In 2009, more than ever, the CIO will need to shine as a leader of productivity-led business innovation and change. But she may be under pressure to simply focus on IT efficiencies. She will need to show that a productivity-driven strategy has efficiencies built-in as standard, but that the opposite is not true.
When business gets difficult, to begin with it’s normal to focus on cost efficiencies. Before long, however, an efficiency-driven strategy is a race to the bottom. The focus on cost can easily be at the expense of a focus on revenue, and the factors that enhance it (such as Brand Reputation, Product Development, Marketing, Selling and Customer Service). And in the worst case scenario a business hits its fixed and non-discretionary cost base, with no more efficiencies possible yet its revenues are fragile or falling.
As the current economic downturn moves into its next phase in 2009, the choice facing organizations and their strategies for IT is this: to focus primarily on IT cost efficiencies, or on the productivity of the business in exploiting those costs.
Realistically, there is only one choice. But it is the opposite of the one many organizations and their CIOs may be tempted to choose.
A productivity strategy includes, de facto, a demand for efficiency, but the opposite is not true. A productivity strategy creates maximum output (e.g. sales, revenue, profit) for every unit of input (e.g. costs, labour, technology). The only inputs we will allow ourselves to incur are those we can use to create maximum output, so efficiency comes as standard. Conversely, an efficiency strategy seeks to minimise the ratio of inputs to outputs, but has no in-built drive to increase the level of outputs.
So in 2009, the CIO’s primary aim is to lead a corporate-wide strategy for maximising business productivity from IT costs. This means resisting any pressure to focus on IT efficiencies alone, by showing that her productivity strategy has efficiencies built in.
For, as the next phase of the economic turbulence unfolds, it’s likely that business productivity will increasingly trump cost efficiencies in defining which organizations – and CIOs – survive and then thrive into the future.