Wednesday, June 26, 2013

The New Path to Success

For decades vendors selling technology products and services have focused on IT leadership as their target.  When the CIO title came into being the leader of IT became the quick sales target.  Relationships were established, decisions made, and increasingly the sales discussions slid down the executive ladder until Directors were driving technology decisions.  Then wheels came off the cart.  CEO's began to notice how much money was being spent in IT and how little demonstrable value was being attained.  New CIO's came in to end the practice of implementing technology for its own sake instead focusing on business needs.  Conversations ascended to the top of the ladder but still focused on the needs of IT.  After some time passed, conversations pushed down the stack, when CEO's noticed again how much money was being spent in IT without demonstrable value.  New CIO's came in to end the days of order taking and start taking a strategic approach to meeting the needs of the business.  Again the conversations started at the top of the ladder, and again after new directions were established conversations descended down the ladder.  Over the past five years CEO's again are questioning the cost of IT versus the value delivered realizing IT was too focused on what the company was doing and not enough on what the company should be doing.  CIO's had succeeded in aligning with business operations, but missed out on business innovation because it's rare a company has a systemic approach to evolving their business model.  As a result many CIO's struggle with the redefinition of their role where they are in the odd position of both leading and following their customer.  Those making progress appear to have had the same epiphany: it's all about the money!  The new focus is revenue realization: how technology can drive new business models creating new revenue opportunities.

A course correction by the CIO toward innovation is manifesting itself in multiple ways.  Now the conversations are strategic, they are focused on business results, and they sound a lot more like talking with the COO, CFO or CEO than a technology leader.  CIO's are refocusing on strategic partners, identifying those companies of greatest value to them as seen through the lens of the future.  No longer are CIO's identifying strategic partners on spend alone.  In fact some are turning their backs on those with big wallet share if they can't earn a seat at the new table and talk business strategy.  No vendor or service provider willingly sits back and watches their revenue erode.  The winners are those who can, or already are, talking business strategy at the CIO level, technology strategy at the CTO level, architecture at the VP level, and tactics at the Director levels and below.  Most paint the acquisition of PwC Consulting by IBM in 2002 as marking a shift in IBM to a "services led" company.  However IBM already had IBM Global Services, a consulting arm with tens of thousands of employees.  It wasn't "services led" that made the difference leading to a $200+ stock price, it was strategic relevance.

PwC Consulting had entre to the C-suite at most Fortune 1000 organizations.  How?  PwC was, and continues to be, an audit firm.  As an auditor they get direct access to the most senior executives and typically the audit committee of the board of directors.  Often there is a burden of knowledge; knowing the most intimate secrets of a company.  Trust is earned over years of dedication to a client, and this trust fostered opportunities when clients needed operational and later technological assistance.  Each of the audit firms established large consulting practices to serve the needs of their captive clients.  Of course regulators became suspicious of such a close relationship, and through Sarbanes-Oxley and the dogged but erroneous pursuit of Arthur Andersen pushed auditors to divest their consulting arms.  Ernst & Young sold theirs to Cap Gemini, KMPG spun theirs off as BearingPoint, Deloitte created some separation but maintained the relationship, and PwC prepared to take PwC Consulting public as Monday (ugh).  IBM jumped the curve through the acquisition of PwC Consulting and gained immediate relevancy in the C-suite.  The entire company pivoted.  Gone were the commercials about technology and in came the famous IBM'er commercials talking about how they were focused on solving business problems.

Today the new path to success for vendors and service providers is business relevance.  In many cases this means creating relationships with the business leaders, sometimes without the endorsement of IT.  CIO's are learning that business leaders are technology savvy enough to carry on high level discussions with their beloved partners, when those partners have demonstrated an understanding of the business.  A new perspective leads to new conversations, new insights, and expands the opportunities for innovation.  And no partner worth partnering with will willingly throw IT under the bus.

As IT shifts from a service provider to business platform provider; operating as a broker responsible for finding solutions whether bought, rented, leased, or built; the onus is on IT to be strategically relevant to the business.  The days of business-IT alignment are over; it's not enough.  The two need to become one operating in unison instead of at arms length.  The new rising term for this relationship: immersion.  Product and service providers who can immerse themselves in the business will reap the rewards.  Those who don't will backslide into oblivion, regardless of how much money is spent.

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