Much has been written about the seismic shifts underway in the chief information officer (CIO) role. Only a few years ago, the duties of the CIO largely focused on procuring and managing information technology investments.
These days, however, CIOs are tasked with leveraging technology so effectively that it drives business benefits. As a result, organizations need their CIOs to become strategic partners with business units. It is a process that is driving a fundamental transformation into the CIO’s job description.
To discuss the challenges and opportunities facing CIOs today, we were fortunate to catch up with Phil Weinzimer, president of Strategere Consulting (www.strategere.com). Mr. Weinzimer’s new book: “The Strategic CIO: Changing the Dynamics of the Business Enterprise” focuses on how CIOs strategically transform IT organizations by leveraging information and technology to create new customer value, increase corporate revenue, and enrich shareholder value.
Mr. Weinzimer interviewed more than 150 CIOs, IT leaders, business executives, and academic thought leaders as part of his research. His previous book: “Getting it Right: Creating Customer Value for Market Leadership,” focused on transforming an organization using a 3P strategy: Prepare personnel to work together as a team, perceive customer needs, and provide new products and services that create sustainable and profitable value.
We caught up with Mr. Weinzimer to discuss his new book and the impact strategic CIOs can have on their organizations:
BTR: Let’s start by describing your latest book project and the key questions you wanted to address as a follow on to your previous publishing efforts.
PW: About three to three and a half years ago, I started asking myself a couple of questions relevant to CIOs that I had interacted with over the last 15 to 20 years. I noticed that there was a change in the how CIOs behaved. Many were much more strategic, they were more intimately involved in the business
So I asked myself three questions:
* What was driving the change?
* What was the process that these CIOs were using to transform their organizations to become more strategic? * Beyond the CIO, did the IT organization as a whole – its personnel – have to evolve in order to create more innovative organizations?
I wanted to see If there were common processes, and if so I wanted to see if there was a way to identify some best practices to measure the maturity of a strategic IT organization. As I thought about it a little more, and I shared my ideas and questions with a number of CIOs that I know, the basic foundation for what I thought would be an interesting book emerged. That’s what started me on this whole book process.
BTR: As you proceeded with your research, did you find that there is a common understanding across an organization’s leadership community of executives – the CEOs, CFOs, chief operating officers –about what innovation actually means and the role that IT should play in creating or developing innovative organizations?
PW: Let me answer that in two parts. First, let me go back to those three questions I was trying to answer. The first was: ‘Is there a process strategic IT organizations go through to become more mature to finally get to that innovative phase.
And the answer is: Yes.
It turns out that there are four key processes or transformation phases:
* IT organizations need to build trust within the business. They need to deliver services exceptionally well. That’s a no-brainer. It can take CIOs anywhere from two-to-six years to accomplish this part. People might think that’s way too long a time. But I interviewed 156 CIOs, IT and business executives as part of the research for my book and every single one of them talked about how delivering services exceptionally well was a core requirement. And it does take a lot of time to accomplish because there are a lot of services that the IT organization provides to the businesses.
* The second is to improve the skill set so that they can more effectively collaborate. This is the change management piece for moving an IT organization from a techno-centric to a business-focused-oriented IT organization.
* The third is working on initiatives that drive margin – and that’s where strategic CIOs can really start to begin the innovation process and work with their business peers to improve cost structure and impact sales revenue.
* The fourth is the one where true innovation takes place. That’s where you leverage technology strategically to drive values to where you’re really innovating new products – you’re innovating new markets and in many cases, transforming the business model of the company.
So those are the four main levels that I believe CIOs should work through, and there is a way to measure each of them. I also wanted to explore the set of competencies and differentiated skills associated with these levels.
So back to your question about innovation and what role it should play in an organization depends on how you define innovation. My definition of innovation revolves around where an organization is creating new ideas and translating those new ideas into products and services by really creating new value. So take Uber, the car-sharing service, as a case in point. That is an innovative way to move people around different cities and their whole business model was very unique.
