Customer Experience brings a different perspective to issues of revenue and cost. This is one of the issues discussed in this post and a topic at the upcoming Gartner CIO Leadership Forums being held in March in London U.K. and Phoenix Arizona in the USA.

Executives and strategists assume a mutual exclusivity between customer intimacy (growth), operational excellence (cost) and product leadership (innovation).  You can do one or another but not both and certainly not all three. But now each is in service of the other and your strategy is one of emphasizing one or another rather than subjugating two to the others.

In 2012 doing both is more important than ever.  Revenue growth and cost cutting are top ranked strategic priorities in the 2012 CIO survey. But how is this possible? How do you connect strategies calling for revenue growth with plans for continued cost cutting?

You connect revenue and cost through the customer experience.

Gartner defines customer experience as: “The customer’s perceptions and related feelings caused by the one-off and cumulative effect of interactions with a supplier’s employees, systems, channels or products.”

Think of the customer experience, as CRM on steroids and the problem is one of tradeoffs.  It costs money to create an experience.  You are back to an either/or choice:  spend more on the experience or spend less and live with that experience.

Leaders see the customer experience as a focal point to grow revenue and cut cost. The customer experience is the focal point where customer intent meets company complexity and that bridges revenue and cost, see figure below.

Create a superior, a simple, an engaging and powerful experience and you will grow revenue. Deliver that experience requires cutting the internal clutter that makes it hard to do business.  This view creates a focal point for both rather than a forcing function requiring a choice between revenue growth and cost cutting.

Externally, its logical that in a world of increasing choice customers will chose the best value proportion AND the easiest way to do business – the experience.  Marketing knows this and is investing in technologies outside of IT all in the name of revenue, brand and the experience.

Internally, we know that time and accretive leadership have created unnecessary complexity.  The case for eliminating any one of part of that complexity is weak as they all had a reason to be there in the first place. Concentrating on enhancing the customer experience challenges gives you new reasons to reconsider internal complexity and a different case for their consolidation.

Managers face tough choices everyday.  They trade between options to achieve their objectives.   Leaders see things differently and create new connections that find new answers beyond simple choice.   Leaders see customer experience as an opportunity for technology to amplify their ability to generate revenue through attracting and retaining customers while cutting costs by eliminating duplications in the business that detract from the experience.

Combining revenue growth, cost cutting and customers is not easy.  It requires leadership which is why it one of the topics we will focus on at this year’s CIO Leadership Forum.

Benchmarking is a hot topic among CIOs and IT leaders as they look to evaluate and justify their operations by answering the question — ‘how do we compare with others?”

Increasing change creates demand for increasing benchmarking as companies value peer comparisons over their own experience and history.  This bias makes it surprisingly easy for executives to misuse benchmarking in making these decisions.

There are two types of benchmarking:  Peer and Historical.  Peer benchmarking is what we normally think about when we think benchmarking against our industry.  Historical benchmarking compares your company performance over time.

Peer Benchmarking helps you ‘mark to the market’, but not drive strategy and commitments.

Peer benchmarking helps you answer questions concerning how do we compare to others in our industry?  Are we above or below industry peers?  How will or relative position make or break our decisions and strategies?

This information is helpful in understanding where you stand. Peer benchmarking advocates will point to the fact that the only way to be ‘world class’ is to know what the rest of the world is doing and then beat it.  A problem is that where you stand is not a powerful enough answer to drive your strategy, to make major decisions, to deliver commitments on value/performance/cost etc.  Companies that look to others for direction have an issue with cerebral non-viability, aka ‘brain dead.’

Peer benchmarks are less powerful for the simple reason that executives use peer benchmark information to do one thing — keep IT Cost/Spend low because the logic of the peer benchmark drives decisions in a single direction.

• Organizations rarely recognize the legitimate reasons why your IT costs may be higher than the industry peer benchmark average. They see the gap between your high costs and the lower industry average as a source of future savings.  Peer data leads to a mandate to get back within industry averages because the peers are assumed to be right.

• If peer metrics were an intellectually honest metric, then situations where you underspend your peers would support increasing the IT budget.  Now if you just smiled at that sentence you know that is not the case.  If your spending is below peers, the answer all to often is that others are foolish and we are the ones getting the best ‘value for money.”

