by Scott Nelson

Chief IoT Officer will be another cost saving for the CEO

Mar 01, 2016

Leaders with the right skills will help consolidate the IoT C-suite, not grow it.

A flurry of recent postings predicts that the Chief Internet of Things Officer (CIoT) will be the new seat at the table in the C-Suite.  The enthusiasm is probably a result of the now annual New Year’s discussions of the impact the Internet of Things (IoT) is going to have on business.  The role may have been first postulated a year ago by Jeff Kaplan at which time he surmised that the need for an IoT strategy justified a new C-level role.  The logic behind the need for leaders with new IoT skills and capabilities is something about which I have written before and is well supported.  But after further analysis and experience with a number of IoT startups I now believe the impact of the IoT on the C-suite is going to be more in line with its impact on operations – cost savings.  Here’s why.

The IoT is all about the integration of technology with the business AND its operational execution.  Heppelmann and Porter published the IoT how-to blueprints for both competing in the new marketplace and company design.  The heart of their teaching on the latter is in the section entitled Implications on Organizational Design — the theory of “differentiation” and “integration.” 

In the classic structure, a manufacturing business is divided into functional units, such as R&D, manufacturing, logistics, sales, marketing, after-sale service, finance, and IT. … These functional units enjoy substantial autonomy. … Integration across functional units happens largely through the business unit leadership team and through the design of formal processes for product development, supply chain management, order processing, and the like, in which multiple units have roles.

Today the C-suite is populated by leaders of corporate functions who must differentiate themselves in the marketplace but integrate with their peers to achieve operational excellence.  But the IoT is not just a new function in the corporation that needs integration with other functional units.  Neither is it a new offering in the business structure that justifies a new divisional business leader in the executive suite.  Again, Heppelmann and Porter:

With the emergence of smart, connected products, however, this classic model breaks down. The need to coordinate across product design, cloud operation, service improvement, and customer engagement is continuous and never ends, even after the sale. Periodic handoffs no longer suffice. Intense, ongoing coordination becomes necessary across multiple functions, including design, operations, sales, service, and IT.

So the posted job descriptions for the CIoT are correct – companies need leaders who understand how to integrate Information Technology (IT) with Operational Technology (OT), data analytics with marketing, customer acquisition with customer service.  The position is still controversial to some, but there is no doubt change is coming. 

The problem is the market is efficient.  Competition will ensure that there will be no sustainable jump in margin to cover the cost of another six-figure salary.  The continued consolidation of early M2M/IoT adopters is evidence that margins are not high enough to justify even the extra fixed costs of R&D and platform support.  So CEO’s will look for multi-disciplinary leaders who can reduce structural costs and integrate across organizational functions. 

Where will they find these types of leaders?  Look to the mass of new entrants that Gartner predicts will be responsible for 50% of the IoT revenue in 2017.  I have seen the kinds of leaders we need.  One CEO I advise is also the acting CTO of his company.  His company is growing fast and he is struggling to keep all projects moving forward at speed and to the technical quality he expects.  I originally thought he should hire a CTO, but that is old school.  He may be a sustainable CEO/CTO who needs either project management help from a CIO or COO.  Another team I mentor was not happy with their funnel – customer acquisition is everything for a startup trying to raise a round.  The CTO, who is not a software engineer by education, stepped in a built a fully automated sales funnel by combining a variety of Linked In scrubbing and automated email tools.  He viewed the funnel as a signal stream, not a collection of data points, and treated it as a signal processing problem.  Necessity is the mother of invention.  Apparently it is also the creator of CIoT candidates. 

The IoT requires integration of function at the individual leader level, not replication or procreation.  The emerging players are training these kinds of leaders.  But CIO’s who do not become accountable to external customers will be disintermediated by PaaS and SaaS suppliers.  CTO’s who do not embrace market analysis and the change in business models technology enables will be outsourced to suppliers who move faster.  The Chief Marketing Officer, already under pressure from another new C-chair — the Chief Digital Officer, will find in the IoT traditional market research and focus group evaluations have been run over by crowd sourcing platforms like Kickstarter and Indiegogo.  Market research is now the domain of IT and market analysis the domain of OT and data analytics.  

GE is looking for the IoT to improve global production efficiency by 1%.  Every day we see articles about how it is reducing operating costs in everything from shipping to chronic care.  It’s effect on the C-suite will be no different.