2016 UK CIO priorities – Driving business innovation and leading change

CIO UK and IDG UK research of over 100 Chief Information Officers and business technology leaders in the UK shows the focus for CIOs in 2016 is to drive business innovation, and they expect to have more money to spend on revenue driving business initiatives.

Overview of findings

• CIOs says their key focus in 2016 will be driving business innovation and leading change efforts.

• However, IT alignment is a still a major concern and aligning IT initiatives with the business is still very high on the CIO agenda.

• CIOs expect to see increased budgets, and they expect to be able to spend more of this money on supporting revenue growth and business initiatives rather than running technology functions.

• While CIOs and business technology leaders believe their CEO see the IT function as an enabler for improved business processes, they face a struggle to be perceived as the home of innovation but their seniors.

CIO action plans

Former CIOs, CIO coaches and trusted CIO advisors Ian Cox, Catherine Stagg-Macey, Ade McCormack and Mark Chillingworth offered advice to how CIOs can respond to the demands on the CIO in 2016:

• Focusing on the customer and talking in terms of business value and business outcomes will be key to helping the CIO lead innovation and business change initiatives. Ian Cox

• The CIO should up the game and brings new ideas and trends to the executive suite, collecting insight and intelligence from the outside world. The CIO really has to understand industry changes, current and future business operating models, and the role that technology has in this future. Catherine Stagg-Macey

• The CIO has to be able to demonstrate a capacity for innovation even if the initial examples are innovations in respect of the IT function. Raising the IT function offering from aligned and reactive supplier to entwined and proactive partner will be essential. Ade McCormack

• CIOs should be horizon scanning at all times, not only for new technologies, but also for business opportunities as CIOs become increasingly central to business change. Mark Chillingworth

Analysis

CIO UKand IDG UK spoke to 181 CIOs, 123 in the UK. Of the UK respondents, 100% were the most senior IT executive in their company or business unit from a typical organisational size of more than 500 employees.

CIO trends – Climate and background

Various studies have pointed to increasing CIO budgets as organisations in the UK emerge from the 2008 financial crisis into a period of economic growth, with business leaders positive they will see increased IT budgets in 2016. The budgets of CIO 100 members have increased gradually from 2013 to 2015, while global CIO surveys from Harvey Nash and Gartner have shown year-on-year budget increases. Gartner predicted in its latest worldwide CIO survey an increase in technology spending by CIOs in 2016 of 2.2%, a figure falling to 1.5% in the EMEA region.

But do CIOs expect this to continue, and if so on what are they looking to spend their budgets?

2016 UK CIO Priorities – From technology alignment to business transformation

In 2013 IDG research showed CIOs in the UK were engaged in a period of technology transformation. To surmise and vastly over-simplify, this was driven by an influx and maturity of ‘third-platform’ technologies becoming pervasive in the enterprise technology sphere underpinned by the so-called ‘SMAC-stack’ of social, mobile, analytics, and – in particular – cloud.

CIOs in the more recent study however see their role as being predominantly business-focused rather than IT-focused. Aligning IT with business goals was cited as the most popular current focus by the CIOs in the UK, followed by improving IT operations and systems performance, and leading change efforts.

However, looking ahead to 2016 and 2017, driving business innovation is not only seen by CIOs as the area that will see the biggest increase in focus, it will be the primary focus for CIOs over the next two years. Up by 19 percentage points, 61% of CIOs in the UK described driving business innovation would be their priority.

While leading change efforts, and IT and business alignment were high on the agenda, analysing market trends and customers needed to identify commercial opportunities, identifying opportunities for competitive differentiation, and developing go-to-market strategies and technologies were the areas seeing the biggest increase – while still behind the functional challenge of ‘simplifying IT’.

Seeing the biggest decline on the CIO agenda for 2016 and beyond was improving IT operations and systems performance, aligning IT initiatives and business goals, and managing IT costs as CIOs continue with the transition from technology to business transformer.

CIO advice

• “A switch in focus to innovation may be a challenge for many CIOs who have traditionally been focused on cost control and managing the day-to-day running of IT. While these areas are still important, the rest of the business is thinking about how technology can be used to create competitive advantage, enhance the customer experience and generate new revenue streams. If the CIO and the IT function are to lead innovation and change initiatives, they too need to think about how technology can be used in these areas. Focusing on the customer and talking in terms of business value and business outcomes will be key to helping the CIO achieve this switch.” Ian Cox

• “Certainly the growing theme of disruption is having a bearing on the relevance of innovation to business success and survival, and naturally smart CIOs are weaving this into their language. CIOs need to be able to demonstrate a capacity for innovation even if the initial examples are innovations in respect of the IT function. Raising the IT function offering and brand from aligned and reactive supplier to entwined and proactive partner will be essential. If the IT function hasn’t already started to provoke the business with the innovative capabilities new tech, then this is job number one.” Ade McCormack

2016 UK CIO Priorities – How are CIOs spending their money?

When it comes to budget allocation, CIOs in the UK responded the majority of their spending was focused on “supporting the technology function” – with the modal response from UK CIOs that they were spending 30-39% of their budget on supporting business initiatives or revenue growth. Some 45% of respondents spend less than 30% of their budget on business programmes and revenue growth, with the majority supporting the technology function.

