The role of the CIO

Organisations invest in technology because they believe it will make their business better at what it does. We now have a substantial body of research that shows that organisations which have world-class IT teams achieve better margins and higher growth than their industry peers.

For example, an Accenture study of European manufacturing and distribution companies found that high-performing IT organisations spend 15 to 20 per cent less than their peers while still being able to invest more in IT-enabled innovation, driving more value, higher earnings and growth. Another example: in their book IT Savvy, Peter Weill and Jeanne Ross report on findings made by MIT’s Centre for Information Systems Research (CISR):

• The most IT-savvy firms are 20 per cent more profitable.

• The top 18 per cent of firms with the best portfolio-management practices have higher profitability.

• Firms that are above average on IT savvy and IT spending have margins that are 20 per cent higher than the industry average. Those that are below average in both have margins that are 32 per cent lower than the industry average.

• And it’s not just about results for organisations. Without exception, the CIOs of high-performing firms are more influential within their organisation and are seen as strategic business leaders.

In these circumstances, perhaps the only real question worth asking is this: How do you create a high-performing IT team? The answer is deceptively simple: You add value when you fulfil your organisation’s needs and expectations around the use of technology.

Doing this, however, is far from easy. There are a number of significant challenges that need to be met before IT’s true potential can be fulfilled.

Challenge 1: Rising user expectations

Today’s users, particularly emerging leaders, are much more demanding about what they expect from their technology tools. They are comfortable using technology in all aspects of their lives, and they just expect technology to work and work the way they want it to. Their expectations are set by their consumer experiences, and they don’t understand why corporate technology is so difficult to use. They know what’s possible.

Challenge 2: Power is shifting

Technology prices continue to tumble at a rate that is unlike that of any other product in history. The widespread availability of comparatively cheap, easy-to-buy ‘as a service’ offerings makes technology more available than ever. Our new sophisticated users are happy to just buy what they need when they need it. Furthermore, organisations are letting them do so because too many IT departments are seen as expensive, unresponsive and out of touch.”

Challenge 3: Unprecedented change

Despite the extraordinary level of change we have seen in the technology industry historically, there is a very real expectation that we haven’t seen anything yet compared with what’s to come.

While there are many different descriptions and acronyms out there, every analyst in the industry agrees that social, mobile, analytics and cloud (or SMAC for us acronym-lovers) is a game-changer for organisations.

Challenge 4: We have a rich heritage

If rising expectations, power shifts and unprecedented change aren’t challenging enough, organisations that have been around for a while have significant legacy investments in technology, and these need to be managed. Let’s face it: with the benefit of 20/20 hindsight, these historical investments – while well-intentioned – are often uncoordinated and complex and consume too much money and resources to maintain. They often leave precious little resources to support ongoing evolution and improvement.

Using the IT hierarchy of needs

Every CIO I have met wants to add value, wants to build a high-performing IT team, but they are so busy with urgent, day-to-day issues that they have no time. And even if they do have time they are not sure how to make it happen, because while the industry is fantastic at creating IT-enabled visions of the future, it is very short on describing how to make these visions a reality.

The IT hierarchy of needs provides a basis for understanding what needs to occur in order for you to be able to deliver business-model innovation and differentiation for your organisation. Further, it explains what you need to focus on right now to meet today’s needs, and provides an explanation as to why you do or do not have influence as a department or as a CIO within your organisation.

Technology delivers value to an enterprise in a number of different ways. As a CIO, you need to begin your journey by delivering on the most basic needs first. As you do this, you not only contribute that value to your organisation but you also build you and your team’s credibility and influence to enable you to contribute at the next level of needs.

Figure 1: The IT hierarchy of needs

So, what are the levels in the IT hierarchy of needs?

Reliable IT

Employees use technology to make their daily jobs easier to do. But if your systems are not available when they should be, then work stops. So while ‘Established/ad hoc IT’ is the lowest level of the hierarchy, the first value stream for the CIO to deliver is reliable systems so that work doesn’t stop. In reality, this isn’t so much about delivering value as it is about the removal of an irritant and destroyer of value and influence.

Efficient and effective IT

Like it or not, organisations run to the heartbeat of money. It doesn’t matter whether you are a for-profit, a not-for-profit or a government department, it is money that makes organisations run.

If you want to be influential, you need to be able to demonstrate that you are an effective manager of money. If you are seen as a person who is careless with money, your influence will be diminished and people will wonder whether you understand the basics of business and management.

Digital business

This is where value creation and influence really start. This value stream is about making the business as a whole more efficient and effective at what it does. IT contributes to this by fulfilling the four jobs of technology:

• to improve efficiency through process automation

• to improve decision-making through the use of information

• to support customer and team engagement through data-supported social interaction

• real-time monitoring, leading to automated sensor-based ‘detect and act’ solutions.

