As savvy CIOs and technology leaders recognize, digital transformation entails much more than implementing new technologies. It’s about identifying opportunities to improve the customer experience, streamline operations, and reimagine how business can perform in the 21st Century.
Digital transformation also requires dramatic organizational changes for the enterprise to successfully pivot. This includes new skills needed to develop and execute on the digital vision as well as a substantial cultural shift required by employees and executives to adapt to a digital mindset.
“Many companies don’t have the genetic structure to be as technology-focused as their peers,” said Pat Gelsinger, the legendary Intel Corp. and EMC executive who is currently CEO at VMware.
As Gelsinger sees it, the CIO plays a crucial role in “stepping up as an Energizer Bunny” in facilitating this transition. “It’s no longer enough for the CIO to make sure the email is still up,” said Gelsinger. “It’s about partnering with the C-suite to leverage assets and drive the business forward.
Increasingly, members of the C-suite are recognizing that technology executives should be driving the digital agenda. Fifty-two percent of companies report that CIOs and CTOs are responsible for creating the organization’s digital vision, compared to just 39% who see this as the CEO’s responsibility, according to a 2016 study from Harvard Business Review Analytic Services and Genpact Research Institute, which canvassed companies in the U.S. and Europe across multiple business sectors.
One of the ways that CIOs and other technology executives can demonstrate the value of digital investments to the C-suite and the Board is by quantifying the real business value that’s being delivered through digital investments, said Gelsinger. This includes sharing the returns from digital projects that are generating strong ROI and communicating these benefits through effective storytelling with the C-suite and Board.
CIOs and technology leaders can also reposition the IT organization from being viewed as a cost center to one that’s perceived as a transformation center. This can be done, in part, by diverting a portion of discretionary spending to digital transformation efforts, said Gelsinger.
Let’s say the annual IT budget for an enterprise company is $1 billion and 70%-to-80% (or $700M-to-$800M) is applied to fixed costs. If $100 million of the remaining discretionary spend can be applied to business transformation, a CIO can regularly update senior management as to how the investments are being used and the returns that are being generated, said Gelsinger.
The financial benefits from these digital investments can be communicated in multiple ways. “You’re not only adding value to the bottom line but you can point to how you’re taking advantage of new technology and retiring legacy systems that are sucking up too much of the company’s cost base,” said Gelsinger. The savings garnered from retiring legacy systems can then be redirected into the business, Gelsinger adds.
CIOs who can demonstrate strategic foresight – the ability to plan, model, and communicate the roadmap for the enterprise’s digital business vision – can alter the perception of the IT organization from that of a cost center to a creator of business value.