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KEEP CHALLENGING July 2016
Being Digital: How and Why CIOs in Europe Are Reinventing Themselves for a New Age
IT leaders at European businesses believe they should play a key role in digital transformation; first, however, they must shift to a new set of truths and ‘givens‘ and transform themselves in ways revealed by our latest study.
KEEP CHALLENGING July 2016
3BEING DIGITAL
Executive Summary
Like their peers throughout the world, CEOs in Europe appear to be stepping up to guide their organizations from 20th century industrial structures to more extensible and fluid digital businesses. In many cases, these business leaders are looking to chief information officers (CIOs) to deliver on the digital mandate — or at least coordinate disparate digital efforts across the enterprise. This trend spells opportunity for European CIOs, who can use this critical juncture to move out of a “cost center” or “chief problem-fixer” role and into a strategic leadership position in the organization.
In early 2016, we surveyed 289 European CIOs and IT leaders in the banking, retail, manufacturing and insurance industries to understand how their roles are evolving in today’s digital environment (see Methodology, page 20). Our results show that many “givens” and assumptions about the CIO’s role are no longer true, such as running IT reactively as a service organization; developing an IT strategy only in alignment with the business strategy ; making it the biggest priority to fix IT complexity and harmonize the IT landscape; addressing IT skill and capacity issues mainly based on defining core capabilities vs. what can be outsourced.
In their place, new truths have emerged. Study respondents believe, in fact, that in the next few years, CIO compensation and performance will increasingly be evaluated based on digital business outcomes. To move toward this digitally defined future, CIOs need to understand and even determine the meaning of digital transformationfor their enterprise and then redefine themselves as digital leaders. Other key findings include:
• European CIOs are up for the digital challenge, with two-thirds saying that digital success requires a hands-on approach to translating the vast possibilities into tangible business results. Currently, fewer than one-third of respondents are leading their organization’s digital efforts, but we
believe that percentage will increase, as long as CIOs expand their current work styles and skill sets in a digital direction.
• To be seen as a digital leader, CIOs need to nurture strong partnerships with the C-suite. Nearly three-quarters of respondents named C-suite collaboration as a key to digital success. CIOs must also turn to a broad ecosystem of partners to keep up with innovation demands.
• Winning CIOs must also act as digital strategists (73%) and transformational leaders (74%), according to respondents. This requires developing the skills to identify digital opportunities, articulate the vision for digital change and mobilize the commitment to excel.
• Digital leadership requires the ability to understand and execute on next-gen IT. Already, more than two-thirds of respondents embrace next-gen IT capabilities, such as the “Uber-ization” of enterprise IT.
• CIOs need to recruit, nurture and retain digital talent, emphasizing not just technical but also creative, social and business skills. In addition to hiring people with “polymath” skills, CIOs should also adopt this mindset for themselves. Over two-thirds of respondents said a key element of success for digital transformation is the CIO’s ability to actively collaborate with talent acquisition teams to acquire needed skills.
While the list might seem daunting for many CIOs, especially those accustomed to highly regulated and traditional environments, the change will be worth it. As one respondent from the banking industry said, “Digitalization is no longer an option today. It’s a must-have in your system if you do not want to risk your company being left behind.”
European businesses — both the old-guard and new — are engulfed in the digital wave sweeping the rest of the world. Not only are businesses in Germany, Switzerland, UK, Netherlands, Sweden and beyond facing disruptive threats imposed by digitally adept competitors, but they also need to respond to tech-savvy customers and partners who increasingly expect organizations to offer the experiences made possible by digital technologies and mentalities. The mandate: Use digital to enable new business models, improve operational agility, develop innovative products and services, and deliver a more personalized and engaging customer experience.
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What ‘Digital Transformation’ Means
No matter the industry, “being digital” goes beyond developing a few mobile apps, launching a Web portal or moving a system or application to the cloud. Paradoxically, it is both simpler and more complex than that: It requires making digital a core element of how the company operates and seamlessly blending physical and digital components to deliver new value.
