Mark D. Lutchen knows what it takes to unleash the full potential of IT so that organizations can derive the maximum benefit from it. As the former global CIO at PricewaterhouseCoopers (PwC), one of the largest professional business services firms in the world, Lutchen oversaw an IT organization of more than 2,500 professionals serving more than 120,000 employees in 144 countries. Today, Lutchen is a senior practices partner in PwC's IT Effectiveness Practice, where he helps clients get more value from their IT investments and their IT strategies. In 2004, he wrote Managing IT as a Business - A Survival Guide for CEO's. Many graduate school professors have used his book in MBA courses on IT management. Lutchen says that the basics IT management principles in his book haven't changed much since it was published.

Enterpriseleadership.org recently spoke with Lutchen, for the second time, to discuss what disciplines CIOs must put in place if they want to run IT like a successful company. This is what he had to say:

EL: Why did you write the book in the first place?

ML: I wrote the book because the IT clients I worked with seemed to have similar issues. It became clear that technology wasn't the problem. Instead, it was about managing IT and being disciplined about doing it. If you look at the failures that have occurred, you start to see some of the patterns. People have not instilled within IT the disciplines we use in other parts of the business. If you're a CIO running a billion dollar IT organization or even a half billion IT organization, that's the equivalent of running a business. To this end, you need all of the kinds of things in place for running a business. The book was to put this idea into context.

EL: Why did you decide to title the book as A Survival Guide for CEOs and not CIOs?

ML: The book is really for the C-level executives. I wrote it from a business orientation. If you look at the role of the CIO five years to 10 years from now, you'll find the CIO of a major corporation acting more like a CEO of a business around IT.

Many of the IT books that have come out in the past two years have redefined the CIOs role. That's what I did, except I redefined the CIO role as that of a CEO. I also wanted other people in the business, such as the CFO and the COO, to understand what happens in an IT organization from both the IT and the business side.

EL: Since your book came out, have CIOs become better at developing IT strategies that meld with the overall corporate strategy, as well as the needs of the business units? If not, how can they be doing a better job.

ML: Some of them have been trying to do that. Upfront in the book I address the issue that IT doesn't provide the one process or the one tool to take care of everything. Instead, if you want to do things right, you always need to be working on about 13 or 14 competency areas. All of competencies have to be at the right level for your organization. If you have the world's greatest technology but you don't have the ability to motivate your skilled people, then you're going to have an imbalance, and the technology won't perform the way you want it to. On the other hand, you have the technology spirit and the people with the right skills but you don't interact with the business units effectively. In other words, you don't set goals, prioritize things, or make sure you're linked to the business strategy. If this's the case, the technology you have, the way you put it in, and the skills you use to support it might be completely off target for the business units.

EL: So how do you get all of this to balance?

ML: People have had a desire to do it, but they have to work hard at it. In some cases, it requires ripping up what's there, and dramatically changing the culture. It also requires having a good base of quality and credible data, visibility, and transparency around what's going in the IT organization. You really need to look at the how the IT spend and IT performance support the business. People tend to work on parts of the problem. They really need a program to work on all the parts. It never ends. People have tried to make progress. It's been expensive.

The tighter money becomes, people begin to say that they don't need the disciplines they put in place, and thus start to cut costs here. For example, they might say no to rolling out an IT dashboard because they have the perception that it won't add value. Of course, an IT dashboard will add value much the same way, as you need a CFO to run a billion dollar business.

EL: What are some of the effective criteria processes C-level executives, including CIOs, and other business leaders or other constituents should consider in deciding on the mix of IT investments?

ML: People can't look at these as just IT investments or just IT spend. The companies making good progress have begun to understand that other than certain specific things, such as infrastructure, these aren't IT projects any more, but business projects with strong IT components. You need to approach things differently by saying that we, as an organization, need to decide on the mix of the total investments. Before you start making any decisions, you need a set of criteria for determining if the investment is a mandatory item, or if it is a regulatory item. Once you get that criteria agreed with by the business unit, then you can start to define the IT components, and to lay them in place. You also need to have a business measurement.

If the project has many business components and one IT component, then the business should unit own the entire project. Once you have structured the process and have agreed upon the criteria, you can start to have an intelligent discussion about which business projects must take priority over others. This discussion drives the platform of the portfolio of business projects you're going to do, and defines the IT components needed to support each project.

When the project gets going, you need to have a way to assess the results and to measure the benefits. At certain intervals, you need to stop and to make sure you can meet the targeted benefits. You can't wait a year or two years to see if there is any benefit. If you can't reach the first set of benefits in the first time interval, why would you let the project go forward?

EL: Where are companies falling short in finding IT dollars to invest in areas such as innovation?

ML: Companies that understand the activities what drive their costs, and make the effort to reduce unnecessary costs are more prone to have a mix of IT investments. On the other hand, if a company understands that 90 percent of its spend is tied up in legacy systems, then it's playing a zero sum game by having to spend money on maintaining these systems. If the company doesn't shift gears, it's costs will increase. You can't stand still. The older your systems get, the more they cost to maintain. People view this spend as a water faucet that they can turn off and turn on as needed. This saw tooth approach adds to the capital expenditure.

