Blog Posts From Articles Tagged With governance

Rick Mears, Owens & Minor's CIO, Talks About Improving IT Alignment With Business Units

bmc-elo@bmc-elo.hosted.jivesoftware.com — Thu, 05 Aug 2010 13:07:39 GMT

With revenue of $8 billion, Owens & Minor, Inc., ranks as one of the country's top distributors of disposal medical and surgical supplies and a leader in healthcare supply chain management. The company serves some 4,500 customers, including hospitals, integrated healthcare systems, alternate care locations, group purchasing organizations, and the federal government. The company's 51 distribution centers service these customers. With roots dating back more than a decade, Owens & Minor provides its customers with products from major healthcare manufacturers such as Johnson & Johnson, Kimberly Clark, and 3M. Rick Mears, CIO of Owens & Minor, says that the company's technology and consulting services help customers to improve their inventory management and streamline logistics across their medical supply chain. "By continuing to improve alignment between IT and the business, we've been able to use make use of innovative technology to provide exceptional customer service." In fact, Owens & Minor has received several awards from Information Week for innovative customer-facing initiatives.

Enterpriseleadership.org recently sat with Mears to discuss how his IT organization carries out the corporate strategy.

EL. Can you briefly describe your IT organization?

RM. We outsource most of our IT services to Dell Services, which acquired Perot Systems. We have had a relationship with Perot Systems for 12 years now. We have a small data center in the home office. Dell's Plano technology center outside of Dallas, Texas, hosts most of our technology.

Our corporate IT team makes sure that the company gets what it needs from technology and bridges the gap between business needs, technology, and our services. To this end, we make sure IT aligns with the business and that we support the strategy and the vision of the company.

EL. What is the overall corporate strategy and how does the IT strategy fit into it?

RM. Our overall strategy is to be the best supply management services company in healthcare. Our customers range from a variety of healthcare providers. They rely upon us every day to get the right products at the right place, at the right time, at the right price, and at the right unit of measure. We refer to this process as our Bill of Rights. We warehouse supplies locally and typically make same-day deliveries when a customer places an order. We also represent the sales and distribution channel for a couple of 1,000 manufacturers that have decided to go through wholesale distribution to move their items. We view our customers on both ends of the supply chain. We sit in the middle servicing both manufacturers and hospitals, and other healthcare providers that buy from us every day. That has been our strategy for decades.

If you look at our current vision and strategy, we want to continue to be great in terms of our Bill of Rights. Our strategy going forward will focus on expanding our services to manufacturers beyond those that have typically gone through wholesale distribution. We also want to expand our services to healthcare providers well beyond the acute hospital facilities. In these areas, we would focus on all healthcare facilities outside of hospitals, such as physicians' groups.

EL. Can you describe some of the key IT investments you have made, why you had to make them, and what they returned to the business?

RM. Our focus has been to extend our technology and our services to our customers via the Web. We have invested much in e-commerce technology and Web-based technology to connect our business with our customers. Specifically, we have extended our supply chain capabilities to our customers to allow them to manage their own supply chain better. By leveraging our technology, our customers can take advantage of our decades of expertise in healthcare supply chain services. We have also done this on the manufacturer side as well. As a result, our technology investments have been to extend our capabilities to our hospital customers and manufacturer partners. We also have looked internally and have invested in our infrastructure. During the past year, we invested heavily in our voice recognition system for our 51 distribution centers across the country. Our pickers no longer use paper or a hand-held device to locate and select the appropriate products. Instead, voice recognition directs the picker to the proper location and tells them how many items to pick.

EL. Did you have to make changes to your enterprise architecture to carry out the voice recognition system?

RM. We have absolutely done that. We just completed a migration of our primary enterprise systems from a mainframe legacy environment to a Microsoft Windows environment. A few years ago, we decided not to take on a major systems replacement approach to our modernization. Instead, we worked with Microsoft and Dell to migrate our systems to a more modern platform. We have opened up many new opportunities. For example, we have created a modernization approach that funds itself. It leverages the operations on a less-expensive HP/Microsoft platform to fund a number of our application modernizations. We also rolled out a new customer service system that will have a dramatic impact on how we serve our customers, and how our customer service people are positioned using technology to serve our customers.

EL. Can you describe the governance process for making and measuring these technology investment decisions?

RM. We go through a capital investment review process. Our capital investment review committee includes our senior management team who evaluate the return on any major investment. The team also goes through the strategic investment process to look at whether or not the investment fits with the company strategy and our anticipated future direction. On the larger investments, we work with the board of directors.

We use an internal rate of return calculation. We put the business owners through a rigorous process. Specifically, they need to look at what is the value of the investment we are going to get, what are the benefits to occur, and how would we measure those benefits doing forward. We try to link the benefits to one of several things: new sources of revenues, improvements in employee productivity, or improved business processes. The return could also be reduced cost or increased revenues. We also make sure that the project is a strategic fit.

This governance process really is what links IT to the business and creates that alignment. The process we go through as we consider IT investments forces IT and the business to sit down and come up with real, actionable impacts of the investments, and to use these impacts to defend the need for these investments. We have to collaborate effectively before we bring the investment to the committee. We have to make the case, explaining how we are going to track the internal rate of return that has been set up (whether it is based on sales or expenses or operating profits). The next step in the process involves coming back as a team during post-implementation of the project to show the actual results that we have achieved. It is not only a governance process, but the way we force alignment between the business and IT.

EL. What did it take to achieve this type of alignment between IT and the business?

RM. It took a while to achieve this type of alignment. When I came on board, I put much discipline in place for the governance process. I said that the business had to end up driving the rate of return. As a result, IT developed a close connection to the business. In fact, in many cases, the business owners are the ones who represent these enhancements or these investments that we need to make.

EL. Since you outsource most of IT, what type of cost savings are you realizing?

RM. We would not say that cost reduction has been the motivation for our partnership with Dell. Dell is the expert in technology with a great deal of resources. We can pull from those resources as we need them. We can swap out people based on the projects we need to do. We just tap into that pool. It forces us to not hire and fire people. Our relationship with Dell enables us to continue to be the best and most innovative in our business relative to when it comes to technology. Dell has an ability to not only bring us the expertise, but help us to get that technology implemented and supported quickly and effectively. It also gives us the ability to shrink and swell as we need to as projects are in place or not in place.

EL. What is the process to update the business strategy and the role IT plays in it?

RM. Because we want to extend our systems and technologies to our customers and our suppliers, IT is an important part of the strategic planning process. That is where we see synergy with IT, in addition to the investment in our infrastructure.

Our senior management team has always held the belief that truly innovative technology can have a great impact on business operations. Of course, IT has to deliver collaboratively with the business. Our CIO is included at the management table during every step of a technology initiative - from initial discussion to post implementation.

The management team meets quarterly to update the business strategy. We also have a formal strategy process with our board of directors. We meet with the board's strategic planning committee at least twice a year and then we have an annual meeting with the full board once a year. Because no one is sure of the status of healthcare, we want to stay current with where and how care it is going to be delivered, and how technology is going to impact healthcare.

EL. What challenges have you faced because of the economic downturn and the Obama healthcare legislation?

RM. It is very difficult to comment on it until the Obama healthcare legislation gets carried out in 2014. The economy has forced our customers and our suppliers to look across their entire organization for efficiencies. That is where we come in. Our value is helping our customers and suppliers to be as efficient as they can be with their supply chain. It goes back to our Bill of Rights. If you look across those things, we have proven that we bring great value, drive efficiencies, and drive cost out for our customers and our suppliers. That has created many opportunities for us.

EL. What about growth?

RM. Our growth rate has been on target for the past couple of years. There are some acquisitions tied to this. I can only give you a historical viewpoint of it. We have been where we thought we would be for the past two years. This is from a revenue standpoint too.

EL. What new technologies are you looking at?

RM. Now that we our enterprise systems operate in a Microsoft environment, we will continue to extend our technology to our customers and suppliers via the Web. We are focusing on better user interfaces for all of our users and a better experience using our enterprise systems. We are focusing on business intelligence and effectively presenting our information in support of decision making, for our company, our customers, and our partners. We have had great success replacing our warehouse interfaces with voice recognition technology. We expect to do more of that.

EL. How do you work with the CFO and CIO to prioritize technology investments?

RM. Again, it comes back to the capital investment review process. Our CFO has laid out some easy-to-use tools for us to present internal rate of return and to show how we are going to monitor the achievements of each project. Our CFO is involved in helping us to put this stuff together, as well as holding us to some tight requirements of approving these capital investments. We meet regularly with the capital investment review committee to demonstrate how we doing against those measurements.

Elizabeth M. Ferrarini is a technology writer from Boston, MA. Reach her at Elizabethferrarini@yahoo.com.

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Eileen Slevin, CIO of New York Life Insurance Company, Talks about an IT Strategy for Ensuring Long-Term Success

bmc-elo@bmc-elo.hosted.jivesoftware.com — Wed, 21 Jul 2010 13:07:39 GMT

With more than $26 billion insurance investment sales, New York Life Insurance Company, a Fortune 100 company founded in 1845, ranks as one of the largest mutual life insurance companies in the United States and one of the largest life insurers in the world. It has the highest possible financial strength rating from all four of the major credit agencies. Headquartered in New York City, New York Life's family of companies offers life insurance, retirement income, investments, and long-term care insurance. New York Life Investment Management LLC provides institutional asset management and retirement plan services. Other New York Life affiliates provide an array of securities products and services, as well as institutional and retail mutual funds.

While the economic downturn has wreaked havoc with some major insurance companies, New York Life has held its own, if not exceeded its expectations for financial growth and stability. Much of the company's success builds on a solid IT strategy that supports both the present and future needs of the company. Eileen Slevin, senior vice president and chief information officer for New York Life, say that the company looks seven years to ten years out to see what types of technology investments the company needs to make, what applications the business units anticipate, and what type of infrastructure needs to be built to support those applications.

Enterpriseleadership.org recently sat down with Slevin to learn more about the company's IT strategy and its approach to long-term planning for IT investments. Here is what she had to say:

EL. Can you describe your IT organization?

ES. I have a centralized group of 1,400 full-time staff members. About 1,250 of them are employees and the rest are consultants. We have an applications development group, an architecture group, an engineering group, an operations or service delivery group, a finance group, a human resources group, and a best practices group, which includes the project management office. I also have a security group. One of our senior executives manages our innovation program, which includes employees spanning the department.

EL. Can you describe a couple of the key technology initiatives that have helped to make the company more customer-centric?

ES. Over the last several years, we introduced some large systems in a couple of significant areas. In 2005, we introduced our new business system, which we have been continually updating. This mission-critical system firmly planted us on the Web. In fact, we call it the cash register for the company. For example, the customer applications the agents submit come through the system, where they get underwritten, and issued.

For the past several years, we have been updating our agency portal, which provides the agents with all of the sales support tools electronically. Since our dedicated, career force of agents provides the main interface with our customers, this portal is critical to our success. We also conduct our business through supplemental channels as well. We recently introduced a contact system as a major addition to the agency portal. Prior to that, we had delivered a collaboration platform to them.

EL. Any other key technology investments you care to mention?

ES. We have an entire program going which focuses on how we make technology investments to support the future needs of the business. We began the process about two years ago by sitting down and trying to understand what the business units would need in the future. We are talking about seven years to 10 years out. We needed to build the infrastructure in advance of the business units building applications upon it. By understanding what applications the business units would need in the future, we would have an easier job of defining the infrastructure they would ride on. We currently have approval for 14 infrastructure projects and nine business projects. The infrastructure projects are spread over seven years to eight years, and the business projects are spread over 10 years.

EL. What are some of the business projects?

ES. One project involves a new system for our sales proposals or sales illustrations that agents present to clients. It is actually part of the agency portal process. We are taking the former client server version of this system and bringing it to the Web. The basic agency portal was built around content and information the agents needed to get access to, such as forms. The contact system we just rolled out helps them to manage information about their customers. After the agents determine what they need to sell, they can use the illustration system to explain the finances around the offering. The new business system is at the end of the process. We will be developing some things that fit in the middle. We have a program for our agents to be able to turn over their business to their family members, such as children who may be taking over the business, or colleagues who may be doing so. We provide them a more effective way to do this as they are near retirement. It gives them the ability to slowly transition that business over to someone else to manage it for them, thereby providing the long-term support that our customers have come to expect from New York Life.

EL. Why have you gone out as many years looking at technology investments?

ES. In the past, we had done three-year planning. We believe that seven years to -10 years gives us a more favorable time frame to build the infrastructure that these applications would need to run on. We need to make sure that we are building a full and robust infrastructure. The company has been doing rounds to plan and to set goals for ourselves for 2015 and 2020. Using that as a basis, we then spoke to the business unit leaders about the applications they would need to meet these goals and objectives. Preceding that, we needed to understand what infrastructure we had to build.

EL. Can you talk a little more about your strategic planning process?

ES. We have been working from the top down, including every business unit. This work has been around more of the wide-reaching scenarios, such as inflation. Because we have set our aspirational goals out that many years, we talked about breaking through some metrics that we have not yet achieved. For example, what happens if we double the number of agents, or what happens if we get to five million customers? How will our systems hold up? What will we need to be able to do to support them? The business would need to do some of these things seven years to 10 years from now. We needed to look at how we would support all of these different things based on our growth.

EL. Are there any particular tools that you used to help you through this process?

ES. We have a unit set aside for some of the strategy planning and economic scenario planning. Most of the effort has been task forces and publishing position papers.

EL. Has all of this planning changed your governance process?

ES. We set dependencies for building out these infrastructure programs and business programs. For example, if we were going to install this infrastructure, it would be needed for our customer service applications in the future. We need to make sure we tie these projects together between infrastructure and business. The importance of specific technology was one of the things we always had a difficult time explaining to the business units. As a result, the governance process is something we now look at for each of these projects. Specifically, we look at the relationships between the projects and in the interdependencies. We make sure that these relationships still hold, and we adhere to the things we said. We have brought this program to the executive management committee several times. For top management, the governance process has been around understanding and telling us what the business objectives are, then sizing how much we can absorb into our financial model and making sure all of that runs through all of our numbers going out in the future.

EL. Any specific methodology do you use for measuring the effectiveness of technology investments?

ES. We use most of the common techniques such as ROI. We did a rigorous cost benefit financial analysis. For example, we looked at what projects would drive down costs versus the projects that would promote growth. Where we had sales coming in, we did marginal value add. Where we had expense savings, we used net present value analysis.

EL. Have you driven cost out of the company?

ES. Because we just initiated this program in 2009, we have not driven out cost with it yet. Separately, we have some strategic initiatives looking at how to drive down some future costs. In doing the cost benefit analysis, we said we could see more cost savings if we could automate some of the work done by our service centers, or provide self-service capabilities. We have identified what the savings would be. We have done this very conservatively, and have made it part of our analysis.

EL. Are you looking at cloud computing for some of these applications?

ES. We are at the very early stages of looking into cloud computing. We are also looking at how we can do our own kind of cloud computing in addition to that. We think cloud computing has a definite place for us in the future. I still have some concerns around security. I am not as comfortable with the public cloud as I am with a private cloud.

EL. What are you doing in collaboration?

ES. We do have a collaboration platform right now for our agents. We built several custom applications for them to use on that platform. We introduced that three years ago. We also use Sharepoint at the team level, but we have not done anything with it across the board for our employees. We have developed some grassroots wikis. One of the 14 infrastructure projects looks at a collaboration suite and expands that. We were early in this space. Because of the large number of agents who use it, we now need to advance that collaboration platform.

EL. What was the catalyst or driving force for your strategic business technology investment program?

ES. Back in 1999 or 2000, we put together a seven-year technology strategy plan. It enabled us to rollout our initial Internet application capabilities in early 2000. We hit the end of that plan around 2007. At that point, we knew we had to start developing our next technology strategy for 2008 and beyond. As we spoke with the business unit heads about some of the infrastructure and technologies that had good business applications, we realized that they were not thinking about the future to the degree we needed them to. To this end, it made it difficult for us to understand what infrastructure we should build and what technology strategy we would devise. That is how we then went down the path of working with the businesses to understand the applications. About 18 months ago, the executive management committee, on which I sit, came up with the goals and objectives we need to aspire to going forward. Using these things, we worked with the business units to help them define the applications they would need to meet those objectives. That is what has enabled us to lay out the infrastructure plan. All and all, that is how we developed our technology strategy.

EL. Have you done anything in the meantime to help the businesses understand the significant of this technology?

ES. At the start of this process, we did several educational sessions for the business on such topics as networking, legacy modernization, and collaboration.

EL. Has the economic downturn affected your company?

ES. We did well in 2009. While we are not are immune to this type of economic environment, we had a great year. We maintained the highest ratings from the four major ratings agencies. We believe that we have seen a flight to quality. Our financial stability, which is one of our foundational pillars, served us well. Our history of conservativeness also served us well. Our agents got the right messages out to customers. Because we are a mutual company and not a publicly held company, we can plan for the future and not worry about the short term. I am glad that we have been able to invest in technology.

Elizabeth M. Ferrarini is a technology writer from Boston, MA. Reach her at elizabethferrarini@yahoo.com.

