A rewarding and important role
The respondents say the CIO role is becoming more rewarding (85 per cent) and becoming more important to the business (95 per cent).
Only 20 per cent of New Zealand CIOs think the role is being sidelined in the business.
New Zealand CIOs share their current focus and what they plan to spend more on within the next three years.
Today, improving IT operations comprise the bulk of the functional activities of CIOs, and in three years, will continue to do so. They will, however, spend more time on security management and less time negotiating with vendors and managing IT crisis. The focus on cost control and expense management will remain constant.
For transformational activities, CIOs spend the most time on aligning IT initiatives with business goals, as well as implementing new systems and architecture and leading change efforts. In three years, they expect to increase their work around leading change efforts, and implementing new systems and architecture.
In their strategic activities, CIOs want to continue driving business innovation, as they are doing today, until the next three years. An overwhelming majority (95 per cent) see the role as becoming more digital and innovation focused.
This presents a juggling act for CIOs - 70 per cent of New Zealand respondents say it is challenging to find the right balance between business innovation and operational excellence.
The balancing act
Bradley de Souza says CIOs in other geographies also face this challenge.
Speaking from the perspective of having held CIO/CTO and CDO roles in New Zealand and across the globe, de Souza sees how business technology leaders caught in this balancing act are responding.
One way is to keep costs ‘net neutral’.
For instance, every dollar the CIOs spend on innovative projects or emerging technologies, should correspond to finding ways to reduce the same amount in operational costs.
People use this as a means of driving innovation in operations, says de Souza.
He cautions, however, about cutting cost without changing the business model.
In one organisation, management cut costs by asking suppliers for discounts. “They were not saying, we have this system, so how do we save money? What can we do differently?”
“It was not about innovation,” states de Souza.
If CIOs are bogged down with the day-to-day challenges, they will not be able to offer innovation to their respective organisations. Instead, vendors will drive change according to their own sales agenda
Another approach CIOs can take is to reduce the level of complexity, by simplifying operational systems. De Souza says, “We are seeing this in a lot of investments in AI, particularly for customer care.”
For instance, chatbots enhance the existing help from online information sources. They are putting an AI interface onto existing help sources, so that when people do a search, the results that come out are more relevant.
In banking, CIOs look at reducing operational costs by sending out electronic statements, or enhancing the notification capability in their app, so customers can be alerted via SMS.
He believes, nonetheless, that CIOs should initiate projects on emerging technologies.
“It is really important to take the initiative in pure play innovation if you want to lead in the market and not be led by it.”
He adds that, “We are seeing a lot of incumbent companies scrambling to follow the leaders. They are not innovating, they are trying to copy, that is a problem.”
There is a need, de Souza says, for the kind of change that the likes of AirBnB and Uber have done, where it was about “applying completely brand new thinking; processes leading to innovation.”
He has seen established organisations apply this thinking by creating a separate venture carved out of the organisation and “put somewhere else to create distance, room to breathe, grow, and develop.”
Airlines are doing this by creating low cost carriers. Some of the low cost carriers have become so successful that the parent companies are feeding more and more passengers that way.
“It is shifting the pattern as they are creating a new brand,” explains de Souza.
Alternatively, they can start from scratch as in the case of easyJet or Ryanair. “They understand every aspect of the airline industry and are optimising it.”
“They have gone from strength to strength where existing carriers are failing. They are built on lean operations with lean platforms,” says de Souza.
They know the cost model, margins, and the technology. “They are recreating the airline experience and removing what is unnecessary.”
CIOs, he says, can be involved in these changes.
“If CIOs are bogged down with the day- to- day challenges, they will not be able to offer these types of innovation to their respective organisations.”
“Instead,” according to de Souza, “vendors will drive change according to their own sales agenda.”
CIOs will need to re-assess their investment strategy in operational excellence, knowing that legacy systems are unlikely to enable a complete digital transformation
The State of the CIO study captures well the current global trend where executives focus on digital transformation and innovation, notes Dr Ilan Oshri, a professor at the University of Auckland's Graduate School of Management.
Oshri cites the results of his earlier study which shows how CIOs struggle to strike a balance between investing in ‘keeping the lights on’ and digitally innovating.
“This study captures this aspect very well, showing that the coming years are going to be even more challenging for CIOs as the costs of owning IT platforms are increasing while IT budgets have only edged up,” he points out.
“CIOs will need to re-assess their investment strategy in operational excellence, knowing that legacy systems are unlikely to enable a complete digital transformation, while seeking strategies to shift services to digital platforms and support them with smart automation solutions.”
A positive note in the survey is how the organisation looks at the CIO as a strategic adviser (an overwhelming 90 per cent in ANZ) when it comes to considering technologies.
CIOs are also tapped to recommend technology solutions to address business initiatives, and during cross-function projects, where IT works with a line of business on a project.
The survey finds CIOs play a major role as their organisations step up in their digital transformation.
The survey finds leading digital business initiatives is their CEO’s top priority (71 per cent across Australia and New Zealand), followed by upgrading IT and data security to avoid a cybersecurity attack (44 per cent) and simplifying IT (40 per cent).
