The 2014 Cio Agenda

4 Executive summary
10 Welcome to the third era of enterprise IT

20 Create powerful digital leadership
26 Renovate the core
36 Build bimodal capability
42 Conclusion: Craft your digital legacy
44 A ppendix: Case studies, additional data, demographics
65 Further reading
2014 No. 1
Taming the Digital
Dragon: The 2014
CIO Agenda
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1 Taming the Digital Dragon: The 2014 CIO Agenda
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2 Gartner Executive Programs
CIOs are facing all the challenges they have for many years,
plus a torrent of digital opportunities and threats. Digitalization
raises questions about strategy, leadership, structure, talent,
nancing and almost everything else.
FOREWORD
This report addresses the question, How are leading CIOs adapting to the additional challenge the
evolving digital world represents?
Taming the Digital Dragon: The 2014 CIO Agenda was written by members of the CIO & executive
leadership research group, led by Dave Aron (vice president and Gartner Fellow), assisted by Graham
Waller (vice president, executive partner).
We would like to thank the many organizations and individuals that generously contributed their insights
and experiences to the research, including:
The 2,339 CIOs who responded to this years survey, representing more than $300 billion in CIO IT
budgets in 77 countries.
The contributors to our interviews and case studies: Luis Uguina, BBVA (Spain); Kevin Gallagher,
Channel 4 (U.K.); John Hagel, Deloitte LLP Center for the Edge (U.S.); George Labelle, IPC (U.S.);
Larry Matias, Jollibee Foods (Philippines); Gianni Leone, Miroglio Group (Italy); Krischa Winright,
Priority Health (U.S.); Dr. Hee Hwang, Seoul National University Bundang Hospital (South Korea);
Mike Yorwerth, Tesco (U.K.); Jos Tam, Universidad Tecnologico de Monterrey (Mexico); and Baron
Concors, Yum Brands (U.S.).
Other Gartner colleagues: John Adey, Heminder Ahluwalia, Nicky Bassett, Militza Basualdo, Peter
Bogaert, Allison Chaffee, Terick Chiu, Youn Choi, Jeffrey Cole, Marco Delfno, Eberhard Elbs, Jan
Eriksson, Arnold Gutmann, Kimberly Harris-Ferrante, Rob Heselev, Chris Howard, Renske Jansen,
Jim Kamp, Kasper Kjaergaard, Kazunari Konishi, Jon Krause, Cristina Lazaro, Thierry Kuperman Le
Bihan, Poh-Ling Lee, Ian Marriott, Marc Mergen, Ritsuko Miyamoto, Hans Moonen, David Norton,
Pierluigi Piva, John Rath-Wilson, Jose Ruggero, David Scemama, David Mitchell Smith, Cristiane
Tarricone, Alastair Tipple, Cristina Vila, Kevin Zhou and the entire executive client manager team.
Other members of the CIO & executive leadership research group: Heather Colella, Richard Hunter,
Jorge Lopez, Leigh McMullen, Patrick Meehan and Andrew Rowsell-Jones.
Dave Aron Graham Waller
EXECUTIVE SUMMARY
In the IT industry, we have become inured and immune to new
buzzwords and messages about how everything is changing.
But this time it really is. All industries in all geographies are
undergoing radical digital disruption a digital dragon that is
potentially very powerful if tamed but a destructive force if not.
This is both a CIOs dream come true and a career-changing
leadership challenge.
Welcome to the third era of enterprise IT
2014 will be a year of dual goals: responding to ongoing needs for efciency and growth, but also
shifting to exploit a fundamentally different, digital paradigm. Ignoring either of these is not an option.
The behaviors mastered in the second era of enterprise IT are potential hindrances to exploiting
digitalization (see gure opposite). New capabilities must be developed. Fifty-one percent of CIOs are
concerned that the digital torrent is coming faster than they can cope, and 42% dont feel they have
the talent needed to face this future.
In 2014, CIOs face the challenge of bridging the second and third eras with a three-part response. They
have to build digital leadership and bimodal capability, while renovating the core of IT infrastructure and
capability for the digital future (see gure on page 6).
Adapt Ideate
Create
Engage Offer
Monetize
Focus
IT craftsmanship
Technology
Programming,
systems management
Isolated; disengaged
internally and externally
Sporadic automation and
innovation; frequent issues
IT industrialization
We are here
Processes
IT management,
service management
Treat colleagues as
customers; unengaged
with external customers
Services and solutions;
efficiency and effectiveness
Digitalization
Business models
Digital leadership
Treat colleagues
as partners; engaged
Digital business innovation;
new types of value
Capabilities
Engagement
Outputs and
outcomes
We are entering the third era of enterprise IT
EXECUTIVE SUMMARY
Create powerful digital leadership
Most businesses have established IT leadership, strategy and governance but have a vacuum in
digital leadership. To exploit digital opportunities and ensure that the core of IT services is ready,
there must be clear digital leadership, strategy and governance, and all business executives must
become digitally savvy.
There is a fast-rising trend to hire chief digital ofcers, who are more likely to come from roles in the
rest of the business than from IT. Whatever their previous roles, digital leadership must be clear and
powerful. Clarifying the coverage and scope of digital leadership, and integration with enterprise IT
leadership, should be high on every CIOs agenda in 2014.
But individual digital leaders are not enough all business leaders must become digital leaders. The
2014 CIO Survey found that the CEOs digital savvy is one of the best indicators of IT and business
performance. To raise digital awareness and digital savvy in your company or public-sector agency,
consider interventions like digital nonexecutive directors, technology showcases, hackathons
(intensive periods for discovering and creating innovations) and reverse mentoring.
IT industrialization Digitalization
Create powerful
digital leadership
Build bimodal
capability
Renovate
the core
Clear digital roles
Savvy digital executives
Digital vision and digital legacy
Agile development
Multidisciplinary teams
Innovative partnerships
New risk/speed trade-offs
Cloud/Web-scale infrastructure
Information
Talent
Sourcing
A three-part response is needed to tame the digital dragon
Renovate the core
Top technology priorities for 2014 reveal two complementary goals: renovating the core of IT and
exploiting new technologies and trends. Exploiting the new speaks for itself. Meanwhile, the core of
enterprise IT infrastructure, applications such as ERP, information and sourcing was built for the IT
past and needs to be renovated for the digital future.
The renovations include moving to a more loosely coupled postmodern-ERP paradigm, deploying
public and private clouds, creating the information architecture and capabilities to exploit big
data, and augmenting conventional sourcing with more innovation, including sourcing from, and
partnering with, smaller and less mature enterprises (see gure below). The talent needed to execute
on renovation includes different skills, such as digital design, data science, digital anthropology,
startup skills and agile development.
Postmodern
ERP/apps
Hybrid
cloud
More-diverse
partnerships
Next-
generation
information
capabilities
Increased adoption and
integration of public and
private IaaS, PaaS, SaaS
and BPaaS
Volume/velocity/variety;
in-memory databases;
advanced analytics;
unstructured and multimedia data
Use of SMBs/startups;
new categories of partner
(e.g., mobile, design,
analytics)
More-federated ERP,
multi-enterprise solutions,
cloud components, mobile
support, embedded
analytics
Reimagine the core
EXECUTIVE SUMMARY
Build bimodal capability
There is an inherent tension between doing IT right and doing IT fast, doing IT safely and doing IT
innovatively, working the plan and adapting. The second era of enterprise IT has been all about
planning IT right, doing IT right, being predictable and creating value while maximizing control and
minimizing risk in short, about running IT like a business within a business.
To capture digital opportunities, CIOs need to deal with speed, innovation and uncertainty. This requires
operating two modes of enterprise IT: conventional and nonlinear.
Those CIOs who have moved early on digitalization, learned the lessons and gotten the scars, have
often extended their second-era restructuring to a more comprehensive change. In these cases, the
grow-and-change function has become a more full-edged digital development function, often reporting
in a straight line to P&L/business unit owners, with a dotted line to IT for architectural governance.
Teams are structured around products (not projects) and are multidisciplinary (see gure opposite).
CIO
IT craftsmanship IT industrialization Digitalization
CIO
OOCIO
OOCIO
CIO CDO
CTO CTO
Functional/
process silos Run D Run D
Grow/
change
Multi-
disciplinary
product teams
P&L
owners
OOCIO = office of the CIO, running IT as a business (strategy, governance, finance, security and risk, etc.)
CTO = chief technology officer, acting as chief operating officer of IT
CDO = chief digital officer, acting as digital change agent
Run = every aspect of IT needed to keep the business running
D = demand management internal demand/relationship/account managers facing off to other parts of the business
Grow/change = every aspect of IT needed to execute on growth and change
Completing bimodal capability is necessary to compete in a digital world
1 WELCOME TO THE THIRD ERA OF ENTERPRISE IT
2014 will be a year of dual goals: responding to ongoing
needs for efciency and growth, but also shifting to exploit
a fundamentally different, digital paradigm. Ignoring either
of these is not an option.
For the CIO, there is a strong opportunity, and also a responsibility, to be part of this new
digital game. However the organizational model plays out, there will be a strong push for the
digital future.
Gianni Leone, chief digital and information ofcer, Miroglio Group
Business as usual, with a shift to growth
As we enter 2014, economists expect a mixed year, with many advanced economies nally recovering
from protracted downturns, and growth slowing in some developing countries.
In the 2014 CIO Survey, we asked CIOs to allocate 100 points between ve outcomes (efciency,
effectiveness, integrity, agility and growth/innovation). In terms of business leaders focus, we observed a
gradual but undeniable shift toward growth (see gure opposite).
IT spending, portfolio balance and the choice of technologies, talent, sourcing options, leadership,
structure and governance must all be designed to make the business win. Despite the need to grow,
there is pressure on IT budgets. The global weighted average expected change in CIOs IT budgets
is an increase of 0.2%. This lack of signicant growth presents substantial challenges for the CIO and
IT organization since, as we discuss later in the report, there is a need to both renovate the core of IT
systems and services, and exploit new technology options.
Still, more than ever, the size and shape of IT budgets are unique to each enterprise. With a shift
to digitalized business models, there can be no more vanilla IT. The more that information and
technology get intertwined in the customer experience, and the more IT serves the most strategic
and tactically nuanced parts of the business, the less appropriate it is to have the same IT as
everybody else, even in the same industry. The global weighted average explodes into highly different
averages when our survey respondents are segmented by geography, size and industry as shown
in the gure on page 12 and in the Appendix.
15%
19%
16%
23%
23%
23%
27%
18%
14%
16%
28%
2009
0%
20%
10%
30%
40%
50%
60%
70%
80%
90%
100%
20%
Growth/innovation
Agility
Integrity
Effectiveness
Efficiency
15%
16%
27%
2013 2014
Note: Percentages for each year may
not add up to 100% due to rounding.
Managements mood: A gradual but insistent shift to growth
Even more signicant, CIOs report that a quarter of IT spending will happen outside the IT budget in
2014 (see fgure opposite). And that is the spending they know about; the reality may be signifcantly
higher. This is a direct result of the new digital opportunities that are more entwined with customer and
colleague experiences, and that may in some cases reect concerns that the IT organization is not fast
enough or otherwise ready for more digital opportunities.
The opportunity for bimodal IT to change the reality and the perception is discussed later in the report.
However, this spending pattern should not necessarily be seen as a problem; it is more an emerging
digital reality that should be managed with smart, lightweight and collaborative governance.
EMEA
-2.4 %
2012->2013: +0.4%
APAC
+0.9%
2012->2013: -1.1%
North America
+1.8%
2012->2013: -1.0%
Latin America
+7.3%
2012->2013: -1.6%
World*
+0.2%
2012->2013: -0.5%
Sources: 2013 and 2014 Gartner CIO Surveys.
*The arrows signify the percentage of respondents whose budgets are increasing (up arrow),
decreasing (down arrow) or remaining flat (horizontal arrow).
