I am delighted to be back writing for CIO. My focus will be digital leadership and the associated opportunities and challenges for CIOs. I am keen to steer the column in line with the needs of the readership. Please use the various social media channels to help shape the content of this column. So onto this month's column:
Like most people who care about the IT industry, I am particularly keen to see the role of CIO join the ranks of their 'fellow' CxOs' and thus play an active role in strategy creation. So here's a suggestion to get the attention of the C-suite. Why don't you offer to help the business erode its profit margin?
This may seem a little controversial, though the CFO might mutter that you have been working on that initiative for some time. Let me explain. There are a number of emerging trends taking place in the world:
In the developed world, customers are expecting your organisation's services for free or almost for free (Ryanair - subsidised air travel)In the emerging world, there is an abundance of potential customers. However they have limited funds (Tata – sub £1,000 car)
Asymmetric business models are becoming more popular. Again Ryanair is a good example of this - a few high paying travellers, subsidise the fares of the majority. Many people access Google search for free. This service is in effect paid for by a relatively small number of 'pay per click' advertisers. Also in a global marketplace the speed at which word of mouth marketing gains traction, and thereby your offering becomes economically sustainable, is important. Sweating your initial customers for maximum profit would be unwise. In most cases only compelling pricing will set the ball rolling.
Thus there is a general trend for organisations to reorganise themselves to trade margin for volume. This requires scalable infrastructure and strong analytic tools.
Some organisations are looking to buck this trend, but this is likely to end in tears. Typically they are enterprise vendors who have enjoyed lavish margins, who feel they would be cannibalising their business to head down-market into the SME space.
So I feel that there is a strong enough case for you to approach the boardroom and make the case for A: - disrupting the existing business model and B: – taking the lead in the transition.
The chances are that you are already active in respect of supply chain management and customer relationship management. You may even have played a part in linking these two enterprise activities together. The key thing now is to look at what you already offer your customers and remove at least 50 per cent of the functionality / product line. A key element of servicing a large customer base is simplicity. Think Pareto principal.