The CIO as a venture capitalist

In this blog my goal is to share some thoughts and observations on the changing role of the healthcare CIO in the reshaping health economy.

By Boris Rachev, Global Health Economist

In this new world, the CIO’s role will expand from enabling operations with technical services to building a technology footprint that feeds into the executive team’s growth and investment strategy. Such a perspective should help us as a healthcare IT company adopt a more holistic view of the CIO’s role in the healthcare organization and leverage our client relationships more successfully.

What is this new world, again? Let’s recapture it in broad strokes: technological advances, empowered consumers, disruptive new entrants, and rising demand by an aging population. While many of those trends have been emerging for some time, never before have they been accompanied by a rapid shift in dollars, pounds and euros, triggering major changes in behavior and fundamentally altering the healthcare business landscape.

In this business environment, there’s probably not a single CIO who does not want to help drive business growth and innovation. To adapt to a quickly changing legal and economic environment, however, healthcare CIOs have to develop a new mindset and new capabilities, and actively manage their IT portfolios in a way that drives enterprise value. Like venture capitalists, they must evaluate portfolio performance in terms that business leaders understand – value, risk, time horizon and profit.

More easily said than done. CIOs have historically focused around low-risk core delivery, budget and operating models. However today, more and more CIOs are faced with disruptive forces such as crowdsourcing, mobile only, big data, cybersecurity – the focus is shifting from a world of known problems into one filled with unknowns[1].

The capabilities related to the leadership role of a CIO in a growth-oriented healthcare organization today are borrowed straight from the playbook of the venture capitalist. CIOs are under pressure to attract entrepreneurial talent with technical skills and business savvy, and they cultivate their organizations to anticipate and respond to changing market conditions.

CIOs today juggle an ever-growing portfolio of projects, ranging from long-term strategic initiatives to keeping the lights on. Not only do they need clear lines of sight across their portfolio of programs and projects, but in order to succeed they need to understand their assets: hardware, software, facilities, delivery models, contracts, vendors and workforce.

CIOs with a venture capitalist mindset don’t just report on the organization’s to-do list or inventory of assets, they communicate the quantitative and qualitative value the IT organization contributes to the business. This means explaining the strategic importance of programs, projects and assets.

As a true venture capitalist, today’s CIOs must hedge their bets with respect to emerging investments, whether in broad technologies or with specific entities. If the plan is to build dependencies on start-ups or niche players, for example, they will need to evaluate not only the technology but the founders and their business models. The concession architecture they build will allow their organization to allocate assets to different players or to shutter underperforming investments or partnerships in order to move on to the next opportunity.

Rethinking the role as a venture capitalist gives the CIO a backdrop for the business to elevate the understanding – and appreciation – of his or her function. IT in healthcare organizations should be and often is a board-level topic, recognized as one of the crown jewels.

CIO’s portfolio mindset these days also extends to talent management. Talent scarcity is a universal concern, but it has a particular impact on IT. CIOs need doers and thinkers just like venture capitalists, but they also need leaders. The savvy ones are bound to use this age of innovation as a means to launch initiatives to reward and successfully retain demonstrated talent with the curiosity and horsepower to help lead growth areas. Demand for talent is outstripping supply in many shops – and expected time to value is shrinking.

Disruption is a given in technology today, and is extending into many aspects of the business. The balancing act is delicate – driving for more nimble, responsive delivery while maintaining architectural integrity and making solutions built to run as the core pillars of business agility.

The new technology-and-consumerism-driven health economy represents the most significant reengineering of the healthcare systems in developed countries since the introduction of universal health coverage programs. In this economy, as the money flows from consumers to new players, the siloed disease treatment industry is being replaced by a wide open health marketplace, where more and more healthcare CIOs begin thinking and acting as venture capitalists. Given all of the above, as a leading healthcare IT company we need to explore these new realities and be able to explain to CIOs what the economic value added of our solutions is in appropriate business language.

 

[1] CIO Magazine, 2013 state of the CIO survey, January 2, 2013, http://www.cio.com/slideshow/detail/79671, accessed September 30, 2015.

 

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