17%
45%
38%
A gradual shift to growth will supplement business as usual
In other 20%
In IT 74% In marketing 7%
Where IT spending will happen in 2014
The digital dragon is upon us, and most companies
arent ready
To compete in the new era of retailing, I believe that Tesco has to be more than a retail company.
We have to become a technology company, too.
Philip Clarke, CEO, Tesco
Digital is different. And I think that less than a quarter of my team is ready and able to make
the transition.
Anonymous CIO
Against the backdrop of this gradual shift to growth and company specialization in the use of IT, there is
a much bigger tectonic shift happening. Every industry and every geography is being radically reshaped
by digital opportunities and threats. Arguably, the traditional, physical-asset-heavy and primary
industries are even more affected than high-tech companies. Examples include agriculture companies
that can help predict and optimize yields in near real time; sports companies that blur the boundaries
with healthcare organizations; logistics companies that can price fnancial risk in real time better than
banks; and governments that can go beyond asking what citizens want, observing and responding to
their needs in real time.
Current enterprise IT is not set up to easily deliver on these digital dreams. In our CIO survey, we tested
agreement with a very strong statement: My business and IT organization are being engulfed by a
torrent of digital opportunities. We cannot respond in a timely fashion. This threatens the success of
the business and the credibility of the IT organization. Fifty-one percent, the majority of CIOs, agreed.
This is why we chose the meme of the digital dragon potentially very powerful, but also potentially
destructive if not tamed.
Beyond not being ready now, 42% of CIOs believe their IT organizations do not have the right skills and
capabilities in place to get ready for the future. And in condential discussions with the authors about
what proportion of their existing IT talent could make the shift to meeting the digital challenge, many
CIOs estimated this to be 25% or less.
Denition
Gartner denes digital as all electronically tractable forms and uses of information and technology.
It is bigger in scope than the typical company defnition of IT because it includes technology outside
a companys control: smart mobile devices (in the hands of customers, citizens and employees),
social media, technology embedded in products (such as cars), the integration of IT and operational
technologies (such as telecom networks, factory networks and energy grids) and the Internet of
Things (physical objects becoming electronically tractable).
We are entering a third era of enterprise IT
The biggest risk is not taking any risk ... In a world that is changing really quickly, the only
strategy that is guaranteed to fail is not taking risks.
Mark Zuckerberg, founder and CEO, Facebook
There is a growing disconnect between our increasingly nonlinear world and the linear mindsets,
practices and institutions that we deploy in our work.
John Hagel, co-chairman, Deloitte LLP Center for the Edge
It would be tempting to think that the CIO and IT organization just need to absorb some of the new
technology and societal trends into what they are doing already to do it just a bit faster, cheaper and
smarter. But if we dig deeper, we see something more fundamental going on. We are moving to a new,
third era of enterprise IT (see gure below).
Adapt Ideate
Create
Engage Offer
Monetize
Focus
IT craftsmanship
Technology
Programming,
systems management
Isolated; disengaged
internally and externally
Sporadic automation and
innovation; frequent issues
IT industrialization
We are here
Processes
IT management,
service management
Treat colleagues as
customers; unengaged
Services and solutions;
efficiency and effectiveness
Digitalization
Business models
Digital leadership
Treat colleagues
as partners; engaged
Digital business innovation;
new types of value
Capabilities
Engagement
Outputs and
outcomes
The third era of enterprise IT has arrived
Up until about the year 2000, we were in the rst era, where IT could help do new and seemingly
magical things automating operations to create massive improvements in speed and scale, and
providing business leaders with management information they never had before. The downside
was that the IT organization was often a little unreliable, almost like a mad inventor who could do
wonderful things but was neither timely, nor dependable, nor a good communicator. Beyond this, the
IT department was normally an isolated subculture not seen as an integral part of the business.
From inside IT, the rest of the business was seen as an annoyance, a distraction from building beautiful
technical architecture.
All this came to a sudden end with the Y2K problem and the dot-com boom and bust. There was less
tolerance for an unreliable black box IT organization in the business. We entered the second era of
enterprise IT, and have been in it ever since.
This has been an era of industrialization of enterprise IT, making it more reliable, predictable, open and
transparent. It has also been an era of processes, services, standards and smart sourcing an era of
ITIL, COBIT, Prince2 and PMBOK, and of the IT organization professionalizing and treating the rest of
the business as its internal customers.
This second era has been necessary and powerful, but with one casualty: disruptive innovation in
end-user organizations and arguably also in the IT industry. There has been relatively little innovation
in enterprise IT in the last decade or so. IT budgets have been tight, and appetite for risk has been
low. The process, service and internal-customer lens has led to an internally focused, incremental-
improvement view.
However, in the last few years, technological and societal trends around technology have been
building and maturing, such as the Nexus of Forces (social, mobile, cloud, information and analytics),
the Internet of Things (integrating sensor networks, factory networks and technology in products and
consumer devices, with enterprise IT), 3D printing, and new currencies and payment mechanisms.
Technologys voice, and the voices of individuals empowered by technology, wont be silenced any
longer!
Now we are entering a third era of enterprise IT, where these new trends are not only improving
what businesses do with technology to make themselves faster, cheaper and more scalable, but
fundamentally changing businesses with information and technology, changing the basis of competition
and the portfolio of businesses people are in, and in some cases creating new industries. Think of
white-goods companies (aka major-appliance makers) providing house as a service, of mobile phone
companies becoming banks, and hospitals seamlessly including home-based telemedicine.
The Y2K crisis was, in part, a result of shortsightedness on the part of the mad inventors. The
same risk is inherent in the third era, where the pace of innovation may lead to longer-term
brittleness. The third era must build on the learnings of the previous two.
Chris Howard, managing vice president and Distinguished Analyst, Gartner
This digital industrial economy requires enterprise IT to shift to an era of digitalization. The possibilities
right now, and in the future, are powerful and exciting, but ironically, the practices and behaviors learned
in the second era the industrialization of IT are stopping many from realizing the potential. Two
issues holding IT back are: treating colleagues as customers (looking at everything through a business
process lens), and aiming for inside-out incremental efciencies through industry best practices.
Many of the new digital innovations require the IT organization to ideate, or dream the digital dream,
and execute in close partnership with colleagues, in an exploratory way, with understanding of the
potential of new trends. Thinking of the rest of the business as ITs customers, and of ITs highest goal
as being an order taker, is the wrong model. Although the word partnership has been abused by
the IT industry, there is a need for the IT organization to treat colleagues as true partners, discovering
and inventing the digital future of their company together, with the real customers being the external
customers or citizens that the company or public-sector agency is there to serve. Indeed, there are also
opportunities to treat external customers as partners and discover the future with them as well.
It is important to recognize that much of the innovation will come as major disruptions to the way we
think about businesses, and that processes are not the whole story, and possibly not even the main
story, in the unfolding digital future. Customer experiences, digitalized products (like cars), digital
communities, digital corporate decisions (e.g., entering or creating new industries) are not about safe,
steady improvement of internal business processes. They require broader, deeper and quicker thinking.
This is not a quantitative improvement; it is a fundamental change in the way information and
technology show up in the enterprise a rethinking of the role of the CIO and the IT organization,
and the rest of the businesss expectations, getting unstuck, and shifting to the third era of enterprise
IT. And this needs to happen as the important work of delivering and incrementally improving existing
enterprise IT continues.
If this transition succeeds and tames the digital dragon, massive new value for businesses can be
created, and with it, a renewed role and greater credibility for the CIO and the IT organization. If
the dragon isnt tamed, businesses might fail and the relevance of the IT organization will almost
certainly disappear.
Taming the digital dragon necessitates a three-part response
The data and case study interviews from the 2014 CIO Survey show that leading businesses,
governments and public-sector agencies are bridging the second and third eras of enterprise IT,
taming the digital dragon by radically innovating in three areas (see gure below).
IT industrialization Digitalization
Create powerful
digital leadership
Build bimodal
capability
Renovate
the core
Clear digital roles
Savvy digital executives
Digital vision and digital legacy
Agile development
Multidisciplinary teams
Innovative partnerships
New risk/speed trade-offs
Cloud/Web-scale infrastructure
Information
Talent
Sourcing
A three-part response is needed to tame the digital dragon
1. Create powerful digital leadership. The transition to the third era starts with leadership. This means
ensuring that the businesss digital leadership vacuum is flled and that every business executive
becomes digitally savvy. At the same time, CIOs must communicate a vision that excites and
mobilizes the IT organization, helping staff understand that the status quo is not an option.
2. Renovate the core of IT. Ensure that the engine room of IT the infrastructure, operations, core
applications (like ERP), services and sourcing models are t for purpose, not just for the present
but also for a highly digitalized future involving greater speed and scale. Emphasize information
as a competitive asset, and form relationships with suppliers that encourage, rather than stie,
innovation.
3. Build bimodal capability. Solve the age-old tension between needing to provide safe, reliable and
integrated enterprise IT while also being able to exploit business moments experimenting with,
and capturing value from, new technologies, and societal and industrial trends at digital speed.
This subsumes and goes way beyond agile software development. It includes creating separate
multidisciplinary digital innovation teams, working with small businesses and startups, and adapting
governance and metrics for a lightweight, second-stream capability.
In the next three sections, we will explore each of these three imperatives in detail.
2 CREATE POWERFUL DIGITAL LEADERSHIP
To exploit digital opportunities, ensure that the core of IT
services is ready; strive for clear digital leadership, strategy
and governance; and help all business executives improve
their digital savvy.
If the CEO asks, Who owns digital? and gets multiple names, then you have to wonder
who owns it.
Baron Concors, CIO, Yum Restaurants International (former CIO and CDO, Pizza Hut)
Progressing to the third era of IT requires an emphasis on
leadership
In relatively certain, stable times, management is arguably the most important discipline. The second
era of enterprise IT ts that model. Straddling the second and third eras is inherently complex and
ambiguous. In times of great change and uncertainty, leadership comes to the fore; more specifcally, as
Bob Johansen at the Institute of the Future has pointed out, clarity will be disproportionately rewarded.
Leaders need to be very clear about the future they are making, but fexible about how it gets made.
As demonstrated by the case studies in the Appendix, to seize the digital opportunity before them,
CIOs must step forward and provide the vision and leadership needed for the future, even if this means
stepping into the unknown and out of their comfort zones.
Recognize digital leadership as distinct from IT leadership
IT strategy is a technical answer to a business question: Given our business strategy, how should we
use IT to help our business win? Digital business strategy is, on the other hand, a business answer
to a technical question: Given how the digital world is unfolding, how should we evolve our business
strategy to allow us to survive and thrive? (Lets Get Digital: A Template for Digital Business Strategy
explores the answer in detail see Further Reading). Note that digital business strategy is not an
extension of, or a replacement for, IT strategy. It serves a different function.
Similarly, digital leadership is not a replacement or substitute for IT leadership. It, too, serves a different
function by:
Ensuring that the business is answering the digital business strategy question
Ensuring that the company or public-sector agency is positioning itself to win in an increasingly
digital world
Building, acquiring and divesting the company or agencys portfolio of business units (and the
products and brands in each)
Adapting sources of competitive advantage and marketing positions
Building new partnerships
All this is more an adaptation of business leadership to the digital context than a matter of IT leadership.
Most enterprises have IT leadership creating, executing and monitoring IT strategy to some degree.
But most have a vacuum in digital leadership.
Companies have always needed both IT and digital leadership, but as we enter 2014, digital
technologies and societal trends that can radically change a business (not just make it a bit more
efcient or effective) have exploded onto the scene. The case studies on Seoul National University
Bundang Hospital and Universidad Tecnologico de Monterrey (see the Appendix) highlight how much
digital technologies and trends can transform every aspect of an enterprise.