Looking to 2016 and beyond, however, CIOs were confident there will be an increasing shift in budget spend towards business initiatives. Some 67% expected an increase in spending allocation towards business initiatives and revenue growth, with 27% expecting the situation to remain the same and 6% responding they would be spending they would have less to spend.

Of the two-thirds who were confident of seeing an increase in spending towards driving revenue growth, 24% responded this swing would be of 20-29% away from supporting the technology function, with 34% predicting this figure would be 10-19%.

CIO advice

• “It is good to hear that IT budgets are rising and that CIOs expect to spend on revenue growth and business transformation projects. The CIO has a key role to play in leading, guiding and influencing the technology choices being made by other functions, and for ensuring a joined-up and consistent approach across the various IT budgets and initiatives. CIOs would be well advised therefore to work in collaboration with their colleagues in the C-suite to develop joint initiatives – something that also requires strong relationships and stakeholder management skills.” Ian Cox

2016 UK CIO Priorities – Where will increase in business spend be prioritised?

Revenue focus will be prioritised towards business operations and capabilities. When IDG UK asked CIOs where this will be prioritised, 63% said improving business operations and processes, with 52% responding the spending would go on improving the quality and capability of products and services, with 48% responding the business area revenue would help reduce operating costs.

Some 40% said improving the firm’s ability to innovate was a focus, with acquiring and retaining customers (26%), growth in emerging markets (20%) and addressing the increase in competition (12%) also cited.

In November Gartner questioned whether CIOs were being bold enough in their digital vision. Principal analyst and Gartner fellow Dave Aron’s research also showed CIOs were using emerging digital technology to optimise rather than disrupt or reinvent, suggesting they could be limiting their digital vision.

IDG’s research – conducted before the Gartner results were released – paints a similar picture where CIOs in the UK are focused on optimising processes as part of their drive for business innovation. The IDG UK results also suggested there could be a disconnect between where CIOs want to focus and where they say they will be able spend their increased budgets.

CIO advice

• “Using technology to improve what the organisation already does is an inward perspective and where many CIOs have always focused. This will always be an important role for IT but in the digital world, businesses need to take an outside-in perspective to shape and drive their revenue growth and business change initiatives. The outside-in approach is about looking at the business from the customer’s viewpoint and using this perspective to design new products, services, experiences and even business models that meet customer needs and expectations. This is where the game-changing and disruptive innovation is coming from. CIOs therefore need to get to know and understand the organisation’s customers and use this knowledge to shape the initiatives they lead in 2016.” Ian Cox

2016 UK CIO Priorities – CIO as a board operator

As part of the research, IDG UK also asked CIOs what they believed to be the perception of technology among their organisation’s board.

While more than half of CIOs responded that the board saw technology primarily as an enabler for improved business and business change, 21% responded their function was seen as necessary cost centre.

Some 21% responded the board saw the role of technology primarily as an operational business process and service, only 2% of CIOs thought their board regarded the technology department as a home of innovation. At least according to CIOs, technology and the CIO role are seen primarily as an enabler and improved business and business change, but CIOs have a tough task ahead if they are to be seen as a centre of innovation and strategy.

CIO advice

• “The CIO should up the game and brings new ideas and trends to the executive suite, collecting insight and intelligence from the outside world. The CIO really has to understand industry changes, current and future business operating models, and the role that technology has in this future. All this implies a well run IT shop and a strong IT leadership team that can free up the CIO to be more outward focused. “The focus is on the business aspect of innovation (rather than the technical), and CIO driving innovation needs to be able to move fast and fail fast. CIOs need to create spaces and permission to experiment and innovate that are outside of IT environment.” Catherine Stagg-Macey

• “To be seen as a leader of business innovation, CIOs need make the transition from technology leader to business leader. This means spending less time in the detail of technology and more time leading the discussion about how IT can enable new business models, products and services. To do this they need build their knowledge of the wider business, its customers and competitors and the markets in which it operates.” Ian Cox