On becoming an IT savvy CEO

A leader today doesn’t need to know how to store information on a “cloud,” for example, but he or she does need to become directly and actively involved in learning why cloud computing is critical to the particular business. A CEO doesn’t have to be a geek, but he or she does need to be “IT-savvy.” Readers will learn how to do it from this author, an Ivey professor and former business leader with significant experience in service marketing and operations.

Robert McDonald, CEO of Proctor & Gamble is one.  Peter Brabeck-Letmathe, Chairman and former CEO at Nestle S.A. is one too.  So is Lorenzo Zambrano of Cemex in Mexico, Massimo Bongiovanni, CEO of Coop Centrale in Italy and Toshifumi Suzuki, CEO of 7-Eleven Japan.  What do these global business leaders have in common that sets them apart from the majority of top management in other organizations?  They are IT Savvy BUSINESS leaders.  That means they communicate an organizing vision which affords a central role to leveraging IT for value creation; they engage themselves in strategic IT decisions and  insist that their top management team does as well; they construct an equal partnership between business and IT ,and they achieve superior returns for their efforts.  According to research by Peter Weill and Jeanne Ross[1], firms with higher IT spending and high IT savvy can achieve 20 percent greater margins than their competitors, whereas the lowest spenders and least IT savvy firms earn 32 percent lower margins than their competitors. 

Naturally with this sort of performance lift, most CEO’s, in fact most business leaders across the organization, must be IT savvy – right?  Unfortunately the answer is “Not yet.” As for evidence, it is visible or can be deduced in headline-grabbing events about IT project failures, rigid information systems which reduce a company’s local and/or global agility, layoffs at firms due to inefficient operations and security breaches and data losses.  All of these occurrences signal deficiencies in leveraging information technology effectively.  Blame for these problems should lay with the business people responsible for IT spending decisions and who own the role of extracting value from these investments.  My research in this area suggests that one core reason for their persistence: a lack of IT-savvy business people leads to underperforming IT investments.  Complimenting this insight is the fact that recent McKinsey surveys of business executives suggest a growing role for IT and the need to increase IT spending to support strategic innovation and growth activities.  But there are several competency-based barriers to realizing IT value: a lack of functional talent to understand and manage the emerging, digitized business operations (i.e. IT-savvy business people), challenges with finding and retaining the right IT talent, and even a lack of knowledge at the board level to support the exploration of technology trends and impacts. [2]

Happily, being IT savvy is something business leaders can learn, though is easier said than done.  It has been said that recognition is the first step towards recovery.  For some leaders, steeped in traditional management education and leading from a mindset that relies on a highly centralized or siloed-IT function for IT strategic leadership, even recognizing that they have a ‘problem’ is a difficult first step.  Nevertheless, for those leaders interested in stepping up to meet the challenges of the digital revolution afoot and achieving above average returns in their firms, I outline below some insight that in the first section, explains the present challenges existing in the business-IT relationship, then in the second section I define IT savvy and discuss what it means in terms of what you need to know, what you need to do and how structures in your organization can support everyone on this journey.  Finally, in the third section I suggest how you can build this invaluable skill into your own capabilities, those of other business leaders in your firm and ultimately into the very fabric of your organization. 

The Business-IT relationship

Mention information technology and business in the same sentence to many businesswomen and men and the all-too frequent response is deep sighs of frustration, long rants about over budget projects, underperforming applications, unreliable data or at best, ambivalent acknowledgement that technology is “important” which is “why those IT people need better business skills”.  This state of affairs exists in the context of an enormous change and revolution of IT’s role in the firm. 

For the last three decades, information systems have moved inexorably from the back office to the front office, from the bottom level of the firm to the board of directors and from physically massive objects to small- form devices with enormous power that you can carry around in your pocket that connect you to anyone, anytime, anywhere in a split second.  Today’s highly integrated, global platforms involve thousands of process and technology choices in contrast to the stand alone, functionally limited systems of the past.  And change continues at a rapid rate. 

Because of this, businesspeople have been drawn into decisions that were formally seen as purely technical.  Ready or not for such challenges, business leaders over the last decade in particular have had to expand their business horizons and thinking to include decision-making about IT investments.  Further, as technology evolves into new forms and opportunities – for example Cloud technology, mobile platforms, digital strategies, social computing and big data – business leaders must get beyond the buzz words and figure out the right questions to ask about the value, relevance, costs and risks of what kind and how IT should be deployed to meet and excel in their firms competitive environment.   Throughout this time period, firms have struggled with acquiring, implementing, governing and driving value from technology.