Understand the role of the chief digital ofcer
I have to play Dr. Jekyll and Mr. Hyde as I move between the two roles, making sure I apply
the correct set of rules depending on the hat Im wearing traditional IT versus leading digital
transformation.
Gianni Leone, chief digital and information ofcer, Miroglio Group
In recognition of the leadership issue, leading companies are creating a chief digital ofcer (CDO) role.
The role started off as a digital marketing and media ofcer, and was concentrated in media companies.
Now the CDO role has broadened; around 7% of enterprises have a CDO, and they are spread across
all geographies and a wide variety of industries (see gure on page 22). Gartner is predicting a tripling of
the prevalence of CDOs and similar roles in the next year.
Even more important than sheer numbers is the evolution of the CDOs role. Now only 42% of CDOs
are primarily focused on digital marketing. A similar number are true advisors to the CEO and board
on digital business strategy. (This gure has been changing so fast, even during the three months we
collected survey data, that the balance noticeably shifted away from an exclusive marketing focus with
every data sample we took.)
Forty-two percent of CDOs now report to the CEO. Just under a quarter (22%) report to the CMO, and
16% to the CIO (the others varied). Similarly, the resources available to the CDO are highly variable.
Nine percent are lone advisors and change agents, 23% have a small team of analysts and evangelists
and/or a budget to run pilots, 27% have a substantial team to develop digital services, and 26% are
resourced to develop and run digital services separate from IT.
A critical question arises: Could/should the CIO also be, or become, the CDO? The short answer is,
possibly but such a dual role is neither easy nor the default. The Yum Brands and Miroglio Group
case studies (see the Appendix) are two very successful examples of one individual holding both the
CIO and CDO roles. But the CDO is more an extension of the chief strategy ofcer than the CIO it
is a strategy role informed by the digital context. Board-level strategy, communication and inuencing
skills are key. As of the end of 2013, 35% of CDOs have come primarily from a business strategy or
marketing background, 19% have an IT background, and 46% have mixed/other backgrounds.
APAC
11%
North America
5%
EMEA
6%
Latin America
7%
Industry % CDOs
Media 21
Communications 13
Services 11
Banking 10
Insurance 9
Retail 9
Healthcare providers 5
Government 5
Manufacturing/natural resources 5
Wholesale trade 3
Education 3
Transportation 4
Utilities 1

CDOs are everywhere
It is certainly not necessary, or probably even desirable, for all CDOs to fall into one scope, role and set
of resources. But it is essential that there are no gaps, overlaps or ambiguities of coverage between
the CDO and CIO. Two-thirds of enterprises that have CDOs are somewhat OK with how IT and the
CDO integrate, but less than a third are very clear on this. Clarifying the coverage and scope of digital
leadership, and integration with enterprise IT leadership, should be high on every CIOs agenda in 2014.
Build a digitally savvy C-suite
We believe its important to embed digital in the role of every key executive.
Willem Eelman, global CIO, Unilever
[Our leadership] have set it as a goal and objective for everyone in the company to become
digitally enabled.
Bill Ruh, vice president global software center, GE
In the era of digitalization, having a smart CIO and IT team is not enough. Every executive needs to think
of him or herself as a digital executive and ask the question, What does the evolving digital world mean
to our business, and to my area of responsibility in particular? This is especially essential for the CEO.
Of all the CIO survey data we collected this year, the best correlations were between the CEOs level
of IT/digital savvy and other leading and lagging indicators of success (see fgure below). There were
strong correlations between CEO digital savvy and business performance, IT performance and the
CIOs level of power and infuence, each rising with the level of the CEOs digital savvy.
Business performance
Operational effectiveness
CIO power
Growth focus
IT effectiveness
CIO reporting
Strategic effectiveness
Satisfaction with IT
ITs future readiness
Strong 7%
CEO IT/digital savvy
Effects of higher levels of CEO digital savvy
Somewhat strong 16%
Slightly strong 19%
Fair 26%
Slightly weak 13%
Somewhat weak 11%
Very weak 8%
CEO digital savvy is critical
The table below contrasts CIO responses from businesses at either end of the spectrum. We asked
CIOs to rate their CEOs IT/digital savvy from very weak to strong. The table shows average answers
to other questions based on those who rated their CEO at either end of the scale (8% with very weak
CEO digital savvy; 7% with strong CEO digital savvy). Note the stark differences between the two.
So how can CIOs infuence the level of IT/digital savvy of CEOs and other executives? Along with the
perennially smart behaviors of creating great business-success-focused IT strategies, and translating all
IT-related issues into business outcomes and strategic business themes, there are a number of specic
proven approaches and interventions:
Use of digital nonexecutives. These people can inject some fresh external thinking into board
meetings and lower-level governance mechanisms. Select individuals who have achieved credibility
through successful digital innovations in contexts similar to that of your enterprise, with personalities
that will provide the right amount of stretch challenge. Dont automatically look for the digerati
from famous digital-era companies like Google, Apple and Facebook. (In early 2014, look for a
research note from Gartner on selecting digital nonexecutives for boards.)
Technology showcases. A technology showcase is typically an annual or semiannual event, where
some or all employees are invited to come and peruse new technologies and technology-enabled
business innovations. It may involve external technology companies showing their wares, external
end-user companies presenting their case studies, internal staff demonstrating company-specic
examples they have pulled together, or simply internal staff explaining new technologies. Each
approach has costs and benets. Baron Concors of Yum Brands (see the case study in the
Appendix) runs a digital summit for the top 200 people in the company, with thought-provoking
external speakers.
Rated CEOs digital savvy as: Very weak Strong
Proportion 8% 7%
Report to CEO 15% 39%
CIO power and influence 2.5* 3.2*
Internal satisfaction with IT 4.4** 5.1**
ITs future readiness 3.5
4.8
Business performance 4.5
5.1
*On a scale of 1-4, with 1 = at risk, and 4 = trusted ally

**On a scale of 1-7, with 1 = very dissatisfied, and 7 = very satisfied
On a scale of 1-7, with 1 = strong disagreement, and 7 = strong agreement
On a scale of 1-7, with 1 = strongly underperforming compared to competitors,

and 7 = strongly outperforming competitors
CIO responses to the CEOs digital savvy
Hackathons/hackdays/innovation jams. Fashionable right now, these events tend to be
intensive, typically lasting 24 hours, where a large number of employees (and possibly others)
work in small groups to either come up with ideas or actually build prototypes of potentially
valuable business innovations (which can then be used in showcases). Most companies that
do this report occasional breakthrough opportunities, but the most reliable benet is getting
the entire staff involved in thinking differently and more deeply about digitally enabled business
opportunities. Mike Yorwerth, group technology and architecture director at Tesco, told us
that his IT organization has run hackathons for the last few years. Tesco also holds a supplier
innovation day that extends the concept to its vendor community (see the case study in the
Appendix). Though hackathons more directly inuence those below the C-suite level, they often
have a strong indirect effect on CxOs.
Reverse mentoring. Radical and virtually unheard of only a few years ago, reverse mentoring
is taking hold in a signicant minority of organizations. It involves junior staff (or even external
youths) advising senior staff about the possibilities of using digital innovations to work and
collaborate differently. Yum Brands does reverse mentoring for senior executives (see the case
study in the Appendix).
Use of examples and analogies. Digital innovation is complex and abstract. Preparing examples
of what others have done with digital, how they have done it and what the results have been
makes it more intelligible and engaging for busy business executives. Examples of both
successes and failures can be helpful. Relevant business model analogies from other industries
are another powerful tool.
We borrowed other industries best practices our national security agencys approach to
cloud, for example.
Dr. Hee Hwang, CIO and chief medical ofcer, Seoul National University Bundang Hospital
In my previous position at Neoris, I collaborated as strategy and architecture advisor on the
CEMEX Shift project. When I joined the university, I saw the opportunity for Shift reloaded.
Jos Tam, CIO, Universidad Tecnologico de Monterrey
Consider using one or more of these techniques to drive the digital savvy and digital thinking of the
CEO and other business leaders.
The core of enterprise IT infrastructure, applications,
information and sourcing along with the talent needed
to execute on it, was built for the IT past and needs to be
renovated for the digital future.
3 RENOVATE THE CORE
In my previous role overseeing an Indonesia mobile payments initiative, we had to simulate
5 million customers, three banking gateways and 10 telecommunications companies. Public
cloud was the only cost-effective way, and I got to see the power of it.
Larry Matias, CIO, Jollibee Foods
Some of the small companies we work with consist of only two or three people. Fortunately, it
is in our DNA as a program maker to work this way. You have to focus on helping these smaller
partners succeed, managing risk more than the legal aspects.
Kevin Gallagher, CIO, Channel 4
Technology priorities reveal two complementary goals
This year we asked CIOs specically about the highest areas of new technology spending (as opposed
to previous years, when we simply asked about priority). It is clear that, in addition to new opportunities
like big data and mobile, a lot of new spending is going into improving core systems and capabilities
(see gure opposite).
How do we interpret this? The clear signal is that the major new categories of spending are split
between two important imperatives. The rst is to renovate the core of IT in other words, to
ensure that the infrastructure, and the main IT applications and services such as ERP and solutions
development, are t for purpose. Part of this is a function of the investment cycle, but part is about
getting digital-ready. This requires creating a detailed vision of what digital innovations in the
business are likely to take place, and making sure core services are ready, or that at least they can
be made ready fast. A common example is companies that are used to a B2B model, needing to
prepare for a B2B2C future.
The second imperative is to exploit new digital trends, including the ability to mine a greater volume,
velocity and variety of information (big data); the ability to engage customers, employees and the crowd
in a more compelling and coordinated manner using mobile, social and other channels; and, more
generally, to deeply innovate the business models based on these digital possibilities.
Ranking based on how many CIOs cited each
as a top 3 new spending priority for 2014
Renovate
the core
Exploit
the new
BI/analytics 1
Infrastructure and data center 2
Mobile 3
ERP 4
Cloud 5
Networking, voice and data communications 6
Digitalization/digital marketing 7
Security 8
Industry-specific applications 9
Customer relationship management 10
Legacy modernization 11
Collaboration 12
Investment priority Rank
CIO technology priorities for 2014
3 RENOVATE THE CORE
Both imperatives are important, and it is essential to pursue them in parallel. Getting stuck on
renovating the core only is too slow, and those who skip this step, and overly focus on exploiting the
new, will nd themselves dreaming digital dreams that are not achievable or sustainable.
Renovate all aspects of the core
Which aspects of the core should you be innovating? The obvious answer is all of them. But four
aspects are especially important:
1. Move away from monolithic ERP to a more loosely coupled paradigm, including integration with
cloud components. Gartner calls this postmodern ERP.
2. Build next-generation information architectures and analytic capabilities, including in-memory
databases; better metadata; and the ability to exploit multimedia, social and other unstructured
data, and data from outside the enterprise.
3. Deploy the public cloud as part of a hybrid enterprise infrastructure, application and service
portfolio to increase agility, innovation and efciency.
4. Rethink and extend supplier, vendor, and partner and service provider relationships, including the
use of smaller, faster, more innovative partners, and working with partners in new domains such
as mobile.
Postmodern
ERP/apps
Hybrid
cloud
More-diverse
partnerships
Next-
generation
information
capabilities
Increased adoption and
integration of public and
private IaaS, PaaS, SaaS
and BPaaS
Volume/velocity/variety;
in-memory databases;
advanced analytics;
unstructured and multimedia data
Use of SMBs/startups;
new categories of partner
(e.g., mobile, design,
analytics)
More-federated ERP,
multi-enterprise solutions,
cloud components, mobile
support, embedded
analytics
Reimagine the core
Gartner will continue to publish extensively in all of these areas (see Further Reading for previously
published research). In our 2014 CIO Survey and associated case studies (see the Appendix), we
tested hypotheses about public cloud and new partnerships. These are explored in this and the next
section of the report.
