Boardroom IT
Few (non-tech) companies have even one director with a strong understanding of technology; in terms of executive directors, while the CEO and CFO are almost always represented, the board level CIO is a rare bird indeed. In this week’s Digital Business supplement, Ade McCormack asserts - correctly imo - that “Technology management is a board issue”:
There are many reasons why IT management fails to stem from the boardroom. These include: *Many business leaders have had a largely tech-free career. Their lack of experience in using technology as a tool beyond word processing makes them feel vulnerable. Making technology management non-strategic helps to keep their weakness off the agenda. * Many technologists do not want “users” interfering in technology decisions, often because their ill-informed input would be detrimental to value maximisation. Keeping users at arm’s length was standard practice because clunky technology tools and approaches did not lend themselves to mid-project change requests. Despite big improvements in the tools, user-inclusiveness is still some way off. *Some technology vendors have too much influence at board level. Their account director has more clout in technology decision-making than the CIO. This is a parlous state of affairs. Under these conditions technology management will be driven by the cash flow requirements of the vendor rather than the imperatives of the business.
Good governance, cost management, innovation management and ultimately shareholder value all require strong board level technology management.
Good IT management does not mean becoming a technologist, although future board members are likely to have spent part of their career in the IT function. It does mean ensuring there is a management process to reduce technology risks - many of which stem from abdicating decision-making to the IT function.
It also requires good technology leadership to ensure that creators and supporters of new technology feel sufficiently valued to stick around.
I first wrote about this (again spurred on by one of Mr. McCormack’s articles) almost two years ago. Unfortunately some of my optimism then was probably misplaced (or at least mis-timed) - I’m not sure we’ve made much progress on this front since then; David Yu’s rise to become the CEO of Betfair (in January 2006) still seems sadly to be very much the exception…
When I am investing, this is one of the first things I look for - does the management understand the strategic importance of technology to their business and if so how does this translate into how they run the business. Not surprisingly, my personal portfolio has a strong bias towards private companies who in my experience are often much further along in terms of embracing technology as a core pillar of their strategic discussion. All to often, many executive and non-executive directors of large public companies see technology as the bit that makes sure their Blackberry is working (or for the true traditionalist - that makes sure their secretary’s computer and printer works so that important emails get printed in a timely manner…)
I hope there are more signs of progress on this front over the next two years. Ultimately, I think it is inevitable but it might well take a generational switch in the boardroom before we see significant changes in approach or attitude. In the mean time, this offers a great window of opportunity for companies and leaders who are willing to embrace this line of thinking now.
February 13th, 2008 at 12:33 pm
It would be nice if your CIO was board material, but I don’t think it’s necessary (wait, I’m going to agree with you in a second). I mean, it’s possible to run an IT department without being of board calibre.
So where I agree with you is this: technology decisions for a growing proportion of companies are of such a strategic importance that they should be discussed knowledgeably at board level. Not, as you say, on the golf course with the vendor.
It doesn’t need the CIO to be on the board for this to happen, if he is on a short enough leash. Although being a CIO with a tech-savvy board might be a bit of a double-edged sword…
If there is nobody on the board who is qualified to be responsible for these issues, then get someone! If the CIO is the right person then so much the better.
February 13th, 2008 at 6:34 pm
Dom, you are absolutely right. I agree that there is no value in being dogmatic as to whether or not the CIO is on the Board, of course that would depend on the specific individual and company.
I guess - restated - the main point I was trying to get across was your last point: almost universally companies of all sizes and in all sectors need at least one (ideally more) person at Board level who understands - and is up to speed with - the strategic implications of technological change (in the broadest sense.)
Without being pedantic about the semantics, I wonder if one shouldn’t push for increasing separation between two senior IT roles (especially in very large organizations) - ie the ‘CTO’ and the ‘CIO’ (think of these as labels rather than getting too hung up in specific definitions) representing the ‘operational’ and ’strategic’ elements of the company’s technology portfolio and footprint. In this context it would make sense to develop individuals that are aiming for the CIO role to be adequately qualified to be well-rounded and in some sense ‘inevitable’ board members.
Of course I’m talking my book in all this as I am cheeky enough to think I would be a good addition to many Boards in terms of marrying nuts and bolts frontline “business” experience with a (high-level strategic) understanding of the threats and opportunities afforded by an enlightened view of technology! So I guess I should just sit back and watch the non-exec offers roll in! Right?
February 13th, 2008 at 10:51 pm
Technological change != IT change. Some companies don’t use IT as a competitive advantage, and only need to do IT well enough that they aren’t so far behind that it’s a problem.
