Discussion 2

How CEOs, CIOs and CMOs see the technology future of corporate openness, customer individualization and innovation partnerships

Linda Ban and Anthony Marshall

E xtensive conversations about the future of business, innovation, customer

interactions and technology with thousands of private and public sector leaders

participating in a series of IBM surveys have revealed insights into opportunities for

C-suite executives – Chief Executive Officers (CEOs), Chief Marketing Officers (CMOs) and

Chief Information Officers (CIOs) – to align their priorities and objectives. Our analysis of

evolving C-suite priorities over several years shows how top executives can work closely

together to leverage new technologies to manage openness across the organization,

individualize customer relationships and invest in the partnership ecosystem for innovation.

Since IBM’s CEO Study series began in 2004, technology has progressively risen on CEOs’

radars. In 2012, technology rose for the first time to the top of the list (see Exhibit 1).

For CEOs ‘‘technology’’ encompasses the growing variety of capabilities that organizations

must incorporate within their businesses, including social, mobile, data, analytics and cloud.

CEOs are strategically focusing on those things that can help their organizations become

more competitive. CEOs also understand that retaining, developing or hiring the right people

with the right skills is critical for business success.

Given the CEOs’ planned operating strategy, there are many opportunities for CMOs and

CIOs to align their staffing and planning. For example, 76 percent of CEOs said they aim to

be innovation leaders instead of fast followers (see Exhibit 2). And 69 percent plan to partner

extensively, as opposed to centralizing all work ‘‘in house.’’ Also notable: the majority of

CEOs (59 percent) expect to simplify operations rather than choosing to manage existing

complexity. It will be crucial for CMOs and CIOs to ensure that their teams plan and execute

initiatives based on these same CEO priorities.

CEOs aim to empower employees through values, engage customers as individuals and

amplify innovation with partnerships. This translates into three major areas of alignment

opportunities for CMOs and CIOs to work toward realizing CEO priorities:

1. Managing openness.

2. Engaging customers.

3. Expanding partnerships.

Managing openness

Openness and transparency are becoming powerful sources of competitive advantage. In

today’s global business environment, rapid and continuous change has become an ongoing

condition. Growing demands for information access and collaboration have also emerged.

DOI 10.1108/SL-07-2013-0051 VOL. 41 NO. 6 2013, pp. 35-42, Q Emerald Group Publishing Limited, ISSN 1087-8572 j STRATEGY & LEADERSHIP j PAGE 35

Linda Ban is the global

C-suite Program Director

for the IBM Institute for

Business Value and the

Global Leader for the 2011

Chief Information Officer

([email protected]).

Anthony Marshall is

Strategy and

Transformation Leader and

Program Director of the

Global CEO Study for the

IBM Institute for Business

Value ([email protected].

com).

The authors would like to thank the 1,709 CEOs, 1,734 CMOs and 3,018 CIOs around the world who generously shared their time, experience and insights with us, and also these IBM colleagues for their contributions to this report: Angela Assis Nascimento, Carolyn Baird, Steve Ballou, Marni Barrett, Saul J. Berman, Kristin Biron, Rachna Handa, Peter J. Korsten, Eric Lesser, Kathleen Martin, Joni McDonald, Gavin P. Roach, Lianthansiam Valte and Vanessa Carels van de Vliet.

To deal with these new realities, leading CEOs are examining – and perhaps redefining – the

imperative for organizational openness. CMOs are increasingly being tapped to manage

this new openness, especially as it is manifested in the explosion of social media. In that

mission, CIOs can play a large part.

In the 2012 IBM CEO Study, we saw that outperforming organizations in particular,

emphasize openness[1]. CEOs anticipate demands for greater transparency, and the

competitive imperative to open up their organizations to expanded collaboration, both

internally and externally. To draw out the best from their workforces, CEOs identified

personal and organizational attributes that are most important to managing openness while

embracing collaboration. The top four personal characteristics cited by CEOs are:

collaborative (75 percent), communicative (67 percent), creative (61 percent) and flexible

(61 percent). The top four organizational attributes CEOs deemed necessary to engage

employees were:

1. Ethics and values (cited by 65 percent of CEOs).

2. Collaborative environment (63 percent).

Exhibit 1 CEOs are most focused on the impact of new technologies, while CMOs and

CIOs ranked other external forces higher in importance

Technological factors

External forces impacting organization

2011 CMO 2011 CIO 2012 CEO

People skills

Market factors

Macroeconomic factors

Regulatory concerns

Globalization

Source: 2012 CEO Study/2011 CIO Study/2011 CMO Study Q1: “What are the most important external forces that will impact your organization over the next 3 to 5 years?” (CMO n = 1,733, CIO n = 3,018, CEO n = 1,709)