Another example everyone is aware of is Apple iTunes and how they disrupted the music industry. Then there’s the iPhone that started the whole mobile revolution. Those are great examples of innovation based on technology enabled processes.
How CIOs use innovation really depends on what type of strategy the organization has. For example, if a company is an innovator like Apple, they really need to innovate on a regular basis. If a company is a cost competitor, then the innovation revolves around their cost structure. Innovation is always important, but it means different things to different organizations.
BTR: Do you find that there is a common understanding among executives about what innovation means and is that something that is important to nail down in order to be an innovative or strategic CIO?
PW: That’s an interesting question and I’ll give you my take on it based on what I have learned from the CIOs I’ve spoken to and the work I’ve done with CIOs on a consulting basis. Let me start with a couple of examples: McKesson is a very large drug and products company, Randy Spratt is the CIO and the CTO. He drives change in that organization.
So McKesson is always acquiring new companies and Randy Spratt as an executive was recognizing that the integration planning for all the newly acquired companies was taking too long. He looked into it and found there was no process for planning the integration. So he took the lead, worked with the business units, put a business and IT team together and they developed a process acquisition playbook that dramatically reduced the planning time for integrating new companies on the business and technology side into the McKesson business model. As a result he was able to reduce planning and integration from an average of 12 weeks down to an average of three weeks. They were able to improve the cash flow process because the sooner you integrate the sooner you can reap the benefits. That’s an example of innovation from a process improvement perspective.
Now let’s examine innovation from a different perspective – where the CIO can really change the entire business model of a company. Build-a-Bear Workshop is a company that a lot of parents and grandparents are aware of because they bring their kids or grandkids to the store to custom build and stuff an animal. When you go to the store, you pick out a stuffed shell, go to various stuffing stations, you pay your hundred-plus dollars, and you get a very nice box with a birth certificate and the child goes home. At this point, Build-a-Bear Workshop crosses its fingers and hopes the parents and kids have a great experience and they’ll come back. It’s a physical experience that exists at Build-A-Bear Workshop.
Dave Finnegan, the CIO of Build A Bear who recently moved over to Orvis, a fishing outfitter, looked at this and noted that kids’ brains today are wired completely differently than kids of yesteryear; kids want to interact digitally. We’ve all seen one, two and three year olds interacting on an iPad. Kids today are just digitally aware.
So he drove an initiative in Build-A-Bear Workshop to change the business model and incorporate a digital experience for the stuffing process for the stuffed animal. He has created a before, during and after experience that ties the business to the customer. Before you go to the store customers can log on, and choose the stuffed animal they want to work with. Now the store knows who you are before you get there. Once you get to the store, they know the stuffed shell that you need, the customer goes through each of the stages and interacts digitally with the physical experience – they’ll have a monitor where you can choose an emoticon, you can choose a song, and the kids can interact digitally with the product to build their stuffed animal. It’s a much more digital experience.
Now when the process is complete, customers still pay the hundred-plus dollars and get a very nice box and a birth certificate with a unique number on it. Only now, when they get home, they can log in with that unique number and up pops an avatar of this stuffed animal. Build-a-Bear Workshop developed interactive learning games where the kids can interact with their avatars online. As a result, Build-a-Bear Workshop has completely changed the business model. That’s where innovation really takes its maximum form – you’re changing business models, which is the Level Four that I have described in the transformation phase.
BTR: Outstanding. It still seems like a pretty rarefied environment. What percentage of the Global 2000 CIO do you think are operating at this strategic innovation level today?
PW: I would say it’s about 5 to 10 percent. Just because a CIO is not operating at the fourth phase of the strategic transformation doesn’t preclude him or her from being an important asset to the company. Let me explain that. There are three different kinds of CIOs. There are CIOs that are really good technically, and they do an exceptional job of delivering services well – that is Phase One. They have great technical skills but they may not have the business acumen because they grew up in the technology space.
