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Focus on Growth

Focus on Growth

How do businesses tapped out on cost cutting and with no room left to manoeuvre on price continue to grow their profits? The only way left is to grow volume and few managers know how to do so.

Reinventing the CIO Role

The bad news for CIOs is that when it comes to growth, IT has been and remains more a part of the problem than the solution. The answer is to secure profound changes in how people look at IT, and that means CIOs must come to a better understanding about what drives sustainable growth for organizations. It really comes down to four basic things, Treacy says.

First is that the notion of the value discipline and consideration of the value proposition is a very important foundation for any sustainable growth. There are CIOs who are really solid participants in that debate and discussion inside their firms, with enough business savvy to make valuable contributions to the discussion about the nature of the organization's value proposition: the question of why any customers should want to do business with the firm.

"The CIO can't invent the value proposition but I think they can be great contributors to the debate, and important ones, since every value proposition is founded on a uniqueness in operating model design, to the question: 'Why we can deliver value the other guy can't'. The IT community can play a big role in that. IT remains one of the fundamental catalysts for new and different ways of operating businesses. It still is the most powerful weapon we've got out there for constructing new value propositions," Treacy says.

The second thing CIOs need to tune into is how their technology investment impacts base retention, share gain and market position.

Then they must recognize that a successful growth strategy relies on a portfolio of initiatives. "A big-sized firm might have 50 or 60 or a hundred different growth initiatives," Treacy says. "They are diversified by time frame, by type, by risk profile, and the reason for it is that any one plan you come up with is inherently risky: it might work, it might not. So the way you create a steady result is by spreading your risk across a wide range of initiatives, some of which will work, some of which won't, but the overall result will be more predictable than any particular plan or initiative.

"The fourth key for these firms to grow at a steady pace is that they don't just grow, they actually simultaneously grow their capacity to grow. There is a constant reinvestment in talent. There is a constant reinvestment in how to become more innovative. And there is a constant investment in how to become better at performance management, which means having a tight control system so that they know where they're growing, where they're not, why that's growing, why this isn't, and kind of have a feedback loop that makes them better all the time at managing and controlling this growth.

"So the basic message for CIOs is that if they want to make a bigger contribution on the growth agenda, they have to start by understanding what is it that actually creates steady, consistent growth."

And of course CIOs can ensure their companies have the tools to help them secure growth. Take the set of value propositions around operational excellence, which is all about centralized, standardized, efficient, low-cost - a seamless hassle-free basic service. As soon as you paint that picture you can imagine the kinds of information technologies that you can apply without harming the value environment, he says.

Growing Irrelevance of Software

On the other hand, Treacy says software has essentially lost its relevance to business innovation. There is a tremendous tension between best in class point solutions and an integrated solution, and there is also tension between software that has been customized to the specific needs of a particular firm versus software that has been standardized to the needs of a broad set of firms.

"One side has been winning both of those tensions," says Treacy. "Things have gone from customized to standardized, things have gone from point solutions to integrated solutions. So we're seeing this rapid consolidation of the software industry; this broad set of features and capabilities built into packages, only some of which I want. They're only somewhat - and with great pain - configurable to the specific needs I have as a corporation. Quite frankly, what I think has happened with the software is that its cost has gone up while the relevance and importance of software in driving innovation has gone down."

All this has come at a time when it is proving much harder for CIOs to exert influence over software vendors, as vendors try to make all of their products fit into a one-size-fits-all kind of model.

"Of course if your agenda is cost-cutting, the big integrated packages make a lot of sense. But when the agenda should surround: 'How do I differentiate this firm and get it growing again', maybe the answer doesn't lie in buying the package that everybody else is buying. You know, this isn't a case of making a bad choice versus a good choice, it's a constrained environment in which it's very, very hard to find the best choice," he says.

It is for this reason that in addition to providing the right tools to the organization, it is also important for CIOs to become a catalytic force for innovative thinking. Treacy says the reason why information systems remain an important topic for business is that it has been one of the principal drivers of innovation in organizations. That is because if you want to innovate you need a new idea, and technology has generated a flood of new ideas about how to do business.

"I think that the biggest impact that the CIO can have, is to be seen as a source of rational, thoughtful, fully analyzed, somewhat tested concepts for growth. The growth initiatives that firms have about how to improve base retention, or how to improve share gain, market coverage or whatever, a lot of those issues are going to be technology-based, and what the CIO needs to learn is how to be more prudent and less of a cheerleader, less of an optimist in evaluating those technology-based ideas."

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