Missing the boat on IT and technology
When you look at surveys of CEOs, such as the ones by PwC in 2014, McKinsey in 2013 and IBM in 2012, they reflect what we should all know: that the innovative use of technology is one of, if not the primary, enabler of business innovation these days. Whether it’s connecting with the customer (as referenced by IBM), obtaining market insights (through analytics including Big Data analytics – see this discussion of a McKinsey report), or simply finding new ways to deliver products and services to customers, technology is a critical driver of business success.
As PwC says:
“CEOs told us they think three big trends will transform their businesses over the next five years. Four-fifths of them identified technological advances such as the digital economy, social media, mobile devices and big data. More than half also pointed to demographical fluctuations and shifts in economic power.”
“The smartest CEOs are concentrating on breakthrough, or game-changing, innovation. They’re explicitly incorporating it in their strategies. And they’re using technology not just to develop new products and services, but also to create new business models, including forging complete solutions by combining related products and services. In fact, they don’t think in terms of products and services so much as outcomes, because they recognise that products and services are simply a means to an end.”
“Breakthrough innovation can help a company rewrite the rules and leapfrog long-established competitors.”
Organizations that fail to leverage new technology are likely to be left behind by customers and competitors. In an ISACA report on Big Data, the point was made that failing to take a risk with new technology is very often a greater risk than any risks created by the new technology.
(Please see these earlier posts on IT Risk and Audit, Deloitte says mid-market companies are using new technology to great advantage, and Digital Transformation.)
Now we get a couple of reports and discussion documents that indicate that companies, executives, and consultants that aim to guide them are all missing the boat!
A new report from McKinsey, IT Under Pressure, says that dissatisfaction with IT’s effectiveness is growing. They start the report with:
“More and more executives are acknowledging the strategic value of IT to their businesses beyond merely cutting costs. But as they focus on and invest in the function’s ability to enable productivity, business efficiency, and product and service innovation, respondents are also homing in on the shortcomings many IT organizations suffer. Among the most substantial challenges are demonstrating effective leadership and finding, developing, and retaining IT talent.”
McKinsey points out that in their survey only 49% felt IT was effective when it came to helping the organization introduce new products and 37% said IT was effective in helping enter new markets.
Even IT executives said that they were failing when it came to driving the use of technology and innovation: just 3% were fully effective and only 10-17% very effective in related areas.
Fully 28% of IT executives and 13% of other executives came clean and said the best way to fix the problem was to fire current IT leadership!
I suggest reading the entire McKinsey piece and considering how it relates to your organization.
Deloitte’s prolific thought leadership team has weighed in with advice for the CFO, who often has IT within his organization. Evaluating IT: A CFO’s perspective starts with some good points:
“Ask finance chiefs about their frustrations with information technology (IT), and you are bound to get an earful. Excessive investments made. Multiple deadlines missed. Little return on investment (ROI) achieved. The list goes on.
“To complicate matters, many CFOs simply do not know if chief information officers (CIOs) are doing a good job. What exactly does a good IT organization look like anyway? How should IT be evaluated? And what are the trouble signs that the enterprise is not prepared for the future from a technology standpoint?”
But then they stray from the need to get IT to drive the effective use of new technology for both strategic and tactical advantage. Instead, they focus on “IT is typically the largest line item in selling, general, and administrative expense.”
This is the attitude, managing cost at the potential expense of the business, which gives CFOs a deservedly bad name!
I will let you read the rest of this paper, but when the first question it suggests for CFOs to use in assessing IT performance is “Have you tested your disaster plan”, I am more prepared to fire the CFO who asks that as his first question than I am to fire the poor CIO who reports to him.
My first question for the CIO is “How are you enabling the organization to innovate and succeed?”
PwC asks some good questions as well:
- What are you doing to become a pioneer of technological innovation?
- Do you have a strategy for the digital age? And the skills to deliver it?
- How are you using ‘digital’ as a means of helping customers achieve the outcomes they desire – rather than treating it as just another channel?
Risk and internal audit professionals should consider whether the risk of missing the technology boat is at an unacceptable level in their organization.
Board members should ask how the leaders of IT are working with the business to understand and use technology for success.
CFOs should worry less about the cost of IT and worry more about the long-term viability and success of the organization if they become barriers to strategic investment.
I welcome your comments.
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Norman Marks on Governance, Risk Management, and Audit 
Based on my 34 yers of experience in all aspects of IT, I can very safely say that there are 2 basic problems with IT.
1. Lack of IT Governance — the Board does not attend enough to IT
2. Lack of business analysis — the business and IT do not understand each other.
I used to think every business should aspire to be a technology pioneer. But now I think it’s much simpler than that. Today’s business is about rate of change. So IT should enable rapid change. Make your organization faster, help it respond to market changes and opportunities more quickly. That’s it. (And yes that costs money.)
You say that the “Board members should ask how the leaders of IT are working with the business to understand and use technology for success.” It’s a two-way street, though, and since the business managers are responsible for the business, the primary responsibility should be for them to communicate with IT. They need to identify where the bottlenecks are that might be corrected with technology. They need to identify where the users are having difficulties with applications. It unreasonable to think that the CIO and other IT leaders can direct the business. Only with such real dialog, where the business and IT both listen to the other, can true progress be made.
This is not a new situation. The disconnect between IT and the business has been an issue for many, many years across many companies in most industries. But very few business leaders have the necessary knowledge of IT infrastructure, development and operations to understand the problems in delivering an IT solution; and very few IT leaders have the knowledge of business processes, production and operations to understand the business needs. Progress is being made, but it can only be effective if both sides work together and blame is equally shared.
Richard, my belief is that leaders of IT have to break out of their technical, inward-looking role, and become leaders of the business. Business managers don’t know what technology can do for them (although a recent survey commissioned by ISACA shows a great number of VPs starting to be the innovators because IT isn’t) and depend on IT. If IT leaders understood the business they could earn a seat at the strategy-setting meeting and show the way forward.
Norman, I fully agree that IT leaders need to become more than just technology wonks. But if business leaders don’t know what technology can do for them, they cannot be effective leaders. Innovation requires thinking outside the box, and for both business and IT leaders this means getting out of the silo and learning about the other side. Even talking with peers in other companies to see what can be done better could lead to a conversation between business and IT.
I am curious about your last statement, though. IT is a support service for most businesses outside the technology industry. Banking, retail, healthcare, manufacturing, government, education, etc., need an efficient and effective IT infrastructure to function, but that does not make IT the guiding force for strategy setting. I agree that they should have a seat at the table, just like HR (another key support function), but I don’t think the tail should be wagging the dog.
Richard, my experience is that business leaders can only imagine the capabilities and limitations of new technology. Leaders in IT have far better insights, not only because of their training and experience, but because they meet with vendors, read technical journals, and attend exhibitions. In short, it is their job to know what is coming.
But too few IT leaders have the deep understanding of the business that the business leaders have. Many have just a skin-deep appreciation because they don’t get out, look and listen.
Yes, it should be a partnership and either can start the conversation with a “what if” or “could we” question.
But, I like the idea of an IT leader seeing and understanding something new, like gamification or 3-D printing, and starting a conversation with business leaders about whether and how the technology could be applied.
It doesn’t work as well when the business leader starts the conversation, because he is limited to thinking about repaving the existing cow path (upgrading what exists now) and doesn’t recognize the opportunity to fly instead (radically change the business).