Recognize the Threat; Take the Lead on Digital
In response to the question “What percentage of your company’s revenues are under threat from digital disruption in the next five years?” the CIOs of the top-performing firms estimated that 49% of company revenues were threatened, while CIOs of bottom-performing firms—firms with margins in the bottom quartile in their industry—said only 19%. As Andy Grove, formerly the CEO of Intel, was fond of saying, “Only the paranoid survive” (and he wrote a book with that title). Recognizing the threat is key to survival, as top-performing firms are often the biggest targets for startups and other digital disrupters.
Interestingly, there was little difference among top and bottom performers in who is primarily responsible for managing digitally enabled threats to the business model. The CIOs were asked to choose from a list of senior roles and committees in the firm, including the board and executive committee. 48% of the CIOs felt that it is their responsibility to take leadership on digital. This finding generated a great deal of discussion in our workshops, and reflects conflicting schools of thought. One is that CIOs should definitely take the lead in bringing these issues to the executive team and driving the conversation toward action: “If the CIO doesn’t do this, who else will?” This was supported by 48% of the CIOs in our survey. The other is, “… Hold on a minute … this is a business issue and it should be driven by the leaders of the business units, particularly the CEO”—aligning with the other 52% of CIOs in our survey. These two schools of thought nicely summarize the fork in the road for digital in 2016: that either the CIO or the business takes the lead.
We are advocates for the CIO taking the lead; otherwise, firms might do something else like appoint a Chief Digital Officer (or similar) to do the job.[foot]For a discussion on why we think appointing a CDO is a cop-out, see P. Weill, J.W. Ross, and S.L. Woerner, “Thriving with Digital Disruption: Five Propositions,” MIT Sloan CISR Research Briefing, Vol. XV, No. 7, July 2015, https://cisr.mit.edu/blog/documents/2015/07/16/2015_0701_fivepropositions_weillrosswoerner.pdf/.[/foot]This is a critical time for the CIO to show leadership around digital and the 48% of CIOs who see digital as their leadership responsibility is about what we would expect in terms of CIOs who are willing and able to take that leadership position.
Here is what we found differentiates CIOs from top-performing firms.
Spending More Time with External Customers
In 2008, we began asking CIOs to estimate how they spend their time. There has been a significant shift in the allocation recently. Back then, the average CIO spent only 10% of his or her time engaging with external customers, focused on selling, sharing best practices, and working with the customer to integrate the two companies’ systems.[foot]P. Weill and S.L. Woerner, “How Other CxOs Think CIOs Should Spend Their Time,” MIT Sloan CISR Research Briefing, Vol. X, No. 1, January 2010, https://cisr.mit.edu/blog/documents/2010/01/21/2010_0101_cxosoncios_weillwoerner.pdf/. [/foot] By 2015, CIOs had doubled the time spent with customers to 20%, often reducing the time spent running the IT unit and delegating more of that role to others.[foot]We found that the average CIO spends only 4.6% of time mentoring direct reports—insufficient for the CIO to delegate responsibilities to them (ibid.).[/foot] This change reflects the increasing digitization of business and that the CIO is much more embedded in the customer experience and sales process, more so CIOs in top-performing firms (22%) than their bottom-performing peers (17%).
Chris Perretta, chief information and operations officer for the Americas for MUFG Americas Holdings Corporation, reflected on this trend: