Digital Transformation can feel like a crowded domain for the C-suite. New roles have emerged, from Chief Digital Officers to Chief Data Officers. Chief Marketing Officers are spending big on digital and Chief Finance Officers are flexing their number-crunching muscle to take leadership of Data & Analytics. In amongst all this jostling for position, what is the leadership role of the CIO?
Starbucks sees a fundamental digital role for the CIO. When Stephen Gillett took over as CIO of Starbucks in 2008, its stock price had lost half its value in less than two years and its same-store sales were declining. Stephen Gillett began by pitching the idea of a new business unit focused on digital innovation and customer engagement. The “Digital Ventures” unit would fuse marketing’s product and consumer knowledge with IT’s technical expertise to deliver a digitally enhanced customer experience at Starbucks stores. Digital Ventures went on to deliver a range of innovations that played a pivotal role in Starbucks’ turnaround, such as the mobile payments program linked to the company’s loyalty cards.
This Starbucks story is a tale of close collaboration between Gillett and Starbucks CMO Annie Young-Scrivner. Our 3-year research with the MIT Center for Digital Business also underscores the significance of a strong partnership between IT and the business in driving successful Digital Transformation. Digital Masters, such as Starbucks differentiate themselves from their peers by consciously striving to build a close relationship between IT and the business. However, fruitful IT-business collaborations are rare. Instead, the business often finds IT’s high costs and long implementation timelines unacceptable. Or they complain that IT leaders do not speak the language of business. There are three areas where the CIO can take practical action to build bridges and drive digital transformation:
- Create a digital IT unit with a cross-functional team structure. Here, IT and the business work together as part of one digital IT unit, with common budgets, KPIs and objectives. This approach brings focus, reduces costs and duplication of efforts, and speeds up time-to-market for digital initiatives. UK-based Lloyds Banking Group has a digital services unit that is led jointly by a senior IT executive and a senior business executive. Not only does the unit deliver the technology solutions for the bank’s new digital retail banking initiatives, but it also ensures that business processes are adapted appropriately.
- Empower the business to rapidly test, build and roll out new digital initiatives. Rather than trying to own all IT and implementation decisions, CIOs such as Dell’s Adriana Karaboutis are comfortable with sharing control with business teams. At Dell, Karaboutis’s team built a self-service platform that allows business teams to test their own product ideas. The IT department then helps business teams take their ideas to production. Describing the rationale, Adriana Karaboutis says: “The line between IT and business is blurring fast. The CIO who tries to maintain walls and tries to own everything is the CIO who will go down quickly. This is now about a CIO who enables environments and allows choice and self-service as we move forward and look at the next best innovations. ”
- Rationalize IT infrastructure and reinvest savings in digital. Our research with the MIT Sloan Management Review shows that lack of funding is one of the most significant organizational barriers to Digital Transformation. Leading CIOs focus on improving the efficiency of traditional IT operations, so that the resultant cost savings can be diverted to digital innovation. For Phil Jordan, Group CIO at Telefonica, consolidation and simplification of IT infrastructure have been two of the key pillars of Telefonica’s global IT strategy. Under Phil Jordan’s leadership, Telefonica decommissioned 1,139 applications in 2013 alone. The number of systems in use has reduced from 7,000 to 4,200 in three years. The use of off-the-shelf Cloud-based solutions has also helped Telefonica cut costs significantly.
IT has for many years looked to build a stronger partnership with the business. Digital offers a unique opportunity to take that collaboration to a new level. Different facets of the organization – from marketing to finance – want to employ digital innovations to transform areas from customer experience to business intelligence. CIOs are essential for ensuring that IT and the business converge harmoniously on these digital innovations.