CIOs Gain Stature in Digital Era -- WSJ
July 11 2016 - 3:03AM
Dow Jones News
With software central to many businesses, post becomes a key to
competitiveness
By Kim S. Nash
In the past, chief executives might have called upon the chief
information officer rarely, and mainly in response to bad news,
such as a computer or network outage. Now, as companies adjust to
the era of digital business, the CEO and CIO relationship has
become key to business competitiveness.
With software at the heart of many new business models and CEOs
part of executive teams that as a whole know more about information
technology than their counterparts in the past, everyone wants more
from CIOs.
"I view technology today very differently than I did five or 10
years ago. It's no longer a backroom function," says Brian Cornell,
Target Corp.'s CEO. His CIO, Mike McNamara, is "very involved with
strategy planning."
CEOs now keep their technology leaders close. More than 53% of
CIOs in Fortune 500 companies report to the chief executive, up
from 46% five years ago, according to executive recruiter
Korn/Ferry International. IT spending is the largest single outlay
at some companies, and CEOs generally are taking a more active part
in deciding financial allocations, staffing and priorities for the
technology group, says Craig Stephenson, a managing director at
Korn/Ferry. The entire leadership team has a stake in the
intertwined matters of business and technology, he says.
Since 2013, Target has made more than $1 billion a year in
capital expenditures for technology and distribution systems and it
expects that amount to reach $1.8 billion this year. At an off-site
meeting in June, Target's senior team decided how much money and
staff to invest this year in key projects such as supply chain,
customer loyalty and store revamps. IT runs through it all, Mr.
Cornell says.
Top CIOs now spend more time in the executive suite than in what
is left of the old corporate data center.
Rahul Samant, CIO of Delta Air Lines Inc., joins CEO Ed Bastian
and the rest of senior leadership every Monday to talk about
business trends and technology. "I'm there and equally
contributing," says Mr. Samant, who joined Delta in February,
following 23 years in financial services at American International
Group and Bank of America Corp.
Last year, Delta launched Comfort+, a seating class with up to 4
inches more leg room and amenities such as free alcohol. Delta had
lagged behind American Airlines Group Inc. and United Continental
Holdings Inc., which were already gaining sales by offering
upgraded service within the main cabin. Comfort+ fees start at
about $50 extra per ticket, over and above the basic fare.
Adding Comfort+ fares required Delta to change mobile and web
applications as well as modify reservations, customer service and
other back end systems, some of which still run on mainframes.
"This one business strategy touched it all," he says.
Johnson & Johnson CIO Stuart McGuigan and Sandi Peterson,
its group world-wide chairman, interact six or seven times a day,
by text, email and phone. They frequently meet face-to-face, too.
As Ms. Peterson says, "CIOs used to run around with pagers on and
the only time you heard from them was during an outage."
At Johnson & Johnson, where the annual IT investment exceeds
$2 billion a year, CIO McGuigan is mapping the path to a new
business line: 3-D printed components for hip and knee
replacements. It is part of an effort to increase flagging sales in
its medical devices unit, which was once the company's largest
revenue-producer.
If Johnson & Johnson can figure out how to print reliable
parts on demand in a doctor's office, it may no longer need to
invest as much in factories and warehouses to produce and store
inventory, Ms. Peterson says. The company may eventually print
custom parts tailored to individual patients. Once the material
science of shaping metals and polymers with printer jets is
perfected, achieving Ms. Peterson's goals "becomes a software
problem," Mr. McGuigan says.
Increasingly, company efforts to help retain existing customers
and reach new markets -- through comfier seats or custom-printed
parts -- are being realized though IT. But someone needs to help
the business harness the power of all those tools, from low-cost,
high-powered computing in the cloud, to industrial 3-D printers,
the latest software development and deployment techniques and
evermore sophisticated machine learning.
It is an evolution that Target CIO Mr. McNamara has noted during
his 25-year career. A good CIO used to apply software and hardware
to make accounting and billing more efficient, he says. "Things
important to me now are user experience, speed to market and
putting technology in front of customers." CEO involvement, he
says, "is constant."
Write to Kim Nash at kim.nash@wsj.com
(END) Dow Jones Newswires
July 11, 2016 02:48 ET (06:48 GMT)
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