Consultants' Corner

CIO Stepping Stones to Success

Steven Callahan
Insurance Experts' Forum, February 8, 2012

Insurance Networking News post, “Insurance CIOs Vary in Value Proposition Views” published Jan. 12th, 2012, offers some interesting insights into the contributions CIOs see themselves making according to Novarica’s recent study “Creating Enterprise Value as a CIO.”

Despite the relatively small sample size of 111 cross-industry leaders, I suspect the responses are representative of what a larger survey would indicate as they are consistent with the findings of many articles and priorities published over the past few years. Given economic conditions, there has been an intense focus on costs, efficiency, effectiveness and legacy system adaptations. Faster, better, cheaper have been the buzzwords for at least a decade, as noted by approximately one-third of the respondents as well as some portion of the 45 percent whose “strategic initiatives” no doubt include some form of efficiency improvement and cost reductions.

The flat growth curves, lower investment returns, diminished product margins, increased reserve requirements and frequent catastrophic events have put added pressure on increasing cost ratios, bringing them into the spotlight of strategy for most companies regardless of program label. At the bottom tier of responses were the 2 percent who marked their primary source of creating value as “identifying growth opportunities.” The focus remains, for the vast majority, on the bottom line instead of the top line.

There are two ways to reflect on the implications of these findings. First, there is the "what should be" approach that focuses on what an effective CIO could do to add to their company’s value proposition, probably a measure for which the survey was attempting to establish a current baseline. Unfortunately, the far more prevalent counterpoint measure of value is represented by "what is” being brought to the role, which recognizes the inevitable reality that what really drive's a CIO's ability to succeed is their superior's view of what they should be doing and their annual goals.

In other words, especially in today’s economy, while innovation may be an excellent value proposition within which CIOs can offer up enabling solutions and empowering technologies, most find themselves being given a tacit acknowledgment of the importance of these strategies while performance is first and foremost still measured by their ability to drive down costs, improve efficiency and keep systems performing. CIO-driven innovation is still often interpreted as a “stepping outside their role” activity that results in losing focus on the manufacturing mentality of operational efficiency. Information technology remains such a large portion of any company’s budget and critical business-sustaining asset that to allow looking beyond the caretaking of that beast brings fear to the heart of many of the even most forward-thinking executive teams.

Yet, layering the CIO under tiers of governance, project thresholds, planning sessions and steering committees creates a vast barrier to the ability to truly generate innovation, thought leadership and organizational empowerment. As a result, our industry continues to lag many others in the adoption and full leveraging of technological advances. Speaking in general, of course, as there are always the exceptions – and those are the ones that stand out.

Far too many exceptional CIOs capable of bringing innovative value and new thought leadership have been discarded, reassigned or effectively muffled because of legacy thought processes, overly simplistic goals of efficiency and deep-seated fears of disruption that prevented the acceptance of fresh perspectives and paradigm-breaking ideas. Even today, to some extent, our industry continues to suffer from a traditionalist mentality that inhibits true innovation, regardless of recent commentary to the contrary. The very nature of the risk aversion industry forces an almost culturally genetic tendency to resist disruption in favor of transition, to avoid revolution in search of gradual evolution.

Along these lines, it is with great interest to note two other recent articles published by Insurance Networking News that cover some of the same territory from a different perspective. January 27th, 2012’s “Insurance CIOs Sound Off” does an excellent job summarizing a recent Celent CIO panel also discussing what it takes to be a successful CIO. During the session, Senior Analyst Mike Fitzgerald introduced the concept of three distinctly different points of focus that had to be blended in the exact right mix for success – operational, strategic and disruptive. Simply put, run the business, help change the business based on future trends, and innovatively disrupt the business by acting almost as an entrepreneur in autonomy. The first two are no real surprise, but the introduction of the concept of disruption is relatively new and a foundational element to organizations being able to nimbly adapt to a constantly changing competitive landscape. Although the panel tended to rate the percent of time to be spent on disruption as low, and the likelihood of rapid turnover high, it introduces a new element to not only the CIOs role but to leadership as well. The second article, “Emerging Technologies: Placing the Right Bets,” maintains the concept of disruption. Here, the focus was not on leadership, but on “outer-edge” technologies that are currently undergoing very low adoption rates due to their disruptive nature, but that represent significant upside potential to the industry. Here, the focus was on how leadership could prepare an organization’s culture to be ready for game-changing technologies that would truly disrupt, in a positive way, the manner in which business is conducted. Clearly disruption is becoming a focus for leadership, moving one step beyond innovation.

Disruption, change or innovation, can all bring great risk as well as potential for growth and competitive advantage. As stated by Voltaire and FDR, with power comes great responsibility. Given an open, collaborative organization, a CIOs ability, or any leader’s for that matter, to succeed as an innovator and a bringer of disruptive change, is directly influenced by the depth of their understanding of the business, products, channels and the organization’s value proposition. An innovative CIO is many levels beyond the traditional technician who holds the keys to the plant. Innovation is based on both deep knowledge and vision, and a CIO must possess both before taking on the responsibility of attempting to generate profitable disruptive change. And since disruptive innovation must be culturally supported, that means that the management team as a whole must be equally prepared and positioned for handling the shift. This is no small adaptation from today’s scenario, particularly given the years of a more traditional, conservatively based foundation of experience and expertise at the core of today’s industry leaders. Yet recent trends, conferences and articles have all made it clear that innovation will drive business growth and success in the coming years — crossing technology, product, service, talent management, distribution and operations. And now, the amplifying adjective disruptive has been added to the equation for necessary future success and growth. Developing a management team and an organizational structure capable of generating and supporting such change will take new forms of intense talent management, focus, flexibility and resilience.

Returning to the original Novarica study, and taking into account the other articles based on the Celent panel discussion, one comment stands out as potentially inconsistent with the overall flow of disruptive innovation and CIO leaders:

"Those “innovators” are more likely to ascribe their ability to deliver innovation to their technology knowledge/skills and project/team management rather than their ability to align with the business side."

Based on a review of the literature being published across analysts and practitioners, it does not seem likely that understanding technology will rest at the core of the innovator’s value proposition. Instead, a CIO should surround him or herself with technical experts but play the role of the translator of options into opportunities, leveraging the vision gained by looking out from the metaphorical organization’s mountaintop. The secret is not in the technology, whether legacy, emerging or disruptive, but in understanding the drivers of success, the enablers of growth and how to synthesize the new technological capabilities into the overall operational and cultural environment. The future successful CIO must match deep business context to technological subject matter expertise, organizationally integrate it, and then leverage it to generate unique and competitively advantageous solutions. Simply “supporting new strategic initiatives” is reactive and will define those who lag the market as the dynamics change as support is a passive verb. Change leaders, who by default will define tomorrow’s leading companies, will be proactive, generating and championing innovative and even disruptive initiatives that effectively blend technological advances, cultural maturity, and business needs into cohesive and appealing market solutions.

Steve Callahan is Practice Development Director for the Robert E. Nolan Company, a management consulting firm specializing in the insurance industry.

Readers are encouraged to respond to Steve using the “Add Your Comments” box below. He can also be reached steve_callahan@renolan.com.

This blog was exclusively written for Insurance Networking News. It may not be reposted or reused without permission from Insurance Networking News.

The opinions of bloggers on www.insurancenetworking.com do not necessarily reflect those of Insurance Networking News.

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