Top Three Playbook Ideas for CIOs: An interview with Professor Lynda M. Applegate of the Harvard Business School

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Preface: Per IBM’s 2015 C-Suite study, “…CxOs believe technology and market factors are by far the biggest of the various external forces buffeting their organizations. CEOs put technology at the top of the list, as they have for the past four years. But now, for the first time ever, the other members of the C-suite also see technology as the main game-changer.” [1] This Q&A is part of a series that secures ideas (of C-Suite leaders and professors) on innovative Business/IT solutions which have the potential to be deployed across a variety of different industries for positive change.

Q. With Fortune’s recent Most Admired Company publication having the three “A’s” (Apple, Alphabet, and Amazon) ranked at the top of their annual survey[2], have we now seen a fundamental shift in corporate dominance to those firms which prioritize technology as the number one strategic driver for their future prospects?

A. While it was interesting to see that approximately 72% of the responding Fortune 500 CEOs would agree with the assertion, “These days, I consider my company to be a technology company”[3], it doesn’t mean that technology is the be all and end all. Rather, ideas, which are grounded in practical technology offerings, can take advantage of today’s very unique business conditions and help position a company for success.

Q. Why is today so unique? After all, I read a quote in a book chapter you wrote by Jack Welch, GE’s CEO at the time, which stated, “…At the beginning of the decade we saw two challenges ahead of us, one external and one internal. Externally, we faced a world economy that would be characterized by slower growth, with stronger global competitors going after a smaller piece of the pie. Internally, our challenge was even bigger. We had to find a way to combine the power, resources, and reach of a large company with the hunger, agility, spirit, and fire of a small one.” Respectfully, these assertions sound similar to many of today’s CEOs’ comments during shareholder presentations…and this quote was from 1988! So one might wonder if today’s business challenges and solutions are quite similar to the past; it’s just a different lens on them.

A. While there might be some merit with the push back around similar market challenges, today’s business conditions are changing at a much faster speed and today’s technologies offer some unique solutions that we could have only dreamed of from the 1980s through the early 2000s. For example, along with several other HBS professors, I was teaching in GE’s leadership development programs during the 1980s shortly after Jack Welch became CEO. At the time, he was attempting to transform a company whose best practices were eventually memorialized in a number of HBS case studies. Similarly, when a group of IBM executives came to HBS’s campus in the early 1990s, I collaborated with them as they strategized on options for IBM’s turnaround. While both companies had disciplined business planning and processes, executives at the time had to spend significant time and effort on manually collating the data and information needed to analyze and make decisions—and by the time they reviewed the data, it was often out of date.

With the progressive advances in technology—for example, internet, cloud, and Big Data/Predictive Analytics—and the standardization and automation of operating and management processes, real-time, actionable information is now available and can be shared throughout an organization and with customers, partners, suppliers and other external parties to enable companies like Amazon, Apple and Alphabet to realize Jack Welch’s vision of decades ago and become large, global companies that remain entrepreneurial..

Q. Given that their fellow C-Suite officers will be asking them how to capitalize on these market conditions, what are the top three playbook ideas that you have for CIOs?

A. First, translate these exciting technical possibilities into business opportunities. These opportunities might be focused on expanding market opportunities to reach customers and deliver solutions that meet compelling market needs. The opportunities can also be focused on dramatically improving operating processes inside an organization or across organization boundaries, lowering costs while also improving performance.  Finally, these opportunities can empower individuals and teams to make decisions and innovate more rapidly while also ensuring that executives understand the impact of those decisions and innovations on overall corporate performance.  In doing so, focus on designing the kind of “big-small” companies envisioned by business leaders decades before. As CIOs work with fellow C-Suite officers to analyze and pursue opportunities—I caution them to become adept at using the approaches we have learned in launching entrepreneurial ventures. These approaches demand that investors and entrepreneurs understand how to develop hypothesis-based plans and forecasts that: identify the strategic and operating assumptions that drive cash flow forecasts and the level of uncertainty in those assumptions. When feasible, they can also apply lean start-up principles to develop “Minimal Viable Products,” test assumptions as they implement, and pivot based on what they are learning.  Savvy investors may commit to fund a more risky project but they stage the investments based on what they are learning as they implement and test hypotheses.  Finally, savvy investors often invest in a portfolio of potential solutions to a large, compelling opportunity so that they can divert resources—both talent and dollars—to the most promising solutions. This enables them to “kill projects—not people” as they pursue potentially breakthrough, yet risky, innovations. CIOs are in the best position to lead these types of technology-enabled breakthroughs, while also leading the strategic and incremental innovations that enable breakthroughs to transition to high growth.