I can see where executives would ask for a peer based benchmark as they either feel that they are getting relatively poor service/capability or that IT spending levels are out of whack.  Peer information is helpful but cannot determine or even drive your strategy because you have no choice when comparing yourself to peers based on the reasoning discussed above.  Historical based benchmarks do not have this issue.

Historical Benchmarking defines performance support making commitments

A historical benchmark compares current performance against your past.  “Marking yourself to yourself’ may sound self serving and a way of blinding yourself to knowing market performance.  They are right, but here is the counterpoint.

Comparing yourself to peers only tells you how different you are from everyone else.  That can be helpful to know in situations where you have no idea of market performance.  Knowing the gap does not create value.  Value comes form changing your performance and demonstrating that change is the domain of a history based benchmark.

Historical based benchmarking gives your management systems information they can use.  Tools like control charts or statistical process control (SPC) use changes in actual performance to drive decisions, actions and change all things that cannot be supported through peer benchmarking.

Benchmarking is big enough to support peer and historically based comparison.  The different benchmarks answer different questions.  One looking outside to performance beyond your company and the other inside into the actual improvement in what you do and how you do it.  Recognizing the difference between the two and how best to use them is essential to building your goals (peer) and to making the improvements that demonstrate value (history).

Which is the more powerful peers or the past?  Well only one feeds the management decisions that drive value as the only way you get better is by being better than you were in the past regardless of how that stacks up in the broader market.

So far so good, people going up to the wall to see where they need to be, I am sure you have seen it a hundred times.  But then the word came down, the company CEO was going to be visiting the meeting.  Suddenly the information that was helpful was taken down.  ‘It was too messy for the CEO to see,’ argued one of the suddenly present members of the corporate staff.   They will see the mess and assume that that what you are doing is a mess.

So, about 30 minutes before the CEO was expected to arrive, corporate staff swooped in, cleaned up and encouraged people to look busy.  Funny thing was that they were already busy, very busy in fact and the paper, while a little messy was helping them be productive.

People talk about senior executives being distant and disconnected from the front line people, their challenges and their reality.  The idea that corporate needs to come and clean up for the front line associates is not only offensive but also detrimental to the business.

Hiding information from the CEO is never a good idea.  It gives the CEO incomplete information that quickly forms into assumptions and expectations that neither sustainable nor supportable.

We all work hard.  We are all inventive in improving the way we work.  Some of those inventions, while not pretty, work really well.  Some of those inventions are indicative of real operational problems.

Hiding reality from the CEO distorts their view to your and everyone’s determent. It is a sign of weak management. To find others see links below or use the keyword ‘signs of weak management’ on this blog.

Besides how will things ever improve unless we are all honest about the way things are?

Selected links to other signs of weak management

Blame storming – one of the signs of weak management

Strategic constipation – one of the signs of weak management

The Little Red Hen – one of the signs of weak management

Working your way stupid – one of the signs of weak management

Sophie’s Choice metrics – one of the signs of weak management

Precision requires that specific investments that produce pre-defined and specific results.  You want to produce more widgets, then you need to buy another machine.  You can precisely say that new machine produced X widgets at a price of Y and therefore has a value of X * Y.  That is the kind of precision people think about when they think about value.

Precision can be achieved when the relationship between the parts of the business are simple and clear cut.

Simple and clear connections come from decomposing business value into constituent parts and measuring the performance of the parts with the assumption that all other parts function properly.

In the example below, the machine produces more widgets but those widgets have no value until they are sold.  So a more accurate measure of the value of the machine would be the revenue generated from the widgets which requires you to bring in elements such as sales volumes and discounts.  The figure below illustrates the difference.

Now this is a very simple example, but suddenly the realized value of a new machine is not what it can produce, but the portion of its production that is actually sold.

This begs the question – what is the cause of excess inventory?  Is it over production or less effective selling, or both?  How you assign causality in this simple system creates false precision that is captured by the spoken or unspoken assumptions of your business model.

Causality for IT Value is even more complicated as IT solutions bring together multiple parties, players and situations.  If IT is horizontal in an organization, then it can easily be the cause of every problem and the basis for every success to none.

