CIOs are used to change. Technology is probably the fastest changing component of the enterprise. And the evolution of the CIO role has kept pace with changes in the technology landscape. But CIOs have always had one trump card in senior management meetings-their comfort level with technology concepts. Is this enough anymore? What are the new core competencies CIOs will need to focus on to remain a strategic partner to the business? Our interviewees discuss the evolving CIO role in the context of agility and innovation.
Discussion with Jeanne Ross
PwC: In your book, Enterprise Architecture as Strategy1, a huge focus is on, let's face it, the blocking and tackling of enterprise architecture development. Your operating model concept, which simplifies the enterprise architecture development process around standards for processes and data, is very helpful. And yet it seems hard to imagine senior managers approaching the issue in this way. CIOs must find it difficult to get this onto the C-suite agenda.
JR: Yes, some CIOs come to us and say, "The operating model would be a good discussion to have. Can you come lead the discussion?" CIOs still have that problem of getting the C-suite to care enough to talk about it.
But senior management teams we have spoken to were looking for a simple language that they can understand. And there have been CIOs that have said, "This little two-by-two (processes standard or nonstandard; data standard or nonstandard) was a way to finally get a discussion that everybody felt like they were capable
PwC: CIOs are often positioned as being technology savants while the rest of the C-suite doesn't feel sufficiently knowledgeable to offer an informed opinion.
JR: I think this has always been the CIO's greatest challenge. How do I engage everyone in a conversation that's going to help us understand the long-term role of technology and IT-enabled business processes? How can I get really strategic decisions made without the senior management team feeling like they have to make a decision on things they don't really understand? And there have been CIOs who have said to us, "This is the model that makes that possible." As long as senior managers want to have the discussion, this is a model that enables the discussion.
PwC: Do companies need to have reached a certain level of business process and IT maturity to have this discussion?
JR: You would think so, but it's not necessary. For a lot of CIOs, they just want someone to articulate fundamentally how the company wants to do business. If you ask people that straight out, they'll give lots of different, not-very-useful answers. But if you ask, "What critical processes do we want to make sure either are or are not shared across this organization?" and also ask, "What is the very small set of data around which this business revolves?" then an effective CIO can make real progress. These kinds of questions don't usually take senior management to questions about maturity levels. But smart CIOs know that the next thing they must consider is enterprise maturity level. If they think, "I now understand the operating model," and they think they are going to wake up tomorrow and put it in, they could run into some major challenges.
PwC: Looking beyond the CIO as an individual, where do you see the IT organization making the biggest contribution to companies seeking a better understanding of their operating model?
JR: I think almost every company could vastly improve its decision-making processes. They need to make decisions faster. IT can provide greater clarity and better understanding for decision makers through better performance metrics. Almost every company I know-even the really good ones-could do even better on that and it would make a huge difference.
PwC: Are there other places IT can be a real difference maker?
JR: There is this big push now to empower the people who are interacting with customers and suppliers and business partners to make decisions. But they will make terrible decisions unless you make sure they completely understand how the business operates and how they contribute to that business. Empowerment is very dangerous if you don't set it up right, and that's why the governance piece of the operating model is so important. This is where IT can play a major role. Senior management must design a better governance model, but IT must translate this into consistent decision-making patterns and obviously get the necessary information to the right people. Getting the right information into the right hands is going to be huge. And if we want to go full cycle, that comes from having processes that are standardized enough that the data is reliable.1Jeanne W. Ross, Peter Weill, and David C. Robertson, Enterprise Architecture as Strategy: Creating a Foundation for Business Execution (Boston: Harvard Business School Publishing, 2006).
Discussion with Yury Zaytsev
PwC: Moving to a global operating model must have had the potential to gore an ox or two. How did Swiss Re overcome the internal resistance to change that inevitably challenges any such major transformation? Was there a specific division of labor between you as the group information officer and the group CEO?
