In a recent presentation entitled “Taming the Digital Dragon” Gartner fellow and vice president Ken McGee revealed that although IT budgets would appear to remain flat again for the 13th year in a row, there was indeed a major growth area in technology spending.  The bad news for many CIOs is that they won’t get to spend it.  Twenty-six per cent of IT spending is happening outside the IT area and increasingly by a new player on the executive team – the chief digital officer.

Barely even a blip on the radar five years ago, this new position is emerging as a growing in popularity as organizations struggle to “tame the digital dragon.” While just five percent of North American companies have a CDO the trend is stronger outside North America. Six per cent of EMEA countries, seven per cent of Latin American companies and 11 per cent of Asia Pacific companies have a CDO.

McGee also noted that the CIO was “not a slam dunk” for this new position and in fact was rarely considered.

Why? Many CIOs simply don’t have the breadth of experience necessary. When talking with recruiters who are filling this position business experience tops technical prowess. CEOs are doing the hiring and they are looking for business strategy, marketing and P&L experience. Technology understanding is needed, but it’s not the sole factor. Few CIOs have that breadth of experience, particularly P&L responsibility.

CDOs winning the ear of the CEO

The CDO is clearly a strategic role and the involvement of the CEO shows it. Half of CDO’s report directly to the CEO.  Compare that with the much lower and ever declining 30 per cent of CIOs who currently report to the CEO.

CIOs may be excluded from truly strategic technology spending and relegated to the operations and application support – a dangerous career shift in a time dominated by outsourcing and cloud based systems.

What can a CIO do?  According to McGee it’s time to take action. “Be the de-facto CDO.”  Don’t wait for the CEO to tap you on the shoulder or more likely, pass you by.

What’s the first order of business? McGee suggests that CIOs conduct a revenue-threat analysis annually.  Many companies miss threats to their revenue from technology developments. He noted that the illusion that companies like Kodak and even Blockbuster were instantly undone by new technology was not true. The technology that drove their demise had been developed as much as 40 years before. What happened was these companies were blind to revenue risk from technology that was out there in the market.

“The trouble is that we wait ‘til something happens,” McGee said.  “You don’t put up a stop sign until there is a tragic accident.

CEOs hungry for innovation

His second piece of advice was to lead the march to innovation that contributes to the top line.  According to Garter’s data, the fourth most commonly used word by CEOs in talking about what they need was innovation.

Once again, CIOs may be at a disadvantage. Most prefer to deal with large vendors, yet according to Gartner companies are increasingly turning to smaller players. The giants like Microsoft and Apple are declining in being perceived as innovators and there are even signs that Google is losing luster in this area.

If they want to shepherd innovation, CIOs need to learn to deal with the smaller players. This requires a change in mind set and in structure. You cannot put the same requirements on a smaller player as on a global player. Things like business history, indemnities and even service level agreement (SLAs) need to be looked at from a different perspective. The emphasis is more on risk management and mentoring than contracting and policing.

Third, the CIO needs to create a structure for the conversation. While everyone talks about innovation, few can succinctly tell you what it is.

McGee warned that CIOs need to be careful about the  “blank slate” that this creates. “A blank slate is a recipe for underperformance. It’s constraints on a team that yield innovative results.”

Nor can you rest on simple solutions.  “When you think you know where the problem is – keep going.”

Use hackathons to change company culture

Fourth, the new reality requires what… called “bi-modal” thinking. In the current world we’ve reached the point where sometimes we can no longer do more with less.  In these cases, you simply have to “do less.” This creates a problem for the CIO who has been trained to build ideal “bullet proof” solutions. Making something “just good enough” is not a skill that many CIOs have mastered.

McGee suggested things like “reverse mentoring” where younger employees mentor and challenge older experienced staff. “Hackathons” are another way to understand and build a new culture. However they do it, CIOs need to build a new way of thinking. They need the wisdom to use old methods where they must and new thinking where its appropriate. Hence the term – “bi-modal.”

Moving towards a role as a CDO does run counter to the experiences and the skills of many CIOs but the challenge may be worthwhile and rewarding. McGee challenged CIOs to “build a digital legacy.”

“At the end of the day, a new CIO arrives because something has happened. It takes a year or so to sort that out and then, what do you do for the next few years?”

How CIOs answer that question may say something about their ability to lead in the digital area and help their organization “tame the digital dragon.”

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