How Much Risk Should CIOs Take?

There was a discernible gap in the floor at the ninth annual MIT Sloan CIO Symposium on May 22. Not a physical gap running down the center of Kresge Auditorium, but a philosophical gap between the academics and CIO practitioners in attendance.

Forcefully representing the academics was Joichi Ito, director of the MIT Media Lab, who called for storming the corporate ramparts, letting 1,000 innovation projects bloom, and glorifying the success of the few while cutting the failures of the many at an early stage.

"Agility beats strategy," said Ito, who exhorted CIOs to adjust their projects to new conditions rather than lock in a strategy and then build a technology platform to meet its objectives.

Then you had the CIOs, execs from the likes of Accenture, Time Warner, and Workday who need to apply technology to business plans. These are the kinds of folks who need to convince CEOs and CFOs why cloud computing is (or isn't) right for their companies. Why the BYOD (bring your own device) philosophy is worthwhile, but only if the hurdles of security, privacy, and compliance can be overcome. Why sometimes, in the words of Booz Allen Hamilton senior VP Thomas Sanzone, keeping legacy systems is a good choice because the development costs have long been depreciated and the systems are working well for the jobs for which they were intended.

[ Learn abut another challenge facing CIOs. Read Cloud's Tough Enemy: Chargeback Pushback. ]

"You have operating dollars and you have investment dollars," says Accenture CIO Frank Modruson. "You have to minimize the operating dollars and maximize the investment dollars."

But most CIOs aren't rampart stormers; they're executives who must take the pulse of their companies and industries and apply limited investment dollars to technology projects that will produce the biggest bang.

Rather than embark on 1,000 projects and see which ones stick, they must limit their companies' risk to those initiatives with the best chance of producing the biggest returns--those that drive the most revenue and do the most to raise customer satisfaction or reduce business friction. When a panel of CEOs was asked where they would like to invest additional technology dollars, they gravitated toward customer analysis and customer-facing systems.

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The best examples came from Zipcar CEO Scott Griffith, a strong advocate of investing in customer-facing technology. He said that more than half of company and customer interactions now take place on smartphones. Mining and analyzing the data from those and other interactions is critical to Zipcar's ability to compete as the likes of Hertz and Avis pile into its car-sharing market.

Rampart storming may work for startups with no legacy to consider, but for larger companies IT investment is more about making the right bets.

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