January Issue

CIOs Need to Snap Out of Complacency

Your business colleagues aren't as impressed with you as you are. Our 14th annual State of the CIO research rewrites your priorities for 2015.

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Generating repeat business is key to Wayfair's growth and so, therefore, is analytics to figure out two things: how to attract loyal customers and how to induce them to buy more than once in a quarter. The payoff is there: In 2013, the cost to acquire one new customer was $46 compared to $36 in 2011. That's up $10. But revenue per customer increased much more--from $265 to $311, or $46.

IT is hungry for customer feedback. "We look at every piece." Wood says.

Bill Swislow, CIO of Cars.com, sends IT staffers to sit with product developers and observe the company's usability lab, where consumers test new website features. Cars.com has 4 million listings of cars for sale in the U.S. and handles 30 million visits to the site each month. IT staffers also go on sales visits to car dealerships and shadow customer service agents in the call center.

IT has as much responsibility as other departments for helping the company meet its business objectives, including Web traffic targets and conversion goals, Swislow says.

This year, the company plans to add a service to connect car owners with dealerships that have promised to guarantee the price repairs will not cost more than what the price estimator on Cars.com says they should. The company decided to enter the services market after hearing from customers who want a reliable, objective source for information about repairs, Swislow says. IT and product developers listened and worked closely to develop the new tools.

"The idea that business and IT are separate is not healthy," he says. In fact, he adds, "it's unsustainable" as traditional companies--not just his own Web-based one--become true digital enterprises.

Make Your Own Future

As roles emerge that bump against CIO boundaries--chief digital officer, chief data officer, chief transformation officer--some observers are quick to declare that the strategic value of the CIO is waning.

Caroline Basyn left the CIO title behind last fall when she became SVP of global business services at Mondelez International, a food conglomerate with 53 brands that include Cadbury, Chips Ahoy and Ritz. Mondelez hired Basyn, who was CIO at Bacardi for three years, to help implement a corporate restructuring that's expected to save at least $1.5 billion by 2018.

"I don't know if I will have the CIO title again," Basyn says. "I'm not against it, but I hate to be complacent. I like transformation and building organizations from scratch."

Because more corporate departments have their fingers in the technology pie, a whopping 36 percent of CIOs say they're involved in a turf battle in the C-suite. What's more ominous is that 47 percent of non-IT executives agree, suggesting the struggle is bigger than CIOs realize. Some CIOs are losing the battle, whether they know it or not. Thirty-seven percent of business leaders say the CIO is being sidelined, compared to just 20 percent of CIOs. Knowing for sure that you've been sidelined is a little like trying to assess shadow IT. It's underground by nature and therefore difficult to gauge. It doesn't help that about half of business and IT executives acknowledge the unfortunate reality that IT gets scapegoated whenever anything goes wrong anywhere in the company.

However, it is possible to counteract those intense forces with a series of well-planned moves. For starters, CIOs this year must come out strong on security to satisfy the CEO, says Armstrong's Lombardi. After witnessing hacker invasions at Home Depot, J.P. Morgan, Kmart and Target, security rose to No. 4 among the most important issues CEOs want CIOs to address. That's up from No. 8 last year (see "Retailers Less Focused on Security," page 26). Now is the time to ask for more money and manpower for security work. More than ever, this year the CIO's role is to serve and protect.

"Based on what's happened this year, it's where you lose your job," Lombardi says, noting that the audit committee of Armstrong's board of directors regularly invites him to meetings for security updates. They discuss his strategy and how the internal audit department assesses it. Last year, he got more money for tools and hired more security staffers. "They want to know we take it seriously," he says.

Another move: Smarter hiring. IT staffing is notoriously difficult because CIOs have to respond to business conditions and customer demands as they shift. Hiring for IT isn't as predictable as hiring for, say, accounting, where the volume of work stays steady in a given year, says Swislow, CIO at Cars.com. A healthy economy may trigger more business ideas for the technology group to support.

"When you look at technology as your innovation and expansion strategy, there's no upper limit on that," he says. There are always new ideas and new customer needs. "No one's going to say, 'We only need three units of innovation and that's it for the next year,'" he says.

At Armstrong, 25 percent of the 145 people in IT are eligible to retire, and they could take important technology and business expertise with them when they go. "You don't transition that knowledge in a 30-day overlap period," Lombardi says. "That's my biggest issue."

That specter has changed his approach to hiring. He seeks IT professionals who have proven skills in relationship-building and innovation. The ability to influence others is also important. In other words, he wants sophisticated interpersonal skills that usually come later in one's career.

The IT talent search will only get harder. Our survey says 56 percent of CIOs expect a talent shortage in the coming year, led by shortfalls in big data, security, programming and mobile.

CIOs must also demonstrate deft handling of budgets and a facility with financial matters, says Hackenson. She has spent much of her time in the past several years cutting IT's costs and helping other groups cut theirs. But this year will be one of growth and, yes, IT spending, she says. AES is getting a new treasury system and an upgraded accounting system. A cloud-based talent management application is also planned.

IT costs will rise, but business units will see cost savings or productivity improvements. The CFO and CEO have to look at the financial ebb and flow holistically across the company, not department by department, Hackenson says. Still, business units should bear some of the costs of projects. Generally, she says, CIOs should be "pushing back and saying, 'This business case can't be all on IT.'"

Developing general business skills will enhance a CIO's value says Wood at Wayfair. Preparing for the retailer's initial public stock offering last summer gave Wood new skills, such as financial modeling for IT and the company as a whole. He gained a higher-level strategic view of the short- and long-term financial implications of key projects, like building a data center. He also had to make sure the IT group was airtight--staffed up, and running stable systems that didn't give internal and external auditors anything to flag as potentially troublesome enough to delay the IPO, he says.

Maybe the best thing a CIO can do right now is to stay sharp--especially the 44 percent in our survey who report to the top boss.

Reporting to the CEO may mean you've arrived, but it doesn't mean you'll stay. The CIO's tenure often depends on the quality of the CIO-CEO relationship. Hackenson started to report to AES CEO Andres Gluski in 2012, after reporting to him for three years when he was COO. "A CIO has to bring a lot of currency," she says, meaning trusted, intelligent advice and tangible results. "I'm always thinking, 'This is a privilege and how do I maintain it?'"

CIOs must pay close attention to the challenges the company faces, and not make every conversation about technology. Corporate strategy, significant financial investments, investor concerns--these now land in a CIO's lap, Hackenson says. Along the way, she looks for opportune moments to insert an IT accomplishment into the conversation, such as how tele­presence has helped cut travel costs from $70 million per year to $30 million. Big money. "I'm not constantly in his face with KPIs but I look at it as situational leadership," she says. "You have to stay on your game."

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