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John Stroup, CEO of Belden Corp, Talks about Shedding Legacy Image and Targeting New Telecom Markets

bmc-elo@bmc-elo.hosted.jivesoftware.com — Tue, 06 Jul 2010 13:07:39 GMT

Homes. Businesses. Schools. Cable for broadband applications is everywhere. Much of that cable comes from one well-known company, Belden Inc. In fact, Belden offers 1,000s of wire and cable products, such as multi-conductor, paired, coaxial, and flat and optical fiber cables. With the gradual decline in the traditional market for cable products, Belden, with corporate roots going back almost 90 years, has worked hard to transform itself into a new company - one that can meet the demand for wireless communications and the need for broadband cable products in emerging countries. The current Belden was formed in 2004 through the merger of Belden Inc. and Cable Design Technologies Corporation. Today, the $1.3 billion company is one of the largest U.S-based manufacturers of high-speed electronic cables. It focuses its products for the speciality electronics and data networking markets, including connectivity.

Like many companies, Belden saw a sharp decline in 2009 revenues from 2008. John Stroup, Belden's president and CEO, said, "By focusing aggressively on technology innovation and investing in global growth, we have seen a stable demand for our products in most of our major markets. We have demonstrated our ability to perform well during these uncertain times. We are also in a good position to excel when recovery re-ignites demand for our products."

Enterpriseleadership.org recently sat down with Stroup to talk about Belden's innovation initiatives, its customer-centric, go-to-market strategy, and the move from a legacy brand to a provider of special transmission products for key global vertical markets. Here it what he had to say:

EL. Can you describe your business model or business strategy?

JS. We try to help our customers transmit data and signals in what we consider mission-critical applications. We go to a very diverse set of end markets. Most of our customers use our equipment -- whether it is copper cable or fiber optic cable or wireless or industrial networking -- in applications that are important to them. We help them get their information from point A to point B correctly, quickly, and reliably. These three things matter. We service hospitals, college campuses, large enterprises, medium-size enterprise, industrial applications such as factories, and infrastructure applications such as alternative energy.

EL. How has the economic downturn affected your business?

JS. It had a significant impact on us. Our 2009 revenues went down 30 percent from where they where in 2008. Some amount of that was correction and inventory, but much of that was role reduction and demand. Most of our customers buy our equipment for capital projects. We saw decreases in manufacturing utilization and in commercial real estate development.

EL. What have you been doing to expand into new markets?

JS. The recession has been an impetus for us to be more aggressive. When core markets like ours are declining, you need to focus on how you find growth. We have been aggressive geographically in emerging markets. We also have been aggressive in some of our market segments that have not suffered the same decline, such as wireless, as well as our industrial Ethernet businesses. Both of those businesses actually experienced growth during the downturn. We tried as hard as we could to deal with the recession affectively from a cost point of view. We tried to reinvest in the dollars we felt could give us a good return.

EL. Can you describe some of your key technology investments?

JS. We continue to invest in some product-related technology that we consider to important regardless of the environment. For example, we have made significant investments in wireless technology, which is important to our future. Customers are continually converting to wireless whenever possible because of the advantages of convenience. We are investing much money in our industrial networking applications. It turns out that industrial applications now use commonplace technology, such as routers and switches. We are a leader in this space. We are always making investments in expanding the bandwidth of our coppered fiber cable products. For example, we have been investing in 10G copper cable. It allows our customers to use copper instead of fiber, which is less expensive and easier to use.

On the manufacturing side, we continue to make the typical investments in ways to reduce out costs. In addition, we are also making many unique investments so that our machinery is more conducive to our Lean manufacturing environment. We work very hard to build our products according to the just-in-time manner. The cable industry has been a batch-manufacturing environment largely because of the long changeover times in the machinery. We have been working hard in the manufacturing environment to find ways to reduce the changeover of our machines and reduce the amount of scrap we incur in a changeover. We see this as an innovation area that is important to our business's success. It is also a unique innovation in our industry.

EL. You joined the company a year after the merger of Belden and CDT. How did you folks handle the integration of the product lines from the two companies?

JS. There was an aggressive integration on the manufacturing and the product roadmap side. We have fully integrated the product roadmaps and the technology innovation between both companies. We did aggressively consolidate the backoffice function and the manufacturing function. The customer-facing resources are largely dedicated to the individual brands. The behaviors we go after with those brands differ. In the front end, you can have many different value propositions, brand propositions, and customer-facing resources. Today, a common organization services most of our product, technology, and the backoffice. Our strategy in the beginning focused on trying to leverage the backend as best we could, and to create an environment where we could use common processes as best we could.

EL. What is your customer-centric, go-to-market strategy?

JS. We have a history of being a product-oriented company. We needed to become more customer-centric. We organized our resources around vertical markets and around customers rather than around products. Our goal includes doing as much as we can for the customers we target with our key markets. We have made many investments to support that.

Out most significant investments includes expanding our products lines beyond our flag ship copper cable to now include wireless, connectors, active connectivity components, and fiber optic. When we go in and work with anyone of our customers, whether it is a big hospital or a casino in Las Vegas, we can now help them solve their entire problem with a broader range of products. We are doing so with customer-facing resources that we organized around the customer and the market segment rather than around a product. We do not have five or six different product people calling on that same customer. We have one customer-centric account executive who navigates and organizes our resources to make certain that we help that customer solve its problems.

EL. Do you have a formal process for innovation?

JS. Our innovation process starts with the definition of our markets. Every year we have a strategic planning process, and a plan to execute it. The process always begins with our served markets. We subdivide that into sub-vertical markets, and then within those sub-vertical markets, we define the applications. Within those applications, we have the desire to offer unique capabilities in that application. We want to become the preferred supplier. When we think about innovation, we do not try to limit it to just technology. We think that innovation can happen in all areas of the company. We try to focus our innovation and our resources around a model that starts with the served market.

A great innovation we did in 2009 had nothing to do with products. It had to do with the way we package our products. We did this innovation in our channel group, the people who work with our distributor partners. We had a specific distributor partner that struggled with how it could profitably sell a certain type of product to an important customer segment. After spending time with the distributor, we completely reinvented the way this cable product comes off the reel. Now our partner can profitably deliver that product to the end customer. The innovation here was not how much bandwidth or how much copper we use in the product to get the same level of performance. Instead, the innovation was the new way the distributor got the product.

EL. What is your corporate governance model for making these investments?

JS. We take our full board through our strategic plan every year. It is part of an approved three-year plan. We share with them the investments we plan to make. Our sources of funds are the things that are going to happen year after year. These investments provide incremental margin dollars. We can give these dollars to our shareholders as dividends, or we can reinvest them in the company. We take our board's buy in and approval. This process has much detail in it.

We then construct an annual budget, which the board has to approval. Again, it is part of our three-year strategic plan. We also have a capital plan. Most of the innovation we do has to link to some form of capital investment -- whether it is a manufacture innovation or a technology innovation. If we do it right, the board sees several views - the 36-month strategic plan, the annual budget, and the capital budget. We give the board a quarterly update on how those programs are performing compared to the commitments we made in the strategic plan. Like any company, we do not always bat 1,000. Some programs do exactly as we predicted. We have other problems that need to do better. In this case, we do our best to describe why - What was the problem? Where did we go wrong? Was it a conceptual issues or an execution issue? Where did we make the mistake?

EL. You have Lean. Do you have the balanced scorecard for measuring investments?

JS. We use a methodology called strategy deployment. It is similar to ocean planning. It works as follows: We identify the critical improvement priorities for the company. It cascades throughout the organization. No matter what part of the organization you are responsible for, your priorities will link in someway to the overall corporate objectives. For each one of those improvement priorities, we ask you to identify a few metrics. We call them targets to improve. Typically, they consist of two or three for each initiative that you will track. You consider these things as a barometer of how your improvement priorities are doing. We track that monthly. We use as a mechanism to report on our performance - if we have fallen short, what is our cause, what is our counter measure, and what are we going to do differently to try to get us back on track. It enables us to measure our strap plan and our breakthrough. We also have our key performance indicators. We track the things that tie to our budget. These metrics really do not change year and year out. They are mostly financial, but they also include things such as safety, incident rates in our manufacturing locations, inventory turns, and other metrics for forecasting accuracy.

EL. How global is your company?

JS. More than half of the revenue comes from outside the U.S. That is a big change from where we were three years ago. The largest market after the U.S. is Western Europe (Germany being the largest). We are trying to be in the largest countries in Asia. Our business has become more significantly global since I joined in 2005. We would expect that to continue.

EL. What is next for the company? More expansion outside the U.S.?

JS. We think emerging markets are going to be very important especially in the next five years. We feel that it is quite likely that the growth rates in Europe and in the U.S. are not going to be very strong. Other capital-intensive vertical markets we serve include China and India. We are planning to make an investment in Brazil. Today we do not have much of a position there. It is an important area for us. Product extensions are important to us. We still have a relatively small share within the verticals that we serve globally. These vertical include the areas of connectors and connectivity. We want to offer a greater portion of the entire solution beyond the cable piece. It is where our legacy is and where our foundation is. It is very important to us.

EL. Is it hard for the company to shake the legacy identity?

JS. There are two sides to the coin. Many customers see our legacy identity as a good position to be in. Our reputation stands out in this area. It surprises me a little bit. The number of people I meet who know about Belden amazes me. They all have a good opinion of the products. Not having that would be horrible. On the other hand, because we are so well known as a cable company, we have had to work hard to do more things within industrial networking or within wireless. Some times, it can be more difficult because people think of us a cable company. Through our acquisitions, we have been able to leverage the brand of our acquired company.

EL. Have any technology investments turned out to be a mistake?

JS. Yes. We have made our share of mistakes, mostly going down the wrong path. For example, a path we took for wireless technology did not work the way we had hoped it would. We had to stop that and move onto another path. In manufacturing, some of our process improvements did not give us the results we wanted. As a culture, we do not want people to be afraid to make mistakes, and we also want people to feel comfortable raising their hand when they do. I believe that you do not want to spend good money after bad.

Elizabeth M. Ferrarini is a technology writer from Boston, MA. Reach her at elizabethferrarini@yahoo.com.

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VF Corp.'s CEO Talks about Forging a Strategy to Become a Global Leader in Branded Leisure Apparel

bmc-elo@bmc-elo.hosted.jivesoftware.com — Sat, 26 Jun 2010 17:52:02 GMT

During a tough economic climate, consumers tend to become very conscious about their spending and tend to go with brands they know and trust. That's the opinion of Eric Wiseman, CEO of VF Corp., a $7 billion global apparel manufacturer and retailer. While VF Corp.'s revenue dipped about five percent during 2009, the company has managed to hold its own, capping off 2008 as a banner year with $7.6 billion in revenues.

VF Corp. sells its well-known brands, such as Lee, Nautica, The North Face, Wrangler, and Vans, through more than 67,000 retailers in about 150 countries. The company owns and operates more than 700 retail stores, including about 60 outlet stores.

Prior to 1998, VF Corp. derived most of its revenues from manufacturing brands such as such as Lee, Rider, and Wrangler, and selling them wholesale to large retail stores. In 1998, VF Corp. aggressively began acquiring well-known active wear and contemporary brands, such as Nautica, The North Face, Eagle Creek, Eastpak, lucy, Vans, and several others. The company divested itself of unprofitable brands. In 2004, VF Corp., which had revenues of $6 billion, launched a bold growth strategy to transform itself into a global lifestyle apparel manufacturer and retailer. "We Fit Your Life" became the mantra for the company's growth strategy.

Enterpriseleadership.org sat down with Wiseman to discuss the company's business transformation, and the role technology has played in it. Here is what he had to say:

EL. How did you categorize your different brands and how do they contribute to revenues?

EW. We group our brands under coalitions such as outdoor and action sports (Vans and The North Face), jeanswear (Lee, Rider, and Wrangler) , sportswear (Nautica), and contemporary and imagewear (For All Mankind and lucy). We further group the coalitions into lifestyle and heritage. Lifestyle includes outdoor and action sports, and sportswear and contemporary brands. Heritage includes jeanswear and imagewear. We acquired most of our contemporary brands during out growth period. These brands contribute to revenue as follows: about 36 percent from outdoor and action sports, 36 percent from jeanswear, 13 percent from imagewear, about 8 sports from sportswear, and five percent from contemporary brands.

EL. What was your vision statement for the 2004 transformation?

EW. Our vision statement was to become more growth oriented by investing and building leading lifestyle clothing brands. Our transformation called for us to redirect our business from being a wholesaler to becoming more international and a more direct-to-consumer business. Our six tenets or growth drivers include the following: build more global, growing, lifestyle brands: expand our share with winning customers; stretch our brands to new geographies; expand our direct-to-consumer business; fuel the growth; and build new growth enablers.

Ten years ago, we had the reputation of being a rock-solid apparel manufacturer that built first-in-class programs for big box stores such as Wal-Mart and Kmart. That was most of our business. The good news is that we still exist. In 2007, many of those stores selected us as vendor of the year. We do a good job of marketing through mass and chain store channels. By changing our brand portfolio, we now reach more diverse customers than any other apparel company.

Up until 1995, everything we sold we made in a U.S. factory. We became the last apparel company to move offshore. You can argue that we moved too late. Because we stayed here that long, we developed a culture and a skill around incredible skills and execution. We could not survive making products in this country unless we were really good at engineering and operations plans and engineering in the factory. It is part of our DNA. The ability to execute complex things terrifically well is part of who we are and we have not lost that.

EL. How did you know your transformation strategy would work?

EW. We were confident it would work. In 2007, we went through a robust bottom to top reconsideration of our strategy. We asked every business unit everywhere in the world to think about the six items we identified as our core strategy and to reassess their relevancy with an open mind. What came out of that was a revised growth plan we announced in 2008. The six fundamental tenets of our strategy remained unchanged. We made a minor revision to make sure we were still relevant for the environment we are in today. We still think we have the right six core tenets for our growth strategy.

EL. Can you explain your integration process?

EW. Our integration process began with our 2004 transformation. We developed a repeatable process for the 10 brands we acquired at the time. We continue to refine this process.

Here is how it works. Say we love your brand and your management team, and think your brand would help us get to a new consumer, a new geography, or to a new channel of distribution. We want to acquire you. In essence, we would like to take your brand to the next level. We would like to have you and your team join us. You will run the front end of the business. You and your team will design the products you want, pick the customers you want to sell to, and continue to brand development. We will give you permission to do that. It is non-negotiable. We will run your distribution centers, which is also non-negotiable. We will decide where you will source. We will put you on our IT systems. You will use our financial system and our HR practices. The kicker is that we will take your brand, you team, and your products anywhere in the world, especially where we have a platform and where we think it has opportunity. We will build a sidecar under that platform to enable your growth globally. If you would like to open retail stores, we have much expertise in that now and we will enable that.

As a result, the seller gets to keep the front end of the business with the passion and genuine pieces of the brand. All of the operating functions come to us because we get a great return for our shareholders. We reinvest some of those savings back in the company to drive growth. That's why our growth has been what it has been. It does not always work perfectly. That is the basic structure. Sometimes we leave the business standalone in its own building. Sometimes it makes sense to move it into adjacent VF buildings for business reasons. These discussions happen over time.

EL. How has the economic downturn affected you business?

EW. Our revenues decreased by about five percent. We did not anticipate much improvement in the economy during 2009. Although it has been a tough couple of years, we have taken some even tougher actions. We have been controlling expenses, investments, and lowering inventory and capital expenditures. We focused on our liquidity, our core strategy around lifestyle brands, taking in the new geographies, building our direct to consumer business, and leveraging our scale and size in the supply chain are the right strategies.

Since we changed our strategy in 2004, we have shown that it is working. Our revenues grew on a compounded basis more than 10 percent over a five-year period. Our earnings grew by 11 percent. Our gross margin had expanded by 230 basis points through 2007. We gave some back in the last quarter of 2008 as the economy shifted.

In 2008, we reported an all-time record for revenue and an all-time record for earnings per share. We delivered $679 million in cash flow, which was above the five-year average and the second highest number in five years. I was proud of this team for pulling that off in a turbulent environment. Also, 2008 was the 36th year in a row that we increased our dividend to our shareholders. It is a good part of why we are a good investment. We ended that year with more cash than we started. We ended the year with less debt than we started.

EL. How do you allocate your capital budget expenditures?

EW. The bulk of our capital budget goes to acquisitions first, retail second, and distribution centers third. We have aligned out capital budget to support our growth strategy to invest in acquisitions, retail stores, ecommerce, and distribution centers.

EL. How did you build out the infrastructure from technology perspective as you began the transformation?

EW. Because we did 10 acquisitions in five years, the integration of the technology has been hard. Our technology has worked hard to keep up with it, which is fine. We have a suite of systems that are potentially relevant to all businesses. If we are going to put in a demand forecasting system for a brand, we will use this one if the brand needs one. Not all of our brands need all of our systems. Some of the systems have no trouble serving a brand that generates a half billion in revenues. A similar system, however, would be overkill for a $70 million brand. Over time, everyone ultimately gets on board on our IT systems.

EL. Several years ago, you folks hired your first global CIO. Why didn't you do that sooner?

EW. Over time, we had a head of IT and a relatively stable portfolio of brands. As we began adding all of these new companies and divesting all of the others, we said we needed to make additional investments in many areas, especially in mergers and acquisitions, corporate strategy, marketing and brand development, and global business technology. To carry out these activities, we needed a stronger IT leader.

