MIS QUARTERLY EXECU XECUTIVE Joe Peppard Cranfield School of Management (U.K.) Chris Edwards Cranfield School of Management (U.K.) Rob Lambert Cranfield School of Management (U.K.) MISQE is Sponsored by W KELLEY SCHOOL OF BUSINESS INDIANA UNIVERSITY SIM Delivering Business Value Through IT Leadership © 2011 University of Minnesota Clarifying the Ambiguous Role of the CIO CLARIFYING THE AMBIGUOUS ROLE OF THE CIO¹ Executive Summary The role of chief information officer (CIO) is riddled with ambiguity. To better understand the role, together with the causes and consequences of the ambiguity, we conducted interviews with CIOs, CxOs, recruiters, and industry analysts. Our findings indicate that this ambiguity is rooted in the fact that there are five distinct CIO roles: Utility IT Director, Evangelist CIO, Innovator CIO, Facilitator CIO, and Agility IT Director/CIO. The appropriate role for a particular organization at a point in time is determined by the criticality of information and technology for competitive differentiation and the maturity of its information leadership capabilities. Both are strongly influenced by the digital literacy of the CxO team. Moreover, our research suggests that in some organizations, the CIO roles follow a clear evolutionary path as some responsibilities that CIOS have assumed migrate away from the CIO and become embedded in CxO roles. We highlight the implications of this shift and provide specific recommendations for CIOS, CEOs, and CxOs as they seek to clarify the role of CIO so that they can optimize the value they generate from IT investments. THE AMBIGUOUS ROLE OF THE CIO The role of the chief information officer (CIO) has received significant attention from researchers and practitioners over the last 30 years.² Although much has been written on this topic, an unambiguous description has yet to emerge. Indeed, what is apparent from all the words that have been written is that the role of the CIO is an ambiguous one. The genesis of all this attention lies in the perennial problems that most organizations experience with their IT investments and the questionable return they believe they are achieving. Generally, the CIO is held responsible for these disappointments, and, in the 1990s, CIOs were reported to have a shorter tenure compared to other CxO roles.³ While some CIOs may not be a good match for their job, a crucial factor contributing to the lack of success from IT is the confusion about what a CIO is expected to achieve. To explore the ambiguity that appears to surround the role, we carried out research to examine the causes, identify the consequences, and extrapolate how the CIO role might continue to evolve. We interviewed a mix of CIOs, CxOs, recruiters, and industry analysts (see the Appendix for an overview of our study). In these interviews, we explored their views, not just of their expectations and understanding of the nature of the CIO role, but also the issues they encountered. CIOs spoke candidly to us about some of the challenges they face. CxOs talked about their expectations and disappointments and the resulting frustrations they have experienced in getting value from IT. Analysts focused on the criticality of information and technology exploitation in enhancing the value of organizations and the potential role that CIOs can play. 1 Ritu Agarwal is the accepting Senior Editor for this article. 2 For academic studies exploring the changing nature of the CIO role published in the 1980s and early 1990s, see the list of selected Further Readings at the end of this article. 3 See Rothfeder, J. and Driscoll, L. "CIO is Starting to Stand for Career Is Over," Business Week, February 26, 1990. MIS Quarterly Executive Vol. 10 No. 1/ Mar 2011 31 Peppard et al. /Clarifying the Ambiguous Role of the CIO Recruiters talked about their experiences in working with boards and leadership teams during a search for a CIO. From our analysis of these interviews, we concluded that there are different demands placed on different CIOs. This led us to identify five distinct CIO roles. Our analysis has implications not just for CIOs but also for CEOs and the wider executive leadership team of an organization. TRACING THE EVOLUTION OF THE CIO ROLE The genesis of the CIO role and the coining of the "chief information officer" label can be traced to a shift from IT having a supporting role in organizations, automating previously manual tasks, to being a driver of competitive advantage, strategic change, and innovation. This shift demanded considerably more than just a focus on deploying and managing IT, which was the role of the CIO's predecessors. The new role required business- driven approaches to exploiting information and IT. Increasingly, information