Today’s tech leaders must move into a much more proactive strategist role within the enterprise, bringing strong communication skills and entrepreneurial goals, according to Larry Downes, author of The Strategy Machine: Building Your Business One Idea at a Time.

The 42-year-old consultant, who also authored Unleashing the Killer App in 1999, has worked with Fortune 500 companies and a number of start-up firms on large-scale systems integration and development. He’s also worked as principal in the legal office of McKinsey & Co.

According to Downes, tech leaders have a tremendous opportunity to take a higher-profile role in leading corporate enterprises, but they must be able to combine technical knowledge, an understanding of business, and a spirit of innovation.

The overall role of IT is changing as well, explained Downes. While tech teams once focused on back-office functions and supporting internal user needs, they’re now tasked with developing systems to control core business functions, which in many cases are front-end applications for customers, suppliers, and business partners. These new applications are “embedded components” of the enterprise’s products and services, according to the author.

Directing the new empire
“The key message I’ve been trying to get across to IT professionals my entire career,” Downes said, “is that if you want a strategic role in your company, it’s there for the taking. Yet if you don’t become an innovator and a leader, the company’s future empire will dwindle bit by bit till you have almost nothing—or, at least, nothing very interesting—left.”

One key hurdle facing tech leaders is resistance to change, said the author, who believes that IT professionals tend to hide when faced with blazing new technology that they’re unfamiliar with. That attitude can thwart a tech leader’s career and also hinder an enterprise’s technology innovation.

Downes said that IT leaders must pay attention to how their industries are changing and how their companies are positioned. In addition to watching for new technologies that can help the company, IT leaders should also watch for new opportunities that could add value to the company’s core goals.

While IT has come to the forefront of the enterprise—by creating front-facing applications driving the business goals—it’s increasingly being viewed as a research and development entity, explained Downes. While many high-tech companies have long had advanced tech research teams focused on leading-edge development, the more traditional IT departments are now being realigned as R&D units as well. Many high-tech companies are already there because technology is the product. “If you ask them at Cisco to tell you where the IT budget is vs. the R&D budget, they don’t understand the question,” Downes said.

In the move to an R&D approach, there is a greater ROI expectation, said Downes. However, that’s still in the infancy stage, as he expects the greatest share of tech budgets will still be spent on efficiency projects to improve productivity, with a relatively short ROI time of one to two years. Today’s examples are enterprise relationship management (ERM), supply chain management (SCM), and customer relationship management (CRM) efforts.

“What I think will happen,” Downes said, “is that kind of IT project will be supplemented by a couple of new kinds: midterm investments and long-term investments.”

Midterm investments with two- to five-year payoffs might include joint ventures. For example, today, automotive suppliers and OEMs work together through Covisint, a hub that facilitates SCM in the industry.

The long-term investments, which may take five to 10 years to show return, are riskier ventures focused at developing emerging technologies, such as the electronic distribution applications that caught the music industry off guard. Companies can commit relatively small amounts of their budget to these riskier IT projects, with the understanding that not all will pay off—an attitude that is common in venture capital firms.

Entrepreneurial IT
As the tech unit changes to become more strategic, Downes sees entrepreneurial skills becoming more important to CIOs.

“Increasingly, IT professionals are going to be expected to be creative thinkers, to come up with the new product ideas, the new service ideas,” Downes said. That’s why innovation and entrepreneurship are also new skills that current and future IT executives will need to develop.

“Maybe these are the people who, two years ago, were looking at Web services and saying, ‘Okay, it’s not here yet. But this is high-potential stuff, and here’s what we can do to get in on the ground floor,’” Downes said. The advanced technology team could meet with marketing, operations, and the executive team every six months and describe the technologies they’ve been investigating. Together, people from IT and other departments can figure out which technologies are aligned with the business and merit investment.