Many organizations are experiencing a crisis of confidence in their information systems and in the chief information officers who lead them. General managers are tired of being told that information technology can create competitive advantage and enable business transformation. What they observe and experience are IS project failures, unrelenting hype about IT, and rising information processing costs. Chief executive officers often do not know how to evaluate the performance of the IS function or the contribution of the CIO.

Consequently, radical IS management prescriptions, such as outsourcing and downsizing, are being applied, and CIOs are even being fired.¹ Some of them are the very heroes of the IT profession whose photographs graced the covers of business magazines not long ago.

For several years, we have been researching IS leaders, conducting extensive interviews with CEOs and CIOs.² One study examined the factors that determined the relationships between CEOs and CIOs in fourteen organizations.³ A second focused on the survival of CIOs, and studied ten matched pairs of "surviving" and "nonsurviving" CIOs in different industries.⁴ In a third, ten CIOs who had been interviewed in a 1986 study were revisited in order to understand their experience and learning over a five-year period.⁵

All of these studies involved CIOs in leading corporations across the spectrum of industries. Face-to-face interviews with CIOs and CEOs explored not only their actions and experiences, but also their personal backgrounds, attitudes, and values, and the organizational contexts in which they operated. We supplemented the CIO interviews by administering psychometric tests. These and other studies gave us data on IS leadership in more than sixty organizations.

A problem or a strength?

CEOs appear to be polarized between those who see IT as a strategic resource, and those who see it merely as a cost

From this data, two patterns stand out. First, CEOs appear to be polarized between those who see IT as a strategic resource, and those who see it merely as a cost. Second, the CIO’s role and actions are crucial in ensuring that IT is deployed for strategic advantage, and that the IS function delivers value. The CIO can and must add value, or IS will be seen as a problem, instead of recognized as a strength. In the following three companies, drawn from our research, IS was seen as a problem:

The CIO can and must add value, or IS will be seen as a problem, instead of recognized as a strength

In a telecommunications company, the CEO revealed that only one thing kept him awake at night: he was never sure whether his CIO was doing a good job. He knew that IT mattered in his industry, and he found the IT strategy seductive, but delivery and benefits were elusive. The strategy centered on building a new state-of-the-art IT infrastructure that would, it was claimed, provide an efficient and flexible platform to meet both current and future business needs.

The CIO had spent his career in the IT industry and was an avid scanner of emerging technologies. Although the CEO was attracted by the promise of longer-term IS capability, he wanted adequate applications quickly to support a rapidly growing business. After wrestling with this dilemma for some time, he fired the CIO. Soon afterward, a successor CEO strongly reinforced the emphasis on rapid support for immediate needs and ensured that most of the IS policies of the past were now formally abandoned.

In a chemical company, the CIO believed fervently that IT could yield competitive advantage across the business, and he regularly created occasions to promulgate his message to the company’s management teams. Given his previous background as a general manager, the CIO’s beliefs were based more on a sense of business opportunities than on long familiarity with IT.

He was initially appointed and backed by a CEO who was himself a well-known visionary on the transformational capabilities of IT. The CIO led investment in a corporate-wide infrastructure well before many of the business units had adopted and owned such a vision. But the environment changed sharply when a successor CEO took office.

The new CEO saw IT as a source of cost that rarely delivered its promise. He was a persuasive and public orator on this topic, and the recent infrastructure investment provided ammunition for his views. Consequently, the CIO retired early, and his own successor found that even charting a middle course was extremely difficult in this management context.

In a fast-growing financial services company, IT had underpinned much of the aggressive marketing of recent years. The CIO enjoyed being a high-profile member of the executive team, and found it difficult to adjust when the company entered a period of consolidation with a new emphasis on cost and efficiency. In this environment, the CEO felt that teamwork at the top was particularly important, and was critical of the CIO’s behavior.

According to the CEO, the CIO stonewalled whenever the level of the IS budget was questioned, and resented questions being asked about his function’s contribution. Further, the CEO felt patronized when the CIO suggested that he could not appreciate the complexity of the issues involved. The relationship became unsustainable.

