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CIOs urged to take risks, or risk being Uberized

The pushback against Uber offers a lesson in risk-taking for CIOs. Also in Searchlight: Black Friday loses sales steam, but Cyber Monday is stronger than ever, especially for smartphone users.

Uber, the mobile app-based ridesharing service and industry disruptor par excellence, was once again in the media crosshairs, this time over flouting city transportation licensing and regulations. Here in Boston, executives from Uber and its rival Lyft appeared before the Boston City Council for a six-hour-long public discussion on the role of ridesharing services in the city's transportation industry.

The upshot? Not much in the way of constructive action, according to the account in BostInno, an online news site with industry disruption ambitions of its own. But the writing on the wall was pretty clear to BostInno's Nate Boroyan: "Even with questionable ethics, Uber and Lyft aren't merely winning the war against Boston taxis -- Uber and Lyft have already won."

It isn't surprising that Uber, like other disruptors that have successfully offered an alternative to the status quo (e.g., Netflix, the cloud, the iPhone), is experiencing pushback. The ridesharing service seems to be rapidly cycling through the four stages of disruption recently described by former Microsoft executive Steven Sinofsky, starting with upsetting the applecart -- or, as he puts it, "disruption of the incumbent" -- and ending with "complete reimagination." Who isn't going to fight being completely reimagined?

In its protest of Uber practices, the taxi industry is also following the script to the T: According to Sinofsky, now a board partner at venture capital firm Andreessen Horowitz, the threatened industry judges the disruptor "by using the existing criteria established by the incumbent." At the same time, the incumbent (pathetically) tries to compete by copying the disruptors. In the Boston case, the incumbent's criteria are based on livery rules established in the 1920s, and the attempt at competition comes in the form of taxi-hailing apps, such as Hailo. The attempt to compete, however, just validates the disruptors, Sinofsky argues. Cue the vicious cycle here in America's college town, where there is no shortage of mobile app users.

"The fact of the matter is [that] Uber, specifically, has a stranglehold on the market. The company's best-selling product, uberX, despite all its flaws, is cheaper and more easily accessible for anyone with a smartphone and the Uber app; there just isn't enough business for drivers to make a decent payday … behind the wheel of a regulated taxi anymore," wrote Boroyan.

So what does this pattern of disruption mean for enterprise CIOs who want to drive innovation, but are unsure of how to balance that disruption with their legacy systems and don't know if it will even benefit the bottom line?

Some of Sinofsky's advice to incumbents could just as well pertain to CIOs: "Your key decision is to choose carefully what you view as disruptive or not," he said. This requires a clear understanding of the possible ways new offerings can provide value to your customers and business partners -- a balancing act that is easier said than done, he cautions: "Creating this sort of chaos is something that causes untold consternation in a large organization."

The CIO as a venture capitalist 

One way CIOs could achieve this precarious balance, according to Deloitte's 2014 Technology Trends report, is to think like a venture capitalist. It sounds far-fetched, but as Deloitte points out, there are some similarities between the mind-sets of successful VCs and CIOs. CIOs, too, have to sometimes take calculated risks on disruptive technologies to get ahead of competitors. They must balance those risks with investments in legacy technology, Deloitte says. CIOs must also be able to explain the value of their technology risks to their business partners.

In case you're still shaking your head at the comparison, take a CIO's word for it. Charles Weston, former CIO at Bloomin' Brands, a holding company that owns casual dining restaurant chains, says, "CIOs need to place bets … that a given product or service is going to hit the market at the right time and fill a niche that others don't." The risks need to be balanced, he agreed, and should also be vetted with the rest of the C-suite. But even then, he warns, failure is inevitable.

Weston faced his fear of risk head on when he first joined Bloomin' Brands as CIO, investing in a cloud-based integration service despite his teams' qualms and the challenges of integration. But in the end, he beat competitors to the punch by taking a risk on the cloud early on.

Weston, who is also a member of VC Sierra Ventures' CIO advisory board, cautions that there are some aspects of venture capitalism that aren't exactly suited to the CIO's job, notably the size and breadth of VCs' portfolios. The CIO portfolio is restricted by the company's industry and should contain only what is required by the business. But the goal is to be receptive to a different way of doing things. "To start on the path of CIO-as-venture-capitalist, try to open your mind to becoming more of a risk taker and to look at technology solutions that are less established," he says. That, or prepare to be completely reimagined.

CIO news roundup for week of Dec. 1

Here is more news from the week as we hurtle headlong into the holiday season:

  • Is Black Friday a thing of the past? Might be too soon to tell, but the sales numbers from Thanksgiving through the weekend don't look too promising: 5.2% fewer people shopped online or at stores than on Black Friday last year, the New York Times reported. But things looked up for online retailers on Cyber Monday: IBM's recent Digital Analytics Benchmark found that online sales were up 8.1% as opposed to Cyber Monday 2013, with smartphones being among the primary traffic drivers.
  • There was one group of shoppers that didn't show any signs of slowing down on Black Friday and Cyber Monday, however: cybercrooks.
  • "By 2015, coming up to 50% of the Fortune 100 will have a chief data officer," tech recruiter Shawn Banerji recently predicted -- and now, a growing crop of academic programs on big data and analytics are bearing out how valuable data is to businesses today.
  • Apple under fire: Lawyers are accusing the tech giant of deleting music that some of its iPod users downloaded from rivals without informing them of the practice. Apple retorts that they did it for security reasons.
  • "Gangam Style" broke YouTube! PSY's 2012 viral hit garnered so many views -- a number that defies mathematical punctuation -- that the video-sharing website was forced to upgrade.

Check out our previous Searchlight roundups on Facebook's enterprise play and the USPS security breach.

Next Steps

Read more on Uber and other mobile disruptors. Plus, get advice on how CIOs can step out of the shadows to grab digital disruption by the horns.

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When was the first time you used Uber and why?
I've actually only used it once - and the reason was because I had a $20 credit for signing up. It was more convenient to request the car rather than waiting for a taxi in the cold...but I did begin to question the decision when the driver immediately took me the wrong way down a one-way street. 
I've actually only used it once too - since I got a free ride from a Facebook promotion. It went rather smoothly but I have heard horror stories from several friends.

In India for a few times which was pretty cheap and quick, plus the ability to track the cab before the actual pickup. Interestingly, Uber is in a media crosshair in India too due to a most recent unfortunate incident (look it up..please).

A close look at the legal statement in the Uber site raises several questions on the accountability for passenger safety norms et al. Might be an interesting topic to comment on for the journos.