I read an interesting article this weekend about what Mike Lynch (founder and former CEO of Autonomy) is doing now.  He’s continuing what one might call his life’s work – creating highly successful, big technology businesses in Europe and more specifically in the UK. His large new venture fund wants to put an end to that nagging question – why are there no Google’s (Facebook’s, Amazon’s, etc. etc. ) arising in Europe?   He thinks we have the original science and the skills, both technical and entrepreneurial. However the really talented people always seem to have to move to the US – often California specifically – to make their ideas fly. It’s an old argument. I have been hearing versions of this ‘silicon valley envy’ my whole working life in IT – 30 years.

Mike Lynch believes a big part of the problem is getting the right kind of venture funding in place and that’s what he’s trying to fix. I can’t doubt him – I don’t know that much about tech venturing. You see I don’t come from the IT industry. I come from the IT industry’s customers – the kind of companies that buy and apply the fruits of technology progress, to make their own businesses more effective.

For Europe to find the economic growth revival we all need, it has to work a lot harder on productivity. Since we don’t want to lose our hard won social advances like minimum wages and good safe working conditions, we are not going to compete with the industrialising sweatshops of the emerging markets. But we must compete with their rapidly advancing knowledge economies. The first part of the answer to that is education and on that score we are doing OK. We have advanced university systems that hone many of the finest minds. Europe is not struggling or failing to produce top end intellectual talent.

However – for a knowledge economy to thrive it must also invest in the tools that will make those talented people as productive as they can possibly be. Not ‘good enough’ tools but world class tools – the very best we can get.  That’s what European CEOs must attend to. Mike Lynch and people like him are setting out to improve the ‘supply side’ of the equation – they will create ever more advanced technology tools. He is putting a very large amount of his own money where is mouth is.

European CEOs should match Mike Lynch’s move – by investing to fix the demand side of the technology equation. The reason is not to make markets for the new tech vendors, but to seriously improve the quality and productivity of the knowledge work that is essential to our advanced economies. A ‘stretch and make do’ attitude to technology investment within firms is still far too prevelant – even among those that have large cash piles on their books. How many European workers, when they get to their desks each morning, can truly say they have the very best information and technology systems to work with? How many can say that their business models are keeping pace with the digital era, or that the products and services they offer are being digitally enabled?

Boards of Directors must ask – what is our company doing to invest in information and technology that can make us more effective and could we be doing more to make that go faster? CEOs who don’t have big digital business ideas and plans to invest are stuck in 20th century thought patterns that will not serve Europe well.

Over the last few weeks, I have been reminded just how far ahead some businesses are in the great race of the information age. We are now at that stage of the marathon where the field is stretching out and the gap between leaders and laggards is getting bigger. Here are the ‘datapoints’ that set me thinking:

* Large UK supermarket chain Morrisons has announced it will provide an online grocery shopping service from 2014.  I think I still have a very faded receipt from my first online grocery shopping experience with Tesco – dated 1996.

* I have been reminded via several client interactions that global standardised ERP operations for a very large corporation seem to be programmes that take 6 to 8 years to implement, and in some cases corporations have needed 2 goes to get it right. Perhaps that’s why our latest CEO survey data shows again that Nestle is admired by other business leaders for its strategic use of IT. Yet some large companies are only embarking on that journey today – having put it off for many years.

* In the context of data driven business thinking and a truly advanced capability in business intelligence, some companies like P&G with its real-time cockpits, or those who understand what a chief data officer is for – are at least a decade ahead. Their advanced are as much in management culture and discipline as they are in information systems and data sources.

One question that immediately arises, as in any race, is whether the laggards or at least the chasing pack can catch up. It is certainly a very hard task.  It’s difficult to buy and install a whole competency. You might buy another firm in your industry to acquire the skills and knowledge along with the systems – but that option isn’t always available.  Morrisons took an equity stake in the US company Fresh Direct 2 years ago. The business press has speculated that Morissons might buy Occado – and the firm itself has openly discussed partnering with them. Whatever happens, playing catchup in a major technology enabled strategic capability like online grocery at scale, is an endeavour that takes many years.

I think it is likely in many cases, that a gap whch took 10 or 15 years to open up, might be closed in half that time. After all – the knowledge is codified and transferable via consultants, packaged software and talent acquistion if not by M&A.  But to fund the work required over 5 to 7 years, to catch up with a competitor on a strategic capability that matters – you will need good strong cash flows from other parts of your current busness capability.

In 2013, the laggards in the technology enabled strategic capability race are busy thumbing through rolodexes looking for head hunters, who can find them a “chief digital officer” or similar leader to accelerate their catchup.  They must also hope that the non-technology business strategy ideas that were apparently more attractive a decade ago, will continue to yield the investment they need to fuel the gap closure project ahead.

Last week glassdoor.com, a business social networking site, published its 2013 listing of the top 50 CEOs as rated by their own employees.

The list is always interesting to review. It has limitations of course, for example most users of the site are  US based, so companies in other countries don’t get so much attention.
Here are a few things I noticed:

* There was only one female CEO in this top 50. As a percentage that’s below the 4% representation of women CEOs in the fortune 500

* There are very few manufacturing companies. Services firms of all kinds are well represented.

* A company with dual CEOs is at number 2. The idea of dual CEOs is often questioned, but in this case it seems to be working – for the employees at least.

To get on this top 50 list, your CEO must have a rating of over 80% from more than 100 employees. My own firm has the former, but not the latter.
My suggestion: look up your own company to see how your CEO is rated. If he or she has less than 100 ratings in the last year they won’t appear in the top 50 ranking. However you can still see how well they are doing by comparison.

