Do CIOs Know (Their) Business? [Part 1]

CIOs are uniquely positioned to understand their company's business more than many others in the company.  The theory behind this is that IT "touches" every aspect of the company and therefore IT has the broadest exposure to the business.  But does this theory hold up under closer scrutiny?

Traditionally CIO came up through the ranks of IT and were very technically focused which limited their business exposure.  And as for touching all aspects of the business that really doesn't happen until you get near the top.  Below that level you tend to focus on particular areas.  Rare is the business analyst/developer that handles both payroll and inventory for example.  Fortunately with the trend of CIOs having worked outside of IT and having an MBA you should expect to see more business knowledge.  Unfortunately the facts don't seem to support this.

Accenture conducted a survey in July, 2006 with 300 IT and general business managers.  The results were rather interesting in regard to the mis-perception IT has of their understanding of their company's business.

"The most glaring difference of opinion between IT executives and general business managers was on how well IT executives understand their company’s business. While 73 percent of IT executives said they believe they understand their company’s business extremely or very well, only 43 percent of general business managers said they believe that IT executives have that level of understanding of the company’s business."

That is a pretty significant difference of opinion.  If you're an IT leader this raises 2 fundamental questions.  First, do you understand business in a generic sense.  Second do you understand your company's business.  To help assess your understanding I thought I present a little quiz.  Like my previous quiz it is of course, capricious, subjective and arbitrary.  However, unlike the previous quiz I'll let you develop your own scoring method.  So, on to the questions, first 10 question to assess if you understand business in a general sense.

1. Can you read and understand financial statements?
2. Can you calculate a discounted cash flow or internal rate of return?
3. What are liquidated damages?
4. Do you know what the following terms mean and do you understand them? - DSO, EBITDA, ROI
5. Do you know the difference between cross-selling and up-selling and value-selling?
6. What does it mean when we say the dollar is "weak" or "strong" ?
7. What is a matrix organization?
8. What is the basic difference between Chapter 7 and 13?
9. What is a Proxy statement?
10. What is the difference between a Put and a Call?

Admittedly other than the question on discounted cash flow and internal rate of return these aren't directly relevant to your IT activities.  The are, however, directly related to your client's activities and if you are going to understand their business you have to be able to understand their activities.  Additionally, while these questions are general in nature they do serve as a proxy for general business knowledge.  For example, knowing about Puts and Calls would likely mean that you have a general knowledge abut the stock market.  So take the test and let me know what you think.

Next post [Part 2] : 10 questions to assess your knowledge of your company's business.

If this topic was of interest, you might also like these:

• How's Your Rain Dancing?
• The CIO as Salesman
• Kent Blumberg on Financial Intelligence
• Or the posts in the "Strategy & Management" category

Untitled photo by jeffreywithtwof's