Ray Wang began an excellent discussion last month that highlighted the major shifts and disruptive forces that the modern CIO faces today. It's a given with most executives these days that the business landscape is quite a different one than it was just two short years ago. As part of this, many long-held assumptions and perceptions about the enterprise have begun to fall by the wayside. Chief among these has been a sense of the growing loss of top-down control amid rapidly changing performance and accountability expectations.
Make no mistake, the business side of the IT/business equation has their hands on the wheel more than ever. Primary operational focus has moved sharply towards promoting short-term revenue stability, transitioning to new market conditions with minimum disruption, and attaining medium-term sustainability. Along the way, the customer has become a vocal back-seat driver and has started to demand a larger share of influence while wielding more real, de facto power than just about any time in business history.
Powerful New Constituents Requires Potent New Means
All of this is only making the top IT job all that much harder: A CIO today must now walk a tightrope between at least five major constituencies: The board, the shareholders, the lines of business, trading partners, and customers. The latter two have been able to drive surprisingly little actual accountability for many CIOs until recently. The big question is now about the ways that CIOs might actually find opportunity amidst these major changes.
Thus there's a new agenda afoot today at the enterprise level with the CIOs that I've been speaking with. It's driven by the aftermath of the present economic crisis and it seems to be combining with the mass behavior transformation that is often referred to as social computing. Put together, these are two of the bigger forces driving change for CIOs today.
The first change is fairly well understood, even if an effective response is sometimes not at hand. It short, it can be summed up as a desire for the CIO to drive revenue instead of funneling the vast majority of their budget into overhead, namely IT operations. For more background on this, see point #2 in this CIO's top ten issues list for 2010 which reports that 80% of their budget goes into keeping the business running instead of seizing meaningful business opportunities.
The second change is one that is broadly altering the operational fabric within which CIOs work and that -- for too many business leaders I speak with anyway -- is seemingly coming from left field: The very process of interaction with workers, suppliers, and especially customers is evolving dramatically to one that is fundamentally more open, egalitarian, participative, and social.
This change is sometimes referred to as social computing and it's a transformative one for many businesses, whether or not they are preparing for it today. The larger part of the market that most businesses must deal with are moving in this direction, even if most of their operations aren't, at least yet.
Today's Market Conditions Are Driving Social Business
While the transformation to social business is in its early stages, it is does seem to be clearly happening. It's also a significant change for which most CIOs are not adequately preparing, partially because of social computing's roots in the non-enterprise consumer world but also because the business benefits themselves are still often poorly understood. Intriguingly, social computing is also a transformation that can actively help with the first change: a focus on being more relevant as a driver of the business.
In Ray's post he laid out four areas of change that are responsible for the major disruptions in today's modern organization. I believe he is correct in his analysis and so I will paraphrase them here for this discussion on the growing need for CIOs to driving forward social business models to meet their operational objectives.
Before diving in, let's also remember that widespread change tends to be unevenly spread in the business world (often industry by industry), so some organizations may be isolated from these trends for a short while yet. In my opinion however, it now appears that enterprise social computing in several forms will deeply impact the business purview of most CIOs this year. The good news: It will also enable them to drive positive change successfully in both their strategic and revenue generating activities.
The Four Types of Factors
The four major business factors driving social business transformation are:
- Macro Conditions. This is the overall business environment including economic conditions, societal trends, and business climate.
- Workplace Environment. How an organization is structured and organized today to conduct business, including its present state and emerging trends.
- Technological Change. What tools are at hand today and what is possible from an infrastructure and technical perspective.
- Business Models. The ways that businesses can derive value within today's macro conditions, using the technical approaches at hand and with the workforce that it will have in the near future.
For the next several posts, I'll be exploring how social business models will be affected by the classes of forces listed above. For now, we'll explore the macro conditions, whereby the we're seeing the following factors drive forward social business:
- Lowered expectations for classical business models. This is not a discussion of whether capitalism or socialism are going away. But it does mean that old business models have aged poorly of late compared to new models based on network-centric and social computing principles that harness widely distributed inputs. In this discussion, user generated content and peer production are not business models in and of themselves. Instead, we look to open supply chains and crowdsourcing to combine theory and practice to create potent new business outcomes, especially when compared to traditional ways of deriving value. These newer and more powerful social business models are just now starting to be understood at a fundamental level. For example, smart CIOs will carefully assess their existing strategic assets in their SOA portfolios, master data repositories, and outsourcing capability combined with digital delivery to revolutionize IT as a revenue driver like never before.
- Global economic uncertainty and transition. There's a sense that we can't go back to the way that we were doing things in business. New operating models that are much more open and transparent are genuinely being considered. This is creating an important opening for CIOs willing to drive real change in their organization and social computing is one of the most cost effective ways to reach and engage the entire organization with a brand-new agenda.
- Resource scarcity and the rising interest in sustainability. The resource abundant environments in today's businesses will inevitably become strained when faced over time with economic deflation from social business models, both commercial and community-based, which can do so much more with less. Sustainability will also put a serious cost drag on operations. CIOs will be under increasingly severe pressure to bring to bear social CRM, peer production, and open product development and other social business methods for radically reducing the cost of operations.
- Growth industries requiring increasingly hard-to-find skills. As we transition to next-generation business, the ability to effectively deliver on broad new digital strategies such as social business will be constrained, despite a need to drive down costs and improve revenue. CIOs will cultivate environments that draw these new workers and focus on skill building and transitional knowledge acquisition in their existing staff.
- Shift of control from institutions to communities of individuals. Social business environments such as customer community, Enterprise 2.0, and social CRM are great examples of what already happening in an increasingly widespread way to businesses today. CIOs will be looking to take advantage of these trends to drive down the cost of operations while proactively capturing innovation, improving productivity, and decreasing time to market. Some of these trends will even directly drive revenue gains, such as social CRM.
- An emerging network-centric, global social marketplace. If you didn't get the memo, most of your business works better online but most large businesses today focus mostly on traditional channels. While some traditional channels will never go away for some businesses, they all work better when plugged into some of the social business models listed above. For example, most multiple location retail stores are greatly under-leveraging their workers (and certainly their customers) to build important data sets, drive expertise capture and knowledge retention, and respond to dynamic business opportunities. Proactive CIOs will find that adequately crafted social computing environment can help with a wide variety of current problems in getting the right information to the right part of their business within the worker, partner, customer trinity.
- Information superabundance and the democratization of data. As I wrote here on ebizQ here recently, we're all about to get buried in the data we're about to capture and unleash with social business tools. This is not a bad thing, unless we do nothing about it. We need much better outputs from our existing business assets, whether that's our workers or customers. We can now achieve them but it's making use of the data we get that can be the hard part. CIOs will enable the flow of vital information enabled by CIOs, but it's also core to their job responsibility to then make the most of it. Again, open supply chains are just the beginning.
There are a large number of interesting (and downright important) developments at the intersection of technology and business today that are perceived to drive major business change. These include cloud computing, unified communications, and mobile devices, yet social business is actually going to be one of the most transformational and important new trends in the business world for the foreseeable future. It cuts across the human, organizational, and technologies dimensions of the enterpirse like few advances before it. And it's one that smart CIOs will enable, drive, and direct for the benefits of their organization and their careers.
I'll return shortly for Part 2 in this series on next-generation CIOs and social business with the factors related to Technology Change from the list above.
Update: Part 2 of this series is now available.
Update: Part 3 of this series is now available.
Will social computing have a major impact to businesses or do you think it's just a consumer phenomenon that won't have lasting effect on businesses?