EL. How do you work with the CIO?

EW. Martin Schneider, our CIO, is an important part of our 12-person operating committee. This committee guides the corporation. Like the other executives on the committee, Martin has an excellent point of view about how to keep the corporation moving forward. That is the best way I can describe how I work with Martin.

EL. What have you learned from your CIO that you didn't know?

EW. Because of his Gillette background, he brought a more sophisticated global perspective than we had at that time. He had added much value. We were pursing at all-or-nothing portfolio of technology. Martin introduced the thinking of not all of it is helpful to all of these businesses. We are better off to let them select the tools that they need. As a result, we function as more of a service provider and an enabler of their success rather than as a corporate censor requiring them to use everything we have to offer.

EL. How do you run the technology organization?

EW. Each business, such as NorthFace and Wrangler, has a person who reports to Martin, but sits at the management table of the brand. That person helps the brand leaders to run that business every day. That is our version of the hybrid matrix organization. We use this same model for human resources, finance, distribution, and our supply chain. The majority of their incentive compensation depends on how well the business unit does. Originally, we paid them on how the corporation did. We found that this new structure helps them to be more a part of the team. The entire team gets paid together.

EL. How do you go about making technology investment decisions?

EW. We have a typical budgeting and review process for the company. At the beginning of the year, we sit and review the global technology budget. Expenses of certain sizes require different approval levels. Martin can approve some of the investment. Some of them go to the CFO. I approve investments above a certain level. The board needs to improve capital investments. Each quarter, Martin will give the operating committee his update on the status of everything going on in his world. We keep the fall moving forward this way.

EL. What is your methodology for looking at the success of technology investments?

EW. We look at a retail store investment differently than we do a technology investment. With technology, we look at the ROI and a payback time. We look at the rationale for the investment, such as strategic, cost reduction, or productivity. There are many metrics In fact, we are very metrics oriented.

EL. What is the major challenge that retailers face during a tough economy?

EW. It is consumer confidence more so than consumer spending.

EL. Where do you think your competitors are falling short?

EW. Why are we doing better than others in this environment? We have a portfolio of relevant brands. Consumers trust brands. When consumers are being very conscious with their spending, they will go with brands they know and trust. Second, we are good at delivering innovative products that are relevant to the consumer and also offer great value. It is not just about price. We hear loud and clear from customers that are happy to pay top price for something if they perceive it has having great value. We execute very well. Because of our discipline and focus on execution, we can minimize the mistakes we make. This capability has helped us to get through this environment.

EL. Some companies, such as Procter & Gamble, spend much time on social media and collaboration trying to plug in what certain consumers say. What are doing to get closer to your customers so that you design your products?

EW. We are as good as any apparel company at marketing sciences that help us to understand consumer. We are pretty close to Procter& Gamble in what they do. In fact, some of their executives visit us to share their ideas. We understand as well as anyone how to make relevant products for consumers. We test everything we do. We use various methodologies from online testing to where you can go look at our products and tell us what you like about them. We do that with 10s of 1,000s of people. It helps get us from making 20 shirts to five we should make. We go into people's homes and talk with them. We spend millions of dollars doing these things.

Most of our research is proprietary that we built for a specific purpose. We are in so many different brands and markets. If we want to understand what Italians want in active wear, we have to narrow that down and speak to Italians about ski outerwear. Some of our other brands use social media as part of their marketing effort.

Elizabeth M. Ferrarini is a technology writer from Boston, MA. Reach her at elizabethferrarini@yahoo.com.

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Former DOT CIO Talks about the Challenge of Putting Governance Around IT

bmc-elo@bmc-elo.hosted.jivesoftware.com — Tue, 16 Mar 2010 20:23:45 GMT

Enterpriseleadership.org sat down with Dan Mintz, the former CIO of the U.S. Dept. of Transportation, to discuss the roadblocks he had to overcome in order to bring about change in IT across the entire department. Before becoming DOT's CIO, he was director for government compliance program at Sun Microsystems.

Established in 1966, the U.S. Department of Transportation (DOT) has an annual budget of more than $70 billion and employees more than 60,000 people across the country. Its mission is to "serve the United States by ensuring a fast, safe, efficient, accessible and convenient transportation system that meets the vital national interests and enhances the quality of life of the American people, today and into the future." Some of the agencies that comprise DOT include the Federal Aviation Administration (FAA), Federal Highway Administration, and the Federal Transit Administration.

About $3 billion of the DOT's annual budget goes to making sure that all of the DOT agencies have secure, timely, and cost-effective solutions. When Dan Mintz became head of the Office of the CIO in 2006, he found the organization concentrated too much on technical issues, He changed that focus to a business orientation, and improved the governance process by making needed changes to the investment review board. He also put mechanisms in place to rate how each agency implemented IT and security initiatives.

Enterpriseleadership.org sat down with Mintz, who left his post in 2009, to discuss the roadblocks he had to overcome in order to bring about change in IT across the entire department. Before becoming DOT's CIO, he was director for government compliance program at Sun Microsystems. Here is what he said:

He changed the organization's focus from being technical to a more business oriented and also improved the investment review board.

EL. Can you describe the IT organization's key responsibilities? How much did it allocate for IT spending?

DM. DOT has about 66,000 employees and spends about billion a year, much of which is grant money. The department spends mostly on programs. The FAA's air-traffic control spends about $2.5 billion a year on IT. I had policy impact. I had to ensure that the various requirements the government faced got done for all of that spend. My office had oversight for all of that. An appropriated budget supports the people who do oversight auditing. We ran a portion of the shared services for the department.

EL. Did you have oversight for all of the IT professionals in DOT?

DM. There was a faint dotted line to me. IT people within each of the operating administrations report directly to the CIO in charge. Program officers manage an IT spend, out of the control of those CIOs. There was a dotted line responsibility between those CIOs and me. I had policy input over the hiring of new CIOs. I participated in the performance plans and the performance reviews of the CIOs.

EL. What were the key challenges you faced in putting governance around IT investments?

DM. There were two issues. I had two responsibilities associated with the CIO function: how to transform the mission of the department, and how to optimize the use of technology. The civilian departments in the government are federated organizations. They are not a single organization. Each of the pieces of the civilian departments has its own political life separate from the middle. For example, DOT has the Federal Highways, the Federal Aviation Administration, and the Federal Railroads. All agencies of these are different. They all have their own budgets, and they eventually collect to the top. We needed a mechanism to pull together decisions that crossed all of these organizational boundaries, and to look at how to do the two responsibilities I mention. For example, how do you reduce congestion, how do you improve safety, and how do you start using more recent technology innovation? We needed a method of making decisions that supported those secretarial initiatives. These did not come naturally because they were independent organizations.

EL. Can you describe the investment review board you put in place?

DM. We needed a better mechanism to make investment decisions for what the budget did with things such as technology. We had an investment review board, which we revised on occasion to change its focus. The investment review board consisted of the senior management of the various operating administrations. The deputy secretary chaired the committee. The goal was to look at these types of decision making.

We went to a two-layer investment review process -- one is at the department level, and the other, two individual investment review boards at the operating administration level. The latter boards fed into us. We did not have an organization that took into account this federated nature very well. This was a major part of our governance process at the management level.

EL. How did you measure the success of capital investments and capital planning?

DM. That is an on-going issue for the government to wrestle with. For example, if we did a grant program, we would have to determine if our goal was to be fast, accurate, or to make things more available. Those things might all contradict each other. Which is more important? We used ROI at least to bring some direction to the shared services part. If we consolidated the desktop support, consolidated data centers, or decided to do payroll in one place, we would use ROI to measure whether or not we saved money. Unfortunately, government cost accounting does not support that analysis very well. We did audit ROI. For consolidating desktop support, we looked at the investment. We tried to use metrics commercially. For example, we had a cost per desktop to provide support. We measured ourselves against other government departments, and we measured ourselves against industry standards. Our goal was to be competitive with that.

We got better at the output of programs. For example, if we did a grant, we needed to know how well it was received, and how accurate it was. The Office of Management & Budget (OMB), which represents the White House, puts out a quarterly rating for all the major programs. It is a red, yellow, and green rating. Everyone wants to get to green. We did that internally within our department, including smaller programs within the department. We tried to make it as objective as possible. We had numerical factors, but we provided a summary. Typically, the summary measured operational numbers, financial numbers, such as earned value management (a tool to measure whether or not we carried out the project successfully). Because of the importance of cyber security, we had many security measurements that we applied to determine how well we complied with our security controls. The National Institute of Standards generates an entire series of controls that we rated against various programs.

EL. Can you describe a couple of the capital programs that you put in place that required large investments of technology?

DM. The largest capital investment in our department included what we called the Next Generation for the FAA. The air-traffic organization managed most of that money. This investment's primary goal focuses on modernizing all aspects of the air-traffic control system. It involves both upgrading all of the systems in place at the FAA, and developing an integrating the activities of other departments involved with air activities. These other departments include the Air Force and National Oceanic Atmospheric Administration. The FAA has much work to do to improve its project management, making sure the project managers meet standards. The major focus here included using earned value management as a tool to do that kind of project.

Cyber security has been a big issue in the government, and always will be. Historically we did cyber security oversight across the department. Each of the federated pieces of our department use to do their own security thing. We consolidated all of the cyber security activities and merged them into a single center. We gave it to the FAA to run because it is the largest, single proponent of that department. It runs under the direction of the CIO of the DOT. We created a cyber-security management center. For the first time, we had visibility into all of the systems for the entire department. We started to identify those areas where we had problems so that we could fix them.

EL. You gave a presentation that talked about collaborating more with the CFO. How did you accomplish this?

DM. In a private company, the sales force drives the company. The OMB functions as the federal government's equivalent to a private company's sales force. The money comes from that office. Typically, the strongest day-to-day activity associated with spending regardless of whatever legislation you have, focuses around the budget process. If you do not devote energy to improving the IT/CIO relationship, you, as a CIO, might make decisions completely disconnected from the way the budgeting process gets done. This problem exists within the larger civilian departments because they are federated. You have to pay attention between the IT staff and the budget staff. If you do not do this, you will have breakdowns in multiple locations, such as not communicating at the department level. Each of the individual components are not communicating. Decisions have no meaning.

We closed the communications gap by identifying a lead person within the CFO group and my office. Both of these people handled all of the coordination between the two departments. We adapted our calendar so that CIO activities folded more tightly into the budget cycle. We had been reviewing IT programs at the wrong time. We typically work on a budget two years ahead of time. If we did not decisions and have a discussion where we projected out two years, we would be late. That was another one of our problems. We got agreement from OMB that nothing went out unless it had my signature. We assigned staff at local points. We integrated ourselves into the budget process. We made sure that the CFO got involved when we had IT discussions, which were also business discussions.

EL. Can you describe the CIO council?

DM. The federal CIO council consists of the CIOs of the federal departments. A member of the OMB chairs this council. At the DOT, each of the component agencies each had their own CIO. We had a DOT CIO council that met monthly to talk about issues. This structure had been around for several years. I felt that it had too much one-way communication. My office said it needed to have more communication back and forth between the operating administration CIOs and my office. Because it was a federated organization, one-way communication did not work.

I created a CIO council co-chaired by a CIO from one of the agencies. I did not run the meetings. The co-chair allowed me to talk at the meetings. That by itself might or might not survive me. I also created a cyber-security management center managed by a board of directors. Two votes came from the FAA and two votes came from the department. I created a fifth vote from the co-chair. To make it more authoritative, we made the board a secretarially charted committee, signed off by the Secretary of Transportation. It had a different legal status. Thus, the co-chair position was not someone I knew. That person had real authority and had the fifth vote on one of the most important DOT functions. The biggest issues we had were cultural not technical. By creating that position and giving it authority and then giving it legal authority, we made that position significant.

EL. What professional organizations helped you the most to do your job better?

DM. I belonged to the Information Technology Association of America. IT helps to encourage a good relationship between government and private sector partners. Social networking and Web 2.0 will change the way the government will function. That is a big problem for the government to face. The private sector can better handle this type of organizational change. The government has difficulty changing those kinds of relationships. Organizations like this one will help in terms of that interface by actively allowing informal communications between both sectors.

Elizabeth M. Ferrarini is a technology writer from Boston, MA. Reach her at elizabethferrarini@yahoo.com.

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Owens Corning CIO Talks about Steering a Steady Technology Strategy through Bankruptcy and Beyond

bmc-elo@bmc-elo.hosted.jivesoftware.com — Mon, 08 Mar 2010 03:24:49 GMT

With annual revenue of about $5.6 billion (will change with new earnings), Owens Corning reigns as the world's largest manufacturer of fiberglass and related products. In fact, the company's Fiberglas brand products have found their way into everything from boat hulls to automobile roofs and electronic windmill blades. The woes of the downturn in the economy pale in comparison to the difficulties Owens Corning experienced in 2000. At that time, the company filed for Chapter 11 bankruptcy protection caused by a massive liability from the settlement of asbestos-related lawsuits.

The Owens Corning bankruptcy, however, kept senior executives, such as David Johns, the company's CIO, focused on steering a steady course for the business. Johns carried out a steady campaign to take cost out of the business, while increasing productivity and improving the governance process to make better technology investment decisions. He says, "Taking cost out of business has helped us to drive the low-cost manufacturer. The economic downturn just magnified that situation and helped promote us to focus more on our customers. We want to do as much as we need to do for them."

Enteprriseleadership.org recently sat down with Johns to talk about he has navigated his company's technology course beyond bankruptcy. Here is what he had to say:

EL. Can you describe your technology organization?

DJ. We have one global IT organization staffed with about 400 internal IT professionals. They focus on applications development, business value and business consulting. I am also accountable for our global shared-services organization. A service manager handles much of our outsourced IT infrastructure. We got into outsourcing early. Third-party outsourcers handle our entire commodity IT services. We have development teams in Europe, Asia and U.S., which covers our North American/Canadian and South American interests.

EL. Because your company went through some tough times in the early 2000s, how have you built IT to drive the company forward?

DJ. From 2001 to about 2006, we were in Chapter 11. We have always had tight ties to the business, especially for driving global standards and common solutions across the enterprise. We always have strived to customize and localize services where we required them.

EL. How have you created business impact of IT throughout your tenure at Owens Corning?

DJ. During our Chapter 11 years, we focused on reorganizing the company and taking cost out. Being in Chapter 11 gives you a chance to rethink and do over much of the things that you have done in the past. We focused on taking cost out of both IT and the businesses. I also operated our supply chain organization for seven years. Here we focused on logistics and supply chain planning.

EL. Where specifically did you take cost out of IT or the business?

DJ. We took much cost out of our backoffice transaction systems and put it into our logistics organization. Owens Corning focuses heavily on logistics. After all, how we get our products to market depends on our logistics capabilities. We concentrated on more effective logistics processes and sourcing processes.

When it comes to the backoffice, we look for more efficient and effective ways to work with and connect to our customers. We also look for ways to leverage processes across our three major business franchises, as well as the different regions of the world.

As a function, IT enables us to drive leverage. We have a purview across the enterprise that perhaps other folks in the organization do not have. We also have a focused global shared services strategy to standardize the backoffice processes that do not touch our customers. We have made these processes more visible and transparent, as well as effective. We have outsourced the processes that provide no value to our customers.

EL. What processes are IT focused on and why?

DJ. Today, we look at financial processes, such as accounts payable, accounts receivable, cash applications, payroll and HR administration functions. We also concentrate on general accounting processes, such as fixed assets.

We have moved quickly into the HR administrative processes and backoffice administrative processes for our customers. We do not plan to focus on a one-size-fits-all strategy. If something will not help us get closer to our closers, then we will not do it.

Sourcing is another area for us. We look for common areas across our supply chain processes. Long-term forecasting, however, has been tough during these economic times. To this end, we look at short-term forecasting.

EL. What types of investments have you made to get closer to your customers and to drive that revenue?

DJ. Our diversified, expansive customer base ranges from a local building contractor all the way to a Home Depot or a Lowe's. Our businesses have done a great job of trying to understand our customers better and determine how to serve their needs. We have a customer discovery process where we go out and talk to our various customers across the various businesses. We listen to their needs and respond with how we can provide value to them. For example, customers often respond to us with in-depth interviews and feedback about what services they value from us. We then take that input and adjust it to provide our customers with the appropriate services, such as online access to EDI transmission of documents or different call-center technologies to vendor-managed inventory.

EL. Can you tell me about specific investments you have made?

DJ. We have invested heavily in SAP and in some Web technology that we use today. We also have invested heavily in our call-center technology. We have call centers across the world.

EL. Where is your business impact of technology coming from?

DJ. Our focus is productivity, taking cost out and enabling ease of business to our customers. We want to provide an environment for our businesses and our innovation folks to engage in open innovation. This concept will enable us not only to drive product innovation internally, but externally as well.

EL. Can you give me an example of how you are making it easy for your customers to do business with you?

DJ. We allow our customers to go online and see their status of orders. That is a very simple one. Our composite business is more business-to-business oriented. As a result, we provide electronic communication to our composite customers. It allows us to interface more efficiently with them and makes it easier to do business with us.

EL. Have you linked your supply chain with your customers' supply chains?

DJ. In some ways, we have. It has been easier to connect our supply chain with those of our smaller customers than with our larger customers. Sharing forecasting and vendor-managed inventory, and gaining more visibility into their supply chains has helped us to work closer with our distributors and to service our end customers better.