YZ: It started, I think, in a relatively simple form. When we began the transformation program, the discussions were around business application architecture and business information architecture. The initial goal was to minimize the number of solutions and to harmonize them to reflect the consistency of our business model. Walter Kielholz, our CEO, put it this way: First, it made perfect sense to him to harmonize our solutions in pursuit of our globalization strategy. And second, he said he would not formally promote this solution harmonization effort. He said, "That's your job, not mine. It's up to you to work with businesspeople to promote that."
However, he told me he would support me in other ways. One, he created additional cost pressure on the business units to discourage them from creating different solutions on their own. And two, when someone had a reasonable complaint about why harmonization was disrupting their business, he would invite me to meet the unit head to discuss things. I said, "Walter, that's the best support I can possibly find from the CEO."
Over time it became much easier. My favorite question when people said they could not do certain things would be, "Is the exception to the rule that you're looking for driven by market conditions, or is it driven by history?" And in 99.99 percent of the cases, it would be driven by their history and ultimately they would go with the global standard. One consistent solution around the world delivers far more value to the group, even if it's less exciting than what you wanted to do in your own environment.
PwC: Did you as the group information officer have ultimate responsibility for creating the harmonized business processes that defined the global operating model?
YZ: No. It had to be the business unit leaders. We would work with them. We organized many, many workshops. But we could not, by definition, define the core processes that conform to Swiss Re's fundamental business model.
PwC: Are businesspeople naturally inclined to create a harmonized global business process?
YZ: No. They usually look at their own level of specificity, their own level of function, and their own level of activity.
PwC: Is this just another way of moving companies toward a shared services model of common infrastructure?
YZ: Oh, it makes sense that certain activities need to be managed in a common fashion. This is a minuscule step. Somebody needs to look at the business from beginning to the end. Who are the best people in any enterprise to see that from beginning to the end? IT people. There is nobody else. Now, it doesn't mean that all CIOs will step up to a challenge of this nature and take a risk of this size, because a lot of this is political. A lot of CIOs would say, "Look, I'm planning to be here three or four years. Why would I start this whole phenomenon that would take a lot longer than that to implement?" There are many counterarguments, but I believe that sooner or later-perhaps in a different way or using a different approach-more and more firms will make the long-term effort to understand their core operating model so they can develop a sustainable foundation for business.
PwC: So here's the quandary. IT is the one group that actually has the vision across the whole organization, everyone else works in functions that limit their vision of the end-to-end processes, but the business must own and define the end-to-end processes.
YZ: Correct. But workshops and a little motivation can broaden their view. And in the process they can see a lack of standardization. For example, we looked at client relationship management. One business unit would have solution A. Another would have solution B, etc., etc. So everybody had their own solution for client relationship management. I asked, "Is this really a different process? Do we really need to collect different information?" And a simple picture like that speaks a thousand words when you start discussing it with the business.
PwC: So it's sort of IT leader as coach or even psychoanalyst?
YZ: It's an education and discovery process to deliver understanding. It's establishing a focus on the process and not on the content and not on functions. That is what makes a huge difference. People would talk about how their businesses functioned in very different ways, and I would go to them and say, "You know, your process is consistent around the world." I said that to nine CEOs of different underwriting divisions. And they said, "You're crazy," or "You don't understand how we do the work. It's completely different." I said, "I understand you do it differently. I'm saying the process by which you should or are doing it, is basically the same." And once you get to the point where they start realizing that the focus is on the process and not on the content, the turnaround can be very easy. They're all responsible businesspeople and they want the company to perform better, so they take ownership and they drive it forward.
Discussion with Martin Curley
PwC: Across the economy, what broad changes in business strategy are you seeing that impact the CIO and the IT organization?
MC: I think a big change that's happening in business is the attempt to move to service models. Companies that historically were product companies are trying to move away from a one-time purchase to an annuity stream by providing a service. And inevitably that's enabled by IT. I think Rolls-Royce is a very good example of that. The company is now trying to sell Power By The Hour. So instead of selling an aircraft engine and maybe a maintenance contract on top of that, Rolls-Royce can use automated telemetry and all that good stuff to sell Power By The Hour, and the company can offer something that's completely different.
