I am delighted to be back writing for CIO. My focus will be digital leadership and the associated opportunities and challenges for CIOs. I am keen to steer the column in line with the needs of the readership. Please use the various social media channels to help shape the content of this column. So onto this month’s column:
Like most people who care about the IT industry, I am particularly keen to see the role of CIO join the ranks of their ‘fellow’ CxOs’ and thus play an active role in strategy creation. So here’s a suggestion to get the attention of the C-suite. Why don’t you offer to help the business erode its profit margin?
This may seem a little controversial, though the CFO might mutter that you have been working on that initiative for some time. Let me explain. There are a number of emerging trends taking place in the world:
In the developed world, customers are expecting your organisation’s services for free or almost for free (Ryanair – subsidised air travel)In the emerging world, there is an abundance of potential customers. However they have limited funds (Tata – sub £1,000 car)
Asymmetric business models are becoming more popular. Again Ryanair is a good example of this – a few high paying travellers, subsidise the fares of the majority. Many people access Google search for free. This service is in effect paid for by a relatively small number of ‘pay per click’ advertisers. Also in a global marketplace the speed at which word of mouth marketing gains traction, and thereby your offering becomes economically sustainable, is important. Sweating your initial customers for maximum profit would be unwise. In most cases only compelling pricing will set the ball rolling.
Thus there is a general trend for organisations to reorganise themselves to trade margin for volume. This requires scalable infrastructure and strong analytic tools.
Some organisations are looking to buck this trend, but this is likely to end in tears. Typically they are enterprise vendors who have enjoyed lavish margins, who feel they would be cannibalising their business to head down-market into the SME space.
So I feel that there is a strong enough case for you to approach the boardroom and make the case for A: – disrupting the existing business model and B: – taking the lead in the transition.
The chances are that you are already active in respect of supply chain management and customer relationship management. You may even have played a part in linking these two enterprise activities together. The key thing now is to look at what you already offer your customers and remove at least 50 per cent of the functionality / product line. A key element of servicing a large customer base is simplicity. Think Pareto principal.
To some extent what you sell is less important than your knowledge of whom you sell it to. Having a well integrated set of channels to market that provide coherent information at both a micro (individual) level and macro (market) level will be key to keeping in tune with reality.
If necessary you can remind your CEO that new technology is the enabler of your suggestion should she concur with your views on how business models are evolving.
There are a couple of pre-flight reality checks:
You won’t be listened to unless you are delivering a reliable and anxiety free IT service to the organisation. You won’t have time to manage the hardware and software if you are going to be the guy that proposes disruptive business models to the senior management team.
So job number one is to offload as much of the IT management to an organisation that has the economies of scale and expertise to deliver the service on your behalf. They won’t have your process wisdom so invariably you will have to export some of your experts as part of any service level agreement.
You will in turn build up a portfolio of partners whose responsibilities extend from datacentre management to prototyping online business models. The latter will be key to the virtual business innovation centre you will need set up to sell your ideas.
All in all this is a big ask. Many CIOs were not invited to play an active role in delivering greater operational efficiency at the start of the last downtown, even though new technologies had a massive potential role to play in this respect. Worse still those CIOs had their own budgets slashed in an arbitrary fashion, rather than increased.
So to go from operationally important but nonetheless perceived as an overhead to the chief business strategist is a rather big leap. I think offering to erode your organisation’s margins may be just the shock-inducing statement needed to startle the senior management team into reviewing their perception of what you have to offer.
About the author:
Ade McCormack is a writer, speaker and adviser on digital leadership (www.itdemystified.com).