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Days of Thunder

Days of Thunder

"I'm a mover and shaker . . . I don't like people who sit around and procrastinate.

Get on with it, even if you get it wrong."IS Head of Department, Australia"The organisation is complex. No matter what you would like to do, a number of other relevant parties have to be considered. This does require an overall view of what you are doing and why."Senior IS Manager, UKSo, who is leading the business-IT partnership race?Compared to the British, Aussie CIOs look like technology junkies. They're significantly more open to and interested in new technologies and more capable of handling them than their British counterparts. They're more responsive to the marketplace, more flexible and more likely to think proactively about change and how to manage it. But according to a pilot research study commissioned by CIO magazine from the Cranfield School of Management (UK), they also have a narrower and more limited view of their organisation than British and US CIOs and tend to think less corporately. That makes them more vulnerable to all sorts of threats and shocks than their peers abroad.

And behind all the regional differences, CIOs everywhere are showing at least one common failing. Whether they're working in Australia, the UK or the US, far too many CIOs continue to think "information" instead of "corporate advantage", while far too few know how to speak the language of the boardroom. Those are just some of the findings of the study Strategic Leadership: Driving the IS/IT Agenda in Tomorrow's Organisation, prepared for CIO by Andrew Kakabadse, director of International Management Development and deputy director of the Cranfield School of Management.

With technology advancing at ever-increasing rates, organisations are demanding more and more of the CIO, who must increasingly engage in business change and in the strategy process itself. The research study was commissioned to find ways for CIOs to harness the collective strength of the IT department to build a strategic and influential partnership within their organisations. So far the study has found significant differences between the attitudes and preoccupations of Australian CIOs and those in the UK (and in preliminary research, those in the US), with implications for Australian CIOs looking to build such partnerships.

Second to Some

As managers in a country of subsidiaries, there's a tendency for Aussie CIOs to be preoccupied with delivery of service, and for their skills to be concentrated around applications, Kakabadse says. This contrasts directly with the preoccupations of the British and US CIOs sampled, who are more likely to work at corporate head office than in an operating business. Being so much closer to the board means those CIOs are more concerned with ways to achieve greater levels of cohesion, and ensures their skills are more strategic and long term.

The findings make clear there are significant differences between being a good senior manager who understands the technology and how it can provide service to the operating elements of the business, and being one who understands corporate capability, corporate value and shareholder value. Far too many CIOs understand the former, especially in Australia. Far too few understand the latter. "[The latter] requires that the information systems director or CIO stops thinking information and always thinks corporate advantage. And that was one of the key findings, be it UK or Australia or US, that was a problem: many were thinking information," Kakabadse says.

"Australia emerged as a country essentially of subsidiaries. So here it was more delivery of service; in the UK/US it was more concerned with how to get more cohesion. The skills required over there were far more strategic, long term; the skills required over here were far more [concerned with] applications, delivery of service to the community, and with very different attitudes as well," Kakabadse explains. For starters, while Australian CIOs say it's important to have a close relationship with the board, they don't see it as particularly relevant to their day-to-day work. Nor do many of them have such a relationship.

Most respondents in the UK said IT was represented on the board. More than 80 per cent of the Australians said it was not, or that it was represented through some other function such as finance. Kakabadse speculates that this lack of board representation may be one reason why, even though Australian CIOs recognise the importance of corporate structures and corporate ways of operating, these things tend to matter less here than they do abroad. No Australian interviewed mentioned the notion of "shareholder value".

CIOs in the UK, and those working in Australia working at "corporate central", consider it is "absolutely paramount" to understand how to begin using IT to pull the corporation together. And they say it is equally vital to understand the true meaning of shareholder value and what it means to attain that value.

"So basically what we're getting in those simple statistics is everybody knows IT is important, in the UK and in Australia. The UK CIO is represented on the board, the Australian is not; from there on in, the way the IT strategy is aligned with the corporate plan is more of an important issue for the UK lot than the Australians," Kakabadse says.

"This is no surprise. If your job is basically to sell a whole number of issues, and you're never really exposed to what it means to create corporate plans, to deal with shareholders, to deal with the ups and downs of the analysts and the market, you can't think that way. It's nobody's fault, it's just a matter of your work-related experience."Risk of IncapacityCIOs working at "corporate central" ignore shareholder value at their own peril. Even those working in operational businesses could do with paying the notion more attention. Otherwise they run the risk of achieving operational excellence, but strategic incapacity. Kakabadse says it's all too possible to do numbers of things "absolutely brilliantly" -- getting the IT systems right, getting close to your customers, implementing quality standards and procedures -- and still find your share price going down and your position at risk. The experience of AMP here and of NatWest Bank in the UK proves the point.

"What the shareholders see is all these lovely things and increased profitability, but a top management that isn't positioning the brand very well.