Across industries, a key driver for digital is transforming the customer experience. The customer engagement bar has been set high by digital businesses such as Facebook, Apple, Amazon, Netflix and Google (FAANG), not to mention newer disruptors such as Uber, Waze and Spotify. Such digital businesses have redefined how customers interact with each other and the business. In addition to enabling hyper-personalized products, services and experiences, fully digital companies ultimately strive to take customer centricity to a whole new level of “customer autonomy.” The end goal is to enable customers to leverage their assets and capabilities to design their own experience, even embedding the customer into previously closed processes and establishing them as a main actor in the value chain. In our study, 73% of respondents said the customer experience is largely shaped by digital technologies. (For more on “being digital” and customer autonomy, see our Cognizanti article, “Being Digital: Making Digital Real and Rewarding”.)
For truly digital companies, the digital experience doesn’t stop at the customer touchpoint but is reflected in everything the business does, including operations, processes, business models and the culture itself. The personalization, mobility and social linkages continue throughout the customer journey. Enabling this requires digital and agile approaches, including DevOps,1 design thinking and continuous innovation, to percolate from IT out to the entire organization.
The accompanying technologies and IT infrastructure supporting these activities must also become more elastic, extensible and responsive. Digital businesses optimize the latest technologies (i.e, social, mobile, analytics, cloud, Internet of Things, open APIs, “bots,” machine learning, microservices that communicate across the network to achieve a focused goal, etc.) to catalyze a new approach to automation, engagement, prediction and execution (see Figure 1). We call this new approach “next-generation IT,” and it’s a vital shift for digital enablement. (For more on microservices, see our whitepaper “Overcoming Ongoing Digital Transformational Challenges with a Microservices Architecture”.)
CIOs across Europe seem to understand the importance of next-gen IT, with more than half embracing organizational capabilities such as agile practices, social media, mobile platforms and rapid prototyping to compete in the digital age (see Figure 2, next page).
Next-Generation IT Key Differentiators
Automated IT processes Digitization of IT Dynamic end user
configuration Self-service platforms
Automation Connected enterprise Day-one user involvement Customer ecosystem Interactive analytics that drive customer insight
Engagement
Agile, not reactive End result driven Security-inherent design Transform IT from cost center to value creator
Execution
Intelligent systems management
Infrastructure on-demand Just-before-time system awareness
Prediction
Figure 1 Source: Cognizant
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Banking Manufacturing Retail Insurance
Response base for Banking = 70; Manufacturing = 72; Retail = 72; Insurance = 75
Agile capabilities
Social media
Mobile platforms
Rapid prototyping tools & techniques
Predictive analytic capabilities
Legacy IT capabilities
56%
55%
53%
51%
45%
39%
Response base: 289 European CIOs and IT leaders
Agile capabilities
Social media
Mobile platforms
Rapid prototyping tools & techniques
Predictive analytic capabilities
Legacy IT capabilities
44%
64%
58%53%
53%
47%
36%
46%
50%
49%
40%
42%
63%
50%
51%
50%
47%
41%
BY INDUSTRY
ALL RESPONDENTS
Which Organizational Capabilities Are Critical to Develop for Digital Success?
Agile capabilities
Social media
Mobile platforms
Rapid prototyping tools & techniques
Predictive analytic capabilities
Legacy IT capabilities
Germany Switzerland UK Netherlands Sweden
Response base for Germany = 83; Switzerland = 20 UK = 80; Netherlands = 63; Sweden = 43
54% 56%
58%63%
58%
51%
47%
47%
54%
39%
44% 60%
40% 57%
46%
33% 35%
70%
75%
65%
60%
51%
30%
57%
58%
51%
54%
46% 10%
48%
BY COUNTRY
Figure 2 Source: Cognizant Research Center
71%
56%
49%
52%
45%
39%
6 KEEP CHALLENGING July 2016
CIO’s compensation/bonus will be directly linked to digital business
outcomes achieved
By 2020, the CIO will be measured by the digital value of the company
By 2020, 80% of CIOs will have P&L responsibility
By 2020, consumerization of IT and the proliferation of technology and data throughout the entire
enterprise will push the CIO into a pure policy advisor role
By 2020, the CIO’s budget will be less than half of what it is today (measured
in % of revenues)
By 2020, 50% of CEOs would have moved up from the CIO position
8% 24% 42% 26%
5% 31% 37% 26%
10% 28% 37% 24%
14% 27% 29% 29%
8% 29% 23% 39%
2% 28% 52% 17%
Strongly disagree Disagree Neither agree or disagree Agree Strongly agree
The Future of the Digital CIO
The CIO Role in “Being” Digital
CIOs in Europe seem to feel ready for the challenge of leading digital transformation, with two-thirds of respondents saying that digital success is predicated on their playing a key role. Further, the majority of respondents believe that by 2020 their performance as CIO will be intricately tied to their digital value contribution (see Figure 3).
