REINVENTING CORPORATE IT

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1 REINVENTING CORPORATE IT A HARVARD BUSINESS REVIEW INSIGHT CENTER REPORT Sponsored by

2 REINVENTING CORPORATE IT The HBR Insight Center highlights emerging thinking around today s most important business ideas. In this Insight Center we ll explore the radical new era that corporate IT is entering. Major new developments cloud computing, big data/analytics, mobile technology, increasingly complex supply chains, a globally distributed workforce, etc. mean that CIOs and their staffs are being asked to support businesses in very different ways. We ll discuss what they must do now to adapt. 1 A System for Speaking IT Truths to CEOs by Robert Plant 3 Shadow IT Is Out of the Closet by Jill Dyche 5 Three Ways to Make Your IT More Nimble by Brad Power 7 The Metamorphosis of the CIO by Jim Stikeleather 9 How to Compete When IT Is Abundant by Aaron Levie 11 The CIO in Crisis: What You Told Us by Jim Stikeleather 13 You, Too, Can Move Your Company Into the Cloud by Nathan McBride 15 CIOs Must Lead Outside of IT by Martha Heller 16 IT Cannot Be Only the CIO s Responsibility by Donald A. Marchand and Joe Peppard 17 Exploit IT for Strategic Benefit by Jeanne Ross and Cynthia Beath 19 Why Can t a CIO Be More Like a CFO? by Deborah H. Juhnke 21 Is Your Organization Ready for Total Digitization? by Peter Weill and Stephanie Woerner 23 Are We Asking Too Much of Our CIOs? by Terri L. Griffith 24 The Real Power of Enterprise Social Media Platforms by Michael Schrage 25 Today s CIO Needs to Be the Chief Innovation Officer by Daniel Burrus 27 The Future of Corporate IT Looks a Lot Like Google by Jeanne G. Harris, Allan E. Alter, and Kelly L. Dempski 29 Platforms Are the New Foundation of Corporate IT by Mark P. McDonald 31 Should Your CIO Be Chief Digital Officer? by George Westerman 33 Avoiding the Schizophrenic IT Organization by Donald A. Marchand and Joe Peppard 35 Move Beyond Enterprise IT to an API Strategy by Thomas H. Davenport and Bala Iyer 36 How IT Professionals Can Embrace the Serendipity Economy by Daniel W. Rasmus 38 IT s C-Suite Problem by Andrew Horne and Brian Foster 39 The Building Blocks of Successful Corporate IT by R. Ray Wang 40 IT on Steroids: The Benefits (and Risks) of Accelerating Technology by Bent Flyvbjerg and Alexander Budzier 42 IT Has to Deliver Great Tools and Teach People to Use Them by Andrew Horne and Brian Foster 43 Google s CIO on How to Make Your IT Department Great by Walter Frick 45 The New CTO: Chief Transformation Officer by Daniel Burrus 46 IT Doesn t Matter (to CEOs) by Robert Plant 48 A Board Director s Perspective on What IT Has to Get Right by James I. Cash, Jr. 50 C mon, IT Leaders. Take a Chance! by Jim Stikeleather and Sanjib Sahoo 52 Yes, Managing IT Is Your Job by Brad Power 54 IT Governance Is Killing Innovation by Andrew Horne and Brian Foster 55 CIOs: Scenario Planning Can Save Your Job by Daniel W. Rasmus 57 Do You Have the IT for the Coming Digital Wave? by Didier Bonnet 59 Webinar Summary Making the Leap: Creating the Next Generation CIO Featuring Terri L. Griffith, Ph.D. FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT ii

3 A SYSTEM FOR SPEAKING IT TRUTHS TO CEOS BY ROBERT PLANT It was while my father was very sick last year that I learned something important about telling painful truths. Toward the end of his life, he was taken care of at a hospice, a world that was new to me. I was impressed by the way he was treated there like a human being, not a product in a factory and by the staff s approach to delivering bad news. There s a lot of bad news in a hospice setting, and it s delivered in a straightforward yet thoughtful manner that defuses the anxiety and even eases some of the pain. I was curious about the doctors and nurses skill at speaking about difficult matters, and in response to my questions the staff introduced me to the small but growing literature on palliative care. I came to understand the reason for a phenomenon I had been aware of for years: CIOs who are MDs tend to be much better at stating unpleasant truths about IT systems than are nonmedical CIOs. It s because, as doctors, they ve been trained to speak truthfully in fraught situations, and some of them have had a lot of experience delivering bad news to patients. One of my MD-MBA students told me he had done more than 50,000 colonoscopies, each of which inevitably required delivery of news sometimes good, sometimes bad. Over my 15 years of teaching a course on IT in health care, I ve seen that for CIOs who are MDs the skill of delivering difficult messages becomes part of their tool set for communicating effectively with senior management. One of the protocols that s used for teaching medical students how to break bad news goes by the (perhaps unfortunate) acronym SPIKES (setting up the interview, assessing the patient s perception, obtaining the patient s invitation, giving knowledge, addressing the patient s emotions, and establishing a treatment strategy). I was so taken with it that I ve adapted it for my exec ed classes to help CIOs learn how to speak difficult truths more easily and effectively. Believe me, this skill comes in handy in the chief information officer s line of work: CIOs often have to tell CEOs that the large portfolios of legacy applications driving corporate operations are bound to fail sooner or later and need to be replaced. CEOs don t want to hear that. They want to believe that companies have better things to do with their money than change what appear to be stable and wellfunctioning systems. They haven t learned the lesson of Comair, whose legacy crew-scheduling software failed on Christmas Eve 2004, costing the company $20 million and stranding 200,000 passengers when 3,900 flights were delayed or canceled. Here s my seven-step adaptation of SPIKES for CIOs who need to find the words to tell the boss that those legacy applications are disasters waiting to happen (sorry, no cute acronym): 1. Understand the CEO s perceptions. Determine the CEO s grasp of the legacy systems issue in order to make the business case for change. CIOs need to engage with the CEO s informal influencers to gain insights into the visibility of this topic in the C-suite. Additionally, CIOs should review all prior presentations to the board and the CEO involving the systems in question. Was a risk assessment presented? What were the areas of focus technical, process, human capital, risk? What actions were taken? What was the effect? 2. Hold the calls. Although doctors sometimes have to interrupt sensitive meetings to respond to emergencies, it s preferable for bad news to be delivered in one uninterrupted, focused session (which I learned directly from the palliative care literature and SPIKES). The CIO needs to work with the CEO s PA to ensure that a sufficient amount of time is available for the meeting; that there will be only one agenda item; and that there will be no diversions, phone calls, or interruptions. 3. Enlist a business ally. The bad news usually isn t one-dimensional; if a technology is out of date, the processes being used by the workforce are probably outdated too. So rather than present the problem as a technical matter, which would reduce it to the level of a help desk issue in the minds of many executives, make it a business problem. Enlist the advocacy of a senior member of the business unit that would be most threatened by any outage, down time, or lack of opportunity caused by the system. Bringing in a colleague from the business side will show that alignment issues have been considered and that the issue goes beyond the data center. 4. Stick to the facts. Rather than try to educate the CEO about technology, focus on the portfolio of risks associated with the legacy system. Failure rates, costs associated with down time, the number of companies using this version of the system, the time since the system was supported by a vendor, the number of staff people who understand the whole system, and the status of the original vendor are examples of data points that, if delivered with clarity, can prevent the issue from being placed on the back burner. FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 1

4 5. Don t improvise. Avoid the temptation to develop what if scenarios on the fly. Prepare a set of best-, typical-, and worst-case scenarios in advance and bring them out if requested. Developing vague scenarios only weakens the impact of the presentation. 6. Insist on immediate action. While it is best to avoid telling the CEO how to perform his or her job, it is important that the meeting be infused with a sense of urgency and that a time line for corrective action be presented. 7. Have a clear next step. The goal is for the CEO to make solving the problem a priority and place the issue on the must do list for execution. Have a specific plan for getting to the goal. CIOs can take a lesson from the doctors and nurses who so compassionately took care of my father during his last days. Encouraging unrealistic optimism through falsely upbeat messages may appear to ease the patient s suffering in the short term, but it only makes things worse in the end. For CEOs as well as for patients and their families, truth is a kind of medicine. FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 2

5 SHADOW IT IS OUT OF THE CLOSET BY JILL DYCHE Five years ago, shadow IT efforts were the dirty little secret of organizations. An impatient marketing or finance manager would, on the sly, secure some extra budget money and hire a contractor to build a little database that tracked mailing addresses or top-line financials. Slowly but surely, as the little database grew bigger and bigger, the manager would wedge the cost into his or her operating budget. Other managers might take notice and start building their own databases. Then came the cloud, which only heightened frustration with IT s lack of velocity in delivery, and managers flocked to outside vendors to automate various business processes, from customer relationship management to supply chain reporting to social media analytics. Now shadow IT has burst out of the closet and is waltzing around the corporation, leaving IT departments rushing to do damage control. Lines of business are now getting their own official technology budgets for nonstandard software products. Departments can automate a business process in the time it would take to enter IT s development pipeline. Shadow IT has been freshly labeled departmental IT. It s not as if IT departments aren t busy. It s just that they re often busy doing what they ve always done, maintaining operational systems while reacting to the demands of an increasingly techsavvy user community. Cumbersome legacy system maintenance, hardware and software upgrades, and tire-kicking in the name of research take up far too much of IT s time time that could be spent building valuable business applications. Show me an IT department at a 30-year-old Fortune 500 company and I ll show you a large group that is supporting increasingly costly, outdated, and unwieldy infrastructures with no time to focus on driving revenues and enhancing the company s brand. How do we change this? Should it even be changed? Have business units earned the right to assume traditional IT work? These questions will confront executives within and outside IT for the remainder of the decade as corporate governance extends to IT expenditures. Understanding the Skepticism To understand how the IT department has lost its way, it s important to understand how the rest of the organization views its activities. The chart below characterizes four types of IT efforts. The bottom left quadrant connotes building and maintenance work required for large systems from proprietary billing systems to legacy mainframe applications. Businesspeople view these initiatives skeptically, considering them black holes where money goes in and nothing comes out. In the upper left quadrant are the multiyear rollouts, like large enterprise resource planning or supply chain modernization endeavors. While these can streamline business processes, they often become bloated, delivered late and over-budget reinforcing the organization s negative view of the IT department. Conversely, in the lower right corner, a range of smaller yet wellbounded work efforts usually fall under the rubric of departmental solutions, and can be delivered quickly. They re simpler to implement than their enterprise-wide counterparts and businesspeople see them as worthwhile and cost-effective. A large insurance client of mine recently added a new data visualization tool to its business intelligence tool box. The displays are so fresh and intuitive that even business users wed to their spreadsheets have been requesting the tool. Finally, even large projects can be broken up into what a banking client of mine calls human bites. Such projects may ultimately be significant in scale, but have been scoped into discrete units of delivery. Done right, these have the power to win over skeptics, but all too often they lose momentum or offer additional lightweight technical functionality that is meaningless to businesspeople Of course there s another side to this story. IT departments are constrained by budget cuts and hamstrung by often-outdated paradigms of executives who care more about keeping the lights on than automating new processes or adopting friendlier user tools. CEOs remain reluctant to invite CIOs to the executive table, insist- FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 3

6 ing that IT is a cost center, not the innovation incubator it could be. Case studies on companies that have failed to invest in IT innovations, and on the resulting business impacts usually disastrous abound. As CIOs pitch new IT projects and their teams undertake delivery, cost and effort estimates can vary wildly. The risk of overinvestment, miscalculated scopes, or inflated costs is proportional to an initiative s projected value. IT as Process Creator One solution is to begin applying a structured taxonomy to proposed IT initiatives based on quantifiable metrics like complexity, breadth of need, and return on investment. Categorizing projects in a sustained and structured way can inform development processes, resource decisions, new vendor conversations, and hiring strategies. Finally, changing central IT s role can generate widespread support. IT can transform itself from we build everything to here s how to build it, and thus be viewed as a competency center focused not on technology but on process creation and refinement. IT delivering straightforward development methodologies to business departments, and coaching them on how to build their own systems, streamlines deployment, ensures domain expertise, eases organizational tensions, and drives economies of scale. Such changes aren t easy. But amidst continued funding battles and organizational alignment struggles, they might make things easier than they are today. FEATURED COMMENT FROM HBR.ORG I find Jill s article and the posts some of the best I ve read/seen on this topic. It will be interesting to see where this goes. Warren The COO of a specialty retailer recently led his IT and operations teams in a series of facilitated workshops to determine success measures for 47 proposed initiatives. Out came a scoring process the teams could use to prioritize and budget new projects. The result? Executives no longer needed to probe about why certain projects were approved while others were mothballed the choices were based on weighted measurements. Another answer is to extract money say, 10% from existing infrastructure budgets and apply it to new technologies and focused innovation. This approach unleashes investments around nonstandard toolsets that could be rapidly deployed, gradually fostering a culture of innovation. FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 4

