From my perspective, GE CEO Jeffrey Immelt (CEO GE) was spot on in his talk at the Gartner Symposium IT XPO 2015 conference in Florida last week. Immelt suggested that his peers would be going to bed as CEOs of industrial companies… and waking up as CEOs of software companies. Either that, or they would become irrelevant.
Immelt and I are not alone in this outlook, and there’s plenty of data to support it. A recent PWC Digital IQ study found that 34% of executives responding felt that the CEO was the ultimate executive responsible for the companies’ digital enterprise investments. A recent Gartner study, meanwhile, reported that CEOs expected their digital revenues to roughly double from 2014 to 2019, increasing on average from 22% of revenues to 41%. Mark Raskino, a Vice President and Gartner Fellow, noted that 15% of the S&P 500 didn’t even exist 15 years ago.
So where does this new digital world leave CIOs? The question was top of mind at the Gartner ITXPO Symposium, particularly in presentations from Immelt and IBM CEO Ginni Rometty, who are both working to move their 100+ year old businesses into the digital age.
IBM: Disrupt or be disrupted
Rometty pointed out that companies like hers face a stark choice in this digital era: be a disruptor or be disrupted. But while Rometty acknowledged that cloud, mobile, and data are key focus areas of companies today and “going digital” is very important, she didn’t see digital as the destination but rather a requirement for future relevance. When everyone is digital, she asked, what is going be the new differentiator?
For IBM, the difference will be cognitive analytics. “Think about digital business married with digital intelligence and you get cognitive,” Rometty said. “This is a… cognitive era.”
Watson, IBM’s artificial intelligence system, is symbolic of the new reality. “What Watson does,” Rometty said, “is it understands information. It can reason, it can learn and then in the end, you can actually take those characteristics—thinking, learning—and then embed it in a business.” Watson can turn any company into a “thinking business,” she claimed.
In alignment with Rometty’s talk at ITXPO, IBM announced last week it is launching a new 2,000-person division, Cognitive Business Solutions, intended to advise companies on how to best use Watson to their advantage.
GE combines the physical and the digital
At GE, the secret to remaining relevant for another century is to marry the physical with the digital. As Immelt put it, “You wake up one day and realize that the locomotive you used to sell is a data center.” He explained that the locomotive can now supply information on maintenance, fuel efficiency, and performance, which can be used to improve fleet management and operational efficiency. For big railroads, Immelt noted, even marginal improvements in efficiency can translate into millions of dollars.
And locomotives are just the tip of the iceberg. GE’s big digital investment is Predix, an industrial analytics platform that’s cloud based, open, and designed to let customers write their own applications. The company plans to offer the GE Predix Cloud through an on-demand, pay-as-you-go pricing model, helping to position the company toward $15 billion in software revenue by 2020, according to Reuters.
Will CIOs become digital partners—or irrelevant?
This digital transformation won’t be easy for many companies, and Immelt closed his talk with a powerful message to the CIOs in the audience. “You’ve just been too passive for too long,” he warned. “You’re not conceptualizing how important you are in your company. You have to be an active leader demanding a seat at the table because your company needs you.”
Chris Curran, Chief Technologist at PWC, put the challenge in perspective, noting that 68% of technology expenditures now occur outside the control of the CIO. With that in mind, Curran advised CIOs to start thinking differently about talent, operating models, and learning. He noted the increasing role of STEM recruiting, crowdsourcing, and freelancing in the talent wars, and called out the importance of agile and DevOps, open source, and cross-functional teams as core to innovation in operating models. And he urged the audience to spend more time with incubators, VCs, universities, and labs to jumpstart their learning. The future role of the CIO is uncertain, Curran suggested, and remaining relevant will require different behaviors than in the past.
What’s the “I” in CIO?
I believe CIOs who understand the importance of digital must do everything they can to make it a reality in their companies. With that in mind, perhaps it’s time to update the go-forward definition of CIO from Chief Information Officer to something more relevant to our digital future. I like Chief Instigation Officer, Chief Investigation Officer, or perhaps best of all, Chief Innovation Officer.