As originally published in Forbes.
As business strategy and information technology continue to converge, Chief Information Officers (CIOs) find themselves in a unique position that offers both great risks and great rewards.
No longer can CIOs succeed simply by making their IT departments run smoothly. Today, CIOs must also actively embrace a new role as C-suite corporate strategists, and distinguish themselves as business thought leaders among senior management.
There are several opportunities to do just that: First, CIOs must help reconcile the need for corporations to have a uniform IT reach nationally or globally with the respect necessary for the way business is done regionally. Second, CIOs must have a seat at the table during due diligence of potential mergers and acquisitions. And third, they must actively champion new business initiatives, not just IT.
Global Reach and Regional Needs
As the most senior executive responsible for the information technology and computer systems that support enterprise goals, the CIO must simultaneously:
- Satisfy senior management’s desire for greater efficiency and standardization — for example, by using IT to consolidate supply chains and financial management while coordinating product sales more tightly; and
- Balance that desire for efficiency with the company’s sales and marketing efforts, which have highly specific local needs. (Taking a product to market in Switzerland, Turkey, and India, for example, requires an intimate knowledge of market differences. The nature of these differences places varied demands on IT infrastructure. As a recent article in McKinsey Quarterly notes, this may require, at a minimum, different modes of customer interaction, go-to-market structures, and pricing channels.). See Kevin Wei Wang, The IT Factor in a Global Business Transformation: An Interview with Lenovo’s CIO (McKinsey Quarterly Aug. 2011).
Simply reacting will not successfully satisfy these needs. Rather, the CIO must leverage technology’s central role in order to champion those IT initiatives that are crucial to business growth. According to Ms. Xiayan Wang, CIO of global computer manufacturer Lenovo,
[You] need to plan and drive the business change-management effort well before you start implementing any new IT … So IT needs to articulate, in advance, the major things that will change and to plan backward to be sure businesses can execute their change-management activities and stay on the agreed-to path.
Mergers & Acquisitions
CIOs must have a seat at core mergers and acquisitions talks. Business strategists typically focus on the challenges that M&A poses with respect to merging corporate cultures. This is hardly an idle concern, and I have seen firsthand at least one clear-cut acquisition of a public company by another framed as a merger in order to make internal transitions more harmonious.
Including the CIO in M&A discussions acknowledges the fact that bringing together two corporations is likely to create highly complex information technology landscapes with disparate structures that must quickly support equally disparate business units. Failure to properly acknowledge this can have serious repercussions, such as a negative effect on the customer experience and an inability to rearrange the customer base across multiple brands.
Similarly, traditional corporate M&A actors need a CIO’s expertise. One cannot fully understand a target’s potential synergies without a rich understanding of what needs to be done to integrate the companies’ information systems. Hugo Sarrazin and Andy West of McKinsey & Co. have identified leading companies supported by flexible IT architectures that have integrated IT into M&A considerations. They write:
[A]s these companies begin merger talks, top management makes sure that IT leaders have a seat at the due-diligence table to get their perspective on the difficulty of systems integration. By evaluating the target company’s technology, executives can determine how it complements their own IT strategy and operations, including what systems to retain and what data should migrate to the acquiring company’s platform. This step is particularly important as companies review cost and revenue synergies. Too often, forecasts are driven by financial formulas or rules of thumb provided by the merger’s advisers. In practice, however, many of these calculations depend on a company’s ability to integrate IT operations — not just IT itself, but the functions that IT enables, including finance, HR, logistics, and customer relationship management.
Hugo Sarrazin & Andy West, Understanding the Strategic Value of IT in Mergers & Acquisitions, (McKinsey Quarterly Jan. 2011).
At The Heart of Corporate Hierarchy
Successful CIOs must position themselves at the heart of any corporate hierarchy and make decisions in concert with senior management. For many CIOs, this requires a painful-but-necessary transition beyond their passion for and mastery of technology — i.e., precisely what propelled their career in the first place — toward a role more focused on business and operations. They must understand business strategy and best practices, not just bits and bytes.
CIOs must also learn a new language. As Joerg Heistermann wrote in Forbes:
CIOs also need to learn to communicate in business terms … CIOs who talk to business managers about software migrations and database updates will be seen as technicians and not as business leaders. But CIOs who manage how IT adds value to the business, by increasing efficiency or driving revenue, will showcase their savvy sense of business.
Joerg Heistermann, From CIO to CEO (Forbes Apr. 14, 2010).
Today’s CIOs face unique challenges and unique rewards. They must position themselves strategically at the center of senior management in order to help formulate and drive business strategy based on their knowledge of IT — how it may be hamstrung by realities in the field, and how it can work to transform challenges into previously untapped corporate opportunities.
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