How Insurance CIOs Can Avoid Failure and Establish Their Credibility

CIOs looking to make an impression should take advantage of “low-hanging fruit," and not avoid the major “career-killing” initiatives but be as transparent as possible about risks, acting in the character of a strategic advisor with a unique view of the enterprise.

Some CIOs end up as long-term advisors within an insurance enterprise and others are shown the door after a relatively short tenure. Technology has only grown in importance to the business, but while that potentially elevates CIOs’ it also raises the stakes of success and failure. How should CIOs balance innovation and prudence, how should they take their place in strategic decision making? Frank Petersmark, CIO advocate of Farmington, Mich.-based consultancy X by 2 offers some interpretation and recommendation in this Q&A.

Insurance & Technology: How would you characterize the environment that CIOs operate in today?

Frank Petersmark, X by 2: I think the environment that CIOs operate in today is a very challenging one, and one that is completely different from just a few years ago. Today, CIOs are expected to be strategic leaders while worrying about operational business alignment, innovate while battling strong headwinds against change within their organizations, and contribute directly to top/bottom line revenue while seeing overall investments in IT stay flat or slightly decrease. Most, but not all of this, has been a result of a prolonged soft market in the industry that has left carriers scrambling to make up for decreases in underwriting profits. That has manifested itself with many carriers looking to IT to come up with ways to enhance/support revenue and expense management. For revenue think of things like data analytics and predictive modeling to support new product and geographical opportunities, and on the expense management side think of things like vendor management, outsourcing, program management, and even the Cloud as a way to wring costs out of IT and the larger organization.

I&T Do you see CIOs as better aligned with the business and more integrated into senior management, or less so today? In cases where trust has eroded, why has that happened?

FP: I think 'alignment' is yesterday's challenge for CIOs — if they're not strategically integrated into their organizations then they're not functioning effectively as a CIO. Where that hasn't occurred it's often due to undelivered promises on IT initiatives — over time, over budget, unrealized efficiencies, etc. That's often how credibility and trust is lost.

I&T: What technology areas are more likely to help CIOs chalk up successes today, and what are areas that present a greater risk for tripping up their careers?

FP: Any area where CIOs can deliver capability sooner rather than later, like portal implementation/enhancements, mobility, and customer/agent self-service, are good areas for quick but value-additive successes. The “you bet your career” initiatives are still the same ones they have been but the stakes are even higher now – so things like core system transformations, legacy modernization both hardware and software, and ‘big data’ projects that promise to fix decades of bad data input are still the ones that get CIOs fired. The dilemma of that is that such initiatives are usually the ones that organizations need the most for their long term growth and welfare, so the key for CIOs is to be as candid and transparent as possible about the risks and the benefits, the costs, alternative options, and IT’s ability to execute and deliver.

I&T: Do CIOs need to be careful not to seem too cautious in the eyes of business executives eager to deliver new capabilities to distributors and customers?

FP: I believe that CIOs have to continue to be careful about the way in which they communicate the complexity and effort required for enterprise-wide IT initiatives. It’s a delicate balance to strike for sure, but more CIOs than not get into trouble by over simplifying what it will take to get something done and when things go awry they’ve left themselves in a very vulnerable position politically, and risk damaging whatever hard-earned credibility they’ve attained. The golden CIO rule is still to do what you say you’re going to do, and implicit in that is thinking carefully about what you and your division can and cannot do. This is not negativism, but rather pragmatism and candor, and in the long run that goes further in building the kind of executive trust that the CIO position has struggled with in the industry.

I&T: Could you give examples of conventional wisdom that CIOs have to be very careful generalizing to their own company?

FP: generalized vendor platitudes to the effect that things such as cloud services, big data, business process management, etc., are no-brainer decisions should be met with more than a little skepticism and should give CIOs pause when describing their potential inside their organizations. It’s not that such things can’t provide value, because they can; it’s just that it’s never quite as easy as some might lead one to believe.

Conversely, stripping away all of the nomenclature and acronyms and speaking to business executive peers in the language of business – risks, options, costs, benefits – will go a long way in making collaborative and rational decisions on business technology priorities and initiatives. For example, cloud services is easily translated into an opportunity to cost-effectively acquire hardware and software for a specific use without incurring the capital allocation or IT staff distraction to procure and install.

I&T: How much of a role should CIOs play in shaping their company’s strategy today?

FP: CIOs should be at the executive table and directly involved in shaping company strategy — and not only because the strategic use of technology could provide competitive advantage for a particular organization. CIOs are in a unique executive position in most companies, and probably don’t leverage that position for company benefit as much as they could. CIOs are, generally speaking, the only executive who has a purview over the entire organization in terms of business process, information production and distribution, and technology capabilities. That makes CIOs uniquely qualified to provide strategic perspective – vertical and horizontal – across an enterprise and therefore uniquely qualified to weigh in on strategic direction. The problem is that many CIOs do not view their role that way, or are not situated in the organization to be able to contribute that way, and the opportunity is lost.

I&T:Are CIOs generally in greater danger of advising their companies to move faster or slower?

FP: I think that there’s a fundamental difference between the way companies respond to the influence of technology to their particular market – whether that technology has the potential to be paradigm shifting or not. Those companies that are ‘learning organizations’ – by that I mean driven be curiosity, unafraid of change (or at least not threatened by it), open to experimentation, and are self-critical (a rare characteristic anymore) – are much more likely to understand and absorb the rapidity of technological change, and much more likely to leverage that change for their own benefit. Companies that are ‘closed organizations’ – where tough questions are discouraged or never asked, think they already have all the answers, are reticent to change – are much less likely to view rapid technological change as a potential opportunity rather than something that should be avoided at all costs.

When I was a practicing CIO I generally erred on the side of advocating for faster change for this reason. While moving faster causes more disruption and can lead to mistakes, it also creates and enables opportunities that might not otherwise present themselves. Those opportunities should be the things that CIOs live for, and when presented need to be acted upon. I think that those CIOs who use the slow-but-steady approach risk, on balance, more second guessing and lost opportunities, and will be viewed as a less than strategic thinker and player in the company.

[For more industry expert views on today's insurance CIO role, see 4 Major Challenges for Insurance CIOs: E&Y's Hollander.]

Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio