CEOs CIOs not in Sync

Lead Analyst: Cal Braunstein

According to a post on the Harvard Business Review blog CEOs and CIOs are not in sync when it comes to the new challenges and issues CEOs are facing. Study findings point to the fact that CIOs do not understand where the business needs to go, and CIOs do not have a strategy to address business challenges or opportunities.

Focal Points:

• Key findings from their research are almost half of the CEOs feel IT should be a commodity service purchased as needed. Almost half of the CEOs rate their CIOs negatively in terms of understanding the business and how to apply IT in new ways to the business. Only 25 percent of executives felt their CIOs were performing above their peers. Moreover, 57 percent of CEOs expect their IT function to change significantly over the next three years, while 12 percent predict a "complete overhaul" of IT.
• The above findings are attributed to four trends that are changing the CIOs role. Many CEOs are moving away from ownership and return on assets or investment (ROA or ROI) analyses and are thinking about renting IT equipment for items not directly tied to value creation. The shift from efficiency and scalability to agility and efficacy translates into a movement away from transactional systems to new systems that provide agility, collaboration, and transparency. Thirdly, the boundaries between contractors, channels, customers, partners, staff, suppliers, and even competitors are diminishing and in some cases disappearing, creating a whole new user community for enterprise IT systems. All of this changes how companies manage and organize work and resources, which suggests the need for more unique, niche applications with integration of information and systems across organizational and agent boundaries.
• In summary it states there new systems, business and delivery models, types of information, technologies, and whole new roles for IT in the enterprise's ecosystem. These new business insights, tied to the emergence of new technologies, are creating an opportunity for IT to lead business transformational efforts, creating new business models, initiating new business processes and making the enterprise agile in this challenging economic environment, the report concludes.

RFG POV: Business executives that think IT should be a commodity service purchased as needed do not perceive IT as a business differentiator. That is problematic for their businesses and for IT executives that work for them. IT executives in those organizations need to enlighten the business executives on the flaws in their thinking. As to the four trends identified, RFG and other studies have also found these to be true, which is why RFG has been pushing for IT executives to transform their operations. Business and IT always exist in a state of change, including disruptive innovation, and the next decade will be no different. IT executives must work with business executives to help transform the business and expose them to new process possibilities that are available due to the emerging technologies. IT executives must believe (and pursue) their role is to sell the business – e.g., sell cereal if they work for Kellogg's – and not be a "tech head" if they want a seat at the business table.

CIO Ceiling, Social Success and Exposures

Lead Analyst: Cal Braunstein

According to a Gartner Inc. survey, CIOs are not valued as much as other senior executives and most will have hit a glass ceiling. Meanwhile a Spredfast Inc. social engagement index benchmark report finds a brand’s level of social engagement is more influenced by its commitment to social business than its size. In other news, a New York judge forced Twitter Inc. to turn over tweets from one of its users.

Focal Points:

• Recent Gartner research of more than 200 CEOs globally finds CIOs have a great opportunity to lead innovation in their organization, but they are not valued as strategic advisors by their CEOs, most of whom think they will leave the enterprise. Only five percent of CEOs rated their CIOs as a close strategic advisor while CFOs scored a 60 percent rating and COOs achieved a 40 percent rating. When it comes to innovation, CIOs fared little better – with five percent of CEOs saying IT executives were responsible for managing innovation. Gartner also asked the survey participants where they thought their CIO's future career would lead. Only 18 percent of respondents said they could see them as a future business leader within the organization, while around 40 percent replied that they would stay in the same industry, but at a different firm.
• Spredfest gathered data from 154 companies and developed a social engagement index benchmark report that highlights key social media trends across the brand and assesses the success of social media programs against their peers. The vendor categorized companies into three distinct segments with similar levels of internal and external engagement: Activating, Expanding, and Proliferating. Amongst the findings was that a brand's level of social engagement is more influenced by its commitment to social business than its size. Social media is also no longer one person's job but averages about 29 people participating in social programs across 11 business groups and 51 social accounts. Publishing is heavier on Twitter but engagement is higher on Facebook, Inc. but what works best for a brand does depend on industry and audience. Another key point was that corporate social programs are multi-channel, requiring employees to participate in multiple roles. Additionally, users expect more high-quality content and segmented groups. One shortfall the company pointed out was that companies use social media as an opportunity for brand awareness and reputation but miss the opportunity to convert the exchange into subsequent actions and business.
• Under protest Twitter surrendered the tweets of an Occupy Wall Street protester, Malcolm Harris, to a Manhattan judge rather than face contempt of court. The case became a media sensation after Twitter notified Harris about prosecutors' demands for his account. Mr. Harris challenged the demand but the judge ruled that he had no standing because the tweets did not belong to him. While the tweets are public statements, Mr. Harris had deleted them. Twitter asserts that users own their tweets and that the ruling is in error. Twitter claims there are two open questions with the ruling: are tweets public documents and who owns them. Twitter is appealing.