Leaders recognize that modern business is too complex to be able to assign specific and reliable causality between investments and changes in business performance.  Rather than seeking causality, they look to prove the following:

Where IT works, good things happen

Those good things are changes in business performance that can be measured using existing business metrics and critical success factors.   Rather than precision, leaders want to demonstrate that IT does participate and contribute to the creation of business value by raising performance.   They do this by recognizing that IT creates value over time. They also look to measure IT’s production of future value. In both cases, the CIOs are trying to show the impact IT has on business performance and future potential.

Demonstrating that association is one thing, getting business leaders to agree to think in this way is another.

Start by talking with the CFO about how you are going to start including these other metrics in your reporting pack.

• Point out that you are not looking for precision or for causality, but rather to enhance the information the executive team uses in making IT decisions.

• Describe how these measures are important to creating a value-based culture in IT.  If all you report and manage are cost and schedule, then that is all you are going to get, people concerned about spending money on time.

• Admit that these metrics are descriptive, directional and will improve over time. Do not take credit for specific IT investments, yes IT did this, but we all worked together to get that, the result.

• Finally, discuss how these measures begin to establish an executive conversation around what really matters – realizing business benefits from operational and technical change.  The name of the game is business performance, no matter how it happens.  Without a way to looking at performance changes in conjunction with performance results there is simply no way to have an informed business conversation about benefits realization.

These actions are a start for IT to measure its impact, albeit a little one.  Greater precision comes over time as the business becomes more comfortable with measurement and more precise in its own measures.   Right now that ability to grow, refine, improve and extend measurement does not happen for the simple reason that many organizations are not ready for these measures, they do not know how to manage to them.  They create false precision that leads to less powerful decisions and misdirected strategies.

Better to start with measures that recognize the reality of business complexity and seek to explore associated connections and then grow into a more prescriptive model.

Otherwise managers are faced with muddling through the same way a High School Student muddles through when trying to learn postgraduate mathematics.  Sure some get them, and you kind of know what is going on, but its decisions based on intuition rather than information.

India is a diverse and dynamic economy at the center of transformation of the IT industry and of the nation itself.

IT’s evolving role

While CIOs are continuing their focus on building out administrative and ‘management’ systems they see the need to evolve their role in the enterprise toward more direct business impact in areas like revenue generation and innovation.  The progression from IT as a function to IT enables the business to a goal of IT contribution has happened faster in India than in any other market I have visited. CIOs in Indian companies looking to raise IT’s role need to demonstrate ITs value and how it

Leadership and Management Capability

Leadership and management talent within Indian companies are as good as anywhere in the world, but talent is thin and unevenly distributed around the company.  Companies are growing well where it is concentrated and encountering problems in areas where operational demands have outstripped management capability.

IT is seen as a way to make up for limited management capability, by creating more controls and process.  That approach may work in the short term, but it establishes IT in a role of protecting/preventing improvement and as responsible for poor performance, particularly when managers have to work around IT to create results.

This represents a particular trap for CIOs as they respond positively for requirements to build new control systems without requiring a requisite increase in management capability.  This sets the stage for misinterpretation of IT’s role and value as when good managers do appear, they frequently have to fight through constraints created by IT to protect the company from prior weak management.  This makes IT seem like a stumbling block or barrier. It makes it the object of management derision rather than enablement.

A better course of action is to keep Executive Responsibility focused on building management capability and capacity.  Link future plans for new systems investments to management education, recruitment and employment so the organization has the people to lead and knows how to use the system to get results.

Cloud Computing is part of the plan

Interest in cloud computing was particularly high with the CIOs and others at Symposium.  Cloud, while not immediately or widely available, is part of future CIO plans despite challenges related to internet reliability and the cost of workstation computing.  From what CIOs were discussing, it looks like plans for cloud call for fusing it with mobile and handset technologies to enable work processes and practices at a national scale.  When you consider the scale and geographic diversity of India this approach seems a reasonable path for future investigation.

Social media is of increasing interest.

