The CIO challenge: Modern

business needs a new kind of

tech leader
As technology becomes increasingly important, an organization’s success
depends on whether the CIO can move from being a functional to a strategic
business leader.

by Anusha Dhasarathy, Isha Gill, and Naufal Khan

© skynesher/ Getty Image

January 2020
 “There’s no worse time than now to be an average This reality requires a CIO to first come to terms
CIO.” These words, uttered by an executive at a with the scope of the transformation itself. In
recent conference, neatly capture the intense our experience, it’s been helpful to think about it
pressure on CIOs. For years, executives have along three vectors:
stressed the need for CIOs to move beyond
simply managing IT to leveraging technology to 1. Reimagine the role of technology in the
create value for the business. This priority is now organization. This vector includes establishing the
a requirement. New technologies have been at role of technology as a business and innovation
the center of trends—from mobile-first consumer partner to design a tech-forward business
shopping preferences to the promise of artificial strategy (for example, tech-enabled products and
intelligence in critical decision making—that have business models), integrate tech management
reshaped the competitive landscape and disrupted across organizational silos, and deliver excellent
business models. For this reason, companies need user experiences.
to be tech forward: technology needs to drive the
business. 2. Reinvent technology delivery. IT needs to
change how it functions by embracing agile;
Despite this pressing need, of the organizations improving IT services with next-generation
that have pursued digitization, 79 percent of them capabilities such as end-to-end automation,
are still in the early stages of their technology platform as a service, and cloud; building small
transformation, according to McKinsey’s 2018 IT teams around top engineers; and developing
strategy survey.¹ Legitimate factors are delaying flexible tech partnerships.
progress, from the scale of the change to the mind-
boggling complexity of legacy systems. We believe, 3. Future-proof the foundation. To keep pace with
however, that one of the biggest issues is that many rapid technological advancements, organizations
CIOs have not accepted the degree to which their need to implement a flexible architecture
role needs to expand beyond cost and performance supported by modular platforms, enable data
responsibilities in order to transform IT into a core ubiquity, and protect systems through advanced
driver of business value. cybersecurity.

Three vectors of a holistic Five traits of a transformative CIO

transformation For IT to become a driver of value, the
Before understanding the responsibilities of the new transformative CIO also needs a new set of skills
CIO, it’s important to understand the nature of tech and capabilities that embody a more expansive
transformations themselves. In most cases we’ve role. In working on tech transformations with
observed, tech transformations are implemented hundreds of CIOs, we have identified five CIO
as a set of disjointed initiatives across IT. That leads traits that we believe are markers of success.
promising developments to stall out or underdeliver.
We have found that a tech transformation must 1. Business leader
be holistic to deliver full business value. Creating To help technology generate business value,
powerful customer experiences, for example, the transformative CIO has to understand
requires a data architecture to track and make business strategy. Findings from our 2018 IT
sense of customer behavior. Architecting modular strategy survey reveal that companies with
platforms needs revamped approaches to hiring in top IT organizations are much more likely than
order to get top-flight engineers. others to have the CIO very involved with shaping

1
“Can IT rise to the digital challenge?” October 2018, McKinsey.com.

2 The CIO challenge: Modern business needs a new kind of tech leader
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Questions for the CIO

• Can I clearly articulate the business’s goals?

• Are the most important technology initiatives delivering quantifiable business value to the company?

• What percentage of technology resources is focused on work that drives business goals versus maintenance?

