CIOs Should Take a Leaf out of the Venture Capitalists’ Book

By February 20, 2014 1 comment

A report from Deloitte recommends that company IT departments should now take on a far more pro-active mindset, progressing from being a bulwark of the firm’s stability towards more risk-taking with technology and innovation management.

The role of the IT department, especially that of the Chief Information Officer, in large companies is changing rapidly, and is becoming central to the firm’s entire approach to productivity and competitiveness. With the development of Big Data, many IT departments seem nevertheless to be currently trying to make up for lost time in adapting the way company systems work rather than innovating in the true sense of the word, thus perhaps illustrating the rather limited mindset that many companies still have vis-à-vis the IT department’s role in the overall business. This is the main issue raised by global professional services firm Deloitte in a newly-published report in which the consultants argue that CIOs should now be expanding their role from the purely technical side to become genuine drivers of innovation in their own right, also taking on some areas of business risk. The report compares the approach taken by venture capitalists, who manage portfolios of promising investments in a pro-active way, and suggests that the time has come to rethink the role of the CIO and bring this IT professional into mainstream management and running of the business.

IT management need a VC mindset

In highlighting the contrast between venture capitalists and traditional IT management, the Deloitte consultants do not imply any inefficiency or lack of professionalism among company IT departments. They do however stress the need for CIOs themselves – and the management of the other company departments – to gain a greater awareness of the existing complexity of the IT job, which consists of endeavouring to get the best out of the assets in place while striving to remain at the cutting edge of innovation. Essentially, argue the Deloitte’s authors, CIOs are managing an investment portfolio of assets and talent, i.e. human as well as technological capital, having to assess the performance of the procedures in place and planning for new projects – all of which means that CIOs are already operating way beyond their ‘original’ technical remit.  Once this new reality is clear, then the need to take on, to some extent, a more venture capitalist mindset should be obvious, reckon the consultants. First of all CIOs must assess the composition of their portfolio in order to derive the greatest value from it.  But aside from simply maximising efficiency within his/her department, the CIO should now also be providing fellow-management with insights into the strategic impact and cost-benefit ratios that are routinely studied in most other areas of the company. The report reveals a variety of statistics on CIOs’ expectations for the coming years. Some 90% of those polled are planning to increase agility in the way projects are run, while 52% stated that the difficulty CIOs have in regarding their department as a business is a definite handicap. The more flexible and agile VC approach calls for the walls between departments, especially those erected around the IT department, to be broken down.

A portfolio approach to innovations

The second aspect of the venture capital approach is that CIOs must be allowed to take certain risks as part of managing their innovation strategies. The Deloitte reports underlines that the traditional approach to purchasing business software is usually cost-intensive, and may prevent the company from staying right up to date with the latest tech innovations. Instead, companies should empower the CIO to look for innovative solutions. Calling on the services of specialised software startups may require the CIO to get more closely involved and provide a greater degree of support to the suppliers but this approach is likely to enable the firm to source and integrate state-of-the-art IT solutions, say the Deloitte experts.  However, this kind of approach is only viable if the firm allows its IT people real flexibility to operate in portfolio mode.  IT management must be empowered to shut down projects which are failing, cut losses and move on, just as venture capitalists do.

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1 Comment

Thanks for sharing

Submitted by Amanda (not verified) - on February 21, 2014 at 01:22 pm

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