Social media was of particular concern as Indian companies look at what is happening in popular culture and other countries.  India is ripe with social media potential as it is a young country with 50% of people under the age of 25. India is also a diverse country creating opportunites for mass collaboration as a path to greater performance.  Indian CIOs indicate that their executive teams are wary of social media either seeing it as Folly or Fearful that social media is a waste of time and uncessary distraction.  Both attitudes are understandable, but CIOs are interested in seeing what mass collaboration might bring to their organizations. Assess your own company at gartner.com/socialreadiness.

Overall

Indian CIOs indicate that their organizations are at multiple places all at the same time.  Organizationally they are evolving from closely run companies with an emphasis on hierarchy toward divisionalized business units.  Technologically they are leapfrogging the functional and task based technology investments to adopt leading information, process and mobile-based solutions.  Managerially they are dealing with a diversity of management talent and the need to build capability.  Globally Indian companies are playing on a world stage in ways never contemplated before either by the nation or by the leadership teams.

This is a dynamic time for Indian companies in general and their use of technology in particular. The decisions they make will re-imagine the organization, IT and their future.  It was an honor to talk with CIOs who are leading from the front and I look forward to future symposium in India.

We came to that finding by asking CIOs to rate the importance of their business priorities in terms of each priority on a scale ranging from differentiating to common practice across all industries.  Likewise we asked CIOs to say how strongly connected were their IT strategies to their business strategies on a scale ranging from Very strong to none.  The result was:

Many claimed to be tightly connected to the business strategy with more than 80% of their plans either strongly or very strongly connected.

However:

The power of those business strategies were quite low as more than 70% represented strategies that were general practices in their industry or across industry.

That was in 2011.

We are about to complete and finalize plans for 2012.  So it’s a good time to look at business strategies, IT plans and business expectations through the same lens.  See: It is time to create more than a little competitive instability for some ideas

Are you being asked to do the dishes again for 2012?  You are if you’re in support of business plans that do not drive your enterprise’s competitiveness – the things that make it

• Unique,
• Different from the competition, or
• Represent the reasons why customers choose to do business with you over others.

These are the terms the business uses to assess the strategic importance of a plan, an investment, or action.    Notice that size does not impart strategic importance.  Your large IT projects, one that may be too big to fail, is not necessarily strategic and in fact may be the epitome of ‘doing the dishes.’

So its time to look at your plans and ask:

• What are my major plans for 2012?  Which business strategies do those plans support?
• What is the level of that support?  What will IT do that will realize the strategy and its objectives.
• What is the strategic nature of that business strategy?  Does it create strategic value that the business would recognize?
• What are the other business strategies where IT is not involved?  What is their strategic nature?  Could IT make them more strategic?

Not every IT plan will be strategic.  In fact for a strategy to be unique and differentiating, it has to be somewhat rare. Trying to claim that all IT plans have business based strategic relevance is not recommended as it makes you look co-dependent.

Rather, treat the business strategically relevant IT plans differently.  Give them more ‘quality time’ in leadership meetings.  Give them greater visibility in your communications with the business.  Adopt business performance based measures for their success rather than progress against plan.

Raise their profile, because if you treat the business strategic programs the same as everything else in your plan then you are telling your business peers that there strategic plan is the same as general practices – you see doing them the same as doing the dishes.

Technology trends are also global as proven practices travel at the speed of the web to companies all see new forms of competitive advantage.  At this year’s Gartner Symposium three technology trends are leading to re-imagining IT and its role in the enterprise.

• Consumerization and Mobility create both new channels and challenges to traditional go to market and IT systems.

• Cloud computing offering local access to internet service based capabilities that reduce local operational requirements.

• Social Media bringing people together in new ways, reshaping media and creating networks that cross-geographic, national, cultural and just about every other boundary.

Australian leaders face a complex and changing marketplace.  The Australian national economy remains strong, its currency appreciating and resources book in the western half of the country.  But like much of the rest of the world Australia is experiencing a ‘two speed’ economy.  Two speeds describe different growth rates across the economy.  There is strong growth in resources related industries and slower economic conditions in the rest of the economy.  This complicates government and business strategies as a rising resources tide does not lift all boats. Australia also has a unique ICT market with a high levels of internet and mobile phone penetration that is in the midst of change as the National Broadband comes online and promises to change the price/performance ratio of the internet.

