2010 State of the CIO: Today’s Focus for IT Departments – Business Opportunities

You thought you knew what business-IT alignment was.

But fighting the dark forces of recession has really taught the lesson. To some of you, anyway.

At a truly aligned company, all cylinders firing, every executive, every manager, every employee works on one goal: winning customers. In the past, CIOs saw their role as, say, installing business intelligence tools so that the marketing group could analyze customer data. Or upgrading enterprise resource planning software for the supply chain guys to improve order fulfillment. Vital work, of course, but inwardly focused and a few steps removed from living, breathing, money-spending customers.

But now, we find in our 2010 State of the CIO survey, top technology executives increasingly see bringing home the bacon as their job, too.

Check out the 2010 State of the CIO Survey Data and the 2010 State of the CIO Survey Results

Read more: Tools for Leading Business Change and The Future-State CIO Starts Here.

This year, nearly one third—30 percent—of the 594 IT leaders we polled say meeting or beating business goals is a personal leadership competency critically needed by their organizations, up significantly from the 18 percent who said so last year. Eighteen percent also named “external customer focus” as a critical skill, double last year’s 9 percent. Double.

Meanwhile, 22 percent cited “identifying and seizing on commercial opportunities”—more than triple last year’s 6 percent. Yes, triple.

It’s clear the recession has deepened CIOs’ understanding of and commitment to business beyond IT. CIOs are interacting with customers directly and working side by side with product engineers to build IT into new goods and services. It isn’t every CIO, nor even most of you, but it’s the way the profession is going, says Chris Potts, corporate strategist at Dominic Barrow, a consulting firm in London.

Shifting attention to outside the company will kill the CIO job as we know it, Potts says. “The CIO role is going away from worrying about IT specifically,” Potts says. “It can’t happen too soon.”

Focus on the Top Line

While aligning IT initiatives with business goals continues to be the most frequently cited CIO activity in our survey, fewer CIOs than in previous years place it among the activities taking up most of their time: 64 percent, down from 71 percent last year and 82 percent two years ago. Hilton Sturisky, SVP for information and communciation technology with the $14 billion BCD Travel, thinks that’s because progressive CIOs have made such headway in the past few years that they can turn attention elsewhere.

And to where? To customers.

For several years, we’ve asked CIOs which leadership traits are critical to their personal and company success. Although each year some have said it’s important to understand customers and drive revenue, not many CIOs actually made that a priority.

That’s changing. It had to. Corporate anxiety about the economy created an atmosphere in which if what you’re doing isn’t generating revenue, you need to stop it right now. About two-thirds of CIOs, or 62 percent, have canceled or postponed projects during the past year as a result of unfavorable economic conditions, according to the survey. The projects they have focused on are those that can enhance their company’s products and spur sales. (For a complete look at the survey results, see “All That Data”).

“In so many of the products offered now, the differentiating component is the IT capability,” says Drew Martin, CIO of Sony Electronics. Certain Sony TVs, for example, can stream movies wirelessly, one of several products and features that Sony’s IT group itself helped make possible. CIOs should get their IT departments involved in product development—if IT can truly step up. “You have to have an awareness of where your business is trying to go,” he says. “Then you have to make sure you have the capability to support that.”

At Konica Minolta USA, the IT group also influences what the company sells, says Nelson Lin, CIO of the U.S. unit that is part of the $9.7 billion Konica Minolta Holdings in Japan.

For example, Konica Minolta printers, measurement devices and medical tools contain enough computer technology that when they break or get replaced, customers must dispose of them carefully to avoid environmental hazards. Who has been dealing with that very issue since the dawn of the PC era two decades ago? The CIO.

Lin saw end-of-life equipment disposal as a service customers would pay for. Lin and other senior executives view Konica Minolta as an advanced technology company and through that prism, he says, the CIO’s input becomes even more valuable. He stepped up to lead discussion of equipment disposal as a money-maker. “I’m doing it for our own e-waste already. It’s now a matter of doing this large scale,” he says. “It’s the right thing to do, everyone knows. But it could be revenue for us, too.”

Technology priorities reflect this commercial shift, amplified by the recession. For example, among the projects CIOs canceled or postponed in the past year, most were infrastructure upgrades (39 percent), followed by enterprise software rollouts (31 percent), unified communications (21 percent) and network upgrades (20 percent). Projects that did get funded, on the other hand, included those that improved end-user productivity (63 percent), improved the quality of products (53 percent) or helped create new offerings (39 percent).