At our CIO leadership forum event in London in March, Dave Aron and I ran a panel discussion session with 4 top executive search consultants who specialise in information and technology leadership roles.

• Demand for top tier IT leaders is up year over year – by around 40%
• There’s a big trend in CEOs asking for digital leadership skills
• The CEOs are asking for both CIOs with more digital skills and for distinct ‘chief digital officers’
• On the majority of occasions where a ‘headhunter’ is assigned, the last CIO was pushed out (rather than resigning, or retiring)
• CIOs who lose their jobs rarely understand why – even afterwards
• Performance related pay is becoming a bigger part of the package and examples of pay related directly to revenue growth are appearing.

Our thanks Cathy Holly, Olaf Pripp, Kevin Sealy and Tim Cook for delivering an excellent session to the audience of over 250 CIOs who attended this year’s forum.

[ Update  - more articles added, from the FT, WSJ  and others ]

Our new survey results show that half of CEOs can’t name a company in their industry that they admire for its use of IT. That’s not a surprise. Our survey also shows they get a lot of their ideas and information about IT  from the business press yet, we know that few CIOs make a point of telling the stories of their business technology innovation successes to the outside world. Why not?  You know that successful major deliveries require process, organisation and culture changes not just technology installation. You also know that stuff is hard to get right – so letting your competitors know what you did, doesn’t necessarily mean they can copy you. Anyway, you can easily leave out a few key ‘how to’ learning points if that’s a concern. But you have everything to gain. Companies admired for their use of technology are helping to build a stronger brand – B2B or B2C.

One of the joys and privileges of being a Gartner analyst is sometimes working with the press.  A joy I hear you ask?  Yes, really. Perhaps in the world of celebrities and politicians, journalists can be too cynical and destructive but in business and technology I always find the opposite. The technology trade press and the business press these days are staffed with only the cream of the journalistic trade. It’s very hard to get one of those jobs and you only keep it if you are very smart, very focused and very hard working. Their business and technology professional reader – that’s you – is looking for interesting information, not scandal or titillation.

When a piece of my research is made visible via a Gartner press release, I look forward to the interviews. The older experienced technology journalists ask insightful questions and also offer me their own perspectives on the the subject. They always ask me things that my research didn’t cover – and that can sometimes set up new lines of inquiry for the future. The newer, younger journalists often have fresh eyes on a subject. They come at it from a different angle and that can cause me to think differently myself. Working with the press is a symbiotic relationship. They get some of what they need for their readers, you get visibility and, assuming your story is impressive – reputation.

Companies with a strong technology reputation will find it easier to attract the better new graduates and the more talented IT and business professionals they need to compete. We know that talent attraction is a perennial concern of CEOs. Talent today is truly global. You might need to attract good people from anywhere on the planet.  The modern IT press is highly syndicated and globalized.  Tell your story in one place and it will travel the world.  Good business IT stories in the trade press will attract the eye of the business press too.

I spent the last day and half on the phone to journalists and it was time well spent.   Listed below are some of the many stories – in different languages – taken from our latest CEO survey. If you browse them, you will see a variety of different angles and focal points, as each journalist gives his or her twist.  That demonstrates yet another learning opportunity for a CIO who may not be personally blessed with the greatest story telling ability. Influence within your own business, will be improved if you can find better ways to explain the value of what you do. So why not let the press help you?

My particular thanks this time to journalists Stephen Pritchard, Cliff Saran, JaneMcCallion, Toby Wolpe, Martin Veitch, Joachim Hackmann, Yves Grandmontagne, Paul Taylor and Clint Boulton & Michael Hickens

UK Managing people and CEO sentiment  Financial Times podcast (1m15s )

UK What is a ‘digital strategy’? Information Age

UK Gartner CEO survey 2013 reveals uptick in IT investment IT Pro

UK CEOs optimistic about IT innovation and investment, says Gartner Computer Weekly

USA CEOs Welcome Chief Digital Officers to the C-Suite  Wall Street Journal blog

USA Financial Times: Business leaders embrace ‘digital’ Financial Times

USA Tech jobs: CIOs look safe, IT managers face chop, chief digital office … ZDNet

Germany Mehr Geld für Mobile und Social : Zuversichtliche CEOs investieren … CFOworld

Germany Zuversichtliche CEOs investieren wieder in IT CIO

Sweden Hälften av storföretagen har digital strategi IDG.se

Netherlands Ict-sector werft weer volop Telegraaf.nl

Netherlands Nieuw leiderstype verdringt IT-manager Computerworld.nl

Spain  Solo la mitad de los consejeros delegados tienen una estrategia … Ticbeat

Italy Gartner, 2013 anno di svolta per gli investimenti IT Corriere delle Comunicazioni

Portugal 52% dos CEO tem uma estratégia digital mais clara Computerworld

Brazil  Maior conhecimento de TI dos CEOs impulsionará investimentos em …  CIO

India 52% Of CEOs Have A Digital Strategy: Gartner BizTech2.com

China 盖特纳:调查显示全球IT行业投资势头稳步上涨  搜狐

Russia Gartner: около половины руководителей имеют стратегии … Компьютерное Обозрение

“We use words like honor, code, loyalty…we use these words as the backbone to a life spent defending something. You use ‘em as a punchline.”
Colonel Jessup ( Jack Nicholson ) in the movie A Few Good Men.

I will be attending Gartner’s Enterprise Architecture Summit events in the UK (May 14) and the USA (May 22)  to present findings from new 2013 CEO and senior business executive survey. As I was working on the slide deck, I was reminded again about just how much weight is behind some of the simple words business leaders use, and how easy it is to misinterpret them.

