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 experience 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 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 magnifies that situation and help promoted us to focus more on our customers. We want do as much as we need to do for them."

Enteprriseleadership.org recently down with Johns to talk to him 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, 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 a development team 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 we were in Chapter 11. We have always had tight ties to the business especially for driving global standards and common solution 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 of our backoffice transaction systems and 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 process, such as accounts payable, accounts receives, 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 for our customers. 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 Lowes. 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 that we use. 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 that look for ways to build a more stable, less variability, more quality manufacturing technology platform. We have targets in the $25 million to $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 form a top down and a bottoms-up standpoint. As we continue to evolve more things, we begin to drive from the top down rather than the bottoms up. We have some good line of sight into some things that focused 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 that we actual track the value and make sure it is sustainable. One of the biggest mistakes many technology organizations make assumes 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. Some times, 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 up 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 help promoted 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.

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

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.

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.

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.

While major automobile manufacturers might be chalking up significant losses this year, one auto finance company has learned how to operate a successful business in a volatile and risky niche. Drive Financial Services, one of the fastest growing automotive finance companies in the U.S., makes new car loans to sub-prime borrowers throughout the U.S.  The company has a current $6 billion portfolio of loans originated from more than 8,000 U.S. franchise auto dealers. In fact, Tom Dundon, Drive Financial Service's CEO, said the company is continuing to enroll new auto dealers.

Unlike some auto financial companies, Drive Financial Services has a strong financial backer. In 2006, Banco Santandar Central Hispano, one of the seventh largest-for-profit banks in the world, brought Drive Financial Services from the Bank of Scotland. Drive Financial Service is Santandar's first privately held North American venture. This company holds a minority interest in Sovereign Bank in the U.S.

What keeps Drive Financial Services successfully on the move? Dundon says that he bases his company's ability to stay profitable during economic downturns on three things: a significant investment in a solid technology infrastructure, a contrarian view of what competitors are doing, and a well-thought out set of business practices emphasizing profitability. Enterpriseleadership.org recently sat down with Dundon to learn more about these things. Here he what he had to say:

EL. What is your business model?

TD. Santandar, our parent, provides us with liquidity to make car loans to sub-prime borrowers throughout the U.S.   We originate the loans for dealerships, mostly franchise dealerships. We also originate auto loans direct to consumers via the Internet.  We do both direct and indirect leading of only car loans exclusively to sub-prime borrowers.

EL. Three years ago, your predecessor decided to hold back on company expansion while other competitors wanted to grow rapidly. How has that strategy paid off for Drive given the state of the economy today?

TD. The decision we made three years ago is characteristic of the way we run our business. Many of our competitors have used the availability of leverage and of liquidity to justify pricing loans and taking risks that aren’t sustainable in an economy that isn’t growing. When you’re in a boom economy, low-margins and lots of risks are easy. If you don't have the margins to handle the losses that come from change in the environment, then you’re going to loose money when the economy stops growing. We have always had very conservative growth plans to make sure that we have the proper margins to handle downturn. The economy has softened up in the past 18 months. Although our profits are slightly impaired, we’re still profitable because of our conservative nature when things are good.

EL. How do you gauge your revenues?

TD. We do it by dollar amount. . The average life of the loan is about two years. We wouldn't do a $1,000 car loan. Our minimum car loan is about $7,500 and our average is about $15,000. We’re going to do $3.5 billion in loans this year.  If were to do the same amount next year, we’d have a $7 billion portfolio.

EL. Where in the company do you assess marketing opportunities and threats in the marketplace?

TD. We have a risk management group that does data modeling or decision science. This process enables us to keep up what our competitors do. We determine what we’re going to do based on what we see in our numbers. We look at our margins for the risks we're taking. We also look at our closure rate for the number of applications we’ve received. That ratio kind of tells us if we’re under priced or over priced relative to the market. If we look at our margin and find out that it’s too high or too low, then between those factors, we decide what to do. We try not to worry about what everyone else does. Just because many of our competitors are doing similar things, doesn’t mean they’re all good things to do.  If you look at what the mortgage companies have done and what some of our competitors have done, they didn't have the margin to sustain their business and unless the economy was growing. We don’t have that problem.

EL. Is change a permanent part of your business?

TD. Yes! Over the years, we’ve seen cycles in the economic environment. If we try to ride the wave up, we’ll invariably crash on the way down. We try to do good things for the stability and profitability of our business. We’re willing to let other people grow their business by going for volume. We make sure that we keep our margins wide enough so we can deal with an economic downturn. We do the same volume in bad times as we do in good times. 

EL. What capital investments, including technology, have you made to enable the company to grow and to become profitable?

TD. We’ve done a couple of things. Good data capture is the most important thing for us.  We make sure that we capture all of our data so we can make educated decisions.  We’ve invested heavily in our infrastructure to make sure our ability to grow or to shrink was based on most of our transactions are incremental costs. We have a base system that has a fixed cost. We then built out our systems to handle incremental volume and to make sure we’re only paying for what we use so opposed to having a huge fixed cost.

EL. What types of data are you capturing?

TD. We receive applications from certain dealerships. We capture everything from where the application comes from to the customer data to the data on what kind of loan they want. Once we book the loan, then we capture how long it took from the time we received the application to when we booked it. We capture the standard type of data having to do with the loan, such as the type of vehicle, and type of payments. We also capture all of the peripheral data around the customer's credit, around the dealer's behavior, and around our internal behaviors as they relate to how we book the loans. We made a commitment years ago to store every piece of data.

Many companies get into trouble because they don't properly label their data warehouse. You have to properly label all of the data and then you have to keep it and use it. We’ve made this task a priority. Historically, companies have purged data to free up resources. We always felt that we should spend the money and store data. As data storage has gotten less expensive, it has become easier to store massive amounts of data. If you ever need, you’ll have it. And we do have that data.

EL. One of your innovations is a scorecard program that enables an auto dealer to know if a customer fits into one of your programs. What makes this scorecard unique?

TD. We use credit bureau data, other third-party data sources, and our own experience to figure out if a customer can fit into our program, and if we should give them a car loan and at what price or structure should we do the loan. The innovation we have done is the value we add to the process. We include some other data sources, and we tightly couple the deal structure and the underwriting to the credit. Many of our competitors will only focus on credit. We believe that credit and underwriting together will lead us to the best decisions.

EL. Can you link capital investments to new customers, new dealers, and new improved business processes?

TD. We ran our business without growing while we invested in our infrastructure several years ago. We don't get benefit from it anymore. We’ve built our systems in such a way that the incremental enhancements don't require much capital investment. We’ve shifted from mostly capital investments and a little bit of maintenance to mostly maintenance, and not needing a many of new systems.  As technology has matured, we’ve been able to integrate our new systems easily in our infrastructure. When we first started building our infrastructure, we found it difficult to integrate a mainframe with other technologies. We built our enterprise architecture so that we can isolate any system with a problem, and keep it from affecting other systems. No one system can bring down the entire enterprise system. 

EL. Do you leverage technology resources from our parent?

TD. We don't do much of that. Santandar has a global IT initiative for its offices around the world to leverage technology. We’re so specialized that we only do auto loans. The technology investments we made before Santandar bought us put us in good shape to run our business. Because Santardar is so large and has so many countries that need its technology help through the world, the company decided that our systems are efficient and scalable enough so that we don’t need the same level of technology as the other business units do. 

EL.Have you built other things into your systems that your competitors don’t have? 

