MGI Research

Wednesday, Jan 16th

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CIO Strategies for Digitizing Traditional Businesses

Aiden ColieSummary: Amongst all of the challenges facing business today, digital transformation clearly stands out for many traditional businesses in publishing, media, healthcare and others. Acquiring a Digital DNA takes more than creating web content or publishing mobile apps. What are the roles of the CIO and CTO in this context? We have invited Aiden Colie who is the VP of Digital Technology at a leading NYC-based book publisher to share with us his views on what makes a successful formula for digitizing traditional businesses. 20 Questions is an MGI Research Interview Series with leading technology industry executives, innovators, and investors.

To access a full printer-friendly version of the interview with Aiden Colie, please click here.

Andrew Dailey: What are the top three key challenges facing CTOs today?

Aiden Colie:  Finances are still tight as we continue to recover from the 2008 downturn.  Budgets are flat, while in the digital world things are getting more complex and challenging. Doing more with the same spending levels as four years ago is a real challenge. Maintaining service levels with as few people as possible is another challenge.  The third challenge is perhaps the most difficult – it is the digital transformation. A lot of businesses are struggling to understand the risks and opportunities of the digital world.  Business executives are leaning on CIOs and CTOs to be a sounding board and source of innovation, but the business doesn’t always understand technology, nor have a clear idea of where they want to go. This creates a Catch-22 type of conversation with the business asking to know what is possible, and CIOs asking where the business wants to go.

Andrew Dailey: What advice would you give to a CEO looking to gain a deeper understanding of what is required to “digitize” a business?

Aiden Colie: There are two primary issues.  One is the need to understand what the competition is doing.  Not just traditional competitors, but also identifying the start-ups in the space, and how they are creating new and different ways of applying technology to become highly disruptive.  It’s easy to focus on the known, established competitors, but the ones to watch out for are the up and coming innovators.  The second key issue is to recognize that in the digital world, you don’t have to build everything yourself.  There is a great opportunity to leverage partnerships, joint ventures, and third-party components.  Speed matters, and there’s a lot of technology and innovation that can be leveraged quickly, - this means abandoning the traditional “let’s build it all and control it all ourselves” approach of the past.

Andrew Dailey: For an established business facing a seemingly low-level, but potentially massively disruptive threat, what role should the CIO or CTO play in getting the executive team out of its comfort zone to address such a threat?

Aiden Colie: The CIO has to start thinking more like a business person and less like a technologist.  CIOs need to provide the CEO with an assessment of the potential options that are out available, the various products that can be used, and a detailed analysis of the competitors.  Further, the CIO needs to be in a position to advise the CEO on potential acquisitions and/or joint ventures, and to present those options in business, not technology, terms.

Andrew Dailey: Digital Marketing Officers – are they an addition to the CIO, replacement for the CIO, or just a passing fad?

Aiden Colie: The DMO is an addition to the CIO.  I don’t think it’s a passing fad, but it’s the type of position that should obsolete itself, if it’s done properly.  For companies struggling to “digitize” their business, the DMO or Chief Digital Officer is a must. That person can create a central strategy that spans the entire organization.  If the person does the job well, the company can get a united vision and strategy and create momentum behind the plan.  The position doesn’t, however, have to last forever within a company.

Andrew Dailey: How do you shift the conversation with your CFO or CEO from IT as a cost center to IT as a business enabler?

Aiden Colie: It depends on the personality of the CEO or CFO and the culture of the organization.  For some organizations, this may be mission impossible.  On the other hand, there are valid arguments to be made in terms of financial metrics, business metrics, in terms of how your customers are interacting with your products in the digital world.

In the digital world, IT is analogous to the R&D and manufacturing operations in a manufacturing company.  If you are building a car, you look at R&D and operations as a source of continuous innovation and competitive advantage – not simply as a pure cost center.  With digital, IT is like your manufacturing operation, it is a strategic partner to the business, and it is an extension of the business.  The old model of treating IT as a cost center and support operation is dead.  In progressive organizations, IT is an equal partner at the table, and a key contributor to the conversation on strategic goals and possible outcomes.

To really understand digital business and the types of projects and investments required, you need to understand technology.  The great business franchises built in the 21st century – Google, Amazon, the resurgence of Apple, - these are companies with technology in their DNA.  Business leaders – be it CEOs, CFOs, or even CIOs, need to be conversant and comfortable at the nexus of tech and business. If they aren’t, then they need to bring in an executive with those skills, and place a lot of responsibility and trust in that individual.

Andrew Dailey: What are the right metrics for digital projects?

Aiden Colie: What I love about digital projects is that quantifiable metrics are often abundant and the numbers can be big.  At AIG I worked on project that delivered $1 billion in direct benefits to the company.  While $1 billion isn’t game changing at AIG, it is still meaningful.  In simple terms, consider how much of your business is done via digital channels.  Five years ago, digital channels (direct and indirect) represented about 10% of most companies’ revenue. Today it is 25-30%, and in five years it will be 65-70%.  Further, the margin on digital revenue is often higher than in traditional channels.