More than many other professionals in business life, Enterprise Architects know just how much words matter and how the context of those words matters. Different groups or individuals within a company will use the same words to mean different things. Different interpretations can lead to sharp confrontation – as in that famous movie courtroom scene. Using someone else’s shorthand without understanding the associated richness of context that the cognoscenti take for granted, can get you into trouble.

Take the simple word “growth”.  In our annual global survey we asked CEOs this year about their top business priorities and that that word came to the top of the list. Often it is given without any additional explanation. If a CEO simply says ‘growth’ should we be affronted because he didn’t expand it? Is he displaying irritation via a very terse response?  In a word – No.  To understand why such a single word answer is not meaningless, let’s switch context for a moment.

Imagine that I ask a group of senior IT professionals about their priorities and they all quickly agree on the single word ‘cloud’ – they can do so, because they understand a huge amount about what that word means and what it implies. There is a whole contemporary agenda behind it, they know there are difficult security issues, there are privacy issues, they know BYOD is a factor, they can describe layers like SaaS and Paas, they know there are licencing issues and portability issues and standards in development. They know what kind of corporate systems can migrate to the cloud, given today’s market and technical capabilities and what might be possible 3 years from now.  A whole room of IT professionals, at a conference, who may never have met each other before – all know all of that stuff and it rises into their minds the moment somebody puts just that one word up on a screen: cloud.

The same is true when CEOs say “growth”.   They know that investment capital is cheap, but certainty in markets is low. They know consumer confidence is volatile and investor tolerance is fickle. They know that double taxation is skewing US company global investment planning and that the emerging markets play is changing – with “Chindia” being a bit less of a gold rush, but Africa looking like a smart play.

The second priority for CEOs in our annual survey, was profitability and the third was cost. Some might be tempted to say “duh!” – business leaders are focused on growth costs and profitability – so what.  Well profitability is a word that arose in the responses with far higher frequency than in the last two years – and that tells us something about the business cycle stage we have reached. The gap between growth and cost as priorities - has widened. That tells us something about CEO’s confidence.

Our survey this year explores CEO reaction to that everything and nothing word “digital”, in the context of another very misunderstood term: “strategy”. It also finds that more CEOs are likely to hire chief data officers, when they already have chief information officers. How’s that for a subject in need of close language scrutiny?

It’s my belief that much of the of the misalignment and misunderstanding between the agendas of business people and technology professionals begins with a simple lack of careful listening and that the roots of the problem start at the top – and then get amplified by the organisation below. Enterprise Architects occupy a key position to help the organisation perform well by understanding and translating appropriately.  But that must be a two way exchange. Explaining what technology can or should do, to the business leadership team is the supply side of the equation.  Strong Enterprise Architects will be equally good at interpreting the demand side – understanding what CEOs mean, what problems they must solve and then helping  assemble the macro technology toolset that will help. If they do so, EA professionals can really move the needle on business results.

So to sharpen your thinking on how business leaders are thinking and expressing themselves – why don’t you join me, at one of our EA Summits?

It is one of the big anxiety questions in modern business thinking. On the one hand economists like Tyler Cowan believe the fundamental rate of innovation is slowing.  On the other hand economists like Eric Brynjolfssen think that millions of middle class jobs may soon be lost to accelerating automation.   You can see a video recording of the two of them debating the point face to face  here.

So who is right?  This question is almost impossible to resolve cleanly with data. It is too subjective. One man’s innovation is another’s incremental improvement. How you categorize and how you count innovations is highly malleable.  And since many economists still disagree on basics like how unemployment is counted or how inflation is measured – it doesn’t seem likely we will get an empirical answer to this pace of innovation question anytime soon.  And yet business leaders must form a view.

The scenarios that help large companies form sound business strategies often need to look ahead 5 to 10 years  For example what’s the point in a construction firm investing in its prime city real-estate, long term ‘land bank’,  if nobody will need more office blocks 10 years from now?

Our latest CEO and senior business leader survey tested belief in whether technology innovation is fundamentally slowing or accelerating.  Here’s the result from the North American respondents.

Bear in mind that the business leaders here were from businesses (not government) and we exclude IT industry firms from this survey (no computer hardware, software, IT services or telecoms firms).  What this data tells me is that most business leaders still believe science and technology is accelerating. However a sizable minority do seem to think it is slowing down. I guess I was a little surprised that a total of 39% have a perception that it is slowing – though more than half of those only selected the weakest agreement level.

Is your CEO one of those believers in a great innovation slowdown?   I think it is those business leaders, who will face the biggest disruptive shocks as digital technologies such as machine intelligence, 3D printing, robotics and  the internet of things accelerate over the coming decade.

Recently I noticed a Bloomberg news story suggesting that Visa Inc. might buy Visa Europe.   Visa was founded decades ago as a cooperative organisation by many banks, to manage payment processing services.  A few years ago it split in two and the US banks sold their stakes by IPO to form Visa Inc.  The European part remained as a separate cooperative entity owned by many European banks. Now, the press speculates, those European banks need cash and selling their stakes might help raise it.

But why does this “cooperative” institution exist in the first place?  Back in the 1960s and the 1970s  industries like aviation and banking had to build their own networks and their own computing infrastructures to do industry wide and international processing. It made sense for them to spread the risk and capital investment load involved in such vast high tech endeavors. It also made sense to create a level playing field platform for core, somewhat commodity processes. Competitive differentiation opportunities lay elsewhere.

