New Economy- Creating Value for Customers

Let's assume your company has outstanding products and services, marketing, and sales and customer support has well-organized data on customer desires and buying preferences, market segmentation, demographics, competitive analysis, etc. You have highly motivated employees, a good track record of innovation and project implementation and a stellar management team. In fact, you may be a market leader. Is this enough to ensure your future? No, it is important to create value with customers. The focus is customer involvement, organization changes and passion for creating and sustaining trust. It is important to focus on customer awareness and leadership to support this momentum through technology changes. Leadership must be prepared to transition the entire company in response to customer feedback. It must be prepared to adopt a corporate culture to support customer engagements. Technology must be applied to increase connection to the customer.

Also, nowadays the customer is in the driver's seat, and technology companies understand the reality. This is a customer oriented value-driven economy which I will discuss a bit later. It also suggests a shift in industry economics and company behavior. Partly, it's because lower prices will give customers more technology benefits and profits. To accommodate these value-conscious customers, producers will outsource to lower-cost providers. In a customer driven world, suppliers no longer can act as salesmen, but must focus on reliable and customer focused product, technologies and services. We see that technology companies are adopting those new business models.

Let's step back and discuss the new episode of new value based support capitalism that emerges from the complex interplay of a number of forces that supports individual value: (1) New human yearnings that create a new approach to consumption and new kinds of markets.. (2). They want to be treated as individuals, not as anonymous transactions of a mass consumption and production society. They want to be heard and they want to matter. They no longer want to be the objects of commerce. Instead, they want corporations to bend to their needs. They want to be freed from the time-consuming stress, rage, injustice, and personal defeat that accompany so many commercial exchanges. They seek advocacy, relationships in place of transactions. They want to take their lives in their own hands and they are willing to pay for what we call the deep support that will enable them to do so. This concept is not new. It is a concept of support economy, and not an enhanced version of conventional customer service. (94) It is an entirely new way of doing business, a radically different approach to the realization of value in which the very purpose of commerce is redefined around the objective of supporting individuals. Deep support enables "psychological self-determination."." It produces time for life, and it facilitates and enhances the experience of being the origin of one's life. It recognizes, responds to, and promotes individuality, and at the same time it celebrates intricacy. It multiplies choice and enhances flexibility. It encourages voice and is guided by voice. Deep support listens and offers connection. It offers a collaborative relationship defined by advocacy. "It is founded on trust, reciprocity, authenticity, intimacy, and absolute reliability." (94)

There is a new digital medium whose networked intelligence, flexibility, ubiquity, and complexity make it ideally suited to meeting the demands of the new markets for deep support. This digital medium has really been focused on old consumption, according to the principles of the old capitalism. The new medium has to integrate with "a new enterprise logic capable of liberating its revolutionary potential." (94)

As they say, a lot of components are in the fire. What's needed is a match to move this forward with fast speed. These conditions create the urgent need for a third force—"a new enterprise logic capable" of marrying and integrating the new markets for deep support and the new digital medium with a proper balance. Zuboff calls this a "new enterprise logic distributed capitalism." (94)

It is also worth comparing a "distributed capitalism" with the old form of "managerial capitalism." The key here is where value is located. With the old model, organizations create value on the inside through the production and distribution of goods and services. The organization and its top management are at the center of the commercial solar system. In the new model of "distributed capitalism," the concept of value is totally inverted. Value is not created by organizations, but instead resides with individual end consumers, based on what they require to satisfy their needs on their own terms. The role of the "new enterprise is not to create new value but to realize the value that already sits with individuals lodged in their unique needs. This shift of focus is the crux of the role of a CTO focusing on transforming the organization and it's crucial to understand the support economy. (94) As you see, "The support economy relies upon the new enterprise logic of distributed capitalism, in conjunction with the new digital medium, to provide the deep support that the new individuals really want. The provision of deep support is the new higher order purpose of commerce—more complex because it includes, but goes beyond, the production and distribution of goods and services." (94)

CTO/CIO- Change and Transformation

The demands for a CTO are so diverse that sometimes we could think of a CTO as a superman. "S/he will have strong business acumen, and will likely have spent time in the high-tech business development arena. S/he will also have a proven track record of working successfully with venture capitalists and be able to negotiate complex deals with stakeholders." The CTO will be required to "work with product group general managers and business development managers to determine future technology opportunities." (39)

Companies will face a more sophisticated marketplace and the unique demands of a consumer. At the same time, the CTO's role will shift to include a broader business and financial focus with real returns but provide competitive edge. The shareholders, employees, and customer cannot accept fantasy projects with an unclear path and destiny. The days of real capabilities and real knowledge are in front of us.

