IBM Survey: CIO Role Is Changing; CEOs Need to Further Align IT and Business to Drive Innovation and Growth
According to a global study just unveiled by IBM (NYSE: IBM), the role of the Chief Information Officer (CIO) is evolving beyond just technology and computing support to strategy creation and business transformation. According to the IBM CIO Leadership Forum Survey, 84 percent of CIOs believe that technology is significantly or profoundly transforming their industries, yet only 16 percent feel their companies are taking full advantage of IT’s potential. IBM found that the state of business and technology points to the need for change in how technology is integrated into the core business. Research also indicates the relationships required between the CIO and the Chief Executive Officer (CEO), to ensure that the IT organization continues to drive business innovation and growth. According to IBM’s 2006 Global CEO Study extensive integrators were growing revenue 5 percent faster than their competitors. CEOs who extensively integrated business and technology reported greater customer satisfaction, speed and flexibility than their less integrated peers.
The IBM CIO Leadership Forum Study(1) was conducted with more than 170 CIOs from leading companies around the world and highlights the increasingly strategic role that technology and the CIO play in generating innovation and growth for their companies.
Additionally, according to comprehensive research conducted among Chief Executive Officers -- the IBM Global CEO Study(2) of 750 CEOs -- most companies face a gap in their integration of business and technology, impeding customer satisfaction, speed and flexibility. Nearly 80 percent of the CEOs interviewed rated business and technology integration of great importance, however only 45 percent felt that the two were integrated to a large extent in their enterprise. Interestingly, “extensive integrators” reported revenue increases three times as often as companies that were less integrated; with that group growing revenue 5 percent faster than their competitors.
CIOs see themselves at the nexus of a radically reshaping business landscape and believe their unique end-to-end view of business allows them to see first-hand the role of technology as an enabler and source of competitive advantage and they want a greater voice in capitalizing on that opportunity. Yet, today, many companies still have the CIO siloed as a support function rather than engaged as a business leader and strategic partner for process and culture change. CIOs want to forge stronger relationships with the CEO and other C-level and line of business leaders to turn this around.
CIOs surveyed believe they can begin to address this gap by:
Getting involved earlier in the strategic decision-making process
Forging stronger relationships with CEOs and other business leaders
Leading high-profile transformation projects
Being measured more on innovation and growth versus more traditional performance and cost metrics
Closing the Gap
CIOs feel that enhanced CIO involvement in strategy is critical. Ninety-two percent of CIOs surveyed feel that it is either important or critically important to have greater influence and impact as business leaders, and 86 percent recognize an opportunity to work with other leaders to create and shape strategic options.
Increasingly CIOs are finding their way onto companies’ executive committees, which is an acknowledgement on the part of senior management that IT matters. More can be done. Over one-third (34 percent) of the CIOs surveyed do not have a formal role on their company’s executive committee. CIOs are continuing to express a desire to contribute to major growth and innovation initiatives.
CEOs Must Take Action
CEOs need to take further action to close this gap between IT and core business units. According to the CIOs surveyed, about a third (31 percent) feel that the number one barrier preventing them from having greater influence as business leaders is the misperception about the role of the CIO. The CIOs surveyed indicate that the first step is for CEOs and other business leaders to recognize the strategic role that IT plays within an organization. Many CIOs feel that senior management understand the transformative power of technology but concede that they need to do more to help build the case for IT investment.
Leveraging Your CIO
CEOs and other business leaders can make four changes to enable CIOs and their IT organizations to make a stronger contribution to the core business:
Measurement: Reward CIOs for contributing to growth, innovation and people. The IBM CIO Leadership Forum Survey found that to move beyond C-suite misperceptions, CIOs are now establishing milestones that measure success in terms of the benefits that are delivered to their organizations. A majority of CIOs believe they should be measured on business initiatives other than IT; 80 percent cite business transformation as a primary metric while 79 percent indicate innovation and growth. These outrank IT operations, which came in at 62 percent.
Strategy: Engage CIOs early on in the strategy process. Technology is often a good indicator and source for what’s possible for a business. Forty-three percent of CIOs believe their primary role is participating in creating the strategy for their organization, compared to 26 percent, who said implementing the strategy was the key role. Nearly all of the CIOs surveyed believe that their role is changing.
Organization: Help CIOs undertake process transformation and give them a mandate to create organizational readiness for IT. CEOs need to promote partnership with the line of business, overcome resistance to change, and drive technology innovation. Seventy-five percent of the CIOs polled recommend building stronger relationships with business leaders to elevate their role in the organization and 73 percent believe that contributing to a major growth or innovation initiative will help.
Talent: Provide CIOs opportunities to develop broad skills and leadership competencies. Of the CIOs polled, 40 percent indicated that they had additional business responsibilities beyond IT and 69 percent indicated an interest taking on primary responsibility for business process re-engineering or transformation, which is a strong indication of where the profession is heading.
Closing the business-technology integration gap: The new CIO
“The role of the CIO is dramatically changing,” said George Pohle, Global Leader, IBM Institute for Business Value. “Information Technology is becoming an enabler and a catalyst for innovation. CIOs are embracing this new model to provide strategic business direction and offer new ideas on how to align IT in a way that delivers business value. In order for CIOs to be successful, consistent business and technology integration is crucial to innovation.”
Information Technology investments are now judged on the basis of whether they can produce a return on investment through improved productivity or provide a competitive advantage over others in an industry. CEOs are increasingly changing their business models to include CIOs in the business side of the equation. The success of any organization’s innovation efforts requires the alignment of IT and business.
Supporting this trend are recent studies that show that the most successful companies use IT to drive innovation and change. IBM’s analysis shows that companies that put more emphasis on business model innovation experienced significantly better operating margin growth (over a five-year period) than their peers. This correlates to the global IBM CIO Leadership Forum Survey in which more than 85 percent of the CIOs polled agree that they should be viewed not only as IT experts but business leaders.
For more information, visit www.ibm.com
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