October 28, 2020
In the digital world,
CIOs need to lead IT as a profit engine not a cost center
Is your management agenda holding your leadership agenda hostage?
In the July IDG survey, 53% of CIO respondents said that their top digital business objective was to “maintain overall revenue, given market shifts.” 53% also sited the need to “drive new revenue” up from 48% in 2018. CEOs and Boards are increasingly looking to digital technology as the primary source of new business growth and profitability.
CIOs need to proactively widen their leadership aperture in order to expand the impact and value that digital technology can bring to their organizations. To do that effectively, they need to rebalance the time they spend on managing the IT function vs. leading the new business growth initiatives. They have to change the narrative from IT as a cost center to IT as a profit engine that directly contributes to delivering increased revenues, margins and profits.
Zone Leadership: A 4 Zones leadership framework
The 4 Zones leadership framework, vocabulary and decision-making process enables C-Suite executives (in this case CIOs and CTOs), to discuss, segment, and prioritize multiple ways digital technology delivers sustainable business value to their organizations. It enables them to understand how much of their organization is dedicated to running, changing, or transforming the business. It provides a structure by which to govern activities to that end.
Simply put, this entails reviewing your total body of work and segmenting it into four zones as follows:
Performance Zone: the set of externally facing products and services (systems of engagement & systems of intelligence) that your function has been funded to deliver. This is what the enterprise as a whole is buying from you.
- The leadership mandate is to demonstrate how digital technology directly contributes to generating increased revenues, margins, and profits.
Productivity Zone: the set of internal initiatives you are undertaking to improve the effectiveness and efficiency of the organization’s systems of record.
- The leadership mandate is to recover IT resources and budget away from low value functions and redeploy them to high value functions which reduce costs and increase digital technology investments in growing the business.
Incubation Zone: the set of internal initiatives that you are undertaking to explore, test, and validate next-generation digital technology products and services.
- The leadership mandate is to enable cross functional teams to utilize Agile, Lean, and DevOps processes to increase speed to market and time to value.
Transformation Zone: any external facing initiative that revamps IT’s value and impact. This is where digital technology enables the organization to launch a net-new line of business that can scale to 10% or greater of the company’s overall revenues.
- The leadership mandate is run IT as a profit engine not a cost center.
Each zone requires a different type of leadership playbook
The leadership rationale for applying this framework at the functional level is the same for the enterprise as a whole: each zone’s charter, culture, and metrics are so different from the other three that they need a different type of leadership playbook to get the desired results and outcomes as shown on the slide below:
Here is a first cut on how it might playout for you and your IT team.
Performance Zone: This zone is responsible for delivering your value to the rest of the enterprise. To ensure success here you want to install a performance culture led by a results-oriented leader who measures outcomes objectively and holds people accountable to their committed metrics. The metrics themselves relate directly to how digital technology drives new revenues, margins, and profits. The leader should know the business well and hold his entire team accountable to achieving the company’s business growth goals and financial targets.
Productivity Zone: This zone is primarily internal to the IT function. Its job is to help the performance zone become more effective and more efficient. To ensure success here you want to install a collaboration culture led by an empathy-oriented leader who inspires the team to be in service to others. He or she must be vigilant in maintaining the quality, integrity, and security of the company’s systems of record while at the same time being sensitive to the pressures the performance team is under. It is critical to deploy a strong demand management/capacity planning governance tool to make sure that IT can deliver on the commitments it makes to the performance zone.
Incubation Zone: This zone is where you want people to look beyond your current charter and processes to identify new digital technology products, services, and businesses that enable your company to successfully compete as a digital enterprise. To ensure success, you want to install an innovation culture that will challenge the status quo, inspire creativity, and generate game changing ideas. Here the key metrics are speed to market and time to value driven by an iterative fail-fast development model.
Transformation Zone: This zone is where the organization commits to using digital technology to launch a net-new revenue engine that will scale to 10% or more of the company’s overall revenues. To ensure success you need to install a command culture led by the CEO and Board of the company as the stakes of success or failure are too high to be delegated elsewhere in the C-Suite. IT’s leadership role here is to help make the compelling business case that the necessary investments in the new digital technologies will generate exponential growth and a higher return than the cost of capital.
The point of these zone leadership profiles is to provide a lens through which to evaluate your current organizational design, operating model, and the leadership skills and capabilities of your senior team. The goal is to develop a set of solutions that maximizes the business value IT delivers to the organization.
Here are some questions to get you started:
- How well does digital technology enable or enhance core business functions?
- What value is the business getting from its most important digital technology investments?
- How long does it take for the IT organization to develop and deploy new products, services, and systems that achieve mutually agreed upon, critical business outcomes?
- What skills and capabilities does IT need to achieve those desired outcomes?
- What metrics will you use to measure the value that IT brings to the business?
The ultimate question is: what do you want the IT brand to stand for at your company?
Successfully transforming IT from a cost center/support function to a profit engine will be the defining leadership challenge for CIOs and their senior leadership teams. It will take vision, persistence, resilience and an unmitigated desire for success.
It will require CIOs to free IT’s future from the pull of its past and ensure that their leadership agendas are not held hostage by their management agendas. The Zone Leadership framework is intended to help you focus your time and attention as productively as possible to get the most out of your organization and give your people their best opportunity for success.
If you decide to deploy it, I’d welcome the chance to help you do so.
As always, I am interested in your comments, feedback and perspectives on the ideas put forth in this blog. Please e-mail them to me at here. And, if this content could be useful to someone you know please share it here: