As technology gets more integrated into strategy, CIOs need to understand not just the organizational business processes but also the competitive landscape, which may significantly vary across verticals. But vertical specialization is not something most CIOs are excited about!
Can CIOs with vertical expertise add more value to a business?
Role of technology in business has changed drastically over the decades. Information technology initially was applied to enhance efficiency in processes. They still are. But increasingly, in many businesses—especially many services industries where the primary offering can be reduced to information flow, such as banking, IT, online services, entertainment and media, and of late, in many other non-services industries with significant services components—information technology itself defines the product.
In the last decade or so, IT has gone beyond processes and products. It has begun impacting the strategy plane. With the advent of advanced analytics, data-centric business models are becoming common place. Market aggregators like the Uber and AirBnb have disrupted age-old business models leveraging information alone. Traditional businesses are trying to replicate some of these strategies, if only in limited manner. Today, business and technology are so integrated that players who have integrated technology and business are becoming a significant force in many verticals with fintech, healthtech, edutech becoming common usage. That so many entrepreneurs are deliberately using the word technology to attract investors is a testimony to the importance of technology in business.
So critical is technology in business now that deep technology understanding is considered a prerequisite for building a solid business. In a jointly authored paper published recently, noted economists Raghuram Rajan and Viral Acharya, former Governor and Deputy Governor of the Reserve Bank of India respectively, have suggested sweeping changes in the banking sector, including privatization of public sector banks and unambiguously recommended “bringing in private investors who have both financial expertise as well as technological expertise.” Technology expertise is as core to banking today as financial expertise.
In short, technology decisions in business are no more subsequent to a business decision. While we hear sweeping statements laden with superlatives about the role of technology in business, this fundamental change—business and technology decisions being taken together rather than IT just implementing solutions designed by business using technology tools—is by far, the biggest shift.
That challenges the traditional expectations from a technology manager—the CIO.
The initial role of the CIO was that of a technology expert who knew the tools and technologies well and applied them to processes to make them more efficient. Among other things, technology enabled savings and added to the bottomline by enhancing individual productivity, improving process efficiency and significantly improving accuracy and quality of work. That was a time when the CIO did not need to know the business; as long as he knew his tools and could apply them correctly and efficiently, he was effective.
The next evolution in the role of technology saw reengineering processes and using learning from running processes (albeit in a post-analysis way) to make them better. Accordingly, the role of the CIO evolved as a problem solver—who understood processes and based on the knowledge of technology and business, could provide a solution when the problem was presented to him. That was a huge improvement and the outsourcing wave of the 90s and early 2000s was a direct result of this change.
Things have changed since then. Advent of AI, Big Data, IoT on the technology front has further integrated technology with business. A look at the themes of the annual summit of the World Economic Forum (WEF), Davos, arguably the most influential global multilateral think tank, will convince anyone of the role technology has come to play in business.
This hype has resulted in top management in organizations of all sizes looking to embrace technology to compete—a huge change seen in less than one and a half decade. Today, organizations are starting from the opposite end—as opposed to the earlier sequence—thinking of business problems, solutions and applying technology to those solutions, organizations are asking how they can leverage emerging technologies like blockchain or virtual reality to create value in the business. Call this the ‘use case’ regime.
This changes the expectations from CIOs completely. It is not enough to know technology or business processes. They must be able to suggest technology application at the drawing board to demonstrate how it can significantly enhance business value. For that, not only should CIOs have good overview of emerging technology landscape, but also understand the strategic business implications and leverage that knowledge to think on a clean slate—not just solve a problem that has been defined precisely for them. This is the essence of a good digital transformationist.
This means CIOs must understand not just their own organizational strategy but the competitive landscape, dynamics that play out in the industry and the changes that could be initiated. In other words, not just understand technology, processes or even their organizations—but the industry vertical as well.
That essentially has necessitated the question—is vertical specialization a must for CIOs?
Are CIOs game?
