Chapter 2
IT Does Matter
Back in 2003, Nicholas Carr wrote an article for the Harvard Business Review entitled “IT Doesn't Matter.” The article is now legendary—several CIOs referred to it during our conversations—and it still incites vigorous debate. As most of you already know, Carr argued that IT would become a commodity, like electricity, that provides basic capabilities, but not strategic advantages.
Carr's article sparked some furious debate. Many people thought he was right. Some even said that the arrival of cloud computing was the final nail in IT's coffin. Once everything moved to the cloud, they reasoned, there would be little need for a robust corporate IT function. The CIO would be relegated to the role of custodian or supervisor—the person who called the cloud vendor in the unlikely event that something went wrong.
Caught up in the hype, writers and analysts saw the cloud as living proof that Carr's vision of the future was both sensible and accurate. Of course, it didn't quite work out that way.
The responsibilities of the CIO, the burdens on IT, and the expectations that technology must deliver real business value have dramatically increased, not diminished, since Carr's famous article was published.
So at the risk of stating the obvious, it's important to filter out the hype and stay focused on what we know is real: IT does matter, and the CIO is expected to lead IT in such a way that it delivers value to the enterprise. Moreover, the CIO is expected to provide leadership across the entire enterprise. In other words, now that the CIO has a seat at the C-level executive table, the CIO is expected to provide C-level executive leadership.
Stay Focused on Delivering Value
Over the course of writing and researching this book, I have conducted more than 70 interviews with CIOs and IT industry leaders. Time and time again, they told me this: The cloud is not the solution. The cloud is part of a solution, one piece of a much larger puzzle.
There is no question that for many organizations, software-as-a-service (SaaS) makes sense today. And I think it's reasonable to say that in the near future, the business benefits of platform-as-a-service (PaaS) and infrastructure-as-a-service (IaaS) will become increasingly clear. We're on a path, but we're not there yet.
Here's something we can say with certainty: For the vast majority of businesses and organizations, the cloud represents an evolutionary step away from the traditional IT paradigm and a step toward something new.
Let's take a moment to discuss the difference between a “step” and a “leap.” A leap is okay if you know where you're leaping from and where you're leaping to. If you're not sure, don't leap.
Sometimes the smart strategy is taking several exploratory steps. At this particular moment in history, it's important for CIOs to be conducting pilots and experiments with cloud-based offerings. That's really the only way for the CIO to discover what the cloud can and cannot provide. There's no substitute for first-hand knowledge, so now's the time to put some skin in the game and find out what the cloud can do.
At the same time, the CIO must remain focused on the much more difficult task of leveraging technology to create business growth and value. That's what the CEO and the stakeholders want—business growth and value. No matter what they might say, they really aren't interested in the technology itself. On the other hand, they do care very much about results you can help them achieve.
The cloud is a means to an end, not the end itself. There is some very cool technology in the cloud. But today's CIO is expected to deliver more than cool technology—the CIO is expected to deliver measurable business value.
So now the real question becomes:
How does the CIO deliver real value?
If that is the primary question, the logical follow-up question is:
Should the CIO focus on achieving increased operational efficiency or continuous innovation?
And the next logical follow-up question is:
Can the CIO achieve both?
Replacing the Perpetual Pendulum
Randy Spratt is the EVP, CIO, and CTO of McKesson Corporation, one of the world's leading health care services and information technology companies. McKesson is currently ranked 14th on the Fortune 500. But even if McKesson were smaller and less prestigious, it would be worth knowing more about, since its primary business is helping hospitals, physicians, and pharmacies deliver high-quality health care by reducing costs, streamlining processes, and improving the quality and safety of patient care. What McKesson does has an impact on all of us and our families.
Randy was a keynote speaker at our CIO Executive Leadership Summit in San Francisco last year, and I very much wanted to include an interview with him in this book.
When chatting about the challenges confronting CIOs, Randy uses a great image: a “perpetual pendulum” in which the CIO's priorities swing back and forth between the perceived needs of the business and the perceived needs of IT. The business seeks speed and agility to generate top-line growth; IT seeks efficiency and security to improve the bottom line. Depending on the state of the economy and the overall health of the business, executive management will swing from one extreme to the other—and woe to the CIO who doesn't follow the swinging pendulum.
Now imagine replacing the “perpetual pendulum” with a virtuous cycle in which IT is constantly evolving through phases of innovation, adoption, standardization, and commoditization. Instead of a wasteful battle between proponents of top-line and bottom-line growth strategies, you have a smooth and continuous evolution that enables both strategies to coexist and to support each other constructively.
Let's look at the virtuous cycle in greater detail. The innovation phase covers the development of new products and new services. Clearly this is about top-line growth. The adoption phase is all about customer satisfaction and customer experience. This phase is also focused on top-line growth. The accompanying graphics from Randy illustrate this concept.
IT Life Cycles in Value Creation:Perpetual Pendulum
IT Life Cycles—Another Version:Virtuous Cycle
Remember, the cycle is constantly evolving toward greater maturity, so the next two phases—standardization (process efficiency, operational excellence) and commoditization (high availability, demand-driven, business continuity, security, low cost)—will be all about bottom-line leverage.
In the virtuous cycle described by Randy, the goals of IT and the goals of the business aren't mutually exclusive—they are complementary and supportive.
Tom Peck is the CIO of Levi Strauss & Co. A graduate of the U.S. Naval Academy and the Naval Postgraduate School, Tom began his career in the U.S. Marine Corps, where he held a variety of finance and technology jobs.
When I asked him to describe the major challenges facing modern CIOs, the item at the top of his list was “driving an innovation agenda.” Here's how he describes that agenda, in his own words:
Levi Strauss & Co. is a 150-plus-year-old company that has been innovating since 1873, the year we created the world's first blue jeans. Throughout our long history we've inspired change in the marketplace, the workplace, and the world. But bringing innovation through technology and ultimately to the way we sell and how we interact with consumers is new to us.
We've all discussed and read about the importance of CIOs and IT leaders being influential and “having a seat at the table.” Nowhere is this more true than in driving the innovation agenda. It's easy to chase too many or too few ideas. It's sometimes difficult to find seed money for innovation. And oftentimes the business doesn't know what they want or what IT may be capable of delivering. One of my favorite quotes is from Henry Ford: “If I had asked people what they wanted, they would have said faster horses.”
. . . we must stay at a reasonable pace with the overall trends in the consumer marketplace and “@ home” technologies. I truly believe that individual people (end users and our employees), not IT organizations, will fuel the next wave of technology innovation and adoption. Thus it's important we stay relevant, innovative, creative, and closely aligned with the workforce we are trying to enable.
“I truly believe that individual people (end users and our employees), not IT organizations, will fuel the next wave of technology innovation and adoption. Thus it's important we stay relevant, innovative, creative, and closely aligned with the workforce we are trying to enable.”
Driving innovation means keeping close tabs on the trends and patterns of global markets. One of the most powerful—and perhaps least anticipated—trends is the consumerization of information technology. Here are Tom's thoughts on the topic:
The reality is that many of us have powerful computer systems at home, and social computing tools like Facebook, Twitter, blogs, etc., are a part of our everyday lives. As technology plays an increasingly important role in our personal lives and we become accustomed to the power, convenience, flexibility, and connectedness of consumer technology experiences, we want those same capabilities to help us at work.
However, in most cases we aren't being given the tools. It wasn't that long ago that we learned about and experienced cutting-edge technology in the workplace. How quickly that has changed—as consumers, we now have access to and take advantage of the latest technology to hit the shelves or even be streamed as a service through our high-speed broadband connections.
The reality is that corporate IT, for the most part, lags in adoption and deployment cycles. . . . We often align to bring business the “latest” offerings for the enterprise . . . only months or even years late. It's further complicated by the new influence of the millennial generation.
CIOs cannot always say “no.” We need to adopt and embrace consumer technologies, learn from our users (who are also consumers), and put the appropriate guard-rails in place to allow for agility without sacrificing security, total cost of ownership, and support levels.
