Tuesday, May 11, 2021
Home Leadership The CIO as a Chief "Investment" Officer

The CIO as a Chief “Investment” Officer

Past performance is not a guarantee of future results.….

Whether as a seasoned investor or when first funding our 401K, we will encounter this common footnote in any collateral or prospectus that involves financial investments. This cautionary note is often included given that the measure of performance is dependent on many factors beyond the control of the entity managing the investment.

In many ways, there are similar parallels to our role as a CIO entrusted with technology investments that are expected to produce long-term gains with optimal cost and managed risk. In this article, I will use the analogy of a financial investment and elaborate on how we as technology leaders can deliver optimal, if not guaranteed results.

One Size Does Not Fit All

Over the course of our careers, we are afforded the opportunity to work on many different technologies. Every so often it turns out that we get to apply your previous experience with a particular technology in a new environment. For instance, this could include implementing an ERP, CRM, mobile app, or a decision to purchase hardware of a particular brand with which we have had previous success.

This is akin to picking a stock that performed well for one individual and repeating the same for another individual. Although what fits one person’s profile of risk and objectives may not align with another and a technology investment in one organization does not necessarily guarantee success in another organization. 

CIOs as a result must consider the objectives, risks, costs, and competitive business pressures as it pertains to a given organization when making technology decisions.

Focus on Outcomes

Financial investments are often geared toward life events such as retirement, buying a home, getting married, expecting a child, funding an education, etc. Investment strategies are then modeled based on various factors ultimately focused on delivering desired outcomes to support these events. 

Establishing the expected outcomes is also an important and necessary function for technology investments. The outcomes are expressed in specific measures such as reduce product cost by x%, increase market share by y%, or grow sales 2X, etc., within a certain time horizon. These measures are largely dependent on the overall business strategy, but as CIOs we have a responsibility to ensure these outcomes are clear and well understood by all involved.

A clarity of purpose and outcomes informs the alignment of other factors such as tooling, talent, training, etc., determine program costs, and creates alignment between customers and the technology function to deliver on the expected outcomes.  

Identify Underperforming Assets

If picking the right stock is an informed decision so is the need to disinvest from an underperforming stock. If the objectives of the investment are not being met, then this is the natural thing to do. For instance, many enterprises have dozens or even hundreds of applications which can consume a large part of the technology operations and maintenance budgets. 

An inventory of all technologies supported/managed by the IT organization – whether a core services like network or communications, databases, or business applications, provides an opportunity to look at how IT assets create value or introduce risk.

This can help CIOs develop an actionable rationalization plan to eliminate redundancies, reduce cost, and allow for strategic use of resources thus improving the overall value of the technology portfolio.   

Investment Modalities

No two technology implementations are the same. Every choice of a particular technology brings an inherent risk with it. Technology choices fall into the same categories as financial investments, which are generally available as stable pools, high risk/high return options, or low risk/low return options.

You may find value in a cutting-edge technology that offers significant returns, a breakthrough competitive, or a first-mover advantage. However, this may also come with the high-risk involving a startup entity or an unproven technology. Alternately, you may seek an established and trusted technology that presents lower technical risk but does not realize any significant market differentiation.

CIOs are often faced with decisions on considering the uncertainty of new and emerging technologies while also ensuring stability in day-to-day operations. A few options to manage this includes establishing what Gartner refers to as a bi-modal structure. Others may partner with third-party entities and some may set up their own stand-alone “innovation” centers. The specifics behind the structure, choices, and decisions on how it is to be accomplished may be different in each organization.

Regardless of how it is accomplished, CIOs must take calculated risks to maximize returns with their overall technology portfolio.

Bang for the Buck

The options for technology investments continue to increase exponentially and often these choices are non-binary. As a result, CIOs must view themselves as business leaders responsible for an organization’s technology investments. This mindset enables us to engage with our business peers as investment advisors seeking to understand the business objectives, risk tolerance, time horizon for each investment.

When CIOs roleplay as investment fiduciary to technologies, we increase the likelihood that these investments will deliver the biggest bang for the buck. And perhaps someday we can be the one leader to proclaim past performance is indeed a guarantee for future results. 

Harsha Bellur, TNCR Contributing CIO
Harsha Bellur, TNCR Contributing CIO
Harsha Bellur serves as EVP and CIO at James Avery Jewelry. Since joining the company eight years ago, he has led a customer-driven strategic transformation of business operations and guest experiences in this vertically integrated company. Harsha’s career spans more than two decades in industries including technology consulting, retail, manufacturing, leisure/entertainment, and food service.
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