Traditionally, IS organizations are focussed on providing efficient services that run their businesses. This is no longer sufficient. CIOs must engage on top-line growth.
There are two ways to grow profits: cut costs or grow revenue. The problem with cutting costs is that eventually you run out of runway. As for sustainable growth, you need to look at the other end of the income statement: the revenue line.
The good news is that there is an opportunity for CIOs to contribute directly to the top line in most enterprises. All it takes is developing an understanding of the specific levers of growth and doing something to address them.
There are seven ways in which an enterprise can grow its top line: 1. Improve operations and sell more in the current business model 2. Innovate products 3. Exploit new and existing channels to market 4. Target new customers and markets 5. Acquire, merge or partner with similar companies 6. Acquire, merge or partner with others in your business ecosystem 7. Create completely new businesses, including “blue oceans”, where there is little existing competition
Each of these growth levers presents different challenges and leadership opportunities for IT and the CIO.
Enterprise growth levers
CIOs that take a leadership role in helping to grow the business contribute more directly through better engagement with external and internal customers. There are four major opportunities for the CIO and IS to connect to customers.
First, continually deploy IS staff in functional departments. IS staff need to be in a strong position to contribute to business innovations, as they have a view across information and process capabilities and are less tied to specific business processes. Leading business innovations requires credibility and a deep understanding of the business – not just current operations but also business strategy and sources of competitive advantage.
Second, establish a stronger working relationship with the sales organization. As enterprises focus on new customer segments and markets, CIOs must ensure that their IT organizations know what’s going on and are plugged into trends that are emerging in the market for products.
Third, get out and spend time with real customers by taking part in staffing rotations through retail outlets or having an IT person part own and help grow the value of a customer relationship. There’s nothing like having to deliver at the front line to provide a deep understanding of the importance of some things that IT does, and the weaknesses and opportunities to improve in others. This might even stretch as far as assuming ownership of a few key customer relationships to provide a direct means of learning about growth needs and opportunities.
Finally, make sure that IT, as a minimum, doesn’t get in the way of growth. For example making sure infrastructure is scaleable so that it can handle any anticipated increase in volume.
Flexibility of IT architectures and sourcing arrangements to allow features to be quickly added to be able to ‘delight’ new customers.
Gear up your growth contribution
To sustain their contribution, CIOs and IT organizations must move beyond isolated initiatives and become consistent contributors to growth. This starts with adopting and instilling what we call an “IT venture capitalist” mind-set.
To get there requires three things: • Clarifying enterprise growth levers and where IT should contribute • Building deep business knowledge and behavioral capabilities, and contributing proactively to business project definition and prioritization • Going beyond project management to encouraging benefits realization practices and engaging beyond implementation throughout the benefits life cycle.
Also important, the CIO needs to take active steps to identify and communicate IS’s contribution to enterprise growth. Although the current macroeconomic environment is the reason growth is high on the agenda, the IT venture capitalist mind-set is always appropriate, just as growth itself is. Continually reinforce this message and reward these behaviors in your IS organization.