the business strategy and agenda, and strong get firsthand feedback on both products and the
performance on core IT tasks enables faster customer’s experience of doing business with the
progress against a company’s digital goals.² CIOs company. He uses these perspectives to inform
who can make this leap tend to take the following his technology decisions.
actions.
Take responsibility for initiatives that generate
Learn the business inside and out revenue
The scope of an IT transformation means that CIOs CIOs can further develop business acumen
must be prepared to interact with the business in by taking responsibility for initiatives that
different ways. We have found, for example, that generate business impact, such as building an
the best CIOs go far beyond meeting with the e-commerce business, or by working with a
C-suite or attending strategy meetings. They invest business-unit leader to launch a digital product
time with functional and business-unit leaders and then measure success by business-
and managers to gain an in-depth understanding impact key performance indicators (KPIs), not
of business realities on the ground and go out technology KPIs. Such efforts allow CIOs to
of their way to develop a nuanced and detailed build a deep understanding of the business
understanding of customer issues. CIOs do this implications of technology, such as customer
by continually reviewing customer-satisfaction abandonment because of slow download times
reports, regularly monitoring customer-care calls, on a site or other poor user experiences.
and participating in user forums to hear direct
feedback. As part of a digital transformation, for instance,
the CIO at a large financial institution committed
As one large financial institution set out to to developing digital products to help the
build its digital products, the business and business scale its presence in a new market.
technology teams jointly led user listening and While the CIO already understood how to build
feedback panels early and often throughout systems to support financial products, he and
the development process. Both technology and his team had limited experience in creating new
business leaders made it a priority to attend these digital products to sell directly to consumers. So
panel discussions so that they could effectively the team created a program built on rapid test-
guide their teams on developing products that and-learn cycles to identify what mattered to
would best address the needs of end customers. customers and meet those needs. Subordinating
The CIO of a B2B technology-services company, tech decisions to customer needs was crucial in
meanwhile, meets customers on a regular basis to allowing the CIO and his team to develop a digital

2
“Can IT rise to the digital challenge?” October 2018, McKinsey.com.

The CIO challenge: Modern business needs a new kind of tech leader 3
 offering that succeeded where it mattered: with based on common goals, mutual responsibility,
consumers. and accountability. According to a McKinsey
survey on business technology, in fact, the
Get on boards companies in which IT plays a partner role
Developing a deeper well of business knowledge in digital initiatives are further along in both
often requires CIOs to extend their networks implementation and achieving business impact.⁴
beyond the organization. One of the best ways to
do that is by joining the board of another company. To kick-start the transformation journey, the
A third of the boards of companies within the CIO of a transportation-and-logistics company
Fortune 500 today include a former CIO or CTO, made it her first priority to meet with every
and that number continues to increase.³ single business leader to understand their goals
and issues and to set expectations on how
2. Change agent they could best work together, by clarifying, for
A full technology transformation is not about example, what the business side could expect
moving to the cloud or embracing new IT solutions. to get from IT in a consultant role versus IT
It also involves infusing technology into every as a service provider or partner. This effort
strategy discussion and process throughout to understand what mattered to each leader
the organization. Driving a transformation established trust, and from each of these
around the three vectors we laid out earlier discussions it became clear that the business
(reimagining the role of technology, reinventing wanted a true partnership with technology
technology delivery, and future-proofing the and understood what it meant. The CIO further
foundation) starts with a CIO mind-set that both built on the relationship with the business by
acknowledges the need for transformative prioritizing initiatives in the tech transformation
change and commits to a multiyear journey. that addressed business needs and working
closely with business leaders to drive progress.
Partner with business leaders This active collaboration ensured that the
Generating support for a transformation among products and services IT developed were
business leaders across the organization requires adopted.
creating true partnering relationships with them

3
“ The digital CIO has arrived,” MIT Sloan CIO Symposium, 2016.
4
“Partnering to shape the future—IT’s new imperative,” May 2016, McKinsey.com.

Sidebar

Questions for the CIO

• Do leaders in the C-suite have a clear understanding of why a tech transformation is important?

• Do you have partner-level relationships with people in the C-suite in developing the vision and plan for both
business and IT?

• Is your tech transformation actively incorporating each of the three vectors of change?

• Do you have a “war room” to manage the transformation that can solve problems as well as track progress?