At the same time, only one-third of respondents are currently involved with leading digital transformation at their organization. In other cases, the role goes to the CEO (23%) or another C-suite executive, such as the chief digital officer, chief marketing officer or chief financial officer. For the majority of organizations, then, IT may still be viewed as a cost center, or CIOs themselves are still overly focused on keep-the-lights-on work. In either case, it’s incumbent on CIOs to do the hard work of redefining themselves in a less functional and more strategic role.
To fully benefit from the opportunity that digital transformation presents, we believe CIOs must transition away from a “service-oriented” role — intent on delighting internal customers, fulfilling requirements, solving problems and working on behalf of the CXO — to working alongside
their fellow C-suiters, in a partnership position. Further, as much as system and process integration remains an everlasting issue, CIOs need to resist the temptation of making this their top priority. The role of “chief integration officer” is a back-office function that inhibits CIOs from being an equal partner in the C-suite. Many large ERP integration programs have not achieved their objectives; however, at many companies, we still see that time and money spent on integration is crowding out investments in digital innovation. CIOs need to explore new approaches to integration such as robotic process automation (RPA) as a “workaround” to automate effort related to non-integration (i.e, dealing with hand-offs and disconnects) or the blockchain as a potential universal protocol for business integration using smart contracts (the Internet of value).2
With all that’s at stake in the digital age — threats from new competitors, the possibility of quick irrelevance and fast extinction — the CIO’s most valuable role today is to protect the business against disruption from technology companies infringing on their markets and offerings, and defining new forms of value that digital can enable, such as data monetization and new services based on connected product enhancements. By doing so, CIOs can move to the forefront of business strategy vs. being a service organization operating in the background.
Figure 3 Source: Cognizant Research Center Response base: 289 European CIOs and IT leaders Note: Percentages do not always sum to 100% due to rounding.
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Mindset Shifts
Mindset Shift 1: Form Collaborative Partnerships
To rise to the digital challenge, CIOs need to develop new skills, mindsets and workstyles. Chief among these is forming collaborative partnerships with C-level leaders (see Figure 4, next page, and Quick Take, page 11). According to our study, the most common sponsor for digital initiatives is the CEO (39%) or CFO (22%); CIOs and COOs are equally as likely to act as sponsor (19%). Taking a leadership position in the digital strategy, then, is driven by the ability to partner and collaborate with top executives rather than usurp them or simply carry out instructions.
Doing so will require skills that are very possibly new, or previously under-emphasized, for many CIOs, including: political savvy, networking and social skills, as well as more familiar areas, such as working with cross-functional teams (see Figure 5, page 10). These shifts require proactive change led by CIOs prepared to assert themselves in new ways – perhaps in ways for which past experiences and training hasn’t prepared them.
CIOs must perform a balancing act, helping to elevate the business while continuing to deliver on the traditional imperatives — managing IT efficiently and containing, if not reducing, costs. By doing so, they can earn their seat at the table alongside their fellow digital leaders.
CIOs also need to forge relationships with constituents outside the enterprise, with startups, innovators and technology partners in the broader ecosystem. With the fast pace of change — and cut-throat competition with the best and brightest in the technology world —there is simply no other way to keep up with the near constant demand for innovation. Study respondents take their role as innovator seriously, with 76% naming this as a top persona for the digital CIO. However, they cannot do it alone. The digital economy is defined by collaboration with others within or outside the industry, often using open application programming interfaces (APIs) and platforms for bolt-on innovation.
No longer should CIOs try to define their “core” IT capabilities and partner with providers to source the rest. Rather than protecting the core at all costs, they need to work with a diverse ecosystem of external partners that can jointly deliver digital capabilities and innovate faster and scale faster than their internal IT organizations can. In our study, two-thirds of respondents embrace this idea, naming the ability to build external ecosystems to jointly work on digital solutions as a key competency for the digital age.
Mindset Shift 2: Act as Digital Strategists and Transformational Leaders
In our study, respondents said a top role for CIOs is developing and contributing to the enterprise digital strategy (73%), as well as articulating a shared vision for digital and mobilizing commitment to achieving that vision (74%) (see Figure 6, page 13, and Quick Take, page 12).