Andrew Dailey: Social, mobile, cloud, and big data – these are the hot topics of the moment.  Which one of these will deliver the greatest benefit to the business, and which one is, in your view, the most over-hyped?

Aiden Colie: None of these is over-hyped.  Every single one is absolutely critical, and any company that overlooks anyone of these is missing a potential game-changer.  Determining the priority for each and the potential combinations is the challenge. Not all companies have a need for big data analysis, but a large number do.  It’s a huge opportunity, especially for companies that have been around a long time, and have tons and tons of data about their customers. This is an opportunity to better understand the customers, target them with offerings that they want, etc.

Mobile is a topic where companies are falling further behind.  In these fast-paced areas like social, mobile, and big data, you can find yourself chasing last year’s paradigm.  Many companies are building mobile experiences around 20-second interactions, when in fact mobile has gotten to the point now where it’s not a 20-second interaction anymore, it’s people commuting to work for an hour, it’s people on business travels, it’s people sitting on the couch, or working in the kitchen. By building a 20-second interaction when the interactions are really 5, 10, 20 minutes, even an hour or two – those are missed opportunities.

Andrew Dailey: Which of the major vendors are the companies that you look at as thought leaders that are pushing the envelope?

Aiden Colie: Amazon is the best, although I think they could be doing even more to help customers understand the full scope of their capabilities and how to better leverage them. Google does a pretty good job at helping customers get the most out of their products.  Both Amazon and Google are doing a better job than IBM, Oracle, or Microsoft.

Andrew Dailey: Is the era of Microsoft and Windows everywhere over?

Aiden Colie: It’s not over, but its dominance is done.  A few short years ago, everyone used a PC with Windows on it.  Today, Apple laptops are everywhere, and in the high-growth tablet market, Windows doesn’t have any traction. The iPad and Android tablets dominate.  Soon the tablet market will exceed the PC market.  Microsoft missed an opportunity by withholding Office from the tablet platforms.  That may end up looking very short-sighted.

Andrew Dailey: Does Apple have a role in the enterprise?

Aiden Colie: Definitely.  They already do.  Look around any major company, and you’ll see more MacBooks or iPads than standard Windows laptops.  The Apple operating system OSX keeps improving while Windows doesn’t.  Personally, I switched two years ago, and would find it hard to go back.  I tried Windows 8, and found it lacking in many ways.

Andrew Dailey: What do you see as the biggest benefits/challenges of cloud computing?

Aiden Colie: Cloud computing is a very broad term, and the challenge for companies is to determine how to take advantage of the various layers – from software as a service to platform as a service to infrastructure as a service.  For applications that are very predictable, keeping them in a standard environment makes sense. For new applications, particularly ones that are not very predictable and that have uneven demands on compute resources, the cloud is an attractive option. Cloud based resources offer benefits in terms of flexibility and scalability.  The key issue is determining the most appropriate fit based on application type/workload.

Andrew Dailey: What are the likely scenarios for the evolution of cloud infrastructure? Will incumbent outsourcers and hardware vendors become a credible force in this market?

Aiden Colie: They will try, but Amazon, Microsoft and Rackspace have such a jump-start on the rest of the market that it is almost a runaway horse race at this point.

Andrew Dailey: Is cloud computing a zero sum game for the IT industry?

Aiden Colie: It’s not clear at this point in time.

Andrew Dailey: Do you expect private clouds to gain traction relative to public cloud adoption?

Aiden Colie: It’s definitely a hybrid.  Certain applications will always require a private cloud due to security, performance, or cost reasons.  Overall, perceptions towards the public cloud are evolving and more people are open to it as a viable option.  There are a lot of systems, particularly consumer-facing applications that are candidates for public cloud or hybrid implementations.

Andrew Dailey: What percentage of your applications portfolio is SaaS vs. on-premise today, and how do you see it changing over the next three years?

Aiden Colie: The percentage of SaaS usage is on the rise.  Companies are looking at their portfolios, and determining what is strategic vs. non-strategic, and they are moving to SaaS in all the areas where they aren’t differentiating their business. Cloud-based email and CRM are classic examples.

Andrew Dailey: What are the three biggest benefits of SaaS, and the biggest challenges?

Aiden Colie: The biggest benefits are 1) having a world-class product at a substantially lower cost; 2) not having to use your resources to support it;  and 3) as many of us found out during super storm Sandy, having the availability of those applications even when your own data center is knocked out. Certain companies couldn’t access email for days, whereas those that outsourced email to Google or Microsoft didn’t miss a beat.  The main disadvantage of SaaS is I think people feel like they’re losing control of their data, and they worry about security.  The SaaS vendors have stepped up and proven that the level of security they provide is is far, far greater than the level security that most corporate IT departments are going to provide.

Andrew Dailey: Is it possible to broadly adopt SaaS solutions from a variety of vendors, and still maintain control of your IT architecture? Does IT architecture matter anymore?

Aiden Colie: Architecture matters and you need to look at what pieces of your architecture you’re comfortable moving out to a SaaS platform.   The place to focus is on embracing a service-oriented architecture, and building APIs for all of key systems.  There will always be the need to integrate on-premise applications with SaaS applications, as well as across SaaS applications.  Having the right architecture and APIs in place are essential.