Fast forward to the second decade of the 21st century.  The cloud is making it possible to build new industry platforms of a kind we could not conceive 20 years ago. Storage, bandwidth and processing can economically deal with real-time high definition video or instant retrieval of set of records from a lifetime’s transactional data. The business capabilities and industry models that could be built on top of this – will be amazing.  But who will be in control?

When the banks and airlines created entities like Visa and SITA decades ago, there was no competition for the platform. If they didn’t collaborate to create it themselves – it wouldn’t happen. Nowadays of course, IT industry players are only too happy to use their impressive resources to create cloud based platforms for industries to gradually evolve into.   However, CEOs should be wary of the smiling technology company executives lining up to offer an easy path to the  future.  The risk is that once they control the platform, they control your destiny.

It seems that some large, smart companies are aware of the trap. I was very intrigued by General Motors very public move last year to in-source most of its IT, including building its own data-centers. Like most car companies, GM can see that the future is the cloud connected vehicle. It  might drive itself or at least park itself. It might be insured or taxed by the minute or by the mile. It will stream usage data out and media entertainment in. Now – if those are the reasons you make your buying choice – do you think the car companies should control that capability and innovating with it?  Or should it be Google, or Amazon or some other  - yet to emerge – technology platform player?

The book publishers have already lost a lot of control. They could have built an industry collaborative platform for distributing e-books. They didn’t club together and do that – even though the  the fate of the music industry was in right front of them, as a clear example of the price of inaction.  Now Apple and Amazon and Google have a big say in how the book industry works,  what the price and format of a ‘book’ will be and who gets paid what share  in the value chain.

I have written about this before but I think it bears restating.  Look at your industry. Look at the forces of digitization ahead - including the Internet of things. Now ask – can you build a single enterprise platform that will protect your future? If the platform must be industry-wide.. who will build it?  Do you trust those parties more or less than your current competition?

If the banking and aviation business leaders of the 1970s, so early in the information age, could collaborate on visionary industry-wide technology platforms – why is the current generation of business leaders, with all their IT enabled business experience, being  so timid by comparison?

The ‘enemy’ you know is often the easier foe to manage. I think a lot more business leaders should be reaching out to their competitors and thinking more radically about *cooperating* to build the future platform for their own industry, before someone else takes control.

Last week  I spent a couple of excellent days in Madrid and Barcelona. In my conversations with people, I was quickly reminded that this is a country in deep and continuing economic trouble.  Some told me of their concerns that a whole generation of young people would give up on the country and simply leave. Certainly headline youth unemployment rates  are eye-watering and there are many good graduates who cannot find work. I recalled a conversation I had with the young man monitoring the door at one of my presentation sessions at Symposium last year.  He had a first class degree in industrial design, yet in the city of Gaudi’s great inspirational works, he was doing a temping job swiping attendee badges. He told me he felt certain he would have to emigrate within the EU.

However last week I also saw signs of true international greatness and technological hope.   In Madrid I met with a bank that is using  a team of “digital natives” – all 25 or under to drive new ideas for the future of banking.  After my evening presentation I briefly met a senior IT manager from one of the country’s biggest football teams. That club, like others of its kind, uses digital technologies to project its brand globally and attract fan revenues from all over the world.  My journey between the two cities was taken on a wonderful, gleaming high speed train that any country would be proud of – and the train was full of commuting professionals. I boarded using a QR code, self printed pass. Such modern infrastructure is the lifeblood of sustained economic growth.  When I presented my digital business research in Barcelona, it was on the campus of IESE business school – which is one of the world’s top universities for international MBAs and management education, alongside Associate Professor Evgeny Kaganer.  He explained his MIT Sloan published research on the “human cloud” – a wonderful perspective on the future of work and employment models.

Overall – I came away with more feelings of hope than gloom.  I believe Spanish technology professionals and thinkers can make a huge difference in helping their country’s restoration to full economic health.

I’m a bit uncomfortable with the destruction part of the Schumpeter term “creative destruction”.  Many economic thinkers believe it is a required process and that progress cannot be made without destroying what existed before. It’s an idea that found a ready marketplace of minds amid 20th century experiences of world wars, flattened cities, culled generations and terrible times.  Today, some would actively bring it on more frequently – seeing periodic destruction as good for economic progress; the same thinkers believe in unfettered “greed is good”.  I’d prefer to see societies evolve to find a more thoughtful, agreed and gradual disassembly and rebuilding process, than random destruction. But for now it seems, that makes me a naive dreamer.

Last week I visited Ireland and if you want to see an example of creative destruction at work this is it. A banking crisis, a construction industry crisis, massive government debts, EU bailout assistance with harsh austerity conditions attached, deep recession, unemployment and (as my taxi driver sadly confirmed) the cream of its talented youth emigrating. And yet I saw evidence of real progress in discussions I had.

We organised a Gartner breakfast briefing for CEOs and COOs – at which I went through some of Gartner’s findings from our most recent international CEO survey and perspectives on the emergence of digital business strategy.  Through that day and the next I then met with a number of CIOs to discuss what they were working on. I came away impressed that, with the worst behind them – Ireland’s business leaders are now working to build a stronger, digitally enabled economy.

I met a strategy leader who is considering how to advance the operating model of his hi-tech firm as new opportunities like data science and the internet of things emerge.  I met a CIO who is working to significantly strengthen his company’s multi-channel capability. I met one company that recently appointed a “chief data officer” and another that is likely to do so in the near future. And in all the conversations I saw a new level of engagement and commitment towards information and technology related innovation inside businesses.