To do this, CIOs need to develop curiosity about what digital can enable, and how that can be applied to their business. They need to broaden their perspective on what digital is, including a full set of activities that span data and the organization. Examples include using blockchain to establish breakthrough business models and enable real-time transactional value chains built on smart contracts;3 enriching products and services with sensors and data to enable remote services, upgrades and maintenance; using robotic process automation, or bots, to execute rote and repetitive tasks; making customers part of the value chain with tools that empower them to create their own experiences.
Digital CIOs also need to understand and explain the benefits of digital transformation and the new forms of value it can enable. For example, the data generated by connected products can be used to create new types of services, such as predictive maintenance, and trusted platforms for customer interaction can lead to new ways to evaluate corporate worth, such as reputation equity. In the digital age, entire new competencies — such as data ethics, consumer trust equations and give-to-get ratios — will rise to the fore. (For more on these constructs, read our whitepaper “The Business Value of Trust”.)
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Strongly disagree Disagree Neither agree or disagree Agree Strongly agree
5% 29% 35% 31%CIO playing a key role in digital transformation
2% 24% 42% 32%
CIO effectively collaborating with multiple CXOs since digital will play a role
in enhancing all elements of the business value chain
8% 26% 38% 28%Having clearly identified shared goals
between IT and other functional teams
8% 27% 37% 27%Actively collaborating with talent acquisition
teams to acquire the required skills
7% 23% 38% 31%Identifying the skill gaps that
impede digital transformation
8% 29% 29% 33%Understanding of costs of digital
transformation programs and realistic returns on investment
9% 27% 24% 40%Understanding the benefits of digital programs and having the metrics to
measure the success of digital initiatives
3% 23% 52% 21%Having a digital strategy that is clearly
articulated, communicated and understood
10% 25% 39% 26%Identifying the appropriate digital
technologies to deliver on business objectives
11% 25% 35% 27%Having annual planning processes that align departmental objectives with the company’s
overarching digital strategy/objectives
Digital Transformation: Keys to Success
Figure 4Source: Cognizant Research Center Response base: 289 European CIOs and IT leaders Note: Percentages do not always sum to 100% due to rounding.
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Game changers (reflect on challenges and opportunities to find the best way forward)
Networking and relationship building (actively forge partnerships internally)
Build external ecosystems with peer CIOs, partners, vendors and startups
to jointly work on digital industry solutions and standards
Socially savvy (engage with regulators, clients, media and analysts)
Innovator/co-creator (create new business models in partnership
with cross-functional teams)
Network with fellow CIOs (build peer networks with other CIOs to keep
close to the market)
CIO Competencies & Skills for the Digital Age
Strongly disagree Disagree Neither agree or disagree Agree Strongly agree
Politically savvy (push digital transformation through enterprise-wide)
Big risk takers (ability to justify their actions and investments)
Lead from the front (have solid knowledge of business and industry)
Transformation leadership (mobilize commitment, create shared
vision and work towards digital)
Figure 5Source: Cognizant Research Center Response base: 289 European CIOs and IT leaders Note: Percentages do not always sum to 100% due to rounding.
27%49%20%4%
9%
4%
2%
7%
2%
8%
10%
10%
27%
27%
26% 30% 34%
38% 24%
39% 26%
26%
33% 38% 27%
39% 28%
29% 35% 32%
26% 37% 32%
8% 21% 37% 33%
20% 26% 44%
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Additionally, CIOs need to be able to articulate the digital vision and help business leaders open their minds to the art of what’s possible. We advise CIOs to focus on only a handful of high-impact initiatives at a time and develop a compelling story around what these could accomplish. By doing so, they can both see digital in a more tangible and concrete way themselves, as well as repeat the story to others. (For more on this approach, see our white paper “The New CIO Mandate in Life Sciences”.)
Mindset Shift 3: Understand and Execute on Next-Gen IT
Clearly, the technology approaches and IT infrastructures of the past cannot support the new capabilities demanded by the digital era. As noted earlier, we recommend a next-generation IT strategy, which shifts away from a monolithic, big-system approach, to an agile, adaptive one that is made up of modular components, plug-and-play capabilities through open APIs, and easily implemented microservices and as-a-service processes and applications.
Study respondents understand the need to transition to a new approach to IT, with over half agreeing that adopting an “Uber-ized” approach to enterprise IT, next-gen app stores, as-a-service capabilities, AI and process automation are all important for digital businesses (see Figure 7, page 14): Combined with new approaches such as DevOps, agile practices and design thinking, such technologies enable CIOs to define the highest value capabilities and implement these features and functionalities very quickly with a lower effort in a more focused way.
