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Executive summary ITs aspirations require addressing current realities CIOs need a new agenda for digital business and beyond CIOs must hunt and harvest IT must set aside old rules and adopt new tools The 2013 CIO Agenda Appendix: Additional data, demographics Further reading
January 2013
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FoRewoRd
CIOs face a complex future, caught between current IT operations and digital opportunities. On average, CIOs report that their enterprises realize only 43% of technologys business potential. That number must improve if companies are to realize value from IT in a digital world. The CIO agenda for 2013 involves adopting new approaches to hunting for innovations and opportunities that deliver digital value, while harvesting increased business performance from products, services and operations.
The 2013 CIO Agenda addresses the question, What are the opportunities and challenges facing CIOs in an increasingly digital world, and how are they addressing them? As an agenda, this report concentrates on discussing the results of this years CIO survey and the actions of leaders in the face of ongoing operations and emerging digital challenges. It raises more questions than it answers but in the process seeks to help CIOs evaluate their agendas for the coming year. The questions and answers establish the research agenda for 2013 and inform the direction of the Executive Programs reports outlined in the nal section of this report. Hunting and Harvesting in a Digital World: The 2013 CIO Agenda was written by Mark McDonald (group vice president and Gartner Fellow) and Dave Aron (vice president and Gartner Fellow).
Mark McDonald
Dave Aron
We would like to thank the many organizations and individuals that generously contributed their insights and experiences to the research, including: he 2,053 CIOs who responded to this years survey, representing more than $230 billion in CIO IT T budgets and covering 36 industries in 41 countries. T he contributors to our interviews and case studies: Tunde Coker, Access Bank (Nigeria); Mike Capone, ADP (U.S.); Saul Hernandez, Alpha Natural Resources (U.S.); Sabine Everaet, Coca-Cola Europe (France); Fredrik Karlsson, DeLaval (Sweden); Mike Bracken, Government Digital Service (U.K.); Claudio Laudeauzer, Grupo Fleury (Brazil); Joan Miller, Houses of Parliament (U.K.); Michael Hanken, Multiquip (U.S.); Marc Franciosa, Praxair (U.S.); Tony Bridgewater, Salmat (Australia); Sundi Balu, Telstra International Group (Hong Kong); and Scott Studham, University of Minnesota (U.S.). ther Gartner colleagues: Lisa Beck, Linda Cohen, Annemarie Earley, Sue Evans, Jolanta Gal, O Derek Galvin, Steven Lachowski, Bard Papegaaij, Claudia Ramos and Kevin Zhou. ther members of the CIO & executive leadership research group: Richard Hunter, Raymond O Laracuenta, Ken McGee, Leigh McMullen, Mark Raskino, Andrew Rowsell-Jones, Michael Smith, Lee Weldon and Colleen Young.
Hunting and Harvesting in a Digital World: The 2013 CIO Agenda 3
Executive summary
According to CIOs, the enterprise realizes only a fraction of technologys potential. Realizing the full potential of digital technology opportunities requires changing IT practices and tools. To hunt for digital innovations and opportunities, and consistently harvest value from products, services and operations, CIOs must set an agenda that leads to new attitudes, behaviors and roles.
In this years survey, CIOs reported that, on average, their enterprises realize only 43% of technologys potential. Volatility, uncertainty, change and other challenges erode business and IT capabilities, raising the stakes for the business and IT. Though exceptional companies exist, the vast majority of IT organizations need to address fundamental gaps in their performance relating to strategy, funding and skills. Only in this way can IT meet digital business expectations and its own aspirations.
As shown in the gure below, the tension between cost and digital technology creates three interlocking issues that CIOs must address over the next three years: strategy, funding and skills.
Strategy
Funding
Skills
The 2013 CIO Agenda concentrates on recognizing these challenges and developing plans to win in a digital world. Most CIOs cannot simply make the case for greater strategic involvement, funding and skills based on where IT is today. IT must go beyond its current focus on tending to current operations and systems to adopting new behaviors so that it can hunt for new digital innovations and opportunities, and harvest raised business performance from products, services and operations. CIOs who merely stick to their current job in this quiet crisis are setting themselves up to lose that job in the future. IT is not going away; it just needs to change not because it is wrong, but because the world has changed and enterprises are realizing only a fraction of technologys potential.
Based on your judgment, how much of technologys potential would you say your enterprise has realized?
60% 51% 50%
Percentage of respondents
Average: 43%
40%
30%
25% 21%
20%
10%
CIOs report that signicant challenges have limited their ability to realize more value and meet the demands of digital technologies, which have only amplied these limitations. While there are technological challenges outside of IT, many of the factors holding technology back lie squarely within ITs backyard: S urviving in an environment of limited budget increases keeps IT focused more on current operations and less on being strategically relevant. orking with a labor market that no longer delivers the required stream of skilled professionals limits W ITs capacity to take on new challenges and new digital technologies. etaining an inflexible organizational structure despite changing demands restricts ITs role and R adaptability. It is incumbent on CIOs to lead in the face of these factors, rather than muddle through with what they already have. Over the next three years, they cannot repeat a past of doing more with less if they expect to create value far into the future. The rest of this section quanties the factors and denes the requirements for realizing the full potential of IT.
