The crucial role of CIOs in business transformation
Digital transformation and business strategy are inseparable, argues Innosight’s Scott Anthony. And IT leaders are the link between them.
Scott Anthony, managing partner at innovation consulting firm Innosight, likes to quote from Game of Thrones when describing the biggest challenge facing businesses today. “Winter is coming,” he says — referring to the threat of a mini-ice age that hangs over the whole TV drama series — is a good metaphor for what will happen in every industry across the world.
Digitally inspired disruption is breaking open and reshaping markets that were previously the constrained, Anthony says. And dominant players, who might have expected to exert control over chosen niches for decades, are having to stave off the threat of disruption by transforming themselves — on two fronts.
This is the greatest change facing leaders at market incumbents today, he says. They need to rapidly repositioning the existing business to withstand assaults and sustain vital cash flow and capabilities — what Anthony calls transformation A. At the same time they need to create new businesses activities that will form the foundations of the company’s future — transformation B.
This two-stage metamorphosis needs to be embraced by the whole C-suite, he says, but the CIO will be pivotal in determining its success.
“I would argue that the CIO plays an absolutely critical role in dual transformation, because digital is a key component behind all of this change,” Anthony argues in our exclusive Big Thinker video series. “Transformation A, in almost all cases, will involve digitalizing today’s operations and digitizing the interfaces with customers,. The CIO simply has to own that.”
Transformation B, in many cases, will require the development of new digitally enabled business models, where the nascent unit might be developing a digital or date-powered platform, for example. “In all cases digital is the core component that enables both transformations,” he says.
“The CIO needs to ensure that efforts to drive digital transformation are connected to — and in many cases actually driving — the strategic direction of the organization,” Anthony says. “In fact, I think the CIO needs to have equal standing to the chief strategy officer, or in some cases even the CEO, in setting a direction for their organization.
Of course, that is not the reality for many IT leaders. “If a CIO is not playing a critical driving role in some of the strategic changes, it’s a big miss. It really inhibits efforts to drive dual transformation, because treating strategy and technology as completely separate things is simply foolish. Do you see this in many places? No. Is it a big opportunity? Absolutely,” he emphasizes.
Early warning signs
Technology leaders should not only involve themselves in the execution of business transformation, they are well-placed to be the scouts for emergence of disruptive threats, says Anthony. When digital is the disruptive force, CIOs need to know what is going on at the fringes.
“One of the biggest challenges facing executives at large incumbent businesses is that the disruptions that end up being the biggest threats often look relatively innocent in their early days,” he warns. “They start out at the edges of the market, their core technology doesn’t work all that well, their business models are uncertain, so they are easy to dismiss.”
For Anthony, there are four early warning signs of a disruptive change that executives have to spot. “First, you look for restless customers who are showing signs of wandering, of looking for different things. Second, you look for accelerating technologies that are creating new possibilities. The third thing you look for are innovative business models that are doing things differently. And then you look for a slow down in revenues. That’s often the pattern you see in the early days of disruption.”
• Portrait photography: Scott Woodward