Ellen Kitzis Dr. Kitzis directs Gartner's Executive Program in the Americas, which provides research and advisory services to more than 1,500 CIOs worldwide. Kitzis also has served as VP of strategy for Compaq's Services Division, and as VP and worldwide director of Gartner's Dataquest IT Services group. She has a Ph.D. in sociology from Tufts University.
As 2002 comes to a close, there's a big gap emerging between what CEOs and top business leaders say they need to achieve with technology and what CIOs are able to delivernow and for the coming year. IT executives are hearing mixed messages, says Ellen Kitzis, the chief of Gartner's Executive Programs in the Americas: Drive top quality, but cut costs. Start new projects, and stop them. Standardize, but shrink the investment in infrastructure.
What's going on? Kitzis says most CEOs are demanding that CIOs perform "a new balancing act" driven by increased economic instability, which Gartner says will continue through 2003.
At the end of what she calls "one of the most volatile years for CIOs in a decade," Kitzis draws on recent research and interviews with hundreds of CIOs across the corporate landscape to explain how CIO behavior and priorities must change, fast, to cope with what has become a crazy quilt of conflicting priorities from the boardroom.
Can CIOs meet all these expectations perfectly? Kitzis says they should not try. Delivering "good enough" is all that's requiredat least for now. But don't attempt to figure out how to make these tough trade-offs alone, she cautions. Wise CIOs, Kitzis told CIO Insight Executive Editor Marcia Stepanek, ask for a lot of help. What follows is an edited transcript of her interview.
CIO Insight: What is the new balancing act that's being required of CIOs?
Kitzis: If we had sufficient time, budget and resources, nobody would have to make tough choices. Unfortunately, this economy and the speed at which business wants to operate make it impossible for CIOs to deliver a 100 percent solution to each opportunity or demand, as they pretty much strove to do during the technology boom. In 2002, they have been required, suddenly, to start making some serious trade-offs.
CEOs told them to create value and drive growth, but to cut IT costs. That's the balancing act we're seeing now. We can't deploy every business solution we want, and we have no time to add all the bells and whistles, so we have to figure out how to deploy solutions that are good enough from a functionality and a time-to-market perspective.
Take the budget process. In the past, you got a clear annual budget, and you spent it. Today, very few companies actually have one; it's old before the ink dries in most cases. CIOs have to decide what's possible in the current climate. And today we can't always, as we tended to in the past, simply choose to either deliver a 100 percent solution or do nothing, because doing nothing may not be an option. Taking some IT action that keeps us from slipping too far behind, or becoming totally noncompetitive, is better than doing nothing. "Good enough"in other words, the best we can do under cost-squeezed circumstances within the context of competing interestskeeps us in the game until the opportunity for further investment lets us take the lead.
"Good enough" is a trend we see in both our personal and professional lives. It forces us to make choices, and those choices require trade-offs. We want dinner but we can't make every meal from scratch, so we buy prepared foods. We want to work and have families, but this means every night both parents can't be home to tuck the kids into bed. One parent has to be "good enough." In companies, we see the same decision processes being applied to technology decisions.
Who's doling out all the conflicting demands in the corporation?
They're coming at CIOs from all sides of the business, but I think it starts with the CEO. CEOs set the tone for their companies, and the challenge is that CIOs have to learn how to juggle competing business interests. I think CEOs play this balancing act every day of their lives. Do we take a write-off this quarter and take a financial hit now so we get a longer-term gain? Do we opt to pursue one product line instead of another? CEOs make these trade-offs between investment and value all the time. The challenge is that now they're asking their senior leadership team to do the same thing. This past year, our surveys showed that for the first time, CIOs felt they were getting a heavy dose of mixed messages from the business side about what they should be doingnot just in IT but also for the business. This is not a set of messages and a set of decisions that CIOs have had to grapple with before, and that's why it's been so hard.
For example, in prior years, many CEOs drove revenue acquisition. The whole game was driving growth. When they set that agenda, spending was not an issue. But when CEOs switched the agenda in 2002, they said you couldn't just drive revenue anymore. You also have to drive value and profit. It put the whole enterprise into a tailspin because everyone always had enough money to create business value. Not so now.
