While IT delivers a basic capability, complementary capabilities must also be developed within the organisation for any expected value to be generated. For example, the CIO and his or her team can deploy CRM technology but complementary capabilities -- for example, in customer management -- have to be developed by sales and marketing if this technology is going to be leveraged. Typically, adoption requires change and to be effective, this change must be managed.

As discussed in Part 1, the conundrum is that many CIOs are charged with delivering value from IT yet have no control or authority over their business users as to what has to happen for this value to emerge. No wonder many are frustrated!

CIO recruiters tell us that they frequently have to educate CEOs, boards and recruitment committees as to what a modern CIO can be expected to achieve. One recruiter noted to us that “many leadership teams do not know what [a good CIO] looks like because they have never seen good;” their expectation is for someone to “keep the lights on” and not an executive who can contribute to strategy and innovation. Another head-hunter minces when he reads a client brief that is basically targeted at hiring CIOs to sort out “their problem with IT” so the executive team can get on with running the business!

While 29% of CIOs in our survey report that they sometimes get involved in helping to define the business strategy, a staggering 55% reveal that they never do. This is somewhat expected, given that 64% do not report into the CEO, but into other corporate functions, especially finance and operations. Many CIOs argue that their direct boss is ill-positioned to represent IT and all it can bring to their company.

Another surprise from our survey is that CIOs report a low level of “digital literacy” among their leadership team colleagues; nearly half, (49%) say that execs don’t understand the capabilities and potential impact of new and emerging technologies. Even more worrying, however, is that they don’t understand how IT value is generated and what their role is as business leaders in this process. Just because an executive uses an iPad or books flights using the Internet does not mean that they understand how to lead and manage IT at an enterprise level.

Missed Opportunities

Perhaps not unexpectedly, two-thirds, (67%) of CIOs report that their companies don’t use IT to grow the business to the extent that it could, leading them to miss out on significant opportunities. Many of these issues have been suggested for decades and this research provides evidence that they still prevail. There is clearly a “knowing-doing” gap.

A case in point was offered by a non-IT executive from a global consumer goods company who attended an education programme that I recently led on managing IT projects to increase the likelihood of successful outcomes. An MBA graduate of a top school, he was a 30-year veteran with his company and, as he said himself, had “been a victim of IT” over the years. When the programme concluded, he noted that he and his organisation had run projects is the same way for three decades and he “never knew there was an alternative.”

CEOs and CXOs need to see the alternatives. They need to hear that problems with IT are not with IT per se, but are due to the lack of business leadership of IT. As business leaders, they, as well as their CIO, have a role to play. It’s their turn to actively join the IT team.

Joe Peppard is a Professor at the Cranfield School of Management in the U.K.

********

Writer’s Note: Together with John Thorp (author of The Information Paradox: Realizing the Business Benefits of Information Technology, McGraw-Hill Ryerson, 2003), I have being conducting research on the role of CEOs and C-suite members in the process of generating real business value from IT.

We have written an article titled, “What Every CEO Should Know and Do about IT,” which reports the findings of this research together with a framework and guidance for CEOs. Due to copyright restrictions, we cannot post a link to this article, but can make it available if you send me an email at j.peppard@cranfield.ac.uk.

Last week with their usual fanfare and fantastic marketing, Apple made a small but absolutely world changing announcement. They announced their new Education focused iBooks release and digitial textbooks strategy for the iPad. In short students can now download interactive and multimedia driven textbooks onto an iPad for $14.99. They will get any updates that the publisher makes automatically. The marketing buzz from Apple focuses on giving students up to date information (unlike that ten year old history book that I used in high school) in a format that is much more engaging than the printed page. I definitely agree with the high level benefits of this and it got me thinking about how this will impact our future workforce and how IT will interact with them.

I’m a big note take and I like taking notes on paper- it helps me keep focused and ultimately I remember things better when I write them down. I do type faster than I can write, but I am easily distracted by all things on my laptop or tablet……….. sorry just had to check my email, I’m back. I am however from a generation who was educated on taking notes on paper and we didn’t have hand held digital devices in our backpacks to use. I strongly believe that Apple’s announcement is the first step in massive changes in how children will learn. Of course Amazon and Google will respond with offerings as well, but I don’t think it’s hard to imagine that big heavy printed textbooks will be gone in first world countries in the next 5 years (oh no, has Apple just killed the school locker industry!). As the price of tablets and ereaders continue to drop to prices that are cheaper than a single high school text book, it just doesn’t make sense financially anymore.