Within that last decade, the emphasis on solutions to this IT dilemma included directives to: align the business and IT strategy, hire business savvy IT people, seed the line with IT people, outsource IT, create better IT governance and more recently, develop your enterprise architecture to guide IT decision making. All of these are great suggestions and there is certainly enough academic research findings and discussions in practice about them (in books, in consulting reports, vendor white papers and key news websites) to suggest that many of these tools and techniques have been implemented to varying degrees.  But it hasn’t been enough to solve the IT dilemmas that remain.  The puzzling question remains why there is such a wide range among firms’ attempts to capitalize on their IT investments?   

The leaders mentioned give us some clue to a key source of the difference in performance.  All of the above business leaders offer a different solution which is directly related to better business performance as a result of leveraging IT effectively: Become an IT savvy business person.  Yet, even with compelling evidence supporting this idea, and given today’s turbulent, changing, digital world, IT Savvy CEO’s are rare.  The next section explores why IT savvy remains rare, defines what it is and describes how you know you have it. 

What is IT Savvy?

Prior advice has focused on what IT can do better and how organizational structures that bring IT and the business together to talk can improve the business.  But what has been missing in any meaningful way is the willingness of today’s business leaders to embrace the role they personally play in a contemporary business setting where technology is quite simply everywhere.  In fact, only 9 companies out of Fortune 500 companies are savvy enough to be considered “highly digital” according to a June 28th, 2012 Harvard Business Review Blog post[3].  This 2 percent of Fortune 500 firms pass a four-part test to earn the title “Highly Digital” which includes an assessment of the degree of deep digital experience held by the CEO and a board of director. Not surprisingly, most of these are in the top 100 firms and include the high- tech success stories like Amazon, Apple, Cisco, Microsoft, Oracle and Google, who have many IT savvy business leaders and board members.  But what about the rest of them?  In this highly digital business world we live in, are they not “highly digital” because the present group of business leaders are digital immigrants and not digital natives?  Do they cling to a belief that IT is the responsibility of the IT people? Does their personal leadership history and experience limit their ability to embrace their new IT responsibilities? Will a new younger generation of business leaders who are digital natives naturally have these capabilities and insights?

After studying this issue and teaching future business leaders over the last several decades, I’ve come to several conclusions.  First, a leader’s age is not in itself an explanation of the barriers business people face in embracing or not embracing their new digital responsibilities. The IT- savvy business leaders noted above reflect this reality.  All of them observed the changing business landscape and actively sought to become highly digital thinkers.  Additionally, digital natives, especially those earning business degrees, are more likely than not to go through their whole education without ever taking a course in the specific role of technology in business where the dominant design remains the historical functional silos[4].  So, if they don’t learn to become highly digital thinkers in school, where will this knowledge come from?  Will it emerge naturally because they are so experienced with the internet, online social networking, and device ownership?

It is my observation that digital natives are not naturally digital business thinkers – in short, IT use does not equate to IT savvy.  I’ve also observed, at least anecdotally, that many business leaders (new and senior) resist embracing IT savvy knowledge and responsibility and its inherent mode of thinking because it may challenge their identity – their vision of what business leaders are and what they do.  After all, information technology is what the IT people do right?

But such thinking reflects long-extinct realities.  In today’s world of cloud, data, embedded computing, social networks, collaborations, crowdsourcing and mobility (etc. etc. etc.), business people are constantly spending money on technology and leveraging it for value, at the very least in support of corporate strategy and at the highest level of opportunity to create brand new strategy and  new business models.  Thus IT savvy and digital skills cannot be avoided – a lesson learned by the almost 2000 marketers recently laid off from P&G for lack of holding appropriate digital marketing skills to embrace new digital marketing practices[5].

IT savvy is not a ‘tool’ you learn to use, like Excel, nor is it a technique to be deployed like discounted cash flow or real options analysis.  It is part capability and part mindset – a way of seeing the world through a ‘digital’ lens.  Like everything you believe, it evolves from a combination of what you know, what you do – your behaviors, and your interaction with your environment – in this case the structures you put in place to support the development of this specific capability.  Synthesized below in Table 1 are the actual things you need to know, what you need to do and the structures you can enable or advocate for in your firm to start developing your IT savvy. 