Digital technologies create a new context for the business and IT At some level, every technology is a digital technology. In this report, digital technologies refer to a specic set of new technologies: those that create value by applying information rather than automating business transactions. Mobile, analytics, big data, social and cloud are the key digital technologies we discuss. Generating revenue and results through digital technologies denes a digital business, which goes beyond simply substituting digital resources for their physical counterparts an e-book for a book or an e-store for a brick-and-mortar store. Technology-oriented forms of digitization underplay the innovation and value-creation potential of digital technologies. Our focus, then, is on how digital technologies drive revenue and results rather than replace people and processes.
CIOs and their IT organizations are expected to survive in an environment with little if any real budget increases
CIO IT budgets the amount of money CIOs control within their own cost codes have been at to negative ever since the dot.com bust of 2002. For 2013, CIO IT budgets are projected to be slightly down, with a weighted global average decline of 0.5% compared to 2012 actual spending. Twenty-five percent of firms expect to cut their 2013 CIO IT budgets; 33% of firms expect an increase over 2012 actuals, with 42% predicting the same spending as in 2012. Declines in larger CIO IT budgets outweigh increases in smaller budgets, resulting in the overall decline in the global weighted CIO IT budget. On an unweighted basis, CIO budgets were at. The gure on page 10 shows IT budget trends over the past 10 years overall, a decade of devaluation in CIO IT spending.
Hunting and Harvesting in a Digital World: The 2013 CIO Agenda 9
$109.83 $106.53 $103.73 +2.5% $101.20 +1.2% $100 0.0% +2.7% +3.1% +3.3% +1.0% $104.27 $104.67
$104.15 $103.12
$104.14
+0.5%
2003
2004
2005
2006
2007
2008
-1.1%
2011
2012
Percentages represent the projected average weighted change in the CIO IT budget for the year. The dollar figure represents the dollar value change in the CIO IT budget between years, using 2003 as the base year.
2010
-0.5%
2013
-8.1%
2009
Based on this ow of money, IT cannot expect to secure additional funding without assuming new responsibilities or producing new results. Reacting to limited budgets by restructuring costs, outsourcing and doing more with less made sense from 2002 to 2011, when the supply of innovative technologies was scarce. But now CIOs need to make the case that mainstream emerging mobile, analytics, big data, social and cloud technologies justify revisiting IT budget and investment levels.
10
20%
26%
29% No opinion
18%
7%
Strongly disagree/disagree
Strongly agree/agree
11
Digital technologies will only further challenge a weak IT labor market. Without the ability to readily build new skills internally, CIOs are vulnerable to skill shortages, especially as older IT professionals with expertise in those skills retire. Approaches to getting the right skills in IT require circumventing the limitations of the current labor market. This will be the topic of a 2013 Executive Programs report.
21%
6% The current IT organization can support foreseeable changes or business strategy without organizational change. 22% The IT organizational structure is independent of changes in business strategy.
CIOs must be able to change IT rather than just change IT priorities. A CIO overly condent in the stability of the IT organization contradicts the changing nature of technology innovation and the businesss requirements of IT. Given the changes on the horizon, CIOs should consider evolving their organizational structure not only to meet the requirements of new digital technologies, but also to adapt to business goals such as cost-effective growth in a globally competitive world.
12 Gartner Executive Programs
Extending ITs performance prole beyond tending, to hunting and harvesting for digital value
Tending Performance Performance Hunting Performance Harvesting
Time Working within existing constraints (supporting step change) Improving current operations and resources Generating value through optimization Upgrading existing capabilities and systems Concentrating on achieving the IT plan at cost and with quality
Time Searching for new innovations (the arrows) that expand business opportunities and strategy Disrupting markets with new digital innovations and offerings Generating value by extending the frontier of performance Implementing new digital solutions Concentrating on linking across the enterprise and creating new sources of value, results and revenue
Time Exploiting business capabilities to achieve consistent growth and performance Transforming business processes, products, services and operations Generating value by actively managing business results Creating new operations and sustaining performance levels Concentrating on achieving the business plan via changing business performance
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Tending, hunting and harvesting represent an expansion of the roles CIOs and IT organizations will play in the digital world. These expanded roles are not mutually exclusive, and an IT organization should not restrict itself to one role. CIOs should recognize ITs role in each situation and adapt the organization, skills and resources to respond to the roles business requirements. We dene the roles as follows: T ending involves managing ITs current operational and investment responsibilities within existing boundaries and constraints where the enterprise needs stability, cost management and quality of service. unting is used in situations where technology is out in front and involves scouting and nding H innovations and opportunities beyond enterprise boundaries. Some hunting projects will fail, but each helps the enterprise learn about digital technology and value. The result is an accelerating rate of performance as new technology and business solutions take the enterprise beyond current operations. arvesting is used throughout the enterprise as IT raises business performance by actively changing H business processes, extending products and services, and replicating best practices. Unlike tending, harvesting transforms IT, business processes and applications to produce additional results.
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Case Study
15
Case Study
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How technology will support growth and results is a fundamental question for the future. It is no longer sufcient to tend the IT garden and declare success. Digital technologies provide a platform to achieve results, but only if CIOs adopt new roles and behaviors to hunt for digital value. CIOs require a new agenda for digital business and beyond an agenda that secures ITs future strategic role, funding and skills.
Business strategies require new behaviors to achieve enterprise growth, gain customers and expand technology
According to this years CIO survey, growth strategies dominate business strategic priorities, and for good reason. Even in good economic times, growth is challenging, so current economic, nancial and political uncertainty make it particularly vexing. The 2013 business priorities laid out in the gure opposite show that a focus on growth is a focus on a future where executives see a major role for customers and improvements in technology.
