The Formidable Challenge Facing the Next-Gen Electronics CIO
I could lead off making a point about the amount of change underway in electronics organizations, but I’m not going to tell you what you already know. Instead, I’d prefer to help you understand the changes going on specifically in the CIO role. This is a long and detailed post with plenty of validation built in.
During the IBM Institute for Business Value 19th C-Suite Study, we asked CIOs about where they needed to increase their effectiveness. This is the full picture that we’ll decompose below.
IT leaders expect to develop new competencies in the next 2–3 years, dramatically improving their effectiveness across the board but with heavy concentrations in new areas. They’ll need to lift the skills in their organizations by at least 30 perentage points across the board as they evolve into new offerings, solutions and services — in addition to the products they currently support.
The Highest Hills: Two Big Hairy Challenges
The two areas where CIOs felt the greatest need to lift up their organizations are in emerging capabilities — namely enabling the extraction of insight and intelligence from data (going from 35% to 74%) and building a digital platform for the enterprise’s ecosystem of partners and customers (going from 27% to 68%).
In the case of insight extraction, responding CIOs felt they needed to improve their capabilities 100%. It’s important to keep this in mind as we review the changes in groups. It’s impossible to talk about the extraction and applicaton of insight without talking about cognitive technology.
Across the C-suite our research indicates that 73% of electronics executives expect AI to have an impact on their competitive position in the next 2–3 years and 41% of them expect that impact to be significant.(1) Then 65% expect to influence their revenue model.(2) And 58% expect it to influence their capital investments.(3) It’s clear, cognitive has a sizable role to play and the smart CIO is getting out in fornt of that demand now .
Data Avalanche, Meet Underprepared Systems
This is to be expected. There’s a continuous data avalanche driven by IoT sensors, video, internal and external data that is most definitely real. Consider a single sensor, delivering data back every 10 seconds. 6x60x24x7x4…241,920 pings per sensor per month — for an only “mildly active” sensor. And a factory has thousands of them. For an IoT product — say a home automation system with maybe 15 sensors, pinging every minute and a company with 500k customers using these systems, that amounts to 3e11 or 111,110,000,100,012 — monthly. And that’s the just the data for a single product line. And most of that data is the sensor sending back a signal saying, “hey, i’m just hanging out, nothing doing, here’s a reading.” Most IT systems weren’t designed to handle this — creating significant fragility in the infrastructure.
With this in mind, CIOs noted a desire to become more effective at updating legacy IT systems, growing from 51% to 73%. Those systems just weren’t ready to handle this volume or velocity. They aren’t tuned to adjudicate conflicting data, or be able to extract critical data and process it midstream and initiate alerts to appropriate parties.
It’s an unprecedented scale. And one that only promises to grow as IoT continues its steady march into every device, machine and automobile, traffic light, building and even clothing…(not kidding, see image below: which is an IoT enabled suit for assisted mobility in aging. Everything will be “smart” and that means even more data.)
That’s why executing IT operations is also on the CIO improvement list, increasing 23 percentage points from 48% to 71%. This is the core work of IT, and CIO’s still indicated they need to be half again as effective at it.
The Platform Challenge (Part 1)
Everyone is talking about platforms. Why? Platforms are transforming industry design. In many categories there is intense pressure on margins due to competition. Differentiation alternatives that rely heavily on features and devices are being challenged. Yet, platforms continue to grow — because they have the ratios everyone wants — an ability to scale easily, with fewer resources needed and large customization potential. So lot of companies are scrambling to put one in place, often choosing to bring the superplatforms into their ecosystems — for brand names’ sake.
Yet, you should be asking about some strategic considerations — who will own the data? Who can use that data and for what purpose? Where is all that learning based on your data going?
Platforms are bringing new opportunities into the industry. Voice’s rapid ascension is clear, with vision and gesture not far behind. These modalities bring changing market expectations and financial dynamics. They capture value creation apart from electronics companies, redirecting it toward the platforms where machine learning and AI are baked into the customer interface.
What’s more important is that in letting that data leave your organization, there’s also a potential for loss of learning across the organization. The experience an organization gains when it implements its own machine learning processes and platform is sizable — because knowledge gained in one area can influence supply chain, manufacturing, sales processes and messaging, resource planning and demand management.
That’s why digital reinvention is so important. (Get the whitepaper here). Digital reinvention focuses on asking what you want, not what you have. Consider data. When you only rely on the data you have you miss tons of available data. Most of what you actually need is external to your operation and that why creating a robust ecosystem and a group of data partners is mission critical. Most companies are so worried about the IoT data they’re missing the forest for the trees in defining how they’ll use that data. Look at the chart below for a much broader way to view the data universe.
Winning Friends and Influencing Others (Namely the Business)
CIOs felt strongly about the need to collaborate with peers on strategy execution — the second strongest capability of the 9. Krishna Nathan, EVP and CIO at S&P Global CIO notes:
“IT projects often seem to fail while the business says their projects always succeed, so that’s why I now make every project a business project.”
