Is Your CIO Adding Value?

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Many organizations are experiencing a crisis of confidence in their information systems (IS) functions and in the chief information officers (CIOs) who lead them. General managers are tired of being told that information technology (IT) can create competitive advantage and enable business transformation. What they observe and experience are IS project failures, unrelenting hype about IT, and rising information processing costs. Chief executive officers (CEOs) often don’t know how to evaluate the IS function’s performance and the CIO’s contribution. Consequently, radical IS management prescriptions, such as outsourcing and downsizing, are being applied, and CIOs are even being fired.1 Some of these fired CIOs are the same heroes of the IT profession whose photographs not long ago graced the covers of business magazines.

For several years, we have been researching IS leaders, doing extensive interviews with CEOs and CIOs.2 One study examined the factors that determined the relationships between CEOs and CIOs in fourteen organizations.3 A second project focused on the survival of CIOs. Ten matched pairs of surviving and nonsurviving CIOs in different industries were studied.4 In a third investigation, ten CIOs who had been interviewed in a 1986 study were revisited in order to understand their experience and learning over a five-year period.5 All of these studies involved CIOs in leading corporations across the spectrum of industries. Face-to-face interviews with CIOs and CEOs explored not only their actions and experiences but also their personal backgrounds, attitudes, and values and the organizational contexts in which they operated. We supplemented CIO interviews by administering psychometric tests. These and other studies give us data on the IS leadership in more than sixty organizations.

From this data, two patterns stand out. First, CEOs appear to be polarized between those who see IT as a strategic resource and those who see IT as a cost. Second, the CIO’s role and actions are crucial in ensuring that IT is deployed for strategic advantage and that the IS function delivers value. The CIO can and must add value, or IS will be seen as a problem instead of as a recognized strength. In the following three companies, taken from our research, IS was seen as a problem:

  • In a telecommunications company, the CEO revealed that only one thing kept him awake at night: he was never sure whether his CIO was doing a good job. He knew that IT mattered in his industry, and he found the IT strategy seductive, but delivery and benefits were elusive. The strategy centered on building a new state-of-the-art IT infrastructure that, it was claimed, would provide an efficient and flexible platform to meet both current and future business needs. The CIO had spent his career in the IT industry and was an avid scanner of emerging technologies. Although the CEO was attracted by the promise of longer-term IS capability, he wanted adequate applications quickly to support a rapidly growing business. After wrestling with this dilemma for some time, he fired the CIO. Soon afterward, a successor CEO strongly reinforced the emphasis on rapid support for immediate needs and formally reversed most of the IS policies of the past.
  • In a chemical company, the CIO believed fervently that IT could yield competitive advantage across the business, and he regularly created occasions to promulgate his message to the company’s management teams. Given his previous background as a general manager, the CIO’s beliefs were based more on a sense of business opportunities than on long familiarity with IT. Initially, he was appointed and backed by a CEO who was himself a well-known visionary on the transformational capabilities of IT. The CIO led investment in a corporatewide infrastructure ahead of many of the business units adopting and owning such visions. But the environment changed sharply when a successor CEO took office. The new CEO saw IT as a source of cost that rarely delivered its promise. He was a persuasive and public orator on these points, and the recent infrastructure investment provided some ammunition for such views. Consequently, the CIO retired early, and his own successor found that even charting a middle way was extremely difficult in this management context.
  • In a high-growth financial services company, IT had underpinned much of the aggressive marketing of recent years. The CIO enjoyed being a high-profile member of the executive team and found it difficult to adjust when the company entered a period of consolidation with a new emphasis on cost and efficiency. In this new environment, the CEO felt that teamwork at the top was particularly important; he was critical of the CIO’s behavior. According to the CEO, the CIO stonewalled whenever the level of the IS budget was questioned and resented questions being asked about his function’s contribution. Further, the CEO felt patronized when the CIO suggested that the CEO could not appreciate the complexity of the issues involved. The relationship became unsustainable.