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19
The diversity and complexity of business priorities calling for growth, customer acquisition and technology adoption translate to IT playing a range of roles. The gure below offers a different view of business priorities, based on the tending, hunting and harvesting proles presented earlier.
CIOs face the same business strategies regardless of their preference to tend, hunt or harvest
Business strategies Ranking Increasing enterprise growth Delivering operational results Reducing enterprise costs Attracting and retaining new customers Improving IT applications and infrastructure Creating new products or services Improving efficiency Attracting and retaining the workforce Implementing analytics and big data Improving business processes Implementing enterprise strategy Ranking of business strategies CIOs selected as one of their top 3 in 2013 All CIOs 1 2 3 4 5 6 7 8 9 10 11 Tending 1 2 3 4 5 6 7 12 10 8 14 Hunting 1 5 4 3 2 6 7 15 8 10 9 Harvesting 1 2 3 4 5 6 7 15 8 10 9
As the gure shows, the priorities are important regardless of role, and therefore CIOs need to consider a multirole approach when working on business strategies. In other words, the tending, hunting and harvesting roles carry through to the diverse set of digital technologies that will dominate CIOs agendas in 2013.
20
21
CIOs see these technologies as disrupting business fundamentally over the next 10 years. When asked which digital technologies would be most disruptive, 70% of CIOs cited mobile technologies, followed by big data/analytics (58%), social media (54%) and public cloud (47%). The disruptiveness of each of these technologies is real, but CIOs see their greatest disruptive power coming in combination rather than in isolation. For example, the gure below shows the frequency with which CIOs see mobile, big data/analytics and social media technologies working together.
CIOs see digital technologies creating value in combination rather than in isolation
Mobile technologies Big data/analytics Social media
Mobile technologies
Big data/analytics
Social media
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Digital technologies have the potential to disrupt and transform any industry. Most of us think about the role of digital technologies in terms of information-based businesses, but what business today is not information-based? The following case study on DeLaval illustrates how a Swedish company is using technology to digitalize the business by hunting for information opportunities and harvesting value from the emerging digital platform. Case Study
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Case Study
CIOs plan to improve ITs ability to hunt for digital innovation while harvesting business value from current operations
As CIOs continue to amplify the enterprise with digital technologies while improving IT organizational structure, management and governance, 2013 promises to be a year of dual priorities. The CIO IT strategy rankings in the gure opposite reect the realities of dual business priorities and conrm the need to expand ITs ability to hunt for new opportunities and harvest current business value. CIOs recognize that ITs value contribution comes from delivering business solutions; they also recognize that the prioritization and delivery of specic results must change.
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2013 top 10 global CIO IT strategies reect the need for CIOs to tend, hunt and harvest simultaneously
CIO IT strategies Ranking Delivering business solutions Improving IT management and governance Improving the IT organization and workforce Reducing the cost of IT Consolidating IT operations and resources Expanding the use of information and analytics Implementing mobility solutions Implementing business process improvements Improving business alignment and relationship Developing or managing a flexible infrastructure *New response category Ranking of IT strategies CIOs selected as one of their top 3 in 2013 2013 1 2 3 4 5 6 7 8 9 10 2012 1 5 10 2 8 4 7 9 6 3 2011 2 4 6 3 5 7 18 8 10 1 2010 1 6 10 3 9 7 * 4 2 8 2009 3 4 8 2 9 10 * 5 1 11
The ability to make and keep multiple commitments is critical to digital innovation; it is equally critical for CIOs to deliver on their IT strategies. This requires executing a combined strategy based on tending, hunting and harvesting roles. How CIOs lead in changing ITs capabilities, capacities, and prioritization and execution of strategies will determine the future of their organizations. Praxair, a global industrial chemical and supply company, reects the depth of change required for IT to become a better hunter and harvester. Case Study
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Case Study
Praxair is creating an IT organization that hunts and harvests at a global level (continued)
When Vice President and CIO Marc Franciosa joined Praxair, the IT organization was highly decentralized. He has restructured IT into business-facing teams that are based by geography and supported by centralized, global delivery engines embracing infrastructure, ERP, collaboration applications, the program ofce, strategy and security. The teams support both existing and growth markets. In geographies with static or declining growth, they drive productivity by restructuring and adding efficiencies; in new and growth markets, they often replicate productivity best practices but have leeway to be innovative. We help drive all these initiatives, explains Franciosa, but we really want them to be led by the business. Praxairs annual revenue has grown steadily since 2005 from about $7.5 billion to $11 billion. Precisely how does the IT organizational structure help support this? Franciosa studied the rigor, resources and lessons learned in Praxairs mature geographies to fully understand the business models and then used them to support high-growth environments. Replicating solutions is a big part of our success over the last couple of years, he says. Its allowed us to focus resources, concentrate a little less on cost constraints and drive growth in certain geographies. Franciosa adds that solutions dont just happen to be replicable theyre designed that way. For example, all business cases must have applicability outside their geography of origin. Moreover, to optimize a process and develop best-in-class metrics, the IT teams incorporate lean and value stream principles while working closely with business process owners. Thus, rather than go with a quick, local solution, they vet a project for global applicability. If the benets could extend beyond the original locale, the solution moves forward and is eventually replicated on a global scale.