First, we should note that all of these changes require a rigorous review of the digital talent in the IT
organization, across the business and in partner organizations, asking the question, Do we have the
right skills for the future? As mentioned earlier, 42% of CIOs replied with a resounding no. And there
are other, even starker, gures.
When we asked those involved with agile whether they had the right agile skills, 18% said yes, 43%
said improvements were needed, and 39% said the IT organization needed a major talent overhaul.
CIO interactions and Gartner thinking suggest ve common areas of increasing concern around talent:
Digital design. The ability to design for new digital platforms to provide compelling customer
experiences.
Data science. The ability to use big data and generate insight. Gartner has been stating for a
number of years that lack of data science skills will be a major bottleneck in economic activity
globally. Specifc capabilities here include the ability to analyze unstructured, multimedia and noisy/
imperfect data; and visualization, simulation and advanced modeling techniques.
Digital anthropology. Unknown to most enterprises until recently, the discipline of understanding
human behavior, customs, rituals, and economic and political organization increasingly important
as digital permeates all aspects of our clients, employees and citizens personal and private lives.
Small or midsize business (SMB)/startup engagement. The need to engage small enterprises as
partners to gain innovation and speed (which more and more companies are recognizing). This
is not an easy task, and special skills are needed. See the discussion on partnerships starting on
page 32.
Agile development. Both specic skills (e.g., methodologies like Scrum and Extreme Programming)
and a mindset for highly collaborative, iterative development.
When you look at our systems, you see only what appear to be conventional technologies.
The key to patient-centered systems is their softer aspects, which reect understanding of
the patients journey.
Dr. Hee Hwang, CIO and chief medical ofcer, Seoul National University Bundang Hospital
3 RENOVATE THE CORE
Deploy the public cloud to support agility
We are looking for an architecture that could serve 1 billion people. We could afford traditional
infrastructure when customers came to the bank once a month. Now they may access their
accounts via mobile phones 10 times per day. The cost per transaction must approach zero to
make this usage viable for the bank.
Luis Uguina, global head of remote channels and new digital business, BBVA
For most organizations, the dialogue around public cloud has transitioned relatively quickly from
extreme skepticism stemming from concerns about performance, reliability, control and risk, to
a pragmatic discussion of what, when and how. This change has been driven by supply-side
improvements from cloud service providers, an increasingly well-informed understanding by CIOs and
their businesses, and pressure to achieve Web-scale architecture, performance and agility (given cost
constraints).
BBVA, a large Spanish bank also featured in the 2012 CIO Agenda Report, based its large, early move
into public cloud on collaboration services with Google. Despite being in an industry with high regulation
and customer privacy issues, BBVA is pressing ahead with plans for a hybrid future, based on smart
load balancing across multiple private and public clouds to achieve efcient scale, meet regulatory
requirements, yet prevent private data from going into the public cloud.
Jollibee Foods, a fast-food chain based in the Philippines, is relying on public-cloud infrastructure
and services for better cost, speed and scale for many core services. These include Web and phone
food delivery services, material requirements planning (MRP) and interim ERP services for overseas
subsidiaries (until the companys own ERP templates are deployed). (See the BBVA and Jollibee Foods
case studies in the Appendix.)
Potential benets of cloud include cost savings and other capabilities such as agility, innovation
and time-to-market. It is often the latter that is the real impetus. These benets are often less
quantiable but are more and more commonly cited as the true drivers and value of cloud.
David Mitchell Smith, vice president and Gartner Fellow
Survey data shows that a quarter of businesses have made signicant investments in public cloud
(not just tests). Seventy-two percent of these invested in software as a service (SaaS), 47% in
infrastructure as a service (IaaS), 43% in platform as a service (PaaS) and 17% in business process
as a service (BPaaS). For half, agility is the primary motive. Although all cloud investments must have
a business case, only 14% were investing primarily to reduce costs.
Perhaps not surprisingly, the benets of public cloud have been mixed. Overall, respondents averaged
a 22-month payback period on cloud investments. Comments on their experiences suggest an equal
mix between those who got more than they expected, those who got what they expected, and those
who got less (in terms of business benets). Why are some cloud investments yielding benets and
some not? The combination of survey results, case studies and Gartner insight leads us to propose
eight CIO golden rules for investing in public cloud:
1. Whatever your plans, test public cloud quickly and safely to dispel myths and elevate executives
and IT staffs understanding, and to promote internal dialogue.
2. Manage internal and external expectations and concerns, focusing on issues and concerns around
performance, control and innovation.
3. Understand and communicate your primary goal: Is it innovation, agility, cost or something else?
4. Consider public cloud for multiple uses: long-term cost-effective agile capacity, interim capacity
during periods of change and as a tool to test.
5. Plan for a hybrid architecture based on economics, performance/agility needs and regulatory/
security/privacy considerations.
6. Dont get stuck with websites only, and dont discount putting mission-critical systems on the
public cloud.
7. Ensure that you have the right partner. Focus on reliability, congurability, granularity of pricing and
availability of tools.
8. Retain the ability to exit a cloud partnership gracefully, with your data intact! (Build this and rule 7
into contractual terms and conditions.)
Most CIOs believe in a hybrid future with a signicant cloud component, and they are moving toward it.
In the 2011 survey, and again in this years survey, we asked CIOs how soon in the future they expect
more than half of their business to run on public-cloud infrastructure and SaaS (see gure below).
The short answer is that despite being three years closer to that future, CIOs remain pretty bullish that
public cloud will represent the majority of the IT estate in the not-too-distant future. About a quarter of
CIOs continue to believe that public cloud will never represent the majority.
Escape partner relationships that arent working for you
IT sourcing strategies must be structured to enhance IT agility and address the needs of digital
businesses. Organizations that dont adapt their strategies, and the competencies required to
execute them effectively, will fail to achieve the value opportunities presented by a highly
digitalized future.
Ian Marriott, research vice president, Gartner
3 RENOVATE THE CORE
When will more than half of your business run on public* cloud infrastructure and SaaS?
2011: n = 1,993 respondents; 2014: n = 2,252 respondents
*2011 survey asked about cloud; 2014 survey specified public cloud
2
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6
2
0
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7
2
0
1
8
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0
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9
2
0
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2
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4
2
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2
0
3
0
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3
1
2
0
3
2
2
0
3
3
2
0
3
4
0%
25%
50%
75%
100%
% of 2014 survey respondents
% of 2011 survey respondents
(23% said never in both 2011 and 2014)
The future still looks increasingly cloudy
At the beginning of this report, we discussed the transition to the third era of enterprise IT moving
from a dominant focus on the industrialization of enterprise IT, to a period of digitalization, characterized
by deep innovation beyond process optimization, exploitation of a broader universe of digital technology
and information, more integrated business and IT innovation, and a need for much faster and more
agile capability.
Aside from the inherent stuckness of IT organizations in the second era, the nature of relationships
between IT and its providers of technology, services and people, is exacerbating the situation. As the
fgure below (derived from the 2013 Gartner CIO Survey) shows, most CIOs dont feel that the biggest
IT names have been bringing enough innovation to the market, and they see the future (especially in the
digital space) in the long tail of small enterprises.
Which technology company has been most
influential over the last 10 years?
Which will be in the next 10 years?
Last 10 years
Next 10 years
23%
37%
28%
32%
14% 15%
20%
15%
1%
1%
3%
1%
5%
2%
5%
2%
3%
1%
5%
3%
5%
4%
Intel
VMware
SAP Oracle
Amazon
Cisco IBM
M
i
c
r
o
s
o
f
t
A
p
p
l
e
G
o
o
g
l
e
O
t
h
e
r
Percentage of respondents mentioning each company
Source: 2013 Gartner CIO Survey (n = 1,305 respondents to the first question; 1,255 respondents to the second question).
CIOs do not feel that innovation will come from the usual suspects
3 RENOVATE THE CORE
Why is this? Most large IT companies, being invested in the second era of enterprise IT, are set up to
monetize that model. Sure, most of them have cool, funky stuff in their labs, and in some bleeding-
edge deployments, but this is not represented in most of their client contexts and contracts.
Moreover, in keeping with our earlier argument, if the big vendors have it, everyone can, and it
becomes vanilla. Innovation from big vendors doesnt help differentiate you from your competitors.
Is this just idle talk and negativity, or do CIOs intend to change? There is no sign that outsourcing
will stop 59% of CIOs intend to outsource more in the next two to three years, and only 13% will
outsource less. However, more than two-thirds (70%) report that they will change their technology and
service providers in the next two to three years.
Change to what? And how do CIOs encourage more agility and innovation? In addition to continuing
to push the usual suspects to bring their A game and developing more exible win-win relationships
and contracts, there is a strong case to be made for CIOs to directly engage with smaller businesses,
including startups, to reap the benefts of innovation and differentiation. Almost a third (29%) of CIOs
say they will diversify their partner portfolio in the next two to three years to include more small
organizations. At the 2013 Gartner EMEA Sourcing Summit, Mark Hall, then CIO of the U.K. revenue
and customs agency, spoke of bringing in startups from unusual areas like gaming to drive more
innovation.
Kevin Gallagher, CIO of U.K. TV broadcaster Channel 4, has been using startup and small-enterprise
partners for some time, mainly out of necessity due to the nature of the lm and TV broadcast business.
He told us he has seen the value, the challenge and the need to approach partnerships with small and
young businesses differently, especially when you are in a large business (see the Channel 4 case study
in the Appendix).
We offer nine more CIO golden rules, these for partnering with small and young companies:
1. Build a competency center around working with smaller companies, recognizing that this needs to
be much more than a procurement exercise.
2. Consider a broad range of partners: startups, incubators, universities, crowdsourcing services, local
SMBs and citizen development services.
3. Design the relationship for win-win; dont try to hold smaller companies to minimum price/maximum
delivery they might say yes because they want to work with you, but by the time you nish with
them, they may be dead!
4. Keep legal issues light and focused on intellectual property. Dont focus on the liabilities should a
partner fail, because they might not be able to pay them (assuming they are still around).
5. Expect to put a project management/delivery wrapper around small partners. Let them focus on
and provide what they are good at.
6. Think about the partners cash fow, as well as their proft. You may need to adapt your payment
processes (e.g., lower latency, higher frequency).
7. Develop the ability to do quick, lightweight audits of potential small partners (neither you nor they
can afford to do slow, heavyweight ones). Focus on the people and their capabilities.
8. Make every effort not to constrain partners in terms of methodology, tools and approach. Focus on
the outputs.
9. Dont try to lock small partners into only working with you. Manage intellectual property issues in
conventional ways.
Partnering with small companies introduces complexity and has risks, neither of which should be
underestimated, but the risk can be managed (see The Nexus of Forces Enables Differentiated
Business Value Services in Further Reading). Note that sticking with the usual suspects and/or
inexible contracts may represent even higher risks to your business.
4 BUILD BIMODAL CAPABILITY
To capture digital opportunities, CIOs need to deal with speed,
innovation and uncertainty. This requires operating two modes
of enterprise IT: conventional and nonlinear.
The reality is that you do have to operate at two speeds. And some of that you do by creating
dedicated teams for each. Focusing on the big systems, making them run smooth, while at the
same time having disrupters to innovate, together with marketing and the customer, exploiting
digital.
Willem Eelman, global CIO, Unilever
A single mode of IT is not enough
There is an inherent tension between doing IT right and doing IT fast, doing IT safely and doing IT
innovatively, working the plan and adapting. The second era of enterprise IT has been all about
planning IT right and doing IT right, being predictable and creating value, while maximizing control and
minimizing risk. In short, it has been about running IT like a business within a business.