4 The CIO challenge: Modern business needs a new kind of tech leader
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The CEO’s role in making the CIO successful

The stage is set for CIOs both to lead a successful technology transformation and to influence business strategy. They
can’t do it alone, however. The CEO must create an environment where the CIO can thrive. Here are a few things CEOs
can do:

• establish a strategic role for the technology function

• elevate the CIO to report directly to the CEO

• rebalance technology investments and track their business value

• prioritize the development of a world-class tech workforce

Articulate the ‘why’ which allows transformation teams to better

Gaining support for a transformation requires that remove roadblocks and to allocate people and
stakeholders understand that true change will spend when and where they are needed. To
come only from tackling all three transformation actively manage this process, such CIOs also
vectors in a strategic, interlinked manner. That put in place a “war room,” a dedicated team
means not just explaining how this three-pronged that ensures transformation initiatives are
approach is better for IT but also clarifying delivering value by actively tracking progress
how it drives business goals and how it can be and helping to break through root-cause
implemented. When considering a shift to cloud, issues.
for example, executives tend to understand it
first as a cost-saving opportunity. But in helping This was the approach taken in a large global
executives understand the full range of cloud retailer’s digital and technology transformation.
benefits—improved speed to market, better The CIO set up a transformation war-room
developer productivity, and improved resiliency team that worked jointly from the beginning
and disaster recovery—CIOs can help them see with leaders outside the IT function, including
how the cloud can unlock new revenue models marketing, operations, sales, and e-commerce.
and services tied to business priorities. Together, they created detailed work plans.
This detailed early planning revealed which
Have an integrated plan that highlights risks and systems needed to be upgraded and when.
dependencies beyond IT The war-room team actively tracked progress
Large IT initiatives have always required detailed and quickly escalated issues for speedy
planning, but business-oriented CIOs ensure that resolution. The results were clear: a fivefold
transformation plans account for dependencies jump in digital sales, and project delivery four
outside of IT, such as marketing campaigns or times faster than projects of similar scope had
legal implications. They approach planning as a previously taken.
dynamic process rather than something static,

The CIO challenge: Modern business needs a new kind of tech leader 5
 Sidebar

Questions for the CIO

• Are the top people in IT really stars in their field?

• Do you rely exclusively on HR to find your talent?

• Do you have a clear view of the talent you need in the next three years—and a plan to develop it?

• What percentage of the best people you hire are still with you two years later?

3. Talent scout The head of technology and analytics at a large

Nearly half of respondents to McKinsey’s 2018 retail organization set up a talent war room to
IT strategy survey cite skill gaps on traditional hire data scientists and engineers. As part of this
teams as the top obstacle to a successful digital effort, the war-room team revamped recruitment
transformation.⁵ So CIOs need to focus not just on and onboarding processes by using different
recruiting top people but also on retaining them. talent sources, such as HackerRank and General
Two solutions have proven effective. Assembly, and by updating candidate screenings
and interviews with appropriate assessments
Reimagine how to attract tech stars of technical and other skills, such as coding
Companies can reap tremendous benefits and collaboration. In addition, they led weekly
from outsourcing. In the oil and gas industry, check-ins to track the talent funnel and adjust the
for example, the outsourcing of application process as needed.
development grew 50 percent between 2014
and 2018.⁶ But that needs to change, especially Build up internal talent
around the most crucial capabilities. CIOs who Getting good people doesn’t matter if you can’t
want to reinvent tech’s role need tech stars, keep them. Top CIOs, therefore, develop diverse
particularly the best engineers. By hiring the best career paths so that top talent can advance in
tech people, we’ve seen companies reduce their their own areas of strength—for example, by
technology costs by as much as 30 percent while letting a top-notch software engineer advance
maintaining or improving their productivity.⁷ CIOs while continuing to code design software rather
need to move quickly. In just 18 months, one CIO at than forcing her to manage others in order to
a transportation-and-logistics company radically succeed.
reshaped its talent profile. All the direct reports
and approximately 50 percent of tech employees Retraining the existing tech workforce also
were new, and 80 percent had transitioned to needs to be an important element of this platform.
different roles. The CIO of a large consumer company made

5
“Can IT rise to the digital challenge?” October 2018, McKinsey.com.
6
Dhingra, Sverre Fjeldstad, Natalya Katsap, and Richard Ward, “A new mandate for the oil and gas chief information officer,” November 2019,
McKinsey.com.
7
Klemens Hjartar, Peter Jacobs, Eric Lamarre, and Lars Vinter, “It’s time to reset the IT talent model: Foster an engineering culture of smaller
teams of better engineers to maximize productivity,” forthcoming in Sloan Management Review.

6 The CIO challenge: Modern business needs a new kind of tech leader
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Questions for the CIO

• Do you meet or speak with IT employees who are on the front lines at least once a week?