CIOs who can successfully deliver change programmes that deliver on the ‘four jobs’ and optimise their organisation are very powerful and influential indeed.

Competitive differentiation

We hear a lot these days about new and disruptive business models, and more often than not these new business models are made possible by innovative uses of existing or new technology. It may be the creation of new products and services, the ability to access new markets or customers, or simply a much cheaper way to serve an existing need. This role is perhaps best described as CIO alchemy – creating value when none previously existed.

Using the IT value chain

The IT value chain looks at the four core areas in which an IT department needs to excel in order to be successful. This is presented as a balanced scorecard, a concept first described by Robert Kaplan and David Norton in an article in the Harvard Business Review in 1993.

The IT value chain focuses management attention on the dynamics that create success for an IT organisation over the medium-to-long term. While specific KPIs (key performance indicators) will change, the four core needs are ever-present no matter what level you are at in the IT hierarchy of needs.

The IT value chain is largely based on the proposition put forward by Heskett and colleagues in their groundbreaking Harvard Business Review article ‘Putting the Service-Profit Chain to Work’. The essence of the service profit chain is as follows:

‘Profit and growth are stimulated primarily by customer loyalty. Loyalty is a direct result of customer satisfaction. Satisfaction is largely influenced by the value of services provided to customers. Value is created by satisfied, loyal, and productive employees. Employee satisfaction, in turn, results primarily from high-quality support services and policies that enable employees to deliver results to customers.’

Figure 2: The IT value chain

So let’s take a closer look at each area, working backwards from the bottom left of the diagram.

Deliver results

This is why we are here, and why organisations pay so much money for IT and IT professionals. The results that organisations want and expect us to deliver are the value streams that flow from satisfying the needs of the IT hierarchy of needs. Meet all of these needs, and you will differentiate your organisation from others in the marketplace today and will position it well to remain at the forefront in the future.

Provide exceptional service

Yes, great companies provide products and services that are valued by their customers, but what characterises great companies is that they also have very high levels of customer advocacy. That is, people love them and their services so much that they tell their friends and keep coming back for more. Better yet, such advocates allow you to act up – to grow and to take new ground. If you want to be influential, you need to create advocates because advocates will allow you to act outside of your demonstrated competence.

Create engagement

Exceptional service is provided by team members who are highly engaged. Engaged employees provide better service because they care. Engaged employees also tend to be able to solve more difficult problems for their customers, which improves the customer experience even more. Employees become engaged when the organisation makes it easy for them to succeed, rather than putting controls and processes in their way.

Design work

Perhaps this is the real work of a CIO – to design a work environment that makes it easy for the IT team to succeed. Traditional organisations don’t do this; instead, they design their work environment to manage and control their team. Successful organisations design themselves in a way that enables their team to succeed in providing great customer service.

So, if you design your work environment to support your team to provide great customer service, and you lead to engage them, then you will create many customer advocates. Customer advocates will continue to do business with you, and will tell their friends and colleagues how great you are. This advocacy underpins demand for new and enhanced IT services, which delivers increasing value to the organisation and allows you to fulfil your purpose of delivering value through the smart use of technology and information.

Measurement and learning

So, the IT hierarchy of needs describes what we need to achieve in order to deliver value through IT for our organisation, and the IT value chain sets out how we need to go about meeting these needs. To be successful, however, there are two more key things that you need to consider.

The first is measurement. It’s all very well knowing where you have to get to, but if you don’t know where you are then it is difficult – if not impossible – to understand what you have to do to progress towards your goal. The only way to know where you are on your journey to being world-class is to consistently measure your current performance. To know whether you are progressing in the right direction, analyse trends in your measurements.

What should you measure? You should measure your performance in each quadrant of the IT value chain, and use this information to assess which needs have been fulfilled and which are still outstanding. As mentioned above, the specific KPIs will change to reflect what’s important to your organisation and also where you are on your journey.

The second area you need to consider is learning. Success is never achieved in a straight line. There are always setbacks and unexpected obstacles. Not everything you try will work, and not all well-intentioned advice will be suitable for your organisation. In the end, you’ll need to find your own way to success not by trial and error, but through trial and learning.

So, set your strategy to meet your organisation’s needs. And, as you do so, measure your progress to see whether what you are doing is working. If it is, keep doing it; maybe consider refining your approach to make it even more effective. If it isn’t working, then review why and change or refine what you’re doing.

Owen McCall (@OwenMcCall) is an experienced management consultant and CIO, and a member of the editorial advisory board of CIO New Zealand. This is an excerpt from his book High Performance IT: Insights into IT leadership and delivering on the promise of technology.

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