Sym14 01B

Tutorial: The CEO Dilemma—
Balancing Growth and Cost Containment
U.S. Symposium/ITxpo Jorge Lopez and Mark Raskino
17–22 October 2004

Walt Disney World
Lake Buena Vista, Florida
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Tutorial: The CEO Dilemma—Balancing Growth and Cost Containment
Gartner Industry Research
Viewpoint
CEOs are
seeking growth …but there
again as global is no “one-
business size-fits-all”
confidence approach.
returns…
Economic
…so CEOs must
turbulence
manage in a way
can wreck
that turns change
plans
into opportunity.
quickly...
IT will be required to meet the demands of business for

real-time information and highly flexible systems.
Viewpoint: After the recent multiyear downturn in the global economy, CEOs around the
world are struggling with the fact that they cannot meet shareholder expectations merely
by doing what has helped them survive so well in the past—cutting costs.
There is a widespread perception among CEOs that there will be modest growth of the global economy in
2004 and 2005, and that to meet the expectations of their stakeholders they must now concentrate on
growing both revenue and earnings. With this as the goal, the implications for the organization as well as
the turbulence in the external environment magnify the sense of risk that CEOs are feeling. In past
environments, where the pace of change was slower (for example, automobile product lifecycles could last
about a decade in the mid-20th century), the risk of change could be mitigated by having enough time to try
multiple changes. In today’s more accelerated environment, where product lifecycles last days or weeks
(automobiles can run 12 months or so), the ability to move the organization to new business models or
strategies becomes a decisive competitive factor. To move to new business models/strategies requires that
the IT organization transform to meet the needs of the organization. It also implies change to the business
itself to ensure it reduces the risk of the change. In this presentation, we will show how CEOs regard the
future, both in terms of hopes and aspirations, as well as fears.
© 2004 Gartner, Inc. and/or its Affiliates. All rights reserved. Reproduction of this publication in any form without prior written permission is
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accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information
Jorge Lopez and Mark Raskino
contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended
results. The opinions expressed herein are subject to change without notice.
01B, SYM14, 10/04 AE Page 1
Key issues for this research
• What are the major business issues CEOs and senior executives face?
• What actions do they intend to take to address these issues?
• What do these actions imply for IT agendas ?
Sources:
Sources:Worldwide
Worldwidesurveys
surveysconducted
conductedNovember
November2003
2003to
toMarch
March2004
2004
••GartnerG2/Forbes
GartnerG2/Forbes 456
456CEO
CEOsurveys
surveysand
andinterviews
interviews
••IBM
IBM 2,300
2,300CEOs
CEOsand
andexecutives
executives
••Deloitte
Deloitte CEO
CEOand
andexec
execsurvey—“fast”
survey—“fast”500
500tech
techcompanies
companies
••Economist
EconomistIntelligence
IntelligenceUnit
Unit 527
527 exec survey and interviews of 112CEOs
exec survey and interviews of 112 CEOs
••PWC Global
PWC Global 1,394
1,394executive
executiveand
andCEO
CEOsurvey
surveyand
andinterviews
interviews
••WEF
WEFCorporate
CorporateCitizenship
Citizenship Approximately
Approximately4040CEOs
CEOsandandCFOs
CFOs
Dynamic: In order to understand the mindset of CEOs toward the external and internal
environments, we asked a few basic questions on major issues, actions to be taken and
the implications for IT agendas.
While it is clear that the actions at the highest levels of the organization have an impact on IT, it is also
clear that the actions of IT may not always be manifested at the same high level of the organization.
The sources we reviewed are the GartnerG2/Forbes.com survey, the IBM survey, the Deloitte survey, the
Economist Intelligence Unit survey, the IBM PwC Global survey and the WEF Corporate Citizenship
survey. In all, they provided us with a treasure trove of information on CEO perspectives within the past
12 months. The responses paint a picture that is at times full of consensus, while at other times provides
conflicting information. Such is the fate of interviewing people who, while very professional and very
intelligent, have different ways of achieving their goals—and even different goals within the same industry.
01B, SYM14, 10/04 AE Page 2
FINDING: There is a return Gartner Industry Research

