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Challenges and Opportunities for the CIO
By Bill Allison and Tim Lovoy
Today's Chief
Information Officer (CIO) is a business leader-not just an IT
manager-steering a mission-critical function as large and complex
as any operation in the company. They work side by side with business
units to help improve performance and efficiency. From rethinking
business strategies, processes, and management practices, to recasting
infrastructures and product portfolios, today's expectations for
a CIO are higher than ever.
CIOs today help other business leaders in the company see what's
possible-and help them anticipate what's lurking in the business
environment and competitive moves of others. In many cases, they
also face the unenviable task of anchoring a transformational
vision throughout the company, overcoming barriers to change,
and building organizational support in the face of significant
resistance.
Defined below are some of the greatest opportunities and challenges
in information and technology today, as well as the essential
capabilities required to master them. These are the issues that
define today's CIO.
Value: Defining the Goal
Almost everyone agrees a company's ultimate goal is to "grow
shareholder value." But what does shareholder value really
mean?
The market's perspective of shareholder value is "what a
company is worth" - usually referred to as market value or
market capitalization. Then there is the investor's perspective,
which is the returns an investor receives from owning shares in
a company.
Both calculations attempt to measure the intrinsic value a company
creates for its investors. But neither does much to help company
leaders define business strategies or identify critical opportunities
for performance improvement. So what are the essential capabilities?
- Convert
shareholder value into terms that mean something
- Identify
the drivers of shareholder value
- Understand
the role IT plays in growing or destroying value
- Focus on
the current and future drivers of shareholder value
Alignment
Equals Collaboration
Poor collaboration creates a gap between what business leaders
want from IT and what IT can do. Business and IT strategies created
in a vacuum don't mesh very well. The result is missed opportunities,
poor execution, and reduced ability to compete in the marketplace.
Alignment requires business and IT leaders to work side by side,
exploring IT's potential to boost business performance and competitiveness-and
to jointly develop strategies that are complementary and comprehensive.
Essential capabilities:
- Clarify
the role of IT
- Align your
leadership style
- Analyze
opportunities and threats
- Insist
on clarity in defining the potential gains from technology
- Tie spending
to business goals
- Plan continuously
- Collaborate
with IT
Governance
and Funding
IT departments often have dozens, if not hundreds, of critical
technology initiatives moving forward simultaneously. Many are
complex projects involving significant operational and organizational
change. The only way to complete them effectively and efficiently
is through effective governance.
Effective governance helps a company balance a range of conflicting
needs: autonomy versus control, consensus versus commitment, and
strategic aspirations versus tactical needs. Effective governance
encourages the organizational behavior you want-and discourages
the behavior you don't-firmly guiding IT spending to deliver real
value.
Essential capabilities:
- Be clear
on purpose of governance
- Select
participants and establish processes focused on results
- Adopt a
simple governance model people can actually use
- Require
a business case that forces people to think clearly about costs,
benefits, and overall goals
- View projects
as a portfolio
- Make decisions
based on hard data
Business
Integration
A solid business-IT architecture is a critical step toward integration.
It creates alignment between processes, systems, data, and infrastructure
and helps ensure all of those diverse pieces fit together-now,
and in the future. It provides a standard platform and tools to
get new business operations and systems up and running quickly.
And, it can be designed to scale and flex-adapting to a company's
changing needs.
Essential capabilities:
- Determine
what you are missing (look for unexploited capabilities that
could produce new business opportunities)
- Define
integration needs and opportunities. Go after the best opportunities
- Then, focus
on architecture.
- Adopt common
terminology for discussing business value, assets, processes,
and IT issues
- Use integration
to trim and simplify business processes and improve efficiencies
IT Sourcing
Despite endless debate, outsourcing and offshoring are here to
stay. Companies are responding in the only way they can to high
market demands-by shifting more and more activities to highly
specialized, low-cost providers at home and abroad.
While many companies have achieved significant cost savings, quality
improvement, and operational flexibility through outsourcing and
offshoring, others have experienced only mediocre results, along
with a whole host of problems.
Essential capabilities:
- Develop
a clear sourcing strategy
- Don't outsource
what you can't manage
- Evaluate
potential suppliers carefully, based on current capabilities,
experience with others, and future plans.
