Amid the increasing chaos of technology-enabled business disruption, stability has become a quaint notion, and the ability to adapt quickly has become the key to organizational success.
Nowhere is that more true than in the role of the chief information officer, because the relentless advance of computing technology is rapidly transforming the CIO’s role from that of high-tech accountant to that of a technical knowledge manager and streaming-data analyst.
Technology managers who are oblivious to this are about to have a rude awakening, according to John Byrnes, executive chairman of the board and president of Mason Wells, who delivered a blunt message during the recent 2015 Fusion CEO-CIO Symposium produced by WTN Media.
In a presentation on the future of business amid technological disruption, Byrnes outlined a framework for interpreting the forces that are driving markets in various industries. Specifically, he cited the forces of mobility, the viral adoption of social media, and the rise of virtualization and cloud-based business models that are profoundly impacting how organizations conduct their business.
With the transition to digital business models, the business case CIOs make before the board will have a much different rationale. “In the old world, the business case for investment in computer technology was primarily financial and cost-driven,” Byrnes explained. “In the coming years, the business case will be revenue-driven, with special focus on the customer experience, new product development, statistical process control, and outcomes management.”
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John Byrnes |
That means the CIO of the future will need a different cast of characters reporting to him, as well as a performance model based on technical achievements and nonfinancial metrics. In this new world, says Byrne, the job of a CIO will involve a blend of horizontal and vertical market technology, and industry-specific technical skills will be required in the areas of mathematics, statistics, engineering, and scientific analysis.
“Enterprise software will be less and less universal across all industries and more and more specific to the applications space of the subject industry,” he said. “Although the middleware for many of the applications will be shared across industries, the user interface, data sets, and process pinch points will be quite different.”
Most consumers have their own computing device, and they download and use their own applications. As more people and devices are connected to the Internet, business organizations have an opportunity to leverage this to increase collaboration and engagement between their employees and customers. As a result, organizations will have to integrate increasingly diverse and sophisticated devices as well as new applications into corporate information technology.
Byrnes believes that successful businesses will differentiate themselves in the marketplace based on how they implement unique algorithms and proprietary data sets on behalf of their customers, and many of these systems will be indistinguishable from artificial intelligence. “People selection and development will be job number one for CIOs of the future, since the leverage provided by next-generation systems will require extraordinary application knowledge in order to properly interpret situations and control outcomes,” he stated.
Old versus new business
With the stakes getting higher and higher for technology managers, new business models are being considered in industries ranging from health care to the service sectors. Byrnes leads Mason Wells, a Milwaukee-based private equity investor that invests in companies operating in information technology, health care, and engineered industrial products. When Mason Wells buys a company, typically an underperforming one, it works to reposition the organization and develops strategies that create value in the business.
Byrnes serves on the boards of companies like Dedicated Computing, Paragon Development Systems, and the Medical College of Wisconsin, giving him a unique vantage point on the blistering pace of change. Noting that every company is now a technology company, Byrnes decried the lack of technological savvy on Wisconsin business boards.
“Most boards don’t get information technology, particularly the large public boards,” Byrnes stated.
He noted that manufacturing today is about capital investment and efficiency, which requires investment in automation and computer-driven technology. That has led to less involvement of people. In contrast, the service sector is about knowledge workers and IT infrastructure.
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Byrnes said companies that do the right things with their IT investments create exponential value, which most business boards don’t understand. When Mason Wells buys a company in trouble, instead of fixating on financial statements, the focus is on developing a good strategy because there will be ample capital available to support a sound strategic approach.
At the moment, “we find ourselves with boards with mostly financial people who are brain dead on technology,” Byrnes stated. When information systems come forward for board approval, the conversation is a combination of “humorous and scary,” he said, so the task of CIOs is to emphasize revenue gains rather than driving down costs, because the former is an easier sell.
“The modern digital economy is based on software and communication networks,” Byrnes stated. “They create value by optimizing people. They don’t reduce cost; they create growth. So this is where you get a clash between CIOs and CFOs. You should be focusing your CIO organization on building business cases for IT investment around the idea that you’re going to help grow revenue.”
Backing up Byrnes
CIOs attending the Fusion event echoed Byrnes’ advice to emphasize revenue gains.
Paul Kronberger, CIO for the City of Madison, now works in government but has some background in the private sector. “It’s using IT to enable your business and to create opportunities for your business, and hence to create more opportunities for higher revenue and longer revenue streams,” Kronberger said. “You obviously want to take a look at costs, but you also want to look at the bigger picture and how the market is changing and how the whole industry is changing.”
Kronberger has worked for a technology company, which he didn’t name, where the emphasis was always on cost control and cost reduction. “We missed out on a lot of opportunities where we could have made, in some cases, relatively small investments and got more market share or got into additional markets, and we really lost those opportunities,” he said. “But then I worked for a company that was a little more forward-thinking and did see the bigger picture and was willing to make the investment to create those opportunities down the line, which really meant much greater revenues for the company.”
That forward-thinking company, he said, was Madison’s Symphony Corp., led by CEO Ravi Kalla.
David Cagigal, CIO for the State of Wisconsin, called the revenue point “spot-on” because of the higher probability of getting funding rooted in revenue growth. “John [Byrne] brings the business perspective,” Cagigal noted, “and it was certainly reaffirming that CEOs can grasp IT issues and even convert it into the kind of statement he made on cost-reduction versus revenue growth because he understands IT. He understands what sells, and he understands what doesn’t sell, and he understands that you’ll have greater success with funding your activities if you’re focused on revenue growth.”
Cagigal also said Byrne is 100% correct on the lack of IT understanding on business boards, but he added the future holds promise on that front. “It’s a generational thing,” Cagigal noted. “I keep waiting for that [older] generation to phase out, and the next generation coming in would have more IT savvy.”
Steve Cretney, CIO of Colony Brands, agreed with Byrnes on revenue because “we are always accountable to profit, and revenue is the best way to profit.”
“Certainly we’re going to do things on the expense line if we can cut expenses, and where it makes sense we will,” Cretney said, “but as we look in our organization, the opportunity is to drive growth and new markets with revenue, and that’s going to be more interesting to the board and to the owners of the company.
“I don’t think it’s easy, because revenue has the characteristic of not necessarily always being real or achievable versus an expense play. If I can take out expense, I’m going to take it out and usually it goes away. Revenue has the problem that a lot of different factors could affect it, and it’s unpredictable at times.”
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