Digitization relies on great vendor relationships

Digital workflows require CIOs to build effective partnerships inside and outside their organizations

When Lululemon Athletica’s website crashed in May 2017, then CIO Dave Berry had a moment of clarity about what collaboration means in the cloud era. The e-commerce site, which accounted for nearly a quarter of the company’s sales, had been outsourced to a big tech company. Yet no one at the athletic-wear seller was able to get the vendor to muster the resources needed to develop a quick work-around.

As the minutes became hours, the downtime frustrated customers and cost Lululemon millions in lost revenue. Eventually, the vendor’s CEO got involved, and the site came back online—20 agonizing hours after it first went down.

“That was a few million in lost sales that was not coming back,” says Berry, reflecting on the experience. Beyond the dollars and cents—and the damage to its reputation—the incident proved to be a wake-up call about the role of a CIO during a time of massive technological change. “You can’t hunker down and focus on your own organization,” Berry says. “You’ve got to be willing to be part of a larger discussion.”

Increasingly, that means reimagining how your organization partners with third-party technology providers. With so much riding on digital systems and the workflows they enable—from speeding up the approval of life insurance applications to making it easier to file patents—the importance of vendor relationships is clearer than ever.

Most CIOs agree, and they rate their vendor relationships as stronger than with their CEOs. In fact, 68% of CIOs polled by Oxford Economics, in a survey commissioned by ServiceNow, said they collaborate effectively or highly effectively with outside partners.

But for many of the CIOs surveyed, the value they get from those relationships remains a work in progress. In fact, only 17% say they’re highly effective at working with external partners to drive digital transformation projects.

So how does today’s CIO do a better job of working with partners? It starts with demanding more from these relationships—both from the vendor and yourself.

“You can’t hope and pray that 1-800-YOUR-VENDOR is going to deliver when it’s a fundamental part of your business,” says Kristi Lamar, managing director and U.S. CIO program leader at Deloitte Consulting.

Indeed, to make sure they’re getting the best results for their businesses, effective CIOs must share their strategies with key vendors and talk to their product teams—not just sales. The two sides then must develop jointly a vision for how they can transform the business by working together.

Communication and thought partnership

Good communication is the first ingredient for effective collaboration with a vendor, which requires a CIO to give as well as take. That often starts with granting a vendor insight into your strategy before you’ve even started working together.

Sharing the strategy shifts the responsibility to the vendor to identify how their technology can help a company. That facilitates what Teri Takai, the former CIO of the U.S. Department of Defense, calls a “next-level discussion.”

Without this background, “the CIO has to figure out how something is going to fit with the other technologies that you have,” she says. “It’s not that you’re not smart enough to do it. You just don’t have time.”

The most successful partners, she says, understand your priorities and can clearly articulate how they can contribute to your success. “I tell my technology partners, if you haven’t read the strategy before you walk in the door, don’t bother,” she says.

She adds: “Technology partners are really, really critical, and part of that reason is that some of the technology partners have been around longer than the CIO has… So, they actually have a perspective that the CIO can use.”

At ServiceNow, CIO Chris Bedi says he’s much more forthcoming than he was previously about sharing his strategy with key partners. But he expects something in return for that sensitive information.

“If I’m betting on you as one of my top five partners, you need to be coming to the table with innovation that fits into my strategic plans,” Bedi says. “I expect you to bring me thought leadership, not thinking about things the way you always have. Otherwise I can’t use you.”

Get involved with product development

Top performing CIOs say a good partnership has to be a two-way street, in which both sides are invested in one another’s success. “This isn’t the old days, when a software company would sell you a bunch of stuff and then disappear, and then come back three years later to try to sell you more,” says Shamim Mohammad, chief information and technology officer (CITO) of CarMax, the largest used car retailer in the U.S.

Yet just 18% of CIOs surveyed say they’re highly effective at sharing a culture of innovation with external partners to drive digital transformation.

In order to make sure his vendor relationships are on that path, Mohammad shares his technology roadmap with partners and works with them to make sure they’re aligned.

For example, before he signed on with a major SaaS provider, Mohammad worked with that vendor’s head of product to develop new features that would meet CarMax’s particular needs. Engineers from both companies, who in previous days might never have met, worked side by side on the project.

Having teams from client and vendor working jointly not only helps the partnerships to deepen, it also allows for iteration, which is becoming an imperative as technological changes and market needs require companies to pivot ever more frequently. According to the Harvey Nash/KPMG 2019 CIO survey, 44% of companies expect to make major or radical changes to their products and services within the next three years. Not surprisingly, more than half of CIOs in the Oxford Economics survey say they’re effective at constantly researching new partnership opportunities, and 20% say they’re highly effective.

“We believe we’re doing a lot of innovative things,” says Mohammad. At times when vendors aren’t keeping up, he adds, “we’re challenging them to move faster.”

Fostering innovation

At their best, partnerships with outside partners can lead to new opportunities that no one group could achieve on its own. Yet just 18% of CIOs say they’re highly effective at using partnership to develop new business models and ways of working.

Douglas Blackwell, SVP and CIO of insurer Horizon Blue Cross Blue Shield of New Jersey, spent years integrating systems with healthcare providers, hospitals, and medical records platforms. The effort helped the insurer create what Blackwell calls “longitudinal patient records,” which give a more accurate history of each patient. That helped the company to move to a pay-for-value framework that rewards good patient outcomes rather than a fee-for-service model that incentivizes overspending by healthcare providers. “In the past, it was more of a negotiation than a partnership,” says Blackwell.

Don’t forget about your own C-Suite

The deep integration and collaboration that forward-thinking CIOs are adopting with vendors, while critical, is insufficient on its own. CIOs must make a similar effort to deepen their communication and relationships within their own C-suites.

Bridging that gap will require effort from both sides. But CIOs can’t wait around for an invitation.

CIOs can start by adopting more of a business mindset, carefully considering the costs of their proposed technology solutions as well as the business value they will provide. This is, of course, the same process they follow when they’re evaluating technology from a vendor and figuring out how to best collaborate.

But many CIOs don’t behave in that way when it comes to their relationships with C-suite colleagues, says Deloitte’s Lamar. That’s partly because, until recently, “many CIOs weren’t asked to put on their businessperson hat,” she says.

The very lessons CIOs have learned developing effective collaborations with outside partners can help them become better evangelists with the C-suite peers in their own organizations, she adds.

Berry, the Lululemon CIO who is now program leader for mergers and acquisitions at commercial jet-maker Bombardier, is a case in point. He says he’s become a better collaborator by educating his C-suite colleagues. His syllabus: being clear about what technology can make possible and what it can’t. “Everyone talks about digital,” says Berry. “But your CEO may not have a clue what the cloud means to the company.”

Of course, an educator needs to strike the right tone: “You can’t be condescending about it,” he says. “If you alienate them, they think you’re nothing but a geek.”