The CIO Dilemma: More Important, Less Strategic

Source: Russell Reynolds Associates

Source: Russell Reynolds Associates

With the rise in the importance of information technology (IT) for all organizations, you would think that the stature of the function and that of its head—the Chief Information Officer (CIO)—will also rise. Instead, two new surveys report that IT and CIOs are trending downward.

Call it the CIO Dilemma. The more attention CIOs get from “the business” and the more IT becomes essential to the success of the organization, the more CIOs are expected to focus on “keeping the lights on.” The greater the impact on the business, the more business executives expect the CIO to just do what they tell him or her to do. Increasingly, the message to CIOs is—what you do is important, so don’t aspire to influence the business strategy or play a major role in its growth.

CSC just published its sixth annual global CIO survey, titled “CIOs emerge as disruptive innovators.” The survey was produced in collaboration with IDG Research Services, which collected data via an online questionnaire from 590 executives with IT or technology-related titles in August and September of 2014.

The report starts by describing reality as CIOs would like to see it: “…today’s businesses recognize the tight bonds linking inno­vation, competitive advantage, and information technology, as well as the CIO’s importance to all three. That new reality is hastening the CIO’s metamor­phosis from tactical enabler to stra­tegic visionary.”

The survey’s findings, however, portray a different reality, the actual reality CIOs have to face every day doing their jobs. The percent of respondents reporting they have a “collaborative partnership with business leaders” dropped from 41% in 2013 to just 28% in 2014.

“Worse yet,” The CSC report tells us,“39 percent of participants in this year’s survey say IT is still viewed as a cost center within their organiza­tion, essentially flat from 2013. And while the number of CIOs saying they have a service provider relationship with their Line-of-Business (LOB) colleagues jumped from 20 percent globally last year to 33 percent in 2014… that’s mixed news at best. Service providers follow strategies defined by others; partners help lead the creation of those strate­gies. To secure their position as agents of disruptive innovation, CIOs must spend less time serving LOB manage­ment and more time partnering with it.”

“Must”? That’s like telling a kid who is bullied at school that he must spend more time with the bullies. Sure, obvious difficulties in following specific advice have never stopped anyone from giving it in the first place. Indeed, the same reality-defying prescription was voiced by McKinsey last month in a report titled “Why CIOs should be business strategy partners.”

The McKinsey survey, conducted online in October 2014, had the advantage of including both IT executives (363 respondents) and non-IT executives (350 respondents) and of trying to tease out the connection between CIOs playing a strategic role and the performance of the IT organization. It would have been even better if we learned something about the connection between a strategic role for the CIO and the firm’s (not just IT’s) performance, but maybe the McKinsey researchers didn’t think it’s an important question or that it would be of interest to their readers.

Here’s McKinsey’s summary of the grim reality: “…few executives say their IT leaders are closely involved in helping shape the strategic agenda, and confidence in IT’s ability to support growth and other business goals is waning. Moreover, IT and business executives disagree strongly on the function’s overall priorities.”

Just like CSC, McKinsey documents the recent decline in the stature and strategic importance of IT: “On the whole, executives’ current perceptions of IT performance are decidedly negative. Beyond providing basic services and manag­ing infrastructure, just one-third or less of respondents say their IT functions are very or extremely effective at a wide range of tasks. Even within IT, the shares reporting effective performance are small. The results also indicate fading confidence in IT’s ability to support key business activities, such as driving growth. In the 2012 survey on business and technology, 57 percent of executives said IT facilitated their companies’ ability to enter new markets. Now only 35 percent say IT facilitates market entry, and 41 percent report no effect.”

There’s more bad news: “Survey results indicate that there is little awareness of or agreement on how IT can meaningfully shape a business’s future. IT and business executives still differ in their understanding of the function’s priorities and budgets. Nearly half of technology respondents see cost cutting as a top priority—in stark contrast to the business side, where respondents say that supporting managerial decision making is one of IT’s top priorities.”

The top IT priority for both IT and non-IT executives is “improving effectiveness of business processes (62% and 65%, respectively) and the second most important is “improving cost efficiency of business processes” (44% and 47%, respectively). When the IT executives surveyed by CSC were asked to rank the importance of IT priorities over the next 12 months, a similar result topped the list: Optimization of key IT processes and the use of best practices (69%). Doesn’t sound very strategic or disruptive innovation-like to me.