By contrast, the CIO and the IS function were perceived as adding value in the following companies:

Following privatization, a utility had to make the transition from monopoly supplier to one of an increasing number of rival providers competing on price and reliability. Faced with the need to make radical changes in the company’s culture, business processes, and cost structure, the CEO recognized IT’s enabling potential. He recruited a CIO who accepted the responsibility rapidly to deliver a new set of systems to underpin the new way of doing business.

Now the CEO sees the CIO as his principal ally in driving fundamental business change

Now the CEO sees the CIO as his principal ally in driving fundamental business change. A critical factor in the relationship is the CIO’s personal ability to contribute to business thinking, the vision for change, and the management of the change process. Interestingly, the CIO’s background is in IT and in quite different industry settings, yet his business acumen is clearly appreciated.

Good CIOs are valued for their business thinking and change management capabilities as much as for their IT knowledge

In an insurance company, the CIO was recently appointed CEO of the largest division in order to turn it around from loss to profit. He was judged to know and understand the economics of its business better than anyone because of the perspectives he gained from doing years of systems work there. He had also won credibility through his management of IS as a line of business.

In a retail group, which has now become an industry leader, the CEO recognized some years ago that he could not match entrenched rivals on the most obvious bases of competition. Instead, he identified the innovative use of IT as his best route to competitive advantage, and recruited a CIO with that in mind.

With the CEO’s backing, the CIO has helped take the company to a position of leadership in areas such as logistics and promotion management. The philosophy has been to deliver lean systems that can be implemented in a few months and expanded over time. The CEO now states publicly that the IS function has given the greatest value to the building of the business.

In the first three cases, we see some familiar experiences. One CEO finds it difficult to evaluate the performance of IS and the CIO’s contribution. Another is a born skeptic; he doesn’t trust stories of IT-based competitive advantage, and he thinks IT doesn’t apply to his industry. To him, the goal should be to minimize the cost of the function. At another company, the CIO believes that IT budgets should not be subject to the same disciplines as the rest of the business; the IS function is beyond challenge, and business executives must trust in the superior and specialist knowledge of IS professionals.

In the latter three cases, it is clear to everyone that IT is adding value and that the CIO’s contribution has been significant. These CEOs believe that IT can enable new and smarter ways of doing business, and that the CIO—and the IS function in general—should therefore be actively brought into the business team. Indeed, the CIOs are valued for their business thinking and change management capabilities as much as for their IT knowledge.

Collectively, these cases illustrate the general divide in perceptions of IT that we have characterized in Exhibit 1. We have found that the CIO’s ability to add value is the biggest single factor in determining whether the organization views IT as an asset or a liability.

Adding value

What is striking in the organizations we have studied is that nearly all have found it difficult, when challenged, formally to assess the value they get from the money that goes to IT. This is a well-documented problem.⁶ Returns are not the result of IT investments alone; there are many unanticipated costs and benefits; and measurement tools and methods are immature. In many organizations, this difficulty is compounded by an inability to point to any conspicuous IT successes, so that an atmosphere of uncertainty and unhappiness prevails.

In other organizations, however, top managers do recognize the difficulty of measuring IS performance, but are not so obsessed by the issue. They are collectively aware that at least some IT applications have been central to important business achievements. When legislative change recently created the opportunity for a new financial services product, for example, one company took a leadership position because the systems support necessary to launch its product was available well in advance of that of its rivals. Here the CIO’s added value was that he had focused, obsessively and continuously, on identifying and supporting the emerging business imperatives. He was able to judge when an IT application should be rolled out quickly.

Stories of how businesses have gained competitive advantage from IT have been important in stimulating management interest.⁷ In the chemical company mentioned earlier, the CIO delighted in relating such stories, but other executives routinely dismissed them as irrelevant to their industry. Meanwhile, a competitor was implementing a business strategy of differentiation by adapting an IT application that had been established in another industry. CIOs also add value by determining whether success stories from elsewhere are relevant to their business.

The strategy connection

A recurring concern of the last few years has been how to connect IT investment to business strategy. All too often, the connections are attempted through special exercises led by IS—or they are not made at all, because some missionary zealot drives through an investment unrelated to business direction. By contrast, the most successful approach we have seen is where there are no IT strategies, only business strategies.⁸ Here, the CIO adds value by building informed relationships with key executives, making sure that IT requirements become an integral component of business strategy.