A company that makes high-tech carbon-fiber bike frames might be fine with standard e-commerce and manufacturing systems, run by a Director of IT who reports to the COO — but have a carbon fiber engineering expert on the board as CTO.
February 14th, 2008 at 10:24 pm
Sean,
You might also be interested in a conversation around that article here: http://ademccormack.typepad.com/itvalue/2008/02/technology-mana.html
Anand Sanwal, author of Corporate Portfolio Management and a VP with AMEX offers his thoughts.
Are you aware of Ade McCormack’s new book, The IT Value Stack? If you would like to review it on your blog or for Amazon, please let me know.
February 18th, 2008 at 12:44 pm
Don you are absolutely right. My argument does not hold for all companies or sectors. Clearly, my main focus is on the financial services sector; although I think you can generalize further to any sector where IT is a strategic enabler. Furthermore, the ‘general’ case can probably be made if - as you quite rightly point out - technology is defined more broadly than just IT. I would hazard a guess that this (having one or more directors well versed in technology relevant to the company’s products or services) is relatively common. Thinking about it, I guess one of the key things I wanted to articulate was that (all too often) information technology is the (corporate) cultural exception: even when it is core to the competitive position of the business, it is too often seen only as a tactical baseline facilitator (in the vein of Nick Carr’s ‘Does IT Matter?’) rather than a strategic asset.
February 18th, 2008 at 7:53 pm
Sean,
I wanted to respond to your comment on my blog and also add my thoughts on what you and commenters have left here. I agree with much of what has been written but do disagree on some fronts.
Much of what we are talking about is not having a Board that is clueless about certain large trends going on in the world whether the trends have to do with technology, the environment, corporate governance, etc. Take your Facebook example that you mentioned in your comment on my blog. (You wrote: “To use an admittedly trite example as a metaphor, for example how can a Director hope to put the CIO’s views on the strategic value of social networks into context if they have never used Facebook?”)
1. I don’t think it’s requisite that the Board have been on and used Facebook but they should be aware of this social networking/social web trend. The technology is an enabler of the trend. But again, I’d argue that a CIO, technologist or business-person articulating/arguing for a project or funding that involves Facebook should be able to communicate the value of it in a way that resonates with the Board and management, e.g. in dollars of profit, revenue or market share, customers acquired, etc.
2. It’s not really practical for the Board or management to be aware of the latest-greatest technologies. In fact, I think it would be dangerous for the Board or management to jump on and spend time becoming aware of all these IT developments as technology trends are fickle and subject to fads which don’t pan out, e.g. the dot com flameout. And to continue on the social networking angle, Facebook, MySpace, etc are far from proven. While the media, Silicon Valley and a host of entrepreneurs and ‘experts’ may think of social networking or any trend as the next big thing, the same happened with B2C and then later B2B platforms back in the day. That said, having someone on the Board who is enthusiastic and aware of technology represents an option but the important matter is discerning tech fancies & fads from true technology-related opportunities. The IT organization can help do this.
3. At least with the very large companies I’ve observed through my work & research, the IT organization is not always leading the charge on new, innovative applications of technology. Things like software as a service and other innovative models of managing tech are not necessarily welcomed by IT because of the risks they pose to the way things have always been done, e.g. large IT organizations of people doing maintenance, development, etc. In all fairness to the IT organization, SaaS may not be ready for prime-time yet as the applications may not be where they need to be yet.
In a somewhat related note based on some of the comments above…
All-to-often, I hear euphemisms about “IT is a strategic enabler” or “the business value of IT” from technology folks who seem to wonder how the business and management could be so ignorant so as not to realize these things. The sad fact as evidenced by the ecosystem of consultants, academics and IT “solution” vendors out there is that many IT organizations have not demonstrated the value of IT to their organizations. And as a result, they haven’t really earned the proverbial “seat at the table” - whether the seat is at a Board meeting or a senior management meeting.
February 20th, 2008 at 10:49 am
Anand, thanks very much for the thoughtful comments (and as an aside your excellent blog which I’ve now added to my NetVibes page.)
