by Mark Raskino | December 4, 2013 | Submit a Comment
I’m often asked whether the CIO should report to the CEO and why. About 40% do; the majority don’t – even in this digital age when tech seems so important to everything. Looking back at the last 15 years or so, I think it’s quite clear that CIOs usually report to CEOs when there is a “great” IT mission in play. If there isn’t one, then IT is more of a maintenance function making sure business-as-usual runs smoothly – and that might not warrant the CEO’s frequent attention.
A great IT endeavor is one where a technology based change to the business is going to have a multi-year, material affect on financial performance. That means either the revenue or the profit of the company is impacted in a way the investors will notice and care about. There have been many of these great endeavors – some of them quite general purpose and multi-sector for example:
But often the great endeavor is industry specific. And sometimes an industry can have a fallow period where there is no obvious IT great endeavor. For example I spent many years in airline IT, where over the decades there have been a number of great endeavors that had huge bottom line implications:
Frequent flyer programs
Schedule and reschedule optimization
Web direct selling
Most of these things were capable of moving the profit margin of an airline by a couple of percentage points – with serious financial performance and competitive effects. But it’s hard to see a new thing of quite such scale in the airline industry right now. Giving crews tablets is cool – but it won’t be big enough to move the share price of a large airline ( e.g. “IPads Help Airlines Cast Off Costly Load of Paper In the Cockpit, Navigation Charts Go Digital; American Sees $1.2 Million in Fuel Savings” ). I have no doubt something really big will arise again for airlines, from some combination of newer technologies: mobile, social, cloud, data science, robotics etc. ( if you know what that thing is – let me know ).
This week we all saw the video from Amazon, suggesting that one day soon battery powered, autonomous octo-copters might bring goods to your door. Others have already had that idea – like the Dominoes pizza “Domicopter“. Perhaps “drone delivery” is a new great endeavor in the making, for a generation of transportation and logistics CIOs. Reports suggest experiments of some kind have probably been undertaken at UPS and FedEx. From such ripples, massive industry progress waves arise – as we are seeing with the arrival of e-cigarettes in the “tobacco” industry.
Every CIO should ask himself or herself: what is the *great* endeavor in my industry, in my time. If it isn’t in play yet, is it coming soon? If it hasn’t been invented yet – could my team be first?
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by Mark Raskino | November 28, 2013 | Submit a Comment
The quote in the title of this post comes from Peter Sondergaard‘s section of the Gartner Symposium keynote 2013. I just keep on seeing more examples that show how it is true. This week I noticed 3 news stories that provide more evidence.
Argos Digital Store
Reuters reports that Argos is introducing “digital stores”. Argos is a major UK home goods retailer, that for many years has operated an unusual catalog shopping in-store model. Now it is doing away with paper catalogs and replacing them with tablet based versions. Take a look at the picture – perhaps this is one way store based retailers can compete with Amazon.
Marlborough maker to introduce an e-cigarette in 2014
The Wall Street Journal reports that PMI – the manufacturers of Marlborough and other big brand cigarettes has announced it will enter the e-cigarette market next year. It will be joining Lorrilard, BAT and others who have already responded to the rapid growth in this category that has been largely developed by start-ups. Don’t be fooled into thinking this is just an “electrical” product. Lorrilard’s “blu” brand already has wireless and social features. Digital innovation in this area will become very lively indeed.
Coca Cola and Target are setting up technology incubators in India
The excellent online news source Quartz reports that these major US firms are investing in tech firms in India to help generate digital business ideas and opportunities.
The definition of a ”tech” company has been changing for several years. Many companies that apply information technology to serve a customer need have been categorized this way by the business media and the investment community – even if they don’t sell technology. LinkedIn, Groupon, Twitter, Pinterest and others are seen this way. If non-tech firms start to apply information technologies directly in what they are selling – surely they are becoming tech companies too? We must at least admit that the boundary is becoming very fuzzy indeed. Tesco sells its own Tablet called Hudl and has its own streaming movie service called Blinkbox, Nike makes and sells Fuelband, Nissan has declared that it will introduce a self-driving car (one might say ‘robot’) by 2020. Technology will become a central competency for many more companies over the next few years.