No doubt the urgent, “all hands on deck” atmosphere triggered some of this shift. But it also comes in part from the evolution of different types of CIOs, our survey finds. The numbers are equalizing among three kinds of CIOs: those focused on IT operations—”keep the lights on” types—those who specialize in large-scale company transformation and those who, removed from the daily fray of running IT, help to set corporate strategy. Last year a clear majority of respondents—52 percent—fell into the transformational category. Thirty percent were operations-oriented and just 18 percent were strategists. This year, the proportion of transformational CIOs dropped to 45 percent and the other two categories grew: operations-focused IT leaders count for 34 percent and strategists for 21 percent.

While there are still significant differences in how these different types of IT leaders spend their time, the data suggests all CIOs may be shifting toward a more business-focused role. For example, more operational CIOs appear to have divested themselves of one day-to-day responsibility—that of managing security. With only 13 percent citing security as a major activity (compared to 18 percent last year), they’re on a par with transformational CIOs. A handful more operations-focused CIOs are also spending time on leading change efforts, a core activity for transformational leaders. Meanwhile, the percentage of transformational CIOs involved with identifying opportunities for competitive differentiation—a focus for the majority of strategists—grew from 20 percent last year to 24 percent today.

Such evolution comes naturally to CIOs with diverse backgrounds. For example, Denise Coyne, CIO of Chevron’s corporate departments and services companies, was previously CIO of the oil and gas giant’s marketing group as well as manager of 200 Chevron gas stations. She would go to conventions to talk up the company’s point of sale system with gas station operators. “I found out what they wanted,” she says. Her MBA and nine years in marketing have shaped how she approaches IT, she says, assessing projects from finance and business perspectives, for example. (Chevron’s CIO and President of IT Louie Erlich weighs in on why IT leaders must become commercially-focused in “The Future-State CIO Starts Here”).

Patti Reilly White has been with Darden Restaurants for 20 years, 10 of them as CIO. IT has “always” been customer-focused at Darden, she insists, but the past two years have been particularly intense. Projects in development include a system to text customers when their tables are ready, doing away with the flashing-light buzzers restaurant greeters now hand out to waiting diners. “What our guests want is for us to value their time and personalize the experience for them. We in IT try to find ways to do that,” Reilly White says.

Some CIOs even run businesses themselves. In addition to overseeing internal IT for the $3.6 billion Nasdaq OMX Group, EVP and CIO Anna Ewing runs Market Technology, a division that sells Nasdaq’s technology to financial exchanges around the world. The unit brought in $359 million in contracts in 2008, for everything from advisory services (helping customers set up various kinds of exchanges) to trading, clearing and post-trade systems.

Before coming to Nasdaq in 2000, Ewing didn’t have profit-and-loss responsibility in her previous positions at CIBC World Markets or at Merrill Lynch. But at those companies, she chose a commercial direction as much as she could: at CIBC, she was a founding member of the financial services company’s e-commerce site. Among several positions at Merrill, she led client technology. She was named Nasdaq’s CIO in 2005.

At Nasdaq, Ewing and her team recently launched a free iPhone application for checking stock quotes as a way to experiment with hot new consumer technology and seed the ground for some revenue-generating app in the future. The app debuted on a Friday. By Tuesday, without advertising, the stock-checker was the fifth most downloaded free financial app at Apple’s site. “We wanted to see if the appetite was there,” Ewing says. “It is.” A CIO’s ability to spot new business opportunities comes from thinking like a CEO, she says. “Product development and technology go hand-in-hand.”

Think Like the Customer

Still, most CIOs have no P&L duties. According to our survey, just 9 percent head up a line of business. And although we see impressive jumps in the numbers of IT leaders concentrating on customers, the majority of respondents still don’t spend their time with any. That’s a mistake, says Bill Deam, CIO of Quintiles Transnational, a $2.7 billion medical research company.

Starting in 2007, most of Quintiles’ top executives, including the COO, the head of corporate development and Deam himself, were assigned one key customer account. Deam says he tries to cultivate good relations with senior managers at his assignment, a $15 billion biotech and pharmaceuticals firm. Quintiles helps the biotech firm conduct clinical trials for medicines in development. Deam reviews the account with an executive at the customer company every Friday and visits every six months. He hopes his efforts not only produce closer ties but also more business between the two companies. But that takes time.

“They want to make sure that all the work we do for them is performed excellently, without issues,” Deam says. “Then we can go to the next phase of the relationship.” He sees his role as that of an advocate for the customer within Quintiles, asking a lot of questions. How is each clinical trial going? Is quality high? Has anything happened in the past week that needs fixing?

“This is very much about the business side,” he says. For example, Quintiles would like to sell customers on the idea of outsourcing their technology infrastructures, Deam says, and he sees a pivotal role for himself in that strategic sales process. “My job is to make sure senior executives feel comfortable enough to talk to each other.”

Without regular calls and on-site visits with customers, companies can easily make wrong assumptions, he says. Just because a customer places a second order doesn’t mean everything is great. “If all you ever see of the relationship is at that order-fulfillment boundary, you don’t understand how to develop new services.”

