Over recent years, IT has shifted from being a primarily efficiency-oriented “business enabler” to an increasingly change-oriented “business driver”. IT has become pervasive within nearly all types of enterprise and value chains have become more dependent on information. Unsurprisingly, this evolution has a tremendous impact on the role and position of the CIO. In order to better comprehend the implications of this trend on executive appointments, Egon Zehnder International recently conducted a survey specially dedicated to the role of the CIO in the financial services industry – a heavily IT-oriented industry which anticipates future trends in other sectors.

The study involved interviews with 20 CIOs of major banks and insurers in Germany. It emerged that future CIOs will tend to be change-oriented business drivers, who also forge ahead with the redesign of organizational structures. To this end, CIOs will have to actively change both their leadership role and their traditional field of responsibility. As the study showed, in a few years’ time, the classical interpretation of the CIO role will no longer exist. The CIO of the future will be the CEFO or Chief Efficiency Officer. Along with the IT organization he will also be responsible for an operational or business unit within which IT plays a significant part.

Another trend that emerged was the centralization of IT activities. The early 1990s witnessed a veritable explosion of IT activities and fast reactions were key. In the meantime standards have been established, the infrastructure has settled into place, and cost pressures are soaring. The current situation calls for greater efficiency, which is best achieved through centralization. This is also the principal challenge facing the CIO.

We have identified three development stages at which companies may be located in terms of their CIOs. Each of these phases demands very different competencies from the CIOs themselves:

• Phase 1 is marked by decentralization and purely IT-related responsibility for the CIO
• Phase 2 is marked by the centralization of IT activities
• Phase 3 is marked by additional business-related responsibilities for the CIO

Figure 1: The value matrix

From CIO to CEFO

As a rule the CIOs in Phase 1 are tenacious, have an above-average grasp of customer requirements, are both customer- and market-oriented, and possess strong strategic competence. However, as the study showed, the value contribution of IT is not at its best within such structures and as a result most companies have shifted toward Phase 2.

CIOs in Phase 2 generally head up a globally centralized IT function within which the decentralized IT officers report directly to the CIO. They also demonstrate a very high level of leadership competence and their approach reveals above-average result-orientation.

In Phase 3 we no longer refer to CIOs but to “Chief Efficiency Officers” (CEFOs) who demonstrate the profile required for this most advanced phase and can therefore generally be considered the CIOs of the future. These are no longer the classical CIOs with a fair grasp of business, but experienced business managers who think and act outside the box and possess a sound understanding of processes and technologies. They form part of the board and bear full budget responsibility. CEFOs are expected to trigger and drive far-reaching processes of change across the corporation, which means that they need to demonstrate pronounced acceptance and mastery of change. In sum, CEFOs think and act in holistic terms across all corporate functions and business units. They are ready and willing to call the status quo into question. They have a background in the operational side of the business and are well acquainted with all of the company’s key business processes.

Role and position of the CEFO

In our view, the ideal CEFO

• is a member of the central board with full board-level responsibility and accountability
• heads a centralized IT organization with complete budget responsibility
• has an additional business responsibility for a core business unit or business processes that are closely linked to IT and a high level of business (profit/revenue) relevance within the organization
• is a general manager with in-depth understanding of the market (insurance or banking) and a solid grasp of IT
• has strong strategic acumen and entrepreneurial drive
• has marked leadership skills and charisma
• has international experience and intercultural agility.

If a CIO is going to graduate from one phase to the next (see graph below) it calls for a very high potential for development and the drive to match. This graduation process can only succeed if CIOs take an honest and critical view of their own capabilities and adopt an uncompromising approach to identifying areas in which they need to improve. Then they must be wiling to work hard to close the gaps in their skill sets. Ideally they will present a blend of crystalline analytical powers and a good head for business. Broad-based experience is another very useful asset. CIOs with a narrow career profile will have a tough time meeting the requirements.

Figure 2: "Where do I invest my development efforts?"

Which phase of this development has the financial sector reached today? Interestingly, the insurance industry has opted more than the banking sector (and other industries) to position its CIOs at board level. However banks have taken a large step toward broadening the CIO profile by including business responsibility in his role. This new responsibility assigned to CIOs in banks is due to IT being a key success factor at branch level, e.g. in transaction banking. Conversely, in the insurance industry, business responsibility has been granted haphazardly to only a few CIOs, and there are no signs that these rare moves are indicative of a general trend.

The results of our study, however, leave no room for doubt that the CEFO is the role of the future: A total of some 80 percent of companies in the banking and insurance sectors have already set the stage for this development, and some have already implemented Phase 3.