Clearly there is a wide spectrum of thoughts ranging from outright rejection of the proposition to toned acknowledgement to taking a stand somewhere in-between.
Says Jaspreet Bindra, Author and Consultant for Digital Transformation who was formerly heading digital transformation initiatives at Mahindra Rise, “Data-driven technologies can deliver transformational benefits and the CIO needs to work closely with the CEO’s office to effect organization-wide changes. There is an emerging trend for new roles, such as chief digital officer, chief data officer in addition to the traditional CTO and CIO which means the traditional technology roles are expanding.”
The CIO finds himself right in the midst of this action by driving technology-enablement to achieve competitive advantages for the business. With deployments running through the organization, the CIO’s position intersects business and technology providing the role a unique opportunity to catalyze business transformation using technology. At the same time, every industry has distinct systems and processes which require in-depth understanding to introduce outcome-oriented changes.
Not everyone thinks so.
“CIOs can use their horizontal perspective to free business partners from their vertical prisons, so that they together can look up and out at the future of the company,” said Martha Heller, author of Be the Business: CIOs in the New Era of IT. Heller also says that while CIOs shift chairs from how to what, they still need to fulfill the how part of the job because they will still need to execute it.
Not many CIOs explicitly acknowledge the need for vertical specialization.
“While no single approach qualifies what an ideal CIO should be, a generalist brings a fresh perspective and can look at the same things with new lens. A person from within the industry brings a wealth of knowledge but at the same time must take care to avoid a tunnel vision,” says Ashish Pandey, CIO of GlaxoSmithKline.
As the orchestrator of the new order where IT is increasingly impacting bottomlines, the CIO must reinvent to distribute responsibility across the organization.
Emphasizing the importance of disruptive thinking by IT, Rahul Kumar, CIO of ArcelorMittal Nippon Steel India Ltd. (AMNS India Ltd.) says, “Spending time in the same vertical is not an advantage if you want to disrupt the system. In fact, we look to hire people from outside our industry to invigorate the team with new ideas. As businesses mature and our learning curve progresses, we study processes in different verticals to understand where they are gaining efficiencies.”
Given that digital transformation can provide unparalleled opportunities for value creation—from better serving customers, new business opportunities, efficiencies in cost and productivity—it is a continuous process which calls for a cultural shift that permeates through the organization and uses technology to re-imagine things and do them faster, better, with more accuracy. And some of these like better customer service, efficient supply chain, or better financial management are factors across multiple industries.
Sometimes experience across verticals in different roles becomes preparatory ground for the future CIO. Madhavi Kanumoory, CIO, HCG Hospitals honed her business understanding in different GE companies spanning appliances and energy taking on roles across business functions to get comprehensive insights into a business.
“That experience is handy when you are dealing in healthcare provider side which has a very ‘high touch’ dynamics and has traditionally not used technology in patient care,” says Kanumoory.
Many CIOs are ambivalent about vertical specialization emphasizing intrinsic capabilities to impact business outcomes.
“CIOs must have business acumen and know the customer well while placing this knowledge in the context of business dynamics to identify drivers, which triggers can contribute or disrupt things, how the value chain operates, what are the expectations of partners, employees and other stakeholders and weave all this knowledge to design and facilitate an enabling environment,” says Bishwanath Ghosh, CIO of Mahindra & Mahindra.
The CIO in a digital economy and in the age of rampant shadow IT is in a state of flux and a new state of being is taking shape where vertical business understanding must be blended with realigned equations with stakeholders to work as partners rather than consumers in shaping the organization’s business IT strategy.
“The overarching goal now is to create impact in transforming the customer journey and facilitate the internal user to do things more efficiently,” says Nandkishor Dhomne, CIO, Manipal Hospitals.
However, a few CIOs who acknowledge the need for vertical specialization cite strong grounds in its favor.
