CIO and Business Thinking

The changes have also brought changes to the job description and responsibilities of the person responsible for the operations of corporate information management. Today, the CIO is considered one of the company's most important people because that person is responsible for providing business benefits through IT solutions and for producing new business information system services. Under the leadership of the CIO, the ICT Department is responsible for supporting the operations of the entire organization and for producing new capabilities to achieve business competitiveness. 

The role of the CIO has changed in the direction of the innovator and the strategist, who affects the rest of the company's management. The modern CIO is a business thinker, relationship builder, skilled negotiator, and architecture-skilled technology producer. At the same time, a person acting as an CIO participates with other company executives in the development of the company. 

How CIO role has changed in 20 years

The CIO is often a member of the company's senior executives, top management. The top management agenda includes identifying new productive business, identifying value-added information inside and outside the company, and delivering innovations to increase business growth. One of the most important tasks of the CIO is to create innovation-generating information systems in order to improve business opportunities and financial returns. 

Today, several CIOs help the company's CEO determine strategies and the management of the company's business units in running their operations. This is how the CIO takes on the role of business developer and process-enhancing innovator. (Gouveia, Varajáo 2019). 

CIO types, roles and capabilities

Ariel La Paz has studied the characteristics of the strategic CIO. According to La Paz, there are four generic types of different CIO, all of whom have different expectations for the capabilities, knowledge and skills required of the IS manager in the course of their duties. A perfect CIO would be a multi-expert in all four types. 

First there are more traditional CIOs like Technologyists and Enablers. In organizations where the CIO operates within the limits of these types of capabilities, the organization often feels that information technology is just a tool for implementing a strategy. In such organizations, information technology mainly maintains (business)operational processes and provides support services, and the CIO's requirements are kept in line with that. Technologyist and Enabler-type CIO's focus is on managing IT resources, implementing business-supporting IT architectures, IT services, and generally supporting business continuity. 

"The modern CIO must therefore have versatile knowledge and skills to negotiate, influence management, lead projects and teams, and produce innovative solutions that generate business value."

Newer CIO types include Strategist and Innovator. These types of CIO's are involved in defining business strategies and improving competitiveness and business processes. Organizations that expect the CIO to operate according to these types think that knowledge, technology, and information technology are strategic and very important assets. These types of CIO are expected to create innovative solutions to improve business processes and provide a competitive advantage for the company. (La Paz 2017). 

The modern CIO must therefore have versatile knowledge and skills to negotiate, influence management, lead projects and teams, and produce innovative solutions that generate business value. Next, I will look at what the CIO needs to know about business thinking that he would succeed in that challenging task. 

CIO knowledge needs about Business Thinking 

The CIO often has a technical background and a background in studies such as electronics, information system science (e.g. Master of Science in Technology). In order for an CIO with a technical background to understand the laws of business, and to be able to add value to the business, person must acquire the necessary knowledge and skills, for example by further training through suitable business studies. He must have a broad business perspective. The CIO also needs knowledge of industry best practices. The fol- lowing diagram shows the information needs of a modern CIO. 

Figure 1: CIO knowledge needs

As competition in the global market has become tougher, companies are developing methods for knowledge management. This is an attempt to achieve better financial results for a company. By participating in the development of knowledge management solutions, the CIO can review business priorities and participate in corporate management decision-making. It is also the responsibility of a CIO that he/she participates in the definition of C-suite business plans to make business decisions in IT matters. It can therefore be concluded that the strategic CIO is primarily business-oriented and secondarily IT-oriented. (La Paz 2017). 

"Participating in the development of knowledge management systems serves as a gateway to understanding business indicators."

Understanding the connection between knowledge management and strategic business planning is therefore important for the CIO. Participating in the development of knowledge management systems serves as a gateway to understanding business indicators. 

The Strategist CIO

To be able to produce IT solutions that are in line with business objectives, the CIO must be familiar with the company's business models, services, organizational structure, operating- and production processes. At the same time, he or she must be able to measure the performance of core processes and monitor key-performance indicators (KPI) indicators. The CIO must be familiar with the company's strategic IT architecture and even the strategic IT projects of competitor companies. Financial planning, budgeting, forecasting and reporting obligations play important roles in IT administration's operations and therefore are part of CIO’s work. (Shao, Zhen; Wang, Tienan; Feng, Yuqiang 2016). 