We can compare two automotive companies. In one, the CIO is the trusted confidant of the CEO, and is automatically included in strategic deliberations; the need for IT applications emerges as business directives evolve. In the other, the CIO has found it difficult to establish relationships with a succession of top executives, and the IT "plans" are no more than a synthesis of new requests from other functions and systems work-in-progress.

A focus on delivery

The CIO must develop such an impressive record of delivery that IS performance drops off the management agenda

The CIO also adds value by achieving a visible track record of delivery. One CIO remarked, "You can’t sell the sizzle of IT if you don’t deliver." Broken promises of lead times and service availability produce cynicism. Managers begin to devise business plans and operations that do not rely on IT. The CIO must develop such an impressive record of delivery that IS performance drops off the management agenda.

Part of IS strategic planning involves identifying IT applications that can support business strategies or create new strategic options, and allocating scarce IS resources.⁹ Organizations that view IT as a liability typically possess "application portfolios" that appear to cover most of the business. By contrast, organizations that perceive IT as an asset often have strongly focused IT efforts, each one tackling an area of business weakness or leveraging a unique organizational capability. The CIO’s added value here is to resist the myriad proposals of how IT could be used in order to concentrate on areas where it should be used.

Attitude and expectation

The CEO’s attitude toward and vision for IT may influence the organization’s strategic orientation.¹⁰ A CEO who promotes the idea that IT is an enabler of business transformation is supporting a CIO’s efforts to target IT investment. More diverse application portfolios (and more limited achievements) are found where the CEO and top management see IT as having an administrative or support role—or where executives have mixed views of the scope of IT’s contribution. CIOs add value by working to achieve a shared and challenging vision of IT’s role among the executive team, a common conception of the nature (not the specifics) of IT’s potential contribution to the business.

Finally, it is our experience that CEOs and their companies are sharply divided in their expectations of the CIO. In some organizations, the CIO is positioned as a specialist functional manager, involved only in what are identified as IT-related issues. In others, the CIO is valued as a regular contributor to business thinking and operations.¹¹ Part of the CIO’s task, then, is to spot and create opportunities to make such contributions, even in contexts that have little or nothing to do with IT.

Exhibit 2 summarizes what we have consistently identified as the added value of CIOs in organizations that perceive IT as an asset. This added value makes the difference between failure and success.

How CIOs achieve added value (and how CEOs help)

What exactly does the CIO do to create the added value we have identified? And how can the CEO ensure that he or she has every chance of delivering it? In our research studies, we found that the following areas contributed to the CIO’s added value.

Business imperatives

Successful CIOs consistently invest their personal time in discussions that develop and test their vision of the business. They never relent

To achieve a focus on business imperatives, successful CIOs consistently invest their personal time in discussions that develop and test their vision of the business. They never relent. They look for the one or two business themes that capture strategic intent and drive IS development.

Formal statements of both business goals and strategy may be taken as starting points, but they are not seen as definitive inputs to IS activity. Such statements can never be rich enough to capture the full essence of critical business needs as they emerge. It is only through dialogue with the CEO and other executives that the CIO can tease out the motivations, meanings, and priorities; know the mind of the business; sense the impending changes; and maintain the relevance and timeliness of the IS effort. Without such insight from the CIO, the IS function is like a supertanker with a broken radio—lurching ponderously in response to ambiguous semaphore messages, more likely to prove an expensive liability than a company asset.

The IS function of a large bank made a huge investment in a global communications network because "the bank has said it wants to be a global competitor." The bank’s CIO soon found that business colleagues did not share his interpretation of the strategic rhetoric, and hence did not value the facilities that the network provided. "They did not believe in it; they did not understand," he complained. After a high-level audit by consultants, he lost his job.

Two actions by the CEO are important in creating this component of added value. The first, and most obvious, is to make the CIO a true member of the top management team. The CIO who attends key executive meetings gains both a new level of understanding of the business, and enhanced access to fellow executives who can provide the next level of understanding. Note that we are not prescribing any particular reporting structure for the CIO; in our research, we have consistently found that team membership, rather than reporting structure, is critical.

