Special Feature

Wanted entrepreneurial CIOs

According to a Gartner report, organizations that plan to emerge stronger after the ongoing recession will need to have entrepreneurial CIOs for it is the spirit that will help pave the way for organizational growth going forward. By Rajendra Chaudhary

Of all the 'C' level jobs perhaps the most demanding is that of the a CIO. Why? For the simple reason that there are so many things that he is expected to do in addition to running the IT function. Unlike many other job roles which are clearly defined, a CIO's job description seems to be a constantly changing one. From the custodian of IT systems to someone who acts as a liaison between IT and other internal organizations (for bringing about greater alignment of IT with business) to someone who is also one of the business leaders in the organization, a CIO's role continues to evolve unfettered. Further modern CIOs are now expected to have an entrepreneurial streak as well.

According to the findings of a recent market survey conducted by Gartner Research, organizations today must find a CIO with a great deal of entrepreneurial ability because otherwise they would lose their competitive edge. In the report The Business Impact of the Entrepreneurial CIO, Gartner Vice President and Distinguished Analyst, Jorge Lopez said that the impact of an entrepreneurial CIO is greatest when the need for productivity leverage is greatest, as in the current economic environment. Lopez said that by 2012, companies with the top 25% of earnings growth will have an entrepreneurial CIO.

He based his arguments on the fact that post recession, most of the profits go to the leader of the industry and the majority of the gains are made during the recessionary period since it is the time when smaller players or weaker organizations usually fall away from the 'herd' or reduce the intensity of their efforts.

“Drawing a parallel from our experience of previous recessions we think that those companies that emerged from a recession in better positions actually captured the largest market shares. These were also the companies that were willing to make investments in the changes during the times of highest pessimism,” added Lopez.

He argued that an entrepreneurial CIO can be one of those important agents of change for an organization during a lean economic phase. Lopez emphasized on the entrepreneurial aspect more since he believed that a CIO who is very conventional and risk-averse in his approach towards things would be detrimental to the cause since he may not actually take the risks or do the things that are necessary for the organization to move forward.

“During bad economic times it is the willingness to apply the highest level of creativity available within the organization to do things in a fundamentally different way that establishes new sources of shareholder value, while also setting new levels for IT productivity,” said Lopez.

He added that one of the biggest dilemmas faced by organizations today is how CEOs and CIOs can execute entrepreneurial tasks in the current risk-averse environment. As shareholders see the recession recede in their day-to-day actions, they will drive for revenue and earnings growth, and they will expect CEOs and CIOs to perform to heightened expectations.

Who is an entrepreneurial CIO?

For the aforementioned reasons it becomes crucial for organizations to check that they have the best person on the job. As per Lopez the right combination of vision, risk-taking and persuasiveness is what is needed to fill the requirements for the job.

Gartner defines an entrepreneurial CIO as the person who, working jointly with an entrepreneurial CEO or business unit executive, marshals resources under the command of the IT organization, as well as creatively linking to resources outside of IT, to define and capture new and growing business opportunities.

“Some of the distinctive features of the entrepreneurial CIO are the proactive willingness and courage to take high-level risks also undertaken by the business, to provide new or breakaway competitive advantages that translate directly into revenue, financial results and market share,” asserted Lopez.

The primary focus of the entrepreneurial CIO is on new-business impact, and that impact is felt in three major ways by the business:

• Velocity of change—the ability to influence the velocity of change through the structure of the business, so that a change in strategy can be implemented at a rate that outperforms all other competitors, and, therefore, also draws revenue at an earlier time and at a rapid pace. Improvements in this area lead to gaining competitive advantage quickly in new markets with new offerings.
• Strategic leverage and extension—capabilities that extend strategy for the enterprise to new markets, new industries and new uses, and that lead to growth in revenue against entrenched and new competition.
• Operational efficiencies—efficiencies that improve operations to gain breakaway competitive advantage that further increase the rate of revenue and earnings growth. Gaining an improvement that is a factor of ten or more is key to establishing true competitive advantage in the area of operational efficiencies.

Nurture entrepreneurial spirits

Now, having an entrepreneurial CIO will be of no use if he doesn't get the right environment to work in. For an entrepreneurial CIO to truly thrive, he requires an entrepreneurial CEO and the two need to work closely to tackle organizational growth challenges together. A disconnect between the CEO and the CIO can knock the wind out of any entrepreneurial endeavor.

An example of this disconnect was seen back in latter part of 2007 when a lot of CEOs in the US were beginning to lose confidence that they had in the future. However, most CIOs around the same time felt like the good times will never end and that they will continue to have higher IT budgets for the upcoming years. There was a clear disconnect between what CEOs were going to do and CIOs’ awareness of that and the results of that disconnect are there for everyone to see.

Secondly Gartner's own CEO research in the past has shown that more than 60% of CEOs see their IT organizations as a key constraint to the changes that they need to bring in. Therefore it is up to the entrepreneurial CIO to deploy resources and architecture within the IT organization that makes it a partner that is synchronized with the entrepreneurial objectives of the business.

The case of Byrne Chapman, the CIO at American Family Insurance is a perfect example of creating such a partnership. Chapman uses information to predict storm paths and matches the predictions to the locations of their policy-holders in order to keep the business ready for faster response to customer service requests in times of disaster.

Similarly back in 2005, when newly appointed CIO Randy Mott was given the charter to modernize HP's IT, he completely transformed the way HP's IT delivered the technology that ran HP within a period of three months and with a budget of about $1.7 billion. As a result of the exercise HP managed to cut its IT spending to almost half of what it used to earlier, saving the company about $4.1 billion annually. Not only this, but the new IT platform also helped HP extend its capabilities into new businesses and even launch some.

There are numerous such examples of entrepreneurial CIOs assisting the business. It is no surprise then that of late more CEOs have shown a liking for CIOs which have greater business background. While the ability to efficiently manage IT remains a strong criterion for them, research has shown that CIOs with greater business sentiments are fast becoming a CEO favourite.

Having said that it is also true that entrepreneurial spirit is not exclusive to people with strong business acumen only, it can just as well be in someone who doesn't have a business background at all.

“The key lies in hiring the right person because entrepreneurship is an attribute innate to an individual. When it comes to the entrepreneurial CIO, if I'm going to hire, it will be someone who can ensure that he keeps the lights on for the business and continuously improves the cost structure. Yet at the same time he is also capable of making a contribution at the senior management level by proactively driving change by working with other business colleagues to ensure that future opportunities are captured in a timely manner,” concluded Lopez.

rajendra.c@expressindia.com