In a subsequent interaction, the CEO of Allied Irish Bank gave us a quote that really nails the change of emphasis and the leadership direction taking hold among some business thinkers in Dublin.  In leading change within his bank David J. Duffy says:

“We must position ourselves in the future on the retail side as a payments and cash management technology utility and we must think of ourselves as a technology franchise that is delivering a banking service rather than the other way around.”

This is radical thought indeed.  The centrality of technology based capability in non-tech firms is starting to be recognized in a way we have never heard or seen before.

Perhaps it takes a crisis to remake a strategy.

The Hype Cycle is one of Gartner’s longest standing research tools. Our clients use it annually, to help filter the deluge of new technology and innovation opportunities they might choose to adopt. Each year, hundreds of Gartner analysts are involved… [ click here to read the full post on our hype cycle blog ]

“Leaders who put their faith in strategy units are abdicating their responsibilities”
[ Sir Terry Leahy, former CEO of Tesco ]

I chose Terry Leahy’s quote because he has been regarded as one of the more successful Fortune 100 CEOs of recent decades and he has written a book encapsulating his wisdom.The quote shows he was rather dismissive of the idea that strategy could be delegated.  However his successor, Philip Clarke appears to have a different view – he has had two strategy directors already.  I use Tesco only as as an abstract example – to illustrate that management best practice thinking is still a little undecided about the need for this kind of role, even though it has been around for decades.

What do you think about chief strategy officers?  To be honest, many business and IT senior managers and executives that I meet tend to sneer a little. Some probably fear the sometimes rather covert and semi-detached nature of a corporate strategy function. Others may see the existence of the role as a symptom of all-too-clever board level politicking – with some faction or another trying to supplement or supplant the incumbent CEO.  But about a third of Fortune 500 companies have someone doing a corporate strategy role, so no matter how much cynics may want to dismiss it as either an apparatchik or exit lounge position – it is often substantive.

That matters because we are quickly entering into an era of new digital business strategy excitement and fast moving activity. There’s evidence everywhere, from head hunters seeking chief digital officers to board agendas dedicating time to the subject.  In any company that has a professional corporate strategy leader supporting the CEO,  the CIO needs to rethink what kind of “digital” thinking might originate from that source over the next couple of years.

I’m researching the role of chief strategy officers in end user businesses (not IT vendors) at the moment.  If such a person exists in your firm I’d be very interested in hearing from you.

[ mark dot raskino at gartner dot com ]

This week my colleague Ken McGee pointed out an article in the Wall Street Journal that provides more evidence of the end of the great BRICS story.  Western business belief in BRICS as the big growth gold rush, has been a dominant feature of the corporate strategy landscape for a decade or so. That has distracted a lot of mindshare and money away from the strategic use of IT for innovation.

Driven by Moore’s law progress rates, IT in all its forms, has for decades been a powerful tool for business innovation. However, to want value from that force, genuine innovation needs to be high up your corporate growth agenda. Despite every CEO’s protestation that they value innovation, there are often easier ways to make money. BRICS has been a great example. Why take risks inventing new things or new ways to do things – if you can just do a lot more of the same thing, but in China?   If China builds more cities and every city needs fast food outlets / mains water pumping systems / traffic lights / buses / insurance – lets just make a China adapted cookie cutter version of what we already know – and replicate, to  make some money. Alternatively, lets transplant the same method of production to India, where labor is cheaper and use the saving to reduce prices and increase the size of our market. Simple, and rewarding growth – without new management science or new computer science.

Of course surfing the BRICS play is not the only “innovation-less” strategy path to growth. Consolidating parts of an industry by serial M&A is a good traditional  alternative to significant innovation. Another is smart refinancing. In recent times larger corporations have been issuing a lot more bonds, which they often use for stock buy-backs that in turn pump up share prices – providing a good capital return to shareholders. Ratings agency Fitch points out that US Industrial company bond issues “now total $3.2 trillion, up from $2.2 trillion at the end of 2009“.  However, the reason that corporate bond issuing play has been working so well is mostly because governments are suppressing interest rates on their own bonds artificially low. And though the cheap money is also available for a possible M&A war chest, the fact is stock  prices have risen considerably over the last 2 years.

So the BRICS are slowing, the bond issuing play will become less attractive as central banks start tapering and interest rates gradually start to rise,  and good M&A targets may not be priced cheap enough to make them an easy and obvious win for skeptical shareholders.

Under these conditions, CEOs and boards will need to look for alternative growth strategies. Deeper innovation of products, services, business models and operating models might start looking like a stronger alternative, despite the complexity and risk. It’s been long time since business leaders invested deeply in technology enabled growth strategies – the last time we saw something like 10% average IT budget increases was 2001.

There’s nothing a farmer likes to see more than a long-time fallow field that is ready to be seeded.  Right now, digital business looks like that kind of field.  The soil is choc full of new nutrients – mobile, social, cloud, big data and the internet of things. Meanwhile some of the  growth plans in the over-used  ”undigital”  strategy fields are starting to look distinctly wilted.

This week I have been finalizing our new annual CEO research survey. One of the questions asks about investment intent for next year, in various areas of the business – marketing, operations, capital equipment etc.  In my generic list of these high level areas, I include “R&D”. It has been interesting to watch intent towards R&D change in recent years. Its relative position has fluctuated but overall it remained fairly well protected even in the depth of the recession.

Like all research work at Gartner, my survey questionnaire gets thoroughly reviewed and I rely on the eagle eyes of my colleagues to spot flaws in my work.  One person with a sharper eye than most,  is my analyst colleague David Furlonger.   He pointed out that in banks, insurers, financial services companies and indeed most services industry – there isn’t a function called R&D.  What does exist is “innovation”.   Doh!  Of course he is right.  Sometimes innovation is a diffuse activity – but it can be formalized into a central function and location. For example, earlier this year I had the pleasure of  very briefly visiting the wonderful BBVA Innovation Center in Madrid.