CIOs need to move away from thinking of months and years-long project timeframes, and get more involved with focused, experimental projects, working in small, cross-functional teams. (For more on DevOps and design thinking, see our white papers “DevOps Best Practices: Combine Coding with Collaboration” and “How Design Thinking Can Power Creative Problem-Solving, Drive Change and Deliver Value”.)
Mindset Shift 4: Develop Talent, Emphasizing Polymath Skills
Not surprisingly, over two-thirds of respondents said a key element of success for digital transformation is the CIO’s ability to actively collaborate with talent acquisition teams to acquire needed skills. CIOs need to first understand the skillsets required for digital success, assess the gaps within their team, and then drive how the business seeks new types of talent rather than waiting for human resources to get involved.
Unfortunately, next-gen IT requires new types of talent that are in scarce supply. In our recent research, 94% of executives cited a moderate to severe skills gap preventing their organizations from realizing their digital future. We believe this dearth of digital-literate talent will drive more distributed work over the next three years. We also see companies starting to build proprietary platforms and driving third parties to engage in co-innovation initiatives around R&D or customer engagement.
Quick Take CIO-CMO Collaboration Is Key
Respondents named the CEO relationship as their highest priority (82%); second and third on their list were rapport with the COO (69%) and chief strategy officer (65%). However, the partnership with the CMO or other head of customer care/corporate communications is also vital, and more than half of respondents seem to realize this (53%).
A majority say that marketing is increasingly becoming digital (68%) and that the CMO actively participates in digital transformation (89%). While there is always room for improvement, CIOs and CMOs in Europe seem to enjoy a healthy collaboration, with 71% saying IT clearly understands the value the marketing team brings to digital initiatives.
Three-quarters of respondents say marketing understands the role of technology in shaping the digital customer experience, and almost two-thirds say marketing understands the importance of considering IT architecture and security needs when recommending digital solutions.
CIOs may want to consider parlaying the strength of this C-level partnership into the rest of the C-suite. Some ways to reinforce the partnership include:
• Focus on the customer experience: As CIOs and CMOs look for alignment on strategic direction, customer experience proves to be a powerful unifying goal. Once a shared vision is established, the CIO and CMO can develop a journey map, with the CIO focusing on the tech layer, and the CMO team on building the service layer. This shared focus also keeps attention on the entire digital ecosystem, rather than obsessing over particular channels and tactics.
• Identify customer-centered KPIs: Building on a shared commitment to enhanced customer experience, CIOs and CMOs can work together on creating a common set of customer-centered key performance indicators (KPI), with each respective stakeholder being held responsible for specific goals and outcomes. These metrics need to focus on a new set of experienced-based metrics, focused on service, satisfaction and outcomes rather than internal efficiency.
• Harness collaborative innovation: Shared innovation workshops can be another powerful bridge between CIOs and CMOs as they spend time shaping a shared roadmap for overall corporate success. Properly framed, and backed with high-level sponsorship and follow-up, these working sessions can lay the foundation for significant digital transformation across the enterprise and raise the bar for customer experience across multiple touchpoints.
KEEP CHALLENGING July 201612
Digital CIO Personas
For CIOs to emerge as digital leaders, they need to develop the following competencies, according to respondents:
• Digital strategist. Help develop the enterprise digital strategy, identify digital opportunities in the marketplace and develop go-to-market strategies and technologies.
• Transformational leader. Articulate the digital business vision and help align digital initiatives with business goals.
• Functional leader. Build an organization that can more effectively find, evaluate and deploy new digital technologies. To accomplish this, CIOs must reassess their organizational role.
Quick Take
13BEING DIGITAL
Understanding CIO Leadership Competencies
Strongly disagree Disagree Neither agree or disagree Agree Strongly agree
DIGITAL STRATEGIST & ENTREPRENEUR
DIGITAL TRANSFORMATIONAL LEADER
DIGITAL FUNCTIONAL LEADER
Invest in co-innovation with ecosystem partners to gain first–mover advantage on
developing new industry standards
Lead enterprise-wide digital initiatives
Manage IT process change
Align digital initiatives with business goals
Actively manage complex organizational environments
Develop monetization plans for digital products, services and data
Cultivate the CIO/CMO partnership
Encourage CIO team/staff to effectively implement digital initiatives
Study market trends/customer needs to identify digital opportunities
Articulate the vision of enterprise digital strategy and mobilize the
commitment to excel
Find, evaluate or deploy new digital technologies
Figure 6Source: Cognizant Research Center Response base: 289 European CIOs and IT leaders.Note: Percentages do not always sum to 100% due to rounding.