The second and related action for the CEO is to ensure that, at least once or twice a year, this top management team takes time out to debate the business direction. Executive team retreats and "away days" can be instrumental in educating the CIO, as well as serving their primary purpose of challenging the continuing validity of strategic thinking.

Interpreting stories

Successful CIOs tend to be skilled analysts, natural tutors, good business theorists, and systems thinkers

CIOs who add value through their interpretation of external IT success stories tend to be skilled analysts and natural tutors. They avoid the perils of making naive suggestions about importing a technology or application from outside, or advocating what may be well-founded ideas in a proprietorial and offensive style. Good business theorists and systems thinkers, they can capture the kernel of an exemplar case study application and identify its potential relevance to the business, whether it relates to an existing need or creates a new strategic option. They communicate with fellow executives by translating new ideas into pictures and understandable benefits. And they draw satisfaction from facilitating the learning of others, unconcerned about who ends up claiming to have originated an idea.

Executive relationships

A CIO’s propensity for tutoring is one of the keys to establishing and maintaining executive relationships. It is easy for CIOs who have built their careers in IS to spend their time with and identify with others in IS, managing within—and perpetuating the specialist values of—the function. Surprisingly, we find that CIOs who were formerly general managers are equally fallible.

Some succumb to the temptation to avoid the hard work of building substantive relationships with their peers. They look for visible but shallow initiatives, such as internal newsletters, presentations, and IT exhibitions, to make a careerist splash. Others become ardent converts who now know exactly how IT should be deployed in all parts of the business, even if their peers do not share their enthusiasm. In all these cases, the IS function ends up isolated from the rest of the business and unable to implement initiatives that require wholehearted collaboration from senior executives.

Whatever their backgrounds, CIOs who succeed in adding value recognize and act on the importance of executive relationships. They view alliance building as a vital component of their job. Most often, they work at it through informal one-to-one meetings—a soft approach, rather than a formal one—and seek out and grasp opportunities as they arise.

"I fought the IS corner, to prove that problems were not of our making, and I generated enemies ...

One CIO commented, "It is never too much trouble to explain when a business colleague asks for help. It is my job to make the technology accessible in the eyes of the management team." Another CIO, who had been fired by his last company, explained how his approach has changed: "In my previous company, I now realize that I constructed win-lose situations with business peers. I was determined to fight the IS corner, to prove that problems were not of our making, and I generated enemies, not allies. Today I work hard at constructing win-win situations that secure the relationships I need."

" ... Now I work hard at constructing win-win situations to secure the relationships I need"

Performance record

CEOs help to enable these relationships by making the CIO a member of the management team, as we have already urged. This one action greatly increases both the number and the quality of relationship-building opportunities available to the CIO. We have also found that CEOs can set powerful examples through their own two-way relationships with CIOs.

Some CIOs spend most of their time establishing and communicating a strong IS performance record. Unfortunately, it often avails them little, serving only to ensure that they have no time to deliver in other areas. Overseeing what may be independently rated as highly efficient data centers has not saved CIOs from being fired, or their empires from being outsourced. In our experience, successful CIOs do care about and achieve this component of added value, but they spend little of their own time in the process. Rather, they set up and monitor a regime that delivers, with such characteristic elements as:

• Selection of subordinates who are outstandingly good at operations management, often better than the CIOs themselves.
• Procedures that require feedback to the business on all actions taken in response to any request or complaint.
• Procedures that require feedback from the business on most actions taken by IS.
• Communication of service and business satisfaction data, with the CIO closely and visibly monitoring results, and getting personally involved early if things start to go wrong.

Awards from peers in the IT community or even the CEO’s personal sympathy will count for nothing if users are unhappy

The CEO can help stimulate such a regime by making clear to the CIO that the perceptions of users in the business are the only relevant performance criteria. Awards from peers in the IT community or even the CEO’s personal sympathy will count for nothing if users are unhappy. It is also helpful if the CEO ensures that the IS function is fully integrated into any company performance initiative, such as a total quality management program, so that IS is perceived as neither forgotten nor special.