We are experiencing a major slowdown of our economy, and at the same time technological changes are occurring constantly and everywhere around us. Everyone is working with a tighter focus and preparing several options to spend a much smaller budget. (27)

Parker and Associates pointed out that large companies such as General Electric, Allied-Signal, and ALCOA created the position of CTO in the late 1980s. In later years the position has played a very important role in IT and Internet companies in the late 1990s. Over the short history, CTO played a prominent role in directing and shaping their entire business. (72)

By the 1980s, companies appointed research chiefs to CTO positions. Technology was being positioned as a solid building block of a company. Senior management started to rely upon a CTO to provide reliable input on applications, products, and services. In the 1980s, companies began integrating Chief Technology Officers to the top management ranks. Technology was already a crucial part of strategic decisions and future planning. Senior management felt that additional advice regarding the "creation of new products and services with large technical components" would be a step forward for a CTO. (5)

In early 1990's, the CTO position was really centered in IT/Software companies, where this individual served as a bridge between the engineering department and the rest of the business. CTO was partly a technology evangelist, and partly a senior product architect. (27)

Today and tomorrow, the CTO is not really expected to be a senior technologist of the company. The CTO must connect business with technology, and s/he must provide real advice on business decisions involving technology instead of research or concept ideas. (5)

We went through a difficult period of separation from the CIO profession. The InfoWorld CTO Forum and CTOs from Sun Microsystems, eBay, Dell Computer, and other companies contrasted responsibilities as being externally focused while the CIO's responsibilities were internally focused. (82) I believe that the CTO is turning in a different dimension, and becoming a very important and pivotal player in executive management focusing on external and internal issues.

As part of this historical trend, organizations have realized the need for the CIO to oversee internal technology operations which includes billing, computer manufacturing, accounting, purchasing, security, and others systems, including computer systems for accounting, billing, and telephony. At the same time, the strategic decisions of incorporating emerging technology and scouting for new applications have taken a back seat. (55)

The internal/external division of responsibilities created a major gray area and a sense of confusion. In fact, the Transformational CTO will tackle most of the strategic responsibilities of the CIO. The CTO has to step up and accept the broad shoulders of corporate strategy and profitability. We will discuss the roles later in the book in more specific detail.

CTOs are not the first senior executives to face the challenge of inclusion or exclusion from the strategic process. Everyone goes through the drill process and learning the ropes. In previous times, CIOs were also labeled as technologists who could not function as business strategists. However, the days of Techno CTOs and CIOs are far behind us. (55) It is clearly understood that technical skills are highly connected human capital, managementstrategy. Neither one could be excluded effectively. (55) CTO and CIOs have recently demonstrated themselves as business savvy leaders with sharp business decisions that are effective with other management peers. One paper cites the results of a study of pairs of executives at hundreds of companies that indicated that the business acumen of CTOs was equal to that of their executive peers. A complimentary study of 417 company executives found that 80 percent of the CIOs in those companies were considered very important contributors of the strategic decision making process. (74)

Clearly, there is a lot to be learned from the holistic drive and experience of CIO colleagues, and how a CTO would assimilate into this environment. Executive management is recognizing that the stereotypes associated with technology focused CTOs are in the days of the past and, having proved an accurate stereotype for the CIO, is starting to push the CTO into a different strategic and change-oriented role.

The next several years will challenge IT leaders to become partners with their internal customers, sharing in the setting of corporate direction and seizing growth opportunities. They'll have to broaden their vision and shift their priority from saving money for the company to creating value for customers. Although excessive costs, process inefficiencies, legacy systems, software bugs, and laggard implementations will remain big concerns, IT's greatest impact will continue to be in finding innovative business uses for technology.

