Will the CIO Survive the Emergence of New C-Level Officers?

Insurers must clarify the respective responsibilities of CIOs and new leaders such as Chief Digital Officers in order to optimize their digital transformation efforts.

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The chief information officer (CIO) role came to existence in the 1980’s to lead companies’ technology departments and provide IT services to the enterprise. Building on the previous roles of EDP (electronic data processing) manager to MIS Director, the CIO role represented the progress from from managing mainframes to client/server, and then to Internet, e-Commerce and Mobile platforms. Today, under the pressure of maturing digital technologies, we have seen the emergence of new C-level officers such as chief digital officer, chief data science officer, chief innovation officer, and chief customer officer. As digital has begun to shape business models, the new C-level executives have begun to eclipse the authority of the CIO in various ways and to various degrees—which puts in question the continued significance of the CIO in the modern enterprise.

Traditional CIOs have been expected to build and maintain applications, databases, infrastructure and networks, working within a “service provider” paradigm. Many CIOs today are still busy trying to replace legacy mainframe systems and address application backlog. In the new digital world, business leaders are looking at technology as a means of innovation a driver of change at a much faster pace than that of a traditional IT organization. Their expectations are driven not only by the changing capabilities of their competitors, but also by their own experience of technology from providers such as Amazon and Google. As a result, company leaders increasingly seek to work within a new technology services model designed to drive innovation, focused on digital transformation, improving customer experiences, and creating data-driven products which can bring new sources of revenue.

Combining with the fact many IT departments still busy trying to replace the legacy mainframe systems and addressing application backlog, organizations are choosing to bring the new C-level executives to drive the digital transformation.

Of the new C-level officers, chief digital officer (CDO) is the one most commonly brought as a transformation agent. While traditional CIOs are busy planning and implementing upgrades and patches and keeping the email systems up and running, these new C-level officers are engaging with the business leadership and closely working with various business function heads in developing a digital strategy that brings innovation.

‘Service Agent’ vs. ‘Service Provider’ Model

CDOs exemplify a “service agent” whereby the teams they direct are continuously looking outside the company for new startups and innovation leaders and facilitate partnership and dialogue with internal business heads. Business leaders are much more comfortable partnering with CDOs as they and their staff tend to originate on the business side and communicate in business terminology and in non-technical terms. CDOs focus on delivery by managing service provider vendors. They also champion the concept of data as the new currency in the digital world, driving a focus is on making sure the right data is captured and data is available for the organization to perform advanced analytics—as well as introducing new data-driven products to generate revenue. This revenue generation model contrasts with the traditional IT department’s status as a cost center. The CDO’s team is outward facing towards the customers and is continuously monitoring customer behaviors, competitors and technology innovators.

Whereas traditional IT departments operating on the service provider model are more reactive to internal business requests, the service agent model operates proactively, monitoring emerging aspects of customer experience across industries, exploring the potential of newer technologies, and studying technical and product innovations that enable growth and profitability. The new digital teams are viewed as technology enablers whereas IT is mostly viewed as gatekeepers. At the same time, IT has the added responsibility of maintaining security and governance it has to impose standards—and this tends only to reinforce their role as gatekeepers and providers of basic enabling services rather than strategic impetus.

The fear of security threats resulted in the introduction of the new CISO (chief information security officer). And the fear of missing out on innovation opportunities—or meeting disruption—challenges—resulted in the creation of CDOs and others.  In some companies, these new C-level roles are clearly defined with respect to the CIO’s territory; in other companies the roles overlap, bringing confusion about who is in charge of what. This also creating new challenges for carriers’ technology vendor partners, as they need to figure out whom to sell their products and services to. To keep the business running smoothly, organizations must clearly define the two (or more) roles.

The first question to answer, whether from the standpoint of company leadership or of the CIO, is about what key role CIOs can play in the new digital world.

Transforming the IT Organization

First CIOs need to develop deep understanding of business and continuously engage in business discussions about innovation and data-driven products with the senior executives. More importantly CIOs need to transform the IT department from a service provider role to a service agent role. This can be accomplished by outsourcing the systems not essential to the innovation and using cloud service providers to manage the infrastructure. By outsourcing things that are not bringing value to the organization and working closely with business leaders on digital transformation efforts. The IT organization must shift to an emphasis on partner management and the curation of capabilities, identifying and working with external partners as opposed to building everything in-house. The IT function also needs to be transformed from primarily a cost center to a Value provider. IT department must acquire new skills and IT organization must be reorganized to support the new service agent model and embrace the role of change agent. If CIOs fail to make this transition, they may find themselves devolving back into the head of data processing.

Ideally, in an insurance organization, the roles of CIO and CDO complement each other as change agent partners in digital transformation. While the CDO focuses on the conceptual customer- and agent-focused aspects of digital transformation, the CIO gains more bandwidth to focus on transforming core systems and building the architecture and infrastructure necessary to support cloud-based operations. That will not only enable a company to enjoy the tremendous efficiencies enabled by cloud, data and other technologies such as artificial intelligence (AI), but it will also serve as a foundation for new digital products and services. Simultaneously, CIOs face the task of transforming their organizations, training and recruiting for new skills required for an IT organization focused less on development and more on procurement, partner management and the curation of capabilities available on the cloud.

Relevance in a Digital World

Major technology systems such as policy administration, claims, billing and financial accounting can be managed by through partnerships with cloud providers. Functions such as regulatory reporting, claims payments, among others, are also good candidates for outsourcing. As CIOs reduce staff traditionally applied to the implementation, maintenance and upgrading of core systems, they can apply those resources to new value-creating activities.

Just as each insurance carrier’s path to digitization must be tailored to its culture and strategy, each CIO can carve his or her own path to reinforced or renewed relevance. Technology has never been more central to the mission of insurance organizations, and by clarifying roles and responsibilities, the CIO will play a vital role supporting both new C-level executives and the business in the company’s journey to becoming a truly digital enterprise.

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Rao Tadepalli // Rao Tadepalli is founder & CEO of Digitran Technologies, an InsurTech startup that provides services in innovation and digital transformation of insurance companies. He has advised prominent industry vendors and is an advisor to Plugn and Play, a technology incubator in Silicon Valley. Tadepalli has over 25 years of experience in the insurance industry, including 10 years as a Senior Vice President and Chief Information Officer at Great American Insurance Group. He can be reached at Rao@digitran.ai

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