The CIO's Dilemma


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The CIO's dilemma can best be described as having to manage the competing imperatives for growth, innovation and new capabilities on the one hand and continued cost reduction and efficiency on the other. There is an answer to the CIO's dilemma: simplification.

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  • Companies are gearing up to start growing again. But it's not just any growth CEOs are looking for. The holy grail for 2010 is profitable growth In sluggish economy = creative tension Requires BOTH innovation and continued cost reduction
  • If not managed well, trying to drive both innovation and efficiency can lead to a lot of wasted energy and little forward motion, like these two locomotives pulling in opposite directions
  • This need for BOTH is being driven by a variety forces. Recession may be over, but slow recovery IMF forecasts Total world GDP: modest 2.5% for 2010, most of that in emerging markets U.S. GDP: less than 1% Companies just have to find a way to grow IMF World Economic Outlook, update July 2009
  • Unlike in previous recoveries, there's still a lot of uncertainty. Companies have little visibility into... Customer intentions Supplier viability Market conditions Financing Regulations As a result, cautious in investments
  • At the same time, demand for new technology capabilities has never been greater. Customers, employees and business partners can't get enough of the latest & greatest, and they don't seem to care that many of the things we now take for granted weren’t even conceivable just 10 years ago. I love this clip of the comedian Louis CK from the Conan O’Brian show, talking about how truly miraculous today’s technology developments are, and yet nobody’s satisfied.… I’m sure that feels familiar to some of you. These kinds of expectations create demand for innovation, market opportunity – and lots of headaches for CIOs.
  • CIOs attempt this balancing act while the economy is shifting beneath their feet. Still an economy in transition This is the power house at the old Bethlehem Steel plant. You don’t have to be in the steel industry to know that things are changing: Detroit Music industry, publishing... [click] Just about every aspect of business is being transformed by information technology, from the very products companies sell to how they create, store, market and distribute them.
  • Just about every aspect of business is being transformed by information technology, from the very products companies sell to how they create, store, market and distribute them.
  • CIOs have always been faced with competing imperatives, but current trends have increased the tension. Today it’s not a matter of shifting from one end of the spectrum to the other but of finding a way to do the things on BOTH sides of the chart. [ review list] For many in IT, dealing with this kind of ambiguity can be extremely uncomfortable. What’s worse, given IT’s focus over the last few years on cost cutting and efficiency, many people in other parts of the business question whether IT is actually up to the task of innovation
  • oversimplified metaphor? illustrative nonetheless. Organizations with relatively immature IT may have trouble delivering both efficiency and innovation at the same time More mature organizations, however, can be much more versatile. The end game for CIOs for 2010 will be the ability to both run efficient operations AND help the company better understand what’s going on with customers and quickly innovate new products around that customer insight.
  • Smart CIOs are taking on this challenge [QUOTE] ..... Part of creating change involves holding two incompatible ideas in your head at the same time and somehow still functioning.
  • The demand for BOTH is pervasive 57% ...
  • While there are many things companies can do to achieve profitable growth, in an information-based economy, IT is one of the most important. According to research by MIT CISR, firms that are IT Savvy are 20% more profitable than their competitors. This is because everything about business is becoming more digitized. .... There are five main characteristics of IT savvy companies: Senior management committed to using IT strategically IT is integrated into all aspects of the business Company has a culture of collaboration and of sharing data and business processes Employees are empowered with great systems and information Management learns from experience by embedding lessons of the past into its governance process
  • We’ve put to rest the question of does IT matter… … how do you make it matter when everyone has access to the same tools? Competitive advantage comes from how well you use technology, and how quickly your business is able to respond to new opportunities
  • Rollin Ford, Wal-Mart, at this year's National Retail Federation conference [QUOTE] This holds true regardless of company size.
  • A big problem in the quest for speed: Many companies are weighed down by overly complex or outmoded systems that have been built up over the past 20-30 years.