It bears repeating, with the accent on innovative business uses—cutting-edge technology, bigger and faster networks, and more "enabling" devices may or may not be relevant. After three years of cutbacks, what counts is for the IT organization to foster its innovative capability to exploit changing conditions, then to imagine how the business and IT strategies interweave to create value. Examples are support of customer-centric strategies at retailers such as Best Buy, Home Depot, and Walgreen. In a previous issue of Optimize, we outlined the basic skills, tools, processes, and platforms needed to build innovation capabilities. All we'll add for the moment is that staff issues are paramount.

Most top executives already grasp this new reality. They see that the path to greater customer value and competitive differentiation is paved with real-time data and lit by customer insights derived from that data. The trouble is what executives think in their armchairs and what their companies do in conference rooms are often utterly different. And while there are exceptions, the gap still shows few signs of shrinking.

Type of Companies - Focused on Customer Value

There must be an opportunity for everyone involved in our companies that inspires, motivates, and fulfills the internal stakeholders, i.e., employees, while also creating a positive experience for the company's external stakeholders. Every party has to win in this scenario.

Our CTOs need to adapt to a new dynamic model—a practical, non-threatening model that is founded on fundamental values to which most people can relate. This pragmatic new approach is not a new way of imposing violent, ethereal "psychological change" on an organization that is exhausted and disenchanted by the frustrations of fighting the win-lose approach currently employed in corporate world today, but rather "a blueprint for helping organizations achieve extraordinary results by addressing stakeholders' needs and getting them to work together in a focused and frictionless manner towards a common purpose that benefits all." (50)

An environment where care and trust are prevalent is an essential precondition for the individual and the community to flourish. This community has to provide consistent win-wins for a growing number of its stakeholders. This is priority for our nation, it is realistic, it is imperative and urgent! A previous section on support economy demonstrated that the current business model is barren, broken and basically unsustainable. Virtually all stakeholder constituencies voice dissatisfaction and loss of faith on a daily basis. (50)

Individuals share values such as love, care, relatedness, freedom, etc. They may not talk about them very often. "September 11 was one of the moments when it became clear that a huge number of people not only hold these values dear, but thirst for opportunities to express and apply them." (50). The key condition for success is a willingness to bring those values into the open and to actively apply them to all business activities. CTOs have the unique position to influence the organization in that direction. (50)

Based on the work of Zuboff and Inzelstein, one belief that is shared by a growing number of people is companies and other communities that embrace a values-based approach will thrive and rise above their peers. The other systems that do not adopt will increasingly struggle under the burden of dealing with unhappy constituencies with no common agenda.

As we have seen earlier in the book, technology executives and managers are seeing some patterns, and are now trying to redefine their roles and demonstrate the value of IT. It is still very important to create a successful leadership style with skills, and nurture them within networks and relationships.

A company called Edizen recently conducted a market research study with technology company executives and others in the industry. (38) The study consisted of interviews with executives representing a cross-section of the IT business landscape—big corporations, mature startups, venture capitalists, and outsourcing firms. The result of the study was a major new focus on development and leadership; organizations that can bring the skills of IT managers in line with their business vision and values. Executives also agreed that collaboration is a very important aspect of technology. People management is a hot priority issue. Technology leaders must have one foot in strategy and one foot in implementation in order to be effective. Edizen participants in the study were quoted as saying that "Leadership in technology today must be far more sensitive to the human element, accepting different work styles and allowing work-life balance. As business leaders, we must get people involved and engaged." (38)

We see a general trend that technical IT managers need to transform to technology visionary leaders. The CTO must be able to able to communicate vision and build value through relationships. All of the participants need to understand business issues and problems. We see a tendency of managers looking for effective facilitators, collaborative decision makers, and caring models of balance. While the Edizen study of participants recognized the need for "leadership," not everyone agreed on exactly what that means.

One thing is certain—to survive in today's challenging business environment means delivering consistent performance over time. We described that we need to move further then revenues and profits and revenue, and demonstrate performance in terms of value. Developing the new skills of IT leadership will go a long way in helping to leverage the value of technology as well as build the bench strength talent needed to move your company forward. (38)