to confidence…but it could be short-lived
OECD
OECDcomposite
composite
leading
leadingindicators
indicators
index
indexfor
foreconomic
economic
growth,
growth,August
August2004
2004
!
Large-scale
business
Source: OECD
change
ahead
Worldwide economic indicators point up, but growth is unsteady.
Financial services, healthcare, media, government grow fastest.
Disruptive regulation, oil prices, terrorism and health scares could
contribute to sudden changes of direction.
Capital investment hunts globally for the slightest market edge.
CEOs must generate growth to meet shareholder expectations.
Dynamic: Based on the CEO mindsets, it looks like modest growth ahead.
With many economic indicators showing mild economic growth ahead, CEOs are interested in allocating
their scarce resources to the sectors of the business where growth is the greatest. It means, first, that you
must have a vertical industry orientation to capture the opportunity. Second, if not, then you must navigate
the difficult organizational changes required to relate to those growth sectors from an industry perspective.
And third, you must make the right bets based on looking forward at the changes impinging on the industry.
So what are the changes that could reveal both opportunity and threat? Most important of all is to look at
changes in regulation. CEOs say they fear the difficulty of predicting implications of regulations being
passed by agencies that are local, state, national, regional, international or global in scope. This issue
segments by industry as well as geography—there are also segmentations that divide by industry. The
impact of regulations provide great uncertainty regarding the costs of the business, and they also show the
need for activism by CEOs to better influence the environment around them.
01B, SYM14, 10/04 AE Page 3
IT ACTION: Invest cautiously, Gartner Industry Research

improve flexibility and information flow
Reduce
Detect change
disruption time
earlier
Watchpoint: Maintain alertness, Watchpoint: Focus your managers’

watch for downturn indicators attention on reducing change cycle time.
Invest in monitoring Invest in change

your customers’ leading management and linkages
business indicators to the wider organization
Dynamic: CEOs say that not only must they focus on growth looking ahead, they also want
to control costs as they have in the past.
This is important to IT because it is considered a lagging economic indicator. In order to respond more
quickly to the needs of the business and avoid the pain of being last on the priority list in an economic
downturn, the IT organization must be able to detect impending changes in the external environment. In
addition, once detected, the IT organization must be integrated into the overall strategic plan to assure the
best response to external change.
One of the persistent myths of business is the conventional wisdom: “You can have either cost, schedule or
quality, but you can’t have all three.” For decades it was thought that issues like quality, for example, are
driven by more costly inspections. Now, through the examples of companies like Toyota, we find that
quality, cost and schedule are not mutually exclusive—when driven by time they all improve together!
In the same fashion, we hear constantly that in order to gain flexibility, you must sacrifice cost or quality.
It is our view that the best companies find ways to build their businesses so that not only is IT more
responsive to the needs of the business, it is also less costly to do so. Making the business case for this
capability is the major task of IT organizations over the next five years.
01B, SYM14, 10/04 AE Page 4
FINDING: The business agenda is growth

Your New business models:
From products………....to services
CEO... From one vertical……...to several
From industrial………....to consumer
From intermediaries…...to direct
Improve market share:
Restructure cost base…win on price
Redesign products……..win on features
Rebuild relationships…..win on intimacy
New markets:
New geographies, new segments, new insights
The return of mergers,

acquisitions and
divestitures
is ready
Implications: Portfolio,
to grow organization and process changes
Dynamic: All the surveys we reviewed agreed on one thing—the agenda is growth.
Growth in revenue, growth in earnings and, in some cases, growth in market share. What does this mean?
For many CEOs, this means delivering on new products. For others, it means moving into areas where the
customer can better discern value—services, industry-centric offerings or consumer markets. For other
CEOs, it means moving to new markets, new segments, new geographies, and new mergers and
acquisitions. For many company executives who were happily making money during the broad global
economic expansion of the 1980s and 1990s, it comes as a shock that they must manage change of this
magnitude. The rest of this decade will be spent with increasing awareness of the need to better manage
organizational change in the light of forces that are driving the accelerating rate of change. The move to
growth is one of those major drivers, and the ability to better manage change is an indicator that the world
is starting to make change a factor in attaining and maintaining a competitive advantage.
01B, SYM14, 10/04 AE Page 5