EL. Do you know how much cost you have driven out of the business?

DJ. It depends on what time frame you mention. From an IT perspective over the years, we have driven out well over $100 million. From a business perspective, we have focused some technology initiatives every year in the supply chain area. We also have manufacturing technology groups which look for ways to build a more stable, less variable, more quality manufacturing technology platform. We have targets in the $25-$35-million-a-year range, just on those programs alone.

EL. Are those technology groups part of your organization?

DJ. Yes! We also have a business integration group. It works with our businesses and our business leaders to understand what goes on, what issues we have, and what opportunities come our way. We then translate these things into ways technology can help us take advantage of new opportunities. That group works with the individual businesses.

We have our manufacturing technology group which works with our manufacturing group. We also have what I would call functional groups that work with finance, sourcing, HR and legal. They go through the same kind of process about looking to apply technology to our opportunities.

We bring all of the information back and then go through a rigorous priority process -- both from a top-down and a bottom-up standpoint. As we continue to evolve more things, we begin to drive from the top down rather than the bottom up. We have a good line of sight into some things that focus on making some good progress for the business.

EL. What is your formal governance process?

DJ. We have spent much time with other senior executives of our company to understand what the big issues are, understanding what the big strategic direction is, and then figuring out how to apply technology the best way to drive business value.

Our governance process has gone through various phases. An acquisition we made in 2007 threw our entire portfolio process on its ear. We spent much time focusing on integrating this major acquisition. Today, we have begun to re-establish our process where we will meet regularly monthly. Sometimes we will also meet quarterly. It all depends on the cycle and our priorities.

EL. How do you look at your portfolio? Do you have different types of investment categories?

DJ. Yes! We have investment categories for productivity, cost out, customers, regulatory and compliance.

EL. How do you measure the results of these investments?

DJ. It depends on what the investment is. Part of the investment decision rests on the quality of the business case. We have a rigorous process for business case submission. It ensures that not only do we deploy a technology that provides value, but that we actually track the value and make sure it is sustainable. One of the biggest mistakes many technology organizations make is to assume that something can sustain itself. We rarely see this happen. You have to put the processes in place to ensure that you can sustain the project. For most of technology investments, we will track the savings or track the benefits for about a year.

EL. What methodology do you use to track these investments?

DJ. For a deployment or an investment, we use the Stage-Gate process absolutely. We make sure that we deliver the benefits we said we would. We have a very well defined Stage-Gate process that we all go through for all technology investments. We also use financial metrics, such as return on investment and economic value add. Sometimes, we use pure cost take out and time value return. We partner with our finance organization to track those benefits that way.

EL. Do you use the balanced scorecard at all?

DJ. We have used the balanced scorecard in the past. Right now, we do not want to use it. Everything has a purpose depending on your cycle.

EL. Are you getting into more analytics?

DJ. Absolutely! Our biggest initiative today looks at providing better visibility and analytics into our technology investment cycle. Our weakest performance over the years has been on investment patterns and acquisitions. For example, we have lacked standards within the business because of our inability to provide good analytics. We have greatly improved the quality of our analytics to the business.

EL. You said your company made an acquisition a couple of years ago. Have you improved the speed of the integration time?

DJ. It was the biggest acquisition that our company has made in quite some time. It made us a true global company. We have been successful in driving synergies, but we concentrated on building the ship while we sailed along. We have looked how to build the right approach or platform for us to speed up the integration of an acquisition.

EL. How has the economic downturn affected Owens Corning?

DJ. It has tough economically for many companies. We are happy with where we are. We performed very well given that the economy affects how we operate. Taking cost out of business has helped us to drive the low-cost manufacturer. The economic downturn just magnifies that situation and helps us to focus more on our customers. We want do as much as we need to do for them.

EL. Are you currently hiring IT professionals?

DJ. We are always looking for good talent who can make the company successful.

Elizabeth M. Ferrarini is a technology writer from Boston, MA. Reach her at elizabethferrarini@yahoo.com.

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Global Printing Company CIO Talks About Making Technology Investments to Expand International Business

bmc-elo@bmc-elo.hosted.jivesoftware.com — Wed, 03 Feb 2010 17:57:39 GMT

The Internet might have sounded the death knell for print newspapers and magazines in the United States. High quality print media, however, continues to thrive around the world. Developing countries in Eastern Europe and Asia have stepped up their efforts to keep pace with people's demand for print media. In fact, Goss International, a $1.1 billion developer and manufacturer of web offset presses, plans to capitalize on the international appetite for print media, especially newspapers, magazines, catalogs, and advertisement. The Shanghai Electric Corporation recently bought a majority interest in Goss International. The company also expanded its global business focus through the acquisition of Heidelberg Web Systems in Germany.

Goss's presses and finishing systems print everything from books to directories from coupons to advertisements for customers on four continents. The company sells it presses to large advertising agencies, major metropolitan newspapers, magazine publishers, and major commercial printing companies. Customers include R.H. Donnelly, KP Group (Russia), AIW Printing (Australia), Segerdahl Corporation (U.S.), and Valpak. (U.S)

Founded in 1895, Goss International has become known for aligning technology innovation and product reliability with customers' requirements. Some of the company's technology firsts include the four-color newspaper tower, tele-color remote ink key control, and high-speed circular newspaper inserter. Bill Rogers, Goss International's CIO, says that the company's innovations, such as marrying print with wireless and online access, give advertisers new capabilities. Meanwhile, Rodgers says that the company has begun to apply its engineering expertise to new markets such as wind turbines.

Enterpriseleadership.org recently saw down with Rogers to talk about Goss International's process for making technology investments and driving innovation.

EL. Can you describe some of the international growth areas Goss is looking at?

BR. Prominent families in the U.S. own many of the major metropolitan newspaper. It has been a rough road for them. U.S. newspapers have been losing advertising dollars to the Web. Several major metros have closed and others have been losing money. The international market for print continues to drive our growth and revenue.

We have seen much growth potential in China. It will accelerate once we get passed the current economic situation. Right now about 10 percent of the Chinese population has the discretionary income to buy newspapers and magazines. As that percentage grows, there will more of a demand for not only newspapers but higher quality print products such as magazines. In fact, Chinese people gather in droves at newspaper viewing stands to read about what's happening around the world.

We have customers with global operations in China. They have already started to invest in huge printing facilities that will accommodate about 40 presses. India is another growth area for us. There are about a dozen Indian families that control much of the wealth. A few of those families want to use the same U.S. model of family-owned newspapers. We have customers who have bought many multiples presses within the same family. At this time, the print quality in both China and India cannot compare to that in many parts of Asia or in Europe. We sell presses that are priced for that economy.

EL. What distinguishes your presses from your competitors?

BR. We do much personalization of print media. For example, we can print catalogues that have specific items for sale or that will go to a specific demographic population. So, instead of one catalog going to an entire group, we can produce a special catalog for 100 or 1,000 people based on their needs.

We provide the print system, but we don't provide the demographic data. The customers get the demographic data from database marketing firms. After our press prints the material, it sorts it into books or signatures and then bundles that the books with either twine or in plastic. If you go to our Web site, you will see a time lapse movie that shows one of our folders that took about three months to build. In 60 seconds, you will see the complexity of handling the folder.

EL. What is the challenge of building a printing press, say, to handle a magazine or a newspaper?

BR. We engineer everything to the customer's specifications. For example, we configured a printing press to stuff plant see packages in the publication. As a result, we build very few of the same thing. A customer's specifications can be based on geographical needs or physical needs. For a customer that wants to get new technology, but is located in a major metro area, we would fit the new technology to reside within the specified building. In the meantime, we would keep the old press running until we built the new one. Some of our customers have constructed a building just to house the printing press.

EL. Are any two printing presses alike?

BR. No! Some of our low-end presses are very similar. A customer might order six of the exact same thing, but they are engineered to order.

EL. Your company has earned a reputation for innovation. Can you talk about some of your technology innovations and the value it provides customers?

BR. Goss RSVP is technology that connects a cell phone to a two-dimensional bar code on print material, such as an advertisement. Depending on the cell phone, you can use his or her cell phone to scan the bar code in the ad. You would get a five-digit code to get more information about the product or you could connect to a Web site or see a video. A project we did for a real estate agent allows you to scan a particular house in the ad, put in a short code, and view more information about that house, including a short video. We are ahead of the times. We have designed some of this for the next generation phone that will run on 3G, and eventually 4G. Today we have lots of customer using the SMS part of it.

EL. Can you talk about other innovative technologies?

BR. Our tagline is 'innovation for business.' We have 1,000s of patents. Many of these patents fall into several areas - reducing labor for the customer, improving print quality, and reducing environmental impact. For example, a few years ago, we developed a technology called gapless printing. It decreases the space between the images or between the pages in the book and thus uses less paper. By using this technology we have helped customers collectively save about 2.2 million trees over the last 10 years or about 4,300 acres of forest land.

EL. What percent of your annual revenue do you spend on product development and innovation?

BR. It's about 15 percent. We have sustaining engineering for our older equipment and new engineering for recent products.

EL. What process do you follow to make technology investments?

BR. All of our major investments are business investments. We do not like to distinguish between investment types, such as technology. The technology team works closely with the business team to develop and conceptualize ideas. We then put together a business case. Depending on the size of it, we might do a pilot. From there, we will develop an appropriation's request with a project plan, benefits, and return on investment. We will review the request at the quarterly steering committee meeting that I chair. All of the business leaders from around the world attend that session. We go over the status of major projects and upcoming projects, and anything else people might want to talk about. It is a governance meeting because we have about 15 people in a teleconference at the same time.

We also have a technology leadership team comprised of all of the on-site technology leaders. We meet monthly via a conference call for two hours to discuss what we accomplished, what we need to get done, and who needs what help.

EL. Are you part of other major investment decisions in the company besides technology?

BR. I participate in all decisions about technology, including our computer aided design systems. I also participate in decisions about engineering, marketing, and sales. I have input into decisions about how we support our customers with technology. For example, most of our newer presses have the ability for us to monitor that press remotely and to adjust it remotely. For example, we can adjust the print quality or the speed of the press, or we can look at what is coming off the press. It is like a remote console.

EL. Where does the innovation come from?

BR. We have a research and development group. Because many employees have been with the company for many years, they have solid relationships with each other and the management team. Our innovation comes from the open dialog we have with employees and our customers. For example, I might ignite some of their ideas when I talk about what I have seen at other places or conferences.

I have a card that says I am the chief innovation officer. A colleague recently came to me and said: 'Because you build large, rotating, high reliability devices, have you ever thought about getting into the wind turbine business?' As a result, I have met with executives from wind turbine companies, as well as have attended a few industry conferences. That technology has a deep tie to how we build high quality presses. In fact, some of our presses have been printing the same newspapers for 60 years. Our technology undergoes much stress testing to ensure the reliability of engineering.

EL. Are you thinking about having a core of the business in wind turbines?

BR. Yes! The manufacturing and design engineering section on our Web site talks about projects we are doing with several wind turbine manufacturing companies. We might never put together a wind turbine and sell it. On the other hand, wind turbines have many components that look similar to those found on a printing press. Both types of components have similar lifecycle and duty requirements.

EL. Have you come up with other innovative ideas?

BR. Because we have a large service force, we have added some things such as Skype. Our Skype videophone enables our service people to see remotely how a press is operating. For example, if a press is making a loud noise, we can dial into it electronically, but we can't see what is wrong with it. This new device will function as our remote eyes and ears. Service people will be able to transmit video of a customer's press to our engineers in the main office. The engineers can help to speed up the solution to the problem.

EL. What marketing challenge does your business face?

BR. Our business is based on relationships. You do not go shopping online for a multimillion dollar printing press. We spend much time educating prospective customers about what we do, how we do it, and why it is better than what our competitors offer. Depending on the price of the press, our sales process can take several years.

EL. How do you communicate business impact to your constituents?

BR. I came up with a periodic checkpoint meeting comprised of directors and vice presidents from functional areas. We each go over some tactical issues about our area. We also talk about we have accomplished and what we need to improve.

EL. Do you attend any meetings of the board of directors?

BR. We are privately held. I, however, attend four board meetings a year to talk about technology and innovation. The board presentation package helps me to further understand our strategy.

EL. What is your process to revise the corporate strategy?

BR. Once a year, the global management team meets. We go through a series of presentations about each site, including any functional areas. Our customers also attend this meeting. Print industry consultants provide us with a three-year vision on where they see the market going.

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

Global Pharmaceutical Company CIO Talks about Driving Business Transformation With Emphasis on Technology Investments

bmc-elo@bmc-elo.hosted.jivesoftware.com — Fri, 11 Dec 2009 20:11:24 GMT

These days generics are the hottest growth market in the pharmaceutical industry. And Ranbaxy Laboratories Limited ranks as one of the eighth largest generics producers in the world. With annual revenue of about $1.7 billion, Ranbaxy offers generic drugs that cover the majority of chronic and acute segments. The company sells in 125 countries and has a physical presence in 49 countries. It also distributes about 80 percent of its products through the three top pharmaceutical distributors: AmerisourceBergen, Cardinal Health, and McKesson. Emphasis on new drug research into areas such as metabolic diseases, oncology, and urology help distinguish Ranbaxy from its global competitors.

Several years ago Ranbaxy underwent a business transformation to do a better job of carrying out its mission deliver value everyday to customers. This transformation included making sizable technology investments so Ranbaxy could both accelerate and lower the cost of bringing new products to market, and streamline the process of developing new chemicals and new chemical entities. The results paid off for Ranbaxy. In early 2009 Ranbaxy became an operating company of Daiichi Sankyo, an $8 billion global manufacturer of branded pharmaceuticals and the 15th largest company in this marketplace.

Enterpriseleadership.org recently sat down with David Briskman, Ranbaxy's chief information officer, to talk about the strategic integration of technology to better enable the company's key business processes.

EL. Can you describe the structure of your technology organization?

DB. We have a centralized technology organization comprised of both internal technology staff members and outsource partners in about 30 countries. Most of our applications, technology support, and our governance process follow a centralized model. Our key technology areas include the following research and development, drug discovery, and manufacturing technology.

EL. How will your business model change because of the Daiichi Sankyo relationship?

DB. Daiichi Sankyo ranks number 15 globally in branded drugs. We plan to follow a hybrid global business model that combines generics and the branded drug globally. Our growth opportunities will include leveraging our capabilities with those of our parent.

EL. I read that your CEO wants to use technology to drive business transformation. Can you describe the areas where technology provides the most strategic value to the company?

DB. Developing a molecule that falls into the multimillion-dollar drug segment, and keeping that intellectual property for years have driven the traditional branded drug market. In the generic market, you have to be very efficient as possible if you want your business to thrive and to be successful. It is a highly competitive business, much like private label, consumer packaged goods. You have to produce a very good basket of goods or else you will not be successful. For us to accomplish this goal, we depend of technology to support our three key business cycles. One key cycle includes moving the product form the research and development cycle to the filing and registration and finally delivery to a particular market. Our supply chain, another cycle, needs to be incredibly efficient, given our product diversity.

Our third cycle looks at how we run our business. For example, we market directly to doctors in India where customer intimacy is less of a focus. For the rest of the world, our business growth opportunities depend consistently on delivering a good quality selection of diverse products.

EL. Can you describe some of the key technology investments you made to improve the business cycles you mentioned?

DB. We have moved our research and development for new products from a manual process to a highly automated one. We submit all documentation electronically to the U.S. regulatory authority using a specific format. We are one of the early adopters on that technology. It has enabled us to obtain faster approvals on the submissions and subsequently to bring faster products to market. We also have deployed our global regulatory database that allows for our tracking, monitoring, and managing of all our regulatory submissions. This database has facilitated our ability to look at our product suite in a more meaningful way. Before this database, we had to figure out what we registered across all of the products in all of our markets.

We invested very heavily in business intelligence and our SAP supply chain suite. In fact, a variety of our business intelligence initiatives focus on enabling the business to respond better to customer demand. Some of those areas include everything from mobile phone-based automation tools in India to the different data mining, and dashboard tools.

EL. What changes did you make to your enterprise architecture for some of the things you mentioned?

DB. Because we have to be efficient, we prefer not to dabble in lots of different technologies. We have a different architecture and set of applications in research and development. Our enterprise architecture, however, revolves around our supply chain backbone and our Microsoft capabilities. We try to leverage these two platforms. Our current enterprise architecture is less than ideal on the sales force automation front.

EL. Can you describe how you are handling sales force automation to make your organization efficient?

DB. We have 17 different sales force automation systems. That might sound like an inefficient number of systems. On the other hand, this number of systems complements the way we operate geographically. We have different business models for certain countries. Most of the business advantage does not come from the architecture of a given system, but from the local market intelligence available on those sales force automation systems. Our global studies show that we are far more effective growing our business with our regional and local players versus an enterprise approach to sale force automation.

EL.What is your governance process for making these investments?

DB. We have both formal and informal governance for making technology investments. Our formal governance process is very straightforward. I sit on both the budget committee and the operating committee.

Each year we go through a very rigorous assessment based on a value framework we adopted from Gartner. It accesses all of the different technology investments to do a multi-cycle review process.