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As an example of Praxairs replication thinking, Franciosa cites recent changes in Brazils medical oxygen regulations, which now include full traceability, lot and batch control, and serialized tracking akin to European regulations. We were able to accelerate implementation by using an existing European solution, he says. That gave us a huge competitive advantage over our local competitors, who had to meet changing compliance issues by starting from scratch. Still, Franciosas business-driven IT organization did not come easy. This was a huge cultural change for us, he says. Before his arrival, IT was organized into geographically dispersed teams that ran everything from strategy and ideation, to the solution-building process, to running and managing the solution. Now his business-facing IT teams focus on ideas and business strategy, and they use Praxairs internal global delivery engines to execute and run a solutions back-end aspects. Franciosa staffed many of the business-facing teams with people who had business process roles, or roles that would make it easy to tap into the business population. Because the teams center on business processes, priorities and strategy, they are less technical than is the norm in IT. Taking a different approach to talent sourcing, Franciosa partnered with HR to build solid talent pipelines. Rather than repeat a sourcing strategy in every country, they focused on a couple of key geographies. Global teams are a lot easier to staff in one geography than all over the world, says Franciosa. We take our talent-sourcing strategy very seriously and discuss it at every leadership meeting. Its not something that we only do once a year. Based on an interview with, and material from, Marc Franciosa, vice president and CIO, Praxair, September 2012. (See an expanded version of this case study on the Executive Programs website.)
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Traditionally, the CIO role has concentrated on tending to IT operations. However, the world has changed and IT must adapt by extending its role in the enterprise. Hunting and harvesting entail new attitudes and responsibilities for IT that reect the realities of digital business. CIOs, therefore, have three tasks today: Tend to the legacy, hunt for new digital business opportunities, and harvest value from business process changes and extended products/services.
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Similarly, the value of harvesting comes from continually tuning existing digital assets, not just for improved IT efciency and effectiveness, but also to serve the evolving needs of the business and its customers.
CIO tenure with the enterprise is a signicant factor in gaining responsibilities outside of IT. The longer the tenure, including time not as a CIO, the more context and connections the CIO has for playing a broader role in the enterprise.
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Almost a fth of CIOs now act as their enterprises chief digital ofcer (CDO), leading digital commerce and channels. Though this nascent role varies in scope and style, it normally includes championing the digital vision for the business that is, ensuring that the business is evolving optimally in the new digital context. Mike Bracken left a CDO-like role at the Guardian Newspaper Group to become executive director of the U.K.s Government Digital Service, where he just spearheaded creation and publication of the governments digital strategy (see http://publications.cabinetofce.gov.uk/digital/). His role includes ensuring a holistic, cross-departmental digital strategy and helping accelerate the exploitation of digital trends for the benet of citizens and the functioning of government. Case Study
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Most people who can use a digital service will choose that service if it is easy to use and can complete the transaction, Bracken says. This requires supporting the customers point of view and choices rather than relying on compliance through government monopoly power. Occasionally, Brackens team will develop and deliver a digital solution to government agencies to advance the digital-by-default strategy, but agencies always handle their mainstream applications and transactions. GDS concentrates instead on building digital solutions to support discrete citizen needs, and on integrating transactions with a bias toward supporting citizens in accessing information. The open-source architecture that GDS has created supports coordination across agencies and opens information to the public to foster development of future digital capabilities. With regard to information and openness, our long-term plan is to go wholesale, by which we mean exposing data and services to the public, explains Bracken. Noting that GDS is replicating its digitalteam model in other government agencies, he adds, Changing IT skills acts as a catalyst for strategic change. We need to bring the Web generation into government, and that means completely resetting the technology skills portfolio in government. Based on an interview with, and material from, Mike Bracken, executive director, Government Digital Service, U.K., September 2012. (See an expanded version of this case study on the Executive Programs website; see Brackens blog, titled Digital Transformation, at mikebracken.com.)
Salary 77% Corporate performance bonus 14% Departmental performance bonus 3% Stock/equity award 4% Other compensation 2%
Salary 72% Corporate performance bonus 17% Departmental performance bonus 5% Stock/equity award 5% Other compensation 1%
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The survey found that CIOs must address increasingly challenging business issues and the need to execute at speed. For example, in October 2011, Tunde Coker, CIO at Access Bank in Nigeria, had to integrate the technology and operations of Intercontinental Bank, a retail bank with 375 branches in Ghana, Nigeria and the U.K. over three times Accesss size. Working closely with Access Banks business change director, Coker achieved full IT integration by March 2012, running all key services off a single core banking platform, electronic channels and enterprise platforms. The 25 project teams that Coker managed handled everything from core banking to ATMs, payments, nancials and HR systems; simultaneously, they integrated staff and handled talent challenges in areas such as service management, core banking and data warehousing. Meanwhile, like other CIOs, Coker must deal with a changing world. He sees postmerger transaction volumes growing signicantly, and other needs, such as straight-through processing, social channels and big-data exploitation, on the horizon. Our two biggest challenges going forward are consistent stability and scalability, he says. (See the Access Bank case study on the Executive Programs website.)