IT ACTION: Assist in
managing strategic change
IT should help shorten cycle time in all four areas of strategic change
Change
Changeto
tobusiness
businessPOLICIES
POLICIES
Structure Process Infrastructure

Mindset (business
(culture) (organization) procedure) (technology)
Corporate Matrix structures, If “the business” Flexible architecture

communications: virtual teams, can’t map its remains key—focus
a real priority, ad hoc workflow, processes, IT on the business cost
not just politics. sourcing. should step up. of change delay
Change to business EXECUTION
Dynamic: IT is the enabler of strategic change.

With the many stakeholders and interests that demand the CEO’s time, it is difficult to think that CEOs
have much time to consider everything put before them. When they do look at IT, CEOs notice that IT
poses a constraint to change. A recent article in Forbes said: “A new study by the white-shoe consultancy
Bain & Co. finds that while 70% of senior executives at large corporations agree that information
technology is relevant to growth, 60% say IT is actually inhibiting their growth efforts. Further, the
perception is affecting tech spending.”
At Gartner, we believe this indicates the beginning of the transformation of IT. We are at the end of one
kind of history, where IT was the enabler of work and we are moving to the beginning of a new history,
where IT is the enabler of change. For this to happen, it requires shifts in mindsets and frameworks that
integrate IT with the rest of the business as a strategic partner in navigating strategic change. This ability to
manage change, done at an industry-leading pace, can become by itself a competitive advantage.
We focus on four levels of change: organization structure, infrastructure, process and mindsets.
01B, SYM14, 10/04 AE Page 6

FINDING: CEOs won’t
give up on containing costs
Leaders in place since 2000 used
cost control to survive.
But after years of cost cuts, CEOs
are seeing diminishing returns.
They hope to move forward with
changes to improve productivity.
But that “cost of strategic change”
may be large and must be carefully
managed.
Implications: Change must be self-funding.

No return to mega-projects in sight.
Dynamic: CEOs have a dilemma.

CEOs have made it clear they want growth, and see this in concert with modest economic growth globally.
Along with this, they have made it clear they don’t want to give up a tool that kept them alive in the recent
global economic downturn—cost management. That means CEOs are trying to manage the “cost of
strategic change.” There is one problem with this—it is what we call “the CEO dilemma.” The types of
change that drives growth—the shift from products to services, the shift from a horizontal product company
to an industry vertical company, and the shift from being a product company to a solutions company—can
drive up costs because large-scale change can cause disruption to existing operations. The efforts of
training, relocating and new systems are all costs. So expect to see CEOs trying to impose the cost
discipline of the past few years as new changes get under way. This will be a crossroads for several
companies. While company executives may internally desire small projects and therefore small change, the
truth is that it may not be an option. As new conditions take effect in demographics, regulation, economics,
competition and technology, we can expect to see corporate boards under stress to determine whether the
CEO who could weather a downturn can also take on the investment and risk mindset for growth. In the
meantime, CIOs will have to deal with the needed mindset of achieving growth along with cost
containment.
01B, SYM14, 10/04 AE Page 7

