CIOs are in a bind. For at least a decade they’ve been declared “chief innovation officers” and charged with championing and introducing game-changing technologies to their companies. This has gone well. When it comes to activities such as the management of infrastructure, process automation, and the establishment of architectures that mix client- and cloud-based systems, innovation has been the result. Cloud-first and mobile-first approaches have also served CIOs well, leading to new IT processes and delivery systems.
But when it comes to business models, products, back-office processes, and the customer experience, CIOs are often on the sidelines. Part of this stems from the nature of their work. IDC surveys suggest that CIOs still spend a great deal of time keeping the proverbial lights on, making sure applications run smoothly, and that support teams are hitting their SLAs. Another part stems from the reality that innovation is distributed across the organization and is not in the hands of any one person or team. And finally, part of it arises from equating the role of the CIO (or CTO or CDO) and the regular process of “adding new things” to IT systems with true innovation.
Take customer experience management as an example. Setting up and maintaining the needed IT back-end requires considerable effort and novel approaches. Data collection and storage must be efficient and integrated across multiple channels. Hybrid architectures and a cohesive set of APIs must be in place to enable real-time analytics and predictive algorithms that can respond to customer needs. Innovation in service is then driven by marketing or a dedicated CXM leader and team. They are the ones that test and decide how best to use mobile apps and websites, when to present loyalty benefits and special offers, what needs to be done to optimize any given touchpoint, and which types of products and services to introduce or eliminate.
Business first — not cloud first
The new reality was summarized neatly by a CIO at the Czech branch of a major European bank. He told IDC: “My job is to create a foundation upon which business and product managers can create, experiment with, and develop new services for our customers.” To do so, he of course had to innovate. In addition to running the bank’s systems on a cloud-based platform (compete with self-provisioning and chargeback), he put developers and software administrators at the service of line-of-business managers to enable the business side to define their needs, processes, and goals in terms of software and services. He also used agile management techniques and DevOps collaboration to create product- and project-focused teams with cross-functional ownership to ensure better results.
Still, the market for IT services and cloud-based services suggests that many LoBs are not turning to their CIOs as innovation partners. For instance, global spending on SaaS is forecast to be more than twice as much as on IaaS and PaaS combined in 2017 — and much of that spending will be done directly by LoBs, sometime without the CIO’s knowledge. CEE is less developed, and the numbers are not yet as definitive. But the writing is on the wall. For instance, the market for business-related services is only a quarter the size of the market for IT-related services. But it is growing faster. And the SaaS market is already 88% larger than the combined IaaS and PaaS markets.
Poland-based IDC Senior Research Manager Ewa Zborowska explains it this way: “Many global suppliers of cloud-based solutions or off-the-shelf IT services have yet to effectively tailor their solutions to Central and Eastern Europe.” She says that the scale of their operations requires them to standaradize offerings as much as possible — and that pricing can be a problem. The US or Western European pricing models are often too high for CEE users. “But local developers and partners are rushing in to fill the gaps at the time global players like Salesforce and ABS continue to pump information into the market,” says Zborowska. “The net effect will be to continue to make it easier for line-of-business managers to make decisions on the applications and tools they need more or less on their own.”
Empowering business leaders
From extensive and ongoing conversations with CIOs, LoB managers, and IT suppliers, we’ve identified five overlapping reasons why CIOs should loosen their grip on the reins of IT power while increasing dialogue cross-functionally. The underlying theme is that CIO-LoB partnerships that distribute IT decision-making and use dialogue and idea exchange are the most effective way to drive innovation.
1. LoB managers are often more aware of the types of IT solutions they need than are IT leaders
The history of IT developing business tools is packed with misguided and sometimes disastrous attempts of IT developers (both internally and externally) to create usable business solutions. About ten years ago at a global advisory firm, a core group of consultants spent months asking for a set of tools to manage and automate customer relationships. After the CIO’s development team essentially went behind closed doors and then delivered something unusable, the LoB leaders (each responsible for a P&L center) shared budgets and built a more effective solution themselves. CIOs aiming to foster company-wide innovation can avoid such pitfalls by working with LoB units and listening closely to the research they have done into off-the-shelf solutions. And both sides need to adopt agile business practices, where experimentation is encouraged and failure (and the killing of IT projects) is an expected part of the process.
2. Cloud makes IT easier for LoBs
The commodification and modularization of technology through cloud and IT services means building a solution is no longer necessary to handle tasks common across industries. Returning to the CRM example from above, highly customizable CRM solutions such as SalesForce, Insightly, Velocify (for phone- and email-based sales), and SalesFusion (for B2B marketing) are available through the and include scores of functional options. Of course, IT should be involved with implementation to ensure compatibility with internal systems and security. Then IT should take a step back for a while, as it is through use that people innovate around any given solution. IT team members and LoBs must then hold regular meetings to offer their respective views on potential new uses.
3. ITS and cloud-based providers know this
Leading ITS providers are increasingly focusing outreach on lines of business. They peddle solutions that appear to be off the shelf but require a fair bit of implementation, customization, and training support, as well as ready-made applications and cloud-based solutions. In both cases, however, they have tailored their messaging, making it industry and function specific. Perhaps more important, they eschew technical details and focus on ease of use, ROI, and scalability. Given the competition, the marketing material must do more than foster sales and solve problems. It must also inspire users to think about new ways to approach their work. For back-office administration, sales and marketing, finance and accounting, supply chain management, procurement, logistics, and HR, the CIO’s absence from the process — and all the caveats and restrictions they may introduce — can prove immensely helpful to spurring innovation. In many cases, marketing material inspires LoBs to suggest functions and user interfaces to solutions built in house.
4. Innovation happens on the front lines
If we have learned anything from Japanese manufacturing, it is that those doing the heavy lifting on the assembly line are often the ones with the best ideas for making things work better. We have also learned that small ideas and micro innovations can add up, improving products, increasing efficiency, and sometimes leading to outsized results. Take Big Data as a case in point. The CIO will need to oversee setup of a Hadoop environment. But it will be the HR director, product manager, supply-chain managers, and financial teams that will standardize the data and ask the questions that lead to new processes, products, and business models. Having said that, CIOs can be of tremendous value by dedicating more of their time and their team to business (rather than IT) challenges.
5. Line-of-business leaders care about KPIs, not architecture
On a project many years ago, I knew enough about how IT works to appreciate that the web developer and programmer I was working with had created a truly elegant technical solution to a set of interactive tools. Unfortunately, it did not quite do what I needed it to do. An earlier solution, while clunkier in terms of the programming and the way the database would be connected to the online user interface, was better from the user and for me. The same applies to LoBs pretty much across the board. While many are interested in learning about the technology underlying any given solution, their main concern is delivering on their KPIs.
CIO as innovation partner
Relinquishing control is a time-honored way to be a better leader. And it can be done safely. There are plenty of IT tools and techniques that support safe and efficient management of traditional hardware and software infrastructure.
For working cross functionally, CIOs can employ the same agile techniques they use to empower their staff. Recognizing that marketing, sales, HR, finance, operations, and procurement are increasingly tech savvy is the first step to providing wide boundaries in terms of IT use and potential implementations. LoBs will (and need to) make mistakes to learn the possibilities and limits of solutions. And they need to be listened to — and understood — with their ideas given careful consideration. This will often require CIOs to leave their IT comfort zones and look deeper into the business.
The resulting trust will foster stronger cross-functional partnerships and dialectics that will generate ideas and solutions neither side could come up with on their own, and make driving innovation that much more rewarding.
Ewa Zborowska, IDC Senior Research Manager, contributed significantly to the structure and substance of this article.