But the third era digitalization poses additional challenges such as the following nonlinear needs:
The need to absorb disruptive new business models, enabled by new digital technologies
The need to scale up and down in Internet time
The need to react fast to capture business moments
The need to fex painlessly to support business model innovations
The need to explore and evolve solutions that are surrounded by uncertainty
Agile software development is helpful but not enough
In the process of transitioning to the second era, there has been a general trend to restructure and
professionalize IT. This has included the following:
Separating IT into two big chunks: run-the-business IT, and grow-and-change-the-business IT.
Run involves everything done to keep the lights on, including some maintenance development.
Grow and change contains or links tightly to everything needed for change, including change
management and benets realization.
The build-out of an offce of the CIO with transversal functions, such as strategy, governance,
security and risk management, IT fnance, procurement and HR.
The creation of a demand/relationship management function to interface with internal customers/
business units.
In some cases, the addition of a chief technology offcer (CTO) in effect, the chief operating
ofcer of IT, freeing up the CIO to be more of an information and technology leader in the business
and broader ecosystem (see The Many Flavors of the CTO Role in Further Reading).
Mythbuster
The second mode of IT is not only applicable where speed is needed, it is not only applicable for
experiments, and it is not only applicable for non-mission-critical initiatives.
Conventional IT doesnt do well under such conditions. In fact, trying to capture these needs with
one mode of IT is impossible. Since the needs present a bimodal distribution, so must the capabilities
to deliver on them. CIOs must develop an additional mode of IT to be deployed under three
circumstances:
1. Nonlinear speed: when there is a need for low latency and/or highly accelerated development
2. Nonlinear innovation: when there is a need for a high level of disruptive innovation
3. Nonlinear direction: when there is a need to continually readjust to deal with high levels of
uncertainty
All this is designed to run IT as a more professional and predictable business within a business, and
those who have gone in this direction are set up nicely for transition to the third era of digitalization.
Establishment of the CTO role lets the CIO be more of a digital leader, and the grow-and-change
function is isolated as the main target for nonlinear innovations.
As the gure below suggests, a number of CIOs (45% according to the 2014 CIO Survey) have already
built some agile software development capability into their grow-and-change function. Those who are
doing this are typically running half of their development using traditional waterfall techniques, and half
using iterative and agile methodologies and tools, such as Scrum (47%), Lean (24%), Kanban (10%)
and Extreme Programming (7%). This second mode typically involves very short cycle iterations, and
high levels of collaboration with users and sometimes external customers, throughout the life cycle.
CIO George Labelle of IPC has made extensive use of agile methodologies to create greater business
value. For him, test-driven development and automated testing are key pieces of the puzzle. IPC has
found this approach so powerful that it has re-insourced a number of systems and services, such as
point-of-sale systems, to create new forms of value for the enterprise (see the IPC case study in the
Appendix). However, it is important to realize that faster and more agile software development is a partial
solution; we also need a complete second mode of IT that creates agility from top to bottom (all aspects
of management and execution) and from cradle to grave (the entire life cycle of all assets and capabilities).
CIO
CIO
OOCIO Agile CTO
Functional/
process silos Run D
Grow/
change
Many business have developed agile capabilities
Competing in a digital world requires completing your
bimodal capability
Those who have moved early on digitalization, learned the lessons and gotten the scars have often
extended their second-era restructuring to a more comprehensive change. In these cases, the grow-
and-change function has become a more full-edged digital development function, often reporting in a
straight line to P&L/business unit owners, with a dotted line to IT for architectural governance. Teams are
structured around products (not projects) and are multidisciplinary, including technical staff, design staff,
marketing staff, engineering staff, etc. (see gure below).
CIO
CIO
OOCIO
OOCIO
CIO CDO
CTO CTO
Functional/
process silos Run D Run D
Grow/
change
Multi-
disciplinary
product teams
P&L
owners
The structure of IT is evolving toward bimodal
Mythbuster
The second mode of IT is not only about software development.
Gartner calls this second mode of enterprise IT nonlinear because it deals with disruptive innovation
and requires accelerated delivery and rapid readjustment.
Agile software development is a must for nonlinear IT, but it is nowhere near enough. Other facets of a
nonlinear IT are as follows:
A separate nonlinear team (47% of those using agile have a second team at present). This team
should be multidisciplinary and probably report outside IT.
Lightweight governance and metrics that allow the second mode to be highly adaptive and take
more calculated risk. (See the discussion of layered governance following these bullet points.)
The addition of the different digital-related skill sets mentioned earlier (see page 29), including agile
development, digital design, data science, digital anthropology and SMB partnering. (Note that only
18% of survey respondents who have a second mode of IT feel they have the needed talent
43% need additions, 39% a major overhaul.)
Aside from conventional sourcing models, consider radical alternatives such as crowdsourcing,
microsourcing, hackathons and working with small enterprises and startups.
The ability to move systems and services between modes. This often means refactoring
nonlinear-mode developments into a more stable, conventional mode. Occasionally it means
the opposite unleashing conventional systems into a more dynamic mode to exploit new
opportunities. In this regard, George Labelle of IPC mentioned bringing a point-of-sale system back
in-house to make it more dynamic and to exploit business moments with customers at the cash
till. The effort required for such modal shifts particularly hardening nonlinear experiments into
industrialized, conventional solutions should not be underestimated (it may be many times the
initial investment).
Gartners Pace-Layered Application Strategy
TM
is helpful in selecting which initiatives and investments
should be handled with which mode. Systems of record should almost always be part of conventional
IT, and systems of innovation almost certainly part of nonlinear IT. Systems of differentiation should be
considered case by case. Businesses with advanced bimodal IT may operate at multiple speeds within
the nonlinear mode, while getting more granular about which aspects of which systems should be
developed at which speed.
Drawn from case studies, survey respondents and Gartner analysis, here are the nine CIO golden
rules for building bimodal IT capability:
1. Create clear principles on what goes into conventional IT and what goes into nonlinear. Default
criteria would be: need for speed, need to innovate, need to address high levels of uncertainty.
2. Design all components structure, stafng, sourcing, governance, metrics and tools to form a
consistent nonlinear environment.
3. Lightweight architectural governance is critical, so ensure that nonlinear-mode initiatives dont make
a mess; but also, dont slow them down.
4. Provide sufcient focus on the ability to refactor or industrialize nonlinear-mode into conventional-
mode IT. And be open to the possibility of unleashing conventional systems into the nonlinear world
when the need arises.
Refactoring is the hidden gotcha of agile. If you dont get this right, architecture and code
debt can build four to six times faster than with nonagile, and the total cost of ownership can
become far higher.
David Norton, research director, Gartner
5. Consider skills (e.g., in the customer experience, digital design, digital anthropology, data science,
startup and agile) and cultural aptitude (e.g., neophilia and tolerance for risk/uncertainty) when
stafng the nonlinear-mode organization.
6. Face up to the need for new people, skills and culture in the nonlinear mode. Dont set yourself up
for failure with the wrong people.
7. Dont reward your best staff members by placing them in the nonlinear-mode organization. They
may not be the right cultural t.
8. Manage communications so that both conventional- and nonlinear-mode IT are seen as important
and exciting places to work.
9. Manage the cultural distance of the nonlinear-mode team from the core of the company not
too near, not too far (see Masters of Innovation: What CIOs Can Learn From the Worlds Best
Innovators in Further Reading).
5 CONCLUSION: CRAFT YOUR DIGITAL LEGACY
The digital future needs your vision for change. Craft a
compelling digital legacy, and factor it into your plans,
operations and communications.
Those of us who have been in the IT industry for a while have heard this rallying cry too many times:
Its all going to be different. You need to reinvent yourself, your IT department, your technologies and
your sourcing! While the changes underlying these messages did represent opportunities to improve,
the messages were massively overcooked.
This time, the combination of powerful digital and societal forces the digital dragon has created
much broader and deeper opportunities and threats than the scope of traditional enterprise IT covers.
And this time, it really is different. CIOs need to act, act fast and act smart to protect their companies,
their public-sector agencies, their IT organizations and themselves. Dont let the past persuade you to
ignore the powerful digital opportunities and threats that are now upon us.
In the rst quarter of 2014, explicitly craft your digital legacy and write it into the coupon below. It
should feel authentic, being based on what your business needs are and what you can truly give. It
should also be enough of a stretch to make you proud.
Cut out and keep
When I leave my current company/position, the digital legacy that I will leave is:
Signed: Date:
Your digital legacy
For inspiration, the gure below offers selections from the 874 responses to our 2014 CIO Survey.
Dont let your digital legacy be like one survey response we received: Ill get back to you on that.
I will transform education from paper-
based with siloed data, to digital
information provided in real time that
impacts students, teachers, parents
and administrators.
IT generates revenue.
Increased patient
empowerment through
digital health solutions.
Cloud infrastructure
with digital services.
Using digital technologies
to personalize content
and create better
engagement opportunities.
Collaborative
digital leadership.
The people I have trained
and mentored, wherever
they may apply themselves.
Solutions for our country
that our citizens need:
payment system, digital
signature system, economic
solutions systems.
Enabling a workforce for
the next generation that
sees business for the first
time via a digital lens and
has the tools to operate
borderless.
IT will be the experts, but
technology will be everyones job.
Selected digital legacies from 2014 survey respondents
BBVA implements a sophisticated multicloud vision
Headquartered in Spain and operating in 31 countries, BBVA is a bank with 50 million customers,
nearly 20,000 ATMs and 8,000 branches. The company has 113,000 employees with more than
600 billion (US$825.5 billion) in total assets.
When interviewed for the 2012 CIO Survey, BBVA was exploring a large commitment to the public
cloud. At that time, the company used a private cloud internally for speed and agility, limiting its use
of the public cloud to collaboration services. Although championed as a savings project, improved
collaboration capability was the primary benet.
Since then, BBVA has moved forward with cloud architectures. According to Luis Uguina, global
head of remote channels and new digital business, You may think that your hardware, infrastructure,
personnel, security and licenses are better than the ones in the cloud. The truth is they are not.
This perspective has led BBVA to develop Liberty, a cloud wrapper that provides access around
mainframe services through hybrid multicloud data caching while ensuring that regulatory requirements
are met and client data never goes into the public cloud. The company also has a vision for secure use
of the public cloud in core bank processes, mainly to achieve efcient scale and agility.
We are looking for an architecture that could serve 1 billion people, says Uguina. We could afford
traditional infrastructure when customers came to the bank once a month. Now they may access their
accounts via mobile phones 10 times per day. The cost per transaction must approach zero to make
this usage viable for the bank.
The vision has led to Hydra (see fgure opposite and http://innotech.github.io/hydra/), a sophisticated
multicloud approach designed to run and load-balance across multiple private and public clouds to
achieve effcient scale and provider-proof extreme resilience. Components of Hydra will roll out in early
2014, with its rst practical use including the ability to deliver millions of notications on user app status
to the real-time performance-monitoring system.
APPENDIX: CASE STUDIES, ADDITIONAL DATA, DEMOGRAPHICS
The multicloud vision is needed to avoid vendor dependencies and increase our resilience, says
Uguina. There is genuine innovation in our architecture, but we are developing Hydra open source. We
want to share it with the world and hope to inspire a passionate crowd of enhancers for free!
He adds that, as the journey to the cloud begins, talent has emerged as a major factor. Skills are a real
challenge, he explains, but the solution isnt to get rid of everybody and hire a new batch of people.
You need to take your staff with you on a cloud journey.
Based on an interview with, and material from, Luis Uguina, global head of remote channels and new
digital business, BBVA, October 2013.
Service A
Srv-01
Srv-02
Srv-03
Service B
Srv-21
Srv-22
Srv-23
Service H
Hydra 91
Need Service A
Use Srv-13
Service A
Srv-11
Srv-12
Srv-13
Service B
Srv-31
Srv-32
Srv-33
Service H
Hydra 92
Service C
Srv-41
Srv-42
Srv-43
Service H
Hydra 93
Status
Source: BBVA.