By contrast, the CIO and the IS function were perceived as adding value in these companies:

  • Following privatization, a utility had to make the transition from monopoly supplier to one of an increasing number of rival providers competing on price and reliability. Faced with the need to make radical changes in the company’s culture, business processes, and cost structure, the CEO recognized IT’s enabling potential. He recruited a CIO who accepted the responsibility to rapidly deliver a new set of systems to underpin the new way of doing business. Now the CEO sees the CIO as his principal ally in driving fundamental business change. A critical factor in the relationship is the CIO’s personal ability to contribute to business thinking, the vision for change, and management of the change process. Interestingly, the CIO’s background is in IT and in quite different industry settings, yet his business acumen is clearly appreciated.
  • In an insurance company, the CIO was recently appointed CEO of the largest division in order to turn it around from loss to profit. He was judged to know and understand the economics of that division’s business better than anyone because of the perspectives gained from years of systems work done there. He had also gained credibility through his management of IS as a line of business.
  • In a retail group, which has now become an industry leader, the CEO recognized some years ago that he could not match entrenched rivals on the most obvious bases of competition. Instead, he identified the innovative use of IT as his best route to competitive advantage and recruited a CIO with that in mind. With the CEO’s backing, the CIO has helped take the company to a position of leadership in areas such as logistics and promotion management. The philosophy has been to deliver lean systems that can be implemented in a few months and expanded over time. The CEO now states publicly that the IS function has given most value to the building of the business.

In the first three cases, we see some familiar experiences. One CEO finds it difficult to evaluate the performance of IS and the CIO’s contribution. Another CEO is a born skeptic; he doesn’t trust stories of IT-based competitive advantage, and he thinks IT doesn’t apply to his industry. To him, the goal should be to minimize the function’s costs. At another company, the CIO believes that IT budgets should not be subject to the same disciplines as the rest of the business; the IS function is beyond challenge, and business executives must trust in the superior and specialist knowledge of IS professionals.

In the latter cases, it is clear to everyone that IT is adding value and that the CIO’s contribution has been significant. The CEOs believe that IT can enable new and smarter ways of doing business and that the CIO — and the IS function in general — should therefore be actively brought into the business team. Indeed, the CIOs are valued for their business thinking and change management capabilities as much as their IT knowledge.

Collectively, these cases illustrate the general divide in perceptions of IT that we have characterized in Table 1. We have found that the CIO’s ability to add value is the biggest single factor in determining whether the organization views IT as an asset or a liability.

Adding Value

What is striking in the organizations we have studied is that nearly all have found it difficult, when challenged, to formally assess the value they get from the money that goes to IT. This is a well-documented problem.6 Returns are not due to IT investments alone; there are many unanticipated costs and benefits; and measurement tools and methods are immature. In many organizations, this difficulty is compounded by an inability to point to any conspicuous IT successes, so that an atmosphere of unhappiness and uncertainty prevails. In other organizations, however, top managers recognize the difficulty of measuring IS performance but are not so obsessed by the question. They are collectively aware that at least some IT applications have been central to important business achievements. For example, when legislative change recently created the opportunity for a new financial services product, one company took a leadership position because the systems support necessary to launch its product was available well in advance of rivals. The CIO’s added value here was that he had focused, obsessively and continuously, on identifying and supporting the emerging business imperatives. He was able to judge when an IT application should be rolled out quickly.

Stories of how businesses have gained competitive advantage from IT have been important in stimulating management interest.7 In the chemical company mentioned, the CIO delighted in relating such stories, but executives routinely dismissed them as being irrelevant to their industry. Meanwhile, a competitor was implementing a business strategy of differentiation by successfully adapting an IT application that had been established in a different industry. Another way that CIOs add value is by determining whether success stories from elsewhere have relevance for their business.

A recurring concern of the last several years has been how to connect IT investment to business strategy. All too frequently, the connections are attempted through special exercises led by IS — or they are not made at all because some missionary zealot drives through an investment unrelated to business direction. By contrast, the most successful approach we have seen is where there are no IT strategies, only business strategies.8 Here, the CIO adds value by building informed relationships with key executives, making sure that IT requirements become an integral component of business strategy. We can compare two automotive companies. In one, the CIO is the trusted confidante of the CEO and is automatically included in strategic deliberations; the need for IT applications emerges as business directives evolve. In the other, the CIO has found it difficult to establish relationships with a succession of top executives, and the IT plans are no more than a synthesis of new requests from other functions and systems work-in-progress.

The CIO also adds value by building a demonstrable track record of delivery. One CIO remarked, “You can’t sell the sizzle of IT if you don’t deliver.” Broken promises of lead times and service availability lead to cynicism. Managers begin to develop business plans and operations that do not rely on IT. The CIO must develop such an impressive record of delivery that IS performance drops off the management agenda.

