprise business processes (45 percent).