• Do you have a way to accurately measure and track people’s attitudes across the IT department?

• Are your top engineers happy with their work?

• How often do you publicly celebrate success and support noble failures?

digital and analytics upskilling one of the established various community-building and
company’s key strategic priorities, launching knowledge-sharing efforts—hackathons,
an enterprise-wide program, in tandem with “dev days,” tech spotlights, brown-bag
HR’s learning team. The program invested in lunches—where product managers,
an online learning portal to create personalized developers, data engineers, and architects
online learning experiences based on an could meet on a weekly basis to share details
employee’s goals and learning needs. These about their projects and bring up ideas or
were supplemented by other programs, issues for discussion. The CIO attended and
including in-person training, top management actively participated.
immersion sessions, and the cultivation of an
in-house expert network that people could tap Model and support true collaboration
on specific topics. Promoting collaboration across technology
teams and between the business and
4. Culture revolutionary technology is one of the most crucial
An effective talent strategy requires a culture prerequisites for a successful transformation.
that supports talent. Top-quartile IT organizations are more
likely to have an integrated or fully digital
Build a true engineering community operating model, according to McKinsey’s
Pay matters, of course, but top people want to 2018 IT strategy survey.⁸
go where they’re valued. One way to create that
kind of environment is to provide engineers In practice, CIOs can enable collaboration
with more autonomy by reducing the number of if they’re willing to relinquish some control.
managers and often-bureaucratic processes, One CIO at a financial-services firm realized
such as time-consuming reports and multiple that for his people to increase their impact,
rounds of approval. they had to be more closely tied to business
teams. So he embedded them into cross-
Creating ways for cohorts of similar skill sets functional teams aligned around specific
to get together can be a powerful way to products, relying on informal networks of
share best practices and foster a sense of guilds and chapters to provide guidance
community. The CIO of a software company and light oversight. The most effective

8
“Can IT rise to the digital challenge?” October 2018, McKinsey.com.

The CIO challenge: Modern business needs a new kind of tech leader 7
 Sidebar

Questions for the CIO

• Do the questions about technology that leaders in the C-suite ask reflect a true understanding of the impact of
tech decisions?

• When you explain the ramifications of tech decisions, do leaders really understand you?

• How often do company leaders reach out to you for substantive guidance about how tech can improve their
business?

CIOs ensure this level of collaboration is the of a B2B technology-services company found this
norm within IT itself as well. This is particularly level of insight so important that he asked the CIO
important around cybersecurity. IT can radically to present periodically to the board on technology-
reduce cycle times and maintain effective led business models.
security by incorporating security early into
development and working closely with the This role was particularly important when a retail
cybersecurity team on an ongoing basis. giant was looking to acquire an analytics company.
The CIO and his leadership team were involved
5. Tech translator from the very beginning in determining the data
In the past, IT transformations have often proven and analytics capabilities needed to fulfill the
expensive, time consuming, and short on value, company’s business strategy. They performed
and this has made some companies leery of deep-dive technical assessments, system and
undertaking them again. To address this issue data-platform compatibility reviews, and tests
and build trust, the best CIOs play an active role of vendor capabilities. The CIO ran a pilot with
in educating leaders about technologies and a business unit and operations team for three
their applications for the business. months to determine whether the final vendor
could deliver on its capabilities. At the end of
Make the business implications of tech decisions the process, the business was able to make an
clear informed decision.
Many tech decisions don’t get sufficient business
scrutiny beyond cost and high-level strategy
discussions. Transformative CIOs don’t settle
for that kind of interaction, articulating instead These skills are the tools that enable a CIO’s
how a proposed solution solves the underlying ability to transform IT. And in an increasingly tech-
business problem, what alternative approaches driven business landscape, they position CIOs as
exist, and the pros and cons of each. The CEO legitimate contenders to lead businesses as well.

Anusha Dhasarathy is a partner in McKinsey’s Chicago office, where Isha Gill is an associate partner and Naufal Khan is a
senior partner.

Copyright © 2020 McKinsey & Company. All rights reserved.

8 The CIO challenge: Modern business needs a new kind of tech leader