As the Commonwealth Bank\u2019s Wired for Wonder conference came to a close, CIO caught up with the bank\u2019s chief information officer, Michael Harte, to discuss innovation in IT, delivering competitive advantage and technologies that will have an impact over the next year.\nCIO There\u2019s been talk for quite some time about the shifting IT away from being a cost centre to a profit centre. How realistic is this and what is the perception of IT within CBA?\nHarte: The talk of cost or profit centres sometimes misses the point. It should be about delivering value, competitive advantage and customer experience.\nPerhaps most of all Commonwealth Bank has always strived to change the way that it delivers IT services. This effort has redoubled to gain advantage in the past seven years. We have modernised our infrastructure by rolling out a new data IP network, building a new IP telephone network, modernising our mainframes, consolidating our data centres from 23 down to two and introducing security and privacy solutions. And of course, we undertook to modernise our core banking platform.\n You could say that \u2018trust-as-a-service\u2019 will begin to emerge as an important part of the online and mobile interactions of consumers.\nAll of these decisions have been driven by a focus on customer experience. For us, it is about real-time relationship value. We have transformed our IT approach with a focus on moving from 'product' to 'relationship' value. This has seen us move from 50 per cent of IT spend being on infrastructure six years ago to 26 per cent today.\nWe have delivered a new core banking platform, which is delivering real-time banking and moved more to the cloud and adopted infrastructure-as-a-service. We have moved our IT investment and human capital closer to customers, shareholders and staff.\nCIO: There's tension between being operationally focused and creative\/innovative. Is IT responsible for innovation? Can this tension be reconciled?\nHarte: I challenge the notion that IT department cannot be innovative. Instilling a culture of innovation is good business practice. Ideas are powerful things [and] as leaders we have got to create sufficient space for people to feel they have a safe environment in which they can test and learn.\nWe focused on creating a culture that encourages change [and] for us the competitive edge is in the ability of our people to make quick decisions and adapt.\nCIO: How do you, as a CIO, help develop a culture focused on innovation?\nHarte: We have lots of initiatives designed to deliver productivity, innovation and creativity benefits. Naturally, we look to recruit bright and creative people. We have designed great work spaces and places to work in some of our new campus-style buildings.\nWe use different processes and methods when building new products and services such as 'agile' and 'design thinking' methodologies to ensure our products and services are simple and easy for our customers to use, and are delivered to market quickly.\nCommonwealth Bank has internal and external innovation and ideas initiatives, events and forums. These are designed to actively encourage a test and learn environment; rapid high frequency low cost experimentation drives high value outcomes with greater reliability. In addition, we also tap into the innovation of our partners as well as with universities and industry associations.\nWe know that the scientific method produces improvement and new efficient and effective ways to do things. But that alone is not enough. Real innovation happens at the nexus of creative thought and scientific rigour.\nCIO: Is there a disconnect between the pace of technological change and the uptake of new technology inside organisations? Is enterprise IT always one or many steps behind? If that\u2019s the case, how do you fix that?\nHarte: Enterprises are complex. There\u2019s a variety of factors from internal policies, external regulations, risk assessments, and privacy and security compliance that means any new IT technology or application needs to be properly assessed before it can be introduced into an IT environment.\nCan a large enterprise be faster in its adoption of IT? Possibly. There\u2019s a variety of ways to achieve this. Ensuring you\u2019re across your vendors roadmaps. Finding out who the new industry players are and whether their technology is compatible. Ensuring your organisation uses open standards. Negotiating more flexible licensing, using cloud more. There\u2019s many ways to help improve the pace of uptake.\nUltimately, you need to strike the right balance between what is good for the business and what will help your people do the best work they can do for their customers.\nPage Break\nCIO: Technology is becoming a big part of functions outside of IT, such as marketing. What does this mean for the traditional CIO role? How do you stay relevant when CMOs, for instance, are going to be potentially spending more on IT than CIOs in the future?\nHarte: It doesn\u2019t matter if you are in IT, marketing, finance, or some other part of the business, the object has to be about relentless focus on customer and shareholder value.\nI have said before that I do think that tech folk have to continue to be very business-savvy, and continue to be very results-focused. Meanwhile business, including marketing folk, have to become more engaged in technology so they can make more informed investment decisions and see how technology can be used to better deliver products and services for customers.\nIt is not an either or equation. In fact, with the growing importance of customer analytics, marketing and IT functions will be working even more closely together. Trust, privacy, security, intimacy, and relevancy are the critical elements to the customer experience.\nCIO: Which emerging technologies are you excited about as an individual and from the bank\u2019s perspective?\nHarte: Social and mobile are two areas where there will be an increased focus by many organisations. At Commonwealth Bank, more people now access online banking using a smartphone than a computer. So it makes sense to invest where your customers are.\nThis is why we were the first Australian bank to launch online banking in Facebook with CommBank Kaching, to offer an online banking experience using social media. We also have introduced a number of new online services including MyWealth and Essential Super to make it easier for customer to manage their financial future online. We have also rolled out video conferencing to our branches across the nation so that our customers can have access to experts wherever they are.\nAcross the next 12 months, social, mobile and online will continue to be a focus. Businesses, regardless of their sector, have to be able deliver products across multiple channels and do it increasingly online or on mobile and to do those transactions in real time.\nPrivacy, identity and trust will also begin to have more of an impact in the near future. As more of our lives are digitised and lived online, there\u2019s more opportunity to conduct more commerce online, to use more services online.\nTo do this, you need to be able to verify an individual and you need to have confidence that any personal information shared is safe and secure. You could say that \u2018trust-as-a-service\u2019 will begin to emerge as an important part of the online and mobile interactions of consumers.\nCIO: People make the distinction between technologists and non-technologists in the CIO world. To what extent do you think a technical background is relevant for a CIO? Are business skills, for instance, more important these days?\nHarte: Here I am biased. I am a technologist and a CIO. I believe that a strong commercial and technical understanding in IT will always help a CIO. But the human elements of design and empathy of customer needs and art and science are important.\nI believe that innovation is important in IT because we must constantly challenge our perspectives to stay ahead. I also work in a large public company, so business skills are also important along with a laser focus on our customers, our people and our shareholders.\nTechnology is a beautiful thing, but we must always relate that back to what humans need and what they want: finding ways to make the interactions with each and every single customer and business simpler and valued. When banks built their original systems some 40 years ago, they were all about account numbers and transactions. Now it is about the customer relationship, and building for their needs today and their dreams and aspirations for the future.\nCIO: What do you think enterprise IT will look like five years from now? Which functions will be outsourced\/offshored?\nHarte: Outsourcing is not a new concept in business. Over the decades trends for outsourcing and insourcing have changed. At Commonwealth Bank, we have made a commitment to continue to retain all customer-facing, call centre and operations processing functions within Australia to ensure we have the best skilled people doing the most valued roles in service of a great customer experience. This commitment remains unchanged.\nWe work with a range of vendor partners in the IT services space who also use their global network of expertise, people and facilities to support us. This allows us to offer world-class services to customers. We also have created more roles in Australia and increased the skills-base to make Australia a vibrant and valuable digital marketplace with higher skilled people moving to higher value roles.\nMy focus is on delivering world-class application of technology both to the bank and to its customers. To do that, we will continue to develop our talented workforce, tap into the experience and expertise of our partners, and also invest in innovation.