Throughout the year we have councils comprised of leaders from the different business areas. These councils also include my direct reports and me. We meet quarterly to assess the amount of progress we have made against the specific plan. These business councils provide a formal structure for what we must work on, along with any unexpected projects. Depending on the region and business function, a business council might have as many as 25 people sitting around the board room to an informal gathering of five people.

Most technology projects have steering teams, which comprise our informal governance process. These teams include mostly technology professionals and some representatives from the business units. Together they work with the different business leaders to understand their priorities, vision, and strategies beyond that quarter.

EL. How will your governance process change because of Daiichi Sankyo?

DB. The governance model going will grow because of our relationship with Daiichi Sankyo. We have made most of the strategic investments and put in place the platforms that enable our generic business to run efficiently on a global basis. The exciting opportunity for me is the ability to extend that efficiency to our parent.

EL. Do you link technology to new sources of revenues, new products, or new improved processes?

DB. We rank all of our technology investments on this value framework. The framework's four areas include the following: financial metrics such as ROI, strategic implementation, compliance, and feasibility. The last one involves the ability of our business to take advantage of an implementation.

I produce an annual report that quantifies the business value associated with each investment. We have been through several cycles on this. In the first year we used this value framework, we focused on ROI. I found that we spent too much time trying to quantify dollar values where we should have been looking at qualitative capabilities.

We can say that our new supply chain platform drove our inventory reduction, but other factors contributed to this reduction. We make sure we can have quantifiable metrics associated with each project. For example, pharmacovigilance is the compliance process for tracking adverse events in drugs used by patients. We do not put a financial benefit on that system per se, but we have started to improve the timeliness of our regulatory reporting.

By focusing on the metrics directly attributable to the investments, we have improved the overall perception of the investment's value. For example, for many of the dashboard and collaboration platforms we have set up, we measure efficiency factors, such as how many reports we run and how many active users we have. We prefer to do it this way rather than this particular report helped us improve revenue by so much. That type of process leads to much interpretative discussions and in turn does not lend credibility to technology. By focusing on the business capabilities we provide, we will derive a perceived value from the knowledge we provide with those capabilities.

EL. How integrated is technology into your business?

DB. It is integrated into the business on several levels - as a centrally managed function and as a strategic driver. We have moved from the perception of being help desk order takers to playing a strategic role in the business. We have become more proactive in our ability to propose business changes and technology investments that will improve the business.

This year my team is leading a project sponsored by our CFO to streamline the financial close process. We are in partnership mode on this project. The same goes of our sales force automation and CRM efforts. We have taken a more strategic stance in bringing solutions to the business and suggesting changes to business operations. For example, we worked on how we could improve our customer management process in India.

EL. What is your process for reviewing the corporate strategy? How will change because of the Daiichi Sankyo relationship?

DB. We have been on a three-year cycle for reviewing and setting our corporate strategy. Our relationship with Daiichi Sankyo, however, will influence how we look at our corporate strategy. I told my team that we do not have to sit down every few years and figure out our corporate strategy and alignment for generics. Instead, we need to get as many good quality products to market and to make sure we deliver them in a timely and efficient fashion. We also have to accomplish this in a compliant and profitable manner.

The generic drug industry is very simple. We support the industry's best practice for new drug development. As our business model evolves with Daiichi Sankyo, we will move forward to leverage our cost advantage in the global branded pharmaceutical market too. Many of our competitors have a federated business model versus our forthcoming centrally controlled business model.

EL. How has the global economy affected your business?

DB. Before 2009, we had been growing at 12 percent per year. Our growth rate is now about six percent. The global economic downturn affects about 10 percent of our business. We have refocused our efforts on becoming more efficient by enabling the appropriate technology and business process to achieve productivity. It has also helped us to leverage and to stick to carrying out more standard policies and procedures that facilitate productivity. For example, we rolled out unified communications and IP telephony to the increase the use of collaboration technologies.

Elizabeth Ferrarini is a technology writer from Boston, MA. Reach her at elizabethferrarini@yahoo.com

Newly Retired General Motors's CIO Talks About Role of IT Before and After Automaker's Bankruptcy

bmc-elo@bmc-elo.hosted.jivesoftware.com — Mon, 12 Oct 2009 12:50:56 GMT

When Ralph Szygenda joined General Motors as CIO in 1996, the automaker was one of the largest, most diversified corporations in the country. However, the IT organization was at an all time low. GM had just unleashed EDS, the IT outsourcing organization. Szygenda says, “There were about 20 of us left in the company who knew anything about IT. EDS did everything. We had to start from scratch to rebuild IT.” Thus began Szygenda’s legendary career to become the global CIOs most CIOs want to emulate. He and his team began to build what would become the world’s largest outsourced IT organization. He says, “We consolidated endless numbers of systems, applications, networks, and processes.” Under Sygenda’s leadership IT’s focus shifted from systems to cars, customers, and innovations, such as OnStar. GM emerged as a global business, especially becoming the number one automaker in emerging markets such as China. Now things are different. Szygenda retired on October 1, 2009, as GM emerges from bankruptcy to become a more focused, leaner automaker. He says, “Now the entire company can focus on getting closer to its cars and customers. ” A month before he retired, Enterpriseleadership.org had the pleasure of sitting down with Szygenda to talk about how the role of IT changed the company, how GM plans to deal with some of its operational issues outside of IT, and what changes we might see for the IT organization. Here is what he had to say:

EL. Because of the bankruptcy, how did the company's business strategy changed?

RS. Clearly, it is still in development. A couple of things happened. The bankruptcy took away many of GM 's decades old legacy problems. More management time went into legacy, healthcare cost, and Delphi, a bankrupt automotive supplier spinoff from GM. We had to give Delphi more money than anticipated to keep it alive because of its criticality to our supply chain. GMAC, the financial services business, has also gone away. Our strategy is to concentrate and make time for our customers. That is what a car company really should be doing. It gives us an opportunity to do this without many of the legacy issues we had in the past.

EL. What changes have you made or plan to make to the IT organization and how will these changes affect the outsourcing partners?

RS. Not a significant amount! I believe in the IT organization shadowing or mirroring the structure of the business. It goes for any company. As GM restructures and changes how it runs its international operations, the IT organization also changes to adapt to that particular area. Our base strategy remains the same -- to use process information officers (PIOs) as well as CIOs. These people drive the common elements of product development, manufacturing, or supply chain across the company. That strategy or that direction for an organization issue will probably stay in place.

EL. Do you still have the same number of outsourcing partners?

RS. During my past 13 years here, we have reduced the number of suppliers to less than 20 key IT suppliers. That number includes all of the product companies, such as Microsoft, Oracle, and Cisco, as well as services company, such as IBM, HP, Capgemini, and Wipro. We have mostly service providers along with both hardware and software product suppliers. From an IT viewpoint, we run our sophisticated model of buying and brokering IT. We have 1,000 people inside the company that have the responsibility to design the business direction and the acquisition of IT.

EL. How will the IT budget change and what new IT investments do you plan to make because of the restructuring?

RS. IT cost will bottom out this year. It has been difficult because of the bankruptcy and the conservation of cash. We have reduced cost every year for the past 13 years through efficiency. In other words, we have taken cost out of the operating side of the IT business and put it back into development of new capabilities and application. This year that figure has been lower than what it has been because of the bankruptcy. It will start to go up again because we cut it very severely this year. So going into next year, we will put more money into innovation as the business changes the particular processes where it wants to go.

EL. Can you describe the investments you made over the years that have really paid off?

RS. Twelve years ago, this company operated very decentralized with autonomous business units. Today the company runs the common processes for product development, supply chain, and manufacturing the exact same way throughout the world using this exact same technology, saving a significant amount of money and permitting great speed for product development. For example, 12 years ago, we had 23 computer aided design systems. Today we have one. We cut the product development cycle time by more than 50 percent. We have approximately 30,000 design engineers around the world using this same technology. People on different continents can work in parallel to design together. We move eight million vehicles throughout the world using the same supply chain systems. We purchased $90 billion dollars of services and materials using the same purchasing systems throughout the world. We deliver just in time to plants and manufacturing facilities across the company. OnStar is another example. We have five million customers using that technology in vehicles. It saves many people's lives. We can diagnose vehicles and tell our customers all through technology that they have an issue. If they have an accident, we can notify emergency resources through satellite systems linked to our call centers. We can stop stolen vehicles automatically if the police officer wants to bring the vehicle to a halt. The person driving is in trouble. All that includes technology changes that have occurred in the company over time. At the same time, we have saved significant IT dollars through efficiency. In fact, we have reduced billions of dollars. At one time, we had 7,000 IT systems. Today, we have about 1,500 systems taking out billions of dollars of costs, and moving from autonomous businesses to very common business There have been significant changes in the business.

EL. Can you describe the current governance process for making technology investments?

RS. We have CIOs for the major business units in the company. Given the company's global size, 14 years ago we created the role of process PIOs or experts in business direction. For example, we have a business PIO in change of the entire product development process, from concept to actual vehicle development. We have another PIO who handles all manufacturing processes throughout the company. Another one has the supply chain. They drive initiatives across the entire company by doing two things: trying to put together and analyze the business needs, and driving the strategic direction with the business leaders on defining the most important requirements to transform the business. Every year we do a portfolio process where we analyze those needs coming from the business PIOs, such as the PIO for product development. In this case, we would work with an IT project management officer to see what the company needs. We also do a comparative analysis or a competitive assessment of all of our competitors each year. Next, we take all of the particular IT requirements we need to do and we rank from one to 60. We go back and socialize with the business leaders, come back in, and ask senior management in the company to evaluate how we should proceed. This occurs every year through a pretty detailed portfolio process for the company. It's unclear whether we will modify this process. I don't think it will happen totally. It is business driven, kind of a ROI investment area. We look at ROI in two areas -- one is analytical based on cost savings, and the other one is intuitive based on what we think we need to do. We look at business ROI, which includes IT. We do not do independent IT, except for running the computer center, or telecommunications, I don't expect a significant difference because the process has worked successfully over time. GM's major issues revolve abound legacy cost issues of not having the right products for the marketplace. It is a global process around the company. I'm not sure anyone will say there is an issue with that. We had a 40 percent reduction in the marketplace of sales, which cash could not overcome.

EL. How do you categorize the technology investments?Do you look at what is innovation or what is explorative?

RS. I have a strategy manager who works across the entire portfolio process. Under those areas, we have clearly new process transformations, which include strategic area changes in the portfolio. Then we have, what I call, more tactical new product launches in the company that need IT investment, such as regulatory or initiatives to keep the business running. Next, we have strategic business process transformations. For example, we have different regulatory requirements in Russia and in China. We have to meet all of those. We have new product launches every year because the vehicle designs change. Here we might need more leading-edge technology. We might experiment with new IT in areas where we see how they would adapt to GM from that perspective.

EL. Are you going to make any changes to the way you measure your technology investments?

RS. It is solid ROI with a total business appropriation request. Any major changes must link with the business for measuring a business change. You can't get much better than that. On the other hand, the intuitive side is very difficult to measure. For example, how do you evaluate every new change to a new HR system? Some of that is intuitive. I am not sure we will change that. We will change the business's end goal to focus more of customers and the cars. We will drive a different perspective from more customer-oriented systems, more product information gathering, and new ways to communicate with the customer. We will drive more investment in those areas. The IT process will not change. The business needs will tend to tilt and change more toward the customer, the vehicle design, and the need to meet the market needs.

EL. Have your expectations of your internal staff changed?

RS. This organization has always been very aggressive. Most of the people on the senior IT leadership team have come from outside GM. As a result, they have had different mindsets, and difference experiences over time. The overall IT speed of the company will accelerate. We will have to deliver our requirements faster. Our IT people view this as a positive move. However, they will be under greater pressure, along with the IT suppliers, to deliver quickly on these requirements.

EL. Can you describe your growth in foreign markets?

RS. Ten years ago, we were not in China. Today, we rank as the number one automaker there. If you look at the new emerging markets, GM has done quite well there because it did not have the legacy area. People say, 'How can GM be a leader in China and still have all of legacy problems and then go bankrupt in the U.S.?' We did not have the legacy cost issues outside of the U.S. I appointed an emerging market head who makes sure we address those markets from an IT perspective very quickly.

EL. Is GM looking to move OnStar into new markets such as healthcare?

RS. Coming out of bankruptcy, we must concentrate on the core automotive businesses and nothing else. GM has a long history of being in all types of businesses, everything from heating and cooling to owning Hughes Corporation. In fact, we owned EDS when I joined the company. Diversification is not one of goals right now. OnStar plays a key role in the insurance industry. We understand, as well as provide, all of the internal analysis of the vehicle electronically. For example, an insurance company might say, 'We will sell you insurance on the miles driven.' This information automatically feeds the insurance company. It is paid per usage. We are doing some of these things. For the government, we can monitor vehicles with OnStar. We know which vehicles have evacuated from a hurricane. We can tell how many people are on the highways. We immediately work with government agencies to give them that input. We leverage the fact that the vehicle acts as another node on the IT network. This leveraging helps us to use OnStar for online navigation and information you want. Many businesses have wrapped themselves around that. One example includes directing people to restaurants. There will be more of that. The killer application will always be safety and security followed by navigation. It is hard to find applications that may be extremely successful after that. It is a new territory for innovation. Today OnStar has no direct similar competitors. We have about five million customers. Other companies install tracking devices into cars after they are built. No other competitor builds a system like OnStar directly into the vehicle. If there is something wrong with my vehicle, I get a diagnosis via email.

EL. What is IT doing to drive innovation within the company?

RS. For a long time, IT has have been transforming all of these business processes, and transforming the technology in the vehicle, though innovations such as OnStar. We are taking that process to other parts of the world. The processes in the company for product development and manufacturing are very good. They will not affect GM's ability to compete in the automotive business. This is a fashion business. You need the right car or truck to meet customers' needs. These needs could include energy efficiency, comfort, or reliability. Ten years ago, IT was fragmented or spread across the world. For example, within 10 years, we have gone to no presence in China to being number one using IT. This is a nice success story. GM also uses more social media than any other company. We have been into blogging for years. We have experience with Second Life. We will see more of that. The next generation of technology will offer more transparency to customers, letting then know everything about our products and our company. Our next move includes making sure GM has the speed it needs to transform after the bankruptcy. Our legacy issues are gone. GM had two issues -- legacy cost which was a major driver and the 40 percent drop off the marketplace. You can see right now with the Cash for Clunkers how many people are buying cars because of the stimulus. IT has never been an issue for IT. If you talk to any members of the executive team today, they will tell you the same thing. I am not sure that executive leaders in other companies would say that IT does what I need it to do.

EL. What was the genesis for GM's major outsourcing of IT?

RS. When I joined the company, IT was decentralized. It offered mediocre processes.We inherited outsourcing when GM spun off from EDS. We had to make it work. In 1996, we were the largest corporation in the world. About 20 people who knew something about IT remained with the company. EDS handled everything else. We had to make it to work. Industry analyst reports say that 70 percent of all enterprise IT includes acquired services through some form of outsourcing. It is a way of life. We did it way before our time. We have done it pretty well. It has allowed us to move quickly. We did not have to worry about having all of those internal people and assets in the company and trying to make it leaner. We could never have moved that fast with technology. The Internet also enabled us to redesign all of the interfaces, whether it is to the supplier, or dealer using the Internet. If we had to do that from a hard-coded environment, it would have taken us a decade or more. It took us three years.

EL. Can you give me some examples of IT firsts at GM?

RS. We were the first one in California to display customer info versus going through a dealership 10 years ago. We were the first one to interface with a supplier base. We had 1,000 of suppliers at that time we were buying $100 billion of materials and services. We did all of that online. Meanwhile, the rest of GM was encumbered by speed in areas such as production. Within three years, IT helped transform GM. IT will not keep GM from being successful. Instead, it will be whether or not this company can meet customers' needs with the right products fast enough. The perception quality problems have taken decades to fade away. Most people believe we have good products and want the U.S. auto industry to succeed. The entire American car industry still has a perception issue that will linger for a few more years. That will occur in the next couple of year.

Elizabeth M. Ferrarini - She is a technology writer from Boston, MA. Reach her elizabethferrarini@yahoo.com.

Jeanne Ross, Researcher at MIT Sloan School’s CISR Program, Talks About Latest Book – IT Savvy

tom@tomparish.com — Sun, 13 Sep 2009 16:29:34 GMT

Why do some CIOs struggle to keep the lights on and butt heads with management every time there is another cut to the IT budget? In contrast, why do some CIOs receive all types of accolades, awards, and publicity for their IT leadership accomplishments? The latter CIOs have an easier time achieving business impact of IT than their struggling CIO counterparts for several reasons: These CIOs know how the business works and have been empowered to use IT to make things happen. What’s more, these CIOs work for CEOs who know that IT done well can make a difference in the company’s growth and profitability. These executives work together to find the right IT model for the business, make a range of IT investments to fuel current growth and to explore new ideas, and make sure the company can function in a digital global economy. In other words, these executives are IT savvy.

Executives who want to become IT savvy should pick up a copy a 150-page book written by Peter Weill, chairman of MIT Sloan School’s Center for Information Systems Research (CISR), and Jeanne Ross, director and principal research scientist at CISR. In fact, the 160-page book is appropriately titled IT Savvy – What Top Executives Must Know to Go from Pain to Gain. Written in easy-to-read language, the book draws from research down by CISR, including vignettes about companies that have done a good job of transforming their IT organizations. The book’s appendix has a survey that allows you to rate how IT savvy you are.

