IT Insights for the C-Suite 

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GREAT EXPECTATIONS

The “Great Recession” has clearly had a major impact on corporations. Shrinking markets have compelled cost reduction programs in an effort to maintain profits. AlixPartners’ research indicates that the phenomenon of reduced consumer spending—and its vast implications, given that 70% of GDP is driven by consumer spending—may be the “new normal” economy. Across industries, executive management is looking to do more with less. And this results-oriented drive for efficiency and value extends to C-suite expectations of the Information Technology (IT) organization and the Chief Information Officer (CIO).

During the past 18 months, through a combination of one-on-one interviews and surveys, we have polled nearly 80 top executives from medium and large global corporations across industries. We discovered that the C-suite expects a lot more from the IT organization, particularly in three key areas (figure 1).

PROACTIVE EXECUTIVE BUSINESS LEADERSHIP

Buzz words are popping up such as Chief Integration Officer, or Chief Innovation Officer, but the reality is that most progressive CEOs are expecting their CIOs to be proactive and to actually help shape the business strategy. The CEO of a multi-billion dollar global services company told us that he had his CIO plan and facilitate their annual strategic planning off-site. This is the most extreme example of the trend that is taking place: The CIO as an executive leader among their peers.

Our interviews revealed that CEOs and CFOs realize that the IT organization is uniquely positioned to understand the end-to-end functioning of the business. More and more, they expect their CIO to capitalize on this unique position and to use it, together with an understanding of the competitive landscape, to be a strong player in the development of the business strategy. Asking the business leaders what they wanted was an acceptable tack for IT before the “Great Recession.” Now, leading companies expect IT to help lead the way.

Time and again we heard from top executives who are now expecting their CIOs to be very proactive leaders, not just in IT, but in the business in general. In the words of the CFO of a global automotive supplier: “Our largest investments in the coming year are focused on IT, and we clearly expect our CIO to be helping our executive team understand how to leverage these investments to grow our top line.”

FASTER DELIVERY OF VALUE

A critical demand that top executives had of their IT organizations was that they deliver projects much faster, and with more immediate impact on the bottom line. When asked whether they had been able to use IT to help reduce business costs during the recession, the nearly unanimous answer was “no.” Across all of the companies, the speed with which the businesses had to shed cost precluded IT from contributing to the effort. “IT just couldn’t react fast enough to help us with rapid cost reduction,” said the CFO of a $4 billion industrial products manufacturer.

Going forward, many companies are counting on IT to be able to rapidly deliver systems enhancements and new applications to help grow their top line as well as continue to reduce costs – and expect IT to help deliver the benefits. One new CIO of a $5 billion global high-tech manufacturer found the company had just “invested” $400 million over a four-year period in a new ERP system, but had no benefits tracking and no executive who was responsible for doing so. This is unacceptable in the “new normal” economy; IT is expected to take the lead in helping ensure that the positive EBIT impact of any IT investment is tracked and realized.

While the other functional and business unit executives are obviously responsible for making the related process and business changes in their areas needed to deliver the bottom line impact of the new systems, the CIO must drive the implementation process and track the value realization. The CIO is in the best position to have a view of the costs and benefits of IT investments, and to enforce the realization of the IT business value. In our conversations, CEOs repeatedly said that they expect the CIO to proactively take this responsibility of tracking and highlighting any shortfall in achieving the planned EBIT improvements of IT investments.

FOCUS ON BUSINESS DECISION SUPPORT

The third common thread through the surveys and interviews was a push to mine the existing systems for valuable business information rather than focus on implementing new, big systems such as ERP. Many companies have invested tens of millions of dollars and more in large systems implementations—and they are still struggling to realize the value of those investments. While “business intelligence,” “executive information,” and “decision support” systems have been talked about in IT for decades, the executive suite now seems to be demanding delivery on those promises.

CFO after CFO described how they have the backbone transaction processing systems in place that were generating millions of pieces of data, but they need IT to help them determine how to use the data to make the key business decisions. And they are expecting the IT organization to come to the business with the analytical solutions. The CEO of a regional grocery chain said, “We have all the data we need to make pricing decisions – we now need IT to work with our merchandisers to buy or develop the analytical tools to turn that data into specific pricing guidance…on a weekly basis.”

Analysis and optimization of customer and product profitability, the manufacturing footprint, the distribution network, SG&A expenses, R&D investments are all areas in which CEOs are counting on IT to help mine the existing databases.

CONCLUSION

The “new normal” economic reality has pushed the C-suite to expect the IT organization in general, and the CIO in particular, to be much more proactive. CIOs are expected to act as executive-level leaders and to bring ideas for IT-enabled change to the business, to deliver IT solutions faster than ever to realize the business value of those investments, and to develop the analytical tools needed to turn the mass of existing data into a real-time business decision aid.

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