How to Close the CIO Leadership Credibility Gap

September 2006

Back in the 1960s, the IT profession arrived on the business scene as a cadre of technical specialists primarily in the service of expensive, temperamental mainframes. But as information technology has become a mainstream business necessity, the need for change in the culture of both business and IT has grown more and more compelling. Accenture routinely surveys top technology and business executives to try to improve our insights into the most important issues in the business technology environment. We have, for example, examined how both groups of executives view IT's impact on such topics as business performance, projected IT investment levels, and key IT and business governance issues.¹ Those surveys have consistently suggested an important evolution in the role of the chief information officer. So in February 2006, Accenture conducted a survey of 300 large-company executives—half of them senior IT executives, half of them senior general business executives—specifically to look at the changing role of the CIO.

Keep in mind that surveys of the type we have conducted often reflect more negative opinions than one sees in daily business life. At the same time, however, we find that these surveys do, in fact, identify opportunities to realistically and candidly assess how executives view the performance and business impact of IT and the senior executives who manage it. In this way, they offer an important opportunity to make improvements.

Agreement on the Basics
The results of this most recent survey were surprising. Although the respondents generally agree about the job CIOs and IT executives should be doing, they disagree on whether that job is being done in a way that consistently leads to high performance.

The good news is that IT executives and general business executives agree that IT's most important functions are:

• To improve business performance/profitability (63 percent of IT executives surveyed; 58 percent of general business executives).

• To create competitive advantage (60 percent; 60 percent).

• To operate business processes effectively (57 percent; 63 percent).

Thus, IT executives who see their role as evangelizing for the importance of IT in business are, in most cases, preaching to the choir. General business executives already believe that IT can and should be much more than a back-office function, and they already look to IT for competitive advantage and high performance.

But is IT delivering on its promise? Somewhat surprisingly, in view of the broad agreement about IT's proper mission and function, the two groups of executives disagree on the question of how effectively IT does the right job.

The Devil in the Details
IT and general business executives start by disagreeing about whether IT executives understand the company's overall business deeply enough. Although nearly three-quarters of IT executives say they understand the company's business "extremely well"or "very well," less than half of other business executives agree with that assessment. In fact, nearly 60 percent of general business executives say that IT executives understand the company's business only "somewhat" or "not at all."

Several factors could explain this difference of opinion. One possibility is that a relatively high turnover rate for CIOs results in some IT executives having a good understanding of business in general, but not of the distinguishing details of the line businesses.

In our experience, CIOs and other IT executives, in fact, often have a more precise understanding of business processes than some general business executives do. But we have also observed that for senior business executives, "understanding the business" means having deep insights into a complex interplay of processes, people, culture, relationships and leadership among customers, suppliers and internal stakeholders. To the extent that general business executives use this second, more detailed and complex definition of "understanding," there may be some merit in their assessment of a number of their IT colleagues.

Some companies have taken specific steps to inculcate this deeper understanding in their IT executives. One capital markets firm, for example, deliberately rotates application developers and managers into positions literally alongside the customer-facing business executives who actually deliver products and services.

Traditional IT approaches often implicitly encourage an attitude of "tell me what you do, and I'll build the system that supports it."But the realities of today's business environment usually have to be experienced to be deeply understood.

Consider the case of the retailer whose supply chain executive had to order from Chinese sources in bulk and well in advance to have enough merchandise on hand for the Christmas season. When the IT team tried to optimize the supply chain's technology around just-in-time processes, it misunderstood the full context of that business problem and built a system that worked well for most seasons of the year but not for holiday periods.
 

Our survey also shows a noteworthy disagreement (Enlarge Figure) about how much IT contributes to the company's competitiveness. Half of the IT executives consider the contribution major, but less than one-third of general business managers agree. We have observed that in some companies, this disagreement reflects problems in communicating across the senior executive team. IT executives acknowledge that they have work to do on the communications front—only 26 percent claim that their peers are "good communicators." But even fewer general business executives—a mere 13 percent—describe IT executives as "good communicators." Our experience with client companies suggests that there is often a real communication gap between senior

business and IT executives with respect to such issues as what drives customer behavior, how business performance and IT are linked, and how IT and business leaders should work together on major investment projects.

That's not to suggest that IT executives are entirely to blame for these communication problems. CIOs are often in a tough spot. While there is wide recognition in the profession and among leading companies that the CIO should be at the decision-making table whenever technology is critical to achieving results, the management culture at many companies still excludes the CIO from discussions about such critical business issues as M&A, new product development and financial projections provided to investors.

This communication gap between business and IT can be self-perpetuating. Worse, it means the CIO is working with an incomplete picture of the full business context within which IT is expected to operate and drive business value. When IT is fundamental to achieving the benefits of major business decisions, failure to include the CIO in the discussion, and to integrate IT into decision making, almost guarantees problems in implementation.

Earning Respect
We believe that companies are more likely to achieve high performance when the CIO is a genuine peer of other C-suite executives. But this level of leadership credibility comes only to those who earn it, and our survey suggests that it would be premature to say that many CIOs have, in fact, done that.

For example, although a majority of IT executives (56 percent) say the CIO's role has expanded in the past three years, only a little more than one-third of general business executives (35 percent) agree. Indeed, IT executives (39 percent) are more likely than general business executives (28 percent) to consider IT an integral part of the company's products and services. Similarly, general business executives (41 percent) are far more likely than IT executives (27 percent) to see IT as merely a support function.

Among other findings in the "respect" dimension:

• Only 29 percent of all executives—27 percent of general business managers and 31 percent of IT executives—say that the CIO focuses primarily on business performance.

• Only 28 percent of all executives—30 percent of IT executives and 25 percent of general business managers—say the CIO focuses equally on business performance and IT operations.