Develop and contribute to the enterprise digital strategy
Develop new go-to-market strategies and technologies
19%
24%
23%
27%
26%
23%
25%
28%
29%
20%
21%
326
29%
46%
51%
25%
38%
34%
54%
33%
27%
35%
37%
50%
31%
36%
32%
22%
42%
29%
30%
20%
39%
39%
31%
40%
26%
37%
29%
3%
3%
10%
6%
9%
3%
3%
6%
5%
3%
3%
5%
6%
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Next-Generation IT Adoption
Next-gen app store 7% 26% 27% 39%
Uber-ization of enterprise IT 4% 26% 49% 20%
Managed security services 4% 24% 44% 27%
Scalable & constantly ready IaaS 7% 28% 37% 28%
Leverage algorithms and scalable data management platforms 8% 33% 35% 24%
Re-platform legacy and cloud enablement 9% 28% 37% 25%
Leverage automation and AI 7% 30% 37% 26%
Robotic process automation 11% 30% 35% 24%
Future workplace 10% 28% 27% 34%
Strongly disagree Disagree Neither agree or disagree Agree Strongly agree
Figure 7 Source: Cognizant Research Center Response base: 289 European CIOs and IT leaders.Note: Percentages do not always sum to 100% due to rounding.
Analytics, algorithms, big data and automation will also automate and abolish rote tasks previously performed by humans. (For more on our research and analysis on the digital skills gap and how to overcome it, see our white paper “People – Not Just Machines – Will Power Digital Innovation”.)
The focus for new talent, however, should not just be on deep technology silos and isolated functions. Truly digital businesses are increasingly replacing isolated business
functions (finance, marketing, supply chain, IT, sales, human resources) with multi-disciplinary teams that encompass all of these functions and are organized around key strategic themes and digital customer experiences. As a result, the highest value employees will increasingly be polymaths, with a wide range of interchangeable skills and capabilities, and the sensibility to know when, where and how to apply them. (For more on the polymath concept, see the book The New Polymath: Profiles in Compound-Technology Innovations, by Vinnie Mirchandani, Wiley, 2010.)
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Education and Experience: Is There an Ideal Mix for Becoming a Digital CIO?
Figure 8Source: Cognizant Research Center Response base: 289 European CIOs and IT leaders.Note: Percentages do not always sum to 100% due to rounding.
Strongly disagree Disagree Neither agree or disagree Agree Strongly agree
EXPERIENCE
EDUCATION
Serving in various assignments across the company 7% 27% 38% 27%
Different background experience (such as consulting, business operations,
marketing and finance/accounting)9% 27% 36% 28%
Beginning career in lower position and advancing to executive positions 7% 28% 33% 31%
Business experience 5% 26% 30% 38%
Cross-industry experience 9% 26% 30% 35%
Experience in leading digital programs/digital company 2% 20% 54% 24%
Core IT education (degree/master’s degree in information, computer science,
network management)4% 23% 43% 30%
Business management education 5% 36% 36% 23%
Certification courses (in technical/professional skills) 9% 26% 36% 29%
Educating from elite institutions 10% 27% 33% 30%
Even in organizations that retain a traditional approach to business functions, approaches such as DevOps and design thinking also require individuals to be adept at both right-and-left-brain thinking, and the ability to work with technical, digital and business personnel, alike.CIOs need to learn how to develop these capabilities within their own ranks, or recruit individuals with these skills. Rather than only pursuing “unicorns” who are adept across a wide range of skills, CIOs should also concentrate on balancing their team with people who
excel in, for example, design thinking or technology architecture and strive to bring together these two schools of thought when designing a solution.
In addition to hiring people with polymath skills, CIOs should also adopt this mindset for themselves. Study respondents are already moving in this direction, emphasizing the importance for digital CIOs to have a background that encompasses a variety of assignments, business functions and industries (see Figure 8).
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Our findings make clear that while CIOs are valued for their technological acumen and vision, a more fundamental organizational shift needs to take place for the IT organization to advance the digital business mandate across the enterprise, and shift from merely “doing” digital to “being” digital.
Ultimately, what’s needed is a new organizational paradigm built for innovation and agility that spans technology platforms, people and processes and is carried out under a unified vision. This means shifting away from the traditional ROI-based model that favors large initiatives that are sponsored by the CEO and approved by the board, and replacing it with an organizational model capable of supporting smaller digital initiatives that can either quickly succeed or fail. To enable this, the CIO can and must play a central role.
We recommend CIOs begin by moving toward the following:
• Transform your approach to investment prioritization. With continually shifting business demands, and ever-shrinking market and technology horizons, CIOs need to fundamentally change how they justify IT investments. While CIOs have traditionally implemented monolithic systems with large price tags and long timeframes, which required big committees to cost-justify them, the more flexible approach afforded by next-gen IT enables them to use a more agile approach to value realization. Traditionally, it was considered a good practice for CIOs to use comprehensive value frameworks to quantify all the value impacts of a large IT program to justify the investment to business stakeholders. Now, CIOs can make use of such value frameworks in a completely different way, by selecting individual value improvement opportunities. Rather than proposing to build/integrate a large standard solution, they can define and implement a “micro” IT solution or service, laser-focused on just the key features or functionalities that will produce the selected value improvements. Doing so will exponentially improve time to market and the cost/value ratio of IT investments; that is, rather
than spending €30 million in three years, CIOs would look at what value can be derived with €100,000 in three months. Next-gen IT is required to enable this; with microservices and agile solutions, investments are reduced, and solutions are more precise and better aligned with value-creating features. This approach entails a different way of understanding and executing on stakeholder demands, and a more partnership-driven model for engaging with the business. CIOs need to adapt to a more continuous approach to driving the business case for new technologies.
• Take a new approach to digital strategy and planning. Many CIOs still own the IT strategy, an IT roadmap or master plan as a top priority. Typically, such plans and strategies are refreshed every couple of years. At the same time, companies are also developing digital business strategies as a cross-CXO activity, sometimes also driven by the CIO. The question is, what are the interdependencies of “classical” IT strategies and digital business strategies? Where do they overlap? How do they need to be aligned? Is the IT strategy just the implementation plan of the digital strategy? And what is the role of the CIO in this process? We think it’s time to overhaul the classical concept of an IT strategy as being a process of aligning IT with the business and deriving a target IT landscape and three-to-five-year implementation roadmap. With the quickened speed of change, and collapsing time horizons for business opportunities, organizations need to instead develop multiple, diverging long-term scenarios defined as potential future states. The standard planning sessions typically driven by budgets, functional priorities and fixing the legacy problems of the past should be replaced with strategic dialogs about these potential future scenarios. A useful approach to strategizing in the digital age is the “5 Ps” model developed by management expert Henry Mintzberg. The model deepens planning activity (planning being the first “P”) by adding four components — perspective, position, play and pattern — that strengthen the strategy formulation process:
Moving Forward
17BEING DIGITAL
> Perspective: It is imperative to develop a holistic cross-industry perspective on how digital megatrends can transform and disrupt an industry. Companies need to be clear on which megatrends will impact their business the most and what to do about it.
> Position: Companies need to define — in today’s terms — the big bets they should pursue. The perspec-tive on alternative future scenarios will help to define these big bets.
> Ploy: Organizations should consider disruptive moves that could disarm competitors and protect or evolve the business model to effectively compete with the new tech competition (FAANG), as well as define the “value points.” > Pattern: Businesses should investigate past behaviors that have proved successful over time. How will my company naturally react to certain digital disruptions/scenarios? How can I drive change into the pattern as a stream of actions? CIOs need to realize that what works best today doesn’t follow the same pattern of what worked best in the past.
We think companies need to practice strategy and hold a strategic dialog using the Cognizant FutureMapping approach, to influence the pattern, develop disruptive ploys, embrace a perspective and develop a position. (For more on FutureMapping and the scenario-planning approach, see our Digital Works Accelerator methodology.)
• Use next-gen IT to protect against competitive attacks by digital competitors. Technology giants and startups alike can disrupt your business by “Uber-izing” the business model and using data to drive an asset-less business. Next-gen IT can protect against that disruption because it helps traditional companies transform from a monolithic approach to technology to an agile, adaptive one.
Even traditional businesses can become as nimble as a tech company if they develop an open, agile, extensive and flexible platform on which to add new product and service offerings, business processes, analytics, and anything else a tech company can do. This transforma-tion won’t come easily, particularly as the fail-fast digital credo contravenes IT’s traditional go-slow approach to rationalize, if not cost-justify, the investment in new tools, processes and people.
• Drive multi-disciplinary teams around key business/digital themes. Traditional IT has worked on a “demand” basis, where a business need is defined, and then an IT project is derived from that. In digital organizations, IT should create key business themes that are important, and work on those as task forces. CIOs should align these task forces with initiatives identified in the FutureMapping phase.
• Become directly engaged and embedded in key digital initiatives, with the CIO advising and serving as a key influencer or “center of excellence” for all things digital. This includes specifying new tools, technologies and techniques, and suggesting business model and process changes that not only breathe new life into existing ways of working but also advance the business innovation agenda.
• Serve as the primary channel through which digital products and services are realized. This means the CIO must play a central role in the development and commercialization of these initiatives, even if they originate somewhere else in the organization. This will come in handy as the CIO’s organization is tasked to better integrate shadow IT initiatives into the enterprise information architecture.
The good news, as our study shows, is that many of these changes are already underway. Now it’s time for CIOs to take the next step — to fully commit to a new way of thinking and truly transform themselves for being digital in the new age of business.
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Methodology
This study was fielded in March 2016 to 289 European CIOs in Germany, Switzerland, UK, Netherlands and Sweden, as well as those with similar IT leadership job titles across the banking, insurance, manufacturing, and retail industries.
The questionnaire was instrumented by the Cognizant Research Center (CRC) and conducted via online questionnaires and via phone by our partner E2E Research. The interviews allowed time for open discussion, and verbatim comments were recorded with respondent approval. The findings (split equally across the aforementioned industries) were jointly analyzed by CRC and Cognizant Business Consulting.
AcknowledgmentsThe author would like to thank Cognizant Research Center Head Anand Chandramouli, CRC General Manager Sanjay Fuloria, Cognizant’s Editorial Director, Alan Alper and Cognizant’s Global Head of Strategy and Transformation Consulting Phil Dunmore, for their contributions to this report.
The Complete Digital CIOAre your views aligned with Europe’s IT leaders?
Digital transformation is changing the way businesses operate, innovate and compete. But to be successful, CIOs need to help their organizations think, act and be digital at scale to serve customers in the ways they expect.
How do they achieve that, and how do their experiences in doing so compare with yours?Discover for yourself by exploring our new benchmarking tool at www.completedigitalcio.com.
Note: All company names, trade names, trademarks, trade dress, designs/logos, copyrights, images and products referenced in this white paper are the property of their respective owners. No company referenced in this white paper sponsored this white paper or the contents thereof.
Footnotes1 DevOps is an agile approach to software development that intertwines the work of application development with operations, testing and maintenance. The practice
of DevOps is meant to improve software effectiveness and quality by advocating for better communication and collaboration between developers and operations staff.
2 According to a recent World Economic Forum survey, 10% of global gross domestic product (GDP) will be stored on blockchain technology by 2027. For more information, see “Deep Shift: Technology Tipping Points and Societal Impact”, World Economic Forum, September 2015.
3 Blockchain started as the underlying technology for cryptocurrency, but its promise is now much broader than that, as it eliminates the need for a “trust” intermediary among parties exchanging value. Combined with other supporting technologies, blockchain stands to redefine business models and processes by making them more decentralized, transparent and efficient. For more on blockchain, see our white papers “Blockchain’s Smart Contracts: Driving the Next Wave of Innovation Across Manufacturing Value Chains” and “Blockchain: Instead of Why, Ask Why Not?” and visit the blockchain section of our website.
About the AuthorsBurkhard Blechschmidt leads Cognizant’s CIO Advisory Practice in Central Europe. He has over 20 years of experience leading IT strategy and transformation, as well as digital business strategy and innovations programs for large global Fortune 500 companies, mainly in the telecommunications and media, energy and manufacturing sectors. Burkhard is also working with clients on blockchain-based business model innovation, such as how smart contracts can enable the Internet of Things. Burkhard studied at HEC, Paris and the University of Cologne and holds a master’s degree in business administration and economics. Burkhard Blechschmidt can be reached at:
[email protected] | Linkedin: www.linkedin.com/in/bblechschmidt.
20 KEEP CHALLENGING July 2016
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