When you look at surveys of CEOs, such as the one 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.
Don't Be Left Behind
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 recognize 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 have a few reports and discussion documents 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 percent felt IT was effective when it came to helping the organization introduce new products and 37 percent 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 percent were fully effective and only 10 - 17 percent very effective in related areas.
Fully 28 percent of IT executives and 13 percent 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.
Readying Your Organization for Success
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.