IT ACTION: Focus on
improving business productivity
“There are no IT Business productivity is the win/win focus—
projects anymore” cutting IT cost is not enough.
(an airline CIO)
Structural investment is required to deliver
sustained productivity improvements.
Help
Business Yet another round of “belt tightening” won’t do.
Leaders
Productivity of the business depends on
your ability to align IT to strategy as it
Juggle changes.
Strategic
IT needs to be a player in policy and strategy
Priorities to get the earliest look at changes.
But deeper change must be delivered in risk-
managed discrete steps, cascading payback.
Project portfolio co-management is essential.
Dynamic: How does IT contribute to business results in a time when both growth and cost
containment are desired by the CEO?
The key to success for CIOs in the near future is to work to integrate the capabilities of IT with strategies at
the highest levels. There is hardly a corporate strategy that does not in some way involve IT:
• Mergers and acquisitions drive the need for systems integration at levels that depend on the business
model needed.
• Moves to new business models, such as services or vertical industry models, require systems for scale
and efficiency.
• Strategies for increased market share require flexible processes to ensure that pricing and new terms and
conditions are rapidly incorporated and delivered to the sales force or point of sale.
With such critical dependency on IT to achieve new strategies at low cost, it is important to make the case
that IT needs to be involved and integrated with strategy formulation so the company can build a
competitive advantage.
01B, SYM14, 10/04 AE Page 8

FINDING: CEOs are
concerned about regulation and governance
• CEOs see regulation as a potentially
useful change driver for overcoming
organizational inertia
• But uncoordinated agencies working

locally, nationally, regionally and globally
seem to create random turmoil.
• This places the change capabilities of

the organization under external stress
as management struggles to keep up.
Implication: Progress on the

internal change agenda is hampered.
Dynamic: The field of regulation is distinct when it comes to strategic change because it
has the character of a legal mandate.
While mandates can be difficult, they are not impossible to negotiate, as we are seeing with Sarbanes-
Oxley. The challenge is that as case law gets established, the ability to negotiate can be diminished
(although companies have stooped to using illegal means such as bribery or extortion as a negotiating tool).
The reality is that the field of regulatory agencies is very dense and the number of regulations continues to
increase as well as the number of regulatory agencies. In addition to the federal government agencies (e.g.,
Occupational Safety and Health Administration; Securities and Exchange Commission; Food and Drug
Administration; Alcohol, Tobacco and Firearms), there are state and local agencies that regulate local codes
and ordinances that impact operating costs and flexibility. Looking outside the United States, the United
Nations and other treaty organizations have rules in place that impact trade, while other countries and the
European Union also have their own agencies in many, if not all, of the same areas as the United States.
This overall complexity increases the load on already overburdened corporate staffs, and the cost of
compliance is a difficult issue for many companies. So while CEOs expect much change ahead due to
regulation, they also are concerned with the sheer complexity of it.
01B, SYM14, 10/04 AE Page 9

IT ACTION: Leverage
compliance and enable transparency
Understand—the Internet has empowered regulators too!
Be proactive—deal with regulatory disruption as a continuing force.
Build your own regulatory radarscope—gain planning lead time.
All
Energy EU age
Financial
discrimination
Kyoto
protocol
Automotive BASEL II
Travel This chart
is illustrative
Biometric only. The data
points may
passports
not be reliable
for decision-
Exhaust EU WEEE 2 making.
Treat Others emissions IT

compliance Years 1 3 5
deadlines as Help business colleagues influence regulation in development.
opportunities
to overcome Turn mandatory changes into opportunities to improve the business.
INERTIA Move toward a philosophy of proactive information transparency.
Dynamic: IT is the constraint to change and growth.

IT is viewed as a constraint to change and growth for the corporation. It is important for IT executives to
have a keen understanding of the external forces that could drive strategic, integrative change in the
organization. There are a few principles that apply to help these executives get better prepared:
• Executive sponsor. Identify and work closely with an executive who understands and champions the
role of IT in an environment of accelerating change. This becomes strategic as the ability to respond to
change is shown to be either an enabler or constraint to growth.
• Build and track a regulatory radar scope. When you take into account the changes ahead, preparation
is critically important to IT success. The earlier the warning, the better—and this requires a lot of work
to understand the environment of your business and the range of regulatory agencies at work.
• Work to build a technology bookshelf. This is a key principle for change and requires investment in
understanding the changes ahead and how technology can contribute to compliance success. The
technology bookshelf is designed for just-in-time contributions to business needs, and benefits from
pilots and early evaluations.
01B, SYM14, 10/04 AE Page 10
FINDING: To win customers, Gartner Industry Research

CEOs need to partner and innovate
Customers are Growing sales has become more of a pressing
demanding
partnerships
issue than managing cash.
to re-engineer
costs To drive revenue growth, the majority of CEOs
look toward the development of new products
and services.
CEOs also say they must meet the demands
of key customers’ deeper partnerships.
(something they demand of their own suppliers).
Developing the capabilities of the sales force

is viewed as key to growth.
Implication: The return of a substantial

sell-side business change and IT agenda.
Dynamic: A world of changing demographics ahead changes consumer markets.