Andrew Dailey: Cyber security is a hot-button today – especially among CEOs and even boards of directors.  With rising fears of IP protection and advanced persistent threats coming at a time when virtually everyone is doing business in places like China, where is security among your priorities, and where will it be in 2-3 years?

Aiden Colie: It depends on your vertical industry and your business.  Awareness is high, but with scarce resources and tight budgets, it’s not always at the top of the investment priorities.  As much as I hate to say this, I do believe we are going to see a very serious cyber-attack that will be a wakeup call to everyone.  When that happens, companies will be scrambling to improve their security.  It’s a big vulnerability right now and somebody’s going to hit it hard.

Andrew Dailey: Let’s talk mobility – what’s happening in education and the use of mobile technology?

Aiden Colie: We’re seeing explosive adoption of tablets: teachers using tablets, kids bringing tablets to school, classrooms being stocked with tablets. The result of this shift to tablets is that within 5-7 years, almost all textbooks will be digital. It makes economic sense. When a tablet costs $300 and can be loaded with textbooks, the financial return occurs within one year.  Next, the number of really compelling educational apps is taking off as well, and many of the apps are free or cost less than a dollar.  There are great apps for kids of all levels.  Imagine what the implications are for textbook companies when you have this diversity of apps, fundamentally cheaper economics, and suddenly every teacher and student can access these.

For textbook companies, mobile is an existential threat. Traditional publishers have a massive infrastructure, and think in terms of books.  Start-ups developing apps think in terms of compelling educational experiences that exploit the mobile technology and the cloud.

The opportunity you have in digital is to embed audio, video and deliver richer content.  Combining the power of mobile, cloud, and social is incredibly powerful – even in simple use cases.  For example, simply sharing highlighting with a friend and asking questions of your friends or the teacher.  Starting with a blank slate (or tablet, as it were) there is so much opportunity to innovate. It’s an exciting time if you are able to step far outside of the traditional ways of doing things

Andrew Dailey: You have worked inside of some very large organizations, as well as some relatively small, entrepreneurial ventures.  Many large organizations envy the speed and agility of start-ups, and yet are unable to replicate the pace of innovation and entrepreneurial velocity of a start-up.  What’s the secret to cultivating innovation and speed within a big organization?

Aiden Colie: First, you have to be committed to a start-up culture. A digital organization within a larger corporate parent has to be given room to innovate, and even fail.  Many large organizations don’t understand what it means to fail fast.  Digital teams need room to try a lot of ideas, and see which one(s) work without any fear of failure. They also need to create their own culture – because that is what you’re looking for, after all.  Too often the digital departments get pulled back into the same organizational norms and sclerotic processes that originally spurred the creation of the digital group. The effective digital groups are not burdened with the “we’ve always done it this way” attitude and management metrics.

Andrew Dailey: What advice do you give to that entrepreneur who is trying to get into the door of the corporate castle to just have the conversation?

Aiden Colie: It’s a tough door to crack open.  Helping find those innovative entrepreneurs is a role that a digital IT group can play.  The DMO needs to be looking for these strategic opportunities and bringing them to the CEO.  The DMO has the benefit of speaking the language of the start-up, and also that of the CEO, and can bridge the gap.   Before initiating the conversation, the entrepreneur needs to think hard about what it means to partner with a big, potentially slow-moving corporation.

Personally I think there are a lot of benefits for everyone to create joint-ventures and special relationships. There are so many well-established, incredible brand names that can’t get out of their own way when it comes to digital business.  If they are willing to trade some of that brand value to a start-up, it gives the start-up instant recognition and credibility.   In return, the established brand names gain access to technology and product offerings that are new and innovative to their marketplace.  It’s a big win-win, but unfortunately you don't see that happening a lot.

Andrew Dailey: What advice would you give to boards of directors and CEOs hiring a CIO?

Aiden Colie: Look for a strategic thinker who speaks business, not technology. Provide the CIO a seat at the table, and give him/her incentives based on revenue and margin improvements – not just cost containment.

Andrew Dailey: What advice would you give to first time CIOs?

Aiden Colie: Look for the business win, and avoid getting painted as a support center.  Make sure everything is a business project, and help the business ensure that its ideas are fully vetted and have business metrics attached.

Andrew Dailey: What’s your most notable success? What are you most proud of?

Aiden Colie: There are several, but creating the notion of a digital foundation is the one that stands out. We now have a standard platform for content management, search and for user profiles. We have the ability to take applications and extend them out to multiple platforms, businesses, and websites – all quickly and easily.   It’s a tremendous achievement, particularly since the need wasn’t that obvious when we started.

Andrew Dailey: In closing, share prediction with us. What do you think is going to be the biggest surprise as it relates to digital disruption in business looking out over the next two three years?

Aiden Colie: Many iconic brands that didn't get on the train fast enough are going to fail. We're going to see a real switch to companies that have digital DNA.  As a result, we’re going to see a lot more business cases like the Blockbuster Video.

Andrew Dailey: Aiden, - thanks you very much! It’s been pleasure to have you as a guest on 20 Questions.

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