Think Flat

Two meetings last month remain etched in my memory for different reasons. Both with CIOs of  retailers who are facing a particularly challenging environment.

First let me point out the similarities. Both retailers are probably number two or number three in their sub-sector and have recently declared dismal results while the number one retailers in their category continue to buck industry trends and declare fantastic revenue and earnings growth. Both these retailers are under pressure to cut costs and at the same time transform the company. Both these retailers have relatively new CEOs whose mandate is to turnaround these companies. Both CIOs have been with their companies for over a decade.
 

So what does this mean for the CIOs? The two CIOs had absolutely different ways of dealing with what seemed to me fairly adverse circumstances.
 

The first CIO, lets call him CIO A…. figured out a way to consolidate his infrastructure spending and strike a pretty neat outsourcing deal with a global major reducing his net operating costs, resulting in lower SG&A. Lets ignore the specifics of the outsourcing deal for now but prima facie, the outsourcing deal has helped him free up headcount for either selected layoffs or to focus on strategic initiatives or both. The net financial impact is positive and he looks like a hero for his CEO. His CEO has gone on record stating that they will not look for further cost reductions in IT since it is so pivotal to the future growth of the company. Masterstroke, some would say….but some further digging may reveal that the CIO A has barely started to focus on how IT can really help turnaround the company. The company faces plaguing issues in areas such as customer service and customer loyalty. The speed at which he moves to mine the already available customer data to bring a customer-focused revolution in the company will be a direct measure of his success going forward…. From what I know of this CIO, my bet is that he will move forward aggressively using the same confidence and personal commitment as he showed in the outsourcing initiative. He knows that the biggest difference he can make is initiatives that directly affect customer service and customer loyalty.
 

The second CIO, lets call him CIO B…is struggling. Faced with similar circumstances, he is dabbling with initiatives around outsourcing, multi-channel management, master data management, etc. but is not truly committing to either. He is waiting for the new CEO to provide direction and will move as per his priority. Politically Smart? I don’t know…. I assume his new CEO will be looking towards his next rung of leaders (who have been around longer than him in the company) to make bold suggestions and take bold steps to take the company forward and make him look good. This retailer for example has no way of controlling how they deal with customers across multiple channels – store, services, website, etc. Any quick initiatives around this area are bound to be received well in the market and will boost the company’s topline. But the wait-and-watch approach so far deployed by CIO B will not serve this company well. I will refrain from betting on this one till we see how the company moves forward.
 

The two stories above highlight a couple of strong trends
1.       CIOs can be as powerful and as self-initiated as they want to be….particularly in difficult times to help reduce costs and improve sales/margins. It’s up to the individual CIO to take the proverbial bull by the horns to make something happen
2.       Outsourcing (as a quick fix to cut costs) and customer-service /loyalty type initiatives are being used to show quick results to Wall-Street. Other structural issues particularly supply chain issues are being addressed by more long-term transformational initiatives. Those are important and should be addressed in parallel but more on that in another blog….