was recognized as a critical resource that required active management, stewardship, and oversight from a senior management perspective. The newly created position of CIOS emphasized information over technology, enterprise over function, and strategy over operations. Incumbents were still responsible for technology, but the role had expanded. In addition to the operational dimensions, the position had a key requirement to provoke executive level discussions across the organization, relating to how information and technology could be leveraged, particularly in the pursuit of competitive advantage. In the quest for executive engagement in information and technology decisions, organizations began to 4 Applegate and Elam (1992) suggest that the rise of the CIO marked the transition from the data processing era to the information era (see Further Readings list at the end of this article). See also. Porter, M. E. and Miller, V. "How Information Gives You a Competitive Advantage," Harvard Business Review, July-August 1985, pp. 149-160. 5 William Synott is generally credited with coining the label “chief information officer" in a speech at the 1980 Information Management Exposition and Conference. Synott predicted that "The manager of information systems in the 1980s has to be Superhuman—retaining his technology cape, but doffing the technical suit for a business suit and becoming one of the chief executives of the firm. The job of chief information officer (CIO) equal in rank to chief executive and chief financial officer does not exist today, but the CIO will identify, collect, and manage information as a resource, set corporate information policy, and affect all office and distributed systems." In 1986, Business Week ran a story announcing the arrival of the CIO; see Bock, G., Carpenter, K. and Davis, J. E “Management's Newest Star: Meet the Chief Information Officer," Business Week, 2968, October, 1986, pp. 160-172. 32 MIS Quarterly Executive Vol. 10 No. 1 / Mar 2011 make the distinction between demand and supply. "Demand management" was promoted as a business- led activity concerned with identifying the information required to both shape and deliver the business strategy, as well as prioritizing IT spend. The supply side was concerned with satisfying these requirements through the sourcing and deployment of IT. While demand would be determined by business executives working closely with their CIOS or achieved by establishing a demand organization containing relationship and “hybrid” managers, efficient and effective technology supply was the responsibility of the CIO. Despite the opportunity this shift provided for CIOS to increase their impact in the "C-suite," many have struggled. While clearly some may not be up to the job, the lack of impact can be attributed to the polarized views of CxOs about the role of technology in organizations. At one extreme is the belief that IT is an administrative expense and a cost to be minimized, while at the other are CxOs who believe that IT offers significant strategic opportunities. This fundamental dichotomy is at the heart of the different perceptions of the CIO's role, job tasks, reporting relationships, and what he or she is expected to achieve. It also determines the level of engagement and involvement of CxOs in what might traditionally have been considered to be IT issues and decisions. Indeed, one study has identified the IT decisions that IT people should not make. But even in situations where CxOs subscribe to a more strategic view for IT, they often do not understand what their role is and the wider responsibilities of “the business” in optimizing value from IT spend. This lack of understanding has 6 Mark and Rau have suggested that companies can get more productivity from their IT by dividing IT into demand and supply organizations. See Mark, D. and Rau, D. “Splitting Demand from Supply in IT," McKinsey on IT, Fall 2006, pp. 22-19. See also Roberts, R., Sarrazin, H., and Sikes, J. "Reshaping IT Management for Turbulent Times," McKinsey Quarterly, December 2010. versa 7 The term "hybrid manager" was first coined by Peter Keen in 1988, and the concept was defined by Michael Earl as "people with strong technical skills and adequate business knowledge, or visa hybrids are people with technical skills able to work in user areas doing a line or functional job but adept at developing and supplementing IT application ideas." See Keen, P. G. "Rebuilding the Human Resources of IS," in Earl, M. J. Information Management: The Strategic Dimension, Oxford University Press, 1988; and Earl, M. J. Management Strategies for Information Technology, Prentice-Hall, 1989. 