According to the American Enterprise Institute, the population of nearly every country is declining as birth
rates fall below replacement rates, even in China and India where cultural and governmental influences
have caused the rate to slow. This indicates a global population that is gradually shifting from largely
youthful to largely elderly. It also indicates large shifts in population needs and tastes ahead that will drive
organizations to move to the new realities. Assuming an older population, CEOs must contend with the fact
that a 45-year-old person may not know what they will want when they turn 50. This pushes the need for
scenario planning in order to get ahead of the population shift with products and services that will have
waiting markets. It will also call into question brand strategies as marketers are now learning how to market
to an older population and implications that has for brand assets. The CEO surveys show that most business
leaders are still trying to improve the fundamentals of cost and flexibility in their operating models. They
need to collaborate with suppliers and partners to achieve this, often on an increasingly global basis. Where
businesses have other businesses as customers, the imperative to meet these new demands becomes
important because partner relationships stave off commoditization. Partnerships require real understanding
of business customers and service-led account management. Developing these skills and evolving the sales
force is therefore a high priority for many.
01B, SYM14, 10/04 AE Page 11
IT ACTION: Focus on deepening partnerships

Organize for process lifecycle management
• Particularly in product development and service development
Anticipate changes to sales force support tools

• Account service management will become more sophisticated
Offer online collaboration support (again)
• Customer collaboration needs more than e-mail and attachments
Sort out roles, rights and

End
responsibilities in the IT customer
customer relationship triangles….
Your CEO is ready BU internal IT dept.
to make the sales customer
Whose
relationships of the
customers’
customer are
business dependent on IT IT service
we supporting provider
today ?
Dynamic: The IT department needs a marketing strategy.

The IT function is often viewed as an overhead in support of back-office functions. Increasingly IT
contributes the partially automated revenue-generating machinery of the business. This change has been
happening quite quickly and management cultures are sometimes slow to catch up. IT management must
think in terms of a marketing strategy to help its customers understand its current contributions and where
they are headed. In particular, the marketing strategy should address two distinct segments.
• Customers of the enterprise. These are the new customers of IT services who are either end
consumers or links in the supply chains that lead to the end consumer. It is important for IT executives
to understand what is happening with customers so impending change is understood and planned for.
• Customers of IT. Here we have the traditional customers of the IT service and their needs. At the core
are ongoing operations that require the continued support and improvement of IT. In addition, this
requires a proactive effort toward organizational change that quickly puts together the value to be
delivered.
From a strategic level, it is key to understand how the customers of IT interact with the customers of the
enterprise. This mapping helps IT executives better understand the leverage available when planning.
01B, SYM14, 10/04 AE Page 12

FINDING: CEOs are
focusing on increased risk and uncertainty
There is always economic uncertainty in business.

But CEOs report more turbulence in today’s
globalized, networked markets.
Managing risks better is a priority for most.
CEOs work to mitigate risks from:
– Disruptive regulation
– Unpredictable economic outlook
– Sudden shifts in market perceptions and confidence
– New entrants leveraging technology and low-cost labor
(especially in emerging markets)
Sept. 11,
SARS, Implication: Building more resilient business
accounting model capabilities that can thrive on rapid change
scandals, oil is becoming key.
price hikes….
What’s next ?
Dynamic: From the CEO perspective, risk is associated directly with the ability of the
organization to achieve the goals and objectives laid out for shareholders.
During a time of stability in an industry, this can be straightforward. With enough market and a stable
competitive landscape, you can find a strategy for future economic returns. It is during times of change,
however, that business risk accelerates. Whether the change is due to a new business venture or to the move
to a new business model, the way an organization navigates change is decisive to its long-term success.
The key to future CEO success lies in the ability to identify: “How much change do we need?” This
requires the ability to sort out the opportunities and threats ahead with enough understanding that a
commitment to make needed strategic, integrative change can become a commitment at all levels, starting
with the highest. This is then followed with a strategy-aligned, integrative change process that takes into
account the many complexities that come with people, as well as the complexities that stem from
infrastructure. While risk looks at probabilities, and some of the probabilities are beyond the ability of a
CEO or organization to control, the response to the right opportunities is the place where the remaining risk
can be contained. To succeed, CEOs must master the ability to change the strategy or critical processes of
their own organization for a competitive advantage.
01B, SYM14, 10/04 AE Page 13