Concentration of effort

We have seen many CIOs who agree to or generate IS applications portfolios that proliferate across the business. Their (forlorn) hope is that this will be a means of satisfying everyone. In practice, they end up satisfying no one. CIOs who add value work hard to ensure that the business concentrates the IS development effort, investing solely in projects that are integral to business strategy. This is the area that most directly adds value; it represents the ultimate payoff enabled by several other components of the CIO’s work. In our experience, the following factors are associated with success:

Sponsorship by the business. Although the CIO takes responsibility for IS-related costs, he or she insists that all investment cases be presented for approval to business executives, who relate them to stated business strategy or accepted business imperatives and agree to be held accountable for the target benefits. Proposals that achieve "useful" rather than "strategic" benefits are strongly challenged as potentially costly diversions.

Maximum elapsed time. The CIO mandates a maximum elapsed time (six or nine months) within which any project must deliver new functions and benefits to the business. This time limit discourages huge monolithic projects, which consistently emerge as disaster stories.

The 80/20 rule. IS and the business agree that, faced with an "impossible time scale," they will identify and implement the 20 percent of the requirement that delivers 80 percent of the benefit. Again, it is the inclusion of the "nice to have" features that turns potentially sound projects into looming catastrophes.

The rewards of concentration can be great. One large multinational recently benchmarked its leading competitor and found its own IT expense was more than double its rival’s. But by targeting and limiting its resources, the competitor still managed to outperform the multinational on the vital dimensions of time-to-market and manufacturing productivity.

CEOs can foster this kind of approach by, first, demanding that projects be appraised against strategic criteria rather than by simplistic cost-benefit analysis, and, second, ensuring that projects are managed as business schemes rather than as IS developments. All too often, in our experience, CEOs still do exactly the opposite.

Shared vision

Working to achieve a shared and challenging vision of the role of IT within the executive team is another value-adding activity that requires much of the CIO’s personal time. In the most successful organizations we encountered, this shared vision positions IT as an agent of business transformation—a technology that is applied to achieve radical rather than incremental improvement in the business. Such a vision is the precursor and enabler of the concentrated IS development effort described above.

In the short term, a CIO can operate with the "sponsorship" of only a few executives who share this vision—perhaps the CEO alone. But longer-term success requires the vision to be shared across the whole executive team. Effective CIOs recognize this, and can provide detailed profiles of the understanding and attitude of every key executive in their business. They have clear plans tailored to each individual for obtaining the desired buy-in to the vision.

"The day you stop working on developing a shared vision for IT, you are gone"

The plans may include formal events such as application demonstrations or visits from appropriate gurus, but are just as likely to be centered on quality one-on-one contact between the CIO and each executive over many months. Realizing that attitudes, visions, and values seldom change quickly, these CIOs are prepared to find whatever time and resources are necessary. The CIO of a large manufacturing company went so far as to bring in a psychologist to help him think through how to work with one key executive. Another remarked, "The day you stop working on developing a shared vision for IT, you are gone."

Business contribution

Finally, CIOs who add value make important general contributions to business thinking and business operations. We have cited the example of the CEO whose principal ally in driving fundamental business change is his CIO. Why should CEOs expect such a contribution? It is clearly not sensible to expect the CIO to have better marketing insights than the marketing director, or sharper ideas for improving the manufacturing process than the production director. But the nature of IT is such that the CIO gets a view across the whole business; the job requires the CIO to have a curiosity about "how things work."

CIOs are well placed to understand the connections and interrelationships between functions and organizational units, and it is by improving these linkages that the greatest opportunities for business advantage often occur. Thus we have seen CIOs become highly valued members of taskforces, charged with improving logistics, reducing the time between customer order and delivery, and taking significant cost out of the business without damaging its competitive capability. It is in the CEO’s interest to ensure that the CIO is a member of such taskforces and working groups: the CIO can contribute a business-wide perspective that is free of allegiance to any of the historical power bases within the company.