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by Mark Raskino | November 20, 2013 | 6 Comments
This week I attended an interview presentation at the UK’s Institute of Directors ( IoD ) . The interviewee was Simon Calver, the CEO of Mothercare – a 52 year old British high street retailer with over 300 stores and $1Bn in revenue, specializing in baby and toddler care products for new parents. During his talk, Simon said a number of interesting things but one quote stood out to me:
“First and foremost we will be a technology business”
He pointed out that the company already gets about 25% of its sales online with a double digit growth rate, while its store business has low single digit growth. No surprise then that he also said
“There’s no reason why we can’t think of that [online] eventually becoming over 50% – that’s an aspiration”.
Simon came to Mothercare from Lovefilm.com an online video rental company founded in 2002, which as CEO he helped sell to Amazon. But he wasn’t always a dot.com guy. His career started in marketing and business operations at Unilever and Pepsi. He also spent time at Dell. So he has a balanced view of both sides of the business world – the digital side and the traditional side.
Later in his talk he said: “Every retailer should ask themselves: ‘what would this business look like if it was over 50% online’ “.
I couldn’t agree more. If Mothercare has already reached the 25% tipping point – every company should take heed. But Simon was also careful to point out that he will
“Use the stores as competitive advantage in an omnichannel model”.
The key insight is that the stores and their staff can offer a service experience – for example measuring a mother to be for maternity bra, or fitting a baby seat into car safely.
I am absolutely convinced we will hear many more traditional business CEOs declare ”we must become a technology business too” over the next 2 or 3 years – and they won’t all be retailers. The digital business revolution is well underway.
Simon (right) Calver at the IoD November 2013
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by Mark Raskino | November 7, 2013 | 1 Comment
The title of this post, is the title of a presentation I have been giving at our Symposiums in the US and Japan. Next week I will deliver it in Barcelona ( session link here ). It’s a position. It’s one I have taken several years to become confident of. I now believe that in due course, every single industry will be deeply digitally disrupted and new mastery will be required. Today’s leading incumbents might change enough to remain in charge, but sometimes they will lose to new entrants coming in from unusual directions. Many boards have read Clayton Christensen, but it’s still very difficult for big public companies to overcome the innovator’s dilemma in practice.
Often the changes taking place will fail to follow previous template patterns and so business leaders will misread and ignore them until they become perilous. In that regard, digital disruption is rather like a retrovirus – it keeps mutating and changing shape. So, just because you have understood how to deal with the way e-commerce dis-intermediates, doesn’t mean you know how to cope with the effects of crowd-funding that social has enabled.
Most importantly, the physical technologies: 3D printing, the wireless and sensor enabled ‘internet of things’ and intelligent robotics – now put all the physical industries in play. It is not just the information and service industries anymore. We all saw and understood how music and news could be disrupted. These were inherently ‘bit’ industries (as Nicholas Negroponte pointed out a long time ago). Now the ‘atom’ industries are all set to be deeply revolutionized – with unpredictable consequences.
For me, the tipping point example was the e-book. Amazon had already taken a big chunk of control over the book industry by 2006 by revolutionizing its distribution with e-commerce. The second step was to revolutionize ‘book’ ( deliberate grammar ). The very concept of book – what it is, how it works, the rights over it, the function of it, the price of it – the “who gets paid what” of it – all those things are changed. An e-book has fewer “pages”, it’s average price has more to do with what Amazon and Apple think it should be – than your favorite 150 year old publishing company. When you die – it won’t be passed down to your relatives – but if you lose it, it can magically reappear in your hands and remember what page you were on. This kind of profound change to products and services themselves is the new digital revolution that lies ahead of us.
Now we have confirmatory examples – it’s happening to cars and its even happening to tobacco. Every time, it looks different, like a retrovirus. For example I just mentioned tobacco. What do you think about “electronic cigarettes” - are they part of the ‘digital’ revolution or is that something else? Well, they contain a micro-controller and they recharge via USB. Some already have limited wireless capabilities – so you decide.