8 See Kaarst-Brown, M. L. “Understanding an Organization's View of the CIO: The Role of Assumptions About IT," MIS Quarterly Executive (4:2), 2005, pp. 287-301. 9 Ross, J. and Weill, P. “Six IT Decisions Your IT People Shouldn't Make," Harvard Business Review (80:11), 2002, pp. 84-92. © 2011 University of Minnesota been attributed to poor levels of "digital literacy" of CxOs. 10 Most of the contemporary research exploring the CIO role falls into two streams: Advocating that CIOs take a stronger and more proactive leadership role in their organizations. Exploring the personal competencies of successful CIOS. The first stream promotes the need for CIOs to expand their responsibilities beyond merely "keeping the lights on" to having a more strategic role driving business transformation, innovating for competitive advantage, and acting as a key strategic partner to the CEO and wider organization.¹¹ Studies in the second stream explore the competencies, personal attributes, and characteristics that are required for success, with leadership, influencing, relationship architect, diplomat, etc. promoted as crucial competencies.¹2 Personal attributes identified for success in the CIO role include communication skills, business acumen, people skills, openness, and conscientiousness. ¹3 Like the findings from earlier studies, contemporary research in this second stream envisions the CIO to be more a business expert than a technical expert. It has also identified CIO leadership profiles (mapping "CIO authority" against "leadership capability"). However, the concept of CIO leadership capability has not been well developed. ¹4 14 While interesting, much of the research in the second stream has added little to help organizations as they seek to capitalize on IT. For example, earlier research sought to discover the different competencies of 10 For a fuller discussion of this topic, see Peppard, J. "Unlocking the Performance of the Chief Information Officer (CIO)," California Management Review (52:4), 2010, pp. 73-99. 11 See Mark, D. and Monnoyer, E. "Next-generation CIOS," McKinsey on IT, Spring 2004, pp. 2-8; and Today's Challenges, Tomorrow's CIO, IBM Global Business Services, 2008. 12 See Agarwal, R. and Beath, C. Grooming the 2010 CIO, A Report for the Society for Information Management Advanced Practices Council, 2007; and Enns, H. G., McFarlin D. B., and Huff, S. L. "How CIOs Can Effectively Use Influence Behaviors," MIS Quarterly Executive (6:1), 2007, pp. 29-38. 13 According to some researchers, CIO characteristics explain a large proportion of the variance in organizations' innovative use of IT. See Li, Y., Tan, C.-H., Teo, H. H., and Tan, B. C. "Innovative Usage of Information Technology in Singapore Organizations: Do OCIO Characteristics Make a Difference?," IEEE Transactions on Engineering Management (53:2), 2006, pp. 177-190. 14 Preston, D. S., Leidner, D., and Chen, D. "CIO Leadership Profiles: Implications of Matching CIO Authority and Leadership Capability on IT Impact," MIS Quarterly Executive (7:2), 2008, pp. 57- 69. © 2011 University of Minnesota Clarifying the Ambiguous Role of the CIO CIOs (although, confusingly, the term "roles" is used in some studies). These studies assumed that if incumbent CIOs possessed these competencies, they would be successful. But aren't these competencies generic and required by all senior executives? We would strongly argue that all members of the C-suite should be business leaders, strategic thinkers, and driving change and innovation. UNDERSTANDING THE CAUSES OF CIO ROLE AMBIGUITY The original definition of a CIO is "a senior executive responsible for establishing corporate information policy, standards, and management control over all corporate information resources." "15 While this definition might have been precise and appropriate 30 years ago, since then, IT has become all-pervasive, and businesses have become ever-more dependent on IT. As a consequence, CIO responsibilities have diversified to such an extent that differing organizations now have different authority profiles and positioning in the organization for their CIOS- at least for those whose job title is "CIO." Over the past 30 years, CIOs have assumed increasing responsibilities sometimes reluctantly and with a realization that many of these responsibilities best lie outside of the IT organization. But, as described later in this article, some of these responsibilities are becoming increasingly embedded in CxO roles. Additionally, there is some confusion about what exactly is a CIO. Our interviews identified four key reasons for this confusion. Unclear Distinction Between Corporate and Business Unit CIOS The first is an unclear distinction between a corporate OCIO and a business unit or line-of-business CIO. While both may be