  • Businesses have built up system upon system, feature upon feature, until their infrastructure looks like this. There’s useful stuff down here – the furnace, foundation, some tools. But most of it is rarely used and never will be. No one wants to give up their pet systems time to clean house Companies just can’t afford to have multiple disjointed systems – both for cost reasons and because fragmented data is a lot less useful
  • According to various surveys, the average company still spends 70% of its IT dollars on non-discretionary fixed costs. Just think if you could shift an additional 20% of that to providing new capabilities – and make your core systems better at the same time. (CIO, Gartner, MIT CISR) Goal: Not only reduce fixed costs -- also reduce operating complexities, making it easier to respond quickly as business conditions change. Consider this: companies that spend more of their IT budgets on new rather than sustaining initiatives have significantly higher revenue growth and net margins relative to competitors. (MIT CISR)
  • There's a big gap between where companies are and where they want to be when it comes to leveraging information. 85% of Harvard Business Review subscribers surveyed recently said that information is a key strategic asset, yet only 36% said their organizations are well positioned to use information for growth – and only 7% said they are very well positioned to do so.
  • Respondents, particularly the CIOs, were very clear that changes in technology and process must be made if their companies are to recognize the full value of their IT systems and data. Organizational silos, a lack of data integration, a lack of analytic skills, and outdated, overly complex information systems all were cited as barriers to making the most effective use of information.
  • It’s not like CIOs don’t know there's a problem, but optimizing IT, like laying any new infrastructure, takes money. And money is scarce.
  • The good news: things are starting to thaw… (survey released early this year by CIO) Not enough to do a lot of new things unless you do a lot of things differently
  • IT has to move to a lighter weight, more flexible, lower-cost model for IT. Small & midsize first to embrace SaaS, free software Virtualization Agile development & Visualization Open Source & “Free” software Service oriented architecture allowing for reuse and repurposing of assets Cloud computing: matter of when and in what mix, internal/external Global spending on cloud computing will more than double to $44.2 billion in the next three years, according to IDC Start projects now
  • SaaS established, accepted, especially for departmental applications
  • Governments make for interesting case studies when it comes to the shifts going on. dramatic decreases in tax revenues at the same time that demand for services is up. Driving many to do things in a radically different way. Last August, Aneesh Chopra, the U.S. govt’s CTO, said [SEE QUOTE]. He went on to say: “ In the old days, an agency might have to adopt a commercial software package and spend $8 or $9 for every $1 spent on the actual license. Increasingly, new platforms are emerging based on the re-use of intellectual property.” No wonder Ballmer looks like he wants to crush something. But Microsoft never stands still – in early 2010, announced its own cloud offering for government.
  • State of California $45.5 BILLION budget gap this year, forcing the government to lay off and furlough workers in record numbers. City of Los Angeles made headlines recently when it announced it was moving to Gmail and Google apps estimated savings of $5.5 million in hard-costs, and an additional $20 million in soft costs due to factors like increased productivity Piloting Gmail now with 3,000 employees Full rollout to more than 30,000 desktops in June Later calendar, word processing, document collaboration, and video and chat Lots of headwinds as competing interests lobby for the status quo. But because Randi Levin, the CTO there, went through solid cost/benefit analysis, due diligence, strong communication about security concerns, moving forward. Government Technology, Feb. 10, 2010
  • iPhones introduced a whole new paradigm for lightweight software development with applets Genentech was an early adopter of iPhones in the enterprise 30 iPhone apps, including SAP shopping cart Pierce compared what he spent to make his purchasing system usable on SAP ($10 million) to what it cost to make it usable on the iPhone ($10,000). In addition to decreasing the cost of IT, IT has a central role to play in lowering business operating costs. The technology exists today to do a lot of things differently – everything from procurement to order management to supply chain to sales. The business case for iPhones at Genentech was mobility and productivity Now in addition to decreasing its own costs, IT has a central role to play in lowering business operating costs. The technology exists today to do a lot of things differently – everything from procurement to order management to supply chain to sales.
  • Cisco did something very different and saved a ton when it held its Global Sales Meeting virtually last fall. [stats] [CLICK] Satisfaction scores for the sessions comparable to previous events 3 global Contact Centers, 24x7 technical monitoring & support >8,000 participants in group chat within the “Chat Zone”
  • no sales meeting wd be complete w/out fun teambuilding exercise – ex. – hard to do virtually >13,000 active players of the alternate reality game “The Threshold” (expected 7,000) YES, people missed seeing their colleagues in person, but at 10% of the cost, that’s a tradeoff more companies will make in 2010. This is one way to free up money for other things While many of these examples are of large organizations, the points they illustrate are just as applicable to midsize enterprises as well.
  • Profitable growth requires looking outward to customers In the Harvard study on information value, we asked participants to rate the priorities that would help their business grow profitably over the next 1-3 years. At the top, named by 81% of participants: retaining customers, followed by acquire new customers at 74% Hasn’t been a big focus for CIOs in the past, but fortunately that’s changing because, again, IT has a big role to play here
  • In the same survey, Respondents were asked to rate the importance of various information strategies to their organization's growth over the next 1-3 years on a scale of 1 – 10. Leveraging Customer information took the top two spots. They were also asked to rate how well their organization is currently doing at each of those. There’s a big gap. And that’s a big problem
  • How are companies going to close that gap? By first focusing on the information flows, and by taking better advantage of the technology they already have! (optimize, turn on features not using yet)
  • There’s really only one answer to the CIO’s dilemma. Simplification. Simplification of processes, standardization of information and technologies – and enabling innovation at the edge Not necessarily easy – or cheap - but it’s not brain surgery, either. [click] The practice of IT management is reaching maturity. We have the tools and techniques today to build effective digital platforms.
  • Charlie Feld [QUOTE] [background] Book targeted at business not IT leaders. Describes Blind Spot as A subject that is obscure or unintelligible to otherwise sharp and intelligent people – the situation with business leaders when it comes to IT today.
  • Charlie’s model focuses on common versus unique processes, standard versus disjointed information, and leveraged versus fragmented IT platforms and networks. If you are common, standard and leveraged in your systems, data and processes, he says, you can continuously flex your organizational model. However, if those things are unique, disjointed and fragmented, you are locked into those structures and change is expensive and slow. Especially relevant for midsize businesses in growth mode – whether through acquisition or not. Direct Energy. Southwest Airlines Frito-Lay, Delta, Burlington Northern, Southwest and more
  • Bechtel liquified natural gas processing plant, Angola Why talking about Bechtel at Midsize Enterprise Summit? Not so much as example that would relate directly to your business, but rather, as Geir Ramleth led IT transformation at Bechtel a few years ago Project Services Network (PSN): Infrastructure built to operate natively within the internet, with a set of services that enables anybody to interact with it from any place at any time with any set of hardware in a secure and cost effective manner. Everyone outside the firewall Creating the ecosytem for the Engineering, Procurement & Construction industry Flow of information up and down the value chain. ISO standard for data exchange. Massive efficiencies, flexibility, speed for everyone Benefits to partners, but to get full advantage, have to comply with the standards Whether you’re the center of the ecosystem or a player in it, something like this is in your future
  • CIO’s tech priorities survey – just released The things people are doing today – ordered by number of respondents, not necessarily $$. It’s a pretty good snapshot of the current technology landscape, as these are the things that are in production or being upgraded and enhanced.
  • These are the technologies CIOs are investigating for tomorrow – a very different list, with Cloud computing, business process management, various facets of services and expanding applications of virtualization topping the list
  • Always get to point where start to feel overwhelmed on behalf you all of you with all the mandates, imperatives and choices So many choices can really can be overwhelming – especially in companies without good governance mechanisms. To have any hope of being effective, CIOs must be good at demand management, portfolio management and project prioritization, negotiating with business partners and suppliers, and communication in many dimensions.
