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HBR Blog Network

Today's CIO Needs to Be the Chief Innovation Officer

by Daniel Burrus | 11:00 AM July 30, 2013

Comments (12) HBR Blog Network Today's CIO Needs to Be the Chief Innovation Officer by Daniel Burrus | 11:00 AM July 30, 2013 Comments (12)

Enterprise IT as we have known it is rapidly becoming obsolete, and the traditional role of the CIO is increasingly irrelevant. As game-changing technologies transform every business process, they also give us the ability to create new products and services that were impossible just a few years ago. Therefore, the CIO's role must shift from protecting and defending the status quo to embracing and extending new innovative capabilities. The old way was about technology-centricity; the new way is about technology-empowered business strategies. The old way was information management; the new way is information intelligence. The old way was IT systems management; the new way is platforms that enable new value chains and integrated ecosystems. The old way was cost management; the new way is driving business transformation and accelerating growth. Today's world of business is not just changing it's transforming. What's the difference? Change is doing something in an incrementally different way. Transformation is doing something so drastically different that it becomes a qualitative shift, not just quantitative. The move from wax cylinders, to acetate discs, to LPs, to CDs these were all change. CDs to MP3s? Suddenly I can carry my entire music library in my shirt pocket, and my digital music player (which also happens to be my smart phone

containing GPS, videos, and so much more) has no moving parts, unless you count electrons. That's a transformation. In the early 1990s, Barnes & Noble superstores changed how we shop for books. By the mid-1990s, Amazon was transforming how we shop for books, which then transformed how we shop for everything. As we all know, technology made this transformation possible. Transformation Drivers Today, technology-driven transformation is happening all around us. A few weeks ago, I was a keynote speaker at a large international technology conference and one of the demonstrations to illustrate game-changing technology involved using an iPad and a high-speed connection to fully control three of the most powerful workstations engineers have access to. All were located in different parts of the country, yet with only the iPad wirelessly streaming to a large screen, thousands of people could see what the engineers were seeing and the user could control each workstation as if he was there. Doing all of this from an iPad was impossible just a few months ago. I was in China two months ago consulting with CIOs who were not only using software as a service (SaaS), but several were also in the process of implementing hardware as a service, connectivity as a service, collaboration as a service, and security as a service. And the real excitement was around implementing everything as a service (XaaS). Clearly, IT is quickly becoming an integrated collection of intelligent services that are on demand, on the move, and on any device. The visual, social, virtual, and mobile transformations that are already happening are creating a new golden era of technology-enabled innovation, and the CIO needs to be leading the charge. So what has enabled the business environment to go from merely changing to transforming? It's all thanks to three change accelerators: the exponential advances in processing power, bandwidth, and storage. I have been tracking their trajectory for the past thirty years and they have now entered a predictable new phase due to their exponential growth a phase that will transform every business process. Think of it this way: Based on the technology-enabled hard trends that are already in place, over the next five short years we will transform how we sell, market, communicate, collaborate, innovate, train, and educate. And if you don't do it, someone else will. In fact, with all the business processes technology is transforming, nothing is transforming more than the role of the CIO. The New Role The CIO's traditional role, which is one of managing information, IT systems, and cost, has itself transformed to creating new competitive advantage, new products, and new services. Traditionally, the CEO was the innovator, but many of today's CEOs as well as the rest of the C-suite are unaware of what is technologically possible now or in the future. However, the CIO does have interest, access, and the understanding of that type of

information and knowledge, which is why the CIO position needs to transform into the Chief Innovation Officer. Of course, not all CIOs will embrace their new role. As our environment transforms, human nature is to hunker down because we want to find comfort. Many will be far too busy doing what they have always done. Many will spend a lot of time protecting and defending the status quo. Why? Quite simply, because we're familiar with it. We know how it works. We have an investment in it. It has made a lot of money for us. It got us to where we are today. Therefore, the mindset is that we have to protect and defend it any way we can. An additional burden the CIO has is the nature of their work itself. They have to maintain the existing system to make sure it's working, that there are no breaches, that it's being upgraded, etc. After all, you have to keep the organization running smoothly during the transforming time. But if that's all you're doing maintaining what's already there then your role is tied to the past and your relevance is decreasing every day. So while you do have to maintain your current and past systems, your new most important role is to drive internal and external innovation. And because innovation is increasingly technology-driven, the CIO is in a perfect position to lead this evolutionary revolution. The fact is that the ability to innovate has never been more possible and has never happened faster. In transformational game changing times such as what we're experiencing now, the key rule is this: If it can be done it will be done ... and if you don't do it, someone else will. Likewise, if you don't change the focus of your CIO role, someone else will.

