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Capitalising on Complexity - Ross Pearce

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  • 1. Implications for the CIO Point of View Presentation of CIO Implications of the 2010 IBM CEO Study: Capitalizing on Complexity 20 & 21 July 2010
  • 2. Introduction and overview
    • IBM executed the 2010 CEO study called Capitalizing on Complexity, culling the insights from over 1,500 interviewed CEOs.
    • This is part of a larger program of C-suite executives, which recently included the 2009 CIO study.
    • Findings of the CEO study focused on complexity in the modern business arena, with CEO focus on creativity, customers, and operational dexterity.
    • As CIOs are key collaborators and enablers of the CEO’s agenda, the results of this study have profound implications for the CIO’s own agendas and thought processes.
    • Although having very different competencies, the CEOs & CIOs interviewed often had complementary views and priorities about business.
    • The implications for CIOs provide additional insight into how they can better support the CEO while improving the effectiveness of his or her own responsibility.
          • A new IBM CEO study was conducted:
          • Capitalizing on Complexity
          • The results have interesting and significant
          • implications for CIOs
    CEO CIO
  • 3. The IBM Global CIO and CFO studies are part of our C-suite series 2005 study 2004 study 2008 study 2007 study 2008 study 2005 study 2003 study Total interviews: 450 Total interviews: 889 Total interviews: 1230 Total interviews: 1130 Total interviews: 404 Total interviews: 456 Total interviews: 320 2010 study Total interviews: 1917 CFO studies CEO studies 2006 study Total interviews: 765 CHRO studies 2009 study Total interviews: 393 CSCO study 2009 CIO study (NEW) Total interviews: 2598 Face-to-face: 2598 Total interviews: 1564 Face-to-face: 1564 2010 CEO study Recent studies of interest to the CIO
  • 4. Agenda
    • CFO and CIO studies
    • CEOs view of the world
    • Outperformers
    • CIO implications of:
    • Embody Creative Leadership
    • Reinvent Customer Relationships
    • Build Operating Dexterity
    • Wrap Up & Questions
  • 5. In this largest known sample of face-to-face CEO interviews, we spoke with over 1,500 CEOs and public sector leaders The study represents organizations in 60 countries and 33 industries Note: The CEO response sample has been weighted based on 2008 Actual Regional GDP of the IMF World Economic Outlook, October 2009; * Growth Markets include Latin America, Asia Pacific (excluding Japan), Middle East and Africa Sectors Regions 13% Communications 25% Distribution 18% Financial services 24% Industrial 20% Public 25% Growth markets* 21% North America 42% Europe 12% Japan
  • 6.
    • The study represents different-sized organizations in 78 countries and 19 industries
    In our first Global CIO Study 2009, we spoke face-to-face with over 2,500 CIOs to understand their goals and challenges Source: IBM Global CIO Study 2009 Sector Public 18% Distribution 24% Financial Services 21% Industrial 24% Others 2% Communications 11% Organization Size 1,000-10,000 Employees 50% >10,000 Employees 34% <1,000 Employees 16% Geography North America 24% Japan 6% Western Europe 38% Rapidly Developing Markets 32%
  • 7. Successful CIOs blend three pairs of roles that seem contradictory, but are actually complementary By integrating these three pairs of roles, the CIO makes innovation real, raises the ROI of IT and expands business impact Source: IBM Global CIO Study 2009 Able Pragmatist Savvy Value Creator Relentless Cost Cutter Collaborative Business Leader Inspiring IT Manager Making Innovation real Raising the ROI of IT Expanding business impact Insightful Visionary ANZ ANZ ANZ
  • 8. The Global CFO Study 2010 is the largest known CFO-level study of its kind with over 1,900 participants Source: IBM Global CFO Study 2010 Geography Asia Pacific 27% EMEA 42% Americas 31% Organization Size <=$500MM 25% $501MM to $1B 15% >$1B to $5B 28% >$5B to $10B 11% >$20B 14% >$10B to $20B 7% Sector Public 13% Communications 13% Industrial 25% Distribution 28% Financial Services 20% Others 1%
  • 9. Using Regression analysis, we developed a model that segmented participants into four profiles based on capabilities and maturity Finance Profiles Source: IBM Global CFO Study 2010 23% 12% 32% 33%
  • 10. Comparing the agenda of each, we see remarkable alignment between the studies Source: IBM Global CEO Study 2010 IBM Global CIO Study 2009 IBM Global CFO Study 2010 A focus on these priorities turns Strategy into execution. Continuous process improvement and business improvement Business process management Build operating dexterity Aligning finance with the business Customer and partner collaboration Reinvent customer relationships
    • Measuring and monitoring business performance
    • Supporting and managing enterprise risk
    • Business intelligence and analytics
    • Risk management and compliance
    Embody creative leadership CFO Priorities CIO Priorities CEO Themes