But how will this transform our future workforce? If our end users spend more than a decade learning and studying on digital devices, how will this impact not only how they work within an organization but what tools business and IT need to provide to make them successful and innovative. I’m not predicting that we will have flying cars and live on the moon- but I think it’s safe to say our work environments will drastically change in the next ten years. We are beginning to see this today with millenials but these are workers that have only been exposed to Facebook, Twitter and iPads for a just a few years.

The only way to prepare for massive unknown change is to structure your IT organization for agility. Focus on alignment to the business and making sure you can react quickly to changing business needs which may not just be competitive forces or industry changes but also changes to your biggest input, the workforce. From an IT Operations perspective I think it all starts with strong a change management process. This is of course easier said than done but a change management process focused on the often opposing forces of reducing risk and a minimal overhead will make your IT organization ready for anything today, tomorrow or in the years ahead.

This year, MIT is celebrating its 150th anniversary. That’s over a century and a half of knowledge-sharing that has lead to breakthroughs in science and engineering—innovations that have improved both social and economic welfare, year after year.

I am reposting here a version of an interview about our upcoming CIO Symposium that appears at: NEWS@MITSLOAN, Vol: XX Issue: 25 April 25, 2011

Graham Rong, SF ’06, has been the chair of the MIT CIO Symposium since 2009. Dean David Schmittlein noted that this event brings together MIT Sloan’s leading research and education with great CIOs, business leaders, and innovators from around the world. It is a platform to engage in problem-solving dialogue, gain strategic insights, and obtain solutions to improve diverse organizational and business issues for the present and well into the future.

Recently, Graham shared some of his thoughts regarding business trends, being a leader in innovation, and how his time at the MIT Sloan continues to shape his perspective.

Q. Reflecting on your experience at MIT Sloan and the CIO Symposium, what were the drivers for the past themes and topics? Were the ideas based on the economic climate or technology?

A. We have a different symposium theme every year. It is driven by industry trend-setters in global CIO leadership and corporate IT. But the common thread carried through the years is that it is always forward-looking in nature. A small group of us usually spends weeks drafting a theme based on research and reviews with thought leaders, both in academia and industry. Ideas for specific panel topics are based on the economy and tomorrow’s technologies.

For example, last year’s theme, “Top-Line Growth and Bottom-line Results,” reflected the initial stage of our economic recovery. Turning a corner means being aware of and ready for the best opportunity to glean top-line or optimal growth. A recovery period is a time of opportunities and options for fresh avenues, but one still needs to focus on the current (realistic) business operation.

Q. The subject of leadership has always been a recurring discussion topic at these symposiums. What leadership qualities did you learn through your MIT Sloan experience and what are the skills needed to lead innovation in business?

A. The academic research and entrepreneurial experience provided me with an excellent balance between technical aptitude and business acumen. At MIT Sloan, particularly in the Sloan Fellows Program in Innovation and Global Leadership, we worked side by side with a diverse group of global leaders, representing a very broad range of industries. It’s a great opportunity to discuss and share lessons learned on every possible business topic—technical, operational, and managerial. This enriched my background. It gave me an understanding that an important leadership quality is holistic thinking. This is another dimension to forward thinking, which is also a crucial attribute to being innovative. What I mean by holistic thinking is to be inclusive or comprehensive in acquiring actionable knowledge. That is, the collective intelligence I gather to make strategic decisions represents an entire body of information—insights not just from the consumers, but rather from key business influencers, including complementors, partners, buyers, suppliers, regulators, and special interest groups.

Q. As the MIT CIO Symposium is a link between academia and the global business world, how did you integrate the faculty in the development of this event?

A. We always work closely with MIT faculty. We have an academic keynote panel with five renowned MIT faculty members who share their latest research and inspire the business world. They give the business world a glimpse of pioneering efforts and future technologies. It’s a great way for the faculty to introduce peer-reviewed innovations to global executives. At the same time, the MIT faculty has an opportunity to dialogue with global CIOs and business leaders and get first-hand information on issues. Industry perspective and practices of the latest technology or business models can trigger new research ideas. As domain experts, MIT faculty members also participate in the review and judging of two of our highlights—the CIO Innovation Leadership Award and the Innovation Showcase. The showcase selects 10 outstanding companies representing cutting-edge B2B solutions that combine both value and innovation to Enterprise IT. It connects CIOs and senior IT executives with some of the most creative minds in enterprise IT. The relaxed atmosphere of this showcase allows everyone to stay in touch with the state-of-the-art thinking while networking with other IT executives. The second highlight is an award that honors CIOs who bring business value by orchestrating organizational change via the innovative use of IT and business processes. For the future, we are considering an advisory board of outstanding CIOs and business executives so that we continuously have a pulse on trends, insights, and challenges.

