The CIO: From Cutting Costs to Driving Growth
As the founding CEO of the Index Group (later CSC Index), Tom Gerrity helped lead the early revolution in how information technology was viewed in the organization. In the late 1970s and early 1980s, he and colleagues realized that instead of merely automating old business processes, IT could be used to reshape business processes and strategies. Business process reengineering was born. A few decades later, information technology is now such an integral part of business that the technology and the business are inseparable.
These changes have raised expectations and created new challenges for the Chief Information Officer (CIO). In collaboration with Gartner, the Wharton School is launching CIO as Full Business Partner, a new executive education program to give CIOs the high-level business knowledge they need to lead successfully.
"Applications of information technology have become more complex as technology becomes woven into every aspect and fabric of the business," said Gerrity, who is a Wharton professor and academic director of the 5-day program that runs for the first time in October. "To achieve real returns on investments in information technology, CIOs need a thorough understanding of IT and a thorough understanding of the key dynamics of the business. All this is clearly much more complex than running either a business or running IT alone."
Changing Roles: Driving Innovation
Gartner's annual survey of CIOs highlights some of the shifts. The 2007 survey of more than 1,400 CIOs found that highly effective IT organizations have moved from a focus on operational excellence to "enterprise leverage." These organizations began by improving costs (function), then focused on quality of service (quality) and next concentrated on improving business efficiency (process). In the future, they should expect to move increasingly toward a focus on innovation through information to leverage IT across the organization.
The survey found that the best IT organizations are leveraging their technology for competitive advantage. Among top performing IT organizations, 64 percent use IT for competitive advantage versus 32 percent for peers. At the same time, CIOs still need to sustain their focus on cost, quality, and processes. CIOs need to achieve high levels of performance in their own organizations, and they expect only modest increases in their budgets.
"The role of the CIO is changing dramatically," said Mark McDonald, group vice president and head of research for Gartner executive programs. "We are seeing effective CIOs moving from implementing and operating technology to changing the way the enterprise works. This new program came about because of that shift."
Organizations increasingly expect IT to drive innovation and growth. Gartner found that 61 percent of organizations plan to grow market share or expand their mission, twice as many as in 2006. These organizations are looking to IT to drive both growth and performance. While the top three priorities of CIOs continue to be improving business processes, controlling costs, and improving customer relationships, driving revenue growth moved from eighth place to fifth place in the most recent survey.
"We found strong connections between effective IT organizations and the ability of the organization to innovate," McDonald said. "For the first time since the birth of the Internet, IT performance is now critical to CEOs in achieving their growth strategies."
This use of technology to drive innovation and growth can be seen at UK television station Channel 4. The channel, which must support itself without public funding (in contrast to the BBC), has been able to grow its business through new media. In addition to sustaining its strong core television channel, it has created new genre-focused digital channels and a broader portfolio of content. This has required building a diverse set of new and old technologies, including television, print, blogs, and social networking. Channel 4 has changed its revenue models in some areas, from traditional broadcast advertising to paying for downloads, for example.
"We need to be where the audience is; and now that the Web has gone to video, we need to become more accessible, enrich our online offerings, and harness our strength in video content," Channel 4 CIO Ian Dobb told Gartner. "We need to be very knowledgeable about the business and work cohesively with trusted partners."
Career Paths: The Need for Broader Business Knowledge
While many CIOs still come up from the technology organization, more are drawn from other parts of the business. "More and more companies are seeing mobility across the organization," Gerrity said. "You might see a CIO whose last position was a business unit head. And IT teams may end up in a position of greater responsibility in the organization they are serving."
The Gartner survey found that CIOs need to increase their performance to meet future business demands. In particular, Gartner found that they need to increase their skills in leadership, planning and strategy, IT governance, program and project management, IS organization, IT financing and budgeting, and IT performance management.
"CIOs will face demands to implement new capabilities that require IT business skills, technologies, and leadership that few of them are well prepared to deliver," McDonald said. "CIOs have to build more general management skills because the role they are playing is bigger. The flipside is that we are increasingly seeing general managers becoming responsible for IT."
The CIO as Full Business Partner program combines Gartner's deep industry expertise with Wharton's strengths in leadership and diverse areas of business knowledge. "It is a unique program," McDonald said. "Every CEO should think about sending their CIO to it because it does have this interaction between business and technology, which is essential. This program offers world leaders from both perspectives, coming together and collaborating."
The program helps CIOs to be knowledgeable partners by seeing the business through the eyes of other members of the leadership team. "The key to the role of the CIO is integrating," Gerrity said. "One way to integrate is for the CIO to build very strong partnerships of mutual understanding with business unit heads, business function heads, and other senior leaders. "The focus of this program is not so much on the traditional role of managing information technology effectively — most CIOs have dealt with that for decades. The focus is rather on building relationships and partnerships across cross-functional teams of business and IT people to accomplish strategic business change and produce major business returns."
CIOs also need strong leadership and people skills to negotiate business change and drive the organizational and behavioral changes that underlie it. "It is not just skills in managing people," Gerrity said, "but also skill in changing behavior, processes, and structures of the organization."
© 2007 The Wharton School, University of Pennsylvania
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