• Only 11 percent of respondents—11 percent of both IT executives and general business managers—see the CIO as a business leader. To improve IT's ability to deliver high performance, and to build respect and effectiveness for the senior IT team, we offer the following recommendations.

• Every IT executive needs to see the business the way that senior line managers do. This means gaining a deep understanding of the performance dynamics of those businesses.

• Every IT executive needs business communications skills as effective as those of peer-level general business executives. This means regularly reaching out to general business executives for frank and honest feedback.

• Every IT executive needs to become an expert in the company's culture, people and assets if IT is to have maximum business impact.

• IT executives should always know where they stand. Are they at the table or not? Are they gaining ground or losing it?

In many companies, IT executives accomplish these goals every day, continually earning themselves a place at the decision-making table and helping to drive high performance. Companies whose IT and business executives see the same world, speak the same business language, share strong mutual respect and explicitly align their objectives consistently outperform their competitors.

Companies where these principles are not in place should recognize that they have an important and compelling opportunity to improve performance. But before they can realize that opportunity, they have to understand it. Reality does not yet match the rhetoric about IT's role in business. The large-company senior executives in our survey, both business and IT, have said this loud and clear.

Reshaping the Role of IT at Procter & Gamble 

As the Procter & Gamble executive responsible for both information technology and global shared services, Filippo Passerini brings a unique perspective to the job of CIO. His mission is to reshape the role of IT within P&G so that IT serves as a business leader rather than in its more traditional role as a support function. In the past year, he has made considerable progress with this visionary approach—including redefining, renaming and restructuring the company's IT department. He also merged the IT and shared services organizations, launched major human resources and IT partnerships, and transformed the way IT and global services work together and with the business side of the company. Bob Suh, Accenture's managing director for Growth & Strategy and chief technology strategist, recently talked with Passerini about the role of today's CIO from both the business and IT perspectives.

Outlook: Do you think that it's important for IT executives to define the role of IT for the business?
Passerini:Not particularly. I think we tend to talk too much about it. I think what is important is not so much defining IT for others but defining it for ourselves, and then using that to shape our approach to business. Simply put, we really need to run IT as a business. If you are a general business manager, you need to deliver higher profits and higher market shares. But in IT, we've traditionally been focused on either/or—either better services or lower cost, either quality or speed. That's a profoundly different approach. What we need to do is think and operate as general business managers. Once we do that, the business will see us in a different light—more as partners than functional support—which is so much more impactful than us trying to redefine ourselves to them.

Is it possible for IT managers to have a business mindset?
I think it's not only possible, it's necessary. Today's market is increasingly competitive, diverse and fluid. Changes come fast and on a large scale. I believe IT needs to play a larger role in enabling our companies to keep pace and thus secure competitive advantage. And that means we need to be much more than a support function: As IT leaders, we need to think and act as business leaders.

What are you doing at P&G to make this happen?
We are working to commercialize what we do in IT. Our driving strategy is to create more value for P&G, and thus our mantra is "financial results." It's always been very clear what P&G's business managers are accountable for: everything from innovation to commercialization cost. We've created the equivalent with our IT services managers. So we're not just thinking like business leaders but acting like them. That's something that the organization as a whole can identify with.

But aren't there IT executives who simply can't make the transition?
My experience to date would be that the majority of them can. Yes, there is a small percentage that perhaps won't be able to make the transition, but I believe most people are ready and able. To help in this transition, we've established a new career development path for our IT professionals. So we're not just saying we need them to expand their professional mindset and skill set, we're helping them to do so.

From the business executive's perspective, how do you deliver the idea of this new IT business-centric model?
At P&G, when we develop a brand concept, our teams can spend days and weeks and months thinking about brand character, brand equity, brand benefits. You have to get this down to one or two words. People sometimes debate those words for a long, long time. But once you get them right, you can leverage them for a long time. In IT, we're following this messaging concept. We scale down to a few simple ideas that people can read in 20 seconds—simple things like: "We do not mandate anything; here it is all pull—not push." Or: "We give you this service for a cost. If you like it, you take it; if you don't like it, don't take it." We're offering a commercial model: running IT as a business.

So basically you're taking what P&G does really well with its core products and applying it to IT.
Yes, that's exactly right. P&G business managers commit to meeting profit goals, market share goals, volume goals. We are trying to develop a mirror program in IT with equivalent measures. Instead of shares, we have service levels; instead of volume, we have value creation. It is very numerical, very measurable. Our scorecard is numbers. We even give our internal IT customers a sales booklet. It's a great identity builder. At the end of the year, you can say and show that you did it or you didn't do it. We have a business manager model within the company that really works, so IT is following it.

¹ For more information, see "Reconcilable Differences: IT and Post-Merger Integration," Outlook, June 2005 and Accenture's report on IT-driven productivity.

About the authors
Gary A. Curtis is the managing partner of the Accenture Global Strategic Information Technology Effectiveness practice. As a consultant, Mr. Curtis has served the top managements of several global investment banks, major media companies and high-technology providers for more than 25 years. He specializes in evaluating the business value of large-scale IT applications and infrastructure portfolios, as well as in creating programs to improve that value over time. Based in San Francisco, Mr. Curtis serves on the advisory boards of several companies that are developing new technologies.

Bob Suh, Accenture's chief technology strategist, is the company's managing director for Growth & Strategy. He brings 20 years of experience in leading technology businesses, consulting to top management on information technology issues, and executing and managing large-scale corporate restructuring projects and turnarounds. Named as one of the Top 25 Consultants in 2005 by Consulting Magazine, Mr. Suh is a member of the Technology Advisory Board for the U.S. Visit program in the Department of Homeland Security.

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