TD. We’ve a strong culture of making sure we’re efficient and not wasting money on costs. Because we're efficient and can make good credit decisions, we don’t have to sacrifice our margins. Many of our competitors focus on volume rather than profitability. In contrast, we emphasize profitability first and then volume. What’s happening in the U.S. economy rather proves this view.  People chase deals and chase volumes because they have an incentive to gain market share and volume. We’ve never looked at it like that.  Every one of our loans has to make a risk adjusted return. The number of loans we’ll book, and the amount of volume we’ll do will result from hard we work and from how well sell our product. Price is a determining factor in what good or service people decide to buy. If someone wants to beat you on price, no matter how good your service is, you’re going to find it difficult to get the get same marketplace and volume as someone who competes solely on price. We’ll never compete solely on price.

EL. How are you dealing with setbacks in the auto industry?  

TD. In July 2007, we decided that because consumers were under so much stress with high unemployment, with liquidity becoming more difficult to maintain, and with credit card companies and mortgage lenders operating under tight margins, we decided to cut out volume and to raise our margins. We felt that anymore undue stress on consumers would have a pretty big ripple effect on consumer finance in general. We got very conservative last year, raised our margins and tightened our credit. Now as other companies took a too long to react to these things in the economy, they’re now faced with heavy losses. We’re still profitable. In fact, we’re very profitable. We more prepared than ever to take advantage of less liquidity and less competitors in the marketplace. We can generate profits to liquidity we need to continue to operate our business.

EL. Do you have a governance process for capital investment decisions?

TD. Santardar wants us to run our business and unless we are trying to do something that makes no sense, it would never be an issue for us. Above a certain level, we have to go to our parent; otherwise, we’re on our own to run our business.  Our board of director’s provides the check and balances for our  key decisions. There are certain governance limits where yes we’d to get certain approval from the board. We haven't run into that as a business problem for us.

Right now the systems that we have are as good as better than anything in the industry. They are very cost effective. We don't have a glaring need that we can see today. Our philosophy has always been if we need to spend the money to make ourselves better, we will.

EL. Why did Santandar acquire Drive?

TD. Santandar is one of the top 10 banks in the world. It focuses on retail and commercial banking. It doesn’t do investment banking. It has strong consumer ties through a group called Santander Consumer, which does auto loans in Spain, Germany, Italy, Portugal, the Nordics, Eastern Europe, and South American. It’s one, if not, the largest non-captive auto finance company in the world. Auto finance is a core business for Santandar. Drive was the best auto finance franchise available for this company to buy.
 
Elizabeth M. Ferrarini - She is a technology writer from Boston, MA. Reach her at elizabethferrarini@yahoo.com

During John Thompson's decade as CEO of Symantec, a $6 billion enterprise security company, he transformed the company from a consumer-based software publisher to a leader in Internet security, data protection, and storage management. Thompson led an effort to diversity Symantec's product portfolio through more than 20 strategic acquisitions, especially the controversial $11 billion purchase of Veritas. Revenues during Thompson's tenure increased tenfold to more than $6 billion. In October 2008, Thompson announced his early 2009 retirement from Symantec. Enterpriseleadership.org recently sat down with Thompson to discuss the strategy for growing Symantec, the challenges of executing on that strategy, and the future growth prospects for the company.

Here's what he had to say:

EL. How has the downtown in the economy affected Symantec?

JT. No company can hide from customers that must deal with challenging economic times. We aren't different in that regard. With that said, we have technologies that companies need to have now. With data volumes growing at more than 50 percent a year for the average large company, they have to secure and to manage that information. If you look at the nature of our product portfolio, we have a certain level of insulation during difficult economic times.

Our primary products include security management, storage management, and backup and recovery. We target the largest companies in the world. More than 70 percent of our business comes from corporate and government customers. The rest of our business comes from consumers around the world.

EL. In 2005, Symantec began a diversification strategy with the acquisition of Veritas. Why did you decide to acquire a storage management company?

JT. We were interested in the backup and recovery components of the Veritas portfolio. A security company tries to keep bad things from affecting an organization's network or its systems environment. Because we had seen so many attacks in 2003 and 2004, we knew we wouldn't be able to stop all of these attacks. We, however, looked at how we could help customers recover to the appropriate level of operational control when an attack does occur. As a result, recovery tools and storage management tools became an important part of our realization that our job wasn't to just keep bad traffic out, but it was to keep an organization's systems up and running. The recovery capability became a critical component of that process.

EL. What is the company's mergers and acquisition strategy?

JT. Mergers and acquisition are an integral part of our business model. We have said to investors that we'd like to spend about half of the free cash flow from operations on mergers and acquisitions. That would translate into about $800 million per year. We want to focus it around two or three important elements. One focus is to look at enhancing the effectiveness of our core businesses, such as our core anti-virus business, and our core backup business. These businesses tend to grow in the mid to high single digit range. The second focus is on enhancing elements around the core that would provide higher growth.

While backup and recovery is an important part of what we do, email archiving, for example, is a similar function, but offers growth. While backup is an important element of what we do, disk space backup and data duplication are areas of very high growth. Can we acquire our way into related or adjacent areas that act as catalysts for growth?

Our third focus is to look for areas that three or five years from now have the potential to be high growth engines for us, but also would provide high volume. We recently acquired MessageLabs, a UK company that will complement our on-premise software appliance business, but it will give us a new marketing path or route.

EL. When you talk about high growth, what figures are you aiming for?

JT. We typically look for anything that is above 20 percent growth. We said to Wall Street that we expect to grow as a company at between eight percent to 12 percent per year. Ten percent is the mid point of that. We consider anything twice that or greater to be high growth.

EL. Why hasn't Symantec adopted more of a build versus a buy strategy?

JT. We've built much of our technology. In fact, we spend about 15 percent of our revenue on research and development. While we acquire much of our stuff, the nature of the security business has been that the threats change constantly. From 1998 to 2002, venture capitalists in Silicon Valley and in Israel funded more security startups than any other type of company in the technology industry. Each of them had a unique twist on how to solve a particular problem. We aren't so smart that we have a foundry on every great idea. To that end, we want to continue to innovate on our own, but, at the same time, we also want to be open to external forces coming in. We use a model similar to open innovation. We innovate ourselves, but we're open to outside ideas, and we're also open to investing in companies where we might be able to help them move the security spectrum along.

EL. Can you describe the business process for updating the corporate strategy?

JT. It's an on-going process. I have a direct report who runs corporate strategy and business development. We go through a quarterly review of what our portfolio looks like, what things in the portfolio we should eliminate, and what things we should acquire. We're looking for acquisitions that will enhance our core, that will represent high growth, or that will reposition us for large market opportunities with healthy growth for five to 10 years. At the annual board retreat, we share our detailed views on these subjects with the board members. Each quarter, we talk to them about the performance of the organizations we've acquiring during the past 12 months, and the prospects of organizations we might consider for the next couple of quarters. We have a healthy dialog about the long-term view of what we're trying to accomplish, the performance of what we've done, and the prospects of things that could be on the horizon during the next six months.

EL. Are you looking at technologies that relate to security?

JT. Yes! We acquired Altiris, a company that does device management. The technology relates to security. For example, before you distribute software to desktops in a corporation, you need to make sure that the software has all of the appropriate patches, that the hardware reflects all of the appropriate changes, and that a process exists for cataloguing everything so you can keep track of it. When a network attack occurred in 2003, we discovered that the vector of the attack had been present in the Windows operating environment for more than six months. If we had systems management tools to update the configuration and to update the software, we could've eliminated that attack vector. Having management tools tied to our security tools represents the opposite side of the same coin. Security resides on one side, while device management, on the other side.

EL. Do you have a particular methodology you use for measuring the success of technology investments?

JT. We look at several key metrics. Is the technology relevant to what we do today? Does it fit into our core business? Can our sales team move it? Do we have synergy with either the go-to-market side or the engineering side? We look at the transaction based on revenue synergies and a growth play or cost synergies, such as consolidation. If it's a revenue play, we want to make sure that the investment enables Symantec to grow at its projected rate or better. Altiris is a good example of a high-growth company. Its growth is in the high teens. We've acquired other companies that are growing at 30 percent per year. We have been able to sustain those growth rates and to accelerate them.