With respect to 1 (and 2,) I have much sympathy for your point of view - I (think) I understand it and I think it makes sense. However, my experience tells me that it is important for the most senior executives - at least a substantial minority of them - to have first hand experience of using a representative panel of important emerging technologies and platforms that are relevant to their employees and customers and have the potential to change the frame of reference in the markets in which the company operates. There is simply no substitute to hands-on experience - no matter how eloquently and robustly the ideas may be transmitted from an expert. You need to “eat the dog food”, not only to understand what it does but to be able to connect the dots in terms of how it might change (or not) your value proposition. That said, I am not suggesting - although I understand that this was perhaps not previously clear - that Board members become tech-junkies or fad-chasers; nor am I suggesting that all - or even the majority - of directors should be ‘technology-savvy’. What I am suggesting, is that the pace of change - and in particular the impact of that change - is such that the traditional 45-60 year old directors are often completely at sea when it comes to making strategic decisions in the networked world of 2008 and beyond. What I am suggesting is that Board’s should have at least one - ideally 2 or 3 - directors who have a strong, general understanding of how technology is changing the playing field. People who have a broad but robust grounding, somewhat analogous to a strong ‘liberal arts’ education in the cultural impact of technology. I do agree that I was mistaken in equating the solution to this requirement with the CIO, who may or (more than often presently) may not have the appropriate skills and temperament to fulfill this role. (Although I would suggest that companies should pursue recruitment and development policies that would lead to CIO’s equipped to operate at a Board or Exco level; including considering individuals who are tech-literate from outside the IT function…)
As for point 3, it is well taken and imo absolutely correct. Thank you for articulating this. Indeed, the often secretive, reactionary and defensive nature of IT organizations in large corporations is perhaps the most important reason supporting my contention that the Board needs to have directors who are knowledgeable - and interested enough - to hold the CIO/IT department to account and to challenge them to rise to the occasion and think more like a creator of strategic advantage and less like a back-office enabler of the business.
So summing up, I agree that I need to correct and re-state my thesis: companies need to seek out and cultivate directors who have sufficient understanding and passion for technology to allow them to engage pro-actively with their CIO to craft relevant and not-so-rarely paradigm shifting, technology-enabled responses to a continuously fast-evolving marketplace. Ideally, they should also change the frame of reference as to what makes a good CIO (in much the same way this happened for the role of CFO over the past decade or so) to be less ‘technician’ and more ’senior executive.’
February 21st, 2008 at 12:50 am
Sean,
Seems like we’re now violently agreeing with each other
I do agree with your assertion that technological savvy/awareness at the Board level will become more and more important esp in some old-school industries where change has come slowly but where technology may now change the game significantly.
I also agree that CIO recruitment will require this type of tech-savvy business-minded person, e.g, someone who is not a “protector of IT resources” or a techie per se but a business-person who sees and identifies problems and opportunities and can suggest how technology maybe used as a solution-enabler. They’re also smart enough to know that not all problems require technology as the issue maybe rooted in cultural/behavioral or process challenges which are often impediments in large organizations.
I also have enjoyed reading your other posts/blog. One unrelated question. What is your view on P2P lending, e.g. prosper.com, zopa.com, etc?
February 25th, 2008 at 12:33 am
[…] I was reminded of the quotation while reading Sean Park’s recent post on Boardroom IT, itself triggered by an article in FT Digital Business by Ade McCormack. […]
February 25th, 2008 at 6:12 pm
What’s up with that whole “technologist don’t want to be bothered with in-expert users” line? That’s like a chef not caring what people want to eat.
My line is: The customer is always right. And our job is to figure out what s/he is right about.
I came up with the line when I worked at this high-end loudspeaker co. A big-time dance club owner approached them wanting to have speakers custom designed around his needs. “I just can’t get enough bass,” he said.
So the engineers tried some stuff and he still said “not enough bass. Can’t you put in another woofer?” (This is the user telling the technologist what to do, right?) Of course, they laughed at his idea (after he left). But they also did not satisfy his needs.
So I did an experiment.
All loudspeakers are designed around a specific frequency profile that is basically the average of all the sounds ever recorded. Not surprisingly, it’s peaked in the vocal range between 300Hz and 1kHz.
I grabbed a whole bunch of dance club music and put it through an frequency analysis in ‘forever averaging.’ Two days later, I got the average curve. Big surprise: it has a HUGE peak at 55Hz. Thump thumpa thump thumpa thump. It also has rolls off much more slowly on the high end.
Long story short: this turned into a line of dance club loudspeakers that now dominate that market. And, yes, they all feature either more or bigger (or more AND bigger) low frequency drivers than in typical loudspeakers.
So, technologists, definitely don’t listen to your users. WTF do we know?
March 2nd, 2008 at 9:41 pm
Sean,
Thanks for exploring the topic I raised in the FT. I agree that the CIO on the board is a good indicator of an executive team braced for the 21st century.
I am looking forward to the time when everyone on the board has passed through IT as part of their career progression, and there is no CIO. More specifically the CEO is in fact the CIO. That would be an organisation that could grab market share whilst its competitors are still dawdling over breakfast.
Ade