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Drive Innovation February 23, 2017

What Does it Now Take for a CIO to Succeed?

Partner, Health & Life Sciences, Oliver Wyman
Key Takeaway
For CIOs, gone are the days of keeping the status quo. #OWHealth

Healthcare is in a state of flux and organizations must simultaneously navigate both regulatory uncertainty and the ongoing shift to a consumer-centric marketplace.

But it’s not just that change is underway; the rapid pace of change is putting additional stress on organizational capabilities. In this complex new environment, organizations with behind-the-times IT operations – and that includes a CIO with an outdated mind-set and skill-set – are not able to keep pace.

As the cycle of change accelerates, the need to reconfigure the role of the CIO is becoming increasingly urgent. In the past, most CIOs focused on cost cutting or improving processes and performance. In the changing marketplace, this will not suffice. The new CIO must embrace mass digital transformation and support new long-term business needs, all in the fastest way possible.

So, to stay current and competitive, say goodbye to the CIO of the past and say hello to the CIO of today.

The CIO of the Past

In the past, companies tended to focus on a simple IT strategy to support their growth objectives, and they looked for CIOs who could concentrate on one of these basic archetypes:

  • Cutting costs: reducing the IT cost burden on the enterprise
  • Keeping the lights on: improving how IT operates
  • Leading a technical transformation: implementing a large-scale technology platform or upgrade
  • Innovating on old ideas: answering how new technology can solve existing problems

Introducing the New CIO

As healthcare shifts from payer and provider systems to the modular, interconnected organizations, the responsibilities of the CIO are also evolving. Gone are the days of keeping the status quo; this static approach does not match the marketplace transformation we see today.

Below are the four archetypes of the new digital CIO, a strategic player who can optimize value in today’s market.

The Integrator

Healthcare innovation is being developed by many players simultaneously. No one company can create all the innovation they need to be successful in the new economy; therefore, they will need to partner with others to be successful. This means the CIO must be able to bring in new capabilities, reconfigure them, and dispose of outdated systems.

Who is getting it right? Companies like Amazon that have invested in scalable application programming interfaces (APIs) immediately come to mind, but consumer-service focused healthcare start-ups, such as Welltok, are also making headway. They are focusing on building the integration technology that makes it easy for any company to connect to their platforms so they can provide new services to consumers simply, easily, and consistently.

The Agile Leader

Digital upstarts in healthcare are agile at their core and create new products or new product enhancements at clock speed. The problem is most business leaders relegate agile to the domain of software development within IT or Silicon Valley. Agile is much more than a way to develop new software. It is a cultural way of connecting the entire organization together so products can be delivered to the market much faster. A CIO who can champion agile thinking will advance not just technology, but also larger corporate goals.

Who is getting it right? A healthcare start-up like OneMedical is an example of the culture of agility. There, business and technology work together to tailor each site to the neighbourhood they enter. Once an office is setup, the business teams and technology teams continuously modify their software and operational processes to improve the customer service, as well as the back-office operations.

The Frugal Modernizer

Wholesale replacement of legacy technology is fraught with risk and job insecurity. The ROI to completely replace legacy systems typically does not exist because the business community cannot see the payback in features or functionality for commodity technology that should just operate. This type of CIO needs to champion a new mind-set where the company creates annual funding pools solely earmarked for modernization enhancements to existing systems.

Who is getting it right? Financial services companies like Capital One have stated they are “going big” on technology and put in place funding mechanisms to continuously modernize and keep the dangers of legacy systems at bay.  There are examples of healthcare companies following this approach – but not many. While most companies consider modernization a periodic event, one company took a more long-term view and budgeted efforts annually so that parts of the entire technology landscape were continuously upgrading. Today, this company is able to merge new plans into its infrastructure simply and efficiently.

The Utility Enabler

Some organizations are focused on innovating through M&A without integration. That is, they want to be more of a holding company and see what bets pay off in the future. This type of CIO needs to approach the solution as if they are supplying basic services and they let others determine what is necessary for each business unit.

Who is getting it right? Alphabet, a technology-holding company, is a good example. Not sure what product will be best for the marketplace, Alphabet is an umbrella over many smaller companies that are free to address the market as they see fit.  Alphabet supplies basic services to the companies, but that’s all.  Within healthcare, some regional health plans are taking this approach in the marketplace. They have been structuring themselves into lines of business (LOBs) where there is a core healthcare insurance company in one and acquisitions in another that create an innovation portfolio. Those in the innovation portfolio have more degrees of freedom and use different services from the IT organization.

Moving Ahead With the New CIO

These new archetypes of the CIO can create long-term success for a company.  For example, you can only perform so much cost cutting before the business asks for something that requires sophisticated integration. In contrast, the CIO who focuses on an integration fabric creates an organization that allows the business to flexibly introduce new market capabilities quickly. This provides powerful and longstanding advantages over those who cannot.

So, who will chart your IT path through this period of change?  The integrator? The agile leader?  The frugal modernizer? Or the utility enabler?

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