Transformation of a cost controller
So there we were, discussing the need to use data and analytics to drive enterprise value, when a New Zealander from a large organisation volunteered “We have four customer segments, nationally, that we have been using for a very long time with reasonable success but it is limiting our growth. Strategically, we are now moving towards a regime of micro-segmentation with an objective of driving data-driven decisions for local area marketing. Our CFO is very interested to know how the NPS is improving in areas where we have made significant capital investments”.
Coming from the marketing guys, this kind of thing would have been a non-event for me. But when I discovered that this was their head of Finance talking, I was pleasantly surprised. I asked him what was behind the transformation of their traditional Finance department - better-known as the ‘Bean Counters’. He laughed, explaining that the costs involved in acquiring and retaining customers are affecting profitability. As a consequence, and strategically, Finance is aligning itself with Marketing, Customer Service, and IT, to grow customer satisfaction, and improve margin and profitability. He added that he believed data and analytics are key factors in unlocking that growth.
How about IT?
It’s a different story in the IT department, though. They continue to focus on cost rather than business value.
Data, BI, and analytics, have always been seen as necessary infrastructural and fundamental investments. Therefore, they’ve been regarded as part of the cost of doing business – in other words, overheads. So, IT is constantly under pressure to reduce costs and, like the traditionalist Finance department, has operated as a gate keeper.
The downside of this approach is that it restricts access to data and analytics and potential business benefits and growth.
A change in CIO leadership style
A survey of CIOs undertaken by the Gartner Group confirmed what we assumed all along - that the IT department thinks of innovation in terms of technology rather than business alignment. Gartner reported that IT focuses on cost (easily measurable), while they ignore (or don’t measure, at least) the thing that’s most valuable to the business. The survey goes on to underline the need for a change to a more vision-led and inspirational leadership style (‘vision first’ rather than ‘control first’).
IT-enabled enterprise value chain
There’s no lack of value-creation opportunities for IT. Of course, it would be unthinkable for an organisation to function without IT (underlying technology infrastructure, applications, data, analytics, and skills). Even more so, when you consider the complex mix of business relationships embracing suppliers, channels, and customers, that require automation to improve enterprise efficiency.
IT is an enabler and facilitator for the end-to-end integration of the data, systems, and business processes, which helps to realise the organisation’s strategic capabilities. And it’s worth remembering that an organisation’s capabilities are not confined to those it owns. They are influenced by external resources which provide an integral link in the chain between product or service design, through production and marketing, to the use of the product or service by consumers.
Alignment with the CEO’s demands
CIOs have the opportunity to match the expectations of the CEOs, developing greater insight across all areas of the enterprise for enabling process efficiencies, customer insight and innovation, plus cost control.
CIOs can also utilise a well-defined framework for measuring the value of data and analytics in driving business growth in line with CEO expectations.