CIOs also wear many hats in digital transformation.
Interestingly, the areas they see where they will have the most difficulty in finding appropriate skill sets are linked towards the digitisation of the business. These are in big data and analytics, AI and machine learning, security and risk management, and application development/programming, and DevOps.
CIOs also find themselves involved in a raft of activities as their organisations speed ahead towards digital transformation.
According to the CIOs, they are working more closely and more often, on group projects involving their colleagues in other business units. They are also working on innovation projects with nontraditional partners, a vendor outside the major enterprise software providers, or a startup. A quarter of respondents have brought their leadership teams to visit technology companies locally or offshore.
“What this data tells me is that there is an increasing awareness in NZ businesses that they need to change and we are starting to see some fundamental shifts as agile and collaborative working are adopted,” says Nicki Raistrick, managing director of consultancy Innovate and Transform and a member of TechLeaders.
“Initiatives like technology visits and bringing startups into the organisation are indicators of early maturity and the steps executive teams need to go on to learn about the changes required,” she says.
Raistrick adds that, “We need to move quickly past this phase and start to put in place the mechanisms for enterprise wide ecosystem change.
“Organisations are already on this journey have governance that embraces change. They are retraining and reorganising for agility, have truly cross functional teams with shared purpose and accountability for results, and a greater focus on value creation which will help people de-prioritise busy work.”
Agile and DevOps are growing in popularity, but “changing working practices isn’t that hard,” she says.
“It’s the mindset and enterprise-wide ecosystem change that companies need to understand and get moving with if they are to be successful in driving greater organisational agility.
“Holding hackathons is great if you run a dev shop and want to keep your developers sharp by experimenting with the latest technologies,” she says.
She stresses, however, that “for most businesses, a collaborative working session with fewer people and paper prototype outputs may generate as much or more value at a far lower cost.”
Far-sighted businesses are recognising that leaders are being disrupted and they need mentors, perhaps, more than anyone
Raistrick says collaborating across business units is a welcome trend if they are being cross-functional.
These projects also help change the relationship of the CIO and the technology team from order taker to partner with shared purpose, accountabilities and alignment around value creation.
She notes how today’s corporates are increasingly looking to startups to relearn how to be adaptive, responsive, and value-focused.
“But corporates are set up to be run for efficiency, which is hard for a startup to understand, and they often don’t have the resources to withstand changes in priorities and management focus,” Raistrick observes.
“A successful partnership requires an understanding of how each fits into the ecosystem, for both to be realistic with expectations, and have a governance model that embraces change and provides the ability to pivot quickly.”
She stresses that promoting awareness of mindfulness approaches and the importance of managing workplace stress is important.
Of equal benefit would be a focused effort on managing people's workload by reducing work in progress and being better at prioritising out busy work, she states.
“Mentoring is something we all need, and far sighted businesses are recognising that leaders are being disrupted and they need mentors, perhaps, more than anyone.”
Show me the ROI
This year, CIOs note how they are under “extreme pressure” to defend their investments and prove ROI, as cited by 69 per cent of respondents.
Following an extensive career as CIO in both the public and private sectors, CEO of Chelmer Limited Alin Ungureanu understands the situation they are in.
“I agree that ‘money doesn't grow on trees’ but most importantly focusing an organisation’s energy on the wrong projects is wasteful and can lead to losing one’s competitive advantage,” he says.
He adds that, “Investment needs to be defendable and benefits need to be measurable.”
CIOs should go beyond financial metrics and concern themselves with investment benefits from managing the cyber risk, benefits from client satisfaction, or innovative approaches to combining and manipulating data
“However, this needs to be balanced to avoid missing the opportunities because you are too busy calculating the return.”
“Indeed, in the end, those activities can and will have a financial impact,” he says.
“Pure focusing on the dollars as the start and the destination will miss the point with the clients, employees, and business partners.”
Ungureanu states that, “Not all clever ideas and initiatives laden with benefits can be easily calculated and deliver a robust ROI plan.
“Business leaders need to trust the capability of their IT leadership and empower them to deliver on their vision.”
“I have been in projects, and I have seen organisations, where the only progress was on writing the business case and answering the board’s questions.”
“By the time they were ready to execute, it was too late and great visions and market differentiating activities [have] collapsed.”
Ungureanu advises: “CIOs need to clearly describe the ‘why’ and ‘what’ that is to be achieved and use their track record and their capability to back the initiatives and get everyone’s buy-in.”
“It always helps to demonstrate how you will measure the benefits you promise to achieve.”
The ROI will naturally be seen as a financial performance metric, he adds.
CIOs, however, should go beyond this and concern themselves with investment benefits from managing the cyber risk, benefits from client satisfaction, with an efficient and effective application user interface or innovative approaches to combining and manipulating data.
At the same time, customer satisfaction, customer retention, efficiency, and effectiveness of processes, even the onboarding and offboarding processes reduce an organisation’s risk and costs, Ungureanu points out.
“They also affect an organisation’s brand and reputation.”
Next up: CIO career paths