From our descriptions of how CIOs deliver added value, it will be obvious that many of the elements overlap and connect. Exhibit 3 demonstrates these connections. CIOs who have built excellent executive relationships, for example, are better able to focus on business imperatives, achieve a shared vision of the role of IT, link that focus and vision into a concentrated IS development effort—and, through those actions, sustain the excellent relationships. Because of the interdependencies, CIOs are likely to deliver on all or none of these added-value elements. This is the primary explanation for the polarity between CEO views of the contribution of IS to their businesses.

As we pointed out earlier, some CEOs see outsourcing as the answer to their dissatisfaction with IS. This outsourcing may include the CIO role and its incumbent.¹² Our added-value framework highlights the implications of such a step.

Outsourcing the CIO role will ensure that IS remains a liability, albeit possibly a smaller one

It is difficult to see how an outsider could deliver any of the elements of added value that we have described. Even the achievement of a good performance record through outsourcing involves substantial management from within the organization and continuous attention to its perception of IS performance. More obviously, building executive relationships and a shared vision, which are so fundamental, cannot be subcontracted. To outsource the CIO role will ensure that IS remains a liability, albeit possibly a smaller one.

Qualities of the CIO who adds value

Through our research we have accumulated extensive data on CIOs who succeed in adding value, including their own descriptions of what they do and the abilities they draw on; their CEOs’ perceptions of the qualities and experience they look for; and behavioral data from psychometric tests we have administered to the CIOs (the Myers Briggs Psychological Preference Test and Belbin’s team-role self-perception inventory).¹³ Collectively, these data provide a consistent profile of the CIOs who add value (see Exhibit 4).

Integrity

For many CEOs, the first requirement of a CIO is integrity. This might be considered an essential quality of any executive, but where CIOs are concerned, it relates to some specific anxieties. CEOs can feel particularly vulnerable in the area of IT, aware of how difficult it is to assess project status, technology risk, and functional performance. They know that CIOs can use their specialist knowledge and language to camouflage problems, advance or defend their own empires and budgets, and pursue their own interests.

CEOs value CIOs who will "report impending problems as quickly and openly as they report triumphs"

Integrity is revealed through behavior, and the major concerns are business loyalty and openness. The CEO needs to be confident that the CIO’s first loyalty is to the business as a whole, and that every IT initiative will be driven by business imperatives, not technology aggrandizement. And because IT activity is opaque, CEOs value CIOs who will, as one CEO stated, "report impending problems as quickly and openly as they report triumphs."

Motivation

Psychometric data show that successful CIOs are strongly goal-oriented. They derive great satisfaction from knowing that they have influenced the course of the business, demonstrating stamina and steely determination in pursuit of goals related to business change. They are also fascinated by new ideas, and usually devote considerable time to scanning and networking beyond their own company and industry. They think instinctively of business as a set of systems whose current operations must be understood so that superior systems can be devised, analyzed, and successfully applied.

The combination of these elements is captured in the comments of one CIO: "I am not interested in running a data processing department; I want to transform this business." This was not a bid for the CEO’s job, but a perception of his mission as CIO.

Competencies

Nevertheless, such ambitions may seem threatening and inappropriate in a CIO, and we have found that some of those who are hard drivers for business change do indeed accumulate powerful enemies. This situation becomes counterproductive and often results in the CIO’s demise.

The successful CIO seeks to be the facilitator rather than the leader of change. He wants the satisfaction of achievement, but does not demand public credit

What saves the CIO quoted above is that he seeks to be the facilitator rather than the formal leader of change. He wants the satisfaction of achievement, but does not demand public credit. In short, he has compensating competencies, the third element in Exhibit 4. Such CIOs are adept at working through others, consulting and involving their peers, and constructing those "win-win situations."

Linked to this competency is another one: communicative ability. We are not referring to oratory, although some CIOs are indeed excellent speech makers. The key requirement is communication in the literal sense; these CIOs are able to absorb and use the language of production or marketing and show understanding of and sensitivity to their colleagues’ concerns. Allied to a profound knowledge of IT, this communicative capability allows them to demystify any aspect of IT. It is the combination of motivation and competencies that allows the goal-hungry CIO to operate effectively, an iron fist in a velvet glove.