  • 11. Today’s complexity foreshadows an even more complex future Expect high/very high level of complexity over 5 years Currently experiencing high/very high level of complexity 32 % more “ Complexity is increasingly multi-faceted. It presents an opportunity and a threat at the same time.” Yoichiro Ushioda, Chairman and CEO, JS Group Corp, Japan Experienced and expected level of complexity 79% 60% Expect high/very high level of complexity over 5 years Feel prepared for expected complexity 30 % Complexity gap* “ The world is non-linear, so the ability to cut through complexity relies on processing a large amount of information quickly and extracting nuggets to make quick decisions. Building advantage will be an outcome of dealing with complexity better than our competitors” Julian Segal, Director and CEO, Caltex Australia Limited, Australia Expected level of complexity and preparedness to handle 49% 79% Source: 2010 CEO study Source: IBM Global CEO Study 2010
  • 12. In the 2008 CEO study a similar “capability” gap was identified regarding managing change The Change Gap* Triples * Difference or ‘gap’ between expected level of change needed and past success in managing change “ We have seen more change in the last ten years than in the previous 90.” Ad J. Scheepbouwer, CEO, KPN Telecom 2006 2008 Source: IBM Global CEO Study 2008 Change Needed No/limited Change Moderate Change Substantial Change No/limited Success Moderate Success Successful Past Change Success 22 % CHANGE GAP* 8 % CHANGE GAP* 6% 11% 83% 19% 20% 61% 13% 22% 65% 12% 31% 57%
  • 13. On average, only 41% of projects were considered successful. But t he top 20%—the Change Masters —reported an 80% success rate.
    • 44% of all projects failed to meet either time, budget or quality goals, while 15 % either stopped or failed to meet all objectives
    Average Project Success Rates
    • The top * 20% of organizations reported an average project success rate of 80%, reflecting a 95% increase above the average share of successful projects
    Change Masters vs. Change Novices PROJECTS THAT EITHER MISSED ALL GOALS OR WERE STOPPED 15% PROJECTS THAT DID NOT MEET EITHER TIME, BUDGET OR QUALITY GOALS 44% PROJECTS THAT FULLY MET THEIR OBJECTIVES 41% 95 % SUCCESS RATE INCREASE BOTTOM 20% CHANGE NOVICES 8% 41% 80% AVERAGE TOP 20% CHANGE MASTERS Share of successful projects A/NZ Average = 35% Only 11% Change Masters in A/NZ A/NZ 49% A/NZ 17%
  • 14. Increasing CEOs recognize that Technology is driving much of this change…. Source: IBM Global CEO Study 2010 Three most important ‘external’ forces over the next three years And that the impact of Technology will continue to increase in reshaping the competitive landscape A/NZ 52% A/NZ 36% A/NZ 42% A/NZ 42%
  • 15. In the CEO Study we identified “Standout” organisations that delivered superior performance during both the long term and recent short term Complexity gap* “ Really, I am not afraid of complexity at all. On the contrary, this just motivates me.” Jacques Pellas, Secrètaire Général, Dassault Aviation, France * Complexity gap = Difference between expected complexity and the extent to which CEOs feel prepared to manage it Long-term, steady-state performance Short-term, crisis performance Top 50 percent Standouts 22 % Gap 6 % Gap 52 % Gap 35 % Gap Top 50 percent Standouts are also better prepared to manage the expected complexity
  • 16. “Outperformers” across recent studies show similarities Consistent use of good, solid change management methodology Closely involved in co-creating the business strategy Continuous process improvement Build Operating Dexterity
    • Actively use collaboration and partnering technologies…
    • Proactively craft data into actionable information
    Drive integration of information across the enterprise Reinvent Customer Relationships Top management sponsorship and understanding of change challenge. Work with business to co-create and champion innovation High focus on enterprise risk management Embody Creative Leadership MCW Study 2008 “ Change Masters” CIO Study 2009 “ High Growth” CFO Study 2010 “ Value Integrators” CEO Study 2010 “ Standouts”
  • 17. Standouts capitalize on complexity in three ways
    • Creativity is #1 leadership quality
    • Drive change in the organization to stay ahead of market and use of wide range of communication styles and tools
    • Break with status quo of industry, enterprise and revenue models
    • Simplify operations and products to better manage complexity
    • Use iterative strategies, make quick decisions and execute with speed
    • Integrate globally, increase cost variability and exploit partnering to increase agility
    • “ Getting closer to customers” is the single most important theme
    • Better understand customer needs through collaboration and info sharing
    • Exploit the information explosion to deliver unprecedented customer service
  • 18. Decision making and its technological supporter, Business Intelligence and analytics, ranked high for both CEOs and CIOs A/NZ 100% A/NZ 92% A/NZ 100% A/NZ 95% A/NZ 89% A/NZ 76% 54 % more Thorough decisions Quick decisions Both 42% 15% 43% 41% 31% 28% Standouts Others Ways in which to achieve rapid change over next five years: Decision Making Source: IBM Global CEO study 2010 86% 80% 77% 76% 73% 70% Business intelligence and analytics Virtualization Risk management and compliance High growth Low growth The most important visionary plan element for CIOs: Business Intelligence Source: IBM Global CIO study 2009
  • 19. So what builds creative leadership? Imperatives for CEOs Implications for the CIO
    • Embrace ambiguity: Reach beyond silos, exemplify breakthrough thinking, act despite uncertainty.