Exhibit 2 A majority of CEOs are focused on becoming more innovative and partnering

more extensively over the next three to five years

Innovation Leader

Simplify

Centralized

Optimize ops globally

All done in house

14% 10% 76%

31% 10% 59%

31% 25% 44%

37% 22% 41%

69% 20% 11%

Fast Follower

Manage complexity

Decentralized

Optimize ops locally

Partner extensively

Operating strategy

Source: 2012 CEO Study Q16: “What will your operating strategy be in 3 to 5 years, compared to today?” (CEO n = 1,663 to 1,685)

PAGE 36jSTRATEGY & LEADERSHIPj VOL. 41 NO. 6 2013

3. Purpose and mission (58 percent).

4. Ability to innovate (51 percent).

As organizations become more open, CEOs recognize the need for organizational values

and a clear sense of purpose to guide decisions and actions. However, openness increases

vulnerability. The internet – especially through social networks – can become a worldwide

stage for any employee interaction, positive or negative. Given the dynamic nature of online

engagement, detailed sets of rules and regulations to guide conduct and behavior quickly

becomes impractical. For organizations to operate effectively in this open environment,

employees must internalize and embody the organization’s values and mission. Defining

and extending strong values across the organization provides great opportunities for CMOs

and CIOs to extend their influence and support CEO priorities.

Engaging customers

Our research shows that CEOs, CMOs and CIOs are mostly on the same page with regard to

the importance of greater customer engagement. To achieve the objective of knowing and

engaging customers, big data is getting big attention across the organization.

In the new, virtual/physical world, data is becoming a core business competency of every

organization. Today, CEOs are prioritizing investments in customer data far above other

investment options. Insights from customer data are becoming a crucial differentiator, and

this is borne out by CEO priorities: 73 percent of CEOs plan to invest in their organizations’

ability to draw meaningful customer insights from data.

In recent years, the pursuit of insight has changed in two key ways. First, there’s far more raw

data to choose from than ever before. And second, ‘‘knowing the customer’’ is no longer

confined to segmentation, statistical averages and historical inferences. Individualization of

customer interactions is the wave of the future.

CEOs search for more meaningful customer insights. Seven out of every ten CEOs are

making major changes in their organizations to better understand individual customer

needs. And they are implementing extensive changes to enable faster, more relevant

responses to markets and individuals (Exhibit 3).

CEOs aim to improve customer relationships using new tools. To improve individual

customer interactions, CEOs plan a step-change in the use of social media, although

face-to-face engagement with customers is not going away (see Exhibit 4). Today, 80

Exhibit 3 CEOs plan to increase investment in customer individualization and

responsiveness – far more than other investments to meet customer

expectations

Improve understanding of individual customer needs

Improve response time to market needs

Harmonize customer experiences across channels

Include customers/citizens across product/service life cycle

Increase transparency and corporate accountability

Increase social and environmental responsibility

72%

72%

55%

48%

47%

44%

Source: 2012 CEO Study Q9: “To what extent will your organization change to meet customer expectations compared to your industry peers over the next 3 to 5 years?”

VOL. 41 NO. 6 2013 jSTRATEGY & LEADERSHIPj PAGE 37

percent of CEOs cite face-to-face interaction via their sales forces or other representatives

as the top way to engage customers. But they expect engagement in the future to be

drastically different.

Although just 16 percent of CEOs report using social media today to interact with customers,

57 percent predict that social channels will significantly displace traditional media over the

next three to five years – a major gap they must quickly close.

Despite the anticipated 256 percent increase in using social media, most CEOs are

grappling with how to use it today:

1. How to incorporate social media into daily organizational activities?

2. How to interact with social environments?

3. How to incorporate social feedback in a meaningful way?

4. How to drive revenues from social media?

Social media is proving both a major challenge and a substantial opportunity for

organizations to engage more closely and intimately with customers, and to potentially drive

brand new streams of revenue.

This anticipated jump in social media use presents an opportunity for both CMOs and CIOs

to have enterprise-wide impact. CMOs cite enhancing customer loyalty as a top priority and

they are already starting to look more closely at customer experience – not just at the point of

a transaction, but across the complete value chain of the customer interactions. However,

movement towards a more comprehensive view into customers is by no means seamless.

Many CMOs who have traditionally relied upon structured data to increase their knowledge

of customers continue to view customers as segments rather than individuals. Today, 61

percent of CMOs still rely on data that surfaces during segmentation and 54 percent rely on

data obtained at the point of purchase.