Challenges at the ground level can be very different from what the books describe. For example, how does one create meaningful impact without insights into the supply chain, production, distribution, customer requirements and brand equity? Can the CIO actively intervene to stop the ripple effect a defective batch of products can create in the market without vertical business understanding?
Vertical knowledge certainly becomes an edge when dealing with industry specific norms such as the precise temperature required to store specific chemical components and how that must be regulated on the factory floor; or knowing the nuances of the assembly line in the automobile industry to ensure it runs smoothly while drawing on the knowledge to effect changes in other business functions.
For example, an automobile company that uses hi-tech is more likely to adopt technology innovatively to fulfill mechanical tasks, such as searching and disseminating information; or automate processes that may impact end users such as loan eligibility. Just as a highly mechanized group like Aditya Birla Group is using a lot of analytics and IoT to get granular insights into the cost of transportation and make optimum utilization of cylinders to store chemicals.
If digital transformation is an approach calling for a cultural change across the organization, then every employee must be a participant and think as an innovator. When innovation becomes embedded into the fabric of the organization, it becomes a continuous cycle—small incremental steps which collectively transforms the business.
AMNS India Ltd. CIO, Rahul Kumar is a strong advocate of this approach and backs it up with a string of examples—from automating invoice processing to intelligently identifying defects in finished products—there is a groundswell of innovation pulsating through the organization which in turn has had a profound impact in streamlining business processes for competitive advantage.
Ashok Jade, CIO of Spark Minda, who has spent a long time in the manufacturing industry, says concepts such as manufacturing 4.0 are deep and require comprehensive understanding and vertical expertise. It is important to have insights into how automation, just-in-time manufacturing and stage of defect discovery have a bearing on the manufacturing processes, its efficiency and productivity.
Illustrating his experience Jade says, “In one of my assignments we examined how to reduce the time to feedback when a defect is identified and lower the cost of replacement. This has led us to introduce process re-engineering wherein R&D was updated immediately from the point of discovery while also simultaneously updating the factory floor, even before the replacement process was initiated. Early intervention curbed the production of more defective pieces and directly impacted the cost of replacement.”
But people like Jade are clearly in a minority. Especially in an industry from where he comes from.
The CIO is Dead! Long Live the CIO
With democratization of technology and increasing decentralization where business users are experimenting with technology, the central office of the CIO will get diminished and have limited focus on areas, such as enterprise security, governance and standardization. Some industry veterans even believe the future CIO in the current avatar is dead.
Considering the shifts Cloud infrastructure has ushered where resources are available on demand and investments are shifting to an opex model, centralized budget management is on the wane. A partnership model is on the rise where businesses and IT become co-creators to fulfill specific goals and converged teams comprising a spectrum of roles, knowledge and experience will overlap to create more value for the organization.
The CIO role is undergoing change wherein adaptability is an instinct, knowing what business needs is intuitive and becoming adept at creating agile tools is the norm.
“Everything will be experience-led where the value creation of the CIO will be measured by how the CIO manages the life-cycle to hasten results by identifying the right technology, aligning technology with business goals, picking the right team to make it happen and where vertical exposure must coalesce with technology and business goals,” says Anil Porter, CIO of InterGlobe Technology.
In short, while the new business needs demand vertical specialization as a potential weapon to make impactful changes in the business, most CIOs are still not comfortable with the idea. The inside view from the CIO circle is clearly more towards the traditional horizontal approach.
There may be many reasons.
One, whether vertical or horizontal, the prime expectation from a CIO is the ability to execute on technology—at least in India. That is the cake. A vertical expertise, at best, is an icing.
Two, as pointed by many CIOs, there is scope for carrying best practices from one industry to cross-pollinate and become ‘fresh approach’ in another.
Three, technology is still viewed by the CIO community through the traditional lens of procurement—abstract machines that power the business.
Finally, not many Indian CIOs have come from non-technology background, unlike in the developed markets. So, they are clearly not comfortable with the change.
Whatever it is, most CIOs themselves do not think vertical specialization is a necessity, let alone a great idea.