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How CIOs can influence new product innovation

Kim S. Nash | Sept. 27, 2010
What we haven't heard much about yet is how this Internet of Things could put CIOs at the strategic heart of new business models and strategies

DiMarzio notes that these are just unrealized ideas right now. But that's good: IT is brainstorming with R&D. "Doesn't mean they'll listen to me, but they are starting to recognize that we deal with this stuff every day, so maybe there's insight we have," he says.

Roberts is more pointed. "It is going to be quite critical for the CIO to step up and really assure that they're being the chief information officer for all the information in their enterprise­-not just the transactional systems."

Making New Friends

Today, about 35 billion devices connect to the Internet, according to Cisco, which is about five devices per each person on Earth. That includes computers and cell phones, naturally, but also items such as manufacturing machinery, vehicles, televisions, game consoles, healthcare equipment and swarms of sensors attached to consumer and industrial products. Within three years, the number will reach one trillion, the networking vendor predicts.

Today, sensors placed in cars can record minutely detailed data about how the vehicle performs. Business analysts can upload that new pool of field data to a corporate database and combine it with historical supply-chain and financial information to determine which parts suppliers are worth doing business with, or which types of customers are most lucrative.

Auto insurers, meanwhile, can find out which drivers are truly safe-or not-and price individual policies accordingly. Teenage boys and their insurance-paying parents may shudder, although that RPM-loving guy in the Mazda may not. For companies, says McKinsey's Roberts, "this opens up a lot of new space in defining business models we haven't heard of yet." (For more on this, see " FTC Considers Allowing Consumers to Opt Out of Behavioral Marketing.")

Yet CIOs will have to keep a grip on how their companies use and profit from the Internet of Things, along with related research and development efforts, he adds. They'll also need to form deeper relationships with peers in product design and engineering. Yet aside from answering the perpetual call for more server power, the IT department and product groups aren't tightly linked at most companies, Roberts notes. The typical partnerships are IT and marketing, IT and finance, IT and sales, IT and supply chain.

Some CIOs will be unprepared to pursue these new forms of collaboration. Our 2010 State of the CIO survey of 594 heads of IT showed that 34 percent fell into a function head/operational category, rather than having a transformational or strategy-setting focus. Just 16 percent said that developing new go-to-market strategies and technologies was a key focus for them. Still, it's a positive sign that our most recent survey showed a big jump in the percentage of CIOs who said that identifying and seizing commercial opportunities is a critical leadership skill for them-from 6 percent in 2009 to 22 percent this year.

 

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