“CIOs cannot always say ‘no.’ We need to adopt and embrace consumer technologies, learn from our users (who are also consumers), and put the appropriate guard-rails in place to allow for agility without sacrificing security, total cost of ownership, and support levels.”
Driving continuous innovation requires a different approach to managing IT. Tom's thoughts on managing the new IT “ecosystem” are especially relevant:
The days of doing business with one company for hardware, another for software, etc., are gone. Today, the modern CIO is almost more like a supply chain officer—a supply chain of technology offerings—managing an ecosystem of partners, suppliers, devices, in or out of the cloud, and more. No longer do you do a deal with one partner in the room.
Today's ecosystem is becoming more and more complex. Even the most experienced CIOs can get confused. We are seeing the perfect storm. Tech spending is favorable. There is a favorable cycle for product renewals.
Consumers continue to become more “tech friendly.” We are watching device convergence and lower-priced, more capable computing chips. Mobility and cloud offerings further complicate the ecosystem as your friendly supplier now offers to do “everything” for you.
This is leading to what I call “vertical integration”—where companies lack a solution, they're acquiring or forming strategic partnerships. It started years ago when hardware and software companies started acquiring services businesses. Now you're seeing integration between hardware and software, on-premise and cloud, mobile and not, and much more.
It begs the questions of what will happen to niche players who lack the “verticalness.” A handful of cash-rich companies are consolidating power . . . expanding into new business or product lines . . . possibly making it harder for small or midsize competitors to break through. The largest tech companies (like Apple, Oracle, Google, Microsoft, and others) generated nearly $70 billion in new cash between 2007–2009 compared to nearly $14 billion for the other 65 tech companies in the S&P 500 index. From the end of 2007 to end of 2009, the 10 richest tech companies increased their cash levels by 48 percent to $210 billion.
The gap is at an all-time record high. This imbalance is changing how businesses behave. CIOs must figure out not only whom to negotiate and source with, but how to leverage the capabilities across multiple service providers in the global marketplace.
We will hear more from Tom in Part II of this book when we look more closely at leveraging the cloud to drive value for the enterprise.
“CIOs must figure out not only whom to negotiate and source with, but how to leverage the capabilities across multiple service providers in the global marketplace.”
It's All a Question of Perspective
Mark Hillman is VP, Strategy and Product Line Management at Compuware Corporation. Compuware provides software, experts, and best practices to ensure that technology works well and delivers value. The company serves 7,100 customer organizations worldwide, including 46 of the top 50 Fortune 500 companies and 12 of the top 20 most visited U.S. Web sites.
Basically, you hire Compuware to make certain that your technology is performing optimally. And if your technology isn't delivering the appropriate level of value, Compuware will help you figure out how to improve its performance.
Our conversation ranged far and wide, but one of Mark's observations about cloud computing really struck home. We were talking about all the usual concerns around the cloud. Security, of course, topped the list. But here's what Mark said that pushed the conversation into high gear:
“Security is critical, but you should look at it as an item on your due-diligence checklist, not as a barrier.”
In other words, you manage security in the same way that you manage all the other challenges that you encounter in your role as an IT leader.
“Security is critical, but you should look at it as an item on your due-diligence checklist, not as a barrier.”
Mark's comment about the due-diligence checklist got me thinking about how different kinds of CIOs sometimes look at the world from very different perspectives.
For example, traditional CIOs generally see themselves as risk-averse, while transformational CIOs are more likely to see themselves as risk-aware. Another quick example: Where the traditional CIO might focus on service levels, the transformational CIO is more likely to focus on business continuity.
I put together a little table showing some of the differences between “traditional” and “transformational” approaches to IT leadership. I hope it engages your interest and sparks some debate.
| “Traditional” worries mostly about . . . | “Transformational” also focuses on . . . |
| Security | Speed to market |
| Cost reduction | Business continuity |
| Service levels | Customer satisfaction |
| Minimizing risk | Managing risk |
| Process | Results |
In real life, the two perspectives aren't separated by a brick wall. They represent subsets of your larger responsibility as an IT leader to drive change and innovation across the enterprise.