labeled "CIO," each plays a different role. A business unit CIO primarily has responsibility for aligning the IT investment portfolio with the business unit's strategy. A corporate CIO, on the other hand, is responsible for seeking (IT) supply synergies across the corporation and defining corporate standards and policies to ensure consistency across the technology infrastructure of the group. A partner in one of the "Big 5” management consultancy firms succinctly captured the challenge 15 Synott, W. R. and Gruber, W. H. Information Resource Management, John Wiley & Sons, 1981, p. 66. MIS Quarterly Executive Vol. 10 No. 1 / Mar 2011 33 Peppard et al. /Clarifying the Ambiguous Role of the CIO posed by an unclear distinction between these two types of CIO: "... the CIO role is often [defined] at group level with operational IT departments at the operating company level. In these situations, it's quite often the case that the group CIO is somewhat powerless because budgets are controlled by the operating companies. Whilst the group function may set such things as strategic direction, sourcing policy, and preferred supplier, it is often the case that operating companies [with their own CIOS] choose to do their own thing since they control the actual spend. In such situations, there's often very little that the group CIO can do about it. "" As described later in this article, this challenge can be addressed by having an effective IT governance structure. Inconsistent Use of IT Director and CIO Titles The second reason is the frequently encountered distinction between an IT Director and a CIO. These titles are often used interchangeably, particularly in Europe, and, more often than not, used inconsistently. For example, one CIO we interviewed has his job title on his e-mail signature as "IT Director/CIO." While CIO has become an established position in U.S. corporations, many in Europe still prefer the title of IT Director. A partner from a private equity firm, in an attempt to provide clarity, summarized the difference as: "An IT Director's job is normally about keeping the lights on and has little to do with strategy or growth. By contrast, the CIO's role is about the strategic application of IT and information for value generation.” The CIO of the world's leading transport operator, which moves more than 2.5 billion passengers every year, commented: "What we are seeing is so many people that walk around with that title [CIO] but, actually they just aren't with no disrespect to them. They are actually IT Directors, and they are very good at what they do, but they sure aren't CIOS." This inconsistent use of titles simply adds to the confusion, although the label IT Director might provide a hint as to where the focus and expectation 34 MIS Quarterly Executive Vol. 10 No. 1/ Mar 2011 of CxOs lie in organizations with this title-what one interviewee referred to as "small ‘i’ large ‘T’ IT management." Mismatch Between Expectations and Performance Metrics A third reason for the ambiguity is the mismatch between expected responsibilities and expressed performance ics. Most of our CIO interviewees reported a variance between their roles as they understand them to be and how their performance is assessed. Frequently, CIOs expressed their expected responsibilities in terms of supporting strategy, crafting the business direction with CxO colleagues, identifying disruptive technologies, and envisioning new opportunities enabled by IT. Indeed, these CIO responsibilities can be found in the recent prescriptive literature. However, CIOs in our study also reported that their performance was generally assessed in terms of cost minimization, network availability, project delivery (particularly using "process metrics" such as on-time, budget, and meeting specifications), and achieving service levels. This can lead to a situation where the CIO is achieving his or her performance goals, but the organization is still failing to optimize value from IT. This contradiction points to a lack of understanding among CxOs of exactly how IT generates value and what their role is, a point that is explored later in this article. Outdated View of the CIO Role The final reason for ambiguity about expectations for the CIO role is the genesis of the role and the historical "baggage" associated with it-many CxOs regard the CIO as being primarily concerned with technology and, in some cases, operational processes. The CIO from a European content and consumer business with over 300 titles and 200 websites and a turnover in excess of £1.5 billion ($2.4 billion) told us: "One of the main reasons why there are so few CIOS in the U.K. is simply that very few chief executives have met or are even aware of really good