There will be no exceptions. Every product and every service will be revolutionized over the coming decade. So much so, that old core competencies will be gutted and replaced. But don’t ask me to predict what will happen to your industry – you have to invent that. There’s no pre-packaged business application software this time. But there has never been a better time for those who understand what technology is capable of and have the creativity to exploit it.
If a cigarette can be digitally substituted then almost ANYTHING can.
Image Source: Michael Dorausch via Wikimedia Commons CC.
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by Mark Raskino | November 6, 2013 | 1 Comment
Whenever a new job role or title emerges in business, the reaction is usually a mixture of confusion, misinformation, conflation and denial. My role as a Gartner analyst is to help in creating research that will answer questions chief executives have about IT and business. So when a new C-level leader title arrives, related to IT, I need to be able to explain it. Is it real or has a trend been over interpreted from just a handful of cases? Why are companies creating the role and what does it really do?
Chief Data Officer is one of those titles that has been rising in visibility over the last 2 or 3 years. My analyst colleagues in our information management team, research the tools and techniques that these leaders will apply – such as Infonomics, MDM, Data Science and Open Data. My task is to ensure we can answer the CEO’s questions about CDOs – things like “who are these people?” and “do I need one?”. So I have been taking another look at the early-bird CDOs recently.
Here are five 2013 CDO facts that might interest you.
CDO Fact #1 There are over 100 chief data officers (carrying that actual job title) – serving in large enterprises today. That’s more than double the number we counted in 2012.
CDO Fact #2 Banking, Government and Insurance are the top 3 industries for Chief Data Officers – in that order. However we are now seeing other industries rising.
CDO Fact #3 65% of Chief Data Officers are in the United States. 20% are in the UK. There are now CDOs in over a dozen countries.
CDO Fact #4 Over 25% Of all Chief Data Officers are in New York or DC. It’s a regulatory catalyzed trend – at least in the early stages.
CDO Fact #5 Over 25% of Chief Data Officers are women. In case you are wondering - that’s almost twice as high as for CIOs (13%)
New, technology related C-leader titles are like buses: you wait for ages – then 3 come along at the same time. We are also watching the “chief digital officer” role very carefully. At this stage I think the ratio of digital officers to data officers is around 2:1. It’s a real large-enterprise C-leader role, but it has different industry clustering. There is also a rapid rise in the number of people carrying the job title “chief data scientist” – however at this early stage the majority of those professionals are in smaller technology and information analytics specialty services firms.
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by Mark Raskino | October 24, 2013 | Comments Off
With enormous relief, over the course of this year I have come to the conclusion that we are at last returning to the idea of truly, strategically, inventive IT leadership. It’s an idea that has been so suppressed for a decade or more, that I was almost giving up hope.
A few weeks ago, I was privileged to be asked to present some Gartner Research perspectives at an event for the awarding of the Fisher-Hopper prize. This award was created, late in their lives,by Max Hopper (founder of American Airlines SABRE) and Don Fisher ( CEO co-founder of clothing company Gap ). Both men shared a vision of CIOs as inventive leaders within their organisations – discovering and applying whole new methods of business organisation and optimization, using the power of computing. It won’t surprise you that this year’s winner, from the retailer Kroger, spent time in his acceptance speech acknowledging his years at FedEx and the influence of its founder Fred Smith - another true IT believer. But Fisher and Hopper felt an unease at the turn of the century – that the CIO was becoming too much of an order-taker / service-provider. There had to be more to the role than simply implementing the next standard business application software package, followed by a series of incremental adaptation requests from “the business”. So they set up a lifetime achievement award to recognize great CIOs, who have made strong original technology enabled business contributions to their organisations and to the evolution of the role. Interestingly, the judging panel consists of serving and ‘renaissance’ CIOs – retired executives who knew what it was to create moderately enduring competitive advantage, through inventing new IT enabled business methods. I am convinced Fisher and Hopper were right to create this important award. The leaders from a decade or two ago, have a lot to teach the current generation by mentoring.