How these trends and technology’s apply to Australia’s unique challenges is the focus of this year’s symposium at the Gold Coast.   We look forward to seeing you there!

While there were a few operational glitches, it was the first time at this location, overall the CIOs I spoke with were pleased with the experience, exercised their issues and exchanged their ideas.  CIOs face the need to find new answers to new questions in an increasingly complex set of economic, operational and financial contexts.   Change is on the agenda of the CIO.

Economics and the debit crisis provided an important context to the event, particularly given events in Italy that happened while the symposium was in session.  I will talk more about that at the end of this post.

In years past, CIOs faced a similar tide of change.  This year there is no single type of change that is pervasive across the CIOs.  This makes 2012 different from 2008/2009 where there was change all in the direction of cost control.  CIOs are changing to support growth initiatives in Asia and Latin America.  CIOs are changing in response to new strategies or regulatory requirements.  And yes, CIOs are changing to reduce costs.

While every one recognizes the need to change, the nature, dricection and challenges of that change are increasnlgy company and contextually specific.  In this regard there is no “European” view on IT for CIOs as each faces their own context and challenges.

Change is at the top of the agenda, but unlike 2008 – 2009, when everyone was changing in the same direction — cutting budgets — change comes in many flavors.

Here are a few things that stick with me as I leave Barcelona.

• European firms are going through structural change in response to the structural economic and business challenges.  There is no clear pattern as some are breaking their companies into smaller divisions while others are consolidating and standardizing to save cost.  These changes are not temporary indicating that leadership believes the current conditions are not temporary.

• The existence of fragmented applications, data centers and operations is a particular target as financial conditions have opened the door to deeper change than simply holding the budget line on spending.  Eliminating the results of accretive change is increasing CIO visibility at the board level and creating new conversations with their business peers.

• Mobility is a hot topic and one that appears to be at the peak of expectations in Europe. The discussions I had related to mobility, tablet devices, etc revolved around understanding how they created value in practice rather than in theory.  The CIOs I spoke with were looking for hard and demonstrable facts rather than relying on the novelty of consumer technologies to create value.  Clearly in this area CIOs have a focus on the longer term rather than the quick value of meeting consumer needs.

• Interest in Social Media was strong, particularly from the perspective of how social media works within a company.  CIOs raised questions and comments regarding issues of individual behavior, free speech, expression and how mass collaboration actually works in a company.  CIO questions reflected an understandable degree of guarded optimism skepticism as they wnat to know how it works before putting it into practice.  You can assess your organization’s attitudes toward social media by taking The Social Organization Book’s assessment gartner.com/socialreadiness

• Cloud computing and sourcing showed renewed interest with discussions centering on actions and plans more than concepts or ideas.   It seems that European firms that had previously thought about these issues, dipped their toes into them were looking to take action in 2012.

• CIOs are facing the need to drive transformation programs in order to meet externally defined requirements and regulations.  The level of transformation and structural change driven by EU legislation appeared to be more on CIOs minds this year than previously.  In some cases, EU legislation is requiring industry restructuring, redefining the boundaries of business in Utilities, Law Enforcement and other areas.

Change requires new answers and new actions.  This creates the impression that CIOs and their organizations are more or less the same as they share similar plans and priority.  Such a view is incomplete as the differences between CIOs in general and European CIOs in particular has never been greater.

Look to the questions that CIOs are answering and the differences emerge.  There appear to be three sets of questions facing CIOs all of which can be addressed with similar plans but to very different results.

New Questions / New Opportunities CIOs facing new questions about growth, channel expansion and overseas operations face a future similar to other multi-national companies.  There questions are new questions about to compete in growth markets primarily in Asia and Latin America. These questions revolve around using technology (including IT) to extend enterprise capabilities and raise the customer experience.

Old Questions / New Answers CIOs facie old questions about cost cutting, consolidation, expense reduction.  They plan to use new technologies such as internet-based services to lower their operational costs, mobility to get high value functionality in to the field, and improve operational efficiency.  Theses CIOs are establishing a new argument around IT as a source of productivity.