7 THREE WAYS TO MAKE YOUR IT MORE NIMBLE BY BRAD POWER If you want to improve how your organization develops, delivers, and supports its products or services, it s hard to avoid changes to the information systems that enable those processes. Yet I often see organizations that try. Why? Because they have suffered from delays and high expenses in changing information technology, some choose a manual workaround that is less efficient. Others believe they should first streamline a broken process and only then make changes to information systems, if still necessary. IT can make business processes much more efficient, and lock in process improvements. Yet IT can also limit speed and flexibility. Companies like CSX, Morningstar, and IBM show how IT can be more friend than foe to process changes. To highlight these issues, let s consider a large, multinational energy company that has spent billions of dollars in the past six years to implement global standard processes across more than 100 countries in its downstream business (refining and retail). The company has built its standard processes for making and fulfilling customer orders on standard information systems. These standard systems forced business units around the world to adhere to new policies and best practices. The new system also provides top management with operational performance data across countries, such as the percentage of perfect orders those delivered on time, in the correct quantity, and with a correct invoice. But this new IT platform could easily put the brakes on the company s next round of process improvements. Executives must reconcile a range of global requirements from over 100 countries into a single software system, where before they previously had one for each country. Then, the IT organization needs to roll out releases and support a consistent global platform. How can IT organizations be responsive when their companies need to improve business processes to answer customer needs and seize market opportunities? And how can organizations do this over the long haul, not just for a moment in time? I see three ways an IT organization can be highly responsive to managers who must make process changes: 1. Have a highly collaborative working relationship with process improvement leaders, and adopt their techniques. At CSX, the $11 billion railroad, the Operations Process Excellence group has a collaborative relationship with the IT group. Assistant Vice President John Murphy told me that CSX s process improvement leaders have found that by documenting processes and using lean techniques the voice of the customer, demand management, justin-time, level scheduling, small lot sizes, mixed model production, and cross-training the IT organization can implement technology changes faster. 2. Prioritize IT resources to be able to make process changes quickly. Anu George, chief quality officer at Morningstar, a leading provider of independent investment research, explained this to me. Technology is integral to our business. Our operations, quality, and technology teams work very closely with each other to drive process improvements that enhance the overall customer experience. For instance, we recently developed a customized interface to improve the quality of our investment criteria write-ups, which took about two to three months. Barring huge system overhauls or migrations, our IT developments happen fairly quickly. But in having adequate IT resources to make system changes quickly, Morningstar isn t typical. Most IT organizations are overrun daily with excess demand for their services. And many are faced with repeated urgent demands that create a culture of firefighting and leave only 10% of their resources for process improvement initiatives. To free up more resources for process improvement, IT organizations could apply improvement techniques internally, as CSX did. A large, diversified energy company reduced its nondiscretionary IT costs from over 80% of its IT spending to 60% in three years by employing much more rigorous governance of minor projects, eliminating the IT walkup window, and establishing consistent vendor service levels and better deals. The result: It unleashed many millions of dollars to support critical process improvement projects. 3. Build an IT infrastructure that makes changes easy and turns over control to line managers. The IT organization can design applications in ways that allow them to be changed more easily. It can also give users web applications, data, and analytical tools so they can manage processes themselves. Susan Watson, vice president of enterprise process simplification at IBM, is responsible for driving best practices in business process management across this $107 billion business spanning 170 countries. In my current job as process transformation leader, I m focused on how IT technologies can enable process changes, she told me recently. For example, FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 5

8 IBM today uses software that lets business users make pricing changes in proposals in hours or days instead of the weeks it used to take when changes had to be done as an IT project. We now have a set of pricing business rules, and business users have control to quickly change prices, Watson said. The system was rolled it out to 32 countries in a few months. New technologies are enabling us to give the business back to the business. That is key to our ability to transform. What ways have you seen IT groups become more responsive to business process changes? FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 6

9 THE METAMORPHOSIS OF THE CIO BY JIM STIKELEATHER As we all know, the very nature of the enterprise is changing. This is the result of the rapid shifts that have been occurring in the business world over the past few years the commoditization of goods and services, the individuation of value, the transformation of the workforce which I discussed in my previous blog post. In order to keep up with these changes and to succeed, future enterprises will need to have three clear characteristics: they will be socially enabled; they will operate as digital business ecosystems, offering innovative services and products as rapidly and inexpensively as possible; and they will view innovation not as an optional advantage, but as the only advantage. This is very different from the way large businesses have operated for decades. Originally, business consisted of neighbors exchanging the products of their labors, dedicated craftsmen travelling from town to town, and localized general stores. Eventually, businesses became department stores, specialty stores, and malls, and finally, today s e-businesses and networked organizations that support them. Traditionally, they have been hierarchical, fixed, integrated, transaction-based, and risk-averse. Only a small percentage came up with anything that was truly innovative. Tomorrow s businesses will have a very different makeup, and the CIO must lead the charge in the face of these changes. As Erik Brynjolfsson said, to succeed in the future, We must reinvent our organizations and our whole economic system. What does it mean to be a socially enabled enterprise? Companies are comprised of business units, work groups, communities of practice, and alliances with suppliers, partners, and customers. The role of management can be broadly thought of as controlling the processes that tie these components together to produce value. Until now, the goal has been to standardize and optimize transactions among these components to reduce costs and achieve efficiency. Most of these benefits have been achieved. Now, management needs focus on enabling and optimizing the connection, communication, and collaboration among employees, customers, and partners. As those new dynamic business networks form (and dissolve), management moves from trying to plan and direct them toward preparing and mentoring them on the challenges the business faces; from staffing and controlling them to engaging their participants and framing their interactions; from imposing structure and authority to encouraging activity and direction to emerge. This will lead to new business models, new processes, more meaningful business interactions, innovation, improved and faster decision-making, and a more agile organization. Companies that fail to facilitate these interactions will stagnate with old processes and strategies, and eventually fail. What does it mean to operate in a digital business ecosystem? A digital ecosystem is a business community of organizations and individuals transacting across a distributed, adaptive, open, social, technical system with collaboration, transparency, constant evolution, self-organization, scalability, and sustainability. This is not a new idea. Each participant focuses on its customers (including members of the ecosystem) and what it does best, while distributing all other enterprise activities dynamically and fully to other participants, so participants can deliver value to each other s customers with rapidity and agility. In the same way that markets have always outperformed command economies, the transactional efficiencies possibly lost are more than made up for by the ecosystem s value effectiveness. Digital business ecosystems dynamically create and operate value chains that extend their participants markets. This allows the smallest of firms to compete globally with the largest of firms. The European Commission believes that digital business ecosystems are critical to Europe s future competitive ability, and the key to realizing this promise of fostering the development of those technologies, systems, applications, and services that are critical to achieving higher growth, more and better jobs, and greater social inclusion. Also, the concept of digital business ecosystems has drawn more academic, business, economics, process, scientific, mathematic, systems theory, and engineering attention than has any other business idea. What does it mean to view innovation as the only competitive advantage? The nature of competition is changing. With the evolution of cloud computing, even the smallest, least-funded organization in an out-of-the-way town can appear and deliver like the largest. Any need or demand can and will be met faster than ever. Traditional economic frictions and barriers to market entry are disappearing. The downplayed downside of this convenience is that there is usually no long-term profit from such ventures. FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 7

10 When enterprise value propositions are racing to the bottom, to commodization, and to the limits of efficiency-driven margins, there is one form of profit left: monopoly profits. Those moments in time when you have an offering that no one else has a unique value proposition. Such propositions come from innovation. This is why innovation is so important and takes up so much room in press and annual reports. Innovation is the key to the future innovation in business models, business processes, and products and services. Only innovation can break the chains of commoditization that a global and frictionless economy encourages. Innovation is the only insurance against irrelevance. It s the only antidote to margin-crushing competition, the only hope for outperforming the economy, and the only way to truly amaze and delight your customers. The contribution of CIOs to all this is to rise up and enable, facilitate, and accelerate its uptake by their organizations. It is the CIO who is the one person in the organization to best understand how the organization operates, since every transaction passes through his or her systems. It is the CIO who best understands where the technology is going and how it can be applied, both to develop new methods for generating existing value, and to rework old methods to generate new value. Therefore, it is the CIO who should guide and mentor the rest of the organization into its 21st-century model. In the last post of this series, I will explore how exactly the CIO should begin this process. The Rise of the CIO CEOs don t think CIOs understand the business and how to apply IT in new ways to benefit the business. CIOs must become aware of the changes in the business world and the enterprise and how these changes are affecting the roles in the C-suite and their own leadership roles. They must then help lead the enterprise s evolution to a socially enabled environment and a digital business ecosystem, and provide the platform upon which innovation is encouraged, nurtured, and manifested. But CIOs also need to not get caught up in the technology trap. Changing technology alone will not cause the changes discussed here; changing management will. The CIO s role becomes one of helping management change by supplying vision, direction, and supporting technology. Gary Hamel asserts that management innovation is the critical component and starting point for all innovation in terms of operations, technology, product, strategy, etc. He also identifies many validating examples, including the history of consistent military competitive advantage: those able to break with the past and imagine new ways of motivating, staffing, training, and deploying warriors. The key is not size, scale, technology, tactics, or strategy though each provides a transient advantage for a short time. Adaptable, agile management above all sustains competitive advantage. FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 8

11 HOW TO COMPETE WHEN IT IS ABUNDANT BY AARON LEVIE You only gain an edge over rivals by having or doing something that they can t have or do, wrote Nicholas Carr 10 years ago in his controversial HBR article IT Doesn t Matter. Carr predicted that an organization s ability to compete through investing in information technology was about to change dramatically. When the core functions of IT data storage, data processing, and data transport have become available and affordable to all, he wrote, IT would cease to be a source of competitive advantage. This was not yet reality at the time of Carr s article. The IT boom of the 1980s and early 90s had brought information technology to the corporate masses, unleashing the first full-scale technology revolution in the enterprise. To stay competitive, businesses rapidly embraced PCs, and the subsequent transition to the client/server era. The original IT department was formed to centralize a unique expertise that could purchase, implement, and manage technology in the enterprise. And given the complexities involved in building up competitive IT weaponry, businesses won by outspending and out-resourcing their opponents. Only the largest of enterprises could afford the best technologies, and even for those with the largest bank accounts, IT strategies were limited to basics like CRM, ERP, or . Today, though, Carr s prediction is coming true. We re in the early days of yet another seismic shift in IT, this time driven by mobile devices, the cloud, and a demand for technology experiences that match the simplicity of the consumer world. We are moving abruptly from an era of IT scarcity to one of abundance. This end of IT scarcity begs an interesting and important question. How do companies differentiate in a world where access to technology is no longer a competitive advantage? Information Eats the Enterprise With the swipe of a credit card, the customer support team can move to Zendesk or Desk.com; the HR team lives on Workday; the business intelligence group moves to GoodData or Domo; the finance team logs into Netsuite; the marketing department orbits around Marketo and Salesforce s marketing cloud. Whereas in the client/server world managing these disparate systems would have taken up the vast majority of a company s IT budget and time, today an organization can be on dozens of job-specific, tailored solutions in days. The cloud enables enterprises to efficiently implement best-of-breed services while serving the varied needs of a business. But here s the surprise twist: Whereas many feared and Carr more or less predicted that the cloud would drive the extinction of the IT organization, the sudden avalanche of technology is actually making the IT function more important than ever before. Rather than serving as an adjunct to the core business, or merely a cost center, IT is becoming intrinsic to the very products and services that every company offers. Why is this? Mainly because, as Marc Andreessen puts it, software is eating the world. A recent Accenture report concurs, claiming that every business is now a digital business: Every industry is now software-driven; as such, every company must adopt IT as one of its core competencies. Here is Nike using wireless sensors and web technology to create a performancetracking system that allows it to create new services to monitor, and to improve and create new training routines for athletes. There is Ford, using sensor data to monitor both how a car operates and the driver s behavior, and seeking to apply analytics to improve the experience for the next generation. As software eats the world, information is eating the enterprise. Access to the right information at the right time from anywhere will transform every business and every industry. Competitiveness in IT will come from connecting employees and partners in meaningful ways to bring products to market faster (how does a supply chain process shrink from days to minutes?), supporting customers with new experiences (can my thermostat talk to my energy provider?), and surfacing the right people and knowledge to generate better ideas (how do I find experts across my organization that I m not connected to?). IT abundance will affect every job, product, and customer interaction. We re seeing retail outlets supply store employees with ipads chock full of product catalogs to improve in-store consultation, enabling them to be instant experts on the latest goods and services. Flextronics uses Workday to provide visibility into its global workforce of 200,000 employees, allowing it to move around talent and projects at a moment s notice. Kimberly-Clark utilizes Salesforce s Chatter to connect to its customers for development FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 9

