The last two decades have not been kind to the CIO. Short in tenure but long in frustration, an entire generation of CIO’s is now looking forward to retirement and the golf course.
There is a sea change though in the way we are beginning to think about information technology in the modern corporation though, and it revolves around the epiphany of organizational value.
What we’re just beginning to understand, or at least acknowledge, is that information technology is not strategic to all organizations. Nicholas Carr pointed this out, wrongly in my opinion, several years ago, but he did have a germ of an idea which has merit.
We all like to think that information technology enables the modern corporation, and without it, many businesses simply wouldn’t be able to function. I tried to make that argument to a CEO early in my career, and he reminded me that the facility manager also had as important role because the company couldn’t work if the toilets didn’t function, or there wasn’t heat in the building.
I didn’t buy the analogy at the time, as I was young and foolish, and IT was the center of my universe, but later, when I had been a CEO myself, I saw IT as yet another function within the organization, and no more, or less important than the facilities department.
Since then I’ve done a lot of thinking about the role of the CIO, and IT in the modern corporation, and I’ve come to some more comprehensive conclusions.
First, and most obvious; every organization is different. It has different goals, different maturity level, different complexity, values, strategy and products or services. It should come as not surprise that in these different organizations there different emphasis put on specific functions.
Some companies are know as “product companies” others as “marketing companies”, others a blend of many specific functions. IT, therefore, has a different role to play in most companies.
In both my research and anecdotally, I’ve found that information technology falls into one of four categories in most companies. These can be defined broadly as:
Core Strategic
These companies are driven by IT. It is intertwined intimately with their core strategy and may even be their product. Here the CIO reports to the CEO and they are joined tightly at the hip.
This category of organization is extremely small: 10% to 15% of all companies fall into this realm. It is the pinnacle of achievement for a CIO. They are the rock stars of our profession.
Trusted Supplier
Here IT is key to the business, but it is not seen as strategic. The CIO reports to the CFO and is seen as a key member of the management team. The company does not see information technology as the principal driver in its business, but it does understand that IT can provide a competitive advantage by lowering costs, improving customer focus or providing some differentiation in the marketplace.
The possibility exists for some small portion of these IT organizations to make the leap to core strategic, but only a very small number will.
It’s here where I believe we see the highest CIO turnover, because either the CIO or the organization feels a tension between where the IT organization performs, and where they want it to be.
I suspect that a number of CIO’s feel frustrated because they see their organization as core strategic, but the rest of the organization feels it is a trusted supplier. I would estimate that 50% of all companies fall into this category.
Utility
Here the IT organization is tasked with closing the books, getting out the invoices, running the factory floor and keeping the mail servers running.
These CIO’s, if they carry the title, and many will not, definitely report to the CFO, and many times they will be a director of IT rather than a VP level position. While seen as providing value, they are not considered part of the senior management team, and are generally seen as a “cost center” within the organization.
I’d estimate that about 40% of IT organization fit into this category.
The focus here is mostly infrastructure and some basic core processes. These organizations are the most likely to be outsourced, but with the right leader can move up the scale to trusted supplier but it will take a lot of effort and a tremendous amount of focus.
Emerging
Smaller companies really don’t fit into any of the major categories, so they really must be evaluated with a different yardstick.
They may have characteristics of several of the more mature organizations and they may move along the continuum in either direction depending on the growth of the company itself.
In general we would say they are “in transition” and should be judged based on where the organization itself goes. Emerging IT organizations tend to be in smaller companies, and even if their role is core strategic the skills necessary to succeed in the arena are different than those in a larger core strategic organization. Conversely, the ambiguity and velocity of the emerging companies requires a very specific skill set in the entire IT organization
Understanding where your organization fits is the first step in better alignment with the organization. Once you know where you fit, you can decide it it’s possible or even desirable to try to move up the scale.
It’s better to accept the situation for what it is than to try to move an IT organization into a role where it doesn’t really fit. It may be possible to move the organization, but it will be a long and difficult process, and you should be certain that the overall organization is ready to accept the new role.
Daniel Gingras has been CIO of five major companies and is a partner at Tatum Partners, a nationwide professional services organization of senior-level technology and financial executives who take on leadership roles for client companies. He has more than 30 years of IT experience and teaches computer science at Boston University. He can be reached at [email protected].