The CIO as strategic thinker

CIOs need to move beyond their traditional role as technologists to contribute to corporate high performance

All CEOs today know that information technology is playing an increasingly larger role in the economy. Many of them, however, have a limited understanding of the intrinsic business value that can be extracted from investments they make in IT and the significant role CIOs can play in leveraging IT to achieve this.

Typically, as an Accenture survey of CIOs and CEOs revealed, IT is regarded as a “quick fix” rather than a tool for sustainable competitive advantage. Most CIOs in the survey said their CEOs do not invite them to meetings on strategic planning.

Yet, other evidence points to the increasing importance of managing information technology to ensure high performance across business cycles. Accenture research focusing on IT governance showed that companies with high profit margins allocate a significantly larger portion of their IT budgets to innovation rather than IT operations, compared with companies with lower profit margin growth.

What this suggests is that CIOs stand to play a critical strategic role in enhancing shareholder value in corporations. They need to equip themselves to transcend their traditional role as technologists and become meaningful contributors to organizational strategy. How can this be achieved?

One step lies in breaking out of the imposed organizational silos, taking ownership of the IT debate and focusing it on creating business value.

Bill Gates once said, “Information technology and business are becoming inextricably interwoven. I don't think anybody can talk meaningfully about one without the talking about the other.” This points to the need for CIOs to drive the IT vision beyond the standard return-on-investment model and examine ways in which IT can enhance strategic objectives such as creating growth, lowering risks or reducing cycle times.

Take the case of Rolls Royce. The aerospace and infrastructure engineering major used to derive significant revenues from selling spare parts to customers of its gas turbines. The corporation now plans to make money by maintaining the availability and reliability of its products in service by aligning IT and transaction systems through its supply chain, service management and engine-health monitoring capabilities.

In essence, CIOs have to constantly look for opportunities for collaborative value enhancement both within the organization and with external stakeholders and suppliers. Astra-Zeneca, for instance, uses IT capabilities to collaborate seamlessly and cost-effectively with external researchers through virtual channels. And European yellow pages company Enrico worked closely with Microsoft to develop an IT tool to significantly reduce product development lead-time.

Beyond that, CIOs need to take the initiative to create powerful propositions for IT-enabled change. This, in turn, requires CIOs to understand their organization's business and transform themselves into strategic business managers with capabilities of understanding risks, striking the best possible deals, setting standards and leveraging third-party relationships.

It is a common misconception that outsourcing the entire IT function, or major parts of it, off-loads the strategic burden from the CIO. On the contrary, the CIO must have a contract as well as a continuous dialogue with the outsourcing party, clearly stating what business value the outsourcing party is expected to contribute.

To be effective, it is incumbent on CIOs to play a critical strategic role in optimizing an organization's information technology investment agenda. Accenture research shows that companies with high profit margins dedicate significantly higher funds to new information technology and still spend less than their peers on information technology.

Smaller scale transformation needs to take place continuously, as when the IT department of a large telecom provider evaluated a new, innovative Accenture tool for end-to-end testing of IT applications and estimated the return on investment in three years to be 400 per cent. Today, the payback from the tool is exceeding even those estimates.

The research also showed that among more than 100 European companies, those leading in productivity commonly align their IT organizations and governance with business units that may be diverse and quite autonomous. To achieve this kind of high performance, CIOs need to lead the way in creating and then implementing an IT roadmap that will ensure information technology funds are invested the right way.

This requires CIOs to be vigilant so that investments are not siphoned to less important areas due to political pressure, ego, confusion or misunderstandings about the link between information technology and business value. As business heads, CIOs need to leverage training, change management and program management to mobilize their departments to execute the IT road-map.

In addition, CIOs need to stay alert to external shifts that might invalidate a business case-and be ready to make adjustments. Equally, CIOs need to be alert to and evaluate new trends, tools, capabilities and architectures that could create opportunities to improve an organization's IT performance.

CIOs who can achieve these objectives and contribute meaningfully to corporate performance will automatically find themselves drawn from the peripheries of the corporation into a more central and vital role in corporate strategy.