12 of products. Education publishing businesses are digitizing their entire supply chains, creating an end-to-end experience that connects everything from the creative and production process to the delivery to and interaction with students. In this transition from a world of IT scarcity to abundance, competitive advantage has little to do with unique access to technology and everything to do with unique access to and use of information. When technology is near-ubiquitous, it s the connection between people and information that drives business forward. Organizations that capitalize on this trend will ensure that as information eats the enterprise, they ll be the ones satiated. FEATURED COMMENT FROM HBR.ORG Excellent article. I agree that there is a complete revolution in software and the cloud because now all enterprises have access, not just the lucky few corporate giants. It is completely changing the game for midsize companies as well as start-ups. M. Parker FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 10

13 THE CIO IN CRISIS: WHAT YOU TOLD US BY JIM STIKELEATHER Enterprise IT is in crisis no doubt about it. Our research, conducted in partnership with Harvard Business Review, The Economist, CEB (formerly the Corporate Executive Board), Intel, and TNS Global, finds that corporate leadership has lost confidence in the CIO as a strategic partner and views IT as a commodity rather than a difference-maker. Clearly the roles of CIO and the IT organization need reinvention and that s the conversation we ve been having over the past few months in webinars and posts. (See also here, here, and here.) This conversation has generated a lot of interesting discussion via blog comments, s, and face-to-face interactions at conferences and meetings, and has revealed a few more insights that should factor into our evolving thinking. CIOs need to understand business better, but the C-suite should understand technology s potential better. While the CIO needs to understand the business to add value, equally true is that senior leadership and the board of directors don t understand how to incorporate technology in their strategies, and some don t even see the need to do so. As gerajohm commented, The best executives I have met have had a great understanding of how to use technology to gain competitive advantage and improve operations. They also worked with the CIO to help them understand the business. They worked together to identify the technologies that could improve the company s competitive advantage versus technologies that were needed to support the business. Once this was done, the executive leadership and CIO focused on implementing technologies that improve the company s competitive advantage. Every other function of the organization is as out of touch as IT. Victorio M. commented, Reading this post is both humorous and disheartening. Humorous because, as a human resources practitioner, I hear similar calls for change within my profession. So it s not just us! Yet it s disheartening because it s yet another organizational function that appears to not be able to keep up with the pace of business, staying stuck in a transactional, as opposed to strategic, frame of mind. The Management Innovation Exchange is currently running a competition to hack the human resources function to enable organizational adaptability. As real space and cyberspace merge, do financial practices like budgeting provide value over their costs of time, money, effort, agility? All the parts of the organization have to come together and build a common language to discuss their markets and their enterprise. They need to have a common appreciation of each other s purposes. The CIO must step up and mentor the C-suite on the potentials, possibilities, threats, and opportunities of information technology; but likewise, the HR lead needs to discuss the impact of a free-agent workforce, the head of legal needs to discuss the impacts of open innovation and IP sharing, and so on. As IT steps up as mentor, it needs to mature as well. IT needs to step up, but collaboratively not as the smartest guys in the room. One commentator said, About 10 years ago, IT people suddenly became business process experts. Strategy in IT is one thing, but the process experts suddenly began giving advice about areas in which they were not experts and honestly felt they should lead strategic planning for the entire organization. If IT and the CIO come to the party talking like engineers, only offer convergent lines of thought (analytical, rational, quantitative, sequential, constraintdriven, objective, and detail-focused), and don t offer a more holistic, shaded divergent-thinking point of view (creative, intuitive, qualitative, subjective, possibility-driven, holistic with conceptual abstractions), then they have missed the point. CEOs sense the problem perhaps more than do CIOs. This is a totally unscientific statement, but it is what I experienced during the two weeks of article writing and the culminating webinar, in which I engaged directly or indirectly with a large number of CIOs, IT managers, and CEOs. There were significantly more CIO/IT conversations that took place in conference or meeting situations, and the CEOs generally self-selected by reaching out to discuss or gather more information. Unless I pointed out the topic, many of the IT people were generally unaware or just tangentially aware. The CEOs were actively aware, concerned, looking at alternatives such as chief digital officers or creating not so shadow IT organizations under the CMO. Few of the conversations originated with IT people, unless they were already engaged in trying to address the issues (another self-selection bias?). A number of the conversations started with the assumption that social engagement, collaboration, and analytics were not part of IT but the responsibility of marketing. The bifurcation of IT and business is a myth. There have been two paths of discussion around this. One is the concept of alignment. The other is the idea that as IT socially enables companies, the actual concept of management, and how we organize and structure FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 11

14 work as practiced today, begins to disappear. There were numerous discussions around COBIT and ITIL popular IT process- and service-management frameworks and there is a lot that COBIT in particular offers. But too often, it turns alignment into supplication, or worse, subservience. The CIO must understand and execute on the differences among leadership, governance, and management. The CIO must lead by showing the way IT can impact the organization both positively and negatively, sometimes leading by how technology is applied in IT itself; and then by influencing and guiding the organization in making the right decisions. Then the CIO must direct and restrain the use of technology how it is developed, sourced, and applied in the best interests of the organization and its stakeholders with appropriate governance mechanisms. Last, the CIO must execute by managing the procurement, provisioning, monitoring, and management of the delivery and application of IT to serve the organization. Several discussions focused in on understanding the difference between delivering IT and applying IT. If you are delivering IT, then you are a surrogate IT company that might not be aligned with the enterprise. If you are applying IT to the business, then by definition you have to be aligned with the business, or fail. Multiple roles, one company versus one role, multiple companies. Historically, people got to the C-suite by progressing up the career ladder in one discipline, moving among multiple companies until they made it to an executive role in finance, sales, etc. Now, however, the model is changing. In successful companies, top executives rotate among multiple disciplines in increasing levels of responsibility until they advance to the C-suite. Leaders then have a multidisciplinary understanding of the organization, rather than an exclusive, deep knowledge of just one area. And as we are learning, good leaders do not have to be discipline-specific if they engender trust and responsibility in their organizations. Many CEOs expect their next CIOs to come from marketing instead of their, or another, IT shop. I started looking into the role of the CIO with the assumption that the onus was on CIOs to step up IT s game to enable their enterprises to succeed in the future. One observation from all this is that there is an endemic problem across the C-suite: there has been such a longstanding culture of domain and functional specialization focused on efficiency that the overall gestalt of the business and its efficacy at creating and maintaining a customer has been lost. But that doesn t relieve CIOs of their responsibility to change IT to enable the business to better change. For aspiring CIOs, the best thing for your career is to leave IT and move to other departments even if it involves taking a step back. Preferably, these roles need to be part of the value chain, facing either customers or partners, and eventually both. Then, step back into IT. This idea could be true for all departments for instance, new business managers should come from outside the business function to encourage a holistic view of the business. For existing CIOs, ask yourself a few questions. Are you generating customer value? Are you (or do you have the potential to be) the best in the world at what you are doing? Are you required to do what you are doing? Based on the answers to those questions, what do you need to stop doing, start doing, or do differently? Where are you spending your time interacting and relating to the rest of the organization? What resources should you have and how should you allocate them? What activities consume most of your efforts and what outcomes are you expecting from them? And last, what are you really focusing on and what questions are really driving you? The point of all this is to pose these questions to everyone in the C-suite not necessarily to be answered, but to start the collaborative, co-creative process to discover the answers and to continue the conversation. FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 12

15 YOU, TOO, CAN MOVE YOUR COMPANY INTO THE CLOUD BY NATHAN MCBRIDE On April 1 of this year, the Department of Defense announced that the U.S. Navy (USN) would embark on a strategy to migrate its services to the cloud. While there have been numerous cases of big and small companies making this leap over the past few months, this one struck a particular chord with me because of its sheer scope. The USN is an organization utilizing 1,400 systems and 7,000 applications to serve more than 500,000 employees. My company, which is approximately 1.7%, 1.9%, and 0.028% the size of the USN in relative scope, made the transition years ago and it was no small effort, taking almost three years to fully make the transition. While the USN is relatively mum about its specific strategies, there are references to the fact that it intends to cut its systems in half within 36 months, reducing some overhead cost and modernizing. This is similar to the approach that the CIA has undertaken in moving much of its infrastructure to Amazon Web Services. These transitions, even when scaled down to a company of 140 employees like mine, require a substantial amount of planning, commitment, resources, and time, with little room for error. So it comes as no surprise that whenever I spend time with industry peers who have yet to move to the cloud, there is a palpable sense of fear and overwhelming anxiety about how to even think about the process. When I m asked to advise people on how they might craft strategies to get to the cloud, I give a four-point overview based on my own experience. It will get you to the starting line, but beyond that each and every strategy will be different depending on a myriad of circumstances in your corporation. Move only what you have to and start fresh wherever possible The first thing is to dispatch with the idea that you are going to move all your current resources into the cloud. That is just not possible, especially if you have invested heavily in distributed enterprise-class systems and the infrastructure to support them. While it is certainly likely that a good portion of your environment can be virtualized and moved into a platform as a service/infrastructure as a service environment like Amazon Web Services, the move to the cloud should be viewed as an opportunity to leave systems behind and replace them with systems that are lighter, faster, and less expensive. Tear down and rebuild your security model If your Microsoft SysAdmin has convinced you that Active Directory is a viable solution for the cloud, or that because you use Active Directory you can only get into the cloud by sticking with solutions that support Active Directory/Windows Azure Active Directory, you need to get a second opinion. When moving to the cloud you have to consider that many solutions do not allow for authentication off of Active Directory and instead rely on more common security protocols such as SAML1, SAML2, OID, and OAuth. Identity access management (IAM) vendors have been forced to consider brokering authentication for Active Directory because companies feel that they must stay on it as an internal authentication platform. Nothing could be further from the truth, and if you do your research, you will discover that there is a wealth of options out there. To get into the cloud you need the most robust and extensible authentication model you can possibly build, and by using one you will increase your options for solutions exponentially. Cost savings are a benefit, not a driver If you think that you need to get into the cloud to save money, you need to think again. Yes, you will ultimately save money by migrating to the cloud, lots of money in fact, but it takes time to get there and there is the chance that you will actually spend more money up front. When making your pitch to senior management, talk about the benefits of reduced infrastructure, resources, better uptime, business continuity enhancements, mobility, and access ubiquity. If asked about cost savings, be ready to deliver your pitch on how you intend to reduce or eliminate CAPEX spending, reduce personnel resources, move services to a pay-by-month model eliminating long-term contracts and ultimately reduce your annual budget by a modest percentage year over year over a three-to-five-year period of time. Do not get caught in the trap of making cost savings one of your drivers for going into the cloud. You will bring a level of scrutiny over your claims on which you will most likely be unable to deliver. Create a long-term flexible strategy The last bit of wisdom is to develop the most thorough one-, threeand five-year cloud strategies that you can put down. My one-year FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 13

16 strategy is very specific; my three-year is slightly less specific because I find that even three years down the road is very hard to see. It s impossible to see five years into the future, but if you work backward from five years you can, even at a very amorphous level, describe how you would want your environment to look at that point. These should be rolling strategies that are flexible enough to consider the dynamics of the industries you will operate in. Today s IAM vendor will be tomorrow s mobile device management vendor, and a week from now could be bought by a company in some entirely different vertical. By creating a flexible strategy, you can constantly adapt to these changing conditions in the industry over which you have almost no control. One last thing to note: In the next five years, new employees coming into your company won t know (or care) how to use Outlook or mapped drives. They won t care for your PC laptop offering or why your firewall blocks Dropbox. They will have established methods for doing work and they will all involve the cloud. Seventy-five out of the top 100 universities in the latest U.S.News & World Report college rankings use Google Apps as their primary backbone. Seven of the eight Ivies are in the same boat. Do you really want to be the last one at the starting line? In considering these four concepts, keep in mind that they are applicable to any size organization and any cloud scope transformation. The more I have considered them, the more I have realized that they are applicable anywhere. It s no small task, but you can move your company into the cloud if you approach things with a new mind and put aside the technologies of the past. FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 14