Sync
1 2 Amazon
BBVA@mx
Google
Multicloud brokering
Client-side balancing
3
Hydra, the hybrid-cloud approach of BBVA

Channel 4 is working with small partners to drive innovation
Launched in 1982 and based in the U.K., Channel 4 is a publicly owned, commercially funded TV
broadcaster focusing on innovative content, with revenue of 941 million (US$1.54 billion) and a
staff of 800.
CIO Kevin Gallagher explains that the TV business is agile by nature, since it must meet tight non-
negotiable deadlines, use a wide variety of conventional IT and operational technology, and partner with
small specialist organizations. The companys focus on innovation increases these demands.
The small companies we work with may consist of only two or three people, says Gallagher.
Fortunately, it is in our DNA as a program maker to work this way.
Channel 4 often works with small creative teams from the outside to develop its TV programs. The key
to success in this business is the ability to help creative people realize their vision without burdening
them with organizational weight. This discipline in its core business translates well to working with
smaller IT vendors, too.
You have to focus on helping these smaller partners succeed, managing risk more than the legal
aspects, says Gallagher. Our culture is to deliver as much as possible. For example, we are currently
using a company expert in the Apple and Google Play ecosystems to help us negotiate the App Store
process, and we are working with universities to develop advanced algorithms for sales.
Two streams, both agile
Gallagher oversees two workstreams: conventional IT to run the business, and content and services,
such as websites and games, to complement specic TV shows created by third parties.
A core team in IT supports online streaming and video-on-demand viewer-facing products that must
be available 24/7. The company uses agile methods such as short sprints (mini-projects with a
deliverable often only a week in duration) and ongoing testing, with content released in a series of
environments to ensure its integrity. The third parties are used to extend capabilities in the television
front ends of niche areas like iPad and Xbox.
A second team supports program commissioning by managing online content and apps developed by
third parties. We do technical due diligence and security/data protection reviews, says Gallagher, but
we dont impose our systems or processes on them. He adds that having run on the cloud since 2008
helps greatly in these areas.
Managing small partners requires a different approach
What can other CIOs glean from Gallaghers experience with small enterprises? He offers these tips on
developing a successful working relationship:
Use different skills. IT contracts with big suppliers can be run almost as a procurement project. But
small companies require a much more hands-on approach. This involves different skills, such as
providing a project management wrapper around partner activities.
Help your partners succeed. Understand that you are using small companies because of their
unique skills and intellectual property. Dont expect them to be mature businesses good at project
management and the like. Provide an internal wrapper that helps capitalize on their special skills.
Get to know your partners. When you use a small niche company, you essentially hire its people, so
meet them and spend time with them. Visit their premises and make sure you can work with them.
If they want to be left alone for six months to develop solutions for you, you must be comfortable
with the relationship.
Help your partners stay alive. Paying partners regularly helps them manage their cash fow. Dont
overburden them with administrative and legal tasks, though proper intellectual-property protections
are a given. There is no point in trying to protect the company from every conceivable liability if
things go wrong, says Gallagher. Even if you did, such partners often dont have the fnancial
means to address liabilities.
Be pragmatic about risk. Get comfortable with risk but never with failure. Gallaghers team is good
at mitigating risk for example, by reducing scope, even at the last minute. We focus on making
things work, he says.
Based on an interview with, and material from, Kevin Gallagher, CIO, Channel 4, November 2013.
IPC makes a commitment to agile
IPC, a U.S.-based purchasing cooperative owned by North American Subway franchisees, provides
procurement, IT and other services to 30,000 restaurants in the U.S. and Canada. The companys
mission is to make the franchisees more protable and competitive. IPC has a staff of 250, half of
whom work in IT.
Frustration brings agile to the forefront
CIO George Labelle has been with IPC since 1999. Prior to agile, we had a lot of unhappy stake-
holders, he says. Business analysts would get requirements and pass them on to developers, who
would code and hand off to QA people for testing. Upon receiving the solutions, the stakeholder would
then say, What the heck is this? It looks nothing like what we asked for six months ago.
As frustration grew, Labelle learned about agile and became very enthusiastic about it as a solution.
But I initially approached it very naively, he explains, getting everyone to read the books, running two-
week development sessions and meeting daily with business users. We were scrambling. Labelle soon
realized this was merely traditional waterfall software development done in shorter cycles.
A change in culture and mindset
Things began to improve when IPC worked on changing the culture and mindset to agile, augmenting
the practices with test-driven development and automated testing. It was hard because we took
developers used to working any way they liked and imposed very rigorous discipline. For six months, it
was a big churn. You have to be prepared for some of your staff leaving because they cant make the
transition. In our case, about 15% couldnt or didnt want to make the change, so they left or we asked
them to leave.
According to Labelle, IPC is now 100% committed to lean agile development, using methodologies
and tools like Scrum and Kanban. Once people understand the value of agile, they become so excited
about it theres no going back, he says. Those most passionate about agile become coaches and
mentors.
The company is developing payment-processing and point-of-sale (POS) solutions that follow the new
methodology, replacing packages and service providers with in-house solutions. The relationships with
our processing vendors werent going well, explains Labelle. We were paying a lot but not getting
what we wanted. And once you get in bed with them, its very hard to get out.
Labelle cites some impressive results: We built a payment-processing platform and saved our
franchisees $20 million almost $1,000 per year per franchisee. It was risky because many
restaurants are 24/7, with more than 50% of payments on plastic, so the system cant go down.
It took two years to develop, but we had the credibility to convince leadership that we could do it.
IPC also set to work on a platform that wouldnt be set in stone for years. The nimble system has
resulted in weekly software releases, and it processes 2 million transactions per day. Yet it has been
down less than 60 minutes in the last 4.5 years (due to a DNS problem). Plus, Labelle reports that the
weekly software releases have never caused a single disruption in service. This gives the business
an extreme advantage, he says. We can react almost instantly to business requests, like mining
customer information to provide one-to-one marketing at the cash till.
Meanwhile, the move to agile has fred up Labelles staff. A group previously uninvolved in the POS
solution suddenly became interested. Meeting on weekends, these four built a POS solution that
works and can take payments on an iPad, says Labelle. They came to my offce, pulled out an iPad
and showed me the fully functioning solution. Soon we will test it with a Subway mobile seller at Florida
Atlantic University. It blows my mind!
For Labelle, another important indicator of success is how purchasing, supply chain, distribution
management and other IPC business units have adopted agile approaches they have seen in IT.
They especially like the daily stand-up sessions (where people huddle to solidify the days game plan,
standing to keep the tempo high and the meeting brief), the transparency and the ability to hold people
accountable, he says.
Based on an interview with, and material from, George Labelle, CIO, IPC, November 2013.
Jollibee Foods uses a mature hybrid-cloud approach
Founded in 1975, Jollibee Foods Corporation (JFC) has 2,100 fast-food stores in its home base of the
Philippines and 500 additional stores in China, Vietnam, Brunei, Hong Kong, the Middle East, Indonesia and
the U.S. JFC has 8,000 employees and had 2012 systemwide sales of PHP92.27 billion (US$2.07 billion).
Before joining the company, CIO Larry Matias led a mobile-banking initiative in Indonesia that required
the simulation of 5 million users, three banking gateways and 10 telecommunications providers. Public
cloud was the only cost-effective way, he says, and I got to see the power of it.
Moving critical apps to the public cloud
Matias has led the deployment of cloud-based services at Jollibee for the last two years, starting with
Web portals and then building internal cloud competencies. Today JFC has several mission-critical
applications on Amazon Web Services (AWS) infrastructure as a service, such as material requirements
planning (MRP) and the companys Web and phone food delivery services.
Moving to the cloud has improved handling of peak loads, with 20 on-premise servers augmented
by access to the equivalent of 150 servers, without a budget increase. JFC currently spends about
$30,000 per month on AWS. New capacity can be deployed in a couple of hours; formerly it took
months to properly size, select, procure, receive and deploy new servers.
It is much better than virtualization, says Matias. You cant really reduce your data centers air
conditioning and power consumption when you turn off a virtual server, since the physical servers and
storage underneath all that virtualization continue to require power and air conditioning. In addition, the
step-xed costs incurred when infrastructure outgrows a data center are no longer an issue.
Exploiting new cloud opportunities
Until JFCs global ERP templates are deployed, Matias is using SaaS ERP for countries outside the
Philippines. IaaS is a good long-term business case for us, he says, but SaaS is better in the interim,
since charging is by seat, as opposed to on/off.
Matias believes in continuing a hybrid of on-premise and cloud capabilities. For example, with JFCs
largest distribution facility, he uses the Infor Warehouse Management System in the cloud, linked to
on-premise Schaeffer conveyor belt systems that manage physical systems in real time.
Matias and his team rely heavily on Amazons cloud management tools, such as Dynamic DNS, Route
53 and Storage Gateway. They also use the cloud to size on-site infrastructure needs. You can try it
on cloud rst, working out what compute power and storage you need by experiment, says Matias. If
you then want to bring it on premise, youre well prepared.
A smarter approach to the cloud
Based on his experience with the cloud, Matias has distilled some key lessons:
Many people have misconceptions about the cloud. The best way to overcome them is through
limited experimentation. To allay staff fears, help them see that they dont need to own assets; they
just need to control them.
It is essential to select a true public-cloud provider, not focus solely on monthly billing. A provider
must be able to turn your services on and off, tune congurations (e.g., storage and compute
power), bill on a dynamic basis and offer a good set of cloud management tools.
For IaaS, it is important to develop a time-conscious mindset in IT (e.g., I would pay more for a
cloud than for an on-premise solution if I didnt downsize or turn off systems when there was little or
no demand).
If you succeed with the cloud, executive satisfaction and expectations will go up, so keep reminding
executives of the innovation that results.
Matias fnal advice is for cloud vendors: I suggest to IaaS providers that they add a different model
whereby they can extend on-premise processing power with a grid-computing-like model. This helps
in weaning new clients onto the cloud before the change to cloud architecture. Furthermore, I would
encourage SaaS vendors to pursue on/off business models, which make for a stronger long-term
business case.
Based on an interview with, and material from, Larry Matias, CIO, Jollibee Foods, November 2013.
Jollibee Foods uses a mature hybrid-cloud approach
(continued)
Digital leadership transforms Miroglio Group
Miroglio Group is an 883.2 million (US$1.2 billion) clothing and fabric manufacturing and distribution
company. Headquartered in Alba Cuneo, Italy, since its establishment in 1947, the company has 49
business operations in 34 countries and sells 18 million garments a year.
Augmenting the CIO role with CDO responsibilities
Gianni Leone joined the company as group CIO three years ago and for the last year has assumed the
additional responsibilities of chief digital ofcer (CDO), delivering digital services to the nal customer.
When top management looked at shifting customer knowledge and engagement practices from a
tactical to a brand and countrywide effort, they saw the need for a groupwide role.
With his experience as CIO and previous e-business experience at Gucci, Leone was an ideal
candidate. A CIO-CDO role also made sense because of the technology implications of digital service
delivery and the need to execute innovative projects formerly handled by a central marketing team.
Early digital initiatives
To fulfll his vision of multichannel holistic customer engagement, Leone formed an 18-member team
responsible for the digital experience, e-commerce and CRM. It operates with a very different set of
rules than traditional IT teams.
I have to play Dr. Jekyll and Mr. Hyde as I move between the two roles, making sure I apply the correct
set of rules depending on the hat Im wearing traditional IT versus leading digital transformation,
explains Leone. Where delivering ERP functionality relies on thorough testing and standardization that
takes time, the digital team must operate very fast, experiment, fail fast, and either iterate or move on.
To ensure there were strong connections between the corporate and brand organizations, Leone
has established digital champions who support brand needs and, as representatives of the central
professional community, share central best practices.