RFG POV: For the most part CIOs and senior IT executives have yet to bridge the gap from technologist to strategist and business advisor. One implication here is that IT executives still are unable to understand the business so that IT efforts are aligned with the business and corporate needs. To quote an ex-CIO at Kellogg's when asked what his role is said, "I sell cereal." Most IT executives do not think that way but need to. Until they do, they will not become strategic advisors, gain a seat at the table or have an opportunity to move up and beyond IT.  The Spredfest report shows that using social media has matured and requires attention like any other corporate function. Moreover, to get it to have a decent payback companies have to dedicate resources to keeping the content current and of high quality and to getting users to interact with the company. Thus, social media is no longer just an add-on but must be integrated with business plans and processes. IT executives should play a role in getting users to understand how to utilize social media tools and collaboration so that the enterprise optimizes its returns. The Twitter tale is enlightening in that information posted publicly may not be recalled (if the ruling holds) and can be used in court. RFG has personal experience with that. Years ago, in a dispute with WorldCom, RFG claimed the rates published on its Web site were valid at the time published. The telecom vendor claimed its new posting were applicable and had removed the older rates. When RFG was able to produce the original rate postings, WorldCom backed down. IT executives are finding a number of vendors are writing contracts with terms not written in the contract but posted online. This is an advantage to the vendors and a moving target for users. IT executives should negotiate contracts that have terms and conditions locked in and not changeable at the whim of the vendor. Additionally, enterprises should train staff on how to be careful about is posted in external social media. It can cost people their jobs as well as damage the company's financials and reputation. 

CEO Surveys

Lead Analyst: Cal Braunstein

IBM Corp. and PricewaterhouseCoopers, LLC released results from their global CEO surveys. For the first time the IBM study identified technology as the most important external force impacting the business. Both studies recognized the need to employ finer customer segmentation and use IT to change business processes to take advantage of new opportunities.

Focal Points:

• IBM released results of its fifth biennial CEO survey, in which the company interviewed more than 1700 CEOs with more than six years tenure in 64 countries. One of the top findings was that technology is now driving more organizational change than any other force, including the economy. In this regard, outperformers embrace openness, excel in executing tough changes, differentiate themselves through better data access and insights which are put into action, and are more likely to partner for innovation and driving revenues from new sources. The top three sources of sustained economic value come from human capital, customer relationships and products/services innovation. Internal and external collaboration are being used as tools for creating organizational change. The second finding was that CEOs create more economic value by engaging customers as individuals. These companies are investing in getting customers to share their insights into what they value individually, and when and how they want to interact. Then they develop and execute plans to interact using social media as well as traditional face-to-face engagements. Outperformers in this category strongly differentiate themselves through better data access, insight, and translation into actions. While big data is playing a role in this dimensional change, other factors are the old fashioned way of listening and capturing what employees see and hear, and then being where the customer expects the company to be.
• The third major CEO survey finding was that CEOs create more economic value by pursuing more disruptive innovation with partners and collaborating to drive new revenue sources. In some cases they create new industries while in others they merely move into new industries. Two of the keys to more effectively meeting the partnership challenge are making the partnerships personal and breaking the traditional collaboration boundaries. In effect, these companies are themselves becoming disruptors. While CEOs have shifted to address the transformational needs of the organization, CFOs are still concerned with controlling cost and improving efficiency. In a separate IBM retail study, IBM found most customers were willing to share information if they perceived there was a benefit to doing so. The greatest areas of reluctance for data sharing were in the categories of financial and medical data.

• The PwC study of more than 160 CEOs in the U.S. identified customer demand as the primary driver of corporate strategy in 2012. While the executives are slightly less optimistic than last year, 40 percent expect their own companies will grow and approximately the same number expect to complete a cross-border merger or acquisition this year. To deliver on their strategies CEOs are reconfiguring operations in local markets, nurturing talent and addressing potential talent shortages, and encouraging the free flow of ideas and innovations. Two significant findings in the survey were a major jump in the concern about competitive threats (73 percent of the CEOs are worried) and a considerable decline in anxiety about risk exposure (a 20 point drop to 19 percent). PwC notes that with more growth opportunities arising in distant lands business leaders are acknowledging that an overly conservative attitude will put their companies at a competitive disadvantage. Lastly, PwC determined that the top CEO priorities overseas are growing the customer base followed by access to the local talent base. Additionally, the PwC study confirmed one of the IBM findings – most CEOs were planning on entering into new strategic alliances or joint ventures this year.