    • Take risks that disrupt legacy business models: Pilot radical innovations, continually tweak your models, borrow from other industries’ successes.
    • Leapfrog beyond “tried-and-true” management styles: Strengthen your ability to persuade and influence, coach other leaders, use a wide range of communication approaches.
    • Enable smarter decisions: Provide facts about the business through analytics, improve the decision-making process with technology, make ambiguity the realm of creativity
    • Advocate the “art of the possible”: The CEO may not know what can be done with new technology -- the CIO can meet the CEO’s vision to what IT can help create
    • Enable the collaborative enterprise through technology: CIOs have an important role in enabling new management styles across the organization. Technology is key to pursue more &quot;viral communications&quot; as a mode of communications, incorporate collaboration technology into daily interaction.
    “ Th ere is no innovation in my organization without the involvement of IT.” Government CIO, Brazil
  • 20. Standouts capitalize on complexity in three ways
    • Creativity is #1 leadership quality
    • Drive change in the organization to stay ahead of market and use of wide range of communication styles and tools
    • Break with status quo of industry, enterprise and revenue models
    • Simplify operations and products to better manage complexity
    • Use iterative strategies, make quick decisions and execute with speed
    • Integrate globally, increase cost variability and exploit partnering to increase agility
    • “ Getting closer to customers” is the single most important theme
    • Better understand customer needs through collaboration and info sharing
    • Exploit the information explosion to deliver unprecedented customer service
  • 21. CEOs want to better understand customer needs and actively work with them A/NZ 37% A/NZ 42% A/NZ 67% A/NZ 34% A/NZ 85% A/NZ 46% Better understanding of needs New or different services New or different products New or different channels 82% 70% 69% 61% 51% CEOs’ view of “How customer expectations will change over the next 5 years” Respondents answered “very large extent” Source: IBM Global CEO study 2010 44% 68% 54% 74% 36% 58% ... and anticipate much greater levels of integration and transparency with customers In five years, CIOs expect end-customers to continuously explore new channels... High-growth CIOs proactively craft data into actionable information High growth Low growth +37% +55% +61% CIOs’ view of changes in customer interaction Source: IBM Global CIO study 2009
  • 22. Customer-centric CEOs will need customer-centric CIOs to fulfill their agendas Impact on organization of information explosion 29 % more More focus on insight and intelligence to realize strategy 18 % more 49% Other CEOs 63% Customer focused CEOs 66% Other CEOs 78% Customer focused CEOs “ Cu stomer relations will require near-real time information and the ability to change ‘on the fly’ which will require innovation.” Energy and Utility CIO Customer focused CEOs use data... ... to generate insight and intelligence Source: IBM Global CEO study 2010 Source: IBM Global CEO study 2010
  • 23. So how do you reinvent customer relationships?
    • Honor your customers above all else: Unprecedented level of focus, heightened customer exposure for every employee, measure what customers value.
    • Use two-way collaboration to sync with customers: Make customers part of your team, solicit customer wants, co-innovate and interact with customers in new ways, deliver true process transparency.
    • Profit from the information explosion: Tap the value of limitless data, use analytics to translate data into insight into action that creates business results, share information freely to build trust and improve customer relationships.