Thus far, the team has had good results engaging consumers through multiple channels, applying
customer information and using digital channels to understand opportunities in new geographies. In
some markets, the company partners with strong digital malls to acquaint customers with the brand
before trying to move them to Miroglios own digital store. This way, companies can also gauge the
size of a market to determine the wisdom of a brick-and-mortar investment, says Leone.
Leone is looking at digital mass customization. He thinks designers would reap benefts from using
digital technology, but he sees more value in digitally engaging customers with made-to-order
customizations. The beauty for a multibrand group like ours is being able to play with all these
directions to test them before spreading out in a digital or physical way, he says.
A revolutionary interim role
Leone views his dual role not as an evolution of the CIO role but as a revolution. After years of
focusing on infrastructure, ERP and the like, he sees the traditional CIO role shrinking as new digital
opportunities grow. For other CIOs who wish to exploit new customer engagement opportunities and
inuence the coming digital world, he recommends a strong liaison with the chief marketing ofcer.
Marketing has a lot of ideas, but they cannot see all the opportunities available in the technical world,
he says. At the end of every dream marketing has, there is the need to deliver and provide value to
execute on the dream.
Leone sees the CIO-CDO role as crucial to any company in the early stages of new digital business
models. Someone who can coordinate traditional CIO duties and emerging digital services, while
maximizing synergies between the two, can greatly increase a companys effectiveness. Still, Leone
sees this as a temporary arrangement an incubator for training, adopting and providing services, and
building the expertise to take the enterprise into the digital world.
When all the worlds business is digital, everything including the organizational model currently
followed will be different, he says. In a few years, we will need something other than a CDO. For
now, however, we and other companies do not have the nal recipe for this kind of role and the teams
that work under it.
Based on an interview with, and material from, Gianni Leone, chief digital and information ofcer,
Miroglio Group, October 2013.
Priority Health sees speed of response as vital in
uncertain times
Priority Health is a Michigan-based U.S. health plan covering 600,000 people at 12,000 employers.
CIO Krischa Winright faced a complex challenge when developing a new mass-market regional
presence for Priority Health. The effort required Web, mobile and deep back-end integration. The
launch date was immoveable, and the websites profle among customers, the healthcare industry and
the media was extremely high. Add to all this a legislative reform process that had left requirements in a
state of ux.
The company met the challenge with an agile development approach consisting of multiple small
teams, many complemented by small boutique partners a seemingly counterintuitive answer but
second nature to Winright and her team. It resulted in the highly successful launch of a major new
capability, on time and without major issues.
Digital leadership transforms Miroglio Group (continued)
Two modes of development at different speeds
Standard upgrades and package implementations are planned and executed using traditional waterfall
approaches, explains Winright, but development projects where signicant digital assets are created
approximately 70% of our portfolio follow an agile path involving two-week sprints across the
environment. In a large healthcare enterprise like ours, we need discipline around the funding of
releases, along with the option to say no at any point. We have a standard ve-stage methodology, but
the path through it can change dramatically depending on the nature of the work.
Priority Health broke the mission-critical healthcare initiative into several workstreams, each supported
by small multidisciplinary agile teams. Most of the teams, in turn, leveraged small, innovative external
partners with specialist skills in areas such as the digital shopping experience. Architecture and other
key disciplines were embedded in every team, with a separate integration team helping to mitigate
execution risk.
To support the cross-functional teams, which are mobile and constantly changing, the company
redesigned the physical workspace. A whole oor supports a work style whereby project teams swarm
into a collaborative area. This avoids internal silos, prevents inertia and minimizes handoff errors, while
fostering trusting and productive business partner relationships.
The benets of bimodal IT
According to Winright, changes introduced over the last three years by the faster of Priority Healths
two-speed IT (agile approaches with two-week sprints, support for the PMO, and collaborative
workspace areas) have improved velocity and throughput by 38%, for the same resource investment
(i.e., dollars and people). She notes that velocity improvements of the highest-performing teams are far
more dramatic as much as 200%. Winright adds that the benets go beyond speed and throughput,
and they do not end at go live. On the contrary, the companys ongoing fast-cycle development
capability keeps solutions meeting market needs into the uncertain future.
It is very important to maintain our small-project muscle, Winright concludes, breaking large and
complex initiatives into small parts and two-week sprints. This way, we reap the benets of high-velocity
approaches that are also highly adaptive to changing requirements.
Based on an interview with, and material from, Krischa Winright, CIO, Priority Health, November 2013.
Seoul National University Bundang Hospital goes fully digital
to replatform its health systems and services
Opened in 2003 with 609 beds, Seoul National University Bundang Hospital (SNUBH) has grown to
a 1,400-bed facility with 38 operating theaters. The hospital hosts 5,000 outpatient visits per day,
employs 700 doctors and 1,000 nurses, and has been digital from the start.
Dr. Hee Hwang, CIO and chief medical offcer, has a Ph.D. in pediatric neurology. He leads the IT
steering committee and supervised the latest rollout of digital health information systems at SNUBH.
I am not an engineer or an IT guy, but I have a great interest in digital technology, he says.
His digital leadership challenge was to muster both corporate and IT resources into a single vision:
Design SNUBH to be fully digital. We were chartless, flmless and order-slipless from the start,
says Hwang. Digital assets include clinical decision support systems, clinical pathways and clinical
indicators. As Hwang explains, We now use 147 clinical pathways in 13 specialties, and more
than 300 clinical indicators in areas such as recovery time, transfusion management and antibiotics
management. Digital covers every aspect of our practice.
The frst system was built using a previous version of Microsofts .NET Framework and browser-based
interfaces. It was getting outdated, says Hwang. Specifcally, it could not support the Nexus of
Forces Gartner refers to: social, mobile, cloud and information.
The next system, implemented in 2013, took SNUBH further into the digital world. I can say that we
used IT to build our rst system, but we applied digital technologies to create the second one, explains
Hwang (see fgure opposite for digital milestones in the hospitals evolution).
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
Source: Seoul National University Bundang Hospital.
Next-generation HIS
Patient guide and
bedside concierge
Mobile EMR dashboard
Developing next-generation HIS
DR system
Desktop virtualization
HIMSS analytics stage 7
Next-generation PACS system
Design of next-generation HIS system
Real-time asset-tracking system
Closed-loop medication administration
Health information exchange (HIE) system
Telehealth pilot project
Extension to 909 beds
Full-digital general hospital (609 beds)
IT adoption status at Seoul National University Bundang Hospital
The latest system, called Next-Generation Health Information System (NGHIS), took three years and
3,000 months of human effort to build, including contributions from 30 full-time physicians in every
specialty. The vision of NGHIS is to promote human health utilizing digital technologies through a
system that is easy to use, smart, cloud based, data oriented, service oriented, mobile, stable, exible
and secure. Still based on Microsoft Windows and .NET, it has a service-oriented architecture, uses
an enterprise service bus on a BizTalk server and creates the user experience through Windows
Presentation Foundation.
NGHIS supports integrated systems and services for staff on virtualized desktops and mobile clinical
devices; secure data on patient devices (including mobile e-consent); smart bedside terminals; large-screen
dashboards in wards; and multimedia animation-based patient education (the last available on any device).
We call this patient-centered healthcare delivery, says Hwang. With a just few touches to the personal
monitors in their rooms, patients can check their schedules and medications, type questions to ask their
doctors or research an upcoming examination. Outpatients can receive information on their medical
consultations through their smartphones. Bluetooth receivers and transmitters in the ceilings guide
patients through the maze of hallways. If you dont own a smartphone, you can use hallway kiosks.
According to Hwang, SNUBH is the frst Asian hospital to reach level 7 of the Healthcare Information
and Management Systems Society (HIMSS) Analytics Electronic Medical Record Adoption Model
(EMRAM), and its bedside station won a 2013 Red Dot Award for communication design. When you
look at our systems, he says, you see only what appear to be conventional technologies. The key to
patient-centered systems is their softer aspects, which refect understanding of the patients journey.
Hwang notes that SNUBH had no option but to design and build its own system. There were no
packages out there that did what we needed, he says. That made the process a challenge, because
there was no precedent. We borrowed other industries best practices our national security agencys
approach to cloud, for example. We had to get creative.
Based on an interview with, and material from, Dr. Hee Hwang, CIO and chief medical ofcer, Seoul
National University Bundang Hospital, October 2013.
Tesco is innovating with suppliers
Tesco is a 72 billion (US$117.8 billion) retail group headquartered in the U.K. The company has
530,000 employees in 12 countries and serves 75 million in-store and online shoppers every week.
A digital-innovation imperative that involves partners
According to Mike Yorwerth, group technology and architecture director, Tesco has always been good
at incremental innovation of internal processes, but the need today is for disruptive innovation that
goes beyond process. Since CEO Philip Clarke stated that supermarkets formerly competed based on
property but now increasingly compete based on technology, digital innovation has moved to a higher
place on the companys agenda.
Recent examples of Tescos digital innovation include a virtual shopping wall in South Korea, which
combines the notion of a billboard (say, on a subway wall) with a shop-able Web page; entry into
streaming media with its Blinkbox business (which rents movies and TV shows on a per-use basis);
and a low-priced Android tablet called Hudl.
For the last few years, Tesco has run internal 24-hour hackathons showcases for the ideas of a
large group of participants. Recently Yorwerth realized that ITs external partners could contribute to
innovation, since the top partners alone spend huge amounts on innovation, without a retail bias.
Yorwerth took the opportunity to conduct an IT supplier innovation day in place of the companys
traditional pre-Christmas meetings with vendors. He asked each IT vendor with a strategic relationship
with Tesco to send two people an account manager and a big-picture architecture thinker. Twenty-
four vendor representatives came, including people from Gartner. The agenda consisted of ve major
sections:
Seoul National University Bundang Hospital goes fully digital
to replatform its health systems and services (continued)
Yorwerth kicked off the meeting, explaining where Tesco was as a company, its goals going forward
and its ambitions for digital innovation.
Groups from the most recent Tesco hackathon presented their creations, which included an app for
tracking calories and physical activity. Another idea was an intelligent display stand for high-priced
retail items such as digital cameras, using 3D-printed components, sensors and a Raspberry Pi (a
tiny computer developed in the U.K.) as a controller, and with the capability to send video between
a big screen and a tablet.
Yorwerth then explained the level of ambition Tesco was looking for and tried to get everyone in an
innovative mood.
Gartner gave a presentation on business model innovation.
The vendors were split into groups and asked to work together to come up with innovative solutions
to four business challenges Yorwerth had discussed.
Getting a supplier innovation day right
The big question was whether a supplier innovation day could work, says Yorwerth. Did we have
the right people in the room? Would they be able to work together? It did work, and we got some
interesting ideas. For example, one very large vendor spoke passionately about its experience with
tools and technology for creating a social organization. And in a discussion on how technology could
help with physical health, a vendor helped us think more about mental health and social value, such as
the importance of contact with those who dont have anyone checking up on them. Perhaps delivery
drivers could help make older, single people feel more connected.
Going forward, Yorwerth plans to run supplier innovation days every four months. For others wanting to
experiment with this approach, he offers the following advice:
Keep the group reasonably small 20 to 30 people.
Give strong direction up front on the level and type of innovation expected.
Dont try to run too fast. Initially, just establish a forum where vendors will listen to and think about
your innovation issues, a valuable outcome in itself.
Encourage openness and sharing by setting out nondisclosure concerns at the start of the meeting.
You work with vendors on condential projects anyway, and the idea is only a small piece of the
puzzle. The tough part is execution.
Dont be limited by your industry. Look for analogies from other industries and exploit them.
Based on an interview with, and material from, Mike Yorwerth, group technology and architecture
director, Tesco, November 2013.
Universidad Tecnologico de Monterrey takes higher
education from nano-collaboration to hyperconnection
Founded in 1943, Universidad Tecnologico de Monterrey is a private nonproft group of two Mexican
universities, with 60 campuses and an online Spanish-language virtual campus. The university
community consists of 14,000 teachers, 700 researchers, 330,000 students and 250,000 alumni.
