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Issue of June 2004 

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CIOs join elite strategists club

With growing operational and strategic importance of IT, the role of the CIO is undergoing a transformation. Here's how CIOs are embracing change to become successful strategists. by Sandeep Ajgaonkar

For most corporations, the CIO or IT Director has been the most recent addition to the senior management team. But while it may be the latest, the role of the CIO designate is fast gaining significance and is evolving too.

Even as the business relevance of IT (both operationally and strategically) has grown, the role of the CIO has undergone a drastic transformation. No longer is a CIO perceived as a backroom technologist involved in managing the finer aspects of IT implementation. The CIO now shares the table of corporate governance with senior management, and shares the all-important task of evolving strategies that would drive the business.

Indeed, the CIO has become a business strategist.

Facets of transformation

With the rapid pace of technology advancement, the CIO must continually refresh his knowledge and fine-tune skills in order to remain effective. Add to this the CIO's evolving role, and the need to focus on management soft-skills like leadership, communication and strategic planning at the executive level.

Nobody said it would be easy.

In fact they say: "Every transformation is painful and involves a lot of relearning."

Infrastructure Strategies 2004 captures the facets of this transformation and on how CIOs are upgrading their skills to stay tuned with the changing dynamics of management.

Technologist at the core

The CIO has always been a technologist at the core. Of the 250 CIOs surveyed, nearly 81 percent had worked in the IT department prior to taking the mantel of the CIO. The other areas in which the CIOs had functional experience are in Administration (34 percent) and Consulting (24 percent).

While there is no ideal qualification or functional experience that can be specified for a CIO, a brief stint in other departments—besides IT—like Finance, Marketing and Strategic planning will help him understand the processes associated with these departments.

Business process is key

Understanding of business processes plays a key role in the transformation process, and Indian CIOs are tuned-in on this. 75 percent of the total respondents stress the importance of understanding of business processes and operations as an integral part of the CIO skill set.

This is closely followed by Effective communication (73 percent) and Strategic thinking and planning (69 percent). In his role as a business strategist, the CIO will have to develop new relationships with senior decision makers in the organization. He also needs to harness IT to maximize corporate competitiveness and growth.

While CIOs still stress the importance of technology expertise (thorough knowledge of technology options at 64 percent, and Technical proficiency at 63 percent), they have realized the significance of management, communication and strategy skills.

Reporting structure

While understanding of business processes plays a key role in the evolution of CIO as a strategist, the reporting structure needs to accommodate the change. For being a successful strategist, a CIO needs to have direct access to the CEO or Managing Director (MD). This would help him understand the business focus and then tune his IT strategy to achieve these objectives.

Sometime back the CIO used to report to the CFO or the COO. But this reporting structuring is undergoing a change. Now, more CIOs report directly to the CEO or MD. As per the survey over 45 percent of the respondents report directly to the CEO or MD. Another 16 percent of CIOs report directly to Corporate or Group CIO, who in turn reports to the CEO.

Only 13 percent report to the CFO and 3 percent to the COO.

Career move

While the evolution of the CIO from a technologist to a business strategist is underway, the question is, Where does this transformation lead to? If one goes by the survey, CIOs while thinking about IT strategy and business objectives still have their feet firmly fixed on the ground. They realize that understanding business processes is not equivalent to managing the business itself—an area that requires totally different skill sets.

Most of them (37 percent) plan to continue in their existing role as a CIO while about 38 percent plan to move on to become the group CIO (if such a post exists).

Research Snapshots
  • The CIO is a technologist at the core. Nearly 81 percent of those surveyed have worked in the IT department prior to taking the mantel of the CIO. The other areas in which the CIOs had functional experience are in Administration (34 percent) and Consulting (24 percent).
  • CIOs acknowledge the importance of understanding business processes and learning management soft-skills. Technology expertise plays second-fiddle to these areas.
  • The top three skill sets necessary to be a successful CIO are Understand business processes (75 percent), Effective communication (73 percent) and Strategic thinking and planning (69 percent).
  • Most CIOs (over 45 percent) report to the CEO. A majority feel they share the best working relationship with the same.
  • Frequent technological changes and lack of key staff/skill set retention are the biggest hurdles faced by CIOs.

'The skill sets of a CIO have been redefined'

The role of the CIO is evolving as more functions in business become dependent on IT. Sanjay Govil, Director - IT, GIS, Cartography & CIO, Eicher Group, says becoming a CIO should not be the end of the road.