If top management has introduced economies of scale but they've only gone a third of the way that they could, you'll get shareholders saying: 'If we took all this capacity in the organisation and changed the top management, see how much bigger the profit would be'," Kakabadse says. The remedy is to consider shareholder value above all other considerations in planning new investments.

Take the example of e-commerce, one of the current preoccupations of Australian CIOs. The market has become intrigued by the technology, and has assumed that technology has actually created a new market. It may indeed have done so, says Kakabadse, but the evidence so far suggests otherwise. In reality e-commerce seems to be just a different form of logistics -- an addition to supply chain management. It has simply speeded up the supply chain side for people who had very good contacts in the market in any case.

"So it's just a different way of positioning base commodity stuff," Kakabadse says.

Certainly companies dealing in commodity products have no choice but to embrace e-commerce if they want to stay competitive. But that does not guarantee e-commerce will provide value in the marketplace.

Strategic Thinking

The survey shows that Australian CIOs are mainly concerned with satisfying and supporting the operating end of the business as key clients, ever keen to achieve marketplace advantage. Most of their attention goes to quality of service, operational applications and techniques, ways to satisfy customers, and service and quality delivery. UK and US-based CIOs share those concerns, but also tend to think more strategically about ways to ensure information is used well and is presented as a corporate brand that will provide advantage not so much to the customer as to the shareholder. In other words, they are starting to think "corporate advantage".

In a sense, the significant difference between the US/UK and Australia is that US/UK CIOs have been forced by their environment to be concerned with operating on the New York or London stock exchanges and with matters like share price, share value and corporate governance, Kakabadse says. "They were on-the-job trained more to think corporately, whereas the guys here, because they are in more of an operating company environment, are forced to think customer service, application of technique, latest technology, keeping up to date. So you can see there are two types of dialogues going on.

"I would suspect nobody would want to ask the question of people here about how they might add value to the board, because they don't see these people over here as providing any type of board-like value. They see them as providing customer-like value, because that is what they are positioned to do. And that's got nothing to do with being Australian, or being 10,000 miles away from the UK. It could be Ireland, which is right next door."But while it is perfectly reasonable for Aussie CIOs in operating businesses to focus more on delivering value to customers than to the board, it does leave them more vulnerable. That's because any operating business positioned to service a market is exposed once its capacity to service that market has ceased. Then the business runs the risk of being repositioned, stripped down, or even sold off at a time when it is doing well, so central office can gain maximum realisation of the assets to reinvest somewhere else. "In markets such as Australia, Ireland or Spain, you will always face the phenomenon of operating company dynamics, and basically of being a disposable asset as well," Kakabadse says.

Doesn't that tie one of the CIO's hands behind his back? "I would have said both," he says.

"It makes it very important to understand what information actually means at different levels. You can use the latest technology to get information which provides you with very explicit data about certain trends or movements. That's often used in customer segmentation type concepts," Kakabadse says. "You then need information to begin to try and tie the organisation together, so that it really is providing corporate advantage and you can see where value is located."But in all too many instances information is being used basically as an explicit mechanism for identifying particular functions rather than an implicit mechanism for tying the whole corporate structure together. "And because it's not being seen that way, and because the people in senior roles have been brought up to think technology and to think using this for very productive and measurable outcomes, they don't think strategies, corporate advantage, policy, global reorganisations. So almost by nature they cut themselves out of the debate where information systems is being used as a tying together mechanism for the corporate structure," Kakabadse says.

So in Australia CIOs say they want to use information systems to gain market share advantage or some other form of market advantage. In the UK they say they want that too, but they also want to find a mechanism to pull the total structure together so the shareholders can see the value they are getting. "The thinking and technological aspects of wisdom and knowledge in this particular area are principally focused towards market, market behaviour, delivery of service, not this over-arching corporate value type of thing. And in many ways that's the challenge -- how can we use knowledge -- not in explicit ways, but in implicit ways? How can it be used strategically," Kakabadse says.

As a starting point that means talking the language of the boardroom, and representing IS in such a way that its corporate value is clear. It means thinking strategically, but about the strategy of the corporation rather than just the strategy of information systems. "It's keeping their eyes open to the dialogue of the board. What does shareholder value mean? One of the most difficult questions I've found for any board member to answer is: what is value here, in this corporation?"If you go to a leading bank and you ask them: 'What is value like for you when basically what you want to offer is replicated by so many banks?' The answer could be not in product. The answer could be: 'We have a better capacity to introduce economies of scale, so that what differentiates us as far as shareholder value is concerned from any other bank is that we can take more costs out of the place and still provide a comparable service.'"That's exactly what Barclay's Bank are doing: they are turning the whole place upside down, they've taken more costs out than most other banks, and they are positioning themselves to provide the same level of service at a much lower level," Kakabadse says. "Now what does that depend on? Well, Barclays has made a major shift. They've all of a sudden gone away from a dependence on people to a total dependence on information. The question is: to what extent was the CIO into that debate? And the answer is: well, he wasn't even aware of it."

Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.

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