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Taking IT reorgs to the extreme

Kim S. Nash | March 31, 2015
IT departments are constantly reorganizing, but a few companies have gone so far as to break the traditional IT department into pieces.

Born to Change
As soon as corporate IT was born six decades ago, someone no doubt wanted to change it. We've seen the pendulum swing from centralized to decentralized and back. Invisible backroom mechanics became service providers, who became business partners.

What's different today is the degree of uncertainty about what the IT group is if virtually all companies are now built, top to bottom, on technology. CIOs themselves are divided about their own futures. In our 2015 State of the CIO survey, 49 percent of 558 IT leaders said they're destined to become managers of contractors and cloud vendors--hardly strategic. Indeed, sometimes old ideas and established leaders don't cut it. RSA Insurance Group in London cleaned house last year, replacing several senior executives, including all IT leaders and the CIO.

RSA also created the position of chief digital officer as it tries to move to "more disciplined and effective use of technology."

At Aetna, a move to explore ways of generating new revenue led the health insurer spin out a new business unit from IT in 2011. The unit, rebranded as Healthagen in 2013, includes technology and health companies Aetna had acquired, and it offers new services based on data analytics. Hospitals, physicians and employers buy software and data products from Healthagen, essentially making it a vendor, says Brian Garcia, CTO of the unit. It could offer an alternative career path for Aetna's IT professionals--Garcia used to be Aetna's chief architect for software.

Race for Creativity
Innovation--the desire to nurture it, the fear of it fizzling--is a prime driver of big IT reorganizations. But finding the best IT structure for promoting innovation is a problem that continues to vex CIOs. Seventy-four percent of the respondents to our State of the CIO survey said it's challenging to find the right balance between business innovation and operational excellence.

The dramatic restructuring at Zappos is intended to re­ignite innovation, says CTO Cromley. The online retailer, which started with shoes and now sells all kinds of clothing and accessories as part of, has never been a typical company. Employees are known as Zapponians, and they live to wow customers. In fact, the company's No. 1 core value is to "deliver wow through service." Passion and "a positive team and family spirit" are also key values promoted with frequent off-site meetings, occasional costume parties and intense "culture" training. CEO Tony Hsieh contends that happy, engaged employees are naturally creative, and creativity engenders customer satisfaction and loyalty.

As Zappos grew, however, Hsieh and fellow leaders worried that the company would lose its edge. They are counting on the new holacracy to wipe out any creeping complacency.


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