Part of IS strategic planning involves identifying IT applications that can support business strategies or create new strategic options and allocating scarce IS resources.9 Organizations that view IT as a liability typically possess “application portfolios” that appear to cover most of the business. By contrast, organizations that perceive IT as an asset often have strongly focused IT efforts, each effort tackling an area of business weakness or leveraging a unique organizational capability. The CIO’s added value here is to resist the myriad proposals of how IT could be used in order to concentrate effort on areas where IT should be used.

The CEO’s attitude toward and vision for IT may influence the organization’s strategic orientation.10 A CEO who promotes the idea that IT is an enabler of business transformation is supporting a CIO’s efforts to target IT investment. More diverse application portfolios (and more limited achievements) are found where the CEO and top management see IT as having an administrative or support role — or where executives have mixed views of the scope of IT’s contribution. CIOs add value by working to achieve a shared and challenging vision of IT’s role among the executive team, a common conception of the nature (not the specifics) of IT’s potential contribution to the business.

Finally, it is our experience that CEOs and their organizations are sharply divided in their expectations for the CIO. In some organizations, the CIO is positioned as a specialist functional manager and is, therefore, involved only in what are identified as IT-related issues. In other organizations, the CIO is valued as a regular contributor to business thinking and operations.11 Part of the CIO’s task, then, is to spot and create opportunities to make such contributions, even in contexts that may have little or nothing to do with IT.

Table 2 summarizes what we have consistently identified as the added value of CIOs in organizations that perceive IT as an asset. This added value makes the difference between failure and success.

How CIOs Achieve Added Value (and How CEOs Help)

What exactly does the CIO do to create the added value we have identified? And how can the CEO ensure that the CIO has every chance of delivering it? We can describe what we have found in our research studies to be important to each of the components of added value.

To achieve the focus on business imperatives, successful CIOs consistently invest their personal time in discussions that develop and test their vision of the business. They never relent. They look for the one or two business themes that capture strategic intent and drive IS development. Formal statements of business goals and strategy may be taken as starting points, but they are not seen as definitive inputs to IS activity. Such statements can never be rich enough to capture the full essence of critical business needs as they emerge. It is only through dialogue with the CEO and other executives that the CIO can tease out the motivations, meanings, and priorities; know the mind of the business; sense the impending changes; and maintain the relevance and timeliness of the IS effort. Without such insight from the CIO, the IS function becomes like a super tanker with a broken radio — lurching ponderously in response to ambiguous semaphore messages, more likely to prove an expensive liability than a company asset. We recall how the IS function in a global communications network made a huge investment because “the bank has said it wants to be a global competitor.” The bank’s CIO soon found that business colleagues did not share his interpretation of the strategic rhetoric and hence did not value the facilities the network provided. “They did not believe in it; they did not understand,” he complained. After a high-level audit by consultants, he lost his job.

Two actions by the CEO are important in creating this component of added value. The first and most obvious is to make the CIO a true member of the top management team. The CIO who attends key executive meetings gains a new level of understanding of the business and enhanced access to fellow executives who can provide the next level of understanding. Note that we are not prescribing any particular reporting structure for the CIO; in our research, we have consistently found that team membership rather than reporting structure is critical. The second and related action for the CEO is to ensure that, at least once or twice a year, this top management team takes time out to debate the business directions. Executive team retreats and “away days” can be instrumental in educating the CIO, as well as serving their primary purpose of challenging the continuing validity of business thinking.

CIOs who add value through their interpretation of external IT success stories tend to be skilled analysts and natural tutors. They avoid the perils of making naive suggestions about transferring a technology or application from outside or advocating what may be well-founded ideas in a proprietorial and offensive style. They are good business theorists and systems thinkers who can capture the kernel of an exemplar case study application and conceptualize its potential relevance to the business, whether it relates to a business need or creates a new strategic option. They communicate with fellow executives by translating new ideas into pictures and understandable benefits. And they draw satisfaction from facilitating the learning of others, unconcerned about who ends up claiming to have originated the idea.