For more information, visit www.mitcio.com

Why is it still so difficult for CIOs to make strategic contributions to their organizations? For more than a decade, CIOs have been urged to become more strategic. A 1999 CEO survey conducted by the London School of Economics, for example, claimed the following:

Despite CEO disappointment with past results, 48 percent of the CEOs say IT will play a prominent role in defining corporate strategy in the future. Over 54 percent of the CEOs surveyed said they had high expectations for IT’s ability to contribute to such things as a company’s competitive advantage.

And yet even with the ongoing focus on those goals, the dream of CIOs becoming strategic remains elusive. Few are able to attain it, and therefore, few derive the related benefits.

Could it be that more than a decade after the London School survey, a new definition of “strategic CIO” is needed? It might be appropriate to ask, for instance: Given the short life cycles of technology as well as the rapid pace of change, is long-term strategy still important at most businesses today? Would it be better, instead, to remain fully adaptive and flexible?

My response is: Of course, CIOs and all business executives need to be adaptive and flexible, but at the same time, these characteristics suggest that we have a course of action, i.e., a strategic direction, that we are deviating from. Otherwise, we are not learning and making course corrections toward some desired destination, but rather, we stand to totally lose our way as we adjust to every external twist and turn in our environment.

Strategy in Action

One of the best examples I have seen of a strategic IT executive was at a Fortune 150-size company in the western U.S. This individual was successful in bringing the entire executive team of the company together for a two-day off-site meeting to develop an enterprise IT strategy. By the end of this event, the executive team had identified and prioritized 12 IT projects that linked directly to corporate business goals. Most of these project ideas came from business executives and were newly developed in the session. In the months following, the IT executive was promoted to CIO and his IT budget was doubled. And even more significantly, the corporation went on to have its best year ever.

For most of its history, IT has been an operational and functional resource — not a strategic one. In the current environment, it’s more important than ever for IT organizations to shift their efforts to the strategic level, i.e., the goals of the enterprise, because this is the area of maximum value-add. In the example just cited, the operating and functional executives became convinced of the greater value of IT by assigning greater priority to it as a contributor to enterprise goals, not just by satisfying the needs of the individual business units.

Another argument in favor of IT’s focusing on the strategic level comes from viewing the enterprise as a system whose success depends on the interaction of its parts. The esteemed management writer and former dean of the Wharton School, Russell Ackoff, had explained the concept this way:

The performance of a system depends on how its parts interact, not on how they act taken separately. Therefore, when the performance of [the separate] parts are improved, it does not follow that the performance of the system as a whole will improve. In fact, in many cases, it will get worse. … The properties to be desired of the parts of a system should be derived from the properties desired of the whole, not conversely.

A Holistic Approach

In other words, using IT to improve the performance of individual business functions will not necessarily improve the performance of the whole enterprise. In fact, it may make it worse. That doesn’t mean that IT should ignore the requests coming from the business units, but as highlighted in the example of the Fortune 150 company, if we can show that the greater value of IT lies in using it to achieve enterprise goals, the operational and functional requests will increasingly have to be weighed against those choices.

Here are a few specific steps to consider in making this happen:

1. Start by being clear about your enterprise goals. Are they really long-term desired outcomes, or as so often happens, are they really means to achieving desired outcomes? If IT serves as a strategic means to another strategic means, the resulting performance can only be suboptimal.

2. How can IT creatively contribute to enterprise goals? This step will take some work. How does IT contribute to top-line growth? (See my earlier Smart Enterprise Exchange blog on this topic here.) How does IT help the company achieve greater market share? Is there some way that IT can help your customers derive greater value from the enterprise?

3. Proactively propose and market IT’s ability to make a significant contribution at the strategic level of the firm. As I noted in the previous blog, IT needs to learn from marketing how to package, communicate and promote our unique ability to do this.

Strategy is ultimately about choices. If the IT organization can accomplish the three steps noted here, the enterprise will be choosing the greater value that IT can provide for the enterprise instead of asking IT to continue its nonstrategic operational role into the future.

#

Peter S. DeLisi is President of Organizational Synergies and Academic Dean, Information Technology Leadership Program, Santa Clara University.

Organizational  Synergies is a strategy consulting firm located in Fremont, Calif.  Previously, Pete spent 16years at Digital Equipment Corp.---eight of  those years as a consultant to large, Fortune 500-size customers.

He has been published in the Sloan Management Review, Harvard Business  Review, Business Horizons and Journal of Management Inquiry. He is also an internationally recognized speaker.