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May 22, 2012

49

Where Big Data Challenges, CIOs Make a Difference

By Marie Lingblom

A new McKinsey Global survey finds top-level executives expect new technologies such as Big Data will transform their businesses, but many admit their companies are far from prepared. The solution: Deeper engagement with the CIO, a position many believe is increasingly obsolete.

Most executives say the three key trends in digital business—namely, Big Data and analytics, digital marketing and social-media tools, and the use of new delivery platforms such as cloud computing and mobility—are strategic priorities at their companies.

These executives have high expectations for the potential value their companies can generate from the three trends, and one-third even expect digital business to increase operating income by more than 10 percent over the next three years. However, the survey reveals some tough challenges, such as garnering direct support and engagement from CIOs.

It’s an interesting conclusion that the CIO will play a greater role in solving data-related problems, as many organizations and the industry in general views the CIO position as increasingly obsolete. The CIO, while still a valuable contributor to the IT infrastructure and process, has been somewhat marginalized by the ability of line of business managers and senior executives to independently implement technology decisions.

McKinsey’s first report on key trends and strategies in digital business is based on responses gathered during April 2012 from more than 1,400 C-level executives representing a range of global industries and sizes.

Nearly half of respondents say their companies’ investments in digital initiatives are too small to deliver on their goals. Many executives also cite overall organizational shortcomings and a lack of IT capabilities as barriers to meeting their companies’ technology priorities.

Of the three key business technology trends the survey asked about, just more than half of all respondents say their organizations have made two of them—big data and analytics, and digital marketing and social tools—at least a top-10 corporate priority on their strategic agendas. In fact, for each of the three trends, between 6 percent and 9 percent say it is their organizations’ top corporate priority.

For each of the trends, the pace at which respondents say their organizations are adopting different practices varies greatly. With Big Data, 49 percent say efforts are focused on customer insights, segmentation, and targeting to improve overall performance; an even higher share say their companies should focus their efforts on using data and analytics to generate these insights.
Yet just one-fifth say their organizations have fully deployed data and analytics to generate insights in one business unit or function; only 13 percent use data to generate insights across the company.

The McKinsey survey asked respondents to compare the value they have generated from digital business at their own companies with that of their competitors. More executives say they have outperformed competitors in their use of Big Data and analytics than in applying any other trend.

At the vertical level, even larger shares of executives in health care and pharmaceuticals (56 percent) and at business-to-consumer companies (50 percent) say the same about big data. Compared with their fellow executives, CIOs are more bearish across the board: only 30 percent expect their companies to generate more value than competitors from big data, for example, compared with 46 percent of CEOs.

McKinsey director Brad Brown and McKinsey consultant Johnson Sikes suggest in the report a broader organizational strategy is needed to carry out digital business initiatives. In particular, they suggest a “new approach to managing talent by utilizing flexible team structures, engaging outside collaborators, and increasing corporate tolerance for failure.”

Brown and Sikes note that good people are scarce in each of these technology areas. Companies have to be resourceful in developing homegrown skills wherever possible, as well as finding or contracting for the talent to implement their strategies most effectively.

And at companies where IT leadership is engaged and sponsors digital business activities, respondents are far likelier to say their organizations capture more value than competitors: 44 percent say so, compared with 24 percent at companies where the CIO plays a more passive role.

This difference suggests that active participation by the CIO contributes significantly to achieving digital business leadership, and further highlights companies’ need for an active CIO who is engaged and credible across the business.

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