This is the first time in a very long while that CEOs are setting an agenda for the whole organization that says do more with less, and to many CIOs, the messages they're hearing now can sound very contradictory when it comes time to execute. I don't think we've ever had a downturn like the one we're having now that most CIOs can relate to. A lot of them don't know how to make the tough trade-offs now required as a result.
Let's look at some of these contradictory messages.
What made 2002 really crazy for CIOs, according to our surveys, was a gap between what business leaders said about strategy and growth and what they told CIOs they actually wanted them to do about it, technology-wise. Again, top executives were saying, "Create value. Drive business growth." But given the funds they were making available, they were also saying, "Take out IT costs." If you, as a CIO, only heard "create value" without realizing that you had to do more with less on all fronts, you probably had a really tough year.
Here's another mixed message CIOs heard in 2002: Be innovative and think out of the box. But when CIOs tried that, they became involved in projects that were shut down, sidelined or ran out of cash.
But probably the most uncomfortable thing CIOs had to do this year was to accomplish in six months what every strand of DNA inside them insisted would take 18 months.
What's the toughest message of all, and are CIOs really clear on what it is?
The über-message is also the toughest messagedo more with less. My sense, from our research, is that CIOs are hearing all the contradictory messages, such as "reduce costs" and "add value." I think CIOs are trying to act on all of them, but eventually they reach a point where the only solution is to assess what the company needs and can afford at the time, and use that analysis to come up with "good enough" solutions. They're going to need to bring in business leaders to help them decide what's good enough to be satisfactory. In other words, it's not that CIOs don't hear the messages, it's that they're groping to respond to ambiguous or conflicting ones. Top executives don't always understand that sometimes less can really be less, not more. For a lot of CIOs, determining the CEO's message this year was especially tough, a bit like trying to make out Plato's shadows on the wall of the cave, where one only sees the reflection of a reflection of an image.
Eventually, CIOs reach a point where new cuts now impact business decisions. The result? Frustrated CIOs who don't consult with the business side take risks by cutting back on much-needed infrastructure investments, or they try to find alternative suppliers that promise to deliver the same result but for less money. These, I dare say, are often very disappointing exercises. The CIO without a good anchor in the business will be left making poor choices, often sacrificing the right decision for the most politically vocal.
How do you balance these conflicting and ambiguous demands?
Wise CIOs say, "I've got to get the business units to help me figure out what they really need." They don't say, "I already know what they need and can figure it out alone." If they've worked at developing the right people networks, and they have sponsors and good communication strategies within the business units, they are going to know where they can cut and where they shouldn't.
The wise CIO also learns how to use a portfolio management approach to prioritize what they need to do. That allows them to trade risk for return, and strategic value versus "nice-to-have."
Wise CIOs also learn to do "guerrilla development"in other words, they push projects forward with less money and in smaller chunks. They identify a need, and then get small teams together quickly to help define for the business units the right project at the right time and, in some cases, find off-budget funding for it. They're able to provide value to the business in a tough time, fast.
The obvious question is: Is this balancing act a temporary reaction to a crazy world? Some of it, I think, represents a permanent shift in the way CIOs have to approach their roles from now on. For example, the balancing act between cost and value is one that we ignored for a very long time. I'll never forget sitting with the CIOs during the e-business boom. We'd see all this frenetic behavior, and ask CIOs what the cost-benefit analysis was concluding that justified putting in 22 new portals. Back then, CIOs told us they simply didn't have the luxury to sit around and analyze the business because if they did, other executives would think the CIO was falling behind. The e-business frenzy took away rational behavior. Now people are turning their backs on a feeding frenzy in which nobody articulated value. These mixed messages from executives are, I believe, a sign that things are returning to rational economic behavior.
I also think that in this new balancing act, the wisest CIOs are learning the difference between stated business goals and what IT can and should realistically deliver. This year, our surveys show, 50 percent of CIOs report directly to the CEO. That's had a huge impact on communication at some companies. In those firms, CIOs are getting better at translating business-speak into IT action because they're not getting the business priorities filtered by people who distort the message. They're hearing it directly. This has helped some CIOs and their IT organizations differentiate between what the business says it wants and the minimum it can live withand then deliver systems and support that's more realistic or better targeted to what the business actually needs. There's still a gap between strat- egy and reality, of course, but some CIOs are starting to get on the same page a little better.