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Distribution of responses
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As CIOs and their enterprises take on more front-ofce digital challenges, other talent gaps will come more clearly into focus, such as digital design and social anthropology. CIOs must use a portfolio of approaches to address the talent issue. An increasing number see cloud strategies as a way to mitigate talent challenges, including Joan Miller of the U.K. Houses of Parliament. Case Study
Building the core of the business, and outsourcing to the cloud, at the U.K. Houses of Parliament
The Houses of Parliament of the U.K. consist of the House of Commons and House of Lords. Parliament examines government activities, makes new laws, approves taxation proposals and debates the issues of the day. The publicly elected Commons is responsible for nancial bills, such as proposed taxes. The Lords is an appointed house that complements the work of the Commons making laws, holding the government accountable and investigating policy issues. Parliaments IT strategy is to develop in-house skills for core business operations, outsource commodity business services to the cloud, and support mobility and BYOD (bring your own device). This is in line with a broader government initiative to increase accessibility and cost savings by making services digital by default. CIO Joan Miller focuses many of her IT resources on the parliamentary publication process a core business deliverable. Output from parliamentary meetings is published in documents distributed through digital media. Our strategy is to build a cadre of in-house developers of these systems to support a digital Parliament capability, says Miller. A major reason for keeping development of the publication systems in-house is that packaged software satisfying Parliaments unique demands has not been found. Security is a special concern, with measures being taken to ensure the integrity and validity of each authored document. As Miller explains, We need to control the words going into each document, and we need make sure we are the ones putting those words in there. Cloud sourcing is done to lower expenses while improving performance. With the cloud, says Miller, were buying resilience and better support and service. We dont have the scale in-house to provide the responsiveness our users demand in case of a system failure.
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She adds that the cloud boils down to a matter of cost, skills and staff. By outsourcing email and other generic services to the cloud, for example, Miller can not only improve service and support but also address the IT skills gap and retention issues. With the stiff competition in the IT labor market, she nds that people interested in parliamentary employment initially are quickly lured away by private companies willing to pay up to 30% more. Miller recognizes that CIOs and their IT organizations must become trusted business partners. Accordingly, Our IT strategy is based on facilitating mobility, connectivity and access to world knowledge for the Members of Parliament, she says. After the 2010 elections, her organization began deploying secure iPads and now supports BYOD for smartphones and tablets. With 50% of Parliament working almost exclusively in a mobile environment, Miller strongly believes that IT should provide the technical analysis, business advice and support mobile users need to securely access the data their jobs require. In recent years, Miller has attached business relationship managers to every department to improve business planning. Business units also manage IT projects with help from a business relationship manager, who handles scoping, planning and resourcing. Miller relies on secondments the temporary transfer of a worker to another position to bring people from other business units into IT. These individuals return to their BUs, Miller reports, as IT brand ambassadors. Based on an interview with, and material from, Joan Miller, CIO, Houses of Parliament, U.K., October 2012. (See an expanded version of this case study on the Executive Programs website.)
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In a world of change, it is concerning that a majority of CIOs, according to the survey, do not see ITs enterprise role changing over the next three years. IT rules regarding enablement, governance, alignment, organization, metrics, etc. created more than 20 years ago addressed automating and integrating business operations for cost reductions and efciency gains. IT needs new tools if it hopes to hunt for digital innovation and harvest raised business performance from products, services and operations. Without change, CIOs and IT consign themselves to tending a garden of legacy assets and responsibilities.
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Factors that keep the enterprise from realizing technologys full potential
Enterprise readiness for new technology Enterprise change management IT funding and budgets
IT skills and capabilities Enterprise realization of technologys potential Above 50% 50% Below 50%
Enterprise strategies Effectiveness of the IT organization Enterprise demand for IT 0% 10% 20% 30% 40% 50% 60%
70%
80%
Percentage of respondents
IT funding, skills and effectiveness, important as they are, become even more important as an enterprise gains from technology. And CIOs who adopt a hunting role are twice as likely to work in high-performing enterprises than their tending or harvesting peers. Note that CIOs cannot hunt for future value unless they effectively tend and harvest current operations. CIOs who reect on these issues in the context of the past decade will clearly see that they are real, and that the rules and tools used to address them have not been effective. If they had been effective, then the issues would not be so prevalent now. In benets realization, for example, CIOs reported in 2010 that the techniques they used most often were the least effective.
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This is no ones fault, but it is everyones responsibility to x. Repeating the patterns of the past will only sustain poor performance. Executives cannot and will not wait for IT to get into the game. This rest of this section, therefore, looks at areas where new rules are needed to raise the benets of technology to the enterprise.
CIOs need to improve their game when it comes to the customer experience and growth
CIOs know they need to tend to current operations. Knowing where to focus hunting and harvesting efforts, however, is an open-ended question. According to CIOs in the survey, hunting and harvesting activities need to concentrate on the customer experience and nding growth opportunities. The gure below shows CIO rankings of eight drivers of organizational innovation. The percentages reect the number of times CIOs ranked each driver No. 1 or No. 2.