As a result, these are the CIOs who recognize if the company really wants to be innovative and move up the curve, they don’t have the skills to move up. If they’re smart enough, they’ll recognize this early on and they’ll move on to the next company that has a real challenge in delivering services exceptionally well. I’m sure you’ve heard many, many CIOs talk about their company and the challenges they faced when they first took on the role of CIO in delivering services exceptionally well.
They need to either move, or develop skills if they find that they are recognized for being very good technically, but companies want to move up the curve and find the current CIO does not have the business acumen and business strategy capability and skills in order to move up the curve with the company.
Then there’s the second type of CIOs who are making an effort to be strategic and try to move up the curve and work on some initiatives with the business. They’re more involved in the business, they’ve created some business success. These are the five to eight or nine year tenured CIOs.
Then there is the third type CIO, like Dave Finnegan, who are really strategic and innovative and are representative of operating at the fourth level of the strategic IT transformation process (leveraging information and technology strategically to innovate value). Two other strategic CIOs that I highly respect and was honored to have write the forwards to my book are Filippo Passerini, who’s group president and CIO of Procter & Gamble, and Rob Carter, CIO of Fedex services.
So for example, when you take a look at Filippo Passerini, he really looked at Procter & Gamble from a perspective that data was inaccurate and business meetings were taking way too long because people were debating the accuracy of data. He moved to a single source of truth – an enterprise-wide SAP system-and that’s what everybody used as the base of data. That was step number one. For step number two, he developed a digitized, visualize, and simulate strategy to help the business make well informed business decisions. In his digitized strategy, he developed a decision cockpit was a way of rendering data and data analytics in a more graphical format than the traditional columns and rows that people use to analyze data today. What he really did was help business managers throughout Procter & Gamble make better decisions because they could view data in a more meaningful way.
His “visualize strategy” was equally innovative. When you’re in consumer goods, you’re always conducting focus groups with customers to determine if answer questions like: Is the product labeled right? Is it the right color? Does it sit on the shelf attractively? So Procter & Gamble would build physical shelves and they’d bring in focus groups and the focus group would say “The bottle’s the wrong color…you need to move it because it’s too close to the other competitor products.”
Procter & Gamble would take their comments, rebuild the shelves and re-do the labeling. Six or eight weeks later they’d bring in the focus group and ask them what they think. And they might say ‘you still need two or three more changes.’ Passerini said: ‘This is crazy – why don’t we use data? Why don’t we visualize a store shelf on a monitor?
He had these gigantic monitors brought in that were connected together like a screen in a football stadium. Focus groups would come in, they would have a digital rendering of the storefront display. Now if someone says the bottle needs to be red instead of green, or suggest a design change or a label change, Procter & Gamble could make that change instantaneously. As a result of this, the product development time shrunk down dramatically because there was no need to physically create these shelves.
The third strategy-simulate scenarios- was to expand on the decision cockpit so that a marketing team could meet to look at global and regional trends. They could focus on Europe, for instance, and understand what was happening in Germany. The facility almost looks like the NASA Space Center with networks and large screens connected and they are using data analytics so that marketing directors can look at a region of a country, drill down to the specifics of what’s going on in a region or a market and understand what is causing the change in market penetration. It has really helped these marketing VPs make well-informed business decisions.
BTR: Is there an inexorable trend toward having more strategic CIOs, or will we achieve some kind of balance?
PW: Every company needs to recognize it’s a technology company. That being given, there are executives who are in the box where they don’t know what they don’t know. They recognize that they need to be more customer-centric. They recognize they need to figure out how to leverage mobility in their company – but who do they go to?
They have to go to the CIO. CIOs today really need to understand that they need to be more strategic and in order to be more strategic, first they need to have the credibility with the business – that’s level one. The second is they need to change the behaviors of their IT personnel – the ones that interact with the business. So they have to make sure their people have the business skills so they can interact effectively. This enables CIOs and IT personnel to work at being more strategic with the executives of the company.
So I think the answer is: Yes — CIOs need to be more strategic because every company is a technology company and needs to figure out which information and technology to leverage in order to achieve improved competitive advantage. I’m seeing more of this each year. As I interact with CIOs there are more and more that seem to be moving up the curve.