Expert Voice: Creating the Renaissance CIOBy Robert Johansen | Posted 02-04-2002
Expert Voice: Creating the Renaissance CIO
When Peter Solvik came to Cisco Systems Inc. from Apple Computer Inc. in 1993, Cisco was a relatively new company, with revenues of about $500 million. Though it had gone public just three years before, Solvik, brought on as senior vice president and CIO and now the head of Cisco's Internet strategy, already found a lot that needed doing. Within five years, Solvik and his team, in order to allow Cisco to achieve its growth objectives, replaced all of Cisco's back-office legacy systems with Internet-ready technology, then connected the company's front-office systems directly to customers. Now the company can take and place orders, answer customer queries and track shipments electronically, in one integrated operation. It's paid off: The number of customers using tech support over the Internet has grown from 70 percent in 1998 to 82 percent in 2001, and more than 90 percent of orders are received via the Internet. The result: more than $1 billion in cost savings annually. Not bad for an initial investment of a little more than $100 million.
The building of Cisco's so-called strategic I-Net didn't happen by accident. It takes a whole new breed of technology executive: what we call the Renaissance CIO. At a recent CIO Forum held at Procter & Gamble Co.'s Beckett Ridge Institute just outside Cincinnati, participants voted on the strengths they believed the successful CIO would need in the future.
First of all, Renaissance CIOs are just plain smart. Many were originally hooked by the intellectual challenge of computer technology: Hardware in the 1970s and 1980s, software in the 1980s and 1990s, networking in the 1990s to the present. Most continue to be drawn to the technology, and have demonstrated the ability to understand its potential beyond what general managers understand. Eric Schmidt, the highly successful former CTO of Sun Microsystems Inc. and now CEO and chairman of Google Inc., reflects that the CTO job is the best position in the company, in part because of its potential for great successor failureand that the job brings daily challenges. Renaissance CIOs are not interested in climbing the traditional career ladder.
And they are not narrow technologists, either. Most are broad thinkers with fast minds. These executives are not only good at IT; they are drawn to it, challenged by it. And they're quick studies of management, thriving on the challenge of understanding its intricacies. Since Renaissance CIOs view the world through an information lens, they frequently pick up on patterns that other executives, with their people-oriented, financial and customer-driven perspectives, will overlook. And they're attracted to companiesusually larger oneswith both the money to afford strategic IT and the business challenges that make the game worth playing. Yet some Renaissance CIOs have no formal IT background at all. Often, they come from the most important lines of business.
The Renaissance Technologist
The Renaissance Technologist
Renaissance CIOs have a balanced view of technology. They have a deep understanding of the real power of IT as well as a healthy respect for the risks associated with force-feeding IT to a reluctant organization traumatized by previous overpromises and underdelivery of IT benefits. The puzzles that intrigue and engage Renaissance CIOs involve designing IT into the business for strategic benefits, working effectively with senior management to make the organizational changes needed to get people to use that technology, and identifying organizational idiosyncrasies and qualified personnel who can smooth out those rough edges.
Renaissance CIOs approach technology from the perspective of architectureor more accurately, from the perspective of city planning. With bewildering speed, IT design has changed from mainframes to micros to networks. Digitization is revolutionizing everything: telecommunications, music, video. But Renaissance CIOs know they must rise above the details of these tasks to bring order to them. The goal of extracting information of value to the business cannot be accomplished while buried in the details, and thus the concentration on architecture. Working with concepts like form and function, the Renaissance CIO uses high-level schematic diagrams to define broad relationships among key technology components, then burrows down to detailed plans and drawings, and then to lower-level lists of the hardware and software needed.
