[MCKinsey] The CIO challenge: Modern business needs a new kind of tech leader

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On this subject here is an article about Change and the CIO: As technology becomes increasingly important, an organization’s success depends on whether the CIO can move from being a functional to a strategic business leader.

“There’s no worse time than now to be an average CIO.” These words, uttered by an executive at a recent conference, neatly capture the intense pressure on CIOs. For years, executives have stressed the need for CIOs to move beyond simply managing IT to leveraging technology to create value for the business. This priority is now a requirement. New technologies have been at the center of trends—from mobile-first consumer shopping preferences to the promise of artificial intelligence in critical decision making—that have reshaped the competitive landscape and disrupted business models. For this reason, companies need to be tech forward: technology needs to drive the business.

Three vectors of a holistic transformation

Before understanding the responsibilities of the new CIO, it’s important to understand the nature of tech transformations themselves. In most cases we’ve observed, tech transformations are implemented as a set of disjointed initiatives across IT. That leads promising developments to stall out or underdeliver. We have found that a tech transformation must be holistic to deliver full business value. Creating powerful customer experiences, for example, requires a data architecture to track and make sense of customer behavior. Architecting modular platforms needs revamped approaches to hiring in order to get top-flight engineers.

This reality requires a CIO to first come to terms with the scope of the transformation itself. In our experience, it’s been helpful to think about it along three vectors:

  1. Reimagine the role of technology in the organization. This vector includes establishing the role of technology as a business and innovation partner to design a tech-forward business strategy (for example, tech-enabled products and business models), integrate tech management across organizational silos, and deliver excellent user experiences.
  2. Reinvent technology delivery. IT needs to change how it functions by embracing agile; improving IT services with next-generation capabilities such as end-to-end automation, platform as a service, and cloud; building small teams around top engineers; and developing flexible tech partnerships.
  3. Future-proof the foundation. To keep pace with rapid technological advancements, organizations need to implement a flexible architecture supported by modular platforms, enable data ubiquity, and protect systems through advanced cybersecurity.

Five traits of a transformative CIO

For IT to become a driver of value, the transformative CIO also needs a new set of skills and capabilities that embody a more expansive role. In working on tech transformations with hundreds of CIOs, we have identified five CIO traits that we believe are markers of success.

1. Business leader

To help technology generate business value, the transformative CIO has to understand business strategy. Findings from our 2018 IT strategy survey reveal that companies with top IT organizations are much more likely than others to have the CIO very involved with shaping the business strategy and agenda, and strong performance on core IT tasks enables faster progress against a company’s digital goals. CIOs who can make this leap tend to take the following actions.

Learn the business inside and out

The scope of an IT transformation means that CIOs must be prepared to interact with the business in different ways. We have found, for example, that the best CIOs go far beyond meeting with the C-suite or attending strategy meetings. They invest time with functional and business-unit leaders and managers to gain an in-depth understanding of business realities on the ground and go out of their way to develop a nuanced and detailed understanding of customer issues. CIOs do this by continually reviewing customer-satisfaction reports, regularly monitoring customer-care calls, and participating in user forums to hear direct feedback.

As one large financial institution set out to build its digital products, the business and technology teams jointly led user listening and feedback panels early and often throughout the development process. Both technology and business leaders made it a priority to attend these panel discussions so that they could effectively guide their teams on developing products that would best address the needs of end customers. The CIO of a B2B technology-services company, meanwhile, meets customers on a regular basis to get firsthand feedback on both products and the customer’s experience of doing business with the company. He uses these perspectives to inform his technology decisions.

Take responsibility for initiatives that generate revenue

CIOs can further develop business acumen by taking responsibility for initiatives that generate business impact, such as building an e-commerce business, or by working with a business-unit leader to launch a digital product and then measure success by business-impact key performance indicators (KPIs), not technology KPIs. Such efforts allow CIOs to build a deep understanding of the business implications of technology, such as customer abandonment because of slow download times on a site or other poor user experiences.

As part of a digital transformation, for instance, the CIO at a large financial institution committed to developing digital products to help the business scale its presence in a new market. While the CIO already understood how to build systems to support financial products, he and his team had limited experience in creating new digital products to sell directly to consumers. So the team created a program built on rapid test-and-learn cycles to identify what mattered to customers and meet those needs. Subordinating tech decisions to customer needs was crucial in allowing the CIO and his team to develop a digital offering that succeeded where it mattered: with consumers.

Get on boards

Developing a deeper well of business knowledge often requires CIOs to extend their networks beyond the organization. One of the best ways to do that is by joining the board of another company. A third of the boards of companies within the Fortune 500 today include a former CIO or CTO, and that number continues to increase.1

2. Change agent

A full technology transformation is not about moving to the cloud or embracing new IT solutions. It also involves infusing technology into every strategy discussion and process throughout the organization. Driving a transformation around the three vectors we laid out earlier (reimagining the role of technology, reinventing technology delivery, and future-proofing the foundation) starts with a CIO mind-set that both acknowledges the need for transformative change and commits to a multiyear journey.

Partner with business leaders

Generating support for a transformation among business leaders across the organization requires creating true partnering relationships with them based on common goals, mutual responsibility, and accountability. According to a McKinsey survey on business technology, in fact, the companies in which IT plays a partner role in digital initiatives are further along in both implementation and achieving business impact.

To kick-start the transformation journey, the CIO of a transportation-and-logistics company made it her first priority to meet with every single business leader to understand their goals and issues and to set expectations on how they could best work together, by clarifying, for example, what the business side could expect to get from IT in a consultant role versus IT as a service provider or partner. This effort to understand what mattered to each leader established trust, and from each of these discussions it became clear that the business wanted a true partnership with technology and understood what it meant. The CIO further built on the relationship with the business by prioritizing initiatives in the tech transformation that addressed business needs and working closely with business leaders to drive progress. This active collaboration ensured that the products and services IT developed were adopted.

Articulate the ‘why’

Gaining support for a transformation requires that stakeholders understand that true change will come only from tackling all three transformation vectors in a strategic, interlinked manner. That means not just explaining how this three-pronged approach is better for IT but also clarifying how it drives business goals and how it can be implemented. When considering a shift to cloud, for example, executives tend to understand it first as a cost-saving opportunity. But in helping executives understand the full range of cloud benefits—improved speed to market, better developer productivity, and improved resiliency and disaster recovery—CIOs can help them see how the cloud can unlock new revenue models and services tied to business priorities.

Have an integrated plan that highlights risks and dependencies beyond IT

Large IT initiatives have always required detailed planning, but business-oriented CIOs ensure that transformation plans account for dependencies outside of IT, such as marketing campaigns or legal implications. They approach planning as a dynamic process rather than something static, which allows transformation teams to better remove roadblocks and to allocate people and spend when and where they are needed. To actively manage this process, such CIOs also put in place a “war room,” a dedicated team that ensures transformation initiatives are delivering value by actively tracking progress and helping to break through root-cause issues.

This was the approach taken in a large global retailer’s digital and technology transformation. The CIO set up a transformation war-room team that worked jointly from the beginning with leaders outside the IT function, including marketing, operations, sales, and e-commerce. Together, they created detailed work plans. This detailed early planning revealed which systems needed to be upgraded and when. The war-room team actively tracked progress and quickly escalated issues for speedy resolution. The results were clear: a fivefold jump in digital sales, and project delivery four times faster than projects of similar scope had previously taken.

3. Talent scout

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