In the period 2002 through 2007, I believe many business leaders sent IT to the strategic “dog house” – because it had generally swaggered, threatened, over promised and under-delivered. In the 4 years 1998 to 2001, those business leaders had invested a lot of net new money, to get past Y2K and to buy into all the new big packaged IT business ideas – CRM, ERP, Supply Chain Management, E-Commerce, Collaboration etc. For too many, the experiences were nightmarish. Major business applications projects took many years to pay back, not 18 to 24 months as the e-business bulls mislead them believe. Sometimes, the consequences of late and failed major IT projects cost CEO’s their jobs. And all the money spent on Y2K, won companies only a rushed and expensive desktop refresh, but not much else. Dark doubts lingered that the whole thing was some sort of IT industry scam in which CIOs had been complicit. So IT leaders were asked to clean up their act. We standardized and consolidated systems, we outsourced and off-shored, we secured and cost-controlled, we professionalized with COBIT and ITIL. We learned to manage demand, optimize portfolios, create shared services, perfect SLAs, partner with vendors, and recently even to support BYOD. In fact, despite initial howls of protest, in many ways CIOs did their level best to demonstrate that Nicholas Carr was right with the sentiment of his 2003 bombshell HBR article title: “IT doesn’t matter“. Collectively it seemed that IT leaders were being asked to standardize to the point where there was little or no chance of competitive differentiation using IT.
In the mean time, business leaders found easier paths to to profit glory. They fed on cheap money, whether it was directly lent by banks to fund corporate investment led expansion – or lent to the Western consumers at the end of every value chain, driving binge and bubble growth. In parallel they pursued high risk, high reward M&A strategies or setup shop in the BRICS countries to sell to the rapidly expanding emerging markets middle classes, while milking fatter margins from cheap labour cost-cutting. Frankly, business leaders didn’t need much deep IT enabled business innovation they just needed more of the same kind of IT at the same or better marginal cost – to fuel cookie cutter business recipes for expansion. But as we all know, in 2008 the debt fueled global party stopped.
Of course the last 5 years since the Lehman crash, have held everything back. Business leaders first had to slash back operations and that included deep IT cost cutting. Only by 2010 could they even start to think about post great- recession growth mechanisms. But in 2011 and 2012, aftershocks and secondary factors – like the Euro crisis and the ‘fiscal cliff’ fear delayed still further the opportunity to act on new strategic insights.
Now CEOs are ready. Many recognize that behind them lie 10 years of fallow-field opportunity. Technology has been completely revolutionized in that time, but it has been very under exploited. They have relatively done little, with dynamic BPM, mobile, social or cloud - in business strategy terms. They have barely started to understand the richness of opportunity the emergence of big data and the internet of things could bring. But they know it matters. Because companies like Amazon, Apple and Google have applied these capabilities to take a big chunk of control of the destinies other people’s industries – from music to movies and books to cars.
When CEOs turn to their own current IT organisation capabilities, they find them wanting. The IT function is perfectly tuned for for the job they have designed it to do – passive incremental order taking – but not for strategic innovation and direction setting. So the CEO tries to hire a new kind of CIO, sets a new technological outlook ambition for the firm and may also be prepared to fund higher risk models of internal innovation – all to catch up. The inventive CIO is reborn. This new CIO takes one look at the long list of dull-edged technology provider contracts supporting a long list of uninspiring incremental back office system maintenance and minor changes – and immediately recognizes a basic fact. We can’t get where my CEO wants to go with this level of semi-detached IT capability. Significant re-internalization and technology core competency building is inevitable. We see this starting to happen in automotive and retail already. We’ll see it in Pharma, CPG and others next.
The inventive CIO will strive to develop unique new technology capabilities for competitive advantage, using a powerful and creative internal technology resource base. If your company wants to remain a leader in your industry, information and technology must become a core competency again.
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by Mark Raskino | September 3, 2013 | 1 Comment
Have you ever heard of “Chapter 33“? It’s a sarcastic Wall Street joke term for a company that has been in Chapter 11 bankruptcy 3 times. The fact that this has ever happened, serves to remind us of an important fact when thinking about strategic change in business – death often comes very slowly indeed to large companies. One of the main reasons for this, is the longevity of cash cow revenue streams from ageing products that have a declining but loyal customer base.