  • There is competition for resources inside most organizations that lack good methods for deciding where to invest in IT. And the competition isn’t just one IT project against another, but all capital spending – is your company going to spend money on a new major software package or a new warehouse or acquisition? How are you going to decide?
  • It’s not going to be easy in companies where the relationship between IT and other business executives is contentious, as it is in many organizations -- creating a need for books like this one. This has got to change. To fund innovation, companies have to face up to the fact that they can’t do everything
  • Nashville [QUOTE] To do what’s most important, business & IT leaders have to work together to prioritize IT projects and spending across the company, understand and agree to tradeoffs
  • Spoke recently with CIO at Mid market retailer, hard hit by the recession – and some marketing and merchandising problems before that. Massive budget and staff cuts over past 4 years –10% on top of 33% already done, staff cut in half. CIO did a couple of remarkable things: First, challenged staff: how get smaller AND better? #1 opportunity: were spending time on work that was not most important work Functionally organized, making project decisions within silos Second, CIO offered to cut deeper than asked – in exchange for business execs sitting down together on monthly basis to force rank the project portfolio across the business Now IT spending time on the highest value things for the entire business
  • Force rank all projects – WITH all functions participating. This will drive some very interesting and productive conversations
  • Having to cut 30-40% of your budget will drive a lot of change It helps to have a burning platform: a situation where people are forced to act by dint of the alternative being worse. Initiate change: Don’t take it for granted that everyone is as aware of the urgency as you. The crisis may already exist but it still needs to be highlighted. Have to show how staying where you are is not an option, and that doing nothing will result in disaster Maintain momentum: Steve Bandrowczak talks about this a lot. DHL acquisition of Airborne. 7/24, 15-week effort. Millions/day that don’t integrate. SAP – report -- $5 million/week operating What strategies will you employ to highlight the situation and get buy in to your ideas?
  • Pursue speed & innovation while also making the business more efficient. The way to do this is to move to a simpler, more flexible, lighter weight model for IT Given limited resources, critical to prioritize efforts across the business to get most value This is a team sport and will require new, more collaborative relationships between IT and the rest of the business
  • This is a time to think big, and think radical. One financial services company that had been through many swings of fortune began to use a novel planning approach: Imagine we’re bankrupt; what do we do now? Strip down to core, then add to that. Whether that means abandoning traditional software models in favor of something that may have seemed only appropriate for the consumer market – or getting functional leaders to view things from an enterprise perspective – or offering end customers something that really is amazing – think big.
  • The CIO's Dilemma

    1. The CIO’s Dilemma Abbie Lundberg, Lundberg Media Former Editor in Chief, CIO Magazine EFFICIENCY OR INNOVATION? PULLED IN TWO DIRECTIONS & GETTING NOWHERE FAST
    2. profitable growth Photo by Matthew Fang
    3. Pulled in two directions, getting nowhere fast Photo by jpmueller99
    4. a slow recovery Photo by Steve Wall
    5. Photo by Anders Ljungberg poor visibility
    7. Photo by Joe Penniston Photo by Urban Archaeology economy in transition economy in transition
    8. Photo by Joe Penniston economy in transition Photo by Joe Penniston
    9. The CIO’s Dilemma <ul><li>Build New Capabilities </li></ul><ul><li>Be More Responsive </li></ul><ul><li>Customize </li></ul><ul><li>Be Open </li></ul><ul><li>Make Business Agile </li></ul><ul><li>Think Strategically </li></ul><ul><li>Business Unit Goals </li></ul><ul><li>Cut Costs </li></ul><ul><li>Be More Efficient </li></ul><ul><li>Standardize </li></ul><ul><li>Be Secure </li></ul><ul><li>Make IT Predictable </li></ul><ul><li>Execute Flawlessly </li></ul><ul><li>Enterprise Goals </li></ul>
    10. pat your head rub your belly
    11. &quot;Being highly responsive to our business partners’ and customers’ needs and creating standardized processes and technology platforms can seem like conflicting goals, but doing BOTH is key to maximizing value .” Stuart McGuigan, CIO, CVS Caremark
    12. BOTH 57% of executives say innovation and cost reduction are equally important to their company’s ability to achieve future growth Source: Accenture survey of 630 U.S. and U.K. executives, Nov. 2009
    13. IT savvy firms are 20% more profitable than their competitors -MIT Center for Information Systems Research
    14. does IT matter? How
    15. “ There are very few secrets out there anymore. The only competitive advantage becomes speed. Organizations need to keep embracing innovation and new technology models. At the end of the day, it’s about getting from point A to point B quicker than everybody else.” Rollin Ford, CIO, Wal-Mart