But here’s a thought. We are moving very quickly into a world where information and communication technology innovation will become very physical.  The internet of things is coming, so are the robots and the 3D printers. The digital business world of the Nexus ++ is about to become a very wide field of sensor and mechatronic creativity. You will need your soldering iron and a supply of Arduinos, Lilypads, Makerbots and robot development platforms - plus the staff to get hacking and the space to work creatively. You might say “we are an information industry” – but such industries will have to intersect the real world too.  What if you need detailed data, quickly, about what’s really going on in a street protest or at a flood site – before you start calculating the insurance cost, or changing your media strategy?  Maybe you’ll rely on video drones one day (by the way if you doubt the awesomeness of drones –  check out this recent video from Dominoes Pizza ). Wondering what might happen when all lawnmowers stream data and how that might change the way you think about extended warranty services? Well hacking a few lawnmowers now to create a test data-set might just give you a competitive insight to the future.

Its all part of a digital business future you are going to have to invent. Its going to involve some fairly gutsy and original experimentation. It won’t be about just adopting and adapting pre-packaged ideas from vendors and often it won’t be about incremental tweaking. Moving your website to a mobile app – that’s innovation. But Square payments and Renew Smart waste bins – they are the outcome of physical R&D.  Yet those two examples are both in information business model, services businesses.

So just maybe your bank / insurance / media / advertising or other services industry company should be investing in a proper R&D function – and naming it so.

A Uniliver R&D Center in Bangalore
(image: DSWati, wikimedia commons)

Have you ever heard of “Chapter 33“?  It’s a sarcastic Wall Street joke term for a company that has been in Chapter 11 bankruptcy 3 times.  The fact that this has ever happened, serves to remind us of an important fact when thinking about strategic change in business – death often comes very slowly indeed to large companies. One of the main reasons for this, is the longevity of cash cow revenue streams from ageing products that have a declining but loyal customer base.

The un-digital products and services you make and serve today are the dying cash cows of tomorrow. Thankfully, many of them will decline slowly over a long period. This means you should be treating the cash flow they generate now as a means to fund the investment needed to systematically plan, develop nurture and evolve strong digital replacements. You may also be able to cross-fertilize learning and ideas from the emerging digital world back to your aging products, to life extend them a little. That will help make a smoother financial transition.

I was reminded of this observation yesterday when I got hold of the latest edition of my local Yellow Pages. Yes it still exists. Look at the picture below and you will see it is a far smaller, handy size and a lot thinner than the arm-achingly heavy tomes of yesteryear.  Doesn’t everyone look up local services online or on their smartphone these days?  Apparently not – there’s still a niche market for a handy paper guide and enough plumbers, TV aerial fitters and removals firms willing to pay to advertise in it. But also note the advert right there on the front cover for “apps.yell.com” and the QR code beside it.  The company has no hesitancy telling you about its digital future, and it is happy to take you there directly.

What’s your product equivalent of the inevitably  fading paper Yellow Pages – and what are you doing to ensure its inevitably declining revenues are reinvested smartly to grow your digital future? In the mean time – what are you doing to build the bridge-work that will lead your laggard customers to the new world as fast as possible?

With enormous relief, over the course of this year I have come to the conclusion that we are at last returning to the idea of truly, strategically, inventive IT leadership. It’s an idea that has been so suppressed for a decade or more, that I was almost giving up hope.

A few weeks ago, I was privileged to be asked to present some Gartner Research perspectives at an event for the awarding of the Fisher-Hopper prize. This award was created, late in their lives,by Max Hopper (founder of American Airlines SABRE)  and Don Fisher ( CEO co-founder of clothing company Gap ).  Both men shared a vision of CIOs as inventive leaders within their organisations – discovering and applying whole new methods of business organisation and optimization, using the power of computing. It won’t surprise you that this year’s winner, from the retailer Kroger, spent time in his acceptance speech acknowledging his years at FedEx and the influence of its founder Fred Smith  - another true IT believer.  But Fisher and Hopper felt an unease at the turn of the century – that the CIO was becoming too much of an order-taker / service-provider. There had to be more to the role than simply implementing the next standard business application software package, followed by a series of incremental adaptation requests from “the business”.   So they set up a lifetime achievement award to recognize great CIOs, who have made strong original technology enabled business contributions to their organisations and to the evolution of the role. Interestingly, the judging panel consists of  serving and ‘renaissance’ CIOs –  retired executives who knew what it was to create moderately enduring competitive advantage, through inventing new IT enabled business methods. I am convinced Fisher and Hopper were right to create this important award. The leaders from a decade or two ago, have a lot to teach the current generation by mentoring.

In the period 2002 through 2007,   I believe many business leaders sent IT to the strategic “dog house” –  because it had generally swaggered, threatened, over promised and under-delivered.  In the 4 years 1998 to 2001, those business leaders had invested a lot of net new money, to get past Y2K and to buy into all the new big packaged IT business ideas – CRM, ERP, Supply Chain Management, E-Commerce, Collaboration etc.   For too many, the experiences were nightmarish. Major business applications projects took many years to pay back, not 18 to 24 months as the e-business bulls mislead them believe. Sometimes, the consequences of late and failed major IT projects cost CEO’s their jobs. And all the money spent on Y2K,  won companies only a rushed and expensive desktop refresh, but not much else. Dark doubts lingered that the whole thing was some sort of IT industry scam in which CIOs had been complicit. So IT leaders were asked to clean up their act. We standardized and consolidated systems, we outsourced and off-shored, we secured and cost-controlled, we professionalized with COBIT and ITIL.  We learned to manage demand, optimize portfolios, create shared services, perfect SLAs, partner with vendors, and recently even to support BYOD.  In fact, despite initial howls of protest, in many ways CIOs did their level best to demonstrate that Nicholas Carr was right with the sentiment of his 2003 bombshell HBR article title: “IT doesn’t matter“. Collectively it seemed that IT leaders were being asked to standardize to the point where there was little or no chance of competitive differentiation using IT.