    • Build a Customer-centric IT organization: The opportunity is to embed customer centricity in everything the IT organization does, be able to measure customer value, and provide insight to guide business decisions based on that
    • Enable customer interaction and collaboration: The CIO will also need to design customer interaction/transaction/collaboration systems to enable collaboration with massive customer bases and to understand and use collaboration information.
    • Embrace business analytics to embrace customer understanding: Develop strengths in collecting, aggregating, analyzing, and optimizing operations based on new analytics and predictive capabilities
    Imperatives for CEOs Implications for the CIO T h e challenge is to change from a “pu sh - model to a pu ll - model, where the customer expresses requirements and IT answers immediately. Banking Industry CIO, France
  • 24. Standouts capitalize on complexity in three ways
    • Creativity is #1 leadership quality
    • Drive change in the organization to stay ahead of market and use of wide range of communication styles and tools
    • Break with status quo of industry, enterprise and revenue models
    • Simplify operations and products to better manage complexity
    • Use iterative strategies, make quick decisions and execute with speed
    • Integrate globally, increase cost variability and exploit partnering to increase agility
    • “ Getting closer to customers” is the single most important theme
    • Better understand customer needs through collaboration and info sharing
    • Exploit the information explosion to deliver unprecedented customer service
  • 25. Standouts simplify operations and products to better manage complexity A/NZ 59% A/NZ 46% Others Standouts 30 % more 61% 47% CEOs see changes to operating strategy: Simplify Source: IBM Global CEO study 2010 Others Standouts 16 % more 45% 39% The most crucial capability for execution success over the next 5 years is execution speed Source: IBM Global CEO study 2010 “ The aim is adaptability, the tool is execution speed. ” Dr. Faruk Yarman, General Manager, Havelsan, Turkey High growth Low growth 22 % more 50% 61% CIOs think business processes will be completely standardized and low cost Source: IBM Global CIO study 2009
  • 26. Execution speed and global integration provide Standouts with increased dexterity A/NZ 78% A/NZ 78% 60 % more 10% Others 16% Standouts Most crucial capabilities for execution success over the next 5 years CEOs focus on global integration Source: IBM Global CEO study 2010 Many CIOs foresee a strongly centralized infrastructure in five years 76% 76% High growth Low growth Source: IBM Global CIO study 2009
  • 27. So what are the steps to build operating dexterity?
    • Simplify whenever possible: Simplify interactions with customers, simplify products and services by masking complexity, simplify for the organization and partners.
    • Manage systemic complexity: Put complexity to work for your stakeholders, take advantage of the benefits of analytics.
    • Promote a mindset of speed and flexibility: Act quickly, push execution speed, course-correct as needed.
    • Be “glocal”: Leverage the world through partners, constantly tune your operating model – global where possible, local where necessary.
    • Simplify IT whenever possible: IT can develop and deploy simplified, streamlined business processes to improve efficiency and simplify operations
    • Manage systemic complexity: Proactively manage the complexity and efficiency of the IT environment, leverage analytics for management to better understand complexity
    • Enable operational speed and flexibility: Enable the organization to act quickly through an adaptable, efficient, and flexible IT environment and through strategic service providers
    • Embrace “glocal” IT operations: Leverage the world through partners, constantly tune your operating model to use the right skills in the right place at the right time.
    CEO Imperatives Implications for the CIO “ Simplification and standardization are key strategies that we have been using for several years to reduce existing and future complexity. ” Brenda Barnes, Chairman and CEO, Sara Lee, United States
  • 28. Seizing the upside of complexity for CEOs and CIOs Imperatives for CEOs Implications for the CIO Honor your customers above all else Use two-way communications to sync with customers Profit from the information explosion Embrace ambiguity Take risks that disrupt legacy business models Leapfrog beyond “tried-and-true” management styles Simplify whenever possible Manage systemic complexity Promote a mindset of being fast and flexible Be “glocal” Reinvent customer relationships Build operating dexterity Embody creative leadership Build a customer-centric IT organization Enable customer interaction and collaboration Embrace business analytics embrace customer relationships Enable smarter decisions Advocate the “art of the possible” Enable the collaborative enterprise through technology Simplify IT whenever possible Manage systemic complexity Enable operational speed and flexibility Embrace “glocal” IT operations
  • 29. Standouts capitalize on complexity in three ways Do you understand what technology is on the horizon to empower your CEO and executive team to achieve their vision? Is your IT environment designed to be flexible and adaptable to change, including its use of flexible operational models and service providers? Is your IT environment capable of capturing, synthesizing, and analyzing diverse information sets for analytics purposes and ultimately for optimizing customer operations?
  • 30.  

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