IT ACTION: Move risk
management forward three ways
Offer real-time
business warnings.
• Focus on detecting material
business events earlier
• Exploit wireless, sensors,
analytics, portals, BAM
Weld business change to systems change.

• Co-manage—if change is not in lock-step, risk is high
• Use examples of others’ mistakes to win the arguments
Strengthen portfolio management.

• Allow risks to be hedged more effectively
When margins • Make resource reallocation decisions easier and faster
are thin, risks
must be taken
…but expertly
judged
Dynamic: IT has a role in containing business risk.

GartnerG2 research has shown that the contribution of IT to business results stems from the ability to
reduce the risk of achieving needed business change. We have the recent example of HP, where the
company publicly ascribed the recent earnings shortfall in its quarterly financial report to the difficulty in
implementing integrated IT systems for taking customer orders. This illustrates that the ability to change
information systems was material to business results. For IT executives the message is simple—integrate IT
with the business so you can at least manage expectations or leverage additional time and insight to ensure
timely delivery for the business.
Another tool in managing risk is that managers should look at the IT projects in the organization and use
the technique of portfolio management—that is, look at your investments as a portfolio of investments with
a range of risks, then manage the portfolio in a manner that matches the goals of the organization. If the
organization is risk-averse, then ensure that projects stemming from risky change comprise a small portion
of your portfolio. If you are a venture capital company, then your portfolio is already high in risk and you
are trying to manage the risk you have. In any event, the risk profile of the company is important to the
strategies the IT staff employs to help manage it.
01B, SYM14, 10/04 AE Page 14

FINDING: CEOs worry
skills gaps will impede growth plans
Competition for talent is increasingly global.
Decisive, fast-acting organizations must be
compact, requiring multi-skilled individuals.
Recent “short-termism” has eroded training,
development and succession planning.
CEOs are concerned about identifying and
plugging the specialist gaps.
“Good enough” isn’t good enough anymore.
Talent pools must be world-class and new
competencies must be assimilated quickly.
“..a hot emerging
issue for
Implication: Staff development policy needs
manufacturing is
skilled-worker attention before it constrains the return to growth.
shortages”
Dynamic: Is there really a labor glut?

With the rise in highly educated people in low-wage areas like India and China, the conventional perception
is that there is a general worldwide glut in knowledge workers and skilled workers. CEOs are concerned
that the skills they will need to drive growth will not be available in time to capture the growth
opportunities ahead.
A recent example is from the Wall Street Journal: “...Some companies are already turning away business
for lack of expert workers. Accu-Swiss Inc., which makes specialized metal parts for medical and defense
industries, has turned down between 10% and 20% of potential business this year for lack of Swiss-style
machinists to staff its factory, says Sohel Sareshwala, president of the Oakdale, Calif., company…It’s clear
that a hot emerging issue for manufacturing is skilled-worker shortages, says Jerry Jasinowski, president of
the National Association of Manufacturers. He says the problem will worsen in coming years as baby
boomers retire.”
A growth agenda requires the right skills in the worker population, and company executives will try
innovative recruiting methods, including offering signing bonuses, to attract the best in the field.
01B, SYM14, 10/04 AE Page 15