You need to understand how you spend capital to reduce costs to keep rolling forward. That translates to how do I free up cash if I'm not going to get any more money to be able to fund innovation? It gets back to perception. Do you have a group that just focuses on innovative things or innovative uses of technology for the rest of the organization or within anyone business unit? Many people view that has a luxury. It's a necessity. You don't always have to be on the leading edge, but you have to be on the edge of certain things, and to understand how these things would help the business to do something better, or to help the IT organization lowers its costs.

EL: What are the hot IT areas your clients are investing?

ML: This's an area where I'm going to tread lightly on. If you think back over the last couple of years, everyone was pushing service-oriented architecture. It was perceived as a major breakthrough in Web-based delivery of IT services. I haven't seen much about that lately. I lot of it was hype as opposed to the basic set of blocking and tackling you need when a new technology comes out.

Several years ago, we saw many companies heavily investing in customer relationship management systems. CRM had the same problems ERP had. People charged ahead and put in very large, global standardized systems to accomplish some objective. Many of these systems failed because of other factors. Some people, still to this day. haven't dealt with certain infrastructure issues that could remove large pockets of costs and make things more efficient. Using a tool as simple as virtual asset management, you can cut costs and improve efficiencies. If you don't understand your asset base, how are you going to understand how to move within a different direction?

Within the business itself, the use of things on the Internet and the Web have reached a certain plateau. We're doing more wireless activities. To this end, we need to have better wireless security and a better way to keep these wireless systems running.

EL: How should a company go about seeing if it can benefit from a new technology?

ML: You need to work with parties that help you to experiment with new technologies so you can evaluate how you can apply them in your organization.

Let me turn back the clock to 1995 when PriceWaterhouseCoopers had 100,000 of PCs and 1,000s of employees traveling all over the world each day. These people used to connect to the office via phone lines to get their Lotus Notes email. Broadband didn't exist at the time. Their calls would go from a server to a modem bank in the office. This service was expensive and the security wasn't where it should've been.

We decided to look at how we could provide connectivity that wouldn't drop calls, would require just a local call or a local connection, and would provide more security. We essentially laid the groundwork for our virtual private network. We asked MCI if it would work with us to develop the VPN. We needed a partner to help us to keep our costs in line. Our need to reduce the costs and to improve the security drove this innovation.

Today VPN is a staple. There are many other things like that out there. We couldn't have done that ourselves. The communications companies didn't understand what we were talking about when we first started speaking with them. You have to work collaboratively with other parties to get some of that innovation going.

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Author: Elizabeth M. Ferrarini - She is a technology writer from Boston, Massachusetts. Reach her at elizabethferrarini@yahoo.com.

In 1987, the 42 separate insurance companies that comprised Factory Mutual Engineering & Research (FM), an industrial property insurer, and engineering-driven underwriter, consolidated their operations into three FM companies: Allendale Mutual Insurance Company, Arkwright Mutual Insurance Company and Protection Mutual Insurance Company. The three separate mutual insurance companies found it difficult to deliver reasonably priced, value-added engineering services in a marketplace driven by increasing competition and a demand for more challenging property protection. To reduce costs and to eliminate competition for the same customers, the three FM companies in 1999 merged to create one company, FM Global.

Today FM Global is an international property insurance and loss prevention engineering company with $4.7 billion in premiums and $9.7 billion in investments for 2007. The company's research group conducts tests in fire and explosion hazards, hazard detection and protection technology, natural disasters, and electrical hazards.

Enterpriseleadership.org spoke with Jeanne Lieb, senior vice president of information services (CIO) of FM Global at the MIT Sloan CIO Symposium 2008 where she spoke about managing a corporate business transformation. In this interview, Lieb talks about how executive commitment helped to make the merger go smoothly, and how standard processes, strong governance, effective leadership practices, and a good understanding of the business have helped IT deliver value to the business. Here's what she had to say:

EL. You can describe your organization's key responsibilities to  support the business? 

JL. We centrally manage all of our infrastructure, our systems development, and our enterprise architecture. Because our business model is unique in our marketplace, we had to build the majority of applications we require to run our business. These applications aren't available off the shelf. We're in the midst of a major six-year initiative to update our entire platform. 

On the infrastructure side, we're upgrading our internal voice network to voice over IP. From a server management, we're trying to gain efficiencies for using virtualization technology. 

EL. What other IT changes have you  made to operate both locally and globally? 

JL. Because of our presence in 50 countries, we had to standardize our global operations across the enterprise. As such, we use the same North American custom software in all of the countries where we operate. The software is centrally developed and centrally managed. This arrangement enables us to bring key information assets on the standard platform and use these assets in other parts of our business process. We drive economies of scale by doing that. 