What skill sets are necessary to become a successful CIO?

The first thing that strikes the mind is good business acumen. Next is an in-depth understanding of technology and technical trends. Finally, in today's changing world, good leadership skills are extremely important. These are the three most important skills that an individual needs to acquire to be a successful CIO in an organization.

Leading teams, internally marketing IT projects to the board, motivating the team and interacting with vendors requires a great amount of leadership skills. Over time, the role of a CIO has been elevated to that of the management cadre. Therefore, the CIO is expected to appreciate the business issues and add value to them. Earlier, CIOs reported to other authorities and were insulated from business processes. That's one reason why CIOs are now asked to demonstrate good leadership skills. Secondly, Information Technology has now moved out of the back office to the front office. That's the biggest change since the days when computers were hidden somewhere in the organization, and were confined to just accounting/finance purposes. Now that IT is in the open, the skill set of a CIO has been redefined accordingly.

How much exposure to the business's functional areas is required before assuming the role of a CIO? Can you specify the functional areas that a CIO should be familiar with?

Honestly, it would be unfair to expect a CIO to know the various functional areas of an organization completely. I believe that a sound understanding of business processes is critical. It is important for a CIO to understand the end-to-end business processes of an organization, from interaction with the business partners to processes within the company that lead to the final product or service. At the same time, understanding customer issues is also imperative for IT heads to function efficiently.

Traditionally it was felt that a CIO should have in-depth knowledge of the financial process, but that is not true any more. Today a CIO is expected to have an equally good knowledge of operations, finance, customer processes etc. Therefore, as patterns increasingly seem to suggest, an understanding of the customers is coming into focus. In certain areas, IT can have a greater impact than anything else. Those are the areas a CIO should concentrate on.

The question here is whether or not the CIO should have the same level of knowledge of the functional areas as the respective functional heads. I don't believe so. We keep talking about CIOs having a good understanding of business needs of an organization. I say that in today's world there is an equally compelling need for the functional heads to understand the IT processes, and how they can improve the business processes to give them a competitive advantage.

What hurdles does a CIO face? Are they purely technical in nature or do business issues also come into the picture?

Technology is now becoming easier everyday and is more or less being used as a commodity. Therefore the technology issues are slowly diminishing as problem areas. The real challenges come from software issues. These, I believe, are the issues relating to change management, which will continue to occupy the maximum time and energy of a CIO. The second most important issue is the talent management in any organization. If you are to manage IT, particularly in India, the demand far exceeds supply. In such a scenario your ability to manage talent is crucial. It starts right from acquiring the right talent to grooming, training and retaining it.

Thus, change management, talent management and internal marketing are the topmost challenges posed to a CIO. These days more technology is outsourced, leaving little to worry about. That brings us to another area of concern: managing technology partners and maintaining a healthy relationship with them. Selecting a right partner itself is a challenge.

Last but not least, influencing the core management to pass IT initiatives that you want to take in the interest of the organization. Educating the top management about the role of IT in an organization can be tough.

Who do you believe a CIO should report to?

There is no dilemma here. A CIO should always report to the CEO of his organization. Whom shall a CFO report to? Whom shall an HR head report to? It's same as asking whom should a CIO report to? He too is a functional head in the company, so he should also report to the CEO. The reason is very simple. At the end of the day, the CEO has an overall perspective of where he wants to take the business. The functional heads are created to align to that direction. If the CIO reports to any other functional head, it dilutes and diminishes the value of the term 'CIO.'

If we look at history, IT originated from the accounts department as EDP or MIS. That is what most benefited from the automation process. However, IT has now entered the front office and the IT department has to serve not only the finance department but also the other departments equally well. That can only happen if the CIO is reporting to the CEO.

A lot of companies are moving in that direction. You will observe that IT has made a significant difference in organizations where CIOs report directly to the CEO. The CFO, to whom many of the CIOs report, has a particular focus, and then the CIO also becomes aligned to that focus—which can prove dangerous in the long run.

Does a CIO's growth path lead to assuming a top role like becoming a CEO? Or is the highest position that can be reached be that of a group CIO?

I think a CIO, like any other functional head or a senior management executive in a company, definitely would aspire to take the number one slot. Whether he really should depends on the person's capability, business acumen and leadership qualities. This branding is actually very damaging. We can ask whether a CFO is fit to become the CEO? If a CIO has got it in him, then why can't he become the CEO?

