Driving Innovation and Growth, While Managing Cost, Compliance and Risk

The effects of the networked economy continue to ripple across our broad business seas, rocking the boats of industry after industry. There’s been a dramatic increase in the number of companies Standard & Poor’s calls “high risk,” from 35 percent in 1985 to 73 percent today (based on a study by S&P and Mercer Management Consultants, as reported in a recent article in Fortune magazine).

What’s going on? Change. Profound change. New technologies are altering the way companies do business, eliminating geographic constraints and digitizing more and more products. It’s hard to find a company these days with a business model that isn’t being disrupted or an executive who isn’t under pressure to innovate his or her way through these turbulent waters.

Case in point: Microsoft is about to release what its COO, Kevin Turner, calls the “biggest R&D investment in the history of business.” Yet much of Microsoft’s attention is focused elsewhere. As Senior Writer Ben Worthen writes in “Beyond Vista” on Page 48, “Vista isn’t a part of the software as a service trend, and all the pomp and circumstance surrounding its release masks a growing concern inside the company about what the IT world will look like five years from now. Software as a service is a threat unlike any it has faced before, and Microsoft must make dramatic changes if it wants to remain the most important technology company in the world.”

The conundrum for CIOs, whether their business is technology or finance, media or retail, is that this imperative to change is happening in a radically networked world in which risks multiply exponentially. One of my favorite questions in our annual “State of the CIO” survey is, “In what way will IT have the greatest impact on your business in the year ahead?” I’ve seen a sneak preview of this year’s results (full coverage will appear in our Jan. 1 issue), and they paint a portrait of competing demands: Innovate and grow, but be very buttoned down when it comes to costs, risks, security and regulatory compliance. Managing these while driving innovation and growth is like patting your head and rubbing your belly at the same time. Not everyone will be able to pull it off.

Gartner CEO Gene Hall claims that the number of CIOs getting fired is on the rise because “many CEOs believe that their CIO is [too] cost-focused and not capable of contributing to growth—and they need IT to contribute to growth.” This is ironic at best (the last backlash was over IT spending too much); at worst it’s a flagrant cop-out on the part of CEOs, many of whom still fail to take ownership of and engage with their CIOs on their company’s technology agenda.

Finger-pointing aside, it will be no mean feat for organizations to achieve simultaneously what are some pretty incongruous goals.