Experience

Value-adding CIOs are typically bridge-builders and facilitators rather than forceful managers

Perhaps the most surprising element of the profile comes under the heading of experience. The value-adding CIOs in our research have invariably come from the IS function; indeed, most have never had a job outside it. The research shows that it is those who have been transplanted from other areas of the business who have struggled, uncomfortable with the technology, unclear of their careers, and typically equipped to operate as forceful managers rather than as bridge-builders and facilitators.

It seems that a lengthy apprenticeship in the IS function, particularly in systems analysis and development, is the appropriate background for a CIO. The CIO will then be accustomed to operating by consent from a function that is not a traditional power base, and he or she will have a mission to explain and a focus on systemic business change.

Some advice for the CEO

"With my previous CEO," one ex-CIO said ruefully to us, "anything was possible; with his successor, nothing was possible." The statement may be extreme, but the sentiment is widespread. CIOs who are intrinsically capable of adding value in the ways we have described know very well that the CEO’s position on certain issues is critical to their own ability to achieve. They believe that IT has evolved to the point where leadership must come from executive line management.¹⁴ Exhibit 5 summarizes the requests that value-adding CIOs would make to CEOs. It is also the advice we now give to CEOs on their behalf.

First, you are in the business of change, particularly in the turbulent 1990s. Position IT and the CIO as agents of change. See them as part of the solution, not part of the problem. Involve the CIO early in the debate about the nature of the change that is required and the options that are available—not after the new way forward has already been defined.

Second, make sure you and your organization focus on how and where the application of IT can be effective. The key idea is to exploit IT within initiatives that deliver some element of business transformation as well as substantial benefits. Do not think of IT as a cost displacement technology, which may contribute, after much effort, some incremental gains in efficiency. The major gains come from applying IT to "doing the right things," not to "doing things right."

So, when appraising IT-related investments, apply the same market-oriented criteria that you would use for investments in new production capacity, distribution channels, and so forth. One CEO remarked: "Ask the question: Does this IT proposal make business sense?"

Third, use the personal time you give to IT to help institutionalize business values across the organization. The CEO of a chemicals group transformed attitudes to IT within his corporation by consistently questioning business executives about how IT featured in their business strategies.

Lead by example. Focus on establishing a business context and language that is conducive to IT exploitation. Get in place the regimes required for achieving excellent IS performance, identifying strategic IS developments, and delivering them fast. Value for money will follow without your having continually to review IS projects and budgets or preside over painful post-mortems.

Whatever the organization structure and reporting lines, the CIO needs to be, de facto, part of the top management team

Fourth, build an executive team that includes an appropriately qualified CIO. Whatever the organization structure and reporting lines, the CIO needs to be, de facto, part of the top management group. And the group needs to operate as a real team. It is difficult to draw out and do justice to new business thinking unless there is a top-level culture in which executives regularly meet—formally and informally—to discuss potentially challenging and far-reaching ideas in an atmosphere of mutual trust.

Finally, manage IT as integral to the business, not as an adjunct. If you have special steering committees for putting the business into IT, disband them. If the CIO is a full member of the business team, that team can deal with issues as they emerge—and to much better effect. Similarly, whenever projects, taskforces, and special initiatives arise, involve the CIO and ensure that a systems and IS perspective is brought to bear on devising solutions to business problems.

The bottom line

We have described how CEOs tend to be polarized in their view of the value for money delivered by IT. In recent years, those organizations that view IT as a liability have often resorted to outsourcing the IS function. This action may reduce IT costs, at least in the short term, but it does nothing to change the dominant variable: the value being delivered by IT.

Organizations where IT is viewed as an asset, where it plays a role in transforming the business, have a quite different IT environment, as we have detailed. This environment is not achieved by outsourcing. It is achieved primarily by the actions and qualities of a value-adding CIO, irrespective of whether the bulk of IT activity is outsourced, or remains in-house.

The critical dependency for the CIO is the attitude and influence of the CEO

But the critical dependency for the CIO is the attitude and influence of the CEO. The CEO can help by inspiring a receptive and constructive climate for IT across the organization. Alternatively, the CEO can, through a personal example of hostility or detachment, inhibit any worthwhile IT achievements. Ultimately, you get what you deserve from IT.