17 CIOS MUST LEAD OUTSIDE OF IT BY MARTHA HELLER The CIO paradox is a set of contradictions that lies at the heart of IT leadership. Be strategic and operational. Stay secure and boost innovation. Adopt emerging technologies, while weighed down by the past. Many CIOs have buckled under the CIO paradox, while others have managed to be effective despite it. In working with these successful CIOs over the years, I have found that they all share a common set of practices, philosophies, and approaches. We are in the midst of a computing renaissance, when all CIOs will need to raise their game and master this same set of practices. Herewith, three items that should have a permanent place on any CIO s breaking the paradox checklist. Sell the foundation Most large companies have underinvested in IT for decades. They ve spent the bare minimum, and that s been fine, since IT has had to function merely as a keep the lights on necessity. As long as the mainframe systems aren t broken, let s not fix them. Today, however, technology innovation is creating a drastic change across all major industries in the way customers want to interact with their suppliers. Companies can no longer get away with treating IT as a commodity. These companies face a technical debt, and it s time to pay up. Most CIOs find it relatively easy to convince an executive team to invest in a technology that increases near-term revenue. They find it considerably harder to ask their colleagues to invest in a major infrastructure upgrade that will take 12 months or more before delivering direct business benefit. But all CIOs need to find a way to convince their peers that without these infrastructure investments, they will be mortgaging their companies futures. Through visuals, storytelling, and metaphors that resonate with the companies business leaders, CIOs must develop the skill of showing their stakeholders that foundational investments are the table stakes of innovation. If they do not, they will get crushed between the rock and hard place of legacy technologies and business demand. Grow blended executives The companies that have underinvested in IT have also underinvested in IT talent. IT leaders are a unique breed, and they need to possess a heady brew of business, technology, and interpersonal skills. High-performing IT organizations appoint executives to sit at the intersection of business areas and the IT function, helping business leaders shape their IT strategies and marshaling a technology team to deliver against that demand. Ideally, these business relationship executives would have two heads: one for business and one for technology. Since cloning is still an imperfect science and these gorgeously blended executives are in short supply in the talent market companies will need to grow their own. The most effective approach to developing blended executives is to develop a program that rotates IT people into business roles, and businesspeople into IT. But regardless of which approach companies take, they need to start now. We are in the midst of war for IT talent, and companies that always have to go outside for their IT leaders are at a disadvantage. A far better strategy is to take the people that they have and develop them into blended executives. You know you are on the right track when you walk into a business unit meeting and, from the dialogue taking place, you cannot easily distinguish the IT person from everyone else. Reach beyond IT The IT function is not easy to manage. IT is highly strategic, intensely operational, hard to staff, and extremely expensive. CIOs who are successful in running IT tend to develop expertise in important areas including project management, continuous improvement, people development, M&A, and strategic planning. These disciplines are critical to every other department in the company. CIOs who want to be effective in the future will extend their leadership and expertise beyond the IT function. They will set up enterprise project management offices; they will take the reins as their companies continuous improvement champions; they will absorb HR and legal and procurement, along with IT, into a new chief shared services officer role. They will step out of their IT boxes because they know it is good for their companies. They will not wait to be asked. With cloud, mobility, consumerization, and big data, the CIO paradox is not disappearing; it is growing stronger. The contradictory forces that define IT are getting more acute, and CIOs will work harder than ever to perform. Those who are already struggling under the paradox will continue to struggle. But those who can rise to the occasion, break the paradox, and deliver value in our new technology marketplace will secure themselves a place of leadership in what promises to be an exciting new era. FEATURED COMMENT FROM HBR.ORG Short and sweet! Hitting the bull s eye! Sriram Nag FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 15

18 IT CANNOT BE ONLY THE CIO S RESPONSIBILITY BY DONALD A. MARCHAND AND JOE PEPPARD IT is not something that can be managed from a box on the organizational chart. Unfortunately, this is not the view in most C-suites. Just look at what most do: They appoint a CIO and give him or her a budget and a mandate to get on with it! Why? As one CEO said to us: I just want to forget about IT and concentrate on my core business. Of course, this response would be fine if the challenge were merely to deploy technology (on time and to budget) and ensure that it continues to function properly for as long as required. It would also mean that outsourcing to a proven tech provider would be a legitimate response to perceived problems with IT (get someone with more experience and knowledge to run it for you). Or that the cloud is the remedy for IT s perceived inability to deliver, its inflexibility, tardiness, and questionable return. (By portraying IT as a utility like water and electricity, with apps on demand, a pay-as-you-use model, and unparalleled scalability, what could be more attractive?) The reality is somewhat different. This approach may work for business functions like manufacturing or logistics, but it definitely won t work for IT. For one thing, what a manufacturing director is and is not responsible for is very clear. So what can a CIO be held responsible for? Technology? This only results in technology that works and is deployed on time and to budget. What about being held to account for the benefits and value from IT spend? This raises the fundamental question of whether a CIO can really be held accountable for something that will only emerge when his or her colleagues step up to the plate. For example, successfully deploying CRM software on time and to budget will deliver little unless sales, customer service, and fulfillment processes are redesigned, staff are trained to have the right conversations with customers, data quality improves, and marketers build the right competencies to use all the data that will now be available to them. Let s say that a company s sourcing strategy calls it to move all IT requirements to best-of-breed cloud-based providers. Infrastructure and IT-based services will now be provisioned and delivered directly from the cloud. The question is, will problems with IT go away, particularly the challenges around delivering business value? Of course not! Why? Because the problems with enterprise IT have generally nothing to do with IT. They never have! What the cloud does is make the technology supply side more efficient and perhaps more agile. It may make costs more predictable and shift investments from CAPEX to OPEX. It may even lead to access to leading-edge technologies. But these are generally not where the challenges lie when we look at the situation in most companies regarding return from IT spend. The reality is that the organization still requires a strategy for information and systems. It still needs to make choices around process standardization and the extent of digitization, define the degree of integration required, and think about innovation opportunities enabled by IT, whether they be process innovation, business model innovation, management innovation, or innovation in the customer experience. And the organization still needs to prioritize IT spend, run programs and projects, manage the IT investment portfolio, orchestrate the organizational change to deliver expected business benefits, and make sense of information. Accountability for some of these areas resides with the CEO and other members of the C-suite (we are assuming the CIO is a member of the C-suite), and for others with the LOB manager. Some will be shared. What is clear is that they are not the sole responsibility of the CIO. All members of the C-suite need to recognize and embrace their fundamental roles. What is therefore required is strong governance of IT. Be clear about the decisions concerning IT that need to be made; who gets to make them; how they are made; and the supporting management processes, structures, information, and tools needed to ensure that they are effectively implemented and complied with, and are achieving the desired levels of performance. Unfortunately, we have found that the focus of governance around IT continues to be on the more operational IT issues of delivering technology capabilities and IT services. The basic requirement for success with enterprise IT has changed little over the decade. There is no magic bullet. The bottom line is that executives need to get their hands dirty and actively engage with their CIOs and IT. Decisions about IT today really have little to do with technology! FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 16

19 EXPLOIT IT FOR STRATEGIC BENEFIT BY JEANNE ROSS AND CYNTHIA BEATH IT leaders have long embraced the idea that the role of the IT unit, and of enterprise IT systems, is to enable business. However, when we ask CIOs how their enabling is going, they consistently respond that sometimes it goes well; sometimes not so much. In the digital economy, as IT becomes evermore integral to the strategic initiatives of firms, sometimes is not good enough. Companies cannot fritter away their valuable resources, whether in the form of money, systems, or, most importantly, people. We argue that leaders should stop thinking of IT as enabling and start thinking in terms of fully exploiting IT to strategic advantage. The word exploit makes some IT leaders squirm. But the definition of exploit is to employ to the greatest possible advantage. More specifically, the idea is that IT leaders should refuse to allow their companies to request systems that will not be used effectively or that aren t integral to business success. At a recent CIO roundtable, one CIO said that the demand for IT in his company is infinite. Infinite! And other CIOs nodded in agreement. If that s the case, why would any company allow a business change initiative to fall short of its promised business benefits? Business change initiatives (those that involve IT projects) engage enormous resources not just IT and financial resources, but human time and emotion. These are finite resources. As another CIO noted, companies also have limited capacity for change. Every project needs to justify not only the resources it consumes but the alternative opportunities that the company cannot pursue because everyone will be busy implementing the chosen initiatives. At most companies, business and IT leaders cannot immediately answer the question, What percentage of your projects fully realize their expected business benefits? Every manager in the company should know the answer to that question. Case studies at MIT s Center for Information Systems Research suggest that if people don t know the percentage of projects that meet their business objectives, the percentage is probably very low. That doesn t bode well for business success. Of course, no company intentionally fritters away critical resources on underused or ineffective systems and business changes. It s hard to get this right. How do great companies exploit IT? Here are three things that can make a difference: Perform regular post-implementation reviews. Most companies write up a business case to explain the expected business benefits that justify the investment of company resources in a new project. But many companies fail to check that the benefits were ever achieved. That kind of follow-up is essential. This is not a matter of figuring out whether a project was on time and on budget (although surely someone wants to learn that as well). This is about engaging project sponsors, system users, architects, and development teams in a clear understanding of the actual value received and how that relates to the business case originally used to justify the project. This exercise often identifies opportunities to drive additional value from existing systems. It also educates everyone involved so that future business cases become increasingly realistic. One financial services company we know reviews the viability of the business case at every major stage gate. If changes in technology or markets are challenging the likelihood that the business case will be realized, project sponsors have two choices: stop the project or revise the business case to reflect what they believe they will be able to achieve. This company gets a huge return on its IT investments. Limit the number of people who can make project requests. Companies that use IT most strategically allow only a select group of senior leaders to request a project. For example, at Tetra Pak, the Swiss packaging company, the role of IT is to minimize the cost of business operations and facilitate global growth. To make sure that IT and business resources stay focused on that objective, only the company s high-level business process owners can submit project requests. These high-level process owners report to members of the senior executive team. The effect is that Tetra Pak is investing its business change resources (IT and non-it) in enhancing global processes and related data. There are many things companies can do with IT, but if management doesn t establish priorities, it s easy to do many things badly. Tetra Pak has implemented standardized processes across 170 countries. Think speed not functionality. The best way to get value from IT is to finish projects quickly and get people to start using new capabilities. USAA, the Texas-based financial services firm, closely monitors the average number of days required to complete projects. Since projects differ in scope and complexity, many IT leaders resist using this metric. However, if the CIO forces measurement of the time required to complete projects and then insists on lowering the FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 17

20 average, people throughout IT and eventually the business will start looking for ways to reduce the scope of every project. They will break up big tasks into a set of smaller tasks. That effort will get technology into people s hands sooner and accelerate the speed at which the business accrues benefits from IT. All three of these activities are becoming habits in companies that get great value from IT. They are fully exploiting IT and, in doing so, identifying new opportunities for developing additional IT assets that can be further exploited. A bonus result: IT leaders have a better sense of what makes the business tick, and members of the executive leadership team have a better sense of when and how to make IT investments that matter. FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 18

