Goodbye IT, Hello Digital Business

It's not about information technology anymore. It's about digital business. The new description is a testament to IT's advancement from a back-office, support-the-business role into a developer of products and apps that customers use directly. It's also a reflection of the central role of data analytics in letting companies see and anticipate customer tastes more quickly than ever before.

This digital business movement is becoming an imperative in the retail industry. Retailers have been doing e-commerce for years, but they now face a more intense customer expectation for a digital relationship that crosses store, Web and mobile channels. How important is that integration? Drugstore giant Walgreens finds that a shopper using mobile, Web and store channels spends six times more than the typical store-only shopper.

But the digital business trend goes well beyond retail, to manufacturing, healthcare and other industries where technology is becoming a vital link to the customer. That link might be through an online app -- in healthcare, for instance, "Meaningful Use" rules give doctors subsidies based in part on having a percentage of their patients access their medical records online. Or the customer tie might come directly through a tech-based new product, such as Nike's fitness-monitoring FuelBand. What does Nike know about writing apps? It's learning fast, including hosting a dozen development startups in Oregon in a three-month "accelerator" to bring in new ideas.

Digital business calls for a customer-facing CIO. One finding of our fifth annual InformationWeek Global CIO Survey suggests that about one-third of IT leaders are embracing this customer-facing role. The big question is whether the other two-thirds will follow suit or sit on the sidelines as other executives drive toward the digital business goal line.

"I raised my hand," says Bentley Curran, CIO of $1.3 billion-a-year manufacturer Brady Corp., who added VP of digital business to his title a year ago. Brady is a classic business-to-business company, a maker of industrial supplies from reflective vests and safety signs to cleanup products for chemical spills, and its executive team realized it needed to improve its digital ties to end customers.

Brady's surveys found that more than 90% of its direct customers in the U.S. and U.K. prefer a digital entry point to start a purchase, but far fewer actually used the digital channels Brady offered, relying instead on paper catalogs or call center reps. "Marketing said, 'We need more out of IT. We need the engine to go faster,'" Curran says.

That realization led to Curran's new digital business role. It also put Brady's IT pros into some new roles. For example, they've worked with business unit colleagues to create "customer journey maps" of five prototypical customers, laying out their current and future digital needs.

Forty percent of Curran's budget is now focused on sales and marketing initiatives. He has eight Scrum teams, trained in agile development, focused on six areas: mobile, search, analytics, product content, platform and custom content. Each team consists of four to five people who deliver code to business units in two-week sprints. Teams from IT, marketing and other areas are looking at the first 60 days of a new customer's experience to map out every interaction and whether the technology supports it well. Sometimes, that amounts to 20 touch points. "We've got to be a customer-facing IT organization," Curran says.

Variations of Brady's digital business story are playing out at companies as different as Walgreens, Vail Resorts, Kaplan, Procter & Gamble and True Value. But before we get into those stories, let's look at our research to see where a broader spectrum of technology leaders are.

CIO Focus

Only 23% of the 118 CIOs and VPs of IT we surveyed say they regularly visit customers; a third have other key IT leaders doing so. More promising, 41% have leaders on the team shaping mobile strategy, and 38% have IT intimately involved in product development.

One trend we've watched closely in the Global CIO Survey is where CIOs expect to innovate in the coming year. Back in 2010, 36% put "new IT-led products and services" among their top three priorities. Three years later, it's stuck at 35%. The concern is if a majority of IT execs see the tech-as-product trend applying only to certain kinds of companies, when in fact examples are sprouting across industries.

While cutting costs is still the area of innovation cited most by survey respondents (39%), that percentage is the same as a year ago. Next come two kinds of growth initiatives: introducing an IT-led product (35%) and creating a new business model or revenue stream (31%). The fourth highest innovation priority among IT leaders, another cost cutter, is making processes more efficient -- though at 28%, it's down 11 points from a year ago. Rounding out the top five is a customer-centric priority -- engage customers in new ways -- cited by 20% of the execs in our survey, up from 13% a year ago.