The un-digital products and services you make and serve today are the dying cash cows of tomorrow. Thankfully, many of them will decline slowly over a long period. This means you should be treating the cash flow they generate now as a means to fund the investment needed to systematically plan, develop nurture and evolve strong digital replacements. You may also be able to cross-fertilize learning and ideas from the emerging digital world back to your aging products, to life extend them a little. That will help make a smoother financial transition.
I was reminded of this observation yesterday when I got hold of the latest edition of my local Yellow Pages. Yes it still exists. Look at the picture below and you will see it is a far smaller, handy size and a lot thinner than the arm-achingly heavy tomes of yesteryear. Doesn’t everyone look up local services online or on their smartphone these days? Apparently not – there’s still a niche market for a handy paper guide and enough plumbers, TV aerial fitters and removals firms willing to pay to advertise in it. But also note the advert right there on the front cover for “apps.yell.com” and the QR code beside it. The company has no hesitancy telling you about its digital future, and it is happy to take you there directly.
What’s your product equivalent of the inevitably fading paper Yellow Pages – and what are you doing to ensure its inevitably declining revenues are reinvested smartly to grow your digital future? In the mean time – what are you doing to build the bridge-work that will lead your laggard customers to the new world as fast as possible?
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by Mark Raskino | August 20, 2013 | Comments Off
This week I have been finalizing our new annual CEO research survey. One of the questions asks about investment intent for next year, in various areas of the business – marketing, operations, capital equipment etc. In my generic list of these high level areas, I include “R&D”. It has been interesting to watch intent towards R&D change in recent years. Its relative position has fluctuated but overall it remained fairly well protected even in the depth of the recession.
Like all research work at Gartner, my survey questionnaire gets thoroughly reviewed and I rely on the eagle eyes of my colleagues to spot flaws in my work. One person with a sharper eye than most, is my analyst colleague David Furlonger. He pointed out that in banks, insurers, financial services companies and indeed most services industry – there isn’t a function called R&D. What does exist is “innovation”. Doh! Of course he is right. Sometimes innovation is a diffuse activity – but it can be formalized into a central function and location. For example, earlier this year I had the pleasure of very briefly visiting the wonderful BBVA Innovation Center in Madrid.
But here’s a thought. We are moving very quickly into a world where information and communication technology innovation will become very physical. The internet of things is coming, so are the robots and the 3D printers. The digital business world of the Nexus ++ is about to become a very wide field of sensor and mechatronic creativity. You will need your soldering iron and a supply of Arduinos, Lilypads, Makerbots and robot development platforms - plus the staff to get hacking and the space to work creatively. You might say “we are an information industry” – but such industries will have to intersect the real world too. What if you need detailed data, quickly, about what’s really going on in a street protest or at a flood site – before you start calculating the insurance cost, or changing your media strategy? Maybe you’ll rely on video drones one day (by the way if you doubt the awesomeness of drones – check out this recent video from Dominoes Pizza ). Wondering what might happen when all lawnmowers stream data and how that might change the way you think about extended warranty services? Well hacking a few lawnmowers now to create a test data-set might just give you a competitive insight to the future.
Its all part of a digital business future you are going to have to invent. Its going to involve some fairly gutsy and original experimentation. It won’t be about just adopting and adapting pre-packaged ideas from vendors and often it won’t be about incremental tweaking. Moving your website to a mobile app – that’s innovation. But Square payments and Renew Smart waste bins – they are the outcome of physical R&D. Yet those two examples are both in information business model, services businesses.
So just maybe your bank / insurance / media / advertising or other services industry company should be investing in a proper R&D function – and naming it so.
A Uniliver R&D Center in Bangalore
(image: DSWati, wikimedia commons)
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by Mark Raskino | August 13, 2013 | 2 Comments
This week my colleague Ken McGee pointed out an article in the Wall Street Journal that provides more evidence of the end of the great BRICS story. Western business belief in BRICS as the big growth gold rush, has been a dominant feature of the corporate strategy landscape for a decade or so. That has distracted a lot of mindshare and money away from the strategic use of IT for innovation.
