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Mary E. Shacklett
January 4, 2024
6 Min Read
Andrew Paterson via Alamy Stock
Earlier this year, McKinsey produced a podcast on the Six Priorities of CEOs.
In the podcast, CEOs listed organizational resilience as a priority, and they highlighted technology as a key enabler. Most (89%) also said that digitalization was under way in their companies. Yet only one third felt that they were getting the value they thought they would get out of digitalization.
“There are a few questions to ask as a management team,” said Liz Hilton Segel, a senior partner and managing partner at McKinsey. “Most people know what they’re trying to get done from a technical point of view. But is there a direct link to the value created? And, since in many cases, we’re seeing that there isn’t, we put that first and foremost.”
What makes CEOs question the value of IT, and how does this contribute to CIOs getting left out of strategic business discussions?
Let’s take a look at the challenges.
Too many CIOs aren’t business-savvy. Many CIOs lack in-depth knowledge of the business, even though recent history shows an increase in more business-savvy CIOs. There are a surprising number of CIOs I speak with who don’t regularly review their companies’ quarterly results or financial statements. Coming from technology, engineering or science backgrounds, their comfort zone is in technology itself, and many have an inherent dislike of the politics and relationship-building that are often necessary to climb the corporate ladder, or to get involved in business strategy.
IT must still overcome its back-office reputation. Although digitalization is on every CEO’s mind, IT still has a decades-old reputation as a back-office cost center to contend with. This makes it difficult for CIOs to reposition IT as a strategic, forward-looking function that can produce revenue and strategic results.
Infrastructure is a hard sell. Whether it is building an e-commerce site, positioning the company for AI systems or digitalizing and automating internal business processes, the IT investments needed for these advancements are often in “behind-the-scenes” assets such as storage, processing, software and networks. The CIO understands the need to invest in these infrastructure assets, but gaining budget support from non-IT executives can be a hard sell because the business results and payoffs from just investing in more storage or networks isn’t immediately apparent.
Relationship building doesn’t come naturally. A majority of CIOs come from IT or engineering backgrounds. They often aren’t comfortable in relationship-building exercises with board members and other key executives, nor are they particularly politically adroit.
IT is a natural “blame center”.
Most of us remember from school days how easy it was to complain about the cafeteria food! In a sense, IT is like that. If you walk into a bank or a store and there’s a problem executing a transaction, the clerk or teller almost always tells you, “Sorry this is taking so long. It’s the system.”
The problem might not be the system, but the system gets the blame. When IT is constantly getting blame, it’s hard to elevate it to a strategic role.
Change the Paradigm
The Cambridge dictionary describes paradigm as “a model of ... or a very clear and typical example of something.” When you shift a paradigm, you change the way that people think about something. Progressive CIOs are doing this. They’re shifting organizational thinking about IT from a back-office role into a forward-thinking, strategic role where IT is seen as a key element of the business itself.
Effecting this paradigm shift is most easily accomplished in technology-centric industries like software, semiconductors, biomedicine, and communications, since the CEO and other top managers typically have come from technology backgrounds and don’t have to be sold on how important technology is.
In other industries, such as financial, brokerage and insurance, that must rapidly assess and manage global risk, and depend upon AI and analytics to make decisions, technology is also being elevated to a strategic role.
What are the common characteristics of companies that change technology from a supporting to a strategic role?
Technology is seen as an indispensable ingredient for company success and market competitiveness.
The value of technology investments is understood, and the CIO is expected to weigh in strategically when the company sets its business direction.
The CIO understands the business.
Redefining IT as a Strategic Discipline
For most CIOs, redefining IT as a strategic discipline and getting the rest of the organization to recognize this isn’t an overnight process. This is also an area where the CIO has to take the lead. Taking the lead means changing perceptions of IT by altering IT practices so IT better aligns with the business.
So, how do you do this?
Start by thoroughly understanding the business. CIOs should understand the company’s financials, markets, and risks. They should be conversant on all these topics with the CEO, the board and other executives and stakeholders. When they have the opportunity, they should demonstrate how IT is contributing to the bottom-line profitability of the company so that others can see this, too.
When IT aligns with business units and managers, relationship development comes naturally. Many of the CIOs I visit tell me that a good way to break the ice and begin building solid business relationships with other executives and managers is by teaming with them on projects. Those CIOs regularly visit with these managers to understand business goals and pain points, and then strategize on how IT solutions can help the managers (and the business) succeed.
As part of this process, more CIOs are placing IT personnel such as business analysts directly into business units, or they’re teaming their own IT analysts with citizen developers in user departments. This creates inter-departmental cooperation, and it is a natural onramp for relationship building with other business managers.
Bundle infrastructure into business initiatives. Adequate infrastructure is always needed to support IT initiatives, but nobody likes to pay for infrastructure. This is why IT infrastructure budget requests should be positioned strategically. This can be done by bundling infrastructure improvements into strategic business initiatives like implementing IoT and automation in manufacturing plants, which requires zero-trust networks, more workstations, automation software, security, and additional processing, storage, and bandwidth.
Be transformative. Being transformative in your company can be risky and isn’t for the faint of heart, but there are CIOs who have understood their companies’ businesses and have come up with transformative solutions that have grown out of IT. These breakthroughs have reinvented their companies. In other cases, CIOs have created their own IT product lines that became separate for-profit subsidiaries of their parent companies. This, in turn, has led to CEO opportunities for those CIOs.
Most CIOs I talk with do not see themselves being this transformational, but they still want IT to be at the corporate strategy table. To get there, they find ways to showcase the value of IT to the business, they collaborate on projects with other business executives, and they deliver measurable value and results.
“Best-in-class CIOs take this a step further, with technology driving the business,” said McKinsey. “That requires reimagining technology’s role through technology-led business models, a product- and platform-centered operating model with ingrained strategic funding allocation, and technology functions becoming the steward of digital user journeys.”
About the Author(s)
President of Transworld Data
Mary E. Shacklett is an internationally recognized technology commentator and President of Transworld Data, a marketing and technology services firm. Prior to founding her own company, she was Vice President of Product Research and Software Development for Summit Information Systems, a computer software company; and Vice President of Strategic Planning and Technology at FSI International, a multinational manufacturer in the semiconductor industry.
Mary has business experience in Europe, Japan, and the Pacific Rim. She has a BS degree from the University of Wisconsin and an MA from the University of Southern California, where she taught for several years. She is listed in Who's Who Worldwide and in Who's Who in the Computer Industry.
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