A CIO’s propensity for tutoring is one of the keys to establishing and maintaining executive relationships. It is very easy for CIOs who have built their career in IS to spend their time and identify with those in the IS function, managing within, and perpetuating the specialist values of, the IS function. Surprisingly, we find that CIOs who are ex-general managers are equally fallible in this area. Some succumb to the temptation to avoid the hard work of building substantive relationships with their peers. They look for some very visible but shallow initiatives, such as internal newsletters, presentations, and IT exhibitions, to make a careerist splash. Others become ardent converts who now know exactly how IT should be deployed in all parts of the business, even if their peers do not share the same enthusiasm. In all these cases, the IS function ends up isolated from the rest of the business and unable to implement initiatives that require wholehearted collaboration from senior executives.

Whatever their backgrounds, CIOs who succeed in adding value recognize and act on the importance of executive relationships. They look on alliance building as an important component of their job. Most often, they work at it through informal one-to-one meetings — a soft approach rather than a formal one — and they seek out and grasp opportunities as they arise. One CIO commented, “It is never too much trouble to explain when a business colleague asks for help. It is my job to make the technology accessible in the eyes of the management team.” Another CIO, who had been fired from his previous company, explained how his approach has changed, “In my previous company, I now realize that I constructed win-lose situations with business peers. I was determined to fight the IS corner, to prove that problems were not of our making, and I generated enemies, not allies. Today I work hard at constructing win-win situations that secure the relationships I need.”

CEOs help to enable these relationships by making the CIO a member of the management team, as we have already urged. This one action greatly increases both the number and the quality of relationship-building opportunities available to the CIO. We have also found that CEOs can set powerful examples through their own two-way relationships with CIOs.

Some CIOs spend most of their time establishing and communicating a strong IS performance record. Unfortunately, it often avails them little and serves only to ensure that they have no time to deliver in other areas. Overseeing what may be independently rated as highly efficient data centers has not saved CIOs from being fired or their empires from being outsourced. In our experience, successful CIOs do care about and achieve this component of added value, but they spend little of their personal time in the process. Rather, they set up and monitor a regime that delivers. Characteristic elements of this regime include the following:

  • Selection of subordinates who are outstandingly good at operations management, often better than the CIOs themselves.
  • Procedures that require feedback to the business on all actions taken in response to any request or complaint.
  • Procedures that require feedback from the business on most actions taken by IS.
  • Communication of service and business satisfaction data, with the CIO closely and visibly monitoring results and getting personally involved early if things start to go wrong.

The CEO can help stimulate such a regime by making clear to the CIO that the perceptions of users in the business are the only relevant performance criteria. Awards from peers in the IT community, even the CEO’s personal sympathy, will count for nothing if users are unhappy. It is also very helpful if the CEO ensures that the IS function is fully integrated into any company performance initiative, such as a total quality management program, so that IS is perceived as neither forgotten nor special.

We have seen many CIOs who agree to or generate IS applications portfolios that proliferate across the business. Their (forlorn) hope is that this will be a means of satisfying everyone. In practice, they end up satisfying no one. CIOs who add value work hard to ensure that the business concentrates the IS development effort, invests solely and successfully in projects that are integral to business strategy. This is the area that most directly adds value; it represents the ultimate payoff enabled by several other components of the CIO’s work. In our experience, several factors are associated with success in this area:

  • Sponsorship by the Business. Although the CIO takes responsibility for IS-related costs, he or she insists that all investment cases be presented for approval by business executives, who relate them to stated business strategy or agreed business imperatives and agree to be held accountable for the target benefits. Proposals that achieve “useful” rather than “strategic” benefits are strongly challenged as potentially costly diversions.
  • Maximum Elapsed Time. The CIO mandates a maximum elapsed time (six or nine months) within which any project must deliver new functions and benefits to the business. Huge monolithic projects consistently reemerge as disaster stories.
  • The 80/20 Rule. IS and the business agree that, faced with an “impossible time scale,” they will identify and implement the 20 percent of the requirement that delivers 80 percent of the benefit. Again, it is the inclusion of the “nice to have” features that turn potentially sound projects into looming catastrophes.

The rewards in this area can be very high. One large multinational recently benchmarked its leading competitor and found its own IT expense was more than twice that of the competitor. But the competitor, by targeting and limiting its resources, still managed to outperform them on the vital dimensions of time-to-market and manufacturing productivity.

CEOs can stimulate this kind of approach by, first, demanding that projects be appraised against strategic criteria rather than by simplistic cost-benefit analysis and, second, ensuring that projects are managed as business projects rather than as IS developments. All too often, in our experience, CEOs still do exactly the opposite!

