Business leaders today rely on information technology more than ever before and, as a result, the role of the CIO has never been more important. The implications for the CIO are dramatic. As a CIO you need to be more strategic in the way you work, think, behave, and interact with your co-workers. This poses three essential questions:.
1. Why are CIO’s more involved in the development of business strategy today than ever before?
2. What does strategy really mean?
3. And what are the key competencies a CIO should Leverage in developing a strategic capability?
CIOs are More involved at the Executive Table Developing Business Strategy than Ever Before.
We have all heard the expression “Business runs on IT”. Think about how true this statement is. Almost every business process involved in the development, creation, production, and shipping of products and services, across the entire value chain, is enabled by information technology. And the same holds true in our personal lives. We use mobile phones to communicate, tablets to read books, and a slew of other electronic devices for entertainment. Automobiles are even controlled by information technology. Technology is all around us in everything we do. The days of information technology organization viewed as a support department or cost center are gone. Today the information technology organization is an integral part of the business, and the CIO, who leads the organization, needs to work with the CEO and other C-level executives to develop, monitor, and maintain the business direction of the company. In short, the CIO needs to become more strategic if he or she is to be an effective member of the executive leadership team.
Strategic Lessons From the Masters
In the 1990’s Henry Mintzberg and Michael Porter published their epic articles on strategy. Each had a different view of strategy. Mintzberg strategy was can be summarized into the following three categories: being a visionary; developing a plan; and continuously improve. Mintzberg believed in the learning model. Porter, on the other hand, viewed strategy as an analytical process that involves determining the unique positioning of your company in the competitive market based upon the variety of goods you offer, the needs of your customers, and the ways your customers receive value. 1
In today’s marketplace change occurs at blazing speeds. New and improved products and services are introduced in the marketplace every few months. In today’s global marketplace economic instability is a reality that executives have to deal with. So how do today’s executives chose between the Mintzberg and Porter strategic model.
To develop a successful strategy today requires a convergence of the key components identified by Mintzberg and Porter. In point of fact, Mintzberg and Porter are both correct. You need to be a visionary, plan effectively, and learn from the marketplace (Mintzberg’s strategic process). And at the same time you need to determine how you will compete in terms of the products you offer, what your customers need, and how they will receive value(Porter’s strategic process). Let’s look at two examples. Apple exemplifies a company that succeeded in applying both Mintzberg and Porter strategies and Kodak is a company that failed because it did not.
Apple is a visionary organization, they are meticulous about planning and they learn from their customers(Mintzberg’s core strategic components). The result of incorporating these components in their strategy results in the introduction of new products implemented within months of previous releases (e.g. Iphone, Ipad, Laptops).But at the same time Apple also incorporates Porter’s strategic components. Apple utilizes a market positioning strategy. Apple products represent a variety of products that provide value to its customers (variety of goods). Each product incorporates a set of functionality that satisfies customer requirements (needs of customers). Their products seamlessly integrate with each other to work in harmony to provide superior value to its users. If you drop you Iphone into a puddle of water there is no need to worry. Just turn on your laptop and all the data from your iPhone is accessible. This plug and play capability makes the Apple products very desirable by customers (ways customers receive value). So by utilizing both the Mintzberg and Porter strategic models Apple has become a glamour company of the 21st century by successfully implementing strategies to achieve exponential growth in a relatively short period of time.
Kodak, on the other hand, is an example of a company that became complacent with their market position and, as a result, is dwindling in revenue, size, and products. They didn’t leverage Mintzberg’s three strategic components. They lacked a realistic vision, didn’t plan properly for the demise of film, their staple product, and did not learn from their customers that a shift to digital photography was the wave of the future. Similarly, they didn’t incorporate Porter’s positioning strategy. They didn’t offer a variety of products that customers wanted, they didn’t incorporate customer needs in their products and/or services, and they didn’t understand the ways customers derive value from photography.
C-level executives who develop and implement successful strategies do so with a solid foundation and understanding of the business and the competitive market. Today the technological component as part of a business strategy is also important. So as the CIO works with the C-level executives he or she needs to develop a third competency. Having a technology prowess that can be used to enable business solutions. These three competencies form the foundation for strategic CIOs to be successful.
Three Key Competencies CIO Should Leverage in Developing a Strategic Capability
To succeed as a strategic CIO you need to integrate 3 key competencies that will enable you to develop a successful strategy leveraging the lessons from Mintzberg and Porter’s models. Two of the three competencies that enable the Mintzberg and Porter models are a sound understanding of the business, and the marketplace you compete in. The third component required in today’s information-based marketplace is a sound knowledge and a technology prowess that can be used to enable your company’s products, services, and business processes (see graphic below).
Business Knowledge is all about developing an awareness of the company business environment. For IT to be a strategic partner to the business it needs to have a solid knowledgebase of the company’s business environment. Otherwise IT cannot effectively communicate and partner with the business to address company objectives. The three skill areas of this domain are: Business Environment; Opportunities / Challenges; and Process Centricity.
Environmental Skills enable IT personnel to understand and articulate the business enterprise strategy, objectives, culture, and internal environment. Understanding the business is fundamental to IT organizations ability to align their services to the needs of the customer. The focus in the IT organization is no longer IT Value, it is the business value measured by business outcomes. The 2011 PA/Harvey Nash international Survey of 2500 CIO’s identified business skills as the most important for CIO’s to develop.2
Opportunities and Challenges skills enable the IT organization to understand and articulate the business opportunities that can enhance customer value, revenue, and profitability as well as an understanding of the company challenges that impact enterprise growth.
