Commentary--Business demands are increasing According to a Gartner Executive Programs (EXP) worldwide survey of more than 1,400 CIOs, three out of every five enterprises are looking to expand their market share or public mission in 2007. Their executives expect the CIO and the IS organization to play a significant role in improving current business processes, controlling enterprise costs and raising workforce performance. IT contribution to growth is an immediate business expectation. Longer-term expectations for IT call for building new strategic capabilities that will use information to attract and retain customers.
The challenge for CIOs is how much progress have they made against these expectations in the first half of 2007? The answer is important as executives have shortened their expectations, what was a three-year priority is now a one or two-year project. CIOs need to make significant progress on executive priorities in 2007 to meet executive expectations. The rewards for progress are significant as effective CIOs have greater budget increases 44 percent above their peers, they are more likely to report to the CEO (46 percent vs. 33 percent) and their companies are twice as likely to use IT as a source of competitive advantage (64 percent versus 32 percent).
CIOs create value and results through focused leadership on enterprise leverage.
CIOs need tangible progress against the goals of growth and new capabilities as they enter into the 2008 planning and budgeting cycle. CIOs must both strengthen the core of IT and create new sources of value. CIOs cannot rely on traditional actions – like improving operational efficiency, reducing IT costs and automation, which all lead to commoditization – to meet those expectations. Success requires making the enterprise different to attract and retain customers. In response, many CIOs are looking for new sources of enterprise leverage, including technical excellence, agility, information and innovation. CIOs need to create significant change with limited effort through focusing on IT leverage points rather than brute-force change programs.
CIOs need enterprise leverage because the pace and scale of customer demands are overwhelming traditional approaches to change. CIOs create enterprise leverage when a focused effort produces significant results for the enterprise and its strategy Leverage gives CIOs a way to focus their actions and create significant results for the enterprise and its strategies by making it more innovative, use information more effectively and create competitive advantage. CIOs will exploit specific sources of enterprise leverage based on their role in the enterprise and the activities they perform.
Enterprises seek leverage in an increasingly demanding market.
Executives are turning up the competitive volume in 2007. From commercial companies looking to grow market share to public sector agencies expanding their services, all are competing for customers, resources and funding. In the face of this crowded market, executives are pursuing distinct strategies by looking to "get bigger" through mergers and acquisitions ; "faster" at introducing new products; “wider” by expanding their geographic and market reach; and, “closer” to customers to grow the size and value of those relationships.
For the first time in seven years, CEO success requires effective IT. Executives need CIOs and IT to play a significant role in leveraging short-term performance and long-term competitiveness else they too face commoditization in the market. This means that CIOs need to exploit new approaches to transform the business. The good news is that there is a strong connection between effective IT, business effectiveness and innovation. Effective businesses require effective IT to enhance the quality of the customer experience and control enterprise cost structures. Likewise effective IT is a prerequisite to using information to drive innovation.
Creating enterprise leverage changes the roles of the CIO and IT
Creating enterprise leverage positions the CIO and IT in new roles relative to improving current operations and transforming the enterprise. Those that are successful are rewarded by reporting to the CIO more often (46 percent to an average of 35 percent) and they are able to direct more IT resources to strategic projects (43 percent versus 32 percent).
Delivering on executive expectations for new and improved capabilities requires CIOs to make significant improvements in key IT functions particularly those focused on the business application of technologies. CIOs report the need to transform business process improvement, enterprise architecture, business relationship management and business intelligence roles over the next three years.
CIOs need these new business intensive IT capabilities to deliver the new business capabilities executives expect to successfully compete in meeting the needs of demanding customers. The net effect is that leading CIOs recognize that the IS organization they have in place today will not be the IS organization they need in 2010.
Make enterprise leverage a focus of your 2007 CIO agenda.
CIOs are leading IT at a time when IT is in transition from a focus on implementing and operating technology to changing the way the enterprise works. Creating enterprise leverage involves expanding IT's impact beyond making tactical or strategic changes to achieving breakthrough performance. These changes can lead the future of the IS organization in many directions. Thus, the emphasis on flexibility, coupled with the importance of information and information technology, will make the next two years--2007 and 2008--pivotal ones for the CIO and IT.
Mark McDonald is Group Vice President for Gartner Executive Programs at Gartner Inc.