IT ACTION: Support
strategic development of workforce skills
Get the extended workforce skills mix
right—develop a sourcing strategy.
• The people you need don’t have to be on headcount.
Fix the corporate Web site job ads process.
• Surveys have shown only small percentages of jobs appear
on corporate job boards. You won’t get the best people
if they don’t know you are looking.
Consider new skill-finding innovations.
• For example, reward portals like Innocentive and Topcoder.
Give HR appointments priority for once.
• Too often, strategic HR applications get pushed down the
priority list behind marketing, sales and operations. Over
several years this starts to damage your human corporate
“Everyone resource management competency level.
has talent at Develop your hybrids.
twenty-five. The • Strengthen policy initiative to rotate managers between
difficulty is to IT and other business departments.
have it at fifty.”
Edward Degas, 1834-1917
Dynamic: How can you get past the skills bottleneck?

Be innovative and strike early in the upcoming war for talent that will emerge if economic growth is
sustained. Gaining the type of people who can fuel expansion usually means having to attract key players
away from other organizations. Cautionary note: If you hope to develop long-term employees who will
grow as the company grows, be careful how you select staff with needed skills. Employees who are too
eager to leave their employer for a new opportunity may be equally eager to repeat the process, and your
investments in the employee will be enjoyed by another employer.
Support your HR function in skills development and recruitment projects across the business. Consider
offering them innovative options to compete for labor, such as participation in reward portals (browse
www.topcoder.com for IT and www.innocentive.com for biosciences examples).
Another key point is the need to do scenario planning now, so if the economy heats up, the skills that might
only be developed within the company are delivered within a year or two. As the role of the IT function
develops and matures, some staff will be happy to come along on your journey, while others may move out,
perhaps to outsourcers. Make the career development paths and choices clear, so employees don’t always
feel at risk. Identify the members of the “spine” of your organization now.
01B, SYM14, 10/04 AE Page 16
Predictions
IT as a strategic imperative will return as CEOs seek
growth.
– Since IT is considered a constraint to growth, it becomes critically
important to do whatever is needed to relieve that constraint.
Investment in IT will increase to improve its time to market.
Strategic IT will be integrated with business strategy
and change in the most successful businesses.
– Conversely those that keep the two separate will experience
increasingly serious business surprises and shortfalls. Expect to see
the constraints of poor infrastructure alignment attacked via new
organizational structures and mindsets.
Proactive exploitation of regulatory change will become
a common collaborative tactic between CEOs and CIOs.
– Repeated regulatory disruption is not going to fade. Leaders will
learn to use it to overcome inertia and further their strategic goals.
Prediction: IT is now a strategic imperative and we predict the IT organization will

experience the demand for change that is driving the rest of the business.
What happens to IT when CEOs see it as constraining growth? The first thing to consider is that, when
planning strategy, executives look first to the goal, then to what is needed to accomplish it, and also look at
the key constraints. When faced with such constraints in the past, executives have moved to make them
strategic imperatives. For example, when faced with the competitive onslaught based on superior quality
and productivity from Japan in the automobile industry in the 1980s, U.S. auto executives moved to create
strategic organizations empowered to drive quality through their business. When it became clear that
services would be important to the advancement of many businesses later in the 1980s and 1990s, services
executives saw their strategic importance grow. As for the role of IT, the rate of business change in
response to the drive for growth is larger than IT alone, although IT is a large part of the constraint. What is
needed is an integrated view of infrastructure that will enable change rather than inhibit it, and integrating
IT with strategy and change will help achieve that result.
01B, SYM14, 10/04 AE Page 17
Final observations and recommendations