The strategically minded CIO should know the following strategy planning frameworks, such as:

• Value Chain Model

• Porter’s five forces 

• Red Oceans and Blue Oceans strategy 

Porter's value chain theory is a strategic tool that the CIO should know also. At the heart of value chain theory is thinking about adding value. A company is a series of value adding activities, each element of which together generates more value. (Zhenlong 2021). 

The CIO should be familiar with this value flow chain and how it can be influenced and measured. Later, we will come to the theme of performance and process improvement.  Zhenlong has studied the digital economy value stream chain, as described below (figure 1).

Figure 2: Diagram of digital value chain structure (Zhenlong 2021). 

Research referenced here shows that there are many complex elements in the digital economy. Zhenlong writes that the digital economy includes parent activities as shown in the following table. This is important if one is working in a company that produces digital services. Just one example here is Digital Services, which includes things like Personalized services of data information, Cloud Computing, Big Data Service, Security, Product Installation and Commissioning, Technical Consultant, Maintenance and Supply of Facilities and Equipment. (Zhenlong 2021). 

This value chain here and related activities serves only as an example of the change that digital transformation is causing in industries whose main market is in the digital economy. Of course, not every element is in use in every company offering digital products or services, but several of them will be. 

Table 1: The value chain activities of the digital economy value chain. 

From management point of view, it would require a very great ability from CIO to be able to absorb and understand more than the basics of the content of these technologies and activities. One’s ability to absorb has its limitations and there is not enough time to learn all of this in such a way that they can be applied. But CIO operating in digital service business needs to be familiar with the value chain. 

"The CIO needs to know the value stream of the company he/she is working for, whatever it is. "

As a result, the CIO must be able to identify the level of accuracy at which he/she operates with these kinds of themes. The person must be able to lead development, not necessarily develop everything personally. The same applies to other areas. The CIO needs to know the value stream of the company he/she is working for, whatever it is. 

CIO with Management Framework knowledge

In order to cooperate with the company's top management, the CIO must understand the management frameworks of the company and what the company's architecture is like as a whole. The business thinking CIO must understand how the company and organization are divided into business lines and business units, as well as different functions. 

Kemp, Schotter, and Witzel write about company structures in their book. Each business line and business unit have its own structure and processes. The diagram below shows how the business management framework is described as a general structure to describe an organization. That structure targets the implementation of a strategy to different parts of an organization.  

Diagram 1. Overarching management framework. (Kemp, J., Schotter, A., & Witzel, M. (2012). Management frameworks).

There are several different management frameworks, such as 5Ps and McKinsey 7S. The models are different, but in general they describe the organization's strategy, structure, processes, people, skills, performance and values. (Kemp, J., Schotter, A., & Witzel, M. 2012). 

So, the structure and processes of a company need to be known by CIO. If you are unfamiliar with the most important processes, you are unable to develop their operation.

It seems to me that these descriptions have a lot in common with Enterprise Architecture development methods (EA), which are familiar to IT architects, that usually work in the IS department. Through use of EA, these themes are also under the influence of the CIO. I would see that the CIO receives a lot of support to him/herself from understanding and acting on these management frameworks in conjunction with Enterprise Architecture (EA) methods. 

The Balanced Scorecard method allows strategic objectives to be divided into more detailed measures that can be set as departmental and team goals. In general, the benefits of these above or similar methods are seen as more effective operational planning and a better decision-making process. Other benefits include more efficient implementation of management and better time management, better information sharing, operational and financial control and reporting. (Kemp, J., Schotter, A., & Witzel, M. 2012). The CIO receives direct support for his or her capability requirements through the expertise of such methods. 

Performance improving CIO 

Process performance improving and Lean philosophy are things that the CIO needs to manage at least at basic level. Lean is broadly classified under the umbrella of process improvement and world class operations, which also includes other approaches like business process re-engineering and the theory of constraints. Marcel F. van Assen has studied the effects of using Lean's methods in improving process performance. He received evidence that Lean has a direct impact on improving processes, especially in improving customer-oriented processes. 

Van Assen points out that "Lean impacts customer-focused performance directly as a result of better knowledge of customer value and customer requirements and the adaptation of customer related variability, and indirectly through improved processes. As a result, a Lean organization is able to deliver customer value more efficiently and effectively". (Van Assen 2018). 

Understanding of Lean philosophy helps the CIO develop solutions for improving processes and measuring performance. 

-- 5.2.2023 Jani Peltomaa