21 WHY CAN T A CIO BE MORE LIKE A CFO? BY DEBORAH H. JUHNKE Information governance is not IT s job. But it should be the CIO s job. It s time for CIOs to move beyond their roles as chief technology officers and embrace the name with all its implications: chief information officer. Why? Because no one is managing the store. The explosive growth of information is accelerating. According to the 2012 IDC/EMC report on the digital universe (PDF), information is doubling every two years. At the same time, technology budgets are static or contracting, and non-it execs want more attention to cost-cutting. We know this. We ve heard it before. Yet we continue to ignore it. I m fascinated by how deftly conversations about information growth turn immediately to hand-wringing over how to store and secure it, avoiding the issue of its creation. The time is ripe for CIOs to take a page from the CFOs playbook to ensure both accountability and responsibility for information creation. We all know that CFOs are accountable for the financial stewardship of their enterprises. They fulfill this role by delegating responsibility and establishing control systems such as budgets, directives, audits, and oversight to drive fiscal compliance. The day-to-day financial activity within the organization is then executed by management and staff, who shoulder the responsibility delegated to them by the enterprise as part of their job to account for funds, both incoming and outgoing. Incurring debt without approvals or other failures to comply with financial controls appropriately results in disciplinary action. CIOs accountability, on the other hand, stops short of information stewardship and instead focuses only on technology stewardship, an intermediate step. CIOs are commonly accountable only for information in the middle of its life cycle (storage, security, and availability), and their control systems reflect this. Unlike the world of the CFO, management and staff generally do what they like when it comes to creating and (not) disposing of information, thus creating a cavernous gap in accountability. There are no overarching frameworks, few controls, little guidance, no audits, and seldom consequences when staff create and hoard information. In financial terms, irresponsible creation and storage of information is like taking on unsecured, uncontrolled debt. It creates risk and encumbers the enterprise with additional costs to support the resulting digital landfill. That landfill has been a money pit for corporations and a gold mine, in my experience, for plaintiffs counsel and regulatory investigators, leading to per case discovery costs ranging from $621,000 to more than $9 million. That s a lot of money for digging through old s. How did we get here? We came to this place easily and methodically, by providing resources of quickly evolving technology with no constraints. We came here by not establishing data stewardship, which is at the root of organizational confusion about information governance. We came here by allowing the just keep everything culture to take hold. Ironically, autonomy in corporate computing does not necessarily lead to greater productivity. In fact, our laissez faire approach to computer education little guidance, hands off, freedom to make decisions leads to lower productivity absent a system for accountability. Without accountability, unproductive behaviors creep in: spending time on CYA, finger-pointing, waiting for guidance, ignoring problems, or waiting too long to act. Given this failure to establish responsibility and accountability, it is also not surprising that most ECM projects fail, and a large percentage of IT projects generally fail to realize their potential or go well over budget. I believe the driving factor for these failures is that many projects are conceived and scoped only to address a symptom, rather than to address the disease of too much information. Patchwork attempts to mitigate or repair our broken information management processes do not get to the core of the issue. It is ultimately up to each of us to make a difference. Of course, we are reminded during emergencies, like Hurricane Sandy, of the bet the company lawsuit, or dare I mention the data security breach. (Can you spell S.N.O.W.D.E.N.?) But when the crisis is over, we go back to the status quo. There are those who still believe that technology alone solves all problems, thus policy-based governance is unnecessary, and there is no downside to information growth. These proponents fail to account, however, for the three R s: Regulation, Risk, and Reward. Regulatory requirements for information governance exist for every enterprise. They must be identified and addressed, and information management is a huge part of this. FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 19

22 At risk in most enterprises are databases, shared storage, and and the latter two are almost exclusively controlled by end users, both in content and distribution. Risks stem from litigation exposure, privacy and data security breaches, and intellectual property theft, among other problems. Reward can come from new insights for new initiatives gleaned from our big data, but only if it is not dark data contaminated with the ROT (redundant, obsolete, and trivial) of 30 years of computing. In each of these, unmanaged volume and content are our enemies. In my years of interviewing staff across a range of industries, the most common theme has been this: No one told me what to do, so I did nothing. Technology is intimidating, particularly to non-millennials. Think like a parent. Create an environment where information is treated as a valued asset. Instruct, guide, and expect good stewardship. Be accountable. Back to the Future CIOs must reinvigorate the vision of 1987, when the inaugural issue of CIO magazine stated that information is a corporate asset to be managed by a top-ranking executive. CIOs have never broadly achieved their destiny. They have remained, instead, CTOs. I submit that they are or should be something different. CIOs need to move beyond technology myopia to become information governance leaders and executive partners in policy direction and enforcement. Someone needs to take control, and CIOs are in an ideal position to mandate the structure, direction, resources, and accountability necessary to achieve coherent governance of information assets. If the prospect of tackling the legacy problem is daunting, consider another finance-inspired concept: zerobased budgeting. With zero-based information governance tied to bottom-up accountability, we have an opportunity to look forward first and stop the bleeding. We can cost-cut by slowing the growth of information and applying a more critical eye to Band-Aid technology requests such as archives or yet more storage, and thereby also achieve better alignment with long-term business goals. FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 20

23 IS YOUR ORGANIZATION READY FOR TOTAL DIGITIZATION? BY PETER WEILL AND STEPHANIE WOERNER What do the following items have in common: credit cards, streaming or recorded music, robots for production, CAD systems, telephone networks, digital games, computers in products like cars and vacuum cleaners, sensors, and video consoles used in remote mining? Answer: They are all digital and connectable. This is the world of total digitization: a multitude of digital devices and sensors creating streams of data, as well as any number of digital services and products for both internal and external use, distributed throughout the enterprise, and sometimes, but not always, connected. As the drive toward increased digitization continues, enterprises have to get a handle on this total digitization and corporate CIOs have to step up to the challenge. Three Approaches to Managing Total Digitization How are enterprises managing the spread and scope of total digitization? We at MIT CISR have found that enterprises are using one or more of three approaches to managing total digitization: convergence, coordination, or a separate digital innovation stacks approach. Each approach has very different objectives and measures of success. Convergence. This approach brings all digitization investments together and places them under a single executive. At Boeing, all enterprise technology (including digital) investments are managed by the CTO, which enables significant synergies. For Commonwealth Bank of Australia (CBA), convergence involved bringing together operations and IT into a new unit, Enterprise Services (ES), headed by the CIO. ES helped CBA achieve its goal of both reducing costs and becoming number one in customer experience. Convergence usually requires the introduction of new organizational structures to create efficiencies and synergies and to increase reuse of resources. Enterprises using a convergence approach will, wherever possible, organizationally consolidate the key assets of people, data, infrastructure, skills, and management processes. Coordination. This approach doesn t change the organizational structure but adds mechanisms (such as committees or gates) onto a business case process, to increase the coordination of big digital investments across groups such as engineering, operations, or product owners. Leaving the organization structure as is reduces disruption while the mechanisms help facilitate working together across the units. A typical structure consists of separate organizational units supported by a shared infrastructure at the base and connected by customer-facing coordination mechanisms at the top. For example, BMW set up two committees focused on digitization to deliver on its enterprise goals, including the design and delivery of a custom car within six days. These committees at BMW ensure the creation and smooth hand-off of information. In a coordination approach, the mechanisms all work together to achieve a specific outcome. This approach works well when there are one or two enterprise-wide goals. But be aware that when there are numerous enterprise goals spanning multiple geographies and business units, the coordination approach can lead to a spaghetti-like set of governance committees and processes. But with just one or two overarching enterprise goals, the coordination approach helps create a consistent customer experience or, in some companies, ensures regulatory compliance. Separate Digital Innovation Stacks. Enterprises with this structure and approach believe the key to their success is innovation via local management. Each of the separate stacks such as the different product groups, business units, or geographies is left alone to maximize its own local value without any coordination overhead. Taking this approach (e.g., News Corp.) commits a firm to local innovation, often organized by products or stand-alone businesses. These enterprises have decentralized management and diversified businesses. Capabilities are often duplicated with slight differences in each stack, and there is local accountability for profit and loss. Typically, though, some global risk management is necessary. As digitization increases and customers (and regulators) expect a more integrated multiproduct experience, we expect to see far fewer business units pursuing a separate digital innovation stacks strategy. Diversified enterprises, however, may still find it a useful approach. Identifying your enterprise s core strategic drivers is the key to deciding which approach is best to follow. Convergence is about reducing cost, reducing risk, and achieving synergies. Coordination is the right choice for enterprises that are trying to achieve a few enterprise-wide goals such as improving customer experience or asset utilization. Finally, the separate digital innovation stacks FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 21

24 approach is right for enterprises that believe autonomy helps improve innovation and local customer responsiveness. We believe that managing total digitization is one of the biggest opportunities and challenges facing enterprises and their CIOs today. We are already seeing companies in which the total digitization spend is over 25% of the operating budget and expect this will become commonplace. In our evermore fully digitized world, you need to strategically manage total digitization or you run the risk of digital anarchy in your enterprise. FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 22

25 ARE WE ASKING TOO MUCH OF OUR CIOS? BY TERRI GRIFFITH It is all well and good and true to say that the role and mandate of the CIO are expanding. Smart commentators here and elsewhere have described why and how that is happening. But too many organizations are stretching their chief information officers too thin. CIOs are being tasked with managing internal business systems, cloudbased services, big data innovation, data security, and the 24/7 needs of global customers who access company data on personal devices. Effective leadership and management across these areas is possible, but not without providing CIOs with the proper support structures and instituting necessary organizational alignment. It s time for a forward-looking but realistic assessment at the expanding role of the CIO, and what it takes to fulfill this successfully. Not surprisingly, the keys are balance, support, and alignment. Here are some constructive ideas: Ray Wang, principal analyst and CEO of Constellation Research Group, outlines four personas of the next-generation CIO: Chief infrastructure officer: Keeping the lights on and managing existing systems Chief integration officer: Bringing together internal and external data and systems Chief intelligence officer: Fostering business intelligence and getting the right data to the right people Chief innovation officer: Looking for disruptive technologies to drive innovation Today s CIOs must learn to balance all these personas. As Jennifer Kenny, CIO of SRI International, describes it, CIOs need to be whole systems thinkers and practitioners (that s business systems, not computer systems). Research focused on the careers of 14 highly successful CIOs found that, beyond the skills needed by all C-level executives (an extensive network, emotional intelligence, leadership, etc.), CIOs especially need: An integrative mind Focus and vision A trusting and trustworthy nature (to better build and nurture cross-functional teams) Finding people who have such a broad base of skills is problematic, at best. And juggling all these roles and responsibilities leaves CIOs with little time to think about innovation. Bruce Whetstone, an IT management consultant covering a variety of industries, argues that the CIO already has several full-time jobs, managing infrastructure and the integration of internal and external data and systems (Intel s CIO, Kim Stevenson, calls those roles table stakes ), as well as business intelligence. This doesn t leave much bandwidth for innovation. And Whetstone doesn t see many companies meeting IT halfway. Instead, people want to blame IT when the data isn t at their fingertips. Whetstone argues that companies need to do a better job of empowering the entire organization to access and manipulate data, while at the same time integrating the CIO s role more seamlessly into business units (and business unit budgets). Indeed, we may begin to see more business unit leaders in CIO roles in the future. For example, at the Las Vegas Sands Corporation an analytics-heavy business Rom Hendler serves as SVP, chief marketing officer, and interim CIO. Match the CIO reporting structure to the strategic goals of the organization. But empowering CIOs and employees throughout the organization isn t enough. Tomorrow s organizations will also need to align the CIO reporting structure to the strategic goals of the organization. Research from Dr. Rajiv Banker and colleagues at Temple University s Fox School of Business found that organizations with cost leadership strategies and CIOs who report to the CFO have higher performance than do peers with CIOs who report to the CEO. However, organizations with product differentiation strategies have higher performance when the CIO reports to the CEO. Alignment with strategic positioning will be key to success. The bottom line is that before we can ask our CIOs to do more for business, we need to evaluate how the organization can provide the support necessary for all four of the CIO personas to function. The right model for your own company may be to employ a single broad-based CIO who can deliver on all four personas; a technical CIO who works in collaboration with other IT executives with business backgrounds; or tighter integration across the C-suite, perhaps through formally aligning the goals of the CMO/COO and CIO. The office and activities of the CIO need to be in tune with the needs of the organization. This is more than a shuffling of responsibilities. Work toward a meaningful redesign that will carry you through the decade. FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 23

26 THE REAL POWER OF ENTERPRISE SOCIAL MEDIA PLATFORMS BY MICHAEL SCHRAGE An unusual and unusually rich funding opportunity inspired researchers at MIT and several other top-tier research institutions to improvise a comprehensive multimedia proposal on a tight deadline. While the schools own IT infrastructures and apps proved disconcertingly incompatible, Dropbox and skillfully edited Skypes facilitated exactly the kind of real-time and asynchronous coordination and version management needed to quickly deliver a knock their socks off plan. They won eight-figure funding. More humbly, incompatible communications networks and a lessthan-proactive IT department drove a company s supply chain and procurement teams to use LinkedIn, private tweets, and cutand-paste SharePoints to quickly coordinate go-to-market product changes with key vendors. The ad hoc network enabled suppliers to transparently coordinate and collaborate with each other as well as respond to their customers requests. These real-world vignettes highlight social media s underappreciated and undervalued impact within and between organizations: the power to self-organize. For completely understandable reasons, enterprise social media tools and platforms like Yammer, Chatter, Jive, and SharePoint have been branded as great ways to communicate, engage, collaborate, coordinate, update, and share information. That s largely accurate. But those pretty verbs obscure where the real action is taking place. Initiators and intrapreneurs aren t just using social media to make their efforts more transparent and accessible, they re using these platforms to improvise and organize new ways to get their jobs done. They re using these tools and technologies to add value to existing processes or, indeed, to create new just in time processes (and programs) that the C-suite and other senior managers had never envisioned. Social media inside the enterprise and out will lower the costs and increase the power of individuals to productively coalesce and coordinate on their own initiatives. In other words, social media tools enable gray markets in enterprise self-organization unanticipated by the organizations that provide them. Sometimes, organizations even experience black markets in social media-enabled self-organization when their people use unauthorized or unsanctioned platforms like Twitter, Dropbox, Skype, LinkedIn, Google+, and even Facebook to share ideas and coordinate their activities. Why? For reasons healthy and dysfunctional alike. More than a few organizations provide such poor communications and collaborative tools that the only way people can really do their jobs is to create and maintain their own collaborative networks. Even worse, some individuals and teams in troubled organizations use external social media platforms to facilitate their own enterprise springs so they can accommodate and counterbalance the perceived incompetence and/or poor behaviors of their bosses. Where IT once confronted the spectra of shadow apps and gray market computing, the rise of social media platforms inside the enterprise and out means that entire managements now see emergent leaders and processes. These aren t designed for or planned; they materialize directly from the perceived needs of concerned individuals and teams who now have the ability to self-organize inside the firewall and out because of these media. That s (potentially) revolutionary. That s also why so many organizations are understandably suspicious and/or wary of what enterprise social media platforms might truly represent. Yes, they re about communication, coordination, collaboration, and transparency. But they re also about power the power of individuals and teams to reach within and across enterprises to effect meaningful change. At Fortune s recent Brainstorm TECH conference, General Stanley McChrystal (retired) observed that technology had fundamentally changed how America s special operations command managed its special forces warriors. The technologies of situational awareness put soldiers at the front lines not the generals in the command centers in the best positions to decide how to best prosecute their missions. The general recognized that these technologies were better used to empower rather than to second guess. The bottom line: The most important impact of social media technologies comes from who and what they empower, not just the information they exchange. Do organizations appreciate and understand that these tools put them in the empowerment and not just the better communications business? FEATURED COMMENT FROM HBR.ORG [This blog post is] an insightful way of looking at how online communication technology has been evolving beyond just being a communication tool. Rahul Kumar FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 24

27 TODAY S CIO NEEDS TO BE THE CHIEF INNOVATION OFFICER BY DANIEL BURRUS Enterprise IT as we have known it is rapidly becoming obsolete, and the traditional role of the CIO is increasingly irrelevant. As gamechanging technologies transform every business process, they also give us the ability to create new products and services that were impossible just a few years ago. Therefore, the CIO s role must shift from protecting and defending the status quo to embracing and extending new, innovative capabilities. The old way was about technology centricity; the new way is about technology-empowered business strategies. The old way was information management; the new way is information intelligence. The old way was IT systems management; the new way is platforms that enable new value chains and integrated ecosystems. The old way was cost management; the new way is driving business transformation and accelerating growth. Today s world of business is not just changing it s transforming. What s the difference? Change is doing something in an incrementally different way. Transformation is doing something so drastically different that it becomes a qualitative, not just quantitative, shift. The moves from wax cylinders to acetate discs to LPs to CDs these were all changes. CDs to MP3s? Suddenly I can carry my entire music library in my shirt pocket, and my digital music player (which also happens to be my smartphone containing GPS, videos, and so much more) has no moving parts, unless you count electrons. That s a transformation. In the early 1990s, Barnes & Noble superstores changed how we shop for books. By the mid-1990s, Amazon was transforming how we shop for books, which then transformed how we shop for everything. As we all know, technology made this transformation possible. Transformation Drivers Today, technology-driven transformation is happening all around us. A few weeks ago, I was a keynote speaker at a large international technology conference, and one of the demonstrations to illustrate game-changing technology involved using an ipad and a high-speed connection to fully control three of the most powerful workstations engineers have access to. All were located in different parts of the country, yet with only the ipad wirelessly streaming to a large screen, thousands of people could see what the engineers were seeing and the user could control each workstation as if he or she was there. Doing all this from an ipad was impossible just a few months ago. I was in China two months ago consulting with CIOs who were not only using software as a service, but were also in the process of implementing hardware as a service, connectivity as a service, collaboration as a service, and security as a service. And the real excitement was around implementing everything as a service. Clearly, IT is quickly becoming an integrated collection of intelligent services that are on demand, on the move, and on any device. The visual, social, virtual, and mobile transformations that are already happening are creating a new golden era of technologyenabled innovation, and the CIO needs to be leading the charge. So what has enabled the business environment to go from merely changing to transforming? It s all thanks to three change accelerators: the exponential advances in processing power, bandwidth, and storage. I have been tracking their trajectory for the past 30 years and they have now entered a predictable new phase due to their exponential growth a phase that will transform every business process. Think of it this way: Based on the technology-enabled hard trends that are already in place, over the next five short years we will transform how we sell, market, communicate, collaborate, innovate, train, and educate. And if you don t do it, someone else will. In fact, with all the business processes technology is transforming, nothing is transforming more than the role of the CIO. The New Role The CIO s traditional role, which is one of managing information, IT systems, and cost, has itself transformed to creating new competitive advantage, new products, and new services. Traditionally, the CEO was the innovator, but many of today s CEOs as well as the rest of the C-suite are unaware of what is technologically possible now or in the future. However, the CIO does have interest to, access to, and the understanding of that type of information and knowledge, which is why the CIO position needs to transform into the chief innovation officer. Of course, not all CIOs will embrace their new role. As our environment transforms, human nature is to hunker down because we want to find comfort. Many will be far too busy doing what they have always done. Many will spend a lot of time protecting and defending the status quo. Why? Quite simply, because we re familiar with it. We know how it works. We have an investment in it. It has made a lot of money for us. It got us to where we are today. FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 25

28 Therefore, the mind-set is that we have to protect and defend it any way we can. An additional burden CIOs have is the nature of the work itself. They have to maintain the existing system to make sure it s working, that there are no breaches, that it s being upgraded, etc. After all, you have to keep the organization running smoothly during the transforming time. But if that s all you re doing maintaining what s already there then your role is tied to the past and your relevance is decreasing every day. So while you do have to maintain your current and past systems, your new most important role is to drive internal and external innovation. And because innovation is increasingly technology-driven, the CIO is in a perfect position to lead this evolutionary revolution. The fact is that the ability to innovate has never been more possible and has never happened faster. In transformational game-changing times such as we re experiencing now, the key rule is this: If it can be done it will be done and if you don t do it, someone else will. Likewise, if you don t change the focus of your CIO role, someone else will. FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 26

29 THE FUTURE OF CORPORATE IT LOOKS A LOT LIKE GOOGLE BY JEANNE G. HARRIS, ALLAN E. ALTER, AND KELLY L. DEMPSKI They tweet. They showroom. They pin and like and yelp. And whenever they do, customers accelerate corporate IT s biggest challenge: to rethink and reinvent itself. The implications stretch beyond any one hot seat in the C-suite. More than ever, customer experiences are based on a foundation of technology and delivered to a digitally savvy population. Digital experiences come in many guises: mobile apps, websites, howto videos on YouTube, LCD screens on products (think of exercise machines that track calories burned). Some experiences come through channels that companies can influence but not control, such as social networks and review sites. Digital experiences unleash more ways for companies to influence and satisfy the customer, and differentiate themselves from competitors. But there s a catch for CIOs and other tech-minded executives: to keep creating opportunities, companies must keep changing the experience or fall behind. Each generation of technologies raises customer expectations beyond the last. In part, this is because customers will keep raising the bar for satisfaction and attention as they use the new technologies and services. But emerging technologies will also enable customer experiences that are far superior to those of today. For example, companies will anticipate customers future needs and act like personal advisors. Already, Google Now works on an anticipate and deliver basis: the technology delivers information that s needed before it s requested. Companies will assist customers as they cross back and forth between physical stores and the online world. Spanish clothing chain Desigual has moved part of the way there, creating flagship stores in Paris and Barcelona that only stock samples the customer can try on different looks, then purchase the clothes online. Tomorrow s digital experiences will offer new kinds of value, solving needs that did not exist before in locations that didn t exist before. When driverless cars roam the freeways, cars are no longer just vehicles. Their interiors will be designed to be whatever passengers want, be it a theater, office, or shopping mall on wheels. And who wants digital gift wrap? An MIT start-up called Delightfully is betting people who give online gift certificates will appreciate it. The problem for companies is that once customers see something cool, different, or better, they expect to see it everywhere. This puts immense pressure on the organization to keep up with the competition while trying to innovate in its own right. It s a digital arms race, and corporate IT and other functions must be battle-ready. How can companies exploit digital technologies to deliver compelling customer experiences time and again? Executives across the C-suite will need to work together with corporate IT and F.O.C.U.S.: Frame strategy based on a new model of customer interaction. Traditional customer acquisition strategies won t work because the path to purchase is no longer linear. Customers now find, evaluate, discuss, and buy products nonstop, bouncing from one stage to another. A complaint on Facebook or a recommendation on a fan s website can hasten or redirect a purchase. This upheaval requires a new way of thinking that spans the physical and digital worlds. Optimize marketing efforts to achieve influence at scale. Word of mouth still influences purchasing behavior. Only now, social networks increase that circle from a few trusted friends and family to hundreds of people online. By studying what customers do with social media, and identifying their sharing patterns, companies can provide attractive online social content at the right time to the right people. Create new digital experiences by adopting Silicon Valley s approach to innovation. The tech staffs at companies like Google, Facebook, and LinkedIn use agile, iterative development techniques to deliver improvements fast. They quickly test new services and features with actual customers and data. And by tapping crowdsourcing and open source communities, they bring more ideas to the table and turn them into products fast. Use in-depth analytics to understand customers better. Creating digital experiences built on the cloud and analytics will rewrite how marketing and sales teams work and break down internal silos. For example, when companies capture and analyze their customers interests, and integrate them with data from other sources, marketers and developers can better predict and influence consumer behaviors and deliver more personalized experiences. Social media and marketing data can also be integrated with warranty data and post-sales and service feedback. Set up enterprise IT that can design, build, and run digital experiences. The bottom line for CIOs: To serve the accelerat- FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 27

30 ing demands of digital customers, IT organizations will have to behave more like Amazon or Google, and less like their traditional competitors. Legacy systems often prevent it. They are unable to manage unstructured or non-numeric data, or too inflexible to develop new features at Valley-like speed. But that won t be acceptable to other executives. They will wonder why their IT organizations can t be more like Facebook s hackers and make thousands of bug fixes, improvements, and new features each week. For corporate IT to remain relevant, it must get its house in order now or risk irrelevance. If rethinking corporate IT leads to a fresh start for corporate IT, so be it. The business side cannot afford to wait while today s customers tweet, like, and yelp. FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 28