Second, I always encourage CIOs to work with their fellow C-Suite officers to develop shared goals for the big opportunities that they are pursuing and then to identify the sequence and timing of projects and initiatives that can help them achieve those goals. While many CIOs are justifiably focused on helping to address current business needs, in today’s fast-paced business environment, they must also demonstrate a vision for the long-term as well. For instance, many C-Suite executives, including the CIO, develop plans for long-term strategic goals but then fail to link those long-term goals to the metrics and milestones that they are using to measure performance on projects and to incent individuals and teams for the work they perform as they sell current products, serve current customers, and execute current operations. Today’s C-Suite executives must do both—they must stabilize and defend their core businesses and execute with discipline today while also leading the breakthrough innovations needed to transform the industry and their organizations.

Finally, while it has been interesting to see a number of Fortune 500 C-Suite officers depart for “entrepreneurial” roles at start-ups; they should first consider opportunities within their own organizations. Many times when we hear the word, “entrepreneur”, we imagine the brave individual who forgoes a career in a Fortune 500 company to pursue a new and potentially risky venture. Still, as research has shown, such personality traits don’t define just those entrepreneurs that launch independent ventures.  Rather entrepreneurial skills, capabilities and mindsets must become embedded in all 21st Century leadership roles, including those leaders in large, established organizations. As a C-Suite executive, it’s up to CIOs to help build a culture and the “talent machine” needed to grow these future entrepreneurial leaders, which in turn can help the company capitalize on these exciting market conditions.

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Professor Lynda M. Applegate is the Sarofim-Rock Professor of Business Administration at HBS and Chair of the HBS Executive Education Portfolio for Business Owners & Entrepreneurs, which includes the school’s flagship Owner President Management (OPM) program, its Launching New Ventures and Private Equity/Venture Capital programs, and its newly launched Global Immersions for Business Owners. Since joining the HBS faculty in the 1980s, she has held a variety of leadership positions, including serving as the head of the Entrepreneurial Management Unit, Co-Chair of the MBA program, Chair of Field Based Learning and as a member of the HBS Technology Board and Academic Technology Advisory Board. She has also held a number of Harvard University leadership positions, including serving as the Co-Chair of the Harvard Policy Group on Networked Government Services and on the on the Harvard University Technology Advisory Board.

Professor Applegate’s current research and recent publications focus on the challenges of building new ventures and leading radical business innovation in the face of significant industry, technological, capital market, and regulatory turbulence.  She is the Series Editor for Harvard Business Publishing’s newly launched Core Readings in Entrepreneurship and is the author of over 40 articles, books, and book chapters, and over 350 published case studies, online learning DVDs, and course materials. She is the recipient of numerous HBS awards for her research, teaching, and service to the school. Most recently, she was awarded the Robert F. Greenhill award for her outstanding contributions to HBS over the course of her career.

Finally, Professor Applegate has served on the Board of Trustees of the Massachusetts Technology Leadership Council, as a member of the Industry Advisory Board for NASDAQ, and on the US Federal Governments’ Executive Council for Information Management and Technology. Lynda has also served as a policy advisor on a Blue-Ribbon Panel to define a National Research Agenda on the development of the Network Economy and as a member of a roundtable panel for President Clinton’s Commission on Critical Infrastructure Protection.

 

[1] IBM Redefining Boundaries: Insights from the Global C-Suite Study (5,247 business leaders from 21 industries in more than 70 countries),  http://www-01.ibm.com/common/ssi/cgi-bin/ssialias?subtype=XB&infotype=PM&htmlfid=GBE03695USEN&attachment=GBE03695USEN.PDF, November 2015

[2] Fortune ranked Apple, Alphabet (Google) and Amazon as the top three, respectively, most admired companies: http://fortune.com/worlds-most-admired-companies/

[3] Fortune, Editor’s Desk, page 14, June 15th, 2015

Associate Partner, IBM Global Enterprise Transformation

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