PwC: Are you seeing any changes in the way businesspeople and IT people are communicating? Are they finding more common ground and common understanding of their domains of expertise?
MC: Yes. In the 20th century, I think that IT people had to be bilingual, and not very many were. So we had this gulf or chasm, and IT folks were seen as hard to understand, even the IT executives. But I think in the 21st century we are seeing business executives who have some technology acumen, and we have IT executives who are demonstrating business acumen, and that really is the sweet spot. Nokia is a really good example. It changed the name of its IT organization to business infrastructure. And that, I think, was a big step both in terms of vocabulary and in terms of a vision of what the IT organization wanted to offer Nokia.
PwC: Where is this trending? What does it mean for the future of the CIO?
MC: A core part of our agenda is that the CIO in the future will stand for chief innovation officer, not chief information officer. Of course, it could stand for career is over if the CIO fails. The accelerating pace of change cuts two ways with technology. Change is often created by new technology, but technology is often at the heart of successful efforts at dealing with change. I think we'll see the successful CIO becoming a much more important part of the executive team, part of the kitchen cabinet. But the profile of the CIO will have to change. That person will have to be just as much a businessperson as an IT person. Today there are very few examples of CIOs becoming CEOs. But I think that will become more common in the future.
PwC: Does this mean that CIOs need to shift from treating business unit heads purely as customers? What would it mean if a CIO is truly treated as a peer of the other business leaders in the C-suite?
MC: It probably comes back to the Swiss Re example, you know, helping the organization understand where extra investment in IT is going to create competitive advantage, and where non-competitive processes can be supported with lower-cost alternatives. In the interview on business value models, I described the Enterprise Capability Framework that calls for management to define what makes them distinctive. But I think many organizations don't have that blueprint. CIOs can lead this effort. In fact, they need to if they want to be considered a peer. It creates the context for more intelligent discussions with business leaders. Ultimately, IT needs to move from seeing business unit heads as customers to seeing them as peers and ultimately to symbiotic partners.
PwC: What will the work experience and resume for a successful CIO look like in 2015? What would be most strikingly different from today's CIO resume?
MC: A good way to think about that is by analogy to what happened with electricity generation. When that started, every company had its own generators with staff and leadership to go along with it. Then, all of a sudden, electricity grids were developed and it could be accessed as a utility. I think whether the same thing happens in IT will be a huge modulator on what the future profile of the CIO becomes. But there's no doubt that technology is becoming more and more important. I think the CIO will be part of the CEO's kitchen cabinet-will be one of the key decision makers-and business acumen will be as important as technology skills. A key part of this is dealing with today's IT complexity: Can we abstract that into a utility, with automated management of all the complexity? Presuming that happens and if that's successful, then we can really think about the CIO as the chief innovation officer. When that happens, the focus will be on innovation technology rather than just grappling with complexity and trying to provide a utility-like service. So I think that will be the significant shift.
PwC: Assuming enterprise IT does make that shift, what experiences will best prepare a CIO for being the chief innovation officer?
MC: I think the formal skills are doubly an engineer-and I'm biased, because I'm one of those-with an MBA. And having entrepreneurial skills will be a dominant factor in determining the success of a chief innovation officer. When I talk about entrepreneurship, it's not necessarily doing startups. That's one of the manifestations of entrepreneurship. More generically, it's learning how to shift resources from lower-yield activities to higher-yield activities. I think that's what entrepreneurship is all about. I think that will be the dominant skill. Additionally, CIOs who can help with the corporate renewal process will be those who have longevity and impact. Gartner has identified a new type of IT leader called a "versatilist," which is a leader who can anticipate, analyze, and quickly respond to opportunities and changes. In a world of speed and change, CIOs who can manifest IT as a platform for agility rather than a cost to be minimized will be the winners.