CSC also asked a direct question about the challenges IT executives face in driving innovation at their organization and the results from respondents in North America reveal how difficult it is to follow the “be a disruptive innovator” advice: 66% blamed “budget constraints.” 50% agreed that “resources are primarily focused on managing existing IT workloads.” And 40% pointed to “difficulty finding staff qualified to execute the technology to drive innovation.” McKinsey also found that “roughly two-thirds of executives still say attracting IT talent is a significant challenge for their organizations, similar to what respondents reported previously.” While both reports don’t say much about the reasons for the difficulties in recruiting IT professionals with advanced skills, let me venture a guess—top IT talent today goes to Silicon Valley and other technology-driven startups around the world.

McKinsey did find a connection between the stature of the CIO and the performance of the IT organization. “Despite downbeat assessments of IT effectiveness,” the report says, ”the results suggest one clear element of high-performing IT organizations: active CIO involvement in the business. Where respondents say their CIOs are very or extremely involved in shaping enterprise-wide strategy, they report much higher IT effectiveness than their peers whose CIOs are less involved… At companies with the most involved CIOs, executives are also much likelier than others to say IT facilitates business activities, including new-market entry and the creation of new products.”

So we can conclude that in those organizations where the CIO is respected as a business leader, both IT and non-IT executives have better opinions regarding IT. Still, even this is not a widespread phenomenon: “The results show that just over half of all respondents say their CIOs are on their organizations’ most senior teams, and only one-third say their CIOs are very or extremely involved in shaping the overall business strategy and agenda.” (There are, of course, exceptions—shall we call them unicorns?—the CIOs who get or make for themselves “a seat at the table.” More than half of the CSC report is devoted to interviews with influential and successful CIOs, and, on these pages, Peter High has been documenting their accomplishments and career moves beyond the CIO role).

Furthermore, “the CIO’s impact on functional perfor­mance is underscored further by the fact that roughly one-fifth of respondents (23 percent of IT respondents and 18 percent of all executives) believe a change at the top of IT management is one of the most significant initiatives that could fix IT’s shortcomings.” Another indication of the fleeting nature of the CIO’s job?

To address IT performance and organizational-health issues, McKinsey recommends recasting the role of the CIO, not unlike CSC recommending to CIOs to recast themselves as agents of disruptive innovation. I would argue that this is impossible because of the CIO Dilemma: The more important IT becomes, the less strategic, innovative, growth-oriented the CIO job becomes .

Every few years we get a new wave of “concerns” that make business executives leery of IT and insisting anew that CIOs stick to keeping the lights on. The current wave is all about security. “Elevated IT Security/Cybersecurity expectations” made the top of the list in the CSC survey as both top technology initiative and top investment.

Manny Fernandez, formerly the Chairman and CEO of Gartner, talked recently to a group of CIOs at Deloitte University about boards’ perceptions of CIOs. “To grow their relevance and influence in the eyes of boards,” Fernandez advised CIOs, they should pursue four goals: provide a stable, resilient, dependable infrastructure, a job “that is typically taken for granted by boards”; use success in infrastructure management to build credibility with board members, “who will then be more likely to approve investment in the new digital initiatives that may ultimately underpin growth and expansion”; talk not in terms of costs but in terms of revenue and EPS; and “acquire new talent—robotics experts, data scientists, machine learning experts, and more.”

Not much different from the advice provided by CSC and McKinsey. But Fernandez delivered a very different, reality-driven conclusion:

All of the above are important. But boards’ primary concern now and going forward is risk, and nothing has drawn more board attention to CIOs than cyber risk. The genie is out of the bottle—no organization is unaffected. At present, 35 percent of searches for new board members are asking for a technologist. Boards want to hear from CIOs how their organizations are managing cyber risk, and CIOs are more likely to find themselves in the board room facing tough questions from increasingly tech-savvy board members.

When you are defending your job and your career to an inquisitive board who is interested only in hearing how you are defending the business, there is no much room for recasting yourself into a disruptive innovator. The word “disruption” is probably the last thing the board wants to hear from you, to say nothing about using IT to generate new growth and expansion for the business. This is the CIO Dilemma, 2015 edition: Risk vs. Revenue.

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