Digital Transformation –Another Brick in the (CIO) Wall?
CIOs are a resilient lot. And it’s just as well. Over the years, predictions about their demise have been common place. Demands on the CIO function to change, read like a litany of management objectives; More cost conscious, more agile, more customer centric, more innovative and more transformational. To CIOs’ credit, they have weathered these demands pretty well. Or, at least, the function has. Today, Digital transformation is pervasive across all companies, regardless of industries. Once again, there is a cry for the CIO function to reinvent itself. Déjà vu all over again or has the time come for a real rethink of corporate IT?
The advent and spread of digital technologies now threatens to test not only the role of the CIO, but also that of the larger corporate IT function. Why? Digital transformation brings at least three game-changing challenges.
First, it is no longer sufficient for CIOs and IT to be “aligned” with business objectives, a fusion is needed. As Angela Ahrendts, Burberry’s CEO puts it: “I need [IT] to move from the back of the bus, where it traditionally sits, to the front of the bus…and it’s traveling fast.”[i] No digital innovation is possible without a strong cross functional involvement and IT playing a key role. Development is marked by a ‘good enough’ approach to error tolerance, relying more on rapid iteration and short cycle times. This is the capability and cultural challenge.
Second, CIOs in the past have been responsible for centralizing technology requirements for all business units and functions. This central role is over. Cloud-based services are directly bought by many functions outside of IT. HP’s EVP of technology and operations explains: “In many companies, the IT department now competes with vendor organizations or even shadow IT organizations within other divisions for work”[ii]. This is the organization and governance challenge.
Third, the industrialization of IT, although still critical, is no longer the sole objective of CIOs in this digital world. Most innovation today is driven by digital technologies. So, CIOs are required to both industrialize IT to cut costs, and digitize the business to boost innovation. Can it be done effectively by a single human being? This is the leadership and transformation challenge.
So how do CIOs respond to these challenges?
Rock star transformational CIOs, do exist. They have developed trusted working relationship between IT and the business; are able to support other CXOs introduce new technologies into the organization, whether “owned” by IT or not; have re-skilled the IT function with strong digital capabilities. And, they manage their IT investment smartly saving on one side to reinvest in digital on the other. P&G’s CIO is also the group president of P&G’s Global Business Services organization, the division responsible for all back office functions, from IT to finance to facilities management. The CEO of P&G sees the role more broadly, “IT is the key enabling function in delivering our digitization strategy. And [the CIO] has been partnering with me to develop the strategy and implement it with excellence.”[iii] Can CIO evolve to become transformational partners? Yes, but it takes the right person, leadership and a concerted effort by the rest of the organization to make it work.
On the other hand, CIOs that are slow to grasp these challenges risk seeing their traditional areas of authority increasingly undermined. The rise of the Chief Digital Officer (CDO) is one such form of split responsibility – a kind of two-speed IT. It Allows organizations to better manage the dual objective of cost reduction and innovation. But it’s not without risks. Who the CIO and the CDO report to is key. They can both report to the CEO, or the CDO to the IT function or even the CDO into marketing. A clear territory definition is also essential. Where does industrialization ends, and innovation starts? When it works, it is effective. Adam Brotman and Curt Garner at Starbucks seem to have developed a very productive working relationship.[iv] But it is not always the case.
The choice of model matters less than the impact. In the end, it is the responsibility of the CEO and the top team to decide how best to deliver digital transformation. Creating cross-functional capabilities can be the main goal; or generating new sources of digital revenues; or developing a new digital service culture. Or, all of the above? All drive different options. A combination of company culture, individual potential and strategic ambitions will dictate the right solution. To thrive, existing CIOs need to grasp the dramatic change that is underway. And, take a proactive stance on this debate at the top table. This time the re-invention could be for real.
[i] “Burberry’s digital transformation”, Digital Transformation Review, Capgemini Consulting, No.2, January 2012 [ii] Forbes, ‘John Hinshaw’s Journey From CIO To EVP Of Technology And Operations at HP: The Beyond CIO Series”, June 2013 [iii] I-CIO, “CEO & CIO United”, April 2012 [iv] “How Starbucks Has Gone Digital”, MIT Sloan Management Review, April 2013.