    16. Photo by Randen Pederson IT weighing you down?
    17. clean house
    18. fixed costs Photo by Matti Mattila 70%
    19. 85% information is a key strategic asset 36% well positioned to use information for growth Source: “Unlocking the Value of the Information Economy,” a global survey of 1,375 executives conducted by Harvard Business Review Analytic Services and sponsored by Symantec Room for Improvement
    20. Barriers to growth Which of the following are barriers to your organization's ability to use information to grow your business? (Select all that apply) Source: “Unlocking the Value of the Information Economy,” a global survey of 1,375 executives conducted by Harvard Business Review Analytic Services and sponsored by Symantec
    21. Photo by Doug Shick
    22. IT budget thaw Source: CIO Magazine’s Economic Impact Survey, Dec. 2009 Direction of IT Spending March '08 May '09 Dec. '09 Increase 63% 14% 40% Decrease 17% 50% 28% Remain the same 20% 36% 32% Overall change (mean) +7% -13% +4%
    23. Photo by Jenny Downing lighten up
    24. SaaS 1/3 of all enterprises have subscribed to or plan to subscribe to software as a service applications in the next 12 months Source: Forrester Enterprise And SMB Software Survey 2010
    25. The government should adopt Web-based and free technologies over proprietary ones wherever possible to reduce government spending on long-term maintenance and consulting contracts. - Aneesh Chopra
    26. Photo by O2UKOfficial City of Los Angeles Photo by Erwin Recinos
    27. Photo by O2UKOfficial Genentech
    28. Cisco Virtual Sales Meeting, September 2009 19,000 participants 89 countries 24 times zones 88 hours 90% cost savings! … and offset 84,400 metric tons of carbon dioxide Image from Cisco
    30. Photo by Vali focus on customers
    31. Performance Gap Please rate how important each of the following information strategies is to your organization’s growth over the next 1–3 years where 1 means “not at all important” and 10 means “extremely important.” Please rate how well your organization is currently doing each. Source: “Unlocking the Value of the Information Economy,” a global survey of 1,375 executives conducted by Harvard Business Review Analytic Services and sponsored by Symantec
    32. Closing the Performance Gap What are the three most important things your organization can do to close the gap from where you are today and where you want to be to make better use of information? (Select up to three) Source: “Unlocking the Value of the Information Economy,” a global survey of 1,375 executives conducted by Harvard Business Review Analytic Services and sponsored by Symantec
    34. “ It may seem counterintuitive, but the more standardized your systems and processes are, the more flexible you can be.” - Charlie Feld, Blind Spot
    35. Leveraged Core Market Edge Charlie Feld, Blind Spot
    37. Today’s Tech Landscape Q. Which option best describes your plans for each of the following applications in the next 12 months? Source: CIO Technology Priorities Study February 2010
    38. Tomorrow? Source: CIO Technology Priorities Study February 2010 Q. Which option best describes your plans for each of the following applications in the next 12 months?
    39. So little money!
    40. Photo by Jack Wolf limited resources
    42. “ We can do anything you want; we just can’t do everything you want.” -Healthcare CIO
    43. Smaller Better
    44. Simple Project Portfolio Framework
    45. Photo by Wilka Hudson
    47. think radical Photo by Ana Cotta
    48. Abbie Lundberg 508.269.3547 [email_address] Most of the photos in this presentation are from flickr, offered for use under a Creative Commons license Photo by Matthew Fang