- Manage
the transition (start by developing a formal transition plan)
- Establish
internal structures to ensure the goals are achieved
- Stay involved
and manage the relationship.
Performance
Measures
CXOs worry constantly about receiving sufficient returns from
IT investments. Yet some don't know what to measure, or how to
go about it. Others have created elaborate measurement systems,
but aren't sure what to do with the results.
Effective performance measurement allows a company to drive project
teams to deliver results better, faster, and cheaper.
Essential capabilities:
- Improve
management of IT assets through their (ever shorter) life cycle
- Create
a balanced scorecard that carefully blends critical performance
measures
- Benchmark
performance to identify stellar performance
- Make measures
an integral part of the process and accumulate data immediately
- Share rules,
expectations, goals, and desired results with employees
- Recognize
success and failure
Security
and Risk
Heightened security concerns are highly evident in today's business
world. Leaders will increasingly be defined by how they respond
in this period of uncertainty.
When it comes to IT development, everyone wants things fast and
cheap-but fast, cheap, and secure simply don't come in one package.
Today's systems are under constant assault from a wide range of
threats-hackers, viruses, corporate espionage-all actively seeking
to exploit their vulnerabilities. Meanwhile, other threats such
as human error, although less malicious, can be just as damaging.
Ensuring the safety of goods, people, information, and facilities
has become tablestakes in global commerce. Indeed, the very concept
of security has taken on a whole new meaning. Security used to
be synonymous with keeping assets safe. Now, it means sustaining
a business through any crisis, from minor to catastrophic.
Essential capabilities:
- Set clear
boundaries that define acceptable levels of risk
- Identify
threats, vulnerabilities, and strengths
- Balance
risk and cost
- Test your
vulnerabilities, your plans, and your assumptions.
- Look beyond
compliance and seek opportunities to better leverage security
management
IT and
Compliance
Today, complying with regulations is tougher than ever. Regulations
affect virtually everything, from office and data center locations
to the contents and location of business information. From employee
matters and financial reporting to the products and services you
offer, the suppliers you choose, and the customers you serve.
Companies must comply with existing and emerging regulations.
But many aren't sure how. The confusion is often justified. Legislators
write laws and make policies with little regard for the complexity
of implementing effective compliance programs.
The result? Compliance complexity is here to stay: Leadership
must anticipate changes and associated risks, adjust processes,
reconfigure companies, rewrite transactional and management information
applications, and all the while struggle to properly allocate
limited resources between compliance and value-growth programs.
Essential capabilities:
- Study the
rules-and their intent
- Reduce
your compliance burden by streamlining operations, systems,
and infrastructure
- Communicate
and educate on new regulations
- Create
a compliant architecture
- Stay on
top of regulatory requirements
Growing
Talent
Short term business-IT vision and turnover issues can cripple
a company. How can a company build an effective IT talent base
and plan for changing jobs, employee retirements, and the inevitable
defections?
Essential capabilities:
- Understand
the current work and capabilities of your IT function
- Make more
effective use of the talent you already have by realigning the
work to match people's interests and skills
- Continually
refresh how you attract and retain talent-beyond compensation
- Rotate
to build experience
- Be flexible
(telecommuting and flexible hours can significantly boost employee
loyalty and productivity)
Beyond
Customer Service
Companies looking to increase shareholder value must think through
the value chain, effectively navigating the demands for IT products
and services from end to end-from customers of the company to
internal business colleagues and external suppliers.
Effective IT leaders know whom to please, and when it's best to
say "no."
Essential capabilities:
- Know your
"consumers", this includes business customers, suppliers
and other business partners, and internal personnel.
- Segment
customers. Group them based on needs and value to the company.
- Manage
demand as well as supply
- Actively
manage customer expectations (i.e. know when to say "no.")
- Satisfy
your most important customers
Today's CIOs
are being asked to transform companies through information technology,
a transformation that requires breaking old habits, learning new
ways to do business-and an unwavering focus on growing shareholder
value. This is a challenging time for CIOs, but there has never
been a better time to make a real difference.
Bill Allison is the Regional Managing Director, Deloitte Consulting
LLP and can be reached at wallison@deloitte.com.
Tim Lovoy is the National Audit and Enterprise Risk Services Leader
(AERS) for the Technology, Media & Telecommunications practice
of Deloitte & Touche LLP and can be reached at tlovoy@deloitte.com.
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