Often, the first real test faced by Renaissance CIOs is what to do about legacy systems. Developed over time and integrated deep into the innards of how companies operate, legacy systems represent huge sunk investments. Worse, legacy systems encourage legacy thinkingthe idea that the organization's capabilities will always be limited by its current systems, making innovative strategies impossible to support. An organization whose legacy system won't support different product prices in California and Pennsylvania is less likely to study whether different pricing policies would increase revenueand thus may be missing out on major improvements in strategy, the benefits from which might easily pay for a systems upgrade 10 times over. Unfortunately, the risk of successfully mounting a project to replace a legacy system is laced with so much organizational change that the probability of success is poor.
Most CIOs linger over the legacy issue, but Renaissance CIOs force the decision, manage through it and move on. Solvik's first item of business when he became Cisco's CIO was to address the legacy systems problem. Within nine months, Solvik and the Cisco management team had done away with the company's legacy systems entirely, replacing them with Internet-ready technology.
As part of their architectural planning, Renaissance CIOs see the Internet for what it is: a revolutionary collection of technologies that will drive the economy to the next level by unlocking the potential value in organizations, customer networks and the knowledge base of Internet users outside the firm. Like television in 1957, the Internet is on the verge of transforming from a technology to a medium, and that means the Renaissance CIO will be responsible for how their firms will play in this arena.
The Internet has changed every company's computer environment from a finite number of owned and controlled computers to millions of interconnected computers, a system that changes continually as new features are developed and made available through the Web. Thus, the idea of a single operating system controlled by a particular company has become obsolete. Instead, the operating system is evolving into an open-standards environment in which the best components offered by any number of companiesfor security, encryption, objects, data, video and the likewin out.
No longer can CIOs look to one vendor to supply them with the operating system and to integrate every new feature onto their platforms. The result: Renaissance CIOs keep their eyes open for major new trendsthe potential for wireless appliances to supplant PCs as the dominant method for getting on the Internet, for instanceand embrace the challenge of increasing complexity.
To that end, some companies are separating their IT operations from their IT strategy. At Procter & Gamble, IT operations have been separated from the CIO, who concentrates on strategy. Steve David, the company's CIO, has the additional title of business-to-business officer, while Mike Power, operational head of the IT network, is vice president of global business services. The logic is compelling: Separate IT and run it as a utility that provides services for the rest of the company, and give the CIO responsibility to plan strategy for IT use in the context of corporate strategy.
The Renaissance Manager
The Renaissance Manager
Renaissance CIOs view their organizations as IT-enabled networks designed to exploit resources, including, but not limited to, the information resource. Unlike the functional hierarchy of the Industrial Age, the Information Age organization is permeableits boundaries are soft. The network organization is an "extended enterprise" that includes suppliers and customers as partners in strategic alliances. The Renaissance CIO sees this network as a natural conduit for the free flow of information in creating business value.
The network is the operative term describing the organization. Communication in the organization is point-to-point, often enabled by technologies such as e-mail, wireless and video. The organization is also organic: It changes in size and relationships through time, depending on the strategy of the business at the time. Indeed, the network organizational takes on technologies that mirror its organization structure. It is now possible to create organizations that have no center and grow from the edges. We are on the threshold of what might be called the Napsterization of groupware, while grid computing lets a vast network of individuals share their local processing power to create a networked organization. The early examples of such radically decentralized organizations are likely to be small and experimental, but big companiesled by their Renaissance CIOsare being attracted to the same capabilities.
Critical to the success of these organizational networks is the knowledge they depend on, and knowledge management is now evolving to manage and exploit its potential value. Renaissance CIOs understand the value of knowledge and lead in the effort to manage and exploit it. To that end, Renaissance CIOs help their companies better understand the value of intellectual capitalknowledge and human assetswithout which no company can succeed. They create the homemade internal working measures needed to track the true business value of the information capabilities created, and use those measures of intellectual capital to convince their capital spending committees to endorse spending on IT initiatives that create, conserve, share and protect intellectual assets. The "offensive" activities include strategically sharing information with supply-chain partners (to improve inventory control, coordinate delivery times and enable customized logistics solutions) and intimidating competitors (by showing them how tough it will be to compete). The "defensive" activities include data administration, developing virtual private networks, and security and encryption.