Enterpriseleadership.org recently sat down with Jeanne Ross to dig deeper into the advice both authors provide in the book. Here is what she had to say:

EL. In the case of Aetna and BT, you talk about what the CEO did to bring about an IT transformation. What was the CIO’s role in this?

JR. We see successful cases where a CIO can take the lead and help the CEO see what it is possible. That’s not the point of this book. If you are a CXO, don’t wait for that to happen. You need to grab control and think of how you want IT to take your business forward. Meg McCarthy, Aetna’s CIO, will tell you that that Ron Williams, the CEO, was in charge. ‘He knew what he wanted, his vision was very clear, and my job was to deliver.’ She had to be extraordinarily good at that. On the other hand, she frames her role this way. It is a very different kind of leadership role. She didn’t have to convince anyone of the importance of IT to the company, as many CIO do. She just had to make sure that IT was first rate, and very professional. She also had to do the things so many CIOs assume they should do, but have trouble doing them. Why? Many CIOs lack the authority or have not been given the go ahead to take the business leadership role. Williams gives McCarthy all of the credit in the world for delivering.

EL. Okay, so what role did the CIO play in the IT transformation at BT?

JR. The BT CEO knew that IT needed to be more important than what it had been. He brought in a CIO who could help him derive more value from IT. BT is a similar case to Southwest Airlines, which is also in the book. At Southwest, however, the CFO, who later became the CEO, spearheaded the IT transformation. These leaders realized that IT has to be really important. They also want to use IT in a way that yields the most value. They find the best CIO. Together they work hand in hand to make things happen in this company. In both cases, we saw a very tight partnership between an IT leader who helped provide much of the vision the CEO knew he wanted. The CXO was waiting for a CIO to help him see it more clearly.

EL. Is an IT transformation part of an overall corporate transformation?

JR. Companies that base the transformation on moving more toward a global digital world will often recognize that IT has a critical element in making that happen.

EL. When selecting an IT operating model, what role does the business architecture and other architectures, such as enterprise, play in the process?

JR. In an ideal world, you pick the operating model and then you define all of your architectures. Realistically you need to know where you are starting from. If you have had a siloed architecture, then you will get into trouble if you adopt, say, a unified operating model, where you standardize everything and integrate everything. If you grew up with siloes, you will have a long journey to unification. You would be better off taking intermediate steps that would take you to either replication or coordination.

Companies that haven’t had any discipline around technology, and that haven’t been thinking about architecture cannot just select an operating model. It just is an overwhelming change, and it is hard to do. As a result, companies in this situation might have their options limited. On the other hand, if you have always been good at architecture, you can select anyone you want and probably be able to pull it off.

EL. You say that IT savvy firms have a 20 percent higher margin than their competitors. Can you discuss your research process to arrive at this figure?

JR. Because this is Peter Weill’s research, I need to piece this together. I should have asked him this question. Of the 600 firms in his sample, he took the top 25 percent of performers. He then went to those that were publicly held and pulled out the financial data. On the average, these companies had profit margins above 20 percent.

The methodology we used to pick these IT savvy companies would lead us to a very similar profile. My research focuses more on enterprise architecture, while Peter looks at how companies spend their IT dollars. We find a huge overlap in the companies with mature enterprise architectures and those companies that spend their IT dollars wisely. Although Peter and I ask very different questions, we come to very similar conclusions on which companies are really deriving value from IT.

EL. Many CIOs say that measure the success of their IT based on ROI. Is this a reliable metric? If not, what do you recommend they use?

JR. ROI is not a bad metric. However, if that is all you are using, you will be headed down the road to more siloes. You have to be careful using an ROI. If you are going to make different kinds of investments for different reasons, you should be explicit about that. You do not want to have an ROI metric for everything you do because that it not why you are making all of your investments. You are making some investments for ROI, and you might be making some investments to experiment on new ideas. ROI doesn’t work for experimentation or exploratory investments. You will eliminate all experiments real early if you use ROI.

In chapter 3, we say that your portfolio of financial investments has different goals so should your portfolio of IT investments. You should be very explicit about that and then match metrics to whatever you are looking for. So, most companies need to have an experiments budget for IT. Peter Weill calls them the strategic investments. As I mentioned, an ROI will absolutely destroy that effort. You need to look for a metric that helps you to evaluate what comes out of the ideas you have. If you go back and look at the portfolio of things you did two years ago, you might look at what things had potential and what you should continue to invest in. If nothing had potential, you might say that you have the wrong approach, you are investing the wrong amount, or you are inveseting in the wrong projects. There is no single answer to that question.

We think that post implementation reviews are essential. So you put together a business case, and you ask yourself honestly what are we trying to get out of this? After it is done, you ask yourself if you did. That is how you are going to learn going forward. It is not so much what metric you use. It is about how you use those metrics. You need to follow up on them to check to see if they were realistic and you got what you expected.

EL. The federal government uses the earned value management metric for IT across all departments. Is this metric good for the private sector to use or is it just tailored to the government?

JR. I am not sure how they are doing that. I don’t think I can answer that. Our research does not extend much to the federal government IT. We have done a fair amount of presenting to government people and occasionally advising them. Our sponsors are all for-profit companies. That’s why we have had little interaction with the government.

EL. What are some of the methods IT savvy organizations use to communicate business value to their constituents?

JR. We noticed that Yury Zaytsev, CIO of Swiss Reinsurance Company, a global financial services company, always talks about IT situations in business terms. We said to him: ‘You are always talking about what the business is trying to do. It doesn’t matter if you are talking to IT people or business people, you instinctively talk about business. How do you do this and how do you train your people?’ He replied that he just does it. I get his point.

If you look at the cases in the book, such as Campbell Soup, Southwest Airlines, and Seven 11 Japan, executives at these companies do not realize they are doing something different from people who do not communicate well. They just say this is the way I talk. This is what we do in our business.

Some CIOs instinctively talk in terms of real business value, while other CIOs do not get it, but they think they have it. For example, these latter CIOs might talk about network downtime. No one cares about downtime. They might say, ‘Well, we talk about it in business terms.’ You do not talk to your business partners about downtime. You need to stop having interruptions or downtime by getting the basic operational stuff to work right. You should not have to explain what is going on with the technology, why it breaks, and why it is expensive. You have to get passed that.

You need to focus the attention of IT on how the business runs and makes money, and where does technology have an impact. If you start your own thinking process from the other end, then you will not be so concerned about how to communicate in value of IT or what metrics you use to measure IT value. You, instead, can concentrate on understanding the company’s biggest concerns and what IT can do about them. In IT savvy companies, CIOs think differently than their counterparts. IT savvy CIOs look at what is happening while everyone is in the valley tries to figure out what they are doing. These CIOs recognize that they have this unique perspective and can articulate and believe what is possible in the organization.

EL. Do you ask CIOs how they communicate with their rank and file?

JR. It is a very interesting question. George Westerman is working on that right now, and he will come back from this study with some ideas.

EL. In IT savvy organizations, what is the CIO’s role on the board of directors? Do these boards have an IT committee or does the CIO sit on the audit committee?

JR. I will have to admit that we have not looked at that at all, especially in this book. We try to define the role the CEO and other CXOs ought to be taking. Are they savvy enough to recognize where IT fits in all of their operations and thus what they would have to report up to the board? You pose some interesting questions. I am surprised we have never studied that issue at all. On the other hand, if we go out and get a feel for the landscape, we will probably find many CIOs who have limited contact with the board of directors. We would have to search for those CIOs who engage regularly with their board.

EL. Have you looked at the types of portfolio management tools that companies use for IT?

JR. No. we have not gone into that at all. We have looked at the strategic view of how organizations think of their IT portfolio as opposed to what tools they use to manage it.

EL. About 60 percent of UPS’ one billion IT budget goes for running the business, and the rest goes for new investments. Do most CIOs have a good handle on a metric like this one?

JR. CIOs should pay much attention to that type of metric. Many of them don’t know the answer to that question. It is valuable to monitor that and to try to push money out of the operation and into the development side.

Elizabeth M. Ferrarini - She is a free-lance writer and IT consultant from Boston, Massachusetts. Reach her at elizabethferrarini@yahoo.com.

Teri Takai, State of California CIO, Talks About the State’s Largest IT Transformation

tom@tomparish.com — Sun, 12 Jul 2009 19:57:55 GMT

In 2005 when California Governor Arnold Schwarzenegger introduced his Strategic Growth Plan to rebuild the state’s crumbling infrastructure, he said that this infrastructure went beyond roads and bridges, but also included the State’s massive information technology infrastructure. On January 1, 2008 the Governor appointed Teri Takai, the former CIO for the State of Michigan, to first transform the California’s IT organization, by managing costs, despite the tough economic environment, and then to put more e-government initiatives in place.

Takai is no stranger to overhauling a state’s IT organization. While CIO for the State of Michigan, she restructured and consolidated that State’s resources by merging the IT organization into one centralized department to service 19 agencies and more than 1,700 employees. Under her leadership, Michigan ranked number one four years in a row in digital government by the Center for Digital Government. Prior to going into public service, Takai worked at Ford Motor Company for more than 30 years. At Ford, she led the development of the company’s IT strategic plan.

Enterpriseleadership.org recently sat down with Takai to talk about the challenges she faces transforming the largest IT organization in the State of California. Here is what she had to say:

EL. What is it like working for Governor Schwarzenegger?

TT. I am enjoying every minute of my work. It's never a dull moment.

EL. Can you describe the structure of your organization?

TT. We are currently in transition. To date, our organization has been highly decentralized. Each of the 130 CIOs have pretty much been able to set their own processes, establish their own way of doing things, from both a business and a technology standpoint.

This position was really the creation of a central CIO organization with reporting responsibilities directly to the governor. That is the first time the CIO has been a cabinet member. It is the first time the position has directly reported to the governor. Before today, my organization was a policy setting and financial review vehicle with about 32 people. I have close to 1,100 people. Within my organization, we plan to consolidate our large mainframe data center, our security organization, and our public safety communication organization. The central shared services to support our infrastructure will become part this larger organization.

EL. How many IT workers does the State of California have?

TT. We have been using the 10,000 number. When we consider things like desktop support and other functions, we think that the actual number is a little larger. We believe that our on-going run rate budget is about $3 billion. We run about $1 billion of project spend on top of that. As a result, our spend comes closer to $4 billion. Even that could potentially be a low estimate.

About 10 percent of the current state IT workforce will become part of my organization directly. The rest will move to a federated model. We plan to establish a dotted line working relationship where the IT policy, as well as all of the technical direction, will come from this office. The business direction will reside within each respective organization. The business organizations will also make the decisions about how much money they want to spend on IT.

EL. Since you are going to this structure, what will your governance process look like?

TT. It is changing dramatically. We plan to establish a brand new governance structure around reporting of projects. We put out a policy letter in April to get the transparency ball rolling. First, we do not want to monitor all of the little projects. Projects that met certain parameters will require reporting into this office. We plan to post the projects on the Web site so they will be available to the public, as well as to the legislature. The reporting frequency depends upon the size of the project.

EL. How do you plan to measure these projects that meet certain parameters?

TT. Initially, we will look at project performance. Our challenge is sheer performance. The first thing we plan to do will be to meet our milestones. Within those milestones, we may have measures around earned value. The first step is to just get the reporting to happen.

Keep in mind that we are not where we need to be. We are just in the beginning stages. We have the challenge of trying to do business transformation while we are trying to do IT transformation.

EL. How are you going about getting this reporting to happen?

TT. We told the departments and the agencies that we have the ability to put out our policy letter, which is the equivalent of the traditional administrative manual. Our policy letter requires certain project and portfolio management training, certain practices, and then reporting requirements. This is all brand new. The portfolio management tool we plan to secure will help us to do the reporting.

EL. What key technologies investments have you needed to make?

TT. Because the budget crisis hit when I arrived here, we have not made what I call key technology investments. We struggle to make due with our dollars. We have continued to support some of the investments that we have had underway. For our infrastructure, we are working on aligning data centers to improve disaster recovery. We have a major project going on to shut down one of our locations and create a more robust disaster recovery plan for our mainframe data centers. The investment there is not a huge amount of dollars. It has been making use of the dollars we have to make dramatic changes in our disaster recovery capabilities.

We still have a large number of application projects underway and continuing to move forward. Some of them even accelerated. We have several ERP projects underway. As you can imagine with the size and scope of California, we have had several of them happening right now in corrections and another one in transportation. We have a statewide payroll and personnel replacement system underway, that is an ERP implementation for personnel. We are in the process of preparing an RFP for an enterprise-wide ERP system for financial management.

EL. Are you folks doing much consolidation of redundant systems?

TT. We have just begun that process, but I would not say we are far along with it. In 2008, we did our first ever five-year IT capital plan. It was the first ever it was ever done for the State of California. We required everyone to come with his or her five-year plan. This process will give us visibility into the areas where we need to move towards consolidation and shared services. We will update that plan this year.

The 130 CIOs will be in 11 different groups. Before I move forward with a statewide consolidation strategy, I have asked all of these CIOs to submit a consolidation plan for their agency based on what they would do. These plans will give us a way of actually looking at what we should do from a state perspective.

EL. Is your shared service organization going to be mandated or not?

TT. Yes and no! It's an interesting situation to look at a shared services environment based on both mandating and cajoling. Because I have done this type of consolidation before, a mandate could damage could damage your ability to pull if off, especially if you do not have the ability to do it properly. Our first step requires that I have the technical team organized, and I have the ability to do consolidation properly. Call it the first step. I am focusing right now on directory and email. It is a great kind of outward invisible place to start. The second place we are starting to work in is our data centers. We have more than 400,000 square feet of data center and only about one third is what we would call tier three. Those are a couple of areas where we are going to move toward consolidation, but I have not yet going to the mandate state. I have mandated that the agencies are to prepare their consolidation plan, but I have not mandated which direction they are going to go in.

EL. Because your IT transformation or reorganization implies a change in communication style, what type of training program are you putting in place to facilitate this?

TT. Our communications director has been working very hard to develop a cohesive communications plan. This plan is not only important for our IT employees and our business partners, but we need it for dealing with our legislature and our various special interest groups in Sacramento. For example, we have a council comprised of the 130 CIOs. They all have the opportunity to participate. Our executive leadership council includes the undersecretary of each major agency. To this end, we are always talking to the business folks, as well as to IT. I then have the venue of the cabinet secretary if there is an issue I have to raise to that level. Communication is key and essential to what we doing.

EL. Are you looking at social media for the communications piece?

TT. Yes! We recognize social media tools as an effective way to reach our audience, especially those who want to follow us. We have done a Facebook page. We are experimenting with Twitter and how to push out information using those short updates for people who want to follow us. Governor Schwarzenegger is twittering. People are very interested in what he say to say. He has started to lead leading state agencies toward that style of communicating. We are looking at different things.

We are focused on using the tools to push information out. We have not yet spent enough time looking at how we use these tools as a way to gauge and to get input. We are re all struggling with this issue.

EL. Have you had much contact with Vivek Kundra, the new U.S. Federal Government CIO?

TT. Yes! We are certainly interested in what he is doing. While putting data out there is great, we are all still struggling with what people do with the data that actually will result in an outcome. We have to continue to work on this piece. On the other hand, we have much internal resistance to putting data out to the public

EL. How do you communicate to the rank and file about the importance of understanding the business impact of IT?

TT. This area is important to us. We are trying to use a business approach to the way we approve projects and the way we implement them.

EL. What are you looking for in a CIO?

TT. We want pro-active people who will stand up and be counted. They want to be leaders.

EL. What challenges would private sector CIOs if they wanted to join your organization?

TT. They have to be able to calibrate and understand the way the work gets done here. They have to be able to calibrate to the pace of government, and the bureaucracy of government. People who can do these things will derive much reward working in government.

Elizabeth M. Ferrarini - She is a free-lance writer and IT consultant from Boston, Massachusetts. Reach her at elizabethferrarini@yahoo.com.

Construction Company CIO Talks About Leveraging Technology Investments to Move into New Markets

tom@tomparish.com — Sat, 06 Jun 2009 20:20:28 GMT

Founded in 1983, Erickson Retirement Communities is not your typical construction company. John Erickson, the company's founder and current chairman, saw the need for building continuing care retirement communities (CCRC) for middle-income seniors, especially the baby boom generation. Today, the company's 23 communities in 12 states house more than 21,000 seniors. The $1.3 billion company has designed each CCRC as a self-contained campus with apartments for independent living, an assisted care facility, and a skilled nursed facility. Each CCRC has a fitness center, a convenience store, a restaurant, and a full-service medical facility.

While Erickson is currently building new CCRC's in Colorado, Kansas, and Virginia, it has begun to leverage its expertise in geriatric care and technology to build a series of medical facilities to serve the local community. Since 2004, Erickson has been investing in electronic medical record (EMR) technology to drive these facilities, as well as healthcare at all Erickson's CCRCs. John Lambeth, senior vice president and chief information officer at Erickson, says that our "technology investments in both healthcare and construction differentiate us from our competitors. In 2008, the InformationWeek 500 recognized us for our construction software and our EMR."