31 PLATFORMS ARE THE NEW FOUNDATION OF CORPORATE IT BY MARK P. MCDONALD Reinventing corporate IT requires recognition of deep differences between what we have today and what we need in the future. These differences go to the foundation of the modern corporate IT department the infrastructure which includes the software, hardware, communications, facilities, data centers, operations, and other technical resources a corporation operates. This infrastructure sits on top of a publicly available substructure of assets and resources telecommunications and the Internet, for example. Infrastructure and substructure support the information, processes, applications, rules, and channels that are the face of corporate IT. Infrastructure largely determines the IT organization s structure, its budgeting, how the corporation goes to market, its legacy, and its capacity to change. It embodies the long tail realities of major business and technology decisions, resulting in an IT department struggling to manage multiple costly and incompatible infrastructures. The days of seeking a single, one-size-fits-all, one-price-feeds-all IT department are numbered. Infrastructures are under assault technically, functionally, and financially. New digital technologies like mobile, big data, analytics, the cloud, social media, and sensors represent fundamentally different types of solutions than do proprietary transaction technologies such as enterprise resource planning. Consider: Standards-based (rather than proprietary) technologies in mobility, Internet protocols, and open APIs demand shorter application and infrastructure development cycle times. Standards reduce not only the amount of technology but also the risk associated with bringing new and legacy technologies together. Functionally, digital technologies are front office, customerfacing, and demand-generating. They re the business s brand. Digital demands move at the pace of the market, competition, and customer expectations rather than the upgrade cycles of IT vendors. Financially, infrastructure is simply too expensive and consumes too much in its present form. CIOs need to provide infrastructure at a lower cost and with more agile capability. Even current cloud and virtualization technologies, which often lower unit costs, don t change the drivers and structures of those costs. It is only a matter of time before growing digital transaction volumes overwhelm these technologies in their current forms. Increasing needs for speed, creativity, low cost, and flexibility demand that we move beyond infrastructure to platforms. A platform is the collection and integration of common resources that support multiple business operations. Financial services companies have platforms that allow them to release new products without having to replace their infrastructures. Facebook, Google, and other digital companies invest in similar capabilities, which give them a seemingly endless stream of innovations and experiments from a single platform. Plures ex uno or many out of one is the goal of a digital platform. Note that this is the opposite of the motto of the United States e pluribus unum or one out of many. The comparison is apt, as corporate infrastructure is federated in nature with limited viability in the digital future. A platform is more than a service-oriented architecture on steroids. Platforms look at technology with a business view organizing around specific business actions like one-click sales, search, description presentation, and pricing. These common actions treat information rather than business logic or code as the source of specialization. This enables platform companies to add new features and functions once that are available to all or just a part of their customers, giving them the flexibility and adaptability required in modern business. Platforms reflect the heterogeneity of digital technology, allowing each part to change without disturbing the peace across all components. Platforms are critical for a world of consumer-driven technology, multivendor competition, and standards wars fought in the marketplace rather than the lab. Platforms fit the economics of digital business. They provide a means to gain scale efficiencies from across the enterprise rather than trying to drive them across individual infrastructures. This is essential in a world where IT transaction volumes grow faster than business purchases. Consider online banking where many transactions are free of charge but have a real cost to the bank. Platforms provide a way to drive down transaction costs and preserve company margins. Platforms require more than stitching together existing infrastructures. More interfaces, more integration, and more condition-specific logic may be interim steps, but they only add cost, complexity, and core rigidity in the corporation. FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 29

32 Achieving the functional and financial benefits of a platform involves going back to the basics of business not transactions. Yes, the devil is in the details. And yes, we have tried a service-oriented architecture and virtualization before with mixed results. Reinventing corporate IT requires more than changing the role of CIOs and IT in a digital age. Reinvention at scale must extend down into the fundamental drivers of IT cost, quality of service, and future flexibility. That starts with reinventing the foundation of IT and abandoning the infrastructure model. FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 30

33 SHOULD YOUR CIO BE CHIEF DIGITAL OFFICER? BY GEORGE WESTERMAN We ve all seen it. CIOs who do great things in leading IT soon gain extra responsibilities. By helping business leaders improve their businesses, the CIOs become obvious candidates to fill any open role that involves technology, process, or strong governance. Some CIOs become CIO-Plus-COO or CIO-Plus-Head of Shared Services. Others gain new responsibilities in strategy, M&A integration, or innovation. Still others move on to business roles including CEO. In the book The Real Business of IT: How CIOs Create and Communicate Value, Richard Hunter and I coined the phrase CIO-Plus. In the four years since our book was published, the CIO-Plus idea has gained real traction, and there are numerous stories and case studies on the phenomenon. But there is another leadership role that has arisen in many organizations in recent years: the chief digital officer (CDO). In many companies, digital is a cacophony of disconnected, inconsistent, and sometimes incompatible activities. One company had three simultaneous mobile marketing initiatives, conducted by different groups, using different tools and vendors. Other companies have multiple employee collaboration platforms with different rules and technologies. The problem is exacerbated as business units do their own things digitally, or as companies hire vendors who can do things only their own way. If your company has wildly different digital marketing activities for each brand or region, you know what I mean. The CDO s job is to turn the digital cacophony into a symphony. It s OK to experiment with new businesses and tools, but experimentation must be coupled with the building of scalable, efficient capabilities. The CDO creates a unifying digital vision, energizes the company around digital possibilities, coordinates digital activities, helps rethink products and processes for the digital age, and sometimes provides critical tools or resources. That s why Starbucks an early leader in all things digital hired a CDO last year. And it s why many other companies are naming CDOs before they get too far along the digital road. The title CDO may or may not become permanent in your company. But the responsibilities of the CDO will be required. You may appoint a temporary CDO to get your house in order, or you may develop other ways to get the job done. Whatever approach you choose, you need to create appropriate levels of digital technology synergy, brand integration, investment coordination, skill development, vendor management, and innovation over the long term. Is CDO the next step for the aspiring CIO-Plus? The answer is not obvious, but it s well worth considering. Many of the CDO s roles are challenges that great CIOs have already mastered in their own domains. But some, such as brand synergy, are new to the CIO. Diverse companies are responding to the digital leadership challenge in different and dynamic ways. Although relatively few CIOs have an official CDO title, roughly 20% of CIOs in Gartner s latest survey said they played the role. At Codelco, the world s largest copper mining company, CIO Marco Orellana is helping fundamentally transform the process of mining and selling through digital technologies such as real-time coordination, analytics, and autonomous vehicles. At Asian Paints, Manish Choksi managed the difficult step of centralizing and standardizing processes across a loosely coupled set of regional units. Now, as CIO and chief of corporate strategy, he leads the digital transformation of manufacturing, selling, and customer service. In some companies, the CIO and CDO are deliberately separate roles. The CIO of an apparel company participates in digital decisions and supports digital initiatives while keeping the company s traditional IT unit running smoothly. He is not seen as a potential CDO, but the company values his skills in a strong supporting role. Meanwhile, Starbucks CDO Adam Brotman and CIO Curt Garner work very closely as a team to drive digital strategy and execution. Then again, executives in some companies feel their CIOs do not have what it takes to be part of the digital conversation. The CIO of a business services provider had little role in digital at all; the CEO asked him to focus only on legacy IT systems while a newly hired CDO managed digital activities. Two years later, the company moved all IT functions under the CDO, and the CIO moved to a new firm. So, should your CIO take on digital responsibilities? Here are some questions you can ask yourself: Is your CIO great at the CIO role? Is IT clearly running well? Are IT costs and agility what you want them to be? If your answer to these questions is no, then you probably want your CIO to focus on fixing IT, not expanding beyond IT. Is your CIO ready for a CIO-Plus role? Do you see your CIO as a senior executive colleague or just a leader of the technology function? Has he successfully managed nontechnical roles such as merger integration, process management, or shared services? FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 31

34 Is your senior team smarter when your CIO is in the room? Does your CIO have digital expertise? Can she talk the language of social media or mobile or analytics, and can she help you understand? Does she understand the digital threats and opportunities your company faces from inside and outside its industry? Can she create a compelling digital vision for the firm? Will your CIO command respect across the enterprise? The CDO role can require even more political savvy and communication skills than the CIO role does. Is your CIO up to the task of driving change across a strong-willed senior executive team? Can she engage a busy workforce to turn digital vision into reality? In an increasingly digitizing business world, most companies need better digital leadership and coordination. You need to create a compelling digital vision, coordinate digital investments, drive appropriate synergies, build a clean technology platform, and foster innovation. You need to energize a busy workforce and generate shared understanding in your senior executive team. If your CIO is good, look to him for help. Strong CIOs have already tackled some of the tough challenges of digital leadership. They understand the importance of governance and policy. They know the intricacies of managing across organizational units. They tend to be highly connected with senior executives, having helped them achieve their objectives over the years. They know the current business and the future opportunities technology can create. Plus, in any big company, it s difficult if not impossible to build great digital capabilities without linking to your existing IT capabilities and people. So, should your CIO be CDO? You need to get the digital leadership job done, whether through a new C-level title or through other methods. If you have a great CIO, give her some digital responsibility. You may not choose to make her your digital leader. But the skills and relationships of a great CIO will be an asset to any digital leadership team. FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 32

35 AVOIDING THE SCHIZOPHRENIC IT ORGANIZATION BY DONALD A. MARCHAND AND JOE PEPPARD A pharmaceuticals company we ve been studying decided to deploy more than 20,000 ipads and other mobile devices to the global sales force to improve its engagement with doctors in emerging and developed markets. Over the next two years, this change in how salespeople interact with customers will redefine what the product content will be; how the sales staff will use a new CRM platform to record visits online; and how new insights will be derived from these interactions across sales, marketing, and brand management ultimately driving decisions. The impact on the company s IT organization has been significant. It has never before rolled out something at this speed. Welcome to the new world of IT. Increasingly, business leaders are driving transformation projects in areas like digital marketing, multichannel sales, and product content and customer information management, pushing the CIO and IT organization to respond in new, faster, and different ways. The timetable for implementing these projects is often months, not years. For CIOs, the good news is that they re now finding themselves at the center of business change with the opportunity to directly impact frontline business results. The bad news (if it is bad) is that business managers expectations of the CIO and the IT organization are soaring; they have a no excuses view of IT responsiveness. This is giving rise to a schizophrenic IT organization. One side is focused on running global infrastructure and implementing bigsystem application programs over three to five years, where the emphasis is on compliance, security, reliability, and effective 24/7 operations. The other side is focused on making IT happen rapidly without the complex plans and multiyear rollouts that have been institutionalized in large IT organizations. The challenge for C-suite executives, including CIOs, is to avoid an either/or view of IT-enabled business change and to have the maturity to embrace both sides of the challenge at the same time. The logical response might seem to be to restructure and reskill the IT organization (again!) to accommodate the new demands in particular, to acquire the skills to deploy emerging technologies like mobile, social media, analytics, and big data. This, we contend, is unlikely to achieve much. What is required is a fresh perspective and novel thinking. The perspective we are advocating is shaped by shifting focus away from portraying the challenge as nailing the design, competencies, and skills of a separate organizational unit. The fact is, IT use is pervasive right across the organization; so any response should reflect this. Executives must consider IT less from the standpoint of a factory (the current mind-set) and more from the perspective of how people are managed. Just think about it: As a manager, you are intimately involved in hiring and managing your staff and appraising their performance; it is not something that you would ever consider delegating to the HR department. Your HR colleagues do have a role to play, but it s an advisory, coordination, and compliance role. They may, for example, liaise with recruiters in identifying potential candidates, help in positioning any advertisements, and work with you to develop talent. Given that you are likely to be critically dependent on information and IT in the performance of your job, why is information and IT treated so differently? Based on our research, we think organizations should embrace three interdependent roles for managing information and IT: orchestrator, broker, and value realizer. The orchestrator role involves coordinating how information will be used across the organization, determining where enabling investments will be made, defining the architectural standards needed for integration and process standardization, balancing agility and stability, and determining policies regarding the protection of information. The role also incorporates an oversight function. The broker role revolves around the supply of IT, applications, and services. These may be brokered from in-house resources, although it is increasingly likely that they will be provisioned from external sources. Even if all applications and services come from the cloud, this must be done within a framework that takes into account both risk and architectural integrity. The role also entails continually assessing the economics and performance of supply to ensure that the organization continues to get the most bang for its buck. The value realizer role is to ensure that the full value from IT investments is achieved. For new investments, this is about managing organizational change and driving use of information. This change enabled by technology must then be sustained over the life cycle of the investment for all the expected value to be delivered. FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 33

36 While the details of these roles may not be new, how each role will manifest itself in an organization most definitely will be. We don t see these roles necessarily aligning to a particular individual (e.g., the CIO); rather, you should treat them as a set of connected behaviors, obligations, beliefs, and norms that will affect a broad range of managers and staff in an organization. (For example, this thinking will accommodate Gartner s suggestion that the chief marketing officer will spend more on IT than will the CIO by 2017.) Nor are these roles likely to reside in a single organizational unit (i.e., the IT function). The challenge is to reconfigure resources and accountabilities across the organization to meet the remit of these roles. This is where the shift in mind-set provides the foundation. This will not be easy, but it s the challenge business leaders face if they are to avoid the schizophrenic IT organization. FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 34