The Renaissance Strategist
The Renaissance Strategist
As Michael Porter has pointed out in his recent Harvard Business Review article, "Strategy and the Internet," business strategy is a discipline in itself. Strategy is a complex process of building integrated component parts into a system. By itself, IT is not a strategy; nor is the operational efficiency enabled by IT a sustainable strategy. IT has no inherent content, no inherent value. IT functions as an enabler. Renaissance CIOs understand this connection and don't count on technology to do too much. Technology enables, but there must be something to be enabled. Technology, for example, can make a rigid, hierarchical organization more hierarchical, but it can also help a horizontal organization function more aggressively in network mode.
Renaissance CIOs do not view their jobs as providing IT resources to support strategies already in place. A support orientation is purely passive, and it works fine as long as IT has no more than an incremental role to play in strategy. Instead, the Renaissance CIO is right in the midst of the process of formulating strategy, providing ideas on how IT might be used for strategies that are impossible without it. Renaissance CIOs understand that the information systems they conceive today will determine tomorrow's information-processing capabilities, which in turn provide support for the set of future strategies that the firm can choose from.
In the past, IT applications were labeled "strategic" if they involved large amounts of money, lacked a solid economic rationale but executive support, or were being usedfor better or worseby industry rivals and were thus considered required to stay in the game. Renaissance CIOs have never been fooled into thinking that IT investments become strategic through industry fads. They know that IT gains strategic importance only when it supports or augments how the information collected, analyzed and carried by technology can be used to create value. And Renaissance CIOs understand that truly strategic ITusing information (gathered not only through IT infrastructure but through a company's essential business processes) to bolster its strategic options, its capabilities relative to its competitors, and its ability to alter its competitive tactics based on real-time informationis still in its infancy.
The Renaissance CIO maintains a healthy paranoia about competitionthat's why Andrew S. Grove, chairman and cofounder of Intel Corp., called his 1996 book Only the Paranoid Survive. Competition can come from anywhere, and it's just as likely to come from a newly formed dot-com or a firm diversifying in an unexpected direction as from an established competitor. LDDS, now part of MCI WorldCom, turned a network of defunct natural gas pipelines into a fiber-optic telecommunications infrastructureblindsiding many higher-tech competitors. And now, business networking providers are coming under pressure from unexpected sourcescable-based networks in sewers, laser-based wireless networks that shoot information from skyscraper to skyscraper, and data transmissions over electric power lineseven as they now replace their 20th-century infrastructure with expensive 21st-century optical networking technology.
The most useful exercise an insufficiently paranoid company can undertake is to identify the "competitor from hell"the potential competitor the incumbent would least like to see entering this market, whether it be a current rival or not. Sketching the profile of your worst nightmare becomes an opportunity to identify key capabilities, existing customer and supplier relationships, and scarce resourcesnot only what they are but where they are in the competitive environment. Such pre-emptive strategic analyses can lead to a strategic acquisition, the formation of an alliance with the potential competitor before it steals a march on you or, if all else fails, a head start on mobilizing a counterattack as soon as the competitor makes its move.
That's why Renaissance CIOs don't allow their view of the dot-coms and what can be learned from them to be clouded by dot-vertigo. The dot-com revolution isn't over just because the latest Nasdaq bubble has burst. The most profound impact of the dot-coms will come in the changes that have been stimulated in very large organizations. Dot-coms tested the traditional assumptions about how organizations worked, stretching the limits of what was possible, forcing businesses to re-evaluate their vulnerability to attacks by smart, technology-enabled entrants. The dot-coms experimented while the larger companiesled by their Renaissance CIOslearned, and these companies have been changed in ways that may not become apparent until they start competing head-to-head in truly electronic markets.