Enterpriseleadership.org recently sat down with Lambeth to talk about the company's process for making and evaluating technology investments to enter new markets.

EL. Can you describe your business model and your business strategy?

JL. We build continuing care retirement communities (CCRC) and then populate them. Once the community has created value, we sell it to a third-party who sets it up as a standalone 501C3 corporation. Erickson then gains it revenues by providing the management services to that community, as well as reimbursements from the Medicare billing. We set up a benevolent fund for those people who run out of money and can no longer afford to pay.

Our overarching part of our business strategy resolves around our senior communities, especially how we provide care to seniors. Part of our business strategy includes our growing medical practice, which extends outside of our communities. We have based this on the electronic medical record (EMR). For example, our Howard County medical center services people that are not our residents. This facility highlights the advanced geriatrics medical practice we have in our communities. Our strategy also includes things such as our retirement living television channel, which appears on cable networks in a variety of states. We also have our own Medigap insurance product, which our residents can purchase at a lower cost than similar products offered by AARP. It is called Erickson Advantage.

EL. What do you offer that other senior living communities do not have?

JL. Our on-site medical practice has become a key competitive differentiator for us. No other CCRC offers that. As a result, our residents can live within our communities through the span of independent living, and on to assisted living or at our skilled nursing facility. Each community has a fully functional medical practice. We have stepped out in front with the use of EMR technology. Moreover, we have also integrated our EMR technology with long-term care systems to create a level of productivity that even doctors in private practice or in another CCRC do not have.

EL. What is your technology platform?

JL. Our infrastructure runs of products from Cisco and Microsoft. The two core medical systems include GE Healthcare's Centricity for EMR and CareMedx to manage the skilled nursing facilities. We have integrated Centricity into CareMedx. When it comes to our enterprise architecture, we distinguish the portfolio of systems related to the medical side from those for the construction side. We manage the portfolio of operational systems as a side entity.

EL. Can you describe some of your key technology investments?

JL. We have been investing in EMR technology since late 2004. Our goal is to have a complete EMR. For example, we added an e-prescribing component, which gives us the ability to do prescriptions electronically. Our e-orders component enables physicians to put orders electronically into the record. We link to external labs. If residents go outside for specialty lab analysis, we get those results back electronically. We now do advanced directives electronically and associate those with the EMR, such as meals or dietary.

EL. Can you describe some of the benefits your EMR capability provides your residents?

JL. Usually, when new people move to one our communities, they often continue to use their own outside physician. After about six months to a year, many residents decide to go with our community physicians because of convenience. At that time, the residents will bring in paper medical records or we will get them from their former physician. We have an initial process to get as much information into our base EMR system. Our community physicians do a full series of diagnostics for residents who decide to use our medical services. We also scan the paper records in their original form and make them attachments to the EMR.

Many of our residents arrive with a shoebox of medicine. Because of our EMR capability, we offer those residents who use our medical facilities with one place that records all of their medications. We can look and see if what interactions those medications have with each other. We also offer programs that help our residents to get off certain medication. Many of our residents wind up taking rid of many of their medications because they just do not need them or they do not work well together. That is the beauty of the EMR.

EL. Do you have any clinicians on your team?

JL. Yes, a medical doctor who reports to me is our vice president of medical informatics. He also makes rounds at one of the communities. I spend an hour or two a week either with the chief medical officer or with his direct report. We talk about the direction we are heading with EMR. The equivalent head of nursing who is our VP of health and operation relies on that same technology set. We meet weekly to make sure we are in harmony. We all sit collectively on the e-health executive team.

EL. What technology investments have you made on the construction side to build your communities?

JL. We are a large construction company. Building a CCRC's has all of the complexity of building a college campus. We invested in building construction management software, called EricksonWare. It helps us to manage all of the different components, the documents and the workflows associated with one of these construction projects. A CCRC can cost several $100 million. The software really used by the construction division is unique.

EL. Can you describe any other major technology investments?

JL. We have a significant investment in our data center. Because of our EMR capabilities, other CCRCs and private physician practices have started to approach us about handling managed medical services for them. This offering will become a new source of revenue. Our data center houses the systems that manage all of the activities for our 23 campuses and our 21.00 residents. In addition to our medical capabilities, we deliver a host of other systems such as general services, work order systems, menu management systems, HR systems, and door-entry access systems. We deliver all of these services remotely from one location.

EL. Did you have to invest in network infrastructure enhancements with the idea of offering new services?

JL. Yes. We made significant investments in our network capacity. We had to make sure that our each of our systems had adequate bandwidth to come back to our location. We also needed bandwidth to provide Internet access for our residents. None of our communities has less than a 3-megabyte circuit to and from their community to our data center. We also invested in fibre and optical networking technology to connect out data center with our four corporate buildings.

EL. Can you describe the process for making these capital technology investments?

JL. Our annual capital investment budget has an allotment for technology. All of our investments have to align with our business priorities and the business strategy. Our capital steering committee includes members from our executive team. Our CEO presides over this committee. We usually look at our main thrust for the year. If it is revenue generation, we might have a higher portion of our capital investment monies going to technology and sales and marketing. We usually carve the pie accordingly based on our priorities.

Next, various project committees hear requests for capital. For example, our e-health executive committee reviews capital investments in technologies related to our medical facilities. Each group requesting funds has to bring a business case with an ROI to that committee. The chief medical officer, the executive vice president of health and operations, and I sit on the e-health executive committee where we approve projects about our capital investment allocations. Our enterprise executive committee includes the chief marketing officer, the chief financial officer, the executive vice president of health and operations, and me. This committee hears all business cases outside of healthcare.

EL. How do you measure the success of these capital investments? Does the board of directors get involved here?

JL. The board gets regularly updates about our capital investments. The board has the oversight responsibility of ensuring that we spend our dollars according to our intended allocations. The board also has a keen interest in how we spend technology dollars among the different departments. The audit committee takes much interest in what we do with technology. Either the CFO of I will give regular updates to our audit committee about compliance issues around technology.

EL. What methodology do you use to measure the success of these capital investments?

JL. We have an ROI process and a customer satisfaction process. Our semi-annual technology satisfaction survey looks at customers' direct satisfaction with technology in the areas of innovation, strategic focus, service delivery, and general quality of services. This survey goes to both executives, as well as users of the systems. For every project, we apply go-live practices from the Project Management Institute. It includes an after-action review. Once we take the project live, we institute a process to do a post-deployment ROI for our capital investments. For example, we just did this for our investment in a human resources information system, which was more than $1 million. We hired an external consultant to interview all of the folks throughout the business to see if we did get the kind of benefit that we expected. We validate whether we achieved the stated ROI or not.

JL. At the end of the day, do you show capital investment linkages to new customers, new sources of revenue, or improved processes?

EL.Yes! Our executive team has a business strategy and a business plan for technology that both map to the planks (strategic drivers) in the overall business strategy. For example, in 2008, our business strategy focused on becoming a leader in senior living, attracting and retaining the best employees, and demonstrating corporate social responsibility. The technology planks for becoming a leader in senior living might include attracting new customers, increasing sales growth, and improving sales productivity. Next, we define some investments against that, such as replacing our sales automation system. We made some investments in our CRM system and our data warehouse. The latter investment will help our sales department to understand price elasticity.

EL. What is your role in the corporate strategy?

JL. Our business strategy has a technology component. After the executive team sets its overall business strategy, I initiate our annual portfolio planning process. I meet with each executive team member. We develop a portfolio of prospective investments. I then take those investments back to the executive team where we prioritize against our business strategy. Next, the team carries out a quantitative voting process where we measure them on ROI or impact to the business. We then go through an above-the-line-below-the-line process for looking at our portfolio of investments. This process helps us to decide if we can squeeze in any pending projects or scale down.

EL. Has the economic climate affected your business in anyway?

JL. Erickson is a construction company that builds large communities years before we populate them with residents. We have no shortage of demand for our communities. On the other hand, some prospective residents have had to wait longer to sell houses than they anticipated. The bond market that drives the construction market has become very tough to crack. We have relied on many of our long-term financing relationships. Many one or two campus CCRC campuses are struggling. Some of them have approached us about managing all of their services or running their communities.

EL. What are you doing in the area of innovation around technology?

JL. We are working with Intel on some pilot programs in home health technologies, which is a booming field now. These technologies will allow a person to have a higher level of support than pure independent living. For example, we have a device that combines a blood pressure cup, a scale, and a thermometer. A Bluetooth enabled patient station sends those statistics in real-time to the doctor or the nurse to interpret. If something does not look right, a nurse could go over and visit the resident and say, 'Your temperature has been up for three days.' The home health concept allows the resident to stay in his or her apartment longer. It costs us less as a community for residents to be in independent living than in assisted living or skilled nursing.

Elizabeth M. Ferrarini - She is a free-lance writer and IT consultant from Boston, Massachusetts. Reach her at elizabethferrarini@yahoo.com.

Baxter Credit Union CIO Talks About How Its Technology Strategy Has Improved Member Services

tom@tomparish.com — Mon, 01 Jun 2009 20:37:31 GMT

Americans concerned about the state of the banking industry might just get some relief by joining a credit union. In fact, the Credit Union National Association has increased it awareness of credit unions as a viable financial alternative to banks. In the U.S., more than 92 million members belong to the 8,200 credits unions. Because credit unions are cooperatives owned by their members, they offer better rates, reduced fees, and a form of insurance similar to the FDIC.

One credit union, however, stands heads above the rest as a pioneer and leader in the field. Baxter Credit Union (BCU) began in 1981 initially to serve the financial needs of Baxter Healthcare's employees. During the 1990s, BCU expanded rapidly by merging with other credit unions, and by offering credit cards, home equity loans, prime mortgages, audio response teller, and online banking. Today, with assets of $1.5 billion and 140,000 members, BCU ranks as one of the top 100 credit unions in the U.S. BCU's key to providing first-class service to member companies, such as Cardinal Health and CDW, resides its integrated business and technology management strategy.

Enterpriseleadership.org recently sat down with Jeff Johnson, BCU's chief information officer, to talk about this credit union's business process for making and monitoring investments in technology. Here is what he had to say:

EL. How would you describe BCU's business strategy?

JJ. As a cooperative, our members own us. I am a member of this credit union. We do not have stockholders. We essentially do not report to anyone, such as a board of directors. We are not about maximizing profits to the highest degree. We aim to provide the best services and the rest rates for our membership. That sets our cultural tone.

As a Select Employee Group-based (SEG) credit union, our charter enables us to serve specific groups of employees or associations.

We seek out large, nationwide companies and try to wow their management teams into providing our services to their employees at no costs. We differ from most credit unions and certainly all of the banks. We have a very tight strategy based on servicing companies and the employees of those companies.

EL. How does your organization support the business strategy?

JJ. My department drives the message that we are not about technology, but we use it to support all aspects of the organization. We support the business strategy by having three distinct groups that focus on what key parts of the organization need to accomplish. Each group addresses a different imperative of the organization. One group supports our day-to-day operations so all of the transaction processing goes smoothly. We make sure all the members can log on to home banking and carry out their transactions. We make sure our front-line employees have access to whatever tools they need to service the membership. Another team focuses on strategy. For example, our project management office executes on the business priorities as projects and requests emerge. They do not worry about the infrastructure or worry about support. Our architecture group, which is our last group, makes sure that we make the best technology investments and that we optimize what we have bought. The technology space can spin out of control very quickly if you do not pay attention to the long-term implications of the investments you make.

EL. Do you have a physical preference or are you strictly e-commerce?

JJ. We have more than 35 service centers located across our company member sites. We determine the need for a service center based on the facility's number of employees. The majority of our transactions still come remotely whether it is through the Web, through the ATMs, through the phones, or what we call shared branching.

EL. What do you mean by shared branching?

JJ. We try to leverage what else is out there in the industry. We have something called shared branching. If you belong to a shared branching network, your members can go into other credit unions that are also a member of the shared branching network. We are very active in that. We hone things like shared branching with other technologies with the goal of pushing our own strategic direction forward.

EL. Can you describe a technology investment that helped you to differentiate yourself from your competitors?

JJ. Much cooperation exists across the credit industry. Because our strategy focuses on SEGs, we have made a couple of major technology investments. When we started expanding into new, large organizations in 2004, we created this entire branding infrastructure where we could custom brand a company as having its own credit union. Some companies do not want the Baxter Credit Union name; they want their own name. We create the Web sites, the documentation, the marketing materials, and the credit cards and debit cards. It is a great benefit for a company to provide a credit union under its name and auspices.

EL. What influence has your branded infrastructure had on the willingness of companies to join your credit union?

JJ. The first companies we signed up in 2004 would not have gone with us if we did not offer that branding capability. That was the ticket for us to get in the game. When we approach a new company, we emphasize what people want -- great service, great rates, and convenience. Technology enables all of those things. It is all about price, service, and convenience. On the other hand, our customers would have thrown us out if we did not have the right technology, but we have managed not to be in that situation.

EL. How do you measure the value of these technology investments?

JJ. We measure many of our investments on their ability to enable our strategy. If we did not have shared branching and did not build the branded infrastructure, we would have not been able to sell to most of the companies we have signed up in the past four years. We could not have done it without some of the technologies we have. Our organizational structure plays a key role here. For example, we have a team that focuses on making sure everything runs with 100 percent accuracy. No one really notices that it works. On the other hand, they certainly notice when it does not work. Just the confidence in the entire ability to deliver is important.

When it comes to measuring the effectiveness of investments, we break all of our projects into different quadrants and then we make decisions based on their quadrant. The senior management team focuses on projects in a specific quadrant. Mid-level managers will handle projects in less critical quadrants.

Before we invest too much time and money, we go through two internal review processes. We have an IT review process where we look at the architecture, and we do a total cost of ownership over the life of the asset. We do a lot of internal analysis. If we were to do this project, what would it mean from an infrastructure, cost perspective? On the business side, we go through a gated process. Once we approve the project, we go off and do a scope of the entire thing. We make sure we have a full understanding of everything the business users are asking for and then we gate it. We go back to the stakeholder and say, 'You know this project can do X. We are projecting it is going to cost Y.' They might agree or not. We then ratchet it up and cut out pieces of the scope or pairing it down. If yes, it goes on to the next level. If the answer is no, we take it back and start pairing down.

We have gone from the majority of our projects being significantly over budget to most coming in pretty close to deadline. The gating process in conjunction with the quadrant has really helped us control the overruns and the over budget part of it.

EL. Can you describe how you arrived at this quadrant approach to managing your investments?

JJ. Before 2006, we would look at all of our technology project requests and then try to make decisions about them holistically. We wound up having huge initiatives jumbled up with all of the mid-size initiatives. We decided to go with a four-quadrant approach, similar to what Gartner Group has. Everything above the horizontal line is ROI positive; everything below that line is ROI negative. We put the projects either an ROI positive or an ROI negative above or below the line. On the perpendicular axis to the right, we look at things that cost more than a certain amount. The ones to the left cost less than that amount. Thus, our management team focuses on the ROI positive things in the upper right quadrant. These things will give us the biggest bang for the buck. As we move over to the left, we delegate less important ROI positive things to middle managers. These things are not large enough to make the radar screen of our senior management team.

As we go through our capital budget process, we try to break everything up into those quadrants and then we decide on our capital spend based upon that. Before investments percolate, I will bring them to the senior management team on an ad hoc basis. Having these conversations has proved to be an effective way to work through these projects before they are put on the quadrant.

EL. How would you gauge your organization's agility to respond to changes in the marketplace?

JJ. The model we have set up allows us to expand and to contract quickly. If we see many things north of the quadrant line, we can usually go out and get contractors to fulfill the projects. We also improved our agility by focusing more on project management and business analysis. We outsourced most of our applications development. The knowledge of our business and the knowledge of project management are the value elements. Applications development is a commodity.

EL. What does business impact of technology mean to you and how do you communicate it to your constituents?

JJ. Once every quarter, I look at our uptime and our transaction volumes. I also look at what our members have said about our services. That is my tactical approach to business impact. The strategic business impact is how well we are providing the services our members require. Each week, we have a meeting to discuss how well we have delivered on the business value of technology. We have not run into any problems in this area, which might sound surprising, but it is true.

EL. Do you tie technology investments to new customers or to improved processes?

JJ. As a financial institution, we have technology integrated with our day-to-day processes. If our systems go down, people cannot do their work. Technology functions as our nervous systems. It is what differentiates us. We do not break technology out that way.

EL. How has the economic downturn affected your business?

JJ. We have members who have lost their jobs or who have seen the value of their houses decline. Because we foresaw the recession, we identified many people who might have gotten into trouble. We told them that if they restructured the loan, we would reduce the fees on their loans. We have been very active to do that. I cannot tell you the number of loan workouts we have done.

EL. Are you using analytics to identify people who need to restructure their loans?

JJ. Yes. Three years ago, we had a major push to get business analytics on the fast track. Today we are doing some good analytics around credit quality. We lend people money for mortgages, not sub prime or any Alt A. We have all prime mortgages. We have not seen too many foreclosures.

EL. Have you made technology investments that turned out to be a mistake?

JJ. In 2005, we made a couple of investments that did not turn out to our satisfaction. We made the mistake of going with vendors who were first to market with their products. It was a dismal failure. Our governance process came about from these dilemmas.

