Posted by: Monideepa Tarafdar | December 16, 2009

Recognizing the “supply-demand” duality in the CIO’s position

Chen, D.Q, Preston, D.S, and Xia, W., Antecedents and Impacts of CIO Supply-side and Demand-side Leadership: A Staged Maturity Model, forthcoming in Journal of Management Information Systems

The paper examines a now-widely-recognized divergence in the expectations, activities, roles and potential contribution associated with the Chief Information Officer’s (CIO) position. Building on anecdotal perspectives that delineate “supply”- and “demand”-oriented CIO roles (e.g. Mark and Monnoyer 2004), the paper reports on an academic investigation of the antecedents and outcomes of these two divergent roles.

What does it mean for the CIO to have demand- and supply- oriented roles? Traditionally, IT has largely been used to automate workflows and provide managers with information for effective decision-making. The CIO has thus been associated with primarily operational responsibilities, that is, making sure that managers have access to cost-effective, efficient and uninterrupted IT infrastructure – networks, databases and servers, along with reliable applications. However, IT has become increasingly complex and business opportunities emanating from it exceedingly compelling. Today’s CIO’s are therefore expected to contribute strategically as well, by visioning the potential role of IT in shaping the firm’s products and markets. An example of the first- overseeing an ERP implementation exercise and ensuring associated activities such as effective project management, IT skill acquisition and end-user support. An example of the second – scanning IT trends and anticipating how they might affect the firm’s products, processes and partner-relationships or how they might enable it to do something new using IT – think integrated front-to-back order processing and inventory management systems that facilitate Dell’s build-to-order strategy.

Chen and colleagues conceptualize the CIO’s demand and supply roles along these lines. They define the supply-side role as the “CIO’s capability to exploit existing IT resources and competencies to improve the efficiency of the firm’s operations” and the demand-side role as the “CIO’s capability to lead the organization to explore new IT-driven business opportunities that will lead to organizational innovations and business growth”. The former measures the extent to which the CIO keeps systems operational and supplies the skills and resources necessary for doing so. The latter measures the extent to which the CIO is an effective visionary and contributes to the strategic business planning activities of the firm. The authors find that the supply side role leads to contribution of IT to the firm’s efficiency, that is, enables IT to contribute to cost savings, operating efficiency and process improvement. The demand side role enables IT to make strategic contributions, that is, to lead to increase in sales, market share and ROI. The demand side also leads to operational contributions. The authors hypothesize that organizational support for IT and the CIO’s organizational tenure, rank-proximity to the CEO, and membership of top management team strengthens both the supply and demand roles. However, they find that support for IT increases only the supply role whereas the CIO’s rank-proximity to the CEO and membership of top management team the demand role. The CIO’s organizational tenure does not increase either.

The paper is one of the first to investigate the duality inherent in the modern CIO’s position and in that sense examines an under-investigated phenomenon. There are a couple of curious aspects to their results. First, why does organizational support for IT affect the supply side and not the demand side? It could be because when CIO’s say that the firm supports IT, what they mean is that although the IT department provides resources and support for important and complex, but not path-breaking projects such as ERP, there may not be support for more “cutting edge” activities such as scouting for technologies, analyzing how they lead to business opportunities and providing for mechanisms for incorporating these opportunities in the strategic business planning process. So there is a need to provide resources for CIO related activities that are really strategic and transformative for the business.  Second the CIO’s rank proximity to the CEO influences the demand side but not the supply side. This might mean that the companies have by now recognized the  importance of the operational importance of IT and do not need heavyweight convincing by their CIO to allocate resources to his or her supply oriented IT activities. However, the strategic potential of IT may still not be understood or recognized – the role of the CIO in facilitating such understanding and making sure that his or her demand side leadership is supported by the organization therefore becomes especially important – and underscored by this particular finding. Third,  the IT experience and organizational tenure of the CIO does not influence either supply or demand oriented IT activities of the CIO – could be because the CIO may not be a technical/IT person to begin with – underscoring another interesting trend – that of non-IT CIO’s . Indeed in many organizations, the CIO is a former business/functional person, a deliberate  decision, to ensure the CIO’s business ans functional familiarity.

The CIO’s position is increasingly seen as the most complex and indeed critical of the executive roles and requiring technical, political and business acumen. Academic literature will, I expect, see more reports investigating divergent CIO activities.

References

Mark, D. and Monnoyer, E. (2004). Next-generation CIOs. The McKinsey Quarterly, July 2004. Retrieved April 13, 2009, from http://www.mckinseyquarterly.com/Next-generation_CIOs_1451

Nolan, R. & McFarlan, F. W. “Information Technology and the board of directors,” Harvard Business Review (83), October 2005.

Marianne Broadbent and Ellen Kitzis, The New CIO Leader: Setting the Agenda and Delivering Result, Harvard Business School Press, 2009.

Richard L. Nolan, and Shannon O’Donnell, Adventures of an IT Leader by Robert D. Austin, Harvard Business School Press, 2009.

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