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Business process change emerges as the primary means of delivering results in these areas. Eightyfour percent of CIOs see the role of business processes increasing over the next ve years, but the nature of that importance is changing. Mobile, big data and social technologies all create new judgment task types of work that do more than push information through a workow or process. These factors are changing the nature of operations and value creation. Thus, in many ways, business processes have become an enabler just like generic IT. The process is no longer an end in itself but a means to unlock growth and customer experience opportunities. In the future, CIOs indicate that business process skills will be more contextual, and applied rather than generic. CIOs should, therefore, consider building domain capability in sales, marketing, supply chain, etc., instead of discipline competency in general skills. Multiquip, a midsize manufacturer and distributor of construction equipment, illustrates the power of applying mobile technology and analytics to harvest new business opportunities. Case Study
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Case Study
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Percentage of respondents
CIOs who make the labor market work for them, rather than just accepting what it offers, work in two very different types of IT shops. Midsize IT organizations (500 to 1,000 people) account for a disproportionate part of this group. They adopt new rules that push the limits of traditional HR and IT HR, going against the grain as follows: Building IT from within instead of hiring IT talent away from other IT organizations Paying above-average salaries to attract and recognize key IT personnel Limiting the use of offshore outsourcing Recruiting people from the business at a slightly higher pay rate Having a dedicated IT HR organization rather than relying on common HR services
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CIOs report that their enterprise HR organizations are not particularly effective in supporting ITs resource needs across all levels of IT labor market effectiveness. They see the main reasons as HRs lack of expertise in the specialized IT skill market and frequent denial of ITs authority to do its own hiring. With the IT labor market so complex, adopting new practices is the only alternative for CIOs. In 2013, Gartner Executive Programs plans to publish a detailed report on the need for, and nature of, IT labor market reform. To summarize, IT organizations planning to actively hunt for digital opportunities and harvest operational results both possible only via transformation require a continuous ow of IT skills and resources. Rather than treating this as an HR challenge, CIOs who use the IT labor market most effectively do not separate IT skills from business results; on the contrary, they see the two as integrally linked. The case study on ADP illustrates how IT skills can play a major role in creating new products and services. Case Study
The reorganization has also changed incentive structures and leadership practices. Critical measures that include revenue generation, protability and client retention have replaced the key project criteria of former times: being on schedule and on budget. There was a time when the business could have a terrible year and IT still got great bonuses, says Capone. That didnt make sense to me. We needed to be tied to the business and our clients, so that our success is their success. He adds that this required ADP to change its IT talent-sourcing strategy. Theres a huge talent war going on, continues Capone, so weve gotten more exible and creative with our compensation models. The company as a whole has adopted a more equity-based compensation structure, even below the VP level (yet above a certain salary), in part to compete with startups. Meanwhile, leveraging collaboration technologies has created agile and very talented product and IT development teams comprising geographically dispersed professionals. Capone had shifted the focus of his own talent searches from B2B knowledge to B2C experience and skills. Our traditional audience has always consisted of practitioners such as payroll managers, he says. Now we increasingly communicate directly with the employees of our clients, and they demand a very consumerized experience. From Capones perspective, perhaps the biggest benet of merging IT and product development has been the ability to use data and predictive analytics to see across the enterprise. The analytics help sell new products, according to Capone; while clients value their own data, they increasingly want to benchmark themselves against others. Capone measures his organization on how successful it is at driving positive outcomes for the rest of the business. Dont start with how much money or how many people you need, he cautions other CIOs. Start with a dialogue with the business about their desired outcomes. Then gure out how to get there, and measure yourself on that. Based on an interview with, and material from, Mike Capone, CIO and corporate vice president product development, ADP, September 2012. (See an expanded version of this case study on the Executive Programs website.)
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Without new approaches, ITs role remains static and less strategically relevant
The need for new approaches reects ITs changing role in a digital world. CIOs who have not accepted a new world for IT see the next three years largely as a repeat of the last three in terms of ITs role and leadership. The gure below summarizes how all CIOs expect ITs enterprise role to change over the next three years.
Only a third of CIOs see ITs role outside IT changing over the next three years
Participation increasing Business strategy formulation Business strategy execution Digital business and digital channels Business innovation Product or service design and development Business process analysis and management Enterprise change execution Enterprise program and project management Mergers and acquisitions Postmerger integration No change in participation Participation decreasing Does not apply Leadership role Last 3 Next 3 years years 14% 19% 18% 22% 14% 28% 26% 41% 8% 18% 26% 34% 32% 41% 25% 44% 38% 51% 12% 24%
41% 38% 29% 41% 35% 36% 29% 27% 18% 15%
54% 56% 50% 52% 52% 56% 62% 66% 47% 46%
3% 5% 8% 5% 6% 7% 8% 6% 6% 9%
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With about half of survey respondents indicating no change in ITs role, CIOs risk painting themselves and their IT organizations into a stable but subtly less relevant corner. Accepting the stability of ITs current role reects a view of CIOs as tending to their own responsibilities and working within their own authority. Without change, CIOs cannot hope to gain the funding or skills to contribute to digital strategies. Breaking out of this role into greater involvement with the enterprise means adding hunting and harvesting behaviors to IT. The gure opposite and the other gures in this section identify growth opportunities in business innovation, strategy execution and business process management. These are the areas where CIOs should concentrate on acquiring new tools and skills. CIOs need to nd a new role in strategy formulation, mainly because peers view IT as a means of execution as opposed to a source of strategic value. Adopting new tools and setting aside old rules admittedly require uncomfortable changes, but these should nevertheless set the tone for the 2013 CIO Agenda. The reports nal section takes a comprehensive look at that agenda, recognizing that CIOs not only need to adopt new techniques, strategies and plans, but also must change or abandon other areas of interest to tend, hunt and harvest in a digital world.