An underserved network of the brilliant minds of Latin America
We have a very broad community network, with professors, researchers and alumni in powerful places
[35% of C-level executives in Mexico are alumni of the university, and 37% of alumni are running their
own companies], and a large, demanding group of millennial students, says CIO Jos Tam. We are
trying to capture the brilliant minds of Latin America.
Tam has a background of 20 years in management consulting. He worked on CEMEX Shift, an internal-
innovation, open-collaboration platform. When I joined the university, I saw the opportunity for Shift
reloaded, he says.
Online services to all stakeholders had not been empowering the university network. Each university
was an island, Tam explains, with tools such as email, content repositories isolated from one
another, and lots of isolated applications. We experimented with massive open online courses
(MOOCs) and virtual classrooms for blended learning. Knowledge is classifed by course for students,
but we wanted to fip the knowledge to Mexican society, too. We also had low alumni engagement
for teaching and learning. We were nano-collaborating, and this was not good enough. We were
making people miserable.
A vision beyond simple collaboration
Tam and others had a vision of hyperconnection for reciprocity to replace the limited collaboration of
the past (see gure opposite). As a not-for-prot, he says, the most important thing for us is to help
connect students, teachers, researchers, counselors and alumni. Giveback and reciprocity are a key
value for us.
Academic offering demand
Thought leadership
Researchers
Knowledge
objects
Semantic
knowledge tree
Semantic tagging folksonomies
Ontological search
Collaborators recommendation
Alumni and
enterprises
Geography
Industry
Open ideas
Collaborative
innovation
Ideas in action
Innovation culture
Idea sharing
Disruptive-innovation
candidate identification
Students,
entrepreneurs
Mentors
Semantic
entrepreneurial
and mentor tree
Teachers
Researchers
Knowledge
demand
Foster teachers
collaboration
Research 2.0 Innovation
TEC listens
to society
Academy 2.0
Source: Universidad Tecnologico de Monterrey.
Apps being developed at Universidad Tecnologico de Monterrey (TEC)
to foster collaboration
With the necessary capabilities now in one place and restructured around content, services and
collaboration, the university is building on this base with tools that connect researchers, and semantic
tools such as folksonomies that make data shareable.
For example, in Dreams Come True, a gamication tool under development, money markets enable
users to invest their starting capital in ideas. This process ensures that the best ideas bubble to the
surface, with selected ideas paying a return to initial investors. The tool not only generates ideas but
also opens innovation to wider communities. People dont need an idea to be part of the innovation
process; they can simply invest in a good idea when they see it. For students, there is Mentoring 2.0,
which exploits social-network capabilities to facilitate virtual mentoring.
After having certain capabilities built on a Microsoft platform, Tam has learned that a key stakeholder
is recommending a Google alternative just one road bump in a technical journey he knows wont
be easy. Still, hes not worried about the particulars of technical evolution. More important is that the
university remain rmly focused on the overriding goal: empowering its extensive human network.
Based on an interview with, and material from, Jos Tam, CIO, Universidad Tecnologico de Monterrey,
November 2013.
Yum Brands recognizes the importance of the CIO-CDO role
Based in Louisville, Kentucky, USA, Yum Brands is the $13 billion owner of Pizza Hut, KFC and Taco
Bell, owning 20% of its stores and franchising 80%.
Baron Concors recently became CIO of Yum Restaurants International after serving ve years as both
CIO and chief digital offcer (CDO) of Pizza Hut. Yum does not have a CDO at the group level, but
Concors intends to remain involved in digital initiatives. I enjoy that side of the business very much,
he says.
Running a digital team alongside IT
In his CDO role at Pizza Hut, Concors had focused on digital marketing and technology: online, mobile,
social and customer loyalty programs. I was responsible for the online business of Pizza Hut, he
explains. I also strived to give my colleagues more visibility into digital than they ever had. He also had
the opportunity to balance the creative input of marketing. We applied a lot of data science to digital
marketing, and we learned from and adapted the practices of companies like Amazon. No point in
reinventing the wheel.
The digital team at Pizza Hut was separate from the IT team 12 to 15 people with critical skills in
usability, design, CRM and loyalty programs. We needed to make it easier for customers to order
online, says Concors. Airlines and others may be able to make it more expensive to order over the
phone, but we didnt have that luxury. We would lose customers if we did that.
The digital team also leveraged those on the IT team with Web platform experience. We used
sophisticated content management systems to allow rapid changes to digital marketing without coding
changes, explains Concors. We have a lot of peak periods in our business for example, around the
Super Bowl.
From CIO to CDO
Concors believes the CDO role, though still not represented in many companies, is critical to enterprise
leadership. If the CEO asks, Who owns digital? and gets multiple names, then you have to wonder
who owns it, he says.
At Pizza Hut, Concors saw his role as digital leader as balancing left- and right-brained people (the
analytical vs. the intuitive). To increase the companys digital savvy, he helped organize a digital summit
every year for senior leaders in the organization. He also believes in reverse-mentoring programs
(whereby junior staff members, or even external youths, advise senior staff on using digital innovations
to work and collaborate more effectively).
Concors believes that his previous background as a management and transformation consultant helped
prepare him for the CDO role; he doesnt feel it is a simple extension of the CIO role. You have to be
seen as a breakthrough thinker and innovator in your current job, he maintains.
In Concors view, CIOs who wish to become CDOs need deep business acumen, strong relationship
and inuencing skills, and the willingness to manage the inevitable tension between IT and marketing.
Be the voice of reason between the left- and right-brained, he advises.
On the CIO side, Concors sees the need to create more agility and speed, and a calculated approach
to risk. Failing is OK as long as you learn, he says. But people remember if you deliver something of
terrible quality. Bring your peers and even your customers in. Be transparent.
Based on an interview with, and material from, Baron Concors, CIO, Yum Restaurants International,
November 2013.
Other 18%
Manufacturing/natural resources 19%
Government 13%
Banking 8%
Education 7%
Services 7%
Retail 5%
Healthcare providers 4%
Transportation 4%
Utilities 4%
Communications 2%
Media 2%
Wholesale trade 2%
Insurance 6%
Survey respondents by industry
EMEA
39%
U.K. 7%
Nordics 6%
Benelux 4%
Italy 3%
France 3%
Germany 3%
Switzerland 2%
Africa 2%
Iberia 1%
Other 8%
APAC
17%
Australia 5%
Japan 4%
China 3%
India 2%
Other 3%
North America
38%
U.S. 34%
Canada 4%
Latin America
6%
Brazil 4%
Mexico 1%
Other 1%
World
2,339 respondents
77 countries
Survey respondents by geography
30%
15%
22%
33%
2014
29%
15%
20%
37%
2013
23%
14%
21%
42%
2012
23%
16%
20%
40%
2011
18%
19%
25%
38%
2010
18%
Other
COO
CFO
CEO
19%
28%
35%
2009
Survey respondents by reporting line
Wholesale trade
Healthcare providers
Banking
Insurance
Transportation
Education
Other
Services
Utilities
Retail
Government
Manufacturing/natural resources
Media
Communications
6.7%
6.6%
3.9%
2.8%
2.5%
1.9%
0.8%
0.6%
0.5%
0.5%
-0.8%
-1.6%
-2.8%
-1.1%
Expected IT budget changes by industry
FURTHER READING
Gartner Executive Programs reports
Aron, D. and Weldon, L., Lets Get Digital: A Template for Digital Business Strategy, G00257724,
2013 No. 9
McDonald, M. and Aron, D., Hunting and Harvesting in a Digital World: The 2013 CIO Agenda,
G00248536, January 2013
McMullen, L., Hunter, R. and Cole, J., Innovate Like a Startup: The CIOs Front-Offce Toolkit,
G00254272, 2013 No. 6
Mesaglio, M., Aron, D. and Lazaro, C., Masters of Innovation: What CIOs Can Learn From the Worlds
Best Innovators, G00213393, May 2011
Weldon, L. et al., The Gartner Travel Guide to the First Digital Decade, G00255443, 2013 No. 7
Core research
Aron, D., Does Your Business Need a Chief Digital Offcer? G00238298, 20 September 2012
Aron, D. and Jones, N., The Art of Innovating by Partnering With Small Companies, G00239799,
22 March 2013
Aron, D. and McDonald, M., Approaching Cloud Services Strategically Helps Banco Bilbao Vizcaya
Argentaria Simplify Platforms and Processes While Enhancing Productivity, G00231037, 23 January
2012
Aron, D. and Raskino, M., The Many Flavors of the CTO Role, G00238323, 19 September 2012
Aron, D., Berry, D. and Mok, L., Toolkit: Chief Digital Offcer Job Description, G00249735,
30 May 2013
Aron, D., McLellan, L. and Genovese, Y., The Three Types of Digital Business Leader, G00251979,
16 May 2013
Da Rold, C. and Karamouzis, F., The Nexus of Forces Enables Differentiated Business Value Services,
G00245426, 27 March 2013
Drakos, N., Hackathons, World-Jams and Mashup Days Can Fit Your Collaboration Strategy,
G00152782, 29 October 2007
Drobik A. and Rayner, N., Develop a Strategic Road Map for Postmodern ERP in 2013 and Beyond,
G00252735, 31 July 2013
Haight, C. and Plummer, D., Use Web-Scale IT to Make Enterprise IT Competitive With the Cloud,
G00250754, 15 May 2013
FURTHER READING
McGee, K., Early Trends in Recruiting Chief Digital Offcers, G00258352, 14 November 2013
Plummer, D. and Smith, D., Hybrid Cloud Is Driving the Shift From Control to Coordination,
G00252934, 19 September 2013
Raskino, M. and Lopez, J., CEO and Senior Executive Survey 2013: As Uncertainty Recedes, the
Digital Future Emerges, G00247308, 25 March 2013
Raskino, M. et al., CEOs and CIOs Must Co-design the C-Suite for Digital Leadership, G00258536,
22 November 2013
Swanton, B., Toolkit: Pace-Layered Application Strategy Starter Presentation, G00249808,
20 May 2013
GARTNER EXECUTIVE PROGRAMS REPORTS
BYOD: Giving Power to the People
2013 No. 11
The It Factor
2013 No. 10
Lets Get Digital: A Template for Digital Business Strategy
2013 No. 9
Transforming Cultural Conicts Into a Competitive Advantage
2013 No. 8
The Gartner Travel Guide to the First Digital Decade
2013 No. 7
Innovate Like a Startup: The CIOs Front-Ofce Toolkit
2013 No. 6
Succeeding in Tomorrows Technology Labor Market
2013 No. 5
Turbocharging the CIO With Software Tools
2013 No. 4
The Psychology of Serial Innovation
2013 No. 3
The Politics of Powerful Partnerships
2013 No. 2
Hunting and Harvesting in a Digital World: The 2013 CIO Agenda
January 2013
Business Capability Modeling Brings Clarity and Insight
to Strategy and Execution
December 2012
The Customer Experience Is the Next Competitive Frontier
Late November 2012
Selling Innovation to Senior Executives
November 2012
Determining the Right Level of IT Operational Spending
October 2012
CIO Ambitions: Breaking Through the Silicon Ceiling
September 2012
Unlocking the Power of a Great Marketing-IT Relationship
August 2012
Business Model Innovation: Unleashing Digital Value Everywhere
July 2012
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4 Executive summary

10 Welcome to the third era of enterprise IT

Business performance 4.5

*On a scale of 1-4, with 1 = at risk, and 4 = trusted ally

On a scale of 1-7, with 1 = strong disagreement, and 7 = strong agreement

On a scale of 1-7, with 1 = strongly underperforming compared to competitors,

Hydra, the hybrid-cloud approach of BBVA

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