ones. "" He went on to explain that, in his experience, most CEOs that he has encountered have an outdated view of the CIO role that is inappropriate for today's business environment. © 2011 University of Minnesota FIVE DISTINCT CIO ROLES The data collected from our interviews revealed that there are also more subtle factors pointing toward different CIO roles and that these can help in understanding the ambiguity surrounding the role. From our analysis, we have identified five distinct types of CIO-Utility IT Director, Evangelist CIO, Innovator CIO, Facilitator CIO, and Agility IT Director/CIO. The label we have used for each role indicates the "mission" of the role. These five CIO types are characterized by differences in the following five factors, also identified from our data: 1. Scope of the role 2. Those issues cited as critical to success 3. The performance metrics used for assessment 4. The challenges cited 5. The nature of the relationship with CxO colleagues, in particular the CEO. Table 1 shows how these factors differ across the five CIO roles. Utility IT Director This first category of CIO is not really a CIO in the strictest sense of the term (the Utility IT Director role existed long before the label was coined) but a technology and operationally focused executive whose primary function is to provide IT infrastructure, systems, data, and telecommunications capability.¹6 Organizations with Utility IT Directors are most likely not strategically dependent on information, or at least choose not to be; rather, they use IT to support operational processes in an efficient manner. The incumbent typically reports to the CFO, with the emphasis of the role on providing essential IT services at lowest cost. As the director of a global investment bank, focusing on mergers, acquisitions, debt, and equity placements, commented: "I think the most obvious reason why so few companies have a CIO is because many genuinely don't need one. The stereotypical widget maker almost certainly doesn't need one." 16 This role has strong resonance with the "keep-it-running CIO" identified by Leidner and Mackay. See Leidner, D. E. and Mackay, J. M. "How Incoming CIOs Transition into Their New Jobs," MIS Quarterly Executive (6:1), 2007, pp. 17-28. © 2011 University of Minnesota Clarifying the Ambiguous Role of the CIO Evangelist CIO The Evangelist CIO typically takes on the task of raising the profile of information within the organization, "selling" the idea that information can potentially be leveraged to generate significant business value. Generally, the operational aspects of IT are also included in the Evangelist CIO role. With this role, the CIO seeks to educate his or her peers on the potential for information to be a potent business driver, partly by providing them with exciting visions of the future, and partly by creating pilots to demonstrate this potential. The challenges confronting Evangelist CIOs relate to overcoming business managers' desire to maintain the status quo and getting them to accept the ability of information and technology to transform existing processes, products, and business models. This sentiment was captured by a recently appointed CIO of a European business services organization: "I don't think they [the senior management team] quite understood what my contribution could be. They didn't understand the business engagement side of IT, and I spent quite a lot of my time selling that.” Because it is not always clear how and when the competitive use of information will result in a positive return on any investments made, it is important that the senior management team as a whole is open to piloting the organization's strategic use of IT. Convincing skeptics requires visionary information leadership delivered by an Evangelist CIO. The CIO of a news media organization told us of the challenge he faced when the previous incumbent had been a Utility IT Director, and the expectations were that he and the IT organization deliver services at the most efficient cost: "I've invested quite a lot of time and effort in rebranding what my team and IT do. I've made it my business to demonstrate that IT and technology are about more than just keeping the lights on and making sure print runs go out on time." Innovator CIO The Innovator CIO identifies and develops opportunities to deploy new IT-enabled processes and products/services that give the organization a clear source of competitive differentiation over its rivals. Information is used proactively as an integral part of strategic growth and innovation. As the CIO of an international engineering business with 40,000 employees noted, Innovator CIOs focus on delivering: MIS Quarterly Executive Vol. 10 No. 1/ Mar 2011 35