HBR Blog Network

Is Your Organization Ready for Total Digitization?

by Peter Weill and Stephanie Woerner | 11:00 AM July 24, 2013

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What do the following items have in common: credit cards and streaming or recorded music, robots for production, CAD systems, telephone networks, digital games, computers in products like cars and vacuum cleaners, sensors, and video consoles used in remote mining? Answer: They are all digital and connectable. This is the world of total digitization: a multitude of digital devices and sensors creating streams of data, as well as any number of digital services and products for both internal and external use, distributed throughout the enterprise, and sometimes, but not always, connected. As the drive toward increased digitization continues, enterprises have to get a handle on this total digitization and corporate CIOs have to step up to the challenge. Three Approaches to Managing Total Digitization How are enterprises managing the spread and scope of total digitization? We at MIT CISR have found that enterprises are using one or more of three approaches to managing total digitization: convergence, coordination, or a separate digital

innovation stacks approach. Each approach has very different objectives and measures of success. Convergence. This approach brings all digitization investments together and places them under a single executive. At Boeing, all enterprise technology (including digital) investments are managed by the CTO, which enables significant synergies. For Commonwealth Bank of Australia, convergence involved bringing together operations and IT into a new unit, Enterprise Services (ES), headed by the CIO. ES helped CBA achieve its goal of both reducing costs and becoming number one in customer experience. Convergence usually requires the introduction of new organizational structures to create efficiencies and synergies and to increase reuse of resources. Enterprises using a convergence approach will, wherever possible, organizationally consolidate the key assets of people, data, infrastructure, skills, and management processes. Coordination. This approach doesn't change the organizational structure but adds mechanisms (such as committees or gates) onto a business case process, to increase the coordination of big digital investments across groups such as engineering, operations, or product owners. Leaving the organization structure "as is" reduces disruption while the mechanisms help facilitate working together across the units. A typical structure consists of separate organizational units supported by a shared infrastructure at the base and connected by customer-facing coordination mechanisms at the top. For example, BMW set up two committees focused on digitization to deliver on its enterprise goals, including the design and delivery of a custom car within six days. These committees at BMW ensure the creation and smooth handoff of information. In a coordination approach, the mechanisms all work together to achieve a specific outcome. This approach works well when there are one or two enterprise-wide goals. But be aware, when there are numerous enterprise goals spanning multiple geographies and business units, the coordination approach can lead to a spaghetti-like set of governance committees and processes. But with just one or two overarching enterprise goals, the coordination approach helps to create a consistent customer experience or, in some companies, ensures regulatory compliance. Separate Digital Innovation Stacks. Enterprises with this structure and approach believe the key to their success is innovation via local management. Each of the separate stacks such as the different product groups, business units, or geographies is left alone to maximize its own local value without any coordination overhead. Taking this approach (e.g. News Corp) commits a firm to local innovation, often organized by products or stand-alone businesses. These enterprises have decentralized management and diversified businesses. Capabilities are often duplicated with slight differences in each stack, and there is local accountability for profit and loss. Typically, though, some global risk management is necessary. As digitization increases and customers (and regulators) expect a more integrated multi-product experience, we expect to see

far fewer business units pursuing a separate digital innovation stacks strategy. Diversified enterprises, however, may still find it a useful approach. Identifying your enterprise's core strategic drivers is the key to deciding which approach is best to follow. Convergence is about reducing cost, reducing risk, and achieving synergies. Coordination is the right choice for enterprises that are trying to achieve a few enterprise-wide goals such as improving customer experience or asset utilization. Finally, the separate digital innovation stacks approach is right for enterprises that believe autonomy helps improve innovation and local customer responsiveness. We believe that managing total digitization is one of the biggest opportunities and challenges facing enterprises and their CIOs today. We are already seeing companies in which the total digitization spend is over 25% of the operating budget and expect this will become commonplace. In our ever-more-fully digitized world, you need to strategically manage total digitization or you run the risk of digital anarchy in your enterprise.