In the mean time, business leaders found easier paths to to profit glory. They fed on cheap money, whether it was directly lent by banks to fund corporate investment led expansion – or lent to the Western consumers at the end of every value chain, driving binge and bubble growth. In parallel they pursued high risk, high reward M&A strategies or setup shop in the BRICS countries to sell to the rapidly expanding emerging markets middle classes, while milking fatter margins from cheap labour cost-cutting.  Frankly, business leaders didn’t need much deep IT enabled business innovation they just needed more of the same kind of IT at the same or better marginal cost – to fuel cookie cutter business recipes for expansion. But as we all know, in 2008 the debt fueled global party stopped.

Of course the last 5 years since the Lehman crash, have held everything back. Business leaders first had to slash back operations and that included deep IT cost cutting.  Only by 2010 could they even start to think about post great- recession growth mechanisms. But in 2011 and 2012, aftershocks and secondary factors – like the Euro crisis and the ‘fiscal cliff’ fear delayed still further the opportunity to act on new strategic insights.

Now CEOs are ready. Many recognize that behind them lie 10 years of fallow-field opportunity. Technology has been completely revolutionized in that time, but it has been very under exploited. They have relatively done little, with dynamic BPM, mobile, social or cloud  - in business strategy terms. They have barely started to understand the richness of opportunity the emergence of big data and the internet of things could bring. But they know it matters. Because companies like Amazon, Apple and Google have applied these capabilities to take a big chunk of control of the destinies other people’s industries – from music to movies and books to cars.

When CEOs turn to their own current IT organisation capabilities, they find them wanting. The IT function is perfectly tuned for for the job they have designed it to do – passive incremental order taking – but not for strategic innovation and direction setting. So the CEO tries to hire a new kind of CIO, sets a new technological outlook ambition for the firm and may also be prepared to fund higher risk models of internal innovation – all to catch up.  The inventive CIO is reborn.  This new CIO takes one look at the long list of dull-edged technology provider contracts supporting a long list of uninspiring incremental back office system maintenance and minor changes – and immediately recognizes a basic fact. We can’t get where my CEO wants to go with this level of semi-detached IT capability.  Significant re-internalization and technology core competency building is inevitable. We see this starting to happen in automotive and retail already. We’ll see it in Pharma, CPG and others next.

The inventive CIO will strive to develop unique new technology capabilities for competitive advantage, using a powerful and creative  internal technology resource base. If your company wants to remain a leader in your industry, information and technology must become a core competency again.

Whenever a new job role or title emerges in business, the reaction is usually a mixture of confusion, misinformation, conflation and denial.  My role as a Gartner analyst is to help in creating research that will answer questions chief executives have about IT and business. So when a new C-level leader title arrives, related to IT,  I need to be able to explain it. Is it real or has a trend been over interpreted from just a handful of cases?  Why are companies creating the role and what does it really do?

Chief Data Officer is one of those titles that has been rising in visibility over the last 2 or 3 years. My analyst colleagues in our information management team, research the tools and techniques that these leaders will apply – such as Infonomics, MDM, Data Science and Open Data.  My task is to ensure we can answer the CEO’s questions about CDOs – things like “who are these people?”  and “do I need one?”. So  I have been taking another look at the early-bird CDOs recently.

Here are five 2013 CDO facts that might interest you.

CDO Fact #1     There are over 100 chief data officers (carrying that actual  job title) – serving in large enterprises today. That’s more than double the number we counted in 2012.

CDO Fact #2    Banking, Government and Insurance are the top 3 industries for Chief Data Officers –  in that order. However we are now seeing other industries rising.

CDO Fact #3    65% of Chief Data Officers are in the United States. 20% are in the UK.  There are now CDOs in over a dozen countries.

CDO Fact #4    Over 25% Of all Chief Data Officers are in New York or DC.  It’s a regulatory catalyzed trend – at least in the early stages.

CDO Fact #5    Over 25% of Chief Data Officers are women.  In case you are wondering -  that’s almost twice as high as for CIOs (13%)

New, technology related C-leader titles are like buses: you wait for ages – then 3 come along at the same time. We are also watching the “chief digital officer” role very carefully. At this stage  I think the ratio of digital officers to data officers is around 2:1. It’s a real large-enterprise C-leader role, but it has different industry clustering.   There is  also a rapid rise in the number of people carrying the job title “chief data scientist” – however at this early stage the majority of those professionals are in smaller technology and information analytics specialty services firms.

The title of this post, is the title of a presentation I have been giving at our Symposiums in the US and Japan.  Next week I will deliver it in Barcelona ( session link here ).  It’s a position. It’s one I have taken several years to become confident of.  I now believe that in due course, every single industry will be deeply digitally disrupted and new mastery will be required. Today’s leading incumbents might change enough to remain in charge, but sometimes they will lose to new entrants coming in from unusual directions.  Many boards have read Clayton Christensen, but it’s still very difficult for big public companies to overcome the innovator’s dilemma in practice.

