By Kim S. Nash 

In the past, chief executives might have called upon the chief information officer rarely, and mainly in response to bad news, such as a computer or network outage. Now, as companies adjust to the era of digital business, the CEO and CIO relationship has become key to business competitiveness.

With software at the heart of many new business models and CEOs part of executive teams that as a whole know more about information technology than their counterparts in the past, everyone wants more from CIOs.

"I view technology today very differently than I did five or 10 years ago. It's no longer a backroom function," says Brian Cornell, Target Corp.'s CEO. His CIO, Mike McNamara, is "very involved with strategy planning."

CEOs now keep their technology leaders close. More than 53% of CIOs in Fortune 500 companies report to the chief executive, up from 46% five years ago, according to executive recruiter Korn/Ferry International. IT spending is the largest single outlay at some companies, and CEOs generally are taking a more active part in deciding financial allocations, staffing and priorities for the technology group, says Craig Stephenson, a managing director at Korn/Ferry. The entire leadership team has a stake in the intertwined matters of business and technology, he says.

Since 2013, Target has made more than $1 billion a year in capital expenditures for technology and distribution systems and it expects that amount to reach $1.8 billion this year. At an off-site meeting in June, Target's senior team decided how much money and staff to invest this year in key projects such as supply chain, customer loyalty and store revamps. IT runs through it all, Mr. Cornell says.

Top CIOs now spend more time in the executive suite than in what is left of the old corporate data center.

Rahul Samant, CIO of Delta Air Lines Inc., joins CEO Ed Bastian and the rest of senior leadership every Monday to talk about business trends and technology. "I'm there and equally contributing," says Mr. Samant, who joined Delta in February, following 23 years in financial services at American International Group and Bank of America Corp.

Last year, Delta launched Comfort+, a seating class with up to 4 inches more leg room and amenities such as free alcohol. Delta had lagged behind American Airlines Group Inc. and United Continental Holdings Inc., which were already gaining sales by offering upgraded service within the main cabin. Comfort+ fees start at about $50 extra per ticket, over and above the basic fare.

Adding Comfort+ fares required Delta to change mobile and web applications as well as modify reservations, customer service and other back end systems, some of which still run on mainframes. "This one business strategy touched it all," he says.

Johnson & Johnson CIO Stuart McGuigan and Sandi Peterson, its group world-wide chairman, interact six or seven times a day, by text, email and phone. They frequently meet face-to-face, too. As Ms. Peterson says, "CIOs used to run around with pagers on and the only time you heard from them was during an outage."

At Johnson & Johnson, where the annual IT investment exceeds $2 billion a year, CIO McGuigan is mapping the path to a new business line: 3-D printed components for hip and knee replacements. It is part of an effort to increase flagging sales in its medical devices unit, which was once the company's largest revenue-producer.

If Johnson & Johnson can figure out how to print reliable parts on demand in a doctor's office, it may no longer need to invest as much in factories and warehouses to produce and store inventory, Ms. Peterson says. The company may eventually print custom parts tailored to individual patients. Once the material science of shaping metals and polymers with printer jets is perfected, achieving Ms. Peterson's goals "becomes a software problem," Mr. McGuigan says.

Increasingly, company efforts to help retain existing customers and reach new markets -- through comfier seats or custom-printed parts -- are being realized though IT. But someone needs to help the business harness the power of all those tools, from low-cost, high-powered computing in the cloud, to industrial 3-D printers, the latest software development and deployment techniques and evermore sophisticated machine learning.

It is an evolution that Target CIO Mr. McNamara has noted during his 25-year career. A good CIO used to apply software and hardware to make accounting and billing more efficient, he says. "Things important to me now are user experience, speed to market and putting technology in front of customers." CEO involvement, he says, "is constant."

Write to Kim Nash at kim.nash@wsj.com

 

(END) Dow Jones Newswires

July 10, 2016 05:44 ET (09:44 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
Delta Air Lines (NYSE:DAL)
Historical Stock Chart
From Feb 2024 to Mar 2024 Click Here for more Delta Air Lines Charts.
Delta Air Lines (NYSE:DAL)
Historical Stock Chart
From Mar 2023 to Mar 2024 Click Here for more Delta Air Lines Charts.