Recently I participated in a panel at a financial services technology conference. During the question and answer period, a senior partner from one of those high-dollar strategic consulting firms had the temerity to ask me how quickly I thought the role of CIO would disappear.
This gentleman is a friend and former colleague and was himself a successful CIO. He and I have been discussing this very question for a number of years now. But there, in front of dozens of current and aspiring CIOs, I had to admit that I believe the role as we know it would disappear at many companies—and in the not-too-distant future.
Perhaps you’re skeptical, but hear me out: Change in the CIO role is already upon us, and I would argue that it’s a natural evolution. Although technology will always have an integral role in business—we’ve become dependent on it—we’ll see a segmentation of CIO duties. In many instances, the CIO will continue as an operations leader, delivering services to the business units of an organization. However, in time we’ll see more CIOs evolving into strategic leaders, driving and enabling business strategy.
This evolution will be good for all of us because we’ll have the opportunity to make the best use of our strengths as leaders, whether as operations experts or strategists.
Two Visions of IT Leadership
Which type of leader a CIO becomes depends on how critical technology is to a company’s operations. A useful way to think about this is to use a measure that I call “IT Intensity.” IT intensity is a company’s IT expense as a percentage of total operating expenses. In firms with high IT Intensity, it may be said that technology is part and parcel of the business and that it is difficult to separate the two. An example would be my company, Ameritrade. Technology is paramount in everything we produce, from the tools our clients use online to the back-end technology that routes their orders to the stock markets. At the other end of the spectrum are low-IT intensity companies, such as retailers or hospitality companies, for which other factors, such as efficiency or client service, are more critical for achieving business goals.
At low-IT intensity companies, the CIO will become a manager of relationships with outsourcers. For such companies—where IT is not a core function—efficiency, availability and cost are likely to be the primary drivers of IT decisions, and these companies will be better off having someone else deliver IT.
Last year, a global bank did away with the corporate CIO role entirely after the incumbent CIO successfully outsourced most of the IT functions. The company needs flexible cost structures that can accommodate changes in business needs. The only part of the traditional IT organization that remains is a small application development function, the responsibilities of which include the creation of quantitative models for the trading and risk management groups. Those tasks were folded into the business lines, with technology supporting deployment through an operations leader.
In this type of environment, IT isn’t glamorous; there will be pressure to get things done with fewer resources, and innovation will not necessarily be the top priority. Therefore, the successful CIO will have to be good at motivating and retaining in-house staff. In addition, because the IT department is in the role of providing services to the business, the CIO at a low-IT intensity company must be a good facilitator with excellent communication and organizational skills.
At the other end of the spectrum we have high-IT intensity companies, where technology is a core business function. Within these companies, the CIO will take on a broader role in defining and executing the strategy of the company. A driver of IT decisions at such companies is likely to be whether IT fosters business innovation or creates products. In this environment, the IT leader is a key business leader.
My role as Ameritrade’s CIO (before I became COO in August) was to create a high-performance, innovative culture within the IT organization. This role required me to develop a comprehensive understanding of all key business functions, the strengths, weaknesses, opportunities and threats affecting each, and how this information related to the company’s strategy. CIOs who develop such knowledge have the opportunity to offer strategic insight to their business peers, which in turn enables them to participate in strategy development.
CIOs at high-IT intensity companies must also excel at communication. However, the role of strategic leader means this CIO’s influence extends beyond the technology group and the corporate management team. In the high-IT intensity environment, the CIO becomes a key external “face” for the organization, requiring both charisma and a keen business sense.
Leading the Evolution
No matter which type of company we work for, of course, we have to understand the interconnectedness of technology and overall business strategy. Our ability to provide corporate leadership, not just IT leadership, will be the key to becoming whichever type of CIO our companies need. At every company, today’s CIO is expected to enable the business strategy by, among other things, keeping budgets flat, providing transparency and driving change across the organization.
To figure out which future role is right for your company, ask yourself whether IT provides a competitive advantage or is an integral support function. If you rank operational efficiency or client service as a core competency, you are less IT-intensive. If IT cannot be separated from the business and is essential to your products, you’re in a high-IT intensity business. Once you have the answer, your challenge is to buy or develop the talent that will enable you to move in the direction required to support the strategy of your firm.
Though it may seem as if the times ahead are uncertain, those of us who have dedicated our careers to the pursuit of exceptional IT leadership are on the cusp of something extraordinary. The changes in store for the CIO have potential to afford more opportunities for IT leaders than ever before.
Current and aspiring CIOs will be able to write their own tickets—to choose the type of organization they want to work in. These choices will be based on each CIO’s skills, interest and sometimes the specific opportunity offered. And whatever you choose, you can continue to play an important role in your company’s success.