Working to achieve a shared and challenging vision of the role of IT within the executive team is another added-value component that requires much of the CIO’s personal time. In the most successful organizations we have encountered, this shared vision positions IT as an agent of business transformation — a technology that is applied to achieve radical rather than incremental improvement in the business. Such a vision is the precursor and enabler of the concentrated IS development effort described above. In the short term, a CIO can operate successfully with the “sponsorship” of only a few executives who share this vision, perhaps the CEO alone. But longer-term success requires the vision to be shared across the whole executive team. Successful CIOs recognize this and can provide detailed profiles of the understandings and attitudes of every key executive of the business. They have clear plans for obtaining the desired buy-in to the vision, tailored to each individual.

The plans may include formal events such as application demonstrations or visits from appropriate gurus, but again these efforts are just as likely to be centered on quality one-on-one contact between the CIO and each executive over many months. These CIOs realize that attitudes, visions, and values seldom change quickly, and they are prepared to find whatever time and resources are necessary. The CIO of a large manufacturing company went so far as to bring in a psychologist to help him think through how to work with one key executive. Another CIO remarked, “The day you stop working on developing a shared vision for IT, you are gone.”

Finally, CIOs who add value make important general contributions to business thinking and business operations. We have cited the example of the CEO whose principal ally in driving fundamental business change is his CIO. Why should CEOs expect such a contribution? It is clearly not sensible to expect the CIO to have better marketing insights than the marketing director or sharper ideas for improving the manufacturing process than the production director. But the nature of IT is such that the CIO gets a view across the business; the job requires the CIO to have a curiosity about “how things work.” CIOs are well placed to understand the connections and interrelationships between functions and organizational units, and it is by improving these linkages that the greatest opportunities for business advantage often occur. Thus we have seen CIOs become highly valued members of task forces, charged with improving logistics, reducing the time taken between customer order and delivery, and taking significant cost out of the business without damaging its competitive capability. It is in the CEO’s interest to ensure that the CIO is a member of such task forces and working groups: the CIO can contribute a business-wide perspective that is without allegiance to any of the historic power bases within the company.

From our descriptions of how the added value is delivered, it will be obvious that many of the components overlap and connect. Figure 1 demonstrates these connections. For example, CIOs who have built excellent executive relationships are better able to focus on business imperatives, achieve a shared vision of the role of IT, link that focus and vision into a concentrated IS development effort — and, through those actions, sustain the excellent relationships. Because of the interdependencies, CIOs are likely to deliver on all or none of the added-value components. This is the primary explanation for the polarity between CEO views of the contribution of IS to their businesses.

As we pointed out earlier, some CEOs see outsourcing as the answer to their dissatisfaction with IS. This outsourcing may include the CIO role and its incumbent.12 Our added-value framework highlights the implications of such a step. It is very difficult to see how an outsider could deliver any of the components of added value, operating in the way we have described. Even the achievement of a good performance record through outsourcing involves substantial management of the supply activity from within the organization and continuous attention to the organization’s perception of IS performance. More obviously, building executive relationships and a shared vision, which are so fundamental, cannot be subcontracted. To outsource the CIO role will ensure that IS remains a liability, albeit perhaps a smaller one.

Qualities of the CIO Who Adds Value

Through our research we have accumulated extensive data on CIOs who succeed in adding value, including their own descriptions of what they do and the abilities they draw on; their CEOs’ perceptions of the qualities and experience they look for; and behavioral data from a number of psychometric tests we have administered to the CIOs (the Myers Briggs Psychological Preference Test and Belbin’s team-role self-perception inventory).13 Collectively, this data provides a consistent profile of the CIOs who add value (see Table 3).

For many CEOs, the first requirement of a CIO is “integrity.” This might be considered an essential quality of any executive, but where CIOs are concerned, it relates to some specific anxieties. CEOs can feel particularly vulnerable in the area of IT, aware of how difficult it is to assess project status, technology risk, and functional performance. They know that CIOs can use their specialist knowledge and language to camouflage problems, advance or defend their own empires and budgets, and pursue their own interests. Integrity is revealed through behavior, and the major concerns are business loyalty and openness. The CEO needs to have confidence that the CIO’s first loyalty is to the business as a whole and that every IT initiative will be driven by business imperatives, not technology aggrandizement. And because IT activity is opaque, CEOs value CIOs who will, as one CEO stated, “report impending problems as quickly and openly as they report triumphs.”