• CEOs are often depicted as strong independent thinkers.
• But surveys show more “flock behavior” than you might expect!
• Our composite picture should give you a useful sketch to build on.
•• Invest
Investfirst
firstininportfolio
portfoliomanagement.
management.
Governance
Governance andprocesses
and processesfirst,
first,tools
toolssecond.
second.
•• Make
Make regulatory change the assumption,not
regulatory change the assumption, notthetheexception.
exception.
It’s
It’s not going away. Manage it actively and turn it intoadvantage.
not going away. Manage it actively and turn it into advantage.
•• Favor management information
Favor management information radar projects radar projects
in
inportfolio
portfolioprioritization.
prioritization.Prescient
Prescientmanagers
managerscontrol
controlrisks.
risks.
•• Put strategic staff development back
Put strategic staff development back on the agenda.on the agenda.
Discuss
Discussskills
skillsdevelopment
developmentwith withHR,HR,before
beforethe
thegrowth
growthcrunch.
crunch.
•• Book
Bookan anITITleadership
leadershipteamteammeeting
meetingwithwiththe
theCEO.
CEO.
Subject:
Subject:The Thethree
threemost
mostimportant
importantgrowth
growthissues
issuesfor forthe
the
next three years and how IT will help address
next three years and how IT will help address them. them.
Recommendation: Achieve your company’s goals by considering IT strategically, from

policy all the way to execution.
This presentation reports what CEOs are thinking, and we make the case for what business and the IT
organization must do during a time of accelerating change. Our case runs counter to the conventional
wisdom that says: “IT doesn’t matter!” or that IT is dead.
What we say is that, in order for you to achieve your company’s goals, you must consider the role of IT in a
strategic manner from policy all the way to execution. To do otherwise neglects the constraint posed by IT
to achieving the type of change that achieves business results.
The history of the IT industry has been to focus on building the structures for information flow. It has done
so with stunning success, judging from the way the world of business has been connected together. Now the
focus is on ensuring that IT does not prevent a business from achieving its goals.
Gartner is currently researching the frameworks, roadmaps and tools that will help IT move to its more
strategic role in enabling change. We expect the next few years to be among the most exciting in the history
of IT as CEOs start to get what they increasingly want out of IT.
01B, SYM14, 10/04 AE Page 18
This is the end of this presentation. Click any
where to continue.
These materials can be reproduced only with Gartner’s written approval. Such approvals must be requested via
e-mail — quote.requests@gartner.com.

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Tutorial: The CEO Dilemma—

Balancing Growth and Cost Containment

U.S. Symposium/ITxpo Jorge Lopez and Mark Raskino

17–22 October 2004

These materials can be reproduced only with Gartner’s written approval.

Gartner Industry Research

IT will be required to meet the demands of business for

Gartner Industry Research

Key issues for this research

FINDING: There is a return Gartner Industry Research

IT ACTION: Invest cautiously, Gartner Industry Research

Watchpoint: Maintain alertness, Watchpoint: Focus your managers’

Invest in monitoring Invest in change

Gartner Industry Research

FINDING: The business agenda is growth

The return of mergers,

Gartner Industry Research

Structure Process Infrastructure

Corporate Matrix structures, If “the business” Flexible architecture

Change to business EXECUTION

Dynamic: IT is the enabler of strategic change.

Gartner Industry Research

Implications: Change must be self-funding.

Dynamic: CEOs have a dilemma.

Gartner Industry Research

Gartner Industry Research

• But uncoordinated agencies working

• This places the change capabilities of

Implication: Progress on the

Gartner Industry Research

Treat Others emissions IT

Dynamic: IT is the constraint to change and growth.

FINDING: To win customers, Gartner Industry Research

Developing the capabilities of the sales force

Implication: The return of a substantial

Dynamic: A world of changing demographics ahead changes consumer markets.

Gartner Industry Research

IT ACTION: Focus on deepening partnerships

Anticipate changes to sales force support tools

Sort out roles, rights and

Dynamic: The IT department needs a marketing strategy.

Gartner Industry Research

There is always economic uncertainty in business.

Gartner Industry Research

Weld business change to systems change.

Strengthen portfolio management.

Dynamic: IT has a role in containing business risk.

Gartner Industry Research

Dynamic: Is there really a labor glut?

Gartner Industry Research

Dynamic: How can you get past the skills bottleneck?

Gartner Industry Research

Prediction: IT is now a strategic imperative and we predict the IT organization will

Gartner Industry Research

Final observations and recommendations

Recommendation: Achieve your company’s goals by considering IT strategically, from

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