Complicated business environments and poorly digitized processes are the best places for a CIO to demonstrate the full range of IT's capabilities—and opportunities to do this abound in China.

Consider Beidahuang Rice Group, a typical agricultural business headquartered in Harbin, Heilongjiang Province, the center of China's rice industry. Currently, this company alone satisfies one-third of China's overall rice consumption. Previously, however, its operations were manual and labor-intensive. CIO Wang Micheng and his team worked to replace the traditional business processes of rice collection and handwritten records with on-demand production based on digital orders.

In another example of IT leading the business strategy, the Inner Mongolia Little-Sheep Catering chain hired a CIO to set up a centralized platform to extend its branded restaurants to Toronto and Vancouver, Canada. The platform now supports the business and manages 700 restaurants globally.

And Zhang Yan, assistant manager of IT at the Industrial and Commercial Bank of China, oversees 10,000 staffers and plays a key role in her bank's business.

All these examples show that IT is playing an increasingly important role in Chinese business. Along with that change, the CIO's job has become more challenging. In addition to being IT gurus, they have to be business wizards who thoroughly understand the company's operations and processes.

A good CIO in China must also play the role of diplomat, managing conflicts among departments ranging from procurement, manufacturing, and sales to finance and logistics. Moreover, they must be willing to take risks that come with business innovation.

To examine the changing role of the CIO, we at InformationWeek China launched our own "Defining the CIO" survey this March. We also conducted in-depth interviews with several companies and organizations. The results indicate three major challenges: overcoming the risks associated with innovation; determining hard-to-measure ROI; and aligning IT with the business.分页

Our survey of 550 companies showed that fully 97% of respondents are eager to advance innovation at their company. They're driven primarily by "swiftly growing requirements," "requirements to maintain customers," and "the pressure of global competition." However, innovation poses risks that could lead a CIO to technological pitfalls.

Mature businesses tend to have the best understanding of these risks and are willing to proceed anyway; others are more reluctant. Impulsive innovations often give rise to unnecessary risks, says Bjarne Roscher, CIO at Siemens China. As a matrix organization with 160 years of history and 475,000 employees worldwide, Siemens is prudent about IT innovation.

For instance, whereas some CIOs see a Windows Vista rollout as an opportunity to carry out quick innovations, Roscher believes Siemens probably needs two years to research and deploy the new operating system. "We may gradually upgrade our present system to Vista around 2008," he says. "An operating system that everybody can use is what we need." Siemens now uses Windows 2000 and XP.

Siemens has approximately 350,000 PCs around the world. In 1998, the company set up a Siemens Workplace Architecture Team (SWAT) to tackle problems concerning the operating systems in its huge global intranet. As a special service, Microsoft sends teams to help the company manage its vast OS environment, which serves as a test bed for Redmond to improve Windows.

China's local companies are more eager than multinational organizations to adopt innovative ideas. In our survey, 77% of the respondents said they're willing to take risks for the sake of innovation. However, 9% admitted to failed efforts in the past.

One way to mitigate risks is to gain a firm understanding of the company's business process. FAW Haima Automobile did this through an approach called "low threshold to connect the suppliers."

Haima used to be a small automaker located in Hainan, with an annual production of only 3,000 cars. It was frequently changing business models.

In 2005, Haima launched a knowledge-management program creating a uniform communication platform between the company and its upstream and downstream partners, based on working E-mails and business processes. This seemingly simple approach matched Haima's corporate culture and proved easy to carry out. "In order to be rich, we have to build the road in the first place," says Wu Song, director of Haima's software-application office, citing a Chinese saying.分页

Companies in China are still struggling to demonstrate simple ROI on many of their IT investments. According to the research findings, more than 20% of companies reject the ROI benchmark that vendors provide.

Shineway Group, a transregional and international food-processing company, is involved in a complicated business process of meat processing and manufacturing, supply-chain coordination, and retail-store management. The complex process and long business chains make it almost impossible to forecast an accurate ROI before IT projects begin. While you can quantify the savings resulting from a single application or business process, ROI for the entire system remains elusive, says Shineway Group CIO Liu Xiaobin, who also serves as general manager at Shineway Computer Software Co. Ltd.

What you're actually calculating in these cases, says Gartner VP and senior research director Jack Heine, is the projected influence of the infrastructure-investment strategy on the future—something that can't be predicted with pinpoint accuracy.

Shineway Group was among China's top 500 enterprises in 2006, with annual revenue of $2.98 billion—10 times what it generated a decade ago. Through an IT system, Liu embedded the business logic of the industry into the company's business process. Today, every transaction in each retail store across the country can be queried easily.

In an effort to prove the business value of IT, most Chinese CIOs tend to emphasize a project's general effectiveness rather than hard monetary results. Take Jiao Min, for example. He's IT director at the People's Education Press, where teaching materials for almost half the primary and middle schools in China are produced and distributed in September before classes resume. For Jiao and his colleagues, editorial efficiency was the business target. A new publishing ERP system improved effectiveness and collaboration in numerous ways over the old paper-based systems.

The InformationWeek China survey confirms that CIOs are working more closely with the business to automate processes and improve operations. Of the CIOs polled, 44% communicate with business-line personnel on a daily basis, an obvious increase compared with last year's statistics.

Like Jiao, Wang of Beidahuang Rice is among the CIOs bringing changes to traditional business lines. Formerly, the company needed 1,200 employees to weigh its rice manually before distributing it to more than 30 companies across China. After studying Beidahuang Rice's work patterns, Wang's IT team figured out how to automate the cross-territory management of the business orders. Developing a software platform that's close to the business line, IT helped the company work its way to the top of what had been a labor-intensive industry. Data is passed on to the company's financial systems, reorganizing and optimizing the ancient business process of rice production and calculation of payments. Statistical information is now centralized, thanks to new optical fibers that connect the company's headquarters to its regional locations.

Obviously, only a CIO who fully understands the process can revamp a business that's existed for thousands of years.