As for motivation, psychometric data show that successful CIOs are strongly goal oriented. They derive great satisfaction from knowing that they have influenced the course of the business. They demonstrate stamina and steely determination in pursuit of goals related to business change. They are also fascinated by new ideas and usually devote considerable time to scanning and networking beyond their own company and industry. They think instinctively of business as a set of systems whose current operations must be understood so that superior systems can be devised, analyzed, and successfully applied. The combination of these elements is captured in the comments of one CIO: “I am not interested in running a data processing department; I want to transform this business.” This was not a bid for the CEO’s job, but a perception of his mission as CIO!

Nevertheless, such ambitions may seem threatening and inappropriate in a CIO, and we have found that some of those who are hard drivers for business change do indeed accumulate powerful enemies. This situation becomes counterproductive and often results in the CIO’s demise. What saves the CIO quoted above is that he seeks to be the facilitator rather than the formal leader of change. He wants the satisfaction of achievement but does not demand public credit. In short, he has compensating competencies, the third element in Table 3. Such CIOs are adept at working through others, consulting and involving their peers, and constructing those “win-win situations.” Linked to this competency is another one: communication ability. We are not referring to oratory, although some CIOs are indeed excellent speech makers. The key requirement is communication in the literal sense; these CIOs are able to absorb and use the language of production or marketing and show understanding of and sensitivity to their colleague’s concerns. Allied to a profound knowledge of IT, this communications capability allows them to demystify any aspect of IT. It is the combination of motivation and competencies that allows the goal-hungry CIO to operate effectively, an iron fist in a velvet glove.

Perhaps the most surprising element of the profile comes under the heading of experience. The value-adding CIOs in our research have invariably come from the IS function. Most have never had a job outside the IS function. It is those who are transplanted from other areas of the business who have struggled, uncomfortable with the technology, unclear of their careers, typically equipped to operate as forceful managers rather than as bridge builders and facilitators. It seems that a lengthy apprenticeship in the IS function, particularly in systems analysis and development, is the appropriate backgroundfor a CIO. The CIO will then be accustomed to operating by consent from a function that is not a traditional power base, and he or she will have a mission to explain and focus on systemic business change.

Some Advice for the CEO

“With my previous CEO,” one ex-CIO said ruefully to us, “anything was possible; with his successor, nothing was possible.” The statement may be extreme, but the sentiment is widespread. CIOs who are intrinsically capable of adding value in the ways we have described know very well that the CEO’s position on a number of issues is critical to their own ability to achieve. They believe that IT has evolved to the point where leadership must come from executive line management.14 Table 4 summarizes the requests that value-adding CIOs would make to CEOs. It is also the advice we now give to CEOs on their behalf.

First, you are in the business of change, particularly in the turbulent 1990s. Position IT and the CIO as agents of change. See IT and the CIO as part of the solution, not part of the problem. Involve the CIO early in the debate about the nature of change required and the options available, not after the new way forward has already been defined.

Second, make sure that you and your organization focus on how and where the application of IT can be effective. The key idea is to exploit IT within initiatives that deliver some element of business transformation and substantial benefits. Do not think of IT as a cost displacement technology, which may contribute, after much effort, some incremental gains in efficiency. The major gains come from applying IT to “doing the right things” not to “doing things right.” So when appraising IT-related investments, apply the same market-oriented criteria that you would use for investments in new production capacity, distribution channels, and so forth. One CEO remarked: “Ask the question: Does this IT proposal make business sense?”

Third, use the personal time you give to IT to help institutionalize business values across the organization. The CEO of a chemicals group transformed attitudes to IT within his corporation by consistently questioning business executives about how IT featured in their business strategies. Lead by example. Focus on establishing a business context and language that is conducive to IT exploitation. Get in place the regimes required for achieving excellent IS performance, identifying strategic IS developments, and delivering them fast. Value for money will follow without your having to continually review IS projects and budgets or preside over painful post-mortems.

Fourth, build an executive team that includes an appropriately qualified CIO. Whatever the organization structure and reporting lines, the CIO needs to be, de facto, part of the top management group. And the group needs to operate as a real team. It is very difficult to surface and do justice to new business thinking unless there is a top-level culture in which executives regularly meet — formally and informally — to discuss potentially challenging and far-reaching ideas in an atmosphere of mutual trust.