He’s only half joking. Lately, the CIO role seems to have splintered into multiple skinnier and sexier roles — CISOs, CTOs, CDOs — leaving CIOs with aging architecture and policies they implement but have been built by others. At the same time, the business is implementing bits and bobs of shadow IT all over the place (bots for everyone!). Yet, when something goes wrong, a system fails or a data breach happens, the CIO is the first call. Improved collaboration across the C-suite is needed. CIOs want to take the effectiveness of their organization up by 2/3 — going from 45% to 74%. Perhaps slightly more difficult is driving business and technology integration, so that they function as a joint cross-functional team. Our fearless CIOs reported wanting performance to nearly double — from 36% to 70%.
Doing this means much more proactivity on bringing ideas and opportunities to the business, while increasing the ability to separate signal from noise in data; bringing machine learning models to the fore and providing the right platforms, dashboards, insights and solution bundling. Working alongside the business in design processes requires the CIO to have a “yes” orientation. That can be difficult when she is responsible for keeping current IT operating smoothly and safely. Changes introduce risk but the CIO must put on her risk management cape and boldly go to new places with the business team. Being superheroes as a team is better than not being a player at all.
Privacy, Security and Other “Minor Challenges”
Cybersecurity is at the top of everyone’s list as GDPR begins what will grow to a global push for more privacy and better protection. CIOs clearly placed the greatest priority on it, even if they’re more confident in their team’s capabilities to manage it effectively.
However, IT and IoT security can be very different things. While there’s a great deal of security protocols and measures to address traditional IT, IoT is very nascent in its protocols as evidenced from this chart in a new IBM IBV Benchmark Insight report: Internet of threats: Securing the Internet of Things for industrial and utility companies. Part of the challenge with IoT is on the user side — where most devices stil retain their largely insecure default settings. But the bigger challenge is that the enterprise operational threat is not well addressed either. As we wrote in another report on IoT security, Preparing for planet-scale security: Getting it right in electronics:
Porous networks and lax users offer tantalizing access for hackers. Although most security spending is at the enterprise level, a shift
is needed to secure IoT applications and provide improved governance and accountability. Electronics companies must create secure environments that safely collect, consume, share and store data on their networks. But they also must go beyond devices and consumers to close holes to factory, ecosystem and partner networks.
As stated in the report, “IoT security doesn’t exist in a vacuum.” Getting this right requires new procedures, well defined organizational ownership and dramatically improved governance. It’s an enterprise-wide initiative, with employee and executive accountability. While insurance is currently the most common method of risk prevention (45%), it can’t be the only defense. Endpoint management is critical. Again to quote the report:
Understand each endpoint, what it does and who it talks to. Every IoT endpoint must be identified and profiled, added to an asset inventory and monitored. Define clear SLAs where there is reliance on partners and system integrators. Form a cross-functional security team made up of IT security, engineering, operations and a control system vendor.
Here are the places IoT places most, across electronics, based on the 269 CISO, CDO and CIO respondents to IBV Benchmark research:
And let’s compare that to the greatest perceived threats as ranked by the same audience. Data leakage and unauthorized access lead the threat pack.
There’s a lot to unpack from these three reports and we will cover more of it in subsequent posts. For now, this is and will remain the leading CIO priority for the foreseeable future.
Do You Have the Skills?
By all accounts, IT spend in an electronics company is about 4% of revenue. It’s dwarfed by spending in manufacturing and distribution, and often, even marketing. That doesn’t mean it shouldn’t be extremely effective. And given the scrutiny every dollar spent is under, make sure it’s going to skills for the future. In order for a CIO to do what he needs to do, with the limited budget she has, she needs to find and develop talent focused especially on these new skill sets. Data scientists, platform architects, IoT experts, security specialists and engineers; the list goes on.
What’s more, the CIO will have the CEO staring directly over her shoulder on this one. In the 2017 C-Suite the business accelerator CEOs said was most important: investing in people — finishing with 55%, the only driver over 50%. So while it finishes 8th out of the 9 factors assessed, it’s still directly on the critical path.
Clearly, there’s a lot on the electronics CIO’s plate. We understand that better than most. Step one is prioritization. Take a look at each of the subject areas and determine what your priorities are. I’ve organized them into the groups so it makes it a little easier to address them at the same time.
(unless otherwise noted, analysis is by the author)
- question 2ba, unpublished data, Incumbent Strike Back, 2017 C-Suite Study, IBM Institute for Business Value
- question 2bb, unpublished data, Incumbent Strike Back, 2017 C-Suite Study, IBM Institute for Business Value
- question 2bd, unpublished data, Incumbent Strike Back, 2017 C-Suite Study, IBM Institute for Business Value