What’s atop CEOs’ agendas for 2011? Gartner analysts recently outlined the top CEO concerns that CIOs will need to identify, understand and address.
“Business leaders see very uncertain times ahead in 2011, and they must defend growth despite falling business and consumer confidence,” noted Mark Raskino, a VP and Gartner Fellow, in the report.
Here, Gartner explains seven critical areas that CIO should focus on in 2011—and shares advice on how IT leaders can demonstrate their effectiveness to business peers.
1. CEOs’ Confidence Fades. CEOs are counting their blessings at having survived the financial crush of 2008 and 2009. However, since the economy still hasn’t fully rebounded, many CEOs plan to “pull back from more bullish investment and expansion bets in 2011 if confidence continues to decline,” according to Gartner analysts.
To prepare for that type of environment, Gartner advises CIOs to expect limited increases in resources and budgets: the familiar “making do with what we have” will be an overriding theme.
That’s not to say all IT investment will be shuttered. “Some more-bullish business initiatives conceived in mid-2010 will make it through the budgeting cycle,” Gartner states. However, IT’s already lean resources will have to be targeted at the most critical projects, which is sure to displease other business execs with projects on tap.
“CIOs should make business initiative owners aware at the start of the year that they may risk losing IT resources to someone else,” according to Gartner.
[ For more on strategic leadership, see 7 Essential CIO Leadership Skills That Get Results ]
2. CEOs Want Projects That Drive “Cash Generation.” Most CEOs’ cost-cutting programs started in 2009 created cash surpluses that have buoyed their companies during exceptionally uncertain economic times.
“Now,” notes the report, “they are faced with the need to invest in growth at the same time as maintaining healthy cash surpluses as a hedge against the bouts of high business volatility the financial crisis aftershocks continue to generate.”
Raskino states that CEOs will be far more interested in IT project business cases that directly drive cash flows and increase their companies’ coffers.
“To properly align IT’s contribution to the most pressing of current business concerns, CIOs should ensure that among the projects they are pursuing, the contribution to cash generation and cash flow acceleration is visible,” Raskino contends. “This may require focusing attention on the issue with your management teams and changing the weightings on cash related criteria in portfolio prioritization.”
3. CEOs Want to See New Cost Efficiencies. Everyone is familiar with the “Do more with less” mantra. Gartner notes that some of the lofty returns CEOs have delivered during the last two years have come from margins created by deep cuts to operating costs (and doing more with less).
Increasing product prices, however, is not an option for many companies because “pricing power is limited at a time when consumers are being more thrifty in their behavior,” the report notes. “In order to keep generating strong gross profits, CEOs know they will need to develop systemic efficiencies by re-engineering rather than simple cutting.”
Gartner analysts suggest a radical strategy for IT leaders: CIOs should target at least one major business process to be revolutionized or obliterated in 2011 or 2012.
“CIOs proposing larger structural cost saving ideas, such as major end-to-end process changes or automations, will likely receive CEO approval,” states the report. One example: eradicating paper statements to customers or partners in favor of online access.
4. CEOs Seek Innovation for Corporate Growth. Gartner states that most CEOs didn’t shutter research and development (R&D) efforts during the recession; but many companies did postpone initial launches of new products and services, in hopes that improved market conditions would prevail.
“As the outlook stabilizes,” the report states, “CEOs will need to accelerate the monetization of the innovation bets they have made.”
This situation is an opportunity for CIOs. “CEOs need IT’s help in bringing new product and service innovations to technology-enabled markets,” Raskino notes. “The majority of CIOs should add e-commerce, e-service, social marketing, smartphone or location-based innovations to bolster new product and service launches.”
5. CEOs Want to Avoid Geo-Political/Economic Gotchas. It’s an ever-changing business world. “CEOs must engage in serious debate with political leaders as they rewrite the rules on how economies operate,” Gartner states. “As advanced economies struggle to regain solid growth, many business leaders are concerned that the regulatory and tax changes governments make will harm the markets of business leaders.”
In particular, today’s top CEOs are concerned that complex taxes levied to recoup bailouts and stimulus packages will raise their costs and dampen demand, according to Gartner.
“CEOs will need strategic information to win political battles and rapid compliance to avoid penalties,” notes the report. “In some cases, business leaders may choose to be active in shaping or rebuffing regulations.”
CIOs need to be aware of the corporate strategy so that they can offer assistance when and where appropriate: Gartner advises that CIOs should ensure they have a strong tactical liaison in place with the office of the CEO and the legal department to help with complex data analysis and information inquiries.
6. CEOs Seek Long-Term Sustainability. According to Gartner, many long-term concerns are causing CEOs to spend more time considering their business and industry sustainability.
Examples of this, noted in the report, include: the massive human scale of the developing economies like China; the recent year’s volatility of commodity prices for oil, precious metals and other resources; and the finite nature of newly important mineral resources.
“These factors add to long-term concerns about oil reserves, climate change, waste and the increasing regulations and fiscal interventions governments are gradually placing on perceived negative externalities,” the report states. “These examples show how CEOs are learning to work with a sustainability mind-set and profit from it.”
The imperative for CIOs in this area is critical. “Though reducing the power consumed in IT operations remains important, for most organizations the more important and strategic issue is how IT can help the business to operate more sustainably,” Gartner contends. “IT must learn how to engage and add value. CIOs should order high-level, long-term sustainability business systems and information architecture development plans.”
7. CEOs Will Be Moving On / New CEOs Will Be Appointed. Gartner analysts predict an increase in CEO turnover during the next 18 months “as boards set out on new, post-recession, strategy directions.”
The report notes that most CEO appointments are internal, and that means there’s a huge opportunity for present and would-be CIOs to identify, interact with and educate the next-generation of CEOs (and other CXOs) before they get the title. (Also see: CMOs and CIOs: Can This Relationship Be Saved?)
“We all want business leaders who are technology savvy and will work smartly with their CIOs to understand the promise of IT, properly invest in it, and lead the business in its full exploitation,” notes Gartner’s Raskino. “Whose fault is it then, if we continue to see some CEOs who don’t seem to understand, who dislike IT and who treat it more like an unavoidable overhead than a value creating tool.”
Raskino states that the “great recovery” generation of CEOs will claim their CEO titles during the next five years.
“As a profession, we can only reap what we sow,” he adds. “CIOs should identify the people around them most likely to rise to the top job and take time to help them in the late stages of their professional development. Teach, mentor, advise, persuade, support, nurture and generally cultivate the next business leader you hope to be working for.”
Thomas Wailgum covers Enterprise Software, Data Management and Personal Productivity Apps for CIO.com. Follow him on Twitter @twailgum. Follow everything from CIO.com on Twitter @CIOonline. E-mail Thomas at firstname.lastname@example.org.