Sunday, November 26, 2006

New IT leadership roles

In many companies, CIOs struggle against the perception that their job is merely to keep the e-mail flowing. After all, CEOs know immediately when basic services fail but are less aware when investments in new technologies fall short or, even more problematic, when companies aren't making the IT investments they need to refresh their businesses. By structuring and governing different aspects of IT to deliver different goals, companies can be more confident that they are getting the most from their IT investments.

New IT leadership roles
As companies restructure IT to support differentiated roles, IT leaders will need to decide where their strengths lie and which aspect of IT they aspire to manage. In our work with leading companies, we see four roles emerging for CIOs. Each relies on different skills and offers the company a different value proposition.

Head of scale
This role expands on the CIO's traditional responsibility for managing IT infrastructure and enterprise systems, broadening it to include improving efficiency and driving down cost of all commodity business services -- not just IT -- by taking advantage of scale and the potential for outsourcing and offshoring.

At many companies, CIOs in this role also have accountability for shared services or back-office functions (such as finance, procurement, and human resources) and for driving down transaction costs through investments in enterprise- resource-planning (ERP) systems and offshoring.

Executives who thrive on improving efficiency and squeezing costs from IT operations are well suited for this role. Measures of success include reducing transaction costs and the level of working capital by making payment processes more efficient. P&G's Filippo Passerini, for example, standardized processes and established a global shared-services organization that is recognized as best in class.

Business process manager
This role involves focusing on differentiating a company's existing business operations from those of competitors. Increasingly, CIOs in this mode manage not only IT resources but also operations and processes, such as customer service, that are part of the core business.

This approach creates a single point of accountability for improving business processes through automation or more traditional routes and makes it possible to develop new products and services rapidly. Such a leader works closely with business unit leaders to improve business processes for competitive advantage. Robert Carter of FedEx saw opportunities to use IT to integrate the company's logistics services more tightly with the supply chains of its clients, so it wins contracts by virtue of its integral support for their processes.

Chief innovator
IT investments in new business models or innovations that open up new markets call for a focus on experimentation and a willingness to learn from failure. Playing this role requires some distance from a company's current businesses, since innovations occasionally threaten to cannibalize them.

In typical organizations in most industries, the IT leader is less likely to be a chief innovator than a scale or process leader. But when technology innovations can make a big difference, CIOs choosing to play the role of innovator can be extremely valuable. Consider Randy Mott's contributions to the evolution of Dell's business model when he was the company's CIO.

After a long career at Wal-Mart Stores, he applied lessons he learned about supply chain and data warehouse technology to enhance Dell's build-to-order business model that uses better information about the price of components and a more sophisticated customer segmentation to make timely, customized sales offers.

Strategic technology adviser
This role involves coordinating the activity among all three of the areas already listed. It is the role that most current CIOs see themselves playing, but many are so mired in daily operational responsibilities that they have only a limited ability to own and evangelize for the enterprise view associated with each of the preceding roles.

To be truly effective in this one, IT leaders should aspire to board-level status, with strong connections not only across functions within the company but also to external parties in other organizations, including clients and suppliers. At Wal-Mart, Linda Dillman led the retailing industry's adoption of radio-frequency identification (RFID) tags by coordinating the efforts of the company's business and functional leaders and of its vast network of suppliers and distributors.

Because each role requires a distinct skill set for success, it's difficult to play all four roles successfully at once. Developing focus takes time, as does earning a record of success in any of these roles. The trends that would push IT leaders into a shared-services support role are likely to increase, so IT leaders should quickly move toward the role where they can add the most value to their companies.