Often the changes taking place will fail to follow previous template patterns and so business leaders will misread and ignore them until they become perilous. In that regard, digital disruption is rather like a retrovirus – it keeps mutating and changing shape. So, just because you have understood how to deal with the way e-commerce dis-intermediates, doesn’t mean you know how to cope with the effects of crowd-funding that social has enabled.

Most importantly, the physical technologies: 3D printing, the wireless and sensor enabled ‘internet of things’ and intelligent robotics – now put all the physical industries in play. It is not just the information and service industries anymore.   We all saw and understood how music and news could be disrupted. These were inherently ‘bit’ industries (as Nicholas Negroponte pointed out a long time ago). Now the ‘atom’ industries are all set to be deeply revolutionized – with unpredictable consequences.

For me, the tipping point example was the e-book. Amazon had already taken a big chunk of control over the book industry by 2006 by revolutionizing its distribution with e-commerce. The second step was to revolutionize ‘book’ ( deliberate grammar ). The very concept of book – what it is, how it works, the rights over it, the function of it, the price of it – the “who gets paid what” of it – all those things are changed.   An e-book has fewer “pages”, it’s average price has more to do with what Amazon and Apple think it should be – than your favorite 150 year old publishing company. When you die – it won’t be passed down to your relatives – but if you lose it, it can magically reappear in your hands and remember what page you were on.  This kind of profound change to products and services themselves is the new digital revolution that lies ahead of us.

Now we have confirmatory examples – it’s happening to cars and its even happening to tobacco. Every time, it looks different, like a retrovirus. For example I just mentioned tobacco. What do you think about “electronic cigarettes”  - are they part of the ‘digital’ revolution or is that something else?  Well, they contain a micro-controller and they recharge via USB. Some already have limited wireless capabilities – so you decide.

There will be no exceptions. Every product and every service will be revolutionized over the coming decade.  So much so, that old core competencies will be gutted and replaced. But don’t ask me to predict what will happen to your industry – you have to invent that.  There’s no pre-packaged business application software this time.  But there has never been a better time for those who understand what technology is capable of and have the creativity to exploit it.

If a cigarette can be digitally substituted then almost ANYTHING can.

Image Source: Michael Dorausch via Wikimedia Commons  CC.

This week I attended an interview presentation at the UK’s Institute of Directors ( IoD ) .  The interviewee was Simon Calver,  the CEO of Mothercare – a 52 year old British high street retailer with over 300 stores and $1Bn in revenue, specializing in baby and toddler care products for new parents.  During his talk, Simon said a number of interesting things but one quote stood out to me:

“First and foremost we will be a technology business”

He pointed out that the company already gets about 25% of its sales online  with a double digit growth rate, while its store business has low single digit growth.  No surprise then that he also said

“There’s no reason why we can’t think of that [online] eventually becoming over 50% – that’s an aspiration”.

Simon came to Mothercare from Lovefilm.com an online video rental company founded in 2002, which as CEO he helped sell to Amazon.  But he wasn’t always a dot.com guy. His career started in marketing and business operations at Unilever and Pepsi.  He also spent time at Dell. So he has a balanced view of both sides of the business world – the digital side and the traditional side.

Later in his talk he said: “Every retailer should ask themselves: ‘what would this business look like if it was over 50% online’ “.

I couldn’t agree more.  If  Mothercare has already reached the 25% tipping point – every company should take heed. But Simon was also careful to point out that he will

“Use the stores as competitive advantage in an omnichannel model”.

The key insight is that the stores and their staff can offer a service experience – for example measuring a mother to be for maternity bra,  or fitting a baby seat into car safely.

I am absolutely convinced we will hear many more traditional business CEOs declare  ”we must become a technology business too” over the next 2 or 3 years – and they won’t all be retailers.   The digital business revolution is well underway.

Simon (right) Calver at the IoD November 2013

The quote in the title of this post comes from  Peter Sondergaard‘s section of the Gartner Symposium keynote 2013.   I just keep on seeing more examples that show how it is true. This week I noticed 3 news stories that provide more evidence.

Argos Digital Store
Reuters reports that Argos is introducing “digital stores”. Argos is a major UK home goods retailer, that for many years has operated an unusual catalog shopping in-store model. Now it is doing away with paper catalogs and replacing them with tablet based versions.  Take a look at the picture – perhaps this is one way store based retailers can compete with Amazon.

Marlborough maker to introduce an e-cigarette in 2014
The Wall Street Journal reports that PMI – the manufacturers of Marlborough and other big brand cigarettes has announced it will enter the e-cigarette market next year.  It will be joining Lorrilard, BAT and others who have already responded to the rapid growth in this category that has been largely developed by start-ups. Don’t be fooled into thinking this is just an “electrical” product. Lorrilard’s “blu” brand already has wireless and social features. Digital innovation in this area will become very lively indeed.

Coca Cola and Target are setting up technology incubators in India
The excellent online news source Quartz reports that these major US firms are investing in tech firms in India to help generate digital business ideas and opportunities.

The definition of a  ”tech” company has been changing for several years. Many companies that apply information technology to serve a customer need have been categorized this way by the business media and the investment community – even if they don’t sell technology. LinkedIn, Groupon, Twitter, Pinterest and others are seen this way. If non-tech firms start to apply information technologies directly in what they are selling – surely they are becoming tech companies too?  We must at least admit that the boundary is becoming very fuzzy indeed. Tesco sells its own Tablet called Hudl and has its own streaming movie service called Blinkbox, Nike makes and sells Fuelband, Nissan has declared that it will introduce a self-driving car (one might say ‘robot’)  by 2020.  Technology will become a central competency for many more  companies over the next few years.