We would all like to see things get back to normal—whatever normal means to you. It could be a job with a sense of security, a retirement fund that is achieving robust gains, or a house that is appreciating steadily year after year. But many observers doubt that the current downturn is just another business cycle adjustment. In a McKinsey Quarterly article published in March, Ian Davis, the worldwide managing director of McKinsey & Company, said we are witnessing a “restructuring of the economic order” and we are not likely to return to the normal of recent years. He called this the “new normal” that will be “shaped by a confluence of powerful forces—some arising directly from the financial crisis and some that were at work long before it began.”
This will have broad implications for CIOs and IT executives. “CIOs will have to overcome hurdles that have limited IT’s performance in recent years,” say Michael Chui, Par Edin and James Manyika in a just published McKinsey Quarterly article entitled “Time to Raise the CIO’s Game.” This will mean making the IT function “dramatically” more productive and “embracing disruptive technologies” that will help companies navigate this new landscape, the authors say.
It will also keep the spotlight on that overused “A” word: alignment. Alignment of IT and the business is typically the number 1 or 2 concern of CIOs in the Society of Information Management’s survey of its members. The McKinsey authors believe new organizational models are called for that allow joint decision-making between IT and the business. But some believe that before companies can tackle the issue of alignment, IT must become more effective. Two years ago Bain & Co. released research that found most businesses believed their IT departments were "ineffective," with projects that were over budget and past deadline.
While the problems between business and IT won’t vanish quickly, the McKinsey authors believe the new normal “brings more urgency to finding a solution—one that will demand better governance, as well a broader range of management skills among IT executives.” It is not enough to understand technology, IT leaders will need to be strong in strategy and finance, skilled communicators, and knowledgeable about the industries they serve. “Customers will wield more power than ever before,” the authors add, and since IT can provide the means for reaching them, it is crucial that IT managers throughout the organization understand their customers’ needs. It’s only through joint decision-making that IT can be knowledgeable enough to anticipate and solve customer problems.
In this new economic climate, IT will have to go far further than it already has in trimming costs from the budget by using technology to “transform cost structures and operating models” throughout the enterprise, the authors say. They believe self-funding investments will be necessary, along with productivity savings. Technology will continue to play a strong role in providing innovations that give companies a long-term competitive advantage and make business processes more efficient. Newer technologies, such as cloud computing and software-as-a-service, can help companies reduce large capital expenditures that can then help fund other strategic IT investments.
Doing more with less is a mantra that is unlikely to go away. CIOs that succeed in the new normal environment will need to be nimble, adaptive, innovative and very well versed in the needs of the business. They may, in fact, come from the business side.
What does your new normal look like?