Old Questions / Old Answers These CIOs face having to dust off their cost cutting plans and repeating the actions they took in 2008 and 2009.  Organizations implementing plans that call for ATB (across the board) cuts of 10, or , 20, or even 40%  fall into this category.  Repeating the past in hope of a different outcome is a sign of weak management and ATB cuts is a potent indicator that leadership needs new questions.

Regardless of the questions you face, the time to act is now.

If your organization has been holding back on spending cuts by budgeting them for year 4 or 5 in hopes of better economic conditions, then you have lost that bet.  2012 is year 4 of that 2008 plan. It is time to make the changes you hoped you could avoid.

Action is required for the simple reason that financial crisis are particularly caustic to an economy.  THey create the illusion that things are temporary, they lead to band-aid approaches to bail-out players at risk, the stifle the need for deep reform.

Inaction leads to ‘muddling through’ which only turns a CRISIS into a CHRONIC CONDITION.  How CIOs re-imagine IT and lead from the front will determining the extent to which IT contributes to that condition.

Please share your thoughts and experiences from Barcelona.

Gartner Executive Programs runs an annual survey of CIOs that seeks to understand CIO priorities, plans and issues.  The survey is the best way for you as a CIO to have your voice heard and to listen to what other CIOs in your industry, geography and size have to say.  I would like to invite CIOs, only please, to contribute their thoughts by following this open link:

http://ciosurvey.gartner.com

The survey takes about 20 – 25 minutes and you will receive a peer report and electronic copy of the 2012 CIO agenda report in January for participating.

You may be asking why should I bother responding to yet another survey.

Good question and I would not be recommending taking even 2 minutes out of your day if it did not represent a good return on your time.

The Gartner CIO Survey seeks answers to specific questions that matter to CIOs.  We do not look to take the temperature of IT or the CIO to give you weather report type answers.  “IT is getting cloudy with a chance of SOA showers,” is something that we will not report.  That is the domain of others.

The specific questions we are testing this year include:

• What constitutes an effective IT strategy?  Its characteristics and how does having a strong strategy change IT and enterprise performance?

• Where are the major skill gaps in IT?  Which roles are performing and which need to step up their game in 2012?

• Is IT’s value being ‘held back’ by business management capability?  Are you creating value that the organization is not competent to realize?

• What are the most effective metrics for demonstrating IT’s value?  Which ones are used most often and to they really work?

• As IT moves more mainstream, how well does IT work with other organizational processes?  To what degree does IT value relate to performance in HR, Finance, Procurement, etc.

• Where do CIOs see their future?  What is their next role?  How are they preparing for it?

If someone said they had responses to these questions based on data you would immediately ask, well are they like me?  The only way to know for sure is to share your thoughts, your experiences and your opinions.

We all have to re-imagine IT or be relegated to making every year just like the last.  Frankly, finding new answers to old questions is one thing.  Understanding the leadership, organizational and operational issues for moving forward are much more exciting individually, rewarding professionally and valuable to your organization.

So give us 20 minutes and we will give you back the context that you need to

“I knew that I was going to make it when I stopped thinking about being a CIO and started thinking about building a great company”

The quote makes an extremely valuable point — namely that its not who you are that matters, but rather its what you create that matters.

That is the difference between a good CIO and a great CIO.  A good CIO successfully leads the IT organization and the enterprise in the strategic application of IT.  These are CIOs who know their job, can motivate teams and operate

The good CIO is a steward of the organization’s information assets, technology resources and transformation skills of their people.  Good CIOs use these resources to enable business performance while delivering results on time, within scope, and on budget.

Great CIOs recognize that information, technology and IT people are a catalyzing force in an organization that contributes to raising business performance and can be the core of a differentiating factor in enterprise competitiveness.  These are the CIOs who think about building a great company rather than concentrating on the performance of the IT organizations.

Every CIO has the potential to be great and there are many things that differentiate a good CIO from a great CIO.  One of them is the way they think about themselves and their relationship to the rest of the organization.

Related Posts:

What makes a good CIO Great? (Post with links to other posts)

The path from good to great for the CIO

Is it time for CIOs to lead from the front?

The CIO Edge — the soft side is hard.  A book review