EL. Have any of the companies you've acquired turned out to be bad choices?

JT. Yes! Mergers and acquisitions are a little like internal development. We've built several products that didn't work quite as we had anticipated, and we had to fix them. Likewise, we've bought one or two things that didn't work for us. This's truly an exploration. If you assume that 100 percent of your mergers and acquisitions transactions will work as planned, then, as a leader, you put yourself in a very naive position. The challenge comes when you recognize that something isn't working as you planned, and you have to decide what actions to take to correct the course that it's on. We have experience going down this road.

EL. Five years from now, will Symantec be largely a services based company?

JT. I envision software as a service or cloud-based services being a larger percentage of our revenue mix, but I don't expect it would be the predominant base of our revenues. We haven't disclosed what our internal cloud-based services represent. For example, last year, MessageLabs had $125 million in revenue. That's a small amount.

Having been in the industry for many years, I'm a bit critical of my colleagues who would argue that cloud computing is the next great thing that's going to change the world. Nothing changes as fast as the soothsayers would suggest. While I think cloud-based services or software as a service will, take on a greater proportion of how customers avail themselves of software, it won't eliminate the need for software companies in general.

EL. How are you helping organizations carry out their IT Infrastructure Library (ITIL) framework?

JT. All of our enterprise products comply with ITIL. In fact, our Altiris product will help you determine how well your enterprise complies with the ITIL framework. ITIL has capabilities around service delivery and service management. Likewise, our Altiris suite has an IT service management component.

EL. How is the piece of the managed service business doing for Symantec?

JT. It's has had good growth in the mid teens to low 20s. It's an area that will get more focus over the next year or two as corporations decide its too taxing for them to handle managing their firewalls, managing their intrusion sensors, and managing their email security infrastructure for spam and anti-fraud. It makes sense to outsource these things to a delivery expert such as us. Tough economic times like this force customers to evaluate whether or not they should managing these things themselves or they should rely on trusted experts.

EL. Does your Symantec's stock price still fluctuate whenever the media reports a major security breach?

JT. Not at all! A few years ago, chatter on the nightly news about the latest virus attack would have a corresponding impact on our consumer-installed business revenue. We've seen less visibility about broad-based attacks of late, and thus our consumer business hasn't had that external catalyst. An incident like TJ Maxx or some of the other data breaches that have occurred provide us to remind our sales team, and in turn, our customers, with our the importance of our data loss prevention technologies. The growth in data breaches prompted us to acquire a leading solution in that space by a factor or two or three. It also has great momentum

Interview conducted by Elizabeth Ferrarini at elizabethferrarini@yahoo.com

When Gary Cantrell became chief information officer at Textron in early 2006, the company was almost three-quarters of the way through a six-year transformation of the information technology organization. Over the years, Textron had become an $11 billion global, multi-industry organization by acquiring aircraft companies and industrial firms. Some of the Textron brand companies include Cessna Aircraft, Lycoming Engines, and Bell Helicopter.

By leveraging formal best practices and governance, Cantrell and his team have continued to streamline the IT infrastructure across all of the Textron companies. He says, "We're doing things faster, better, cheaper."

Recently, enterpriseleadership.org spoke with Cantrell about how the IT organization is structured, what initiatives were key to the transformation, and what were some of the lessons learned from this process. Here's what he had to say:

EL: You've taken a kind of matrix approach to your IT organization. Can you describe it? 

GC: We have a federated model with nine divisional CIOs. They focus on delivering application services and support, but are also accountable for the infrastructure. Our shared services model for IT comprises six Centers of Expertise (COEs) including infrastructure, security, enterprise initiatives and strategic planning, collaboration, SAP, and PeopleSoft. Each COE has a leader. For example, the CTO who reports to me oversees the infrastructure COE. The collaboration COE is working on how we handle virtual teaming across all 400 Textron locations.