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The CIO agenda outlines the challenges for 2013 and the actions required for success. CIOs foresee a nite set of tasks that dene what they do new, undo, redo and choose not to do. These actions, and decisions not to act, reect the need to establish a new nancial, organizational and enterprise rationale for information technology.
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The enterprise goes 100% with laptop and mobile computing 8% 38% 17% 37%
All critical applications and operations are sourced via the cloud 3% 25% 27% 45%
Already there
By 2016
By 2020
According to CIOs, IT has come a long way: Almost a third of CIOs work in enterprises where IT is no longer treated as a cost center, with a majority expected by 2016. Consumerization and mobility continue to drive IT change: 46% of enterprises expect to go 100% mobile/laptop by 2016. These changes, however, will not happen on their own; they require CIOs to address fundamental strategic, funding and skill issues.
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The 2013 CIO Agenda must deal with three interlocking issues: IT strategy, funding and skills
ITs digital aspirations demand that ITs current realities be addressed. IT has emerged from a decade of managing cost, risk, security, quality of service, etc. The digital world facing CIOs in 2013, however, is radically different than the one they have known for the last 10 years. Actually, 2013 harks back to 1997, inasmuch as the broad-scale adoption of digital technologies presents many of the same challenges as the adoption of the Internet. Now, as then, CIOs and IT leaders confront a changing technology model that entails corresponding changes in IT strategy, funding and skills. Again, as shown in the gure below, these are interlocking issues that require a coordinated response to convince the enterprise and the IT organization that the future needs to be different from the past.
Strategy
Funding
Skills
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The new agenda that CIOs need for the age of digital business goes beyond tending to current concerns and embraces the following principles: E xpand the strategic digital roles of the CIO and IT to establish new sources of relevance in a world where marketing, sales and the customer experience garner more investment and innovation, as well as attrition. Increasing ITs digital strategic relevance establishes the rationale for more IT funding (if its not strategic, why expect a budget increase?). nvest in digital IT by recapitalizing IT budgets that have been optimized to provide stable operations I at the lowest possible cost. A decade of doing more with less gives the enterprise more of the same IT at a time when it needs to be digitally different. Increased funding in support of strategic digital projects redenes the context for IT skills and capabilities. B uild a digital IT organization by creating a cadre of new IT professionals, since a lack of skills is a CIOs Achilles heel, limiting the IT capacity and quality essential to digital results. Moreover, without the right skills, CIOs cannot deliver on strategic objectives or generate a return on increased IT investments. Despite condence in their ability to execute against business strategies and priorities, CIOs recognize that the role of IT must change in response to a changing world. This is the reason for extending ITs role beyond tending to todays operations, to hunting for digital innovations and harvesting current value to produce additional results.
Tending, hunting and harvesting represent an expanded role for IT in the digital world
ITs role in a digital world is broader than its past role of tending to current operations and applications and realizing only a fraction of technologys potential for the enterprise. CIOs who hope to extend ITs role in the digital world, however, must add new roles and behaviors. While CIOs must hunt and harvest in the future, they still must tend to current concerns. This is where changing and expanding business and IT leadership practices and tools come in. CIOs recognize that they must set aside old tools and adopt new rules. They cannot simply add more items to the agenda; there is not enough IT capacity to start new things without stopping others. All this sets the context for presenting the 2013 CIO Agenda not just as a set of recommendations, but as an integrated approach dening do new, undo, redo and dont do elements. The gure on page 50 describes each element its goals, requirements and actions.
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A comprehensive CIO agenda describes leadership in terms of a range of actions and goals
Action Do new Goals and context Innovation rests in what you do new. Leaders exploit new digital technologies, creating the capabilities needed to meet growth and efficiency demands a digital edge. Efficiency comes from what you undo. Digital value will come from new connections in processes, structures and roles. Leadership requirements Adopting new business and technology practices driven by digital performance. Leadership actions Doing new things results in the innovation required to become a digital enterprise across your business model, products, services, customers and operations. Undoing the past is not a failure; rather, it recognizes change. Liberate resources trapped in legacy operations and assets, and reapply them toward growth and results. Redoing strategies, practices and metrics refreshes IT and reinvigorates its value potential. Recognize that new realities demand new leadership to drive excellence. Choose where to invest and how to implement. Dont dos must reflect the business strategy decided collaboratively, communicated broadly and integrated into governance.
Undo
Undoing historical and legacy commitments to create new business models in IT and the business.
Redo
Effectiveness rests in what you redo. Every business practice, solution and strategy requires revision and extension. Without both, ability becomes fragility and failure. Secure success by what you choose to not do. Success rarely lasts when you follow the pack, blindly apply best practices, attend to false signals or surf dead-end trends.
Redoing and upgrading practices and tools for the digital world to extend current strengths into the future.
Dont do
Stopping the use of practices that are no longer effective, liberating resources, time and attention for new challenges. (Do not assume that tomorrow you will need everything you have now.)
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Undo
Undo the CIOs and ITs passive role in strategic planning (tend). Undo overly conservative approaches to risk management and the use of risk to stifle innovation and experimentation (tend). Use information and analytics to re-establish ITs relevance with front-office organizations (harvest). Reduce administrative barriers to accessing enterprise information across digital solutions (tend). Increase ITs direct exposure to customers to build contextual awareness and success stories (harvest). Dont assume that IT cannot change the status quo (tend). Dont accept that implementation, operations and management are ITs only roles in digital strategy execution (tend).