37 MOVE BEYOND ENTERPRISE IT TO AN API STRATEGY BY THOMAS H. DAVENPORT AND BALA IYER For the vast majority of organizations, the IT function s focus has been inside the enterprise. They might allow some occasional website browsing by employees (though many sites are banned), and perhaps an inbound website or intranet for customers to enter an order. The focus, however, has been on protecting a walled garden of information transactions. We think the emphasis should instead be external. Toward this end, we increasingly see sophisticated organizations competing in an API economy in which application programming interfaces are the primary approach to interorganizational collaboration and information exchange. APIs, which are specifications or protocols for how to exchange information or request online services from an organization, are already booming in online businesses. As more companies realize that information is key to their product and service offerings, and that they need an ecosystem to provide those offerings, APIs will grow further in popularity. Many of today s ecosystem members are coders and app developers, and APIs are how they interface with provider organizations. Netflix provides a great example of the role of APIs in a successful information-oriented business. Correlation is not causation, but there seems to be a close correlation between the growth of Netflix s stock price and the rise in the number of API calls it gets. The latter figure is close to 50 billion per month now (from about 2 billion three years ago), which is a powerful indicator of how open the company has become. Netflix makes movie and TV content available through a variety of devices, from iphones to PlayStations to many smart TVs. The company also makes available other information content to many sites, including its catalog, recommendations, and ratings. All this content makes its way to sites and devices outside of Netflix through the magic of APIs. a largely closed industry; health records systems like EPIC and GE Healthcare IT are protected environments, largely closed to external ecosystems. One exception to this pattern is athenahealth, a Boston-based software-as-a-service health records system company that is trying to engender a health information ecosystem. Called More Disruption Please, the movement has elicited a few development partners, but CEO Jonathan Bush would like to see more. RunKeeper, a tracker of fitness activities, has had somewhat greater success in building an ecosystem, but it s more about fitness data than health information. Of course, an API strategy is not a binary decision to use it or not to use it. There are public (open to everyone) and private (open only to certified developers or partners) APIs. There are free APIs (Google s, for the most part, although Google charges under certain circumstances) and flat-fee or revenue-sharing ones (Apple s, for the most part). There are information and services that you want to give your ecosystem access to, and those that you probably should keep to yourself. In short, your organization needs to debate the various elements of an API strategy, and then you need a set of governance mechanisms to enforce it. So if your enterprise IT is only focused on the internal enterprise, you re already falling behind in the API economy. You need to start building an ecosystem, and APIs are the way to do it. FEATURED COMMENT FROM HBR.ORG Excellent post very interesting concept and trend. [This blog post] has made me think about using this for client-facing purposes. Sukumar Rajagopal Other companies with strong API-based ecosystems are Salesforce. com, Facebook, Twitter, Google, and ebay. All have seen fantastic growth. They all need API-based ecosystems because consumer demands are hard to predict and they use a wide range of devices. Opening up APIs lets organizations outsource innovation by allowing third parties to experiment with their information assets and share revenue streams. They can also control usage when necessary by limiting access to partners they choose. However, there are other sectors that have not yet opened themselves up to ecosystems with APIs. Health care IT, for example, is FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 35

38 HOW IT PROFESSIONALS CAN EMBRACE THE SERENDIPITY ECONOMY BY DANIEL W. RASMUS With Frederick Taylor s invention of scientific management in the 1880s, and its subsequent assimilation into what we now consider modern management, organizations have used logic and rationality to eliminate waste, seek efficiency, and transfer human knowledge to tools and processes. This perspective created the industrial economy lens through which most managers perceive their operations. The industrial-age economy does not exist in a vacuum. Running alongside it is the Serendipity Economy, an economic space where often random, always unanticipated interactions occur that may lead to value. Industrial-age measures can t evaluate Serendipity Economy results, and so leave its outcomes like invention and innovation, process improvements, and new businesses relegated to the evidence of anecdote. IT professionals need to recognize and embrace the Serendipity Economy in order to better understand the impact of technology investments, improve employee engagement, and drive business transformation. Serendipity into Performance The depths of the Serendipity Economy can t be plumbed in a single short post, but its principles and implications can be spelled out so IT professionals can turn ideas into action. The process of creation is distinct from value realization. Consider the slide deck. Microsoft provides productivity tools that create presentations quickly and efficiently. But nothing in Microsoft s Office suite ensures that the resulting presentation represents anything of value. Cost and time savings should never be the primary reasons for purchase or upgrade decisions. IT needs to create models that examine and reflect the potential for enhanced value coming from such systems. For companies with existing productivity suites, the incremental improvements of new productivity features are small; however, the integration of collaboration features may significantly improve the value realization of the underlying productivity suite. Value realization is displaced in time from the act that initiated the value. A presentation developed for a conference does not produce much value until it is actually presented, an event which may occur weeks or months after the document is completed. Technology investments work the same way. Take for example 7-Eleven, a company that implemented enterprise social networking with no idea as to its eventual use. It languished for months, until 7/11/2011, during the company s birthday celebration, when franchise managers started sharing merchandizing practices. The managers haven t stopped talking to each other. Not only have managers started sharing merchandizing insights, but they also share maintenance tips, and the corporate offices now regularly tap store manager knowledge to help interpret business intelligence results. The implication for IT leaders is that for horizontal technology, like collaboration and enterprise social networking, one must look past time and cost savings and track longer-term, often unanticipated payoffs. The measure of value requires external validation. Once a presentation is delivered, the only way an organization knows whether the message landed is to ask. Serendipity Economy outcomes can t be assigned a value associated with their means of production. These outcomes require feedback in the forms of surveys, discussions, or collaborative feedback to determine what value they may have contributed. Thus, if a process doesn t result in direct value, one should track and ask. Tags like #newproduct or #processimprovement can provide entry points for monitoring the progress of ideas that arise from, or quickly develop, within enterprise social networking environments. Use short, specific surveys to understand whether new technologies, or new ideas, are taking hold, and what value, if any, they may have generated, and how long it took for that value to be realized. Value is not fixed, and cannot be forecasted. The value of a knowledge asset varies depending on who receives it, when they receive it, and their perceived need for that asset at the time. This can t be forecasted. Technology as well, deployed at one point in time and deemed useless, may reveal value as personal, business, and technological circumstances change. So don t assign too much validity to return-on-investment models for horizontal IT products or services. The forecast will likely be significantly discounted from actual results that arise from serendipitous activity. You can t anticipate the network s potential for value or any actual value it may produce. The Serendipity Economy is not bound by the creation of assets, artifacts, or things. It also encompasses human networks. Because of complex interactions, the current value of a network may change significantly depending on who takes part; the topic of engagement; and the ability, FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 36

39 capability, or permission to execute. That means small pilots won t demonstrate the ultimate value or utility of any horizontal product or service. Rich and complex networks will result in serendipitous activity much more so than pilots. Deploy widely early, and monitor a broad spectrum of results for productivity improvements and serendipitous outcomes. Serendipity may enter at any point in the value web, and it may change the configuration of the value web at any time. Value webs represents human networks at work. These dynamic webs result in different potentials for generating and absorbing value. Changes in value webs reinforce the fluctuating value of knowledge or ideas, and this instability essentially eliminates the ability to forecast value from the current state. IT leaders should therefore deploy systems that can adapt to changes, and leverage those changes to produce outputs and outcomes that might not have been anticipated by the designers. In collaborations systems, for instance, don t overly engineer processes so that they constrain a system s ability to adapt. The Serendipity Economy often unconsciously drives the broad adoption of enterprise social networking because it more readily captures, tracks, and facilitates serendipitous activities than do systems designed to control rather than empower. Courage and Patience IT leaders and their business counterparts need to acquire the patience to monitor serendipitous activity, and the courage to protect technologies and ideas that may take time to mature, or changes in circumstance to reveal their true value and the willingness to empower people to embrace, explore, and follow serendipitous activity wherever it may lead. That means not just finding serendipity in the business, but examining your own shop for new value that can t be found in lines of code per day or the speed of a call center response. FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 37

40 IT S C-SUITE PROBLEM BY ANDREW HORNE AND BRIAN FOSTER Employees in today s interdependent, knowledge-intensive workplace have IT needs that are diverse, fast-changing, and difficult to articulate. But when we at CEB ask CIOs who in IT is responsible for understanding and responding to these needs, we get an uncomfortable silence. For years, CIOs have sought a seat at the table by building strong links with senior business leaders. Their approach has been driven by the assumption that senior leaders speak for employees on the front lines. This may have been true in the past. But as the workplace becomes more collaborative and knowledge-intensive, and as employees IT needs diversify, the assumption no longer holds true. In fact, relying on senior relationships is not only inadequate, it can lead IT to pursue the wrong priorities. Instead, IT should interact directly with individual employees to identify their needs and to generate innovations. The most progressive IT organizations are taking three steps to engage directly with employees and to better serve their needs: Making User Experience Design an IT Priority If IT only listens to senior leaders, investment in user experience tends to be deprioritized, as it is cheaper and faster to deploy whatever interface the vendor provides. Many companies spend money to improve interfaces used by customers, but don t think the investment is worth it for their own employees. However, if you actually ask employees what they want from IT, an intuitive, easyto-use interface comes high on the list. And user experience is even more important when employees can choose to use nonsanctioned external technologies instead. In response, leading IT groups are increasing their user experience capabilities and making usability an important measure of project success. In each case, IT is treating employees as its customers and responding to their needs rather than to what the C-suite thinks those needs are. Developing Employee-Focused Interface Roles Service managers, business analysts, and the service desk all have roles to play in building stronger relationships with frontline employees. Service managers should understand what employees need from the services they offer and continually enhance their services to meet these needs. At progressive companies, we are beginning to see business analysts expand their remit beyond projects so that they, too, can help identify emerging needs. The service desk, if correctly resourced, can act as the eyes and ears of IT, picking up on employee challenges and needs in their day-to-day interactions. Adapting Product Marketing for IT Many of the techniques IT requires in order to understand employee needs already exist in marketing and product management. For example, we worked with a large packaging company where IT service managers adopted the concept of market share management. They track the penetration of their services and manage a queue of enhancements designed to boost their market share. The CIO at another leading company employs staff with anthropological and ethnographic research skills to shadow employees, since anthropologists are trained to spot hidden trends and behaviors unobtrusively, without leading the witness or introducing biases. FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 38

41 THE BUILDING BLOCKS OF SUCCESSFUL CORPORATE IT BY R. RAY WANG The job of chief information officer has never exactly been easy. But massive disruptions in business models, technology, and the workforce have been throwing up massive new challenges for CIOs and other technology leaders. Their organizations face disruption from both traditional and nontraditional competitors, and constant change. If they work for a product company, it may be looking to services revenue for growth. If they work for a service firm, it s probably seeking new revenue from information-based differentiation. Meanwhile, informationbased businesses which used to sell, you know, information now sell outcomes and peace of mind. We are in the midst of a digital business transformation in all industries. On the technology front, the CIO s once tight hold on the devices and software employees use has evaporated (except perhaps in the financial world, where regulation keeps legacy systems in place), as markedly better and more adaptable consumer tools have conquered the workplace. Meanwhile, CIOs must cope with five generations of workers digital natives, digital immigrants, digital vagabonds, digital voyeurs, and analog holdouts who must work side by side. These workers bring different values on how to work, where to work, what to work on, when to work, and even why they work. Consequently, CIOs and business leaders with a technology focus face more cacophony and challenge than ever before. On the plus side, though, they can play an increasingly key role in orchestrating and driving overall organizational success. Despite outward differences by industry, organizational size, and geography, we ve seen certain commonalities in those who successfully lead corporate IT amid rapid change. The persona of the next-generation CIO is evolving from chief infrastructure officer through chief integration officer and chief intelligence officer to chief innovation officer. Skill sets are changing and IT leaders must adapt or die (or at least go into another line of work). Understand the three organizational building blocks Many CIOs are of course already well aware of all this. Others in their organizations, however, are often less so. In our research and CXO panels, CIOs tell us there is a high correlation between organizational alignment and successful corporate IT. For a CIO or other technology leader to make the move successfully from infrastructure to innovation, three key building blocks must be in place. 1. Organizational DNA. Market leaders and fast followers seek transformational change; cautious adopters and laggards dip their toes into incremental change. Market leaders and cautious adopters proactively seek change; fast followers and laggards take a reactive approach. (See accompanying chart.) CIOs in market-leader and fast-follower organizations can move quickly and push for a great amount of change. In cautious adopters, the politics are trickier but not impossible. And if you work for a laggard, good luck! 2. Reporting structure. CIOs who belong to the executive management team can play the strategic role that s key to success. As a member of executive management, a CIO can serve as both a utility and a strategic advisor to the business. Unfortunately, there s a trend afoot to have CIOs report to the CFO, which relegates the position to a purely cost-centric, tactical role. 3. Budget. At most corporations, infrastructure consumes anywhere from two thirds to three quarters of the technology budget, leaving little over for integration, intelligence, and innovation. Corporate IT success requires a reduction of infrastructure to 50% of the budget in order to fund the other, more forward-looking areas. Having the right building blocks in place is essential to a CIO s and an organization s success. Corporate boards should take note. It s not just CIOs who need to evolve. Organizations need to change as well to ensure that their technology investments lead to successful corporate IT. FROM THE HBR.ORG INSIGHT CENTER REINVENTING CORPORATE IT 39