IT savvy business leaders know something about technology and how to use it.  This is not a technical skill in the sense that IT people have deep knowledge of their domain.  In fact the domains of IT are ever expanding and growing deeper, requiring increasing specialization and the creation of new jobs.  IT-savvy knowledge for business people is instead a basic understanding of broad classes of technologies, some knowledge of their evolution so that legacy systems in the firm can be appreciated (as in understood, not liked!), knowledge of how systems function to support business processes,  an ability to scan the environment for new technologies and learn from reading business based descriptions of them and  knowledge of various other crucial IT elements like data sources and integrity, security and privacy and risk management issues.

IT-savvy business leader behavior suggests that they directly engage in IT decision making, assume responsibility for extracting value from IT investments, encourage others to be appropriately trained to use or understand the technologies that underpin their business responsibilities, and actively break down mental and physical functional silos to engage in cross-enterprise IT innovation.  Again, their behavior is not building IT, but seeing to actions that bring IT closer into the activities of the business on an everyday basis through direct involvement and not delegation.

Finally IT savvy leaders put structure in place to create spaces for dialogue between IT experts and themselves.  They create rewards, incentives and even job descriptions that explain and reinforce business people’s everyday IT responsibilities. And ensure that they hire or train IT-savvy capabilities into their business ranks. 

Table 1: Checklist for Creating and Being and IT Savvy CEO and an IT Savvy Company

Table 1

Building IT Savvy: CEO/CXO, Heal Thyself!

So, having explored the contemporary challenges for business leaders and the always-present ‘IT dilemma’ they face, and having described a solution – IT savvy – you might ask yourself what you can do to build up your IT savvy?  When asked how he stays on top of technology, Coop Centrales’ CEO, Massimo Bongiovannni described two key activities: being customer centric in his thinking, and being, curious, open-minded and always scanning for new technologies[6].   He combines these two activities with the creative activity of dreaming and imagining the two together to build momentum for technology innovation right from the top.  Once the vision is set and momentum is built, he turns, for execution, to other senior and middle managers who use their IT savvy to see the ideas through – from experimentation, to success/failure and to implementation when innovation opportunities are discovered.

At P&G, Robert McDonald’s practice also includes envisioning, guiding and leading technological innovation.  And he takes business responsibility for IT innovation so seriously that it has become part of everybody’s job description – not just the role of IT.  Advancement at P&G for any business leader includes some assessment of IT competence as well as other performance metrics.[7]  This has been one of the key factors in his success in steering of the digital transformation of his organization over the last decade.

Clearly, internal motivation and vision is key to these leaders’ engagement of and cultivation of IT savvy.  But that is not the only way.  Weill and Ross provide a score sheet to examine your firms IT savvy – this could prove particularly effective in setting a benchmark for the present level of IT savvy in the firm and provide guidance on where you might focus your efforts to build IT savvy for business leaders in your firm. It also gives the means to check progress as does the harder financial returns you’d expect to emerge from these improvements.

Ultimately, mastery of IT savvy for business leaders will come through experience – start acting IT savvy – and you will begin to learn the knowledge you need to be IT savvy.  Start reading about technology – even an article here and there by reliable information technology sources – business journals, consulting company publications,  vendor white papers and you will formulate a base of IT savvy knowledge on which to support your IT savvy actions.  Model the behaviors of the IT savvy business leaders you meet.  Engage with business-savvy IT leaders – if you don’t have any then hire some.  Finally at any level of the organization – whether through specific IT projects right up to major IT governance activities, put in place structures of job descriptions, rewards, incentives and technical support to assist business leaders in embracing being IT savvy.  Information Technology – it’s not just for the geeks anymore!

[1] Weill, Peter and Jeanne Ross. IT Savvy.  What Top Executives Must Know to go from Pain to Gain, Harvard Business Press, 2009.

[2] The two survey’s referred to are: “A rising role for IT”, December 2011 and “Minding your digital business”, May 2012 .

[4] Navarro, Peter. The MBA Core Curricula of Top-Ranked U.S. Business Schools: A Study in Failure?, The Academy of Management Learning, March 2008.

[5] Schaeffer, Mark, June 28th, 2012.   http://www.businessesgrow.com/2012/06/28/marketing-execs-falling-behind-the-digital-learning-curve/

[6] Brown, Brad, Lorenzo Forina and Johnson Sikes.  “How a Grocery Giant puts Technology at the Center of Innovation”, McKinsey Quarterly, December 2011.

[7] Chui, Michael and Tom Fleming. “Inside P&G’s Digital Revolution”.  McKinsey Quarterly, Nov. 2011.