Online Security, a global provider of computer forensics and information technology risk mitigation since 1997   Original Source:    http://www.insurancetech.com/story/showArticle.jhtml?articleID=20301465 Technology Advocates Author:  Anthony O'Donnell There was a day when an insurance company would have been fortunate to have a CEO who understood that technology could be an influential factor in competitive success. But as the maturity of both technology and businesses' appreciation of its potential have progressed, a higher standard prevails. Today's tech-savvy CEOs recognize that technology can be the single most important weapon in their competitive arsenal. Nothing replaces sound business strategies, but astute application of technology can simultaneously shape and enable strategies that can make for stark advantages in operational efficiency and business efficacy. Knowing this, the tech-savvy CEO takes responsibility for understanding technology's strategic potential and running the kind of company that can take advantage of it. Tech-Friendly Culture In fact, one of the signs of a tech-savvy CEO is the creation and enforcement of a tech-savvy company culture, according to Bob Haas, vice president of A.T. Kearney's (Chicago) technology transformation consulting practice. "In many organizations, you still hear the language of, 'Well, there's business and then there's IT.' But some CEOs have banned that kind of language," he says. While that may seem trivial, Haas notes that "You would never say, 'There's the business and then HR or finance.'" Tech-savvy CEOs are also likely to expect technology literacy on the part of the entire executive management team. For such CEOs, "It's no longer acceptable for a senior vice president to claim ignorance about IT," Haas says. These expectations may seem small, Haas adds, "But they end up influencing major cultural changes that have a significant effect on the organization overall." Those cultural changes are most effective when they permeate the organization at deeper levels. In many companies, the degree of networking between the IT organization and business units is low. Stronger CEOs will foster business unit/IT ties, opines Theodore Klein, a partner in IBM's (Armonk, N.Y.) Business Consulting Services. "They do that by rotating executives in and out, by insisting that their senior executives communicate with the IT organization on a regular and frequent basis, and by keeping abreast of what's going on with IT themselves," he argues. A more technology-friendly culture is critical in fostering creative thinking and effective application of technology, but equally important are institutional changes for the management of the risks associated with technology. In fact, it is here that the CEO's management expertise dovetails most consequentially with an aggressively opportunistic approach to technology. Faced with conflicting pressures to leverage IT for competitive advantage and shareholder value, while keeping a lid on IT budgets, CEOs are increasingly turning to IT portfolio management, which applies the techniques of financial management to technology investment. Using these techniques, tech-savvy CEOs are better able to channel scarce business and IT resources into initiatives that do the most good, according to John Stone, a partner with New York-based Foundation Ventures, an investment bank specializing in technology companies. "By creating a common vocabulary of risks and benefits that business and IT stakeholders can understand and embrace - along with the right set of incentives and a means for objectively measuring results - portfolio management can be a valuable framework [that] CEOs can put in place," Stone says. Portfolio management fits within a larger framework of governance measures that include organized bodies of senior executives. Many technologically aggressive companies are taking the further step of appointing a technology representative, or even subcommittee, to the board. "CEOs find this a very effective means of getting the right visibility for what tend to be the largest investment areas, as well as for the risks associated with technology," says A.T. Kearney's Haas. Through both institutional and less formalistic means, the challenge for the CEO is to understand "what their IT investments and assets are compared to other like companies, and to understand where that investment is going and what it takes to get the right return," Haas adds. A.T. Kearney recommends a three-stage "discussion model" for the CEO to interact with the CIO and other senior executives involved in technology decision-making. The three stages, or focus areas, are operational excellence, which looks to core IT infrastructure; business process excellence, which focuses on optimizing functions such as claims management, underwriting and distribution through IT; and a third layer concentrating on using IT to drive innovation through the development of breakthrough products and services, Haas explains. "Companies tend to treat all IT assets the same," Haas asserts. "They tend to resource projects and procure services the same across those three layers when they should be treated uniquely and should have different investment profiles, different benefit hurdles and different payback periods associated with the different categories." Legacy Liability As much as CEOs need to understand how to properly evaluate technology investment opportunities, they also need to evaluate the liabilities of core legacy systems. "These antiquated systems, which are hard to replace and expensive to maintain, are at the core of their businesses," Haas says. "Those become a substantial infrastructure risk for companies, and CEOs need to understand the risks they are exposed to there." In the end, one of the surest signs of a tech-savvy CEO is an understanding not only of the potential of technology but of its limits, according to IBM's Klein. Today's technology has tremendous potential for changing business today, and it's the capacity to manage that organizational change that is the key to success. "The more tech-savvy CEOs recognize that while technology is a major part of the equation, it's by no means all. Many CEOs who have grandiose plans often find themselves less successful because they can't accomplish the degree of change that they envision," he says. IT's Ideal CEO Given the potential of today's technology for the insurance industry, a CEO has to have a special relationship with the CIO and the technology organization as a whole. Accordingly, CEOs must "involve their CIOs in discussions of strategy; not just as an implementer of plumbing, but as an adviser," insists Paul Glen, principal, C2 Consulting, Los Angeles. "Today, strategy formulation should be an ongoing conversation between 'what's desirable' and 'what's possible.'" To IT professionals, Glen says, a good CEO is one who: 1. Engages in relentless truth-telling. 2. Shares a consistent and compelling vision for the future of the organization that provides guidance on technology's role. 3. Appreciates the value of and potential for technology in the enterprise. 4. Respects the skills and value that technologists bring to the organization. 5. Understands both her knowledge of technology and the boundaries of that knowledge.