Peter Hinssen: The rise of the business-minded CIO

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Peter Hinssen, Author and lecturer,London Business School

Peter Hinssen,
Author and lecturer,London Business School

In “The New Normal” you write that IT departments aren’t equipped to respond to the new digital world of social, cloud and mobile. What’s the challenge?

Chief information officers have been on quite a roller coaster ride for the last 15 years. There was the meteoric rise to 2000 when the world was just becoming digital with the dot-com boom and the explosion of the Internet. CIOs were actually becoming powerful figures. That totally changed when the dot-com bubble popped. Many of those CIOs had a catastrophic fall in their importance within companies. Now, many IT departments are still filled with people who have the skills of the digital past, but not those necessary for the future. That’s why many IT departments can’t deal with what is happening in digital.

What skills are they lacking?

I ask the CIOs I work with to make two lists. One focuses on what they absolutely have to do, but that they won’t score points for. On that list I see things like infrastructure, e-mail, mobility, enterprise resource planning, etc. It’s a very long list, but it won’t wow anyone and, in fact, all they can do is screw those things up. The other list addresses what’s going on in the whole digital space, such as social, analytics and big data. When I ask how many people inside the IT department can tackle those things, they almost always answer, “Virtually none.”

So it’s a legacy issue? Or is there something structurally wrong in IT departments?

I think the role of the CIO has never really fulfilled its promise. In many cases, early-era electronic data processing departments reported to CFOs and then became independent IT departments. The people who ran those departments were there to facilitate the introduction of new technology, but rarely led the transformation of business models, products or services. During the dot-com boom, CIOs became full members of the management team. But after the bust they retreated and many were placed under the control of a COO or CFO. What you’re seeing now is that many CIOs who were burned in the first crash aren’t able to staff up or respond to the really cool things happening in the digital space. Instead that sort of talent is being hired into or developed by marketing or other places in the organization. It’s really odd. We’re now living in a world where technology is more relevant than ever and yet the role of traditional technologists is being challenged. The next generation of CIOs is a completely different breed that’s capable of thinking in terms of business propositions. But it’s still quite rare.

How can CIOs who still work closely with finance better manage that relationship?

A great number of CIOs still report to CFOs and you would expect those two roles to get along swimmingly, but often they don’t. There is relatively little knowledge of technology in finance departments and very little knowledge of finance in IT. To bridge that divide, we’re seeing the creation of new and expanded roles. In some companies CIOs report to a newly expanded chief operations officer who is charged with improving outcomes beyond just the quarterly focus of the CFO. Others, such as P&G, have created a chief business services officer, which allows core business functions like IT, facilities, finance and even HR to be combined and encourages a more radical operational transformation.

Is there any CIO that you’d point to as doing an especially good job?

One of my favorites is Mike McNamara. He’s the CIO of UK-retailer Tesco. He actually started, the online supermarket. He took it from zero to 3 billion pounds a year—that’s $4 billion or $5 billion. When he was asked to become CIO two years ago, he didn’t want to because he was running a business that seemed much more exciting. But then he decided to take the role with the pledge that he would take what he had learned online to thoroughly transform the offline shopping experience. That’s what he’s been doing. CIOs traditionally spend more time on implementation than innovation. Mike does the opposite. He’s a next-generation CIO who is willing to take risks and to assume the role of a business leader inside his company. That makes him one of the most crucial people inside Tesco. He’s driving change. Next-generation CIOs can no longer just be a chief technical officer that implements technology. People like Mike actually take on the digital role and assume a business transformational capacity.

How should smart CIOs develop their skills and teams?

CIOs must assume the role of facilitator of intelligence and knowledge-creation while disseminating that information to everyone in the enterprise who needs it. Intelligence is now the core asset of an organization. And you can see that in what is the hottest profession out there—data science. Everybody and their dog believe it’s the next big thing. But you don’t often see CIOs or IT departments attracting these people. Instead, the departments closest to the customers are the ones that insist they need a data-science group. I think that’s a missed opportunity for CIOs. They should be working very closely with data scientists and with other parts of the business to stay relevant.

Who is the most important ally in a company for a CIO to have?

As I said, for a long time there was that historical relationship between the CIO and the CFO because the majority of data being processed in companies was financial. Now, the majority of the information being processed and analyzed is market-driven and consumer-driven data that helps companies react to what’s going on in the social space, for example. So if you’re a CIO who wants to do things differently, who wants to position yourself as transforming the business, you need to have a good partnership with the CMO.

Any advice on making that partnership work?

The connection between marketers and IT professionals is probably one of the weakest links inside organizations. They’ve almost never touched or had normal connections until now, when they find themselves having to work together. To succeed, they’re going to have to start bridging the distinct cultures of IT and marketing. One strategy I’ve seen is to split the IT department between a more traditional CTO-type and a CMO. Everything that is back office and infrastructure goes to the CTO who reports to the chief operating officer or a CFO. But everything that is market-driven reports to the CMO. For the next generation of organizations, this isn’t as much of a problem. They’re not locked into traditional structures the way larger or older companies are. Instead, they have small, multidisciplinary teams that practice fast-paced, agile development. And I think that’s what you need to do inside larger organizations, too. Just trying to bridge the gaps between silos won’t work. It’s too costly and too painful. You need to blend those cultures by taking people out of their domains and getting them to work together. I think proximity is going to be much more beneficial to have a really good working relationship between disciplines.

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