Finally, manage IT as integral to the business, not as an adjunct. If you have special steering committees for putting the business into IT, disband them. If the CIO is a full member of the business team, that team can take the issues as required — and to much better effect. Similarly, whenever projects, task forces, and special initiatives arise, involve the CIO and ensure that a systems and IS perspective is brought to bear on devising solutions to business problems.

The Bottom Line

We have described how CEOs tend to be polarized in their views of the value for money being delivered by IT. In recent years, there has been a tendency among organizations who view IT as a liability to resort to outsourcing of the IS function. This action may reduce IT costs, at least in the short term, but it does nothing to change the dominant variable, the value being delivered by IT. Organizations where IT is viewed as an asset, where IT plays a role in transforming the business, have quite a different IT environment, as we have detailed. This environment is not achieved by outsourcing. It is achieved primarily by the actions and qualities of a value-adding CIO, irrespective of whether the bulk of IT activity is outsourced or remains in-house. But the critical dependency for the CIO is the attitude and influence of the CEO. The CEO can help by inspiring a receptive and constructive climate for IT across the organization. Alternatively, the CEO can, through a personal example of hostility or detachment, inhibit any worthwhile IT achievements. Ultimately, you get what you deserve from IT.


1. M.C. Lacity and R.A. Hirschheim, “The Information Systems Outsourcing Bandwagon,” Sloan Management Review, Fall 1993, pp. 73–93; and

J. Rothfeder and L. Driscoll, “CIO Is Starting to Stand for Career Is Over,” Business Week, 26 February 1990, pp. 47–48.

2. The authors would like to express their appreciation to KPMG’s IMPACT Group and to Egon Zehnder International for their funding of these research studies.

3. D.F. Feeny, B.R. Edwards, and K.M. Simpson, “Understanding the CEO/CIO Relationship,” MIS Quarterly 16 (1992): 435–448.

4. M.J. Earl, “The Chief Information Officer: A Study of Survival” (London: London Business School, Centre for Research in Information Management, Working Paper No. WP93/3, 1993).

5. The original study:

R.A. Hirschheim, M.J. Earl, D.F. Feeny, and M. Lockett, “An Exploration into the Management of the Information Systems Function: Key Issues and an Evolutionary Model,” Information Technology Management for Productivity and Competitive Advantage, IFIP TC-8 Open Conference, Singapore, March 1988.

The study that revisited the CIOs:

D.F. Feeny, “The Five-Year Learning of Ten IT Directors” (Oxford, England: Oxford Institute of Information Management, Research and Discussion Paper No. RD93/9, 1993).

6. P. Strassman, The Business Value of Computers (New Canaan, Connecticut: The Information Economics Press, 1990); and

M.M. Parker, R.J. Benson, and H.E. Trainor, Information Economics (London: Prentice Hall, 1988).

7. R.I. Benjamin, J.F. Rockart, M.S. Scott Morton, and J. Wyman, “Information Technology: A Strategic Opportunity,” Sloan Management Review, Spring 1984, pp. 3–10; and

F.W. McFarlan, “Information Technology Changes the Way You Compete,” Harvard Business Review, May–June 1984, pp. 98–103.

8. M.J. Earl, “Experiences in Strategic Information Systems Planning,” MIS Quarterly 17 (1993): 1–20.

9. M.J. Earl, Management Strategies for Information Technology (London: Prentice Hall, 1989); and

J.C. Henderson and N. Venkatraman, “Strategic Alignment: A Framework for Strategic Information Technology Management” (Cambridge, Massachusetts: MIT Sloan School of Management, Management in the 1990s Working Paper 89–076, 1989).

10. Feeny et al. (1992).

11. This has also been observed by:

C.S. Stephens, W.N. Ledbetter, A. Mitra, and F.N. Ford, “Executive or Functional Manager? The Nature of the CIO’s Job,” MIS Quarterly 16 (1992): 449–468.

12. R. Hamilton, “Kendall Outsources IS Chief,” Computerworld, 8 April 1989, pp. 1–4.

13. R.M. Belbin, Management Teams: Why They Succeed or Fail (London: Heinemann, 1981).

14. J.F. Rockart, “The Line Takes the Leadership — IS Management in a Wired Society,” Sloan Management Review, Summer 1988, pp. 57–64.

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