The Renaissance Leader
The Renaissance Leader
Renaissance CIOs make themselves highly visible within their organization, building relationships and trust with peers, working persistently and facing boldly the tough decisions that go with the job. They lead without controlling, without simply telling people what to do. Traditional IT leaders were trained to control, and systems were the medium of control. The common term "control systems" now appears quaint, however, perhaps even sinister. Today's organizations are part order, part chaoswhat Dee Hock, the founder and CEO emeritus of Visa International, calls "chaordic." Visa's IT systems produce and assist at least as much chaos as they do order. Leaders in a chaordic organization decide when to lean in toward chaos and when to steer toward order, and the Renaissance CIO is a master at navigating the straits between the two.
The days are long gone when it was fashionable for senior managers to declare, "I am not a technologist, nor do I personally use computers." What was fashionable then is embarrassing now. Today, computers and the Internet are so pervasive that every manager must be proficient in directly using computers and networks. Renaissance CIOs lead the way in the effective use of IT on the part of managers in the organization. Communications are generally face-to-face or electronicpaper memos have virtually disappeared. Like every other effective executive, Renaissance CIOs, despite an affinity for e-mail, "drop in" when only face-to-face will suffice. Renaissance CIOs, like other leaders, now have a mental algorithm that suggests to them which medium works best for the task they must perform. In-person meetings, for example, are typically best for orientation, trust-building and team renewal sessions. Implementation, however, requires asynchronous mediae-mail, intranets, project databasesin order to maintain speed, particularly if the work is distributed. Face-to-face has become just one method of communication in the mix.
Like the CFO's fiduciary responsibility for ensuring that financial resources are secure and effectively managed, the CIO has a similar fiduciary responsibility for the corporation's information resources. When these resources are limited to accounting and budgeting for hardware purchases, packaged software, programming resources, maintenance and so forth, a conventional CIO can handle the responsibility. But Renaissance CIOs extend this fiduciary stewardship by working to maximize the value of the information contained in the organization's systemseven though that value is not directly measured, budgeted for or well understood by higher management. The Renaissance CIO thus extends this fiduciary responsibility from cost minimization to value maximizationfrom saving money to making money.
In keeping with their managerial style and active management of information assets, Renaissance CIOs must not only be smart leaders but wise leadersa more complex and subtle task indeed. Smart leaders see only the "technology trees," though they can count them precisely. But the wise leader sees the "information forest." Smart leaders are focused on speed, responding rapidly and driving for fast turnaround. A wise leader looks for the long waves of change, beyond the momentary pressures. A wise leader can also be fast, but the speed is part of a larger, longer-term strategic context. Smart leaders are tempted into habits, done over and over again to increase speed, while losing sight of their original purpose. The wise leader creates practicesactivities he or she performs in a variety of circumstances that improve with experience.
Today's top corporate IT manager faces the highest rate of change of any senior manager. The rules for success for the top IT executive continue to change faster than the location of Nathan Detroit's floating craps game in the musical Guys and Dolls. Yet many of the most talented executives continue to seek out the top IT jobs in their companies, and thrive on the challenge. That is the Renaissance CIO: an executive with a unique view of his or her role within the company who is unafraid of the difficultiesarchitectural, managerial and strategicof the job. For Renaissance CIOs, it's not just the best position in the company, it's the only one they want.
Comments on this story can be sent to editors@ cioinsight.com.
Richard L. Nolan is the William Barclay Harding Professor of Management of Technology at Harvard Business School. His latest book, Sense and Respond: Capturing Value in the Network Era, was published by HBS Press in 1998.
David C. Croson, an assistant professor of operations and information management at The Wharton School at the University of Pennsylvania, researches such issues as the economics of IT and organizations, and the role of information systems in negotiating and sustaining strategic alliances.
Robert Johansen, president of the Institute for the Future in Menlo Park, Calif., is currently researching new models for leadership.
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Birth of the Chaordic Age
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Strategy and the Internet
By Michael E. Porter. Harvard Business Review; 79(3): 62-78, 2001