Looking ahead, CMOs will need to capture, analyze and use unstructured data around

customer experiences, thoughts and behaviors. Real improvements in individual customer

Exhibit 4 CEOs expect a tremendous increase in using social media to connect with

customers in the near term

Face-to-facea Social media

Websites

Today In 3 to 5 years

80%

67%

57%

16%

55%

47%

38% 41%

256%increase

Channel partners

Call centers

Advisory groups

Traditional media

Mechanisms to engage customers

Source: 2012 CEO Study Q8: “What are the three most important mechanisms your organization will use with customers over the next 3 to 5 years?”. aFace-to-face/sales force/institutional representatives

31%

22% 22%

39%

15%

40%

PAGE 38jSTRATEGY & LEADERSHIPj VOL. 41 NO. 6 2013

relationships depend on connecting with customers as individuals so they become

advocates, and not just buyers or users. Today, much of the customer information available

to CMOs is simply lost – only a minority of CMOs capture, analyze and use customer data in

three lifecycle phases: interest/desire (cited by only 45 percent of CMOs); use/enjoy (41

percent of CMOs); and bond/advocate (40 percent of CMOs). CIOs have a real opportunity

to facilitate and enable much greater capture and use of customer data to inform and

motivate increased customer understanding and engagement.

Outperforming CEOs are more insight-driven. One-quarter of all CEOs say their

organizations operate below par in terms of driving value from data. Many CEOs

expressed frustration about their organizations’ inability to capitalize on available

information. But CEOs from outperforming organizations also outperform their competitors

significantly across their data capabilities – accessing data, drawing insights from data and

translating those insights into action (see Exhibit 5).

Expanding the partnership ecosystem

Partnering is pervasive and has reached an all-time high. In 2008, a little over half of the

CEOs we interviewed planned to partner extensively. Now, more than two-thirds intend to do

so. In the future, external partnerships will most likely become even more critical to CEOs’

operating strategies.

Innovation has also become fundamental to organizations as they compete for differentiation

in an uncertain economic environment. In support of differentiation through expanded

innovation, many organizations see that many of the most dynamic ideas come from other

organizations or entire ecosystems. Looking for innovation opportunities, outperforming

organizations are pursuing external partnerships. But external partners are not necessarily

other similar organizations. Increasingly partners are non-traditional – communities of

interest, academic institutions or other types of organizations (see Exhibit 6)[2].

Implementing leading practices

As they focus more and more attention on the challenges and opportunities described,

CEOs, CMOs and CIOs are able to begin improving C-suite coordination and alignment

Exhibit 5 CEOs of outperforming organizations are better at sourcing and using customer

data – access, insight and translation into action

Access to data Draw insights from data Translate insight into action

Outperformers Underperformers

26%

54%

26%

54%

31%

57% 108%more 108%more 84

% more

How well data is used compared to competitors

Source: 2012 CEO Study Q22: “How good is your organization at driving value from data?” (today)

VOL. 41 NO. 6 2013 jSTRATEGY & LEADERSHIPj PAGE 39

immediately. Given the shared obligation to move the strategy forward, individual executives

can ‘‘own’’ specific elements of the strategy:

B CEOs can act to understand, demonstrate and enable organizational openness by

establishing collaborations across the enterprise, recognizing and rewarding those who

embrace collaboration.

B CMOs can jump-start efforts related to data: identifying and advocating to fulfill data

requirements, including how data should permeate through the organization and to

partners.

B CIOs can reduce the number of impediments to collaboration and actively introduce tools

for more creative collaboration.

How CEOs, CMOs and CIOs can align priorities to realize a shared vision. Our analysis

uncovers important actions CMOs and CIOs can take to work together more effectively and

to more fully support the goals of their CEOs:

1. Managing openness across your organization:

B Define openness before openness defines you. Openness is already upon us, but

some organizations are reluctant to incorporate it. Acknowledge that openness is a

major force that will continue. Develop a comprehensive strategy and plan to

orchestrate the evolution of openness in your organization. Build the structures,

processes and policies necessary to deliver the outcomes you want and need from

greater openness.

B De-silo as a top priority. The pressure has never been greater on organizations not only

to be responsive, but to be ahead of market demands. Monitor new technologies that

enable competition from both within and outside of established industries. Act or

respond quickly by removing impediments to collaboration. Prioritize the identification

and removal of remaining organizational silos, along with hurdles that affect customer

interactions.

B People will become the critical priority. In many organizations, the sentiment ‘‘people

are our most important asset’’ is perceived as empty talk, with employees feeling that

they are actually treated like any other resource. But this perception must be changed.