Elizabeth M. Ferrarini - She is a free-lance writer and IT consultant from Boston, Massachusetts. Reach her at elizabethferrarini@yahoo.com.

GSA’s CIO Casey ColemanTalks About Handling Oversight for $500 Million IT Budget

tom@tomparish.com — Sun, 26 Apr 2009 20:53:03 GMT

While it might not be the largest federal agency in the U.S. government or have the biggest budget, the U.S. General Services Administration (GSA) provides good and services to enable the other federal agencies to function. Its formal mission is "to help federal agencies better serve the public by offering, at best value, superior workplaces, expert solutions, acquisition services, and management policies.' GSA employs about 12,000 federal workers and has an annual operating budget of about $16 billion, about one percent which comes from taxpayer dollars. Meanwhile, the GSA oversees about $66 billion of procurement annually and also contributes to the management of about $500 billion in U.S. Federal property.

About a half billion of GSA's budget goes to the delivery of information technology to support the agency's acquisition services. As chief information office for GSA, Casey Coleman wants to make sure that every dollar counts. In fact, her primary role focuses on leading and carrying out the efficient acquisition and management of IT solutions across GSA. She manages the agency's IT program, overseeing management, acquisition, and integration of the agency's information services. Her oversight responsibilities include strategy planning, policy capital planning, systems development, information security, enterprise architecture, and e-government.

Enterpriseleadership.org sat recently sat down with Coleman to talk about how she is bringing about organizational change and using technology to achieve business and mission goals. Here is what she had to say:

EL. Can you describe some of GSA's key responsibilities?

CC. GSA is a worldwide organization. We provide business services to the rest of the federal government. Although we're not a high-profile agency, we provide key business services that the rest of the federal government depends on. We manage all of the federal real estate for all of the civilian agencies. We're the landlord for all of those federal buildings. In fact, we're one of the largest real estate organizations in the world. We're also one of the largest telecom providers in the world. We engage with industry to acquire telecommunications and IT services the rest of the federal government can consume at very competitive rates. We also provide services such as fleet and motor vehicles, office supplies and services, and government-wide managed services such as the travel program and the purchase card program. We do much of the behind the scenes work to help other federal agencies fulfill their mission, and most of our key programs relate to that mission.

EL. What was the most important IT initiative you handled during the past two years and why did you have to do it?

CC. Our IT is devoted to the capabilities around acquisition of goods and services, and the management of client funds to pay for those services. The consolidation of our entire infrastructure has helped us to fulfill this objective. We have 11 regions in the U.S. Each of these regions historically had managed its own infrastructure, such as networks, IT support, and help desk. Eighteen months ago we consolidated 39 contracts and 15 help desks into one program centralized under my office. We also consolidated all of those regional IT employees into this office.

EL. How much of a cost savings is this going to be?

CC. We initiated this program in 2007. We've seen at least a 15 percent cost savings. We also have been able to hold our costs steady in 2007 and 2008 from the original 15 percent savings baseline calculated from 2006 expenditures. We have seen a savings of at least $5 million. Moreover, we've been able to take on new initiatives and do more unfunded mandates with existing money.

EL. What is your definition of business impact?

CC. We try to tie our work to the impact that is has on our constituents. As a result, business impact comes from helping the business organization of our agency better perform their mission. We accomplish this either through removing obstacles to enable productivity or deploying new capabilities to help them work in a way that is more modern and more productive. As a federal agency, we deal with the public trust of safeguarding the taxpayers' dollars. To this end, we need to prevent information security breeches.

EL. How do you communicate business impact throughout the organization?

CC. I believe in using every channel available to communicate our message frequently and personally. For example, I send out a periodic newsletter to the senior leaders of the organization via our Web site. I also like to get into the field and to visit with business managers who rely on our services. I want to hear what they need from us.

EL. Have you made changes to your enterprise architecture to better align with the business architecture?

CC. Yes! GSA is a decentralized organization, and we've managed our IT in a decentralized manner. We have had IT applications, and business applications deployed by each of the business divisions within the agency. In the past, the Office of CIO was more responsible for policy, architecture, capital planning, information security, and not so much the management of IT applications.

A great many business trends caused our agency to act in a more unified and more cohesive manner. As a consequence, we realigned our enterprise architecture to manage IT more as a holistic enterprise portfolio of services and capabilities.

For example, within the agency, we have more than 40 different applications which require a user ID and password. As a result, employees of the agency can have dozens of passwords they need to keep track off. We recognized that this isn't a good way to manage security. It certainly isn't a holistic approach to information security. It's also a productivity impediment. We've embarked on an identity and access management initiative. It's in the early stages. We're developing an identify access management solution that all of these applications will then tie into. Through this one solution, our employees will have access to the network and access to all of their applications.

EL. Can you describe the oversight process for making IT investments?

CC. All federal agencies plan their budgets two years in advance. We're about to embark upon the 2011 budget cycle in the Spring 2009. At that time, we'll go through a process to select the most compelling investments for our emerging business priorities. My office is responsible for prioritizing these investments and submitting them to the Office of Management and Budgets. We manage, monitor, and oversee those investments and make sure they're on track.

EL. Does planning IT investments two years in advance pose a challenge to make sure that certain things get done?

CC. No one can foresee with perfect accuracy what is going to happen two years in advance. I'll say that there is always some changes and adjustments that have to be made. We have to call upon senior leadership to be able to make those adjustments as gracefully as possible.

EL. What tools do you use to monitor that two-year planning process?

CC. The federal agency, as a whole, has to use an ANSI-standard earning value management technique. It is a formal methodology for monitoring the spending and scheduling of any investment to make sure it is on track. It requires the submission of reports. It's basically project management. We use a tool called Electronic Capital Planning and Investment Control, which provides an automated way to submit, to track, and to manage our investment portfolio.

EL. Can you describe your governance process?

CC. We've just revised our governance process because it was several years old. We streamlined it and made it more decisive. We have a set of standing committees that focus on practice areas, such as enterprise architecture, capital planning, information security, and infrastructure. These standing committees deal with tactical-level problems, including working out standards, agreeing upon them, and scheduling tasks. Above that is an IT executive council comprised of senior executives from the primary business divisions of the agency. They're responsible for the guidance and decision making on IT investments. Above that, we have a council of the senior business executives of the agency. They're responsible for setting guidance for our investments. I'm on that committee as well.

EL. If you had to look at an IT maturity index, where would your organization rate on the scale?

CC. We have mature processes especially in the areas of governance, capital planning, investment control, and information assurance. There are things that we're trying to move further along that maturity curve, especially, in the management of our infrastructure. Here we're deploying the IT Infrastructure Library.

EL. You worked in the private sector for many years. What adjustments did you have to make to be successful as a public sector CIO?

CC. My industry experience has been invaluable in helping me in the federal sector. On the other hand, I found that moving into the public sector was a learning experience. In the public sector, you deal with public trust and with public taxpayer dollars. Everything you do comes under greater scrutiny than if you were in a company. There are more stakeholders involved in reviewing and approving the course of action. You aren't the captain of the ship setting the course and steering where you will. We are accountable to the administration through the Office of Management and Budget and to Congress. The media is also a stakeholder. The public at large is another key stakeholder. Other government organizations, such as the Government Accountability Office, are also stakeholders. You need to be able to build coalitions, to communicate clearly, and to be transparent. Being able to build teams who can support your initiatives is critical. On the other hand, the time you take to build these teams can prevent you from moving with the agility you'd like. On the flipside, this team building can keep you from doing things that haven't been thoroughly considered beforehand. There is a positive side to that.

EL. Are you involved in any professional IT organizations apart from the federal government?

CC. I'm the vice president of an organization called AFFIRM.org. It's a federation of federal IT managers. I'm also involved in the Federal CIO Council, where I chair that committee on best practices with the CIO from the State Dept. We're trying to collect, to publicize, and to encourage the use of best practices and standard practices across the government. I'm not involved in Women in IT although I try to keep up with what they're doing. I'm also the chair of a conference called the Management of Change. It occurs every year. The American Council for Technology sponsors it.

I mentioned the importance of stakeholder groups. The IT industry is another important stakeholder group. So much of what the government accomplishes occurs in conjunction with the private industry, which provides much of the resources and the technical expertise. It is important to maintain that open relationship and open communications with the industry in a vendor neutral way. Organizations, such as AFFIRM and the American Council for Technology, give us an opportunity to talk about our initiatives, and our priorities in a vendor-neutral environment. We, in turn, get to understand objectively where the industry is making advances.

Elizabeth M. Ferrarini - She is a free-lance writer and IT consultant from Boston, Massachusetts. Reach her at elizabethferrarini@yahoo.com.

HealthTech's Mission -- Get U.S. Healthcare Facilities to Increase IT Investments

tom@tomparish.com — Sun, 12 Apr 2009 20:18:53 GMT

Emerging technologies that offer medical benefit but require substantial capital investment pose a challenge to hospitals and hospital-based health systems in the United States. Dr. Molly Coye, the former director of the $16 billion budget for the California Department of Health Services, is on a mission to make it easier for healthcare facilities to deal with this challenge. In 2001, she founded a not-for-profit research and educational consortium, called HealthTech. It focuses on stimulating the investments major healthcare facilities make in enabling technologies, and helping them to make well thought out decisions in the process. She says, "We have learned that investments in a combination of imaging devices and information technology have fueled the most important healthcare advances. These technologies have improved the quality of care, reduced the expenditures on care, and improved satisfaction for patients and providers."

HealthTech's 45 members include most of the country's largest, multi-hospital healthcare facilities in the country, such as Kaiser Permanente, Sutter Group Health, and the Veterans Administration. Other members include the Centers for Medicare and Medicaid. She says, "We have more than 25 percent of the bed capacity in the country."

Enterpriseleadership.org recently sat down with Dr. Coye to talk about how HealthTech helps its members make capital investment decisions in technology.

EL. What was the catalyst that prompted you to start HealthTech?

MC. Like many clinicians in the field, I became aware of the quality problems in healthcare that emerged in the early 2000s. In fact, I participated in the Institute of Medicine's Committee on Healthcare in America. We wrote two reports - To Err is Human and Crossing the Quality Chasm - both of which became a catalyst for re-directing the healthcare industry. In summary, the reports said that we needed to overhaul the chassis of a bad healthcare system. We identified several pieces to that change. The most important one was the need for investments in technology.

I founded HealthTech as a not-for-profit organization in order to stimulate and to advance the adoption of technology in healthcare, including biotechnology, information technology, and devices and imaging, and pharmaceuticals. Since 2000, we have been tracking emerging technologies and research to understand their potential and real impact in healthcare. We look at technology in two ways -- what's on the market today and how people are adopting and carrying it out, and what will be on the market in the next three years to five years. Our research falls into 30 categories that cut across four broad areas: biotechnology, information technology, medical devices, and pharmaceutical,

EL. Can you give me examples of how you have helped your members make capital investment decisions about technology?

MC. We work across many different areas. A big win for some of our members included how to make the decision about each generation of a Picture Archiving Computerized Storage system (PACS). We stressed the important of enterprise thinking about a PACS system because it requires a huge investment. Many facilities would buy just a PACS system for their imaging departments. A couple of years later, these facilities realized that they had to extend the system to cardiology and to other parts of the facility. We stressed the need to plan, from the beginning, for this as a platform for storage of images across the organization.

We worked with our members on handling the decision to upgrade from a 16-slice CAT scan to a 64-slice CAT scan moving into coronary CT angiography. We strongly suggested that our members should prepare for the coronary CT angiography. They would at least have the 64-slicer near the emergency room. As a result, they could begin to build a system that routinely processes a certain portion of the potential myocardial infarctions through the coronary CT angiography.

Some times, we might have to caution our members about the timing of a specific investment in technology. In the early 2000s, many clinicians became enthusiastic about the long-term prospects of robotic surgery in urology. Some facilities had this technology because a donor paid for the initial acquisition. These facilities, however, did not have a plan for the continued use of the technology. In fact, some prices of equipment sat around gathering dust. In 2003, we told our members to adopt robotic surgery slowly, and to build a plan for how to extend it beyond urology into cardiology, as well as other areas.

EL. What type of a payoff do healthcare organizations get from systems that generate metrics about care delivery, such as number of patients discharged by 3 p.m.?

MC. These systems really pay off for healthcare organizations. These systems, however, have many pieces, such as computerized physicians order entry and electronic intensive care unit. There are also executive intelligent systems or dashboards that collect information to help the executive team make investment decisions.

EL. Are healthcare organizations deficient when it comes to technology investments?

MC. Healthcare facilities do not invest enough money in technology or invest in the wrong things. This happens for several reasons. The most influential physicians on the medical staff might prefer a technology. Unfortunately, the technology might not be the best for the community, or it does not serve the long-term survival of the facility. Healthcare organizations often get caught in a gridlock where physicians, hospitals, health plans, and even consumers try to maximize their own interests. They ignore initiatives that would reduce costs and improve quality. These things would require everyone to give up a little bit. That's probably the most important reason why health reform has never succeeded.

EL. What methodology do large healthcare facilities use to measure the effectiveness of their technology investment decisions?

MC. There is no single methodology. We have seen a very wide range of opinion about whether you can use a classical ROI at all. If you do, how do you structure for multi-year investments, especially if the parts of the return include improvement, safety, quality, and financial performance. We believe that most administrators of large hospitals and multi-hospital systems have installed electronic health record systems primarily for quality and safety reasons. They have tried to do a competent job of comparison-shopping in order to understand, not just the initial cost of the system, but the on-going operating cost, and the ease of acceptance by the clinical providers. They want to make an intelligent decision about what is the best timing, what is the best product, and what are the best rollout strategies.

EL. How do you guide your members to carry out their governance process?

MC. We help our members with how to present complex technology issues to the board. Usually, board-level decisions focus on where to allocate investment dollars. Do you put a large chunk of money into an electronic health record system, a new imaging system, or a chronic disease program? We help our members to sort through those kinds of issues. For example, we show them how to rank the different strengths of risk and the positive income values of different technologies. Using an array, they can see, for example, which technologies have a relatively lower risk and a higher yield for the things the board would find important. To this end, they might want the portfolio for the next year to have a risky, but high-potential-yield investment and several lower-risk investments that will payoff.

EL. How do clinicians influence investment decisions in technology?

MC. They play an indirect role because often their decisions about technology will either accelerate or slow the adoption of the technology. For example, an administrator of a multi-hospital facility can clearly understand that the computerized ordering entry system will save money over a two- to three year period. This system will also improve patient safety. On the other hand, clinicians might resist adopting a new process, especially if it requires them to use a computer to enter an order for a medication.

To this end, the decision-making process for investments in technology should include clinicians in some way. If the process does not include physicians, then they might threaten and might frustrate the attempt to implement technology. Some clinicians, especially, physicians, have little experience thinking about systems -- why it might be worth investing the extra time, labor, and money in put in an electronic health record system.

Many clinicians see a direct disincentive in investing in some technologies. For example, often pulmanologists view the electronic intensive care unit with much skepticism. Because they think it will decrease their income, they resist it strenuously. In some cases, they have essentially agreed to carry out a portion of the electronic intensive care unit, usually about half way. The nurses use it, but the doctors say, 'I won't let it handle any orders for me. I have to do each order or approve each order.'

EL. Do you think this physician resistance has to do with the person's age?

MC. Not really! We see across that country that it is not a one-to-one correlation. It has also to do with whether or not the physicians are organized into groups. Often in groups, physicians get a chance to start thinking about systems. We also see a very bimodal distribution where the very young physicians and the relatively older ones are interested in technology. We find that physicians in their late 30s and in their 40s tend to resist technology. Because the older physicians are within 10 years of retirement, they feel more economically comfortable, and thus they can afford to be interested and curious about technology. This isn't the case with physicians in their late 30s and in their 40s. They see technology as a lessening of their usefulness.

EL. Should technology leaders in healthcare facilities have a medical background?

MC. Not necessarily! It's great if a CIO or a CTO has a healthcare background in either nursing or pharmacy. On the other hand, many CIOs and CTOs who do not have a medical background have made important contributions to their healthcare facilities. They can bolster their knowledge of healthcare by taking continuing education sources. The most effective approach includes teaming a CIO or CTO with a chief of medical informatics or chief nursing officer. In some cases, these individuals might report directly to a CIO or a CTO. An organization should not isolate a CIO or a CTO. In fact, many healthcare organizations still do not include the CIO on the leadership team. We have seen a decrease in this trend among the large healthcare facilities.

EL. What information are you giving to your members about what to expect from the Obama administration?

MC. During the past few years, the government has become more aggressive about Medicare/Medicaid not paying for serious efficiency and serious quality problems, such as a physician cutting off a wrong limb. As a result, healthcare organizations have to file more paperwork about efficiency and quality problems. We are telling our members that they are going to see a combination of bad economic times, and the intent to make the healthcare system more rational, despite contradictory incentives. They need to think about investing in technology differently. They need to leverage technology to improve service delivery and to increase efficiency. Efficieny also includes, not only making errors, but also not spending as much to get the outcome.

EL. What things is your organization working on now?

MC. Because we want to help seniors stay independent in their homes, we have a new initiative to disseminate information about accelerating the adoption of again technologies.

Elizabeth M. Ferrarini - She is a free-lance writer and IT consultant from Boston, Massachusetts. Reach her at elizabethferrarini@yahoo.com.