Some of my CIO peers face the challenge of how to bring all of the financials together for doing business in several foreign countries. At FM Global, we don’t face this issue because we rely on this consistent platform. Because everything is centralized, we've been able to develop standardized business processes. As a result, we can focus on providing value back to the core business as opposed to worrying about how to handle financial reporting. 

EL. Can you describe why the merger went as well as  it did? 

JL. The three insurance companies that owned Factory Mutual were three equally matched companies. It was a merger of equals coming together to form a new company, namely, FM Global. This's important to understand. Because the merger didn't affect our clients, we quickly had to make some critical decisions at the beginning of the merger. For example, we had to decide which business-operating platform we wanted to use for FM Global. We didn't allow ourselves to say, 'Let's take a bit here and a bit there.' All of the insurance companies had valid platforms. Within three hours, four individuals, including me, made the decision to select one platform. We then worked with the executive committee on our rationale for our decision. During the 15-month merger period, the executive team continued to validate that we made the right decision for FM Global. No one challenged the platform decision. During this period, we also removed all of the system redundancy, and had all of the operations using a common platform. We couldn't have accomplished all of this if we didn't have full executive commitment. 

EL.  How are you providing value to the business units that translate to  profitability and to competitiveness? 

JL. I can approach that in several different ways. We've developed those business applications that run our business. Applications, such as engineering, underwriting, and claims, have an intrinsic value in ensuring that people have the tools, the technologies, and the infrastructure to respond efficiently and immediately to our clients' needs. 

As a developer of products for FM Global, we return a lot of value back to the company. As an insurance company with a foundation in engineering, we think of the information that comes from our visits to clients' facilities as the raw material for a manufacturing process. We have data management practices in place so that we then derive value from our product development, our underwriting, and other process supported by all of that information flow. 

EL. What initiatives have you  developed to become more customer centric? 

JL. We focused an important initiative on the core business roles, which include client-servicing departments, such as underwriting, claims, engineering, and sales. Using that portal technology, we knew we could provide ready access to all the client information and client content our employees needed, depending on their role. We then took a step forward by integrating our business applications into that portal. It presents employees with a list of their associated clients. After they've selected the client of interest, then all of the underlying applications then operate off that client. This streamlined interface helps employees to understand our working relationship with the client by providing information such as policies, terms and conditions, inspections completed, and other services. Essentially, we have one place where we go to find what we need. 

Sometimes business processes get lost; no one knows who owns what. We've worked to provide a clear understanding of which parts of the business own what components. It's important to know which sponsoring part of the organization drives any change or innovation. These things need to evolve over time. Because of our role and our integration of technology into our core business, we play a key role in every aspect of the business. Planning activities, for example, help us to ensure that we put together an annual plan we can respond to. 

EL. Can you  describe your governance process? 

JL. We have a cross-functional technology steering committee comprised of senior management, along with representatives from marketing, underwriting, and engineering. We ensure that we have the appropriate targets on the plan, and we deal with allocating resources appropriately. Our efficient process to resolve issues helps us to break down barriers as they arise. Usually, a team working on an initiative might have issues they can't resolve efficiently. Our resolution forum helps to resolve the team's issues. For example, we might try to resolve how far a certain application might go, or how the scope of a project needs to change. 

EL. How do you make investment decisions? 

JL. Working with the technology steering committee, we come up with a plan. Once the plan is agreed upon, I work with the CEO of on an appropriate budget to support the plan. The board gets involved as needed. Many of our decisions focus on defining the needs of the core business, and looking at what things are in our clients’ best interest.

EL. What steps do you take to address your clients' needs? 

JL. The business organization, not IT, talks with clients directly.  We call them our risk management executive councils, which foster a direct exchange between local management with clients. We also have advisory boards represented by CFOs at our clients’ organizations. 

EL. Do you assign IT people to be the liaison with the  business units? 

JL. I don't have people in the specific role of relationship manager. A good IT professional needs to understand the business. You're always going to need people who are good at coding or managing the infrastructure. Because our business model relies on technology, I require my entire management team, as well as business analysts, to connect directly with the business and have sound relationships with their business peers and understand the plan, the objectives, and the way we leverage technology to best meet those objectives. 

EL. Many people say there is often a disconnection between management and IT. So, when you hire someone, how do you know they speak the language of the business? 

JL. I can't point to a specific methodology we use to ensure that. I've seen many technologists who provide great value, but they do a mediocre job of speaking to business peers about solving business problems. In these cases, you need to have a liaison or a translator in the middle. This person could sit in the business unit or sit in IT.

EL. What are you doing to minimize the personal risk for employees to  understand and to embrace change?

JL. Management experts will say you need to layout and to articulate to an individual what success means to their organization. You need to communicate early in the relationship about your expectation for how employees can contribute and positively influence the changes they want to affect. When it comes to asking employees to accept major changes, you need to take a step back and to understand what obstacles would prevent employees from embracing the change. If you believe, as I do, that people want to do what's in the interest of the company, then you need to look at those other personal factors that define success for those employees.