At the end of the day, we are still conservative. Nevertheless, if you look around, things are changing, particularly in certain industry segments. Before Compaq merged with HP, the Compaq CEO was a CIO of an organization. Therefore, it's a challenge for a CIO to become a CEO, but not completely impossible. As a CIO you are a part of the race. You have a major handicap at the start, but accept it and move on.

'CIO has to be more attuned to the business'

What's the career path like for a CIO? In rare cases, the CIO has become the CEO. Becoming group CIO of a large enterprise itself is a big achievement, and many CIOs aim for that. Sanjay Rawal, General Manager IT, GlaxoSmithKline (GSK), tells Rahul Neelmani what skill sets a CIO needs to aim for the top.

What are the skill sets necessary to become a successful CIO?

Today the role of a CIO is undergoing tremendous change. The CIO has to be more attuned to the business. He has to be not just well-versed with technology but also have a sound understanding of the business. In the past few years, there has been a great shift in how we perceive the role of IT. Instead of being driven by IT, projects are now driven by business needs.

Apart from that, the two major skills a CIO should possess are leadership and project management skills to be able to lead and manage large projects. A good understanding of the latest technologies should also be an integral part. It may not be too in-depth, but at least he should be aware of the changing technology and its proper usage. Knowledge of technologies like CRM, SCM, SRM, business intelligence is handy in today's competitive world. Beyond that, the core role of a CIO is overall management.

How much exposure to the business's functional areas is required before assuming the role of a CIO? Can you specify the functional areas that are essential for a CIO to be familiar with?

Knowledge of functional areas varies from industry to industry. To be more specific, the prime areas the CIO should know well are: Supply Chain, Sales and Marketing and Customer Relationship. If a CIO has done a number of projects in these areas, it is obvious he'd have picked up sufficient knowledge about them. This is why we are seeing another interesting trend: companies appoint CIOs from functional areas such as Supply Chain, Marketing & Sales etc. It all depends on the vision of an organization and where IT fits in that vision.

To be specific about GSK, IT is taken very seriously amongst all the functional areas of businesses. But at some places, IT is still considered just a supporting area, which is not healthy.

What hurdles does a CIO face? Are they purely technical in nature or do business issues also come into the picture?

The hurdles are a combination of various things including technical snags and business issues. The biggest hurdle currently is to get the required IT budgets. The other area where we have to work hard (although it's not really a hurdle), is achieving the Return on Investment (ROI). It also alters the way IT works in many ways. One has to attain higher goals with a small amount of money. It is not as easy as it looks.

Who should a CIO report to?

Again, this varies in different organizations. It depends on how much value IT has been able to create for a particular organization—whether the organization sees it just as a strategic enabler or as a key factor to make a difference. Even today, you'll find IT reporting to Finance.

A lot depends on the kind of finance person you report to. Does he have the vision to take IT and business forward? Does he have some knowledge of IT? The existing relationship between IT and business also matters. Ideally speaking, the CIO should report to the CEO. The CIO is expected to bridge the gap between IT and business. The business rarely understands technology, so the CIO has to play the role of a catalyst. This can be done well if the CIO reports to CEO, who has a clear vision of where he wants his business to be.

Does a CIO's growth path lead to assuming a top role like becoming a CEO? Or is the highest position that of a group CIO?

In a few cases the CIO has become a CEO, but it is the exception rather than the rule. Normally, it is the marketing or the financial heads that get the post. This trend is more prominent in IT organizations. But becoming group CIO of a large enterprise itself is a big achievement, and most CIO's aim for that. Increasingly now, CIOs are being made to assume the role of other functional departments like Supply Chain, Marketing etc. This should broaden the scope of the CIO.

In the past, the CIO has grown in a purely technical atmosphere. With the changing environment, business people are also becoming CIOs of companies. Even so, a CIO is still seen as a technical person, and unless a CIO can prove his business acumen, the road ahead is rough.

NM Suggests
  • The role of a CIO needs to change from a backroom technician to that of a business strategist. Many CIOs are already undergoing that phase of evolution.
  • A CIO needs to have a brief stint in functional areas besides IT. This would help him understand the nuances associated with these departments.
  • The key to becoming a successful strategist is the understanding of business processes and learning management soft-skills (like effective communication, strategic thinking and planning).
  • The organizational reporting structure has to change to sync with the CIO transformation. The CIO should report directly to the CEO.
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