Undo technical silos in the IT organization (which limit flexibility) in favor of more-fluid project assignments (harvest).
Redo
Establish technology and Redo technology business and innovation as board-level investment cases to account for issues outside of the IT audit the top line and customer committee (hunt). impact (harvest). Base IT investment priorities and Re-engineer IT processes and practices to minimize timeschedules on time-to-market to-market (harvest). rather than resource availability Redefine the relationship with (hunt). HR to better account for unique IT jobs and skills (tend). Dont equate tending, hunting and harvesting roles with run/grow/transform budgeting (tend). Dont lose sight of current operations, costs and quality, as they are the foundation for relevance (tend). Dont assume that meeting digital technology requirements is as simple as reprioritizing IT projects and priorities (tend).
Dont do
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CIO success requires working with an expanded and integrated set of tools. Tending, hunting and harvesting reect the range of IT activities and investments required to deliver on business priorities. CIOs must integrate these activities into an expanded view of the IT organization. The gure below illustrates the integration of these roles with IT investment plans based on the run/grow/transform framework.
Grow
Investments required in support of demands for increased operational capacity (servers, storage, devices, etc.); these activities maintain and enhance systems that support future quality of service, capacity and compliance needs.
Transform
The resources and funding involved in changing the operational performance profile of IT; virtualization, application consolidation, standardization, etc., reflect transformation activities that raise technical performance.
Conducting the transformation program, marshaling associated resources, securing funding and building the business case; these are the resources and activities that change business processes and applications, and raise business performance.
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Gartner Executive Programs research supports CIOs in their tending, hunting and harvesting activities. To provide additional support for the 2013 CIO Agenda, the gure below organizes certain existing Executive Programs reports into these three categories.
Gartner Executive Programs reports that support tending, hunting and harvesting
How to tend Managing Strategic Partnerships (June 2011) CIO Power Politics (Special Report 2011) Sustainable Enterprise Change (February 2012) Determining the Right Level of IT Operational Spending (October 2012) New Skills for the New IT (November 2011) The Customer Experience Is the Next Competitive Frontier (Late November 2012) Optimizing IT Assets: Is Cloud Computing the Answer? (February 2011) How to hunt Digitalizing the Business (April 2012) Business Model Innovation: Unleashing Digital Value Everywhere (July 2012) Masters of Innovation: What CIOs Can Learn From the Worlds Best Innovators (May 2011) The Game Changes in the Front Office (March 2012) Unlocking the Power of a Great Marketing-IT Relationship (August 2012) Selling Innovation to Senior Executives (November 2012) CIO Ambitions: Breaking Through the Silicon Ceiling (September 2012) How to harvest Capturing Business Value From Mass-Market Mobile Technologies (July/August 2011) Benefits Realization: The Gift That Keeps On Giving (September 2011) Restructuring Your Application Portfolio (May/June 2012) Business Capability Modeling Brings Clarity and Insight to Strategy and Execution (December 2012) Building the IT Brand: Impacting the Front Office and Beyond (October 2011)
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54
55
Leading in an Environment of Tighter Security and Increasing Risk Adaptive Sourcing Models
Closing the Strategy Gap by Integrating Risk and Performance Management Post-Consumer IT
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Weighted CIO IT budget changes incorporate the size of the budget into the figure. Unweighted CIO IT budget changes are the average of each company regardless of budget size.
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Weighted CIO IT budget changes incorporate the size of the budget into the figure. Unweighted CIO IT budget changes are the average of each company regardless of budget size.
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44%
35%
21%
15%
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FURtheR ReadiNg
Core research
Aron. D., Does Your Business Need a Chief Digital Officer? G00238298, 20 September 2012 Aron, D. and Raskino, M., A Comparison of the CEO and CIO Surveys Finds CIOs Must Elevate Their Focus, G00230121, 21 March 2012 Howard, C. et al., The Nexus of Forces: Social, Mobile, Cloud and Information, G00234840, 14 June 2012 McGee, K., Meeting the Information Needs of Enterprise Executives in 2023, G00239549, 12 November 2012 Prentice, S., The Future of the Internet: Understanding and Using the Trilemma Construct for Scenario Planning, G00234521, 13 August 2012 Raskino, M. and Lopez, J., CEO Survey 2012: The Year of Living Hesitantly, G00230141, 21 March 2012 Raskino, M. and Mahoney, J., CIO New Years Resolutions, 2013, G00246796, 11 December 2012 Van Decker, J., Top 10 Findings From Gartners Financial Executives International CFO Technology Study, G00234215, 16 May 2012
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FURtheR ReaDING
Books
Bradley, A. and McDonald, M., The Social Organization: How to Use Social Media to Tap the Collective Genius of Customers and Employees, Cambridge, MA: Harvard Business Review Press, 2011 Brynjolffson, E. and McAfee, A., Race Against the Machine: How the Digital Revolution Is Accelerating Innovation, Driving Productivity, and Irreversibly Transforming Employment and the Economy, Kindle Edition, Seattle, WA: Amazon Digital Services, 2011 McDonald, M. and Rowsell-Jones, A., The Digital Edge: Exploiting Information and Technology for Business Advantage, Gartner eBooks, 2012 Waller, G., Hallenbeck, G. and Rubenstruck, K., The CIO Edge: Seven Leadership Skills You Need to Drive Results, Cambridge, MA: Harvard Business Review Press, 2010
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January 2013
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