The Big Four areas of innovation (Social, Cloud, Mobile, and Big Data) have generated much discussion about their transformative and disruptive nature. As I’ve described in a recent post, the future enterprise is a Digital Enterprise. In the last two months, I’ve been involved in several forums where the discussion centered on the future of Enterprise IT, and more specifically, the changing role of the CIO. While there are no clear answers, there are a lot of opinions and much speculation.
I’ve been on the side of this argument that believes significant change is coming to Enterprise IT – and for that matter – current organization structures. The big four have created an environment that can’t flourish in traditional command and control models. In a recent IBM CEO Study, CEOs emphasized the need for openness and collaboration. Openness has clear benefits, as empowered employees drive better results by generating ideas, bringing creativity to the innovation process, and delighting customers. But as the study points out, openness comes with risk. The open culture required for success will drive companies to align employee and company values in a way that encourages value-driven decision making – not control-driven. What this translates to in terms of organization design is anyone’s guess – but organizational change is coming to the Digital Enterprise.
In this recent article by Larry Tieman, he describes why the role of the CIO is in jeopardy. In so doing, he underscores the broader organizational change that awaits us. Mr. Tieman points to several key market forces behind these inevitable changes. The article uses the challenges facing Best Buy as the first piece of the argument. Best Buy’s business model faces disruption the same way Circuit City and other electronics retailers did. Bottom Line: You can buy what Best Buy sells online. But that’s a small piece of the story. It’s the underlying dynamics enabled by the big four that drives this phenomena. The information available to customers online is a lot more accurate than a retailer’s sales associates, and it’s available in their pocket. Think of the implications to the way we staff our call centers or retail stores – among other things.
Mr. Tieman describes one possible view of the future retail business model: smaller stores selling products that customers want to see and touch and must be sold by experts. In other words, what they sell in their stores and who they employ will have to change – and expertise and related sales skills are critical success factors. I described this scenario in a recent post titled “When Innovations Collide”.
The article provides a bike shop example to neatly describe the Retail value proposition: what the bike shop has that can’t be purchased cheaper online is the expertise of the cyclists selling the bikes and the expertise of the mechanics maintaining them. To go further, the author describes the ease at which he replaced his refrigerator’s ice maker himself. He Googled the topic and found numerous YouTube videos on the subject. He did research on the manufacturer’s website to determine what icemaker model to buy, and the rest is a refrigerator repairman’s worst nightmare: a lost service call and the markup on parts. So does the bike mechanic suffer the same fate? Is this what expert service providers can expect in the future? We can begin to see the disrupting influence that the online distribution of information has, and the potential disintermediation of expertise. This seemingly simple dynamic has the potential to drive considerable disruption.
This brings us back to the role of the CIO. Mr. Tieman feels certain that Enterprise IT will be a smaller, more externally focused, higher-expertise IT organization. For many reasons, I agree with this broad assessment. He believes as I do that most of the infrastructure and operational expertise will be outsourced. I firmly believe that the relationship between business knowledge and technology will grow more critical over time. Forrester refers to this phenomenon as “Business Technology”. Combine this with an era of disruption that is bigger than anything we’ve seen before – and the role of the CIO is destined to change. The belief held by Mr. Tieman that the role of the CIO will be gone or significantly diminished in the nest five years is supported by all of the factors described by the author, as well as so many other dynamics driven by this perfect storm of innovation.
Mr. Tieman mentions the increasingly discussed notion that the CIO role moves to a more strategic role, sometimes referred to as Chief Innovation Officer – I’ve heard the same dialog and met some existing Innovation officers. I agree with his assessment that the transition of existing CIOs to this new role is not likely. CIOs that are already positioned as a liaison to the business, or accepted as a strategic partner and innovation driver may assume the role. More than likely, a fresh perspective and the aforementioned need for business knowledge will drive this role to another executive.
The next five years will be transformative for Enterprise IT. The number of CIOs is likely to decrease as stated in the article. Management shakeups will define Enterprise IT for the coming two decades. These changes will vary across industry – but just like disruption has made no industry safe – the same can be said for Enterprise IT.
I’ll close with a direct quote from the article:
“In most businesses, the CEO or CFO will start asking why, if cloud computing is so cost beneficial, their companies aren’t doing it. And if someone else starts managing your company’s infrastructure and its key software is now provided and managed as a service by someone else, those execs will ask why the company needs a CIO and that expensive IT organization”.