Even if the message from the business side is becoming clearer to some CIOs, are all of them skilled enough managers to make the right choices?
Put it this way: There are wise CIOs, and there are bumblers. The bumblers, the disconnected ones who rarely talk to the business side, are taking the biggest risk of all in this downturn because they are making all the tough decisions in a vacuum. The bumblers are sitting there making the trade-offs all by themselves. They're trying to figure out how to make multiple constituencies happy and stay out of trouble, and keep their jobs at the same time. But these people, in the end, will not be successful. Why? Instead of talking to their business partners to help them make the right choices like wise CIOs do, they're sitting there trying to make these tough trade-offs aloneand they risk making bad choices. They're don't really understand the business value associated with their decisions.
So if you're in sync with business strategy, will you come out of this downturn relatively unbruised?
In fact, you're going to come out of it very much the hero, because you've done what's best for the business. You've optimized what they need, not what you think they need. "Good enough" is about being wiser. It's doing more with less but understanding when you've reached the point of diminishing returns in terms of investment.
Give me advice for the bumblers. What three or four behaviors must CIOs learn in this new world of ever-tougher trade-offs?
The bumblers, or strugglers, tend to have a couple of characteristics. He or she probably has staffed his or her organization with very skilled technology people, but has very few who are good at business and financial analysis. So the first thing strugglers need to do is get IT people who know how to do business and financial analysis. Then they have to learn how to speak the language of the business units. You don't make a 150-page slide presentation when you present to the board, like a CIO I knew last year had planned to do. You don't speak in acronyms like CRM or 802.11. You talk about business results that could be aided by technology.
Second, CIOs who are most at risk think they can make all the decisions by themselves. They think, somehow, if they can control everythinginvestment, prioritization and standards decisions within their own organizationsthey'll be successful. But it's not necessarily the case. The CIOs who don't manage to integrate other critical decision-makers in the decision process tend to fail much more often than those who did. It's all about getting your constituents involved in a formal decision-making process, and then using that decision-making process to determine which projects should have more priority than others.
But here's the thing everybody's got to understand. All CIOs now really have to learn how to decide which business stakeholders are really important, which ones can really influence the things that they do, versus which ones are nice to play with but not as influential. CIOs haven't gotten used to having different types of stakeholders, but they have to. Increasingly, CIOs are being asked to talk to financial stakeholders, to Wall Street. Or now, as we see with new SEC regulations coming out of the financial reporting scandals of this past summer, CIOs could be asked to verify to regulators the quality and accuracy of data, just like the CFO is asked to do now. That makes Washington another constituent. So in some ways, CIOs have a new kind of role, managing stakeholders insideand outsideof the enterprise.
Do you see things getting any easier this year for the CIO?
Our most recent data forecasts say 2003 budgets are flat over the next 12 to 18 months. Will IT ever return to the days when we saw 15 percent to 20 percent budget increases year over year, as in the 1990s? I don't think so. The most successful companies are not necessarily those that spend the highest percentage of their revenue on IT, right? I think [author and management expert] Jim Collins said it well: Companies go from good to great because they come up with a great strategy idea, not because they deploy great technology solutions. Technology will never give you the answer. It will give you the ability to execute strategy better, if you use it correctly. But you can't use it correctly if as a CIO you're struggling in a tough climate to make difficult trade-offs in a vacuum. Now, more than ever, CIOs have both an opportunity to fail miserably, and a golden chance to shine brightly. Leaders don't lead by themselves.
For CIOs, the big challenge in 2002 was learning how to go from being a technology leader to a business leader. In 2003, CIOs will need to take it to the next level. Knowing what others are really saying won't be enough. They're going to have to learn to anticipate what others will need, and they can only do that if they make business leaders partners in their decisions. Learning to anticipate needs, of course, is a huge difference from what is happening now, but it's going to be critical, both for the business and for the CIO's ability to lead and, simply, to survive in these very crazy times.