Driven by Moore’s law progress rates, IT in all its forms, has for decades been a powerful tool for business innovation. However, to want value from that force, genuine innovation needs to be high up your corporate growth agenda. Despite every CEO’s protestation that they value innovation, there are often easier ways to make money. BRICS has been a great example. Why take risks inventing new things or new ways to do things – if you can just do a lot more of the same thing, but in China? If China builds more cities and every city needs fast food outlets / mains water pumping systems / traffic lights / buses / insurance – lets just make a China adapted cookie cutter version of what we already know – and replicate, to make some money. Alternatively, lets transplant the same method of production to India, where labor is cheaper and use the saving to reduce prices and increase the size of our market. Simple, and rewarding growth – without new management science or new computer science.
Of course surfing the BRICS play is not the only “innovation-less” strategy path to growth. Consolidating parts of an industry by serial M&A is a good traditional alternative to significant innovation. Another is smart refinancing. In recent times larger corporations have been issuing a lot more bonds, which they often use for stock buy-backs that in turn pump up share prices – providing a good capital return to shareholders. Ratings agency Fitch points out that US Industrial company bond issues “now total $3.2 trillion, up from $2.2 trillion at the end of 2009“. However, the reason that corporate bond issuing play has been working so well is mostly because governments are suppressing interest rates on their own bonds artificially low. And though the cheap money is also available for a possible M&A war chest, the fact is stock prices have risen considerably over the last 2 years.
So the BRICS are slowing, the bond issuing play will become less attractive as central banks start tapering and interest rates gradually start to rise, and good M&A targets may not be priced cheap enough to make them an easy and obvious win for skeptical shareholders.
Under these conditions, CEOs and boards will need to look for alternative growth strategies. Deeper innovation of products, services, business models and operating models might start looking like a stronger alternative, despite the complexity and risk. It’s been long time since business leaders invested deeply in technology enabled growth strategies – the last time we saw something like 10% average IT budget increases was 2001.
There’s nothing a farmer likes to see more than a long-time fallow field that is ready to be seeded. Right now, digital business looks like that kind of field. The soil is choc full of new nutrients – mobile, social, cloud, big data and the internet of things. Meanwhile some of the growth plans in the over-used ”undigital” strategy fields are starting to look distinctly wilted.
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by Mark Raskino | August 2, 2013 | Comments Off
“Leaders who put their faith in strategy units are abdicating their responsibilities”
[ Sir Terry Leahy, former CEO of Tesco ]
I chose Terry Leahy’s quote because he has been regarded as one of the more successful Fortune 100 CEOs of recent decades and he has written a book encapsulating his wisdom.The quote shows he was rather dismissive of the idea that strategy could be delegated. However his successor, Philip Clarke appears to have a different view – he has had two strategy directors already. I use Tesco only as as an abstract example – to illustrate that management best practice thinking is still a little undecided about the need for this kind of role, even though it has been around for decades.
What do you think about chief strategy officers? To be honest, many business and IT senior managers and executives that I meet tend to sneer a little. Some probably fear the sometimes rather covert and semi-detached nature of a corporate strategy function. Others may see the existence of the role as a symptom of all-too-clever board level politicking – with some faction or another trying to supplement or supplant the incumbent CEO. But about a third of Fortune 500 companies have someone doing a corporate strategy role, so no matter how much cynics may want to dismiss it as either an apparatchik or exit lounge position – it is often substantive.
That matters because we are quickly entering into an era of new digital business strategy excitement and fast moving activity. There’s evidence everywhere, from head hunters seeking chief digital officers to board agendas dedicating time to the subject. In any company that has a professional corporate strategy leader supporting the CEO, the CIO needs to rethink what kind of “digital” thinking might originate from that source over the next couple of years.
I’m researching the role of chief strategy officers in end user businesses (not IT vendors) at the moment. If such a person exists in your firm I’d be very interested in hearing from you.
[ mark dot raskino at gartner dot com ]
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