Over the coming decade, a perfect storm will hit organizations – demographic shifts,

combined with even greater demand for skills and experience, changing employee

Exhibit 6 Outperforming CEOs are partnering more frequently

2008 2012 2008 2012 2008 2012

55%

69%

39%

46% 46%

59%

25%more 18%more 28%more Extent to which organizations are partnering Propensity to partner for innovation

Underperformers Outerperformers

Source: 2012 CEO Study Q16g: “What will your operating strategy be in 3 to 5 years, compared to today?”; 2008 CEO Study Q11: “To benefit from global integration will you invest to: partner extensively?”; 2012 CEO Study Bench, D.: “To what extent does your organization collaborate and partner (externally) to innovate?”; 2008 CEO Study Q4: “To what extent does your organization collaborate and partner to innovate?”

PAGE 40jSTRATEGY & LEADERSHIPj VOL. 41 NO. 6 2013

expectations, and even stronger expectations for increased organizational openness

and transparency. People will truly become the most important asset, so the capability

to engage and inspire employees will be a key differentiator of outperforming

organizations.

2. Individualizing your customer relationships:

B Deepen customer relationships through superior interactions and experiences. As

transactional relationships transform into experiential ones, customers of all types are

less tolerant of generic or ill-conceived interactions with organizations – irrespective of

their nature or purpose. Customers are not differentiating among physical, virtual or

other types of experiences – and they are beginning to rail against being

dehumanized as a segment or archetype. Recognize this change and invest to

improve customer interactions by acting on what you already know and can learn

about individual customer needs and preferences.

B Unstructured data will become the gold rush of our time. The ability to tap into

unstructured internal and external data has become a key determinant of

outperformance. Marry insights from unstructured sources such as social media,

email, sentiment analysis and blogs with structured systems of record for essential

input into business strategy, customer interaction and engagement.

B ‘‘Chief Data Officer’’ is in everyone’s job description. In this new world of individualized

and immediate data access, insight and interaction, severe damage can be directed

toward customers or organizations even before they know what’s hit them. Deal

directly with issues of security, privacy, accuracy and availability as they become

exponentially more important and sensitive – do not leave them to the IT or Legal

departments. Manage their potential impact on the entire enterprise and work to avoid

implications on the long-term stability (and survival) of the organization.

3. Investing in your partnership ecosystem:

B Convert ‘‘me, me, me’’ into ‘‘we, we, we’’. Establishing new partnerships opens an

important set of choices. The spectrum of partnership possibilities ranges from

‘‘vendor’’ on one side to ‘‘trusted advisor’’ on the other, with many possibilities in

between. Consider numerous factors that determine the optimal level of engagement,

including the nature of the joint effort, and the objectives and culture of each

prospective partner.

B Explode the dimensions of collaboration. Partnerships need not be predictable or

expected. They can go far beyond the formality of historical

organization-to-organization arrangements. Use social media and other

technologies to create unique opportunities to partner with communities of

individuals, customer groups, academic institutions and others with minimal cost

and high potential benefit. Leverage such options to enable one-to-one engagement

with partners across organizations, opening up new possibilities for dynamic

interactions, spontaneous creativity and innovation.

B Be the orchestrator of a shared tomorrow. Avoid thinking of partnerships in a

fragmented way, but rather see them as a portfolio of relationships that can

ultimately support achievement of your long-term business objectives (as you help

‘‘ Our analysis of evolving C-suite priorities over several years shows how top executives can work closely together to leverage new technologies to manage openness across the organization, individualize customer relationships and invest in the partnership ecosystem for innovation. ’’

VOL. 41 NO. 6 2013 jSTRATEGY & LEADERSHIPj PAGE 41

them achieve theirs). Play the role of orchestrator at the center of your own

eco-system – setting the direction and objectives, and enabling collaboration

across your partnership network.

Contributor

Corey Leong, Senior Consultant, Strategy and Innovation, IBM Global Business Services.

Notes

1. Outperformers are defined as organizations that excelled against industry peers in terms of

three-year revenue growth and profitability, according to their CEOs. ‘‘Leading Through

Connections: Insights from the Global Chief Executive Officer Study,’’ IBM Institute for Business

Value, May 2012, www.ibm.com/ceostudy

2. Underperformers are defined as organizations that ranked lower than industry peers in terms of

three-year revenue growth and profitability, according to their CEOs, ‘‘Leading Through

Connections: Insights from the Global Chief Executive Officer Study,’’ IBM Institute for Business

Value, May 2012, www.ibm.com/ceostudy

‘‘ CEOs anticipate demands for greater transparency, and the competitive imperative to open up their organizations to expanded collaboration, both internally and externally. ’’

PAGE 42jSTRATEGY & LEADERSHIPj VOL. 41 NO. 6 2013

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