Process Centric skills enable the IT organization to align the company business process to the supporting technology applications supporting them. The IT organization and the business teams can work together to better understand the value of each business process and the associated value of the technology supporting the process. Process supported by enhancement to applications, revising SLA’s, and revisiting enabling technologies are all tools that can be applied to improve customer value, create and enhance products and services, optimize cost, and align technology to business goals
Market Knowledge provides the IT organization with a keen understanding of the market and competitive environment the company operates in. A good understanding of these components enable the IT organization to identify the “customer value points” across the business value chain. The three skill areas of this domain are: Product Knowledge; Industry Insight; and Competitive Landscape
Product knowledge provides IT personnel with an understanding of the customer value proposition and the associated value derived from the company products and services. These “value points” represent opportunity areas for business/IT teams to work together and identify new opportunities to create and enhance new products and services.
Industry knowledge enables IT personnel to understand the industry landscape as well as upcoming industry trends and how they align to the products and services of the enterprise.
Competitive Landscape knowledge provides IT personnel to better understand the competitive environment the business operates in and the associated issues and opportunities that present marketplace challenges the company needs to overcome. By understanding the industry and competitive environment IT personnel can better understand and evaluate how information technology can be leveraged to produce competitive advantage.
Technology Prowess Knowledge
Technology Prowess addresses the strategic technology skills required by the IT organization to leverage and align information technology solutions to the needs of the business. Remember the times you have left your home and five minutes later ask yourself, “Did I close the garage door?” Well, now you can use your Craftsman remote control that allows you to monitor and operate your garage door from anywhere with your internet enabled smartphone, cell phone, laptop, or tablet. You can check status, close the garage door if you’ve left it open, or even open it for friends or deliveries when you aren’t home. 2
While some IT organizations leverage their internal IT personnel a number of CIO’s are thinking outside the box and engaging their vendors in leveraging their market, competitive, and technology skills to collaborate with the IT organization and the business to focus on achieving the company’s business objectives. Proctor and Gamble’s CIO, Filippo Passerini, credits vendor partnerships with helping save the company $900 million in operating costs over a few years as a result of partnering with the IT organization. The CIO of Hilton Worldwide, Robert Webb, anticipates a set of critical vendors to work together with IT to ” imagine new technology or methods well beyond contractual terms with those providers” 3
The three skill areas of this domain are: Technology Strategy / Adaptability; Organization Agility; and Strategic Project Capability.
Technology Strategy / Adaptability is all about IT developing a technology strategy that enables the company to develop and enhance new products and services. To accomplish this the CIO and the IT Technology team need to a strong understanding of the available and emerging technology available in the marketplace and develop a technology strategy which will enable IT to leverage these technologies into new/enhanced products and services.
Organization agility is represented by an IT organization that can quickly form teams to partner with the business to respond to new business opportunities. In today’s competitive marketplace speed is mandatory so the ability for IT to have personnel with multi business technical skills is a must.
Strategic project capability enables the IT organization to focus their efforts on strategic projects within current budget guidelines. To accomplish this the IT organization has to optimize the support services (run and maintain) and enhancement projects by reducing inefficiencies. Accomplishing this will free-up budget to focus on strategic projects.
Before one embarks on a process of enhancing an organizations knowledge across these three domains you have to assess the current level of knowledge for these domains that exist across your IT organization.
Cross Dimensional Competencies
Most important in succeeding as a strategic CIO is the ability to articulate a vision for how information technology can be used to enable business outcomes. Additionally, the strategic CIO needs to posses the leadership and communication skills that enable the successful partnership with C-level executives in developing and implementing business strategies enabled by information technology.
For the CIO who truly wants to become more strategic and enable business success requires a broad and deep knowledge of the business, the competitive market, and a technology prowess. This knowledge enables the CIO to effectively contribute at the executive table as he works with C-level peers to develop business strategies that drive customer value, increased sales, and enhanced shareholder wealth.
1 Strategic Planning Friend of Foe?, Misti Walker http://www.scribd.com/doc/21176058/Porter-v-Mintzberg
2 Craftsman AssureLinkâ„¢ Internet Connected DC Belt Drive Garage Door Opener with DieHard ® Battery Backup http://www.craftsman.com/shc/s/p_10155_12602_00903043000P?keyword=garage+door+opener+remote&prdNo=4
3 CIO’s Forge Vendor Collectives to Extract Business Benefits, Kim S. Nash, CIO Magazine, November 28, 2011
Phil Weinzimer is president of Strategere Consulting working with clients to develop business and IT strategies that focus on achieving business outcomes. Previously Mr. Weinzimer was Managing Principal-Professional Services for IT Business Management at BMC Software. He has also held Managing Principal positions in the Professional Services organizations for ITM Software, CAI, and Sapient.
Mr. Weinzimer has written a book concerning customer value entitled “Getting IT Right: Creating Customer Value for Market Leadership” and has a forthcoming book, “The Strategic CIO: Creating Customer Value, Increasing Revenue, Enhancing Shareholder Wealth”, will be available in 2013.
Mr. Weinzimer can be contacted at email@example.com