Deam and Quintiles’ other “executive sponsors” get together every few months to discuss common issues. They don’t talk about customers’ confidential business, he explains, but about general ideas for how Quintiles can improve. Quintiles’ account team likes the arrangement. They see Deam as an ally who can get things done for them internally, he says. “I spent a couple days with them just recently, developing a 2010 plan and budget and new ideas.”

Doing sales calls is a relatively simple way for a CIO to learn about customers. The CIO’s presence also adds weight to what the salesmen claim. Having a CIO on a sales call isn’t uncommon, but it’s especially important now, says Sturisky of BCD Travel, when so many products and services rely on IT.

BCD manages travel for big companies whose employees use BCD’s web technologies to, for instance, book flights and hotels. Special services, such as tools for analyzing your company’s travel data for ways to cut costs, are also available.

When Sturisky went out with BCD’s sales team recently, it wasn’t so much to contribute but to listen, he says. BCD hasn’t yet won the contract; sales cycles are nine to 12 months in the travel services industry, he says. But he thinks his being there made a difference. “There was appreciation that we take a collective approach [to serving customers] and that added credibility to what the sales professionals were saying,” he says.

As a result of those conversations, Sturisky is considering how to provide such new services as sending notifications of canceled flights to travelers’ smart phones, along with alternative itineraries. Pilot tests are planned for this year, but he’s wary of pushing out gee-whiz technology that no one wants. “It’s fine to have a differentiator but if it’s not keeping customers, what use is it?” he says. To guard against this problem, he will track usage patterns himself, he says; doing so is another way to keep close to customers.

CIOs should also stay involved with any social media experiments their companies may try, Sturisky says, because of the business potential and the big risks. For example, BCD has a relationship with TripIt, a service that broadcasts users’ travel plans to social sites such as LinkedIn. But privacy concerns mean BCD, which serves many Fortune 500 companies, will go slowly in this realm, he says. “Maybe a CEO doesn’t mind publicizing that he’s attending an industry conference but doesn’t want it getting out that he’s going to Brazil next week,” he says. Competitive intelligence and personal privacy issues would vary for different BCD customers. “But that’s a strategic business question that I as CIO have to be on top of.”

Even informal conversations with customers, whether existing or potential, can help solidify technology decisions, says Matt Rogish, CTO at The J. Peterman Co. clothing company. By talking to consumers, friends and family—as well as living life as a 29-year-old who grew up with technology—he had spotted the desire among customers for a mobile version of J. Peterman’s e-commerce site.

But he had a hard time last year convincing fellow executives of the need. They were all Blackberry users who, disliking the device’s built-in browser, didn’t access the Web much from their phones, Rogish says. “It wasn’t until I got everyone iPhones that we became organizationally conscious that someone might be visiting our website from a mobile device,” he says. “Now that the CEO can pull up our website on his phone, he says, Look, I can’t use this.’ So now we have money allocated to development.”

Eyes now open to mobile commerce, iPhone-toting J. Peterman leaders actually have to be reigned in. Specifically, they’re hot to offer an iPhone app for e-commerce but Rogish—the CTO!—says the business justification isn’t there yet. Apple takes a percentage of the value of each transaction conducted via iPhone applications, he explains, which would eat into J. Peterman’s profit too much. “The tug of an iPhone app is undeniable,” he says. “But we’ll never sell a pair of pants through an iPhone app under Apple’s current terms. There would go our margins.”

The Guts to Change

In addition to smarts and impeccable logic, it also takes guts for IT leaders to prevent faulty ideas from rising high on the decision tree. Rogish thinks he succeeds by staying up to speed with new technologies but not wasting energy on the latest IT fads. “I’ve grown up with the Internet. It’s not that I’m better or worse than anyone else,” he says, “but it’s a different kind of mindset.”

No matter the generation, though, CIOs who want to focus on external customers may have to deal with internal resistance. The way to overcome that, says Coyne of Chevron, is to be visible. When she is trying to change how people work, for example, she meets in person as much as possible with colleagues above and below her. At “Dining with Denise” lunches, she talks with lower-level employees about corporate change. At meetings once or twice a year with Chevron’s senior-most executives, she explains the value of IT. In between there are monthly meetings with departments and governance boards. All the while, it’s her voice, her face out there. “Blogs, e-mail, town halls, dining. The objective for me is to continuously remind everyone of the bigger picture.”

Reilly White, too, is aware of her visibility at Darden and tries to use it as a tool. When restaurant operations crews see IT managers and staff in kitchens and dining rooms, they know Reilly White takes their partnership seriously. If you’re not “out there” she says, you risk not understanding what your business needs.

Contact Senior Editor Kim S. Nash at knash@cio.com.

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