EL: How does your governance structure work?

GC: We have two ways to manage the governance process. Our information management council comprises the nine CIOs, all of the COE leaders, and me. This group provides our strategic direction, the corporate business unit alignment, and then our integrated planning activities. Below this group, we have started to organize tactical review boards staffed by people who report to the COE leaders. For example, we have an architecture review board.

The Textron executive management committee has five members, including the CEO. Below that, there is the Textron Transformation Leadership Team, which consists of all the business unit presidents. All IT capital issues, such as deploying SAP, would go through the TLT. If something affects the business, I might go to the executive management committee. I don't have to go to either committee for everything that happens in IT. Neither one of these committees works on IT issues independent of my involvement.

EL: Textron has undergone a six-year transformation in process improvements. Can you talk about some of the key IT process improvements?

GC: We call our transformation process "systems modernization." Like a lot of companies, we've acquired several companies over the years, nine in our case. SAP has been a big part of our IT modernization.

We're trying to clean up the portfolio of acquisitions. Six Sigma has helped us to reduce the variation in our environment, and Lean has helped us to move a little faster. That's where Lean fits in. You still have to deliver high quality and value, but you have to find innovative ways to do it.

EL: Can you describe the specific areas of IT modernization where these best practices have helped you improve processes?

GC: Using Lean processes and with the help of an outsourcer, CSC, we restructured nine different infrastructures and architectures where we took out dozens of data centers. We also restructured our email service from 150 servers in 70 locations to 40 servers in six locations. Now we have the redundancy and backup capabilities we need on the network backbone.

We also put in a new manufacturing system across the enterprise. However, some of our business units use specific applications that complement the manufacturing system. We leverage these applications across the enterprise also.

EL: Do you use the IT Infrastructure Library, CobIT, or the Balanced Scorecard?

GC: We've tied use of the Balanced Scorecards in with our Six Sigma gold deployment that we used in the beginning of the IT modernization. We're now working on integrating CobIT into some of our process maturity initiatives with Six Sigma. We've pretty much standardized on a plan for using CobIT for the next few years. We have a little bit more work to do on our tactical action plan.

Some of the business units have become very advanced CobIT users. We used the Lean manufacturing philosophy of Shigeo Shingo for one assessment we went through. In some cases, we've gone from silver to gold; in other areas, we're at the basic level moving to bronze. We're working aggressively on having a standard implementation methodology and assessment methodology for driving our maturity. Over the next 24 months, we will get the horses all lined up and get the enterprise on the same level footing.

EL: What kind of certification levels do you have in place?

GC: Right now we have two Six Sigma black belts for every 100 people on our IT staff and on the CSC staff. The ratio of Six Sigma black belts is higher on the corporate side. This year, we're pushing to have 60 percent of the first two levels of IT professionals green-belt certified in Six Sigma. The goal for 2008 is to have 100 percent of these folks green-belt certified.

EL: You have been quoted in the trade press saying that Textron's IT strategy resembles General Electric's IT strategy. How are they similar?

GC: When I was CIO of Honeywell, I had some first-hand exposure to GE. That company has a core corporate IT function similar to our COEs. GE's IT organization also has a fairly strong presence in their business units similar to us.

On the other hand, GE is larger than us and its business units have more scale that ours. We have a more standardized, rigid infrastructure, which provides us speed and efficiency and a lot of leverage. Also, our architecture review process is more rigorous that GE's. We try to do as much enterprise standardization as we can.

EL: Do you think IT can be run as a business?

GC: We had these conversations at both Honeywell and Bank of America. As far as I'm concerned, IT is a support function, enabling the business units to generate revenue and generate support for their customer. If you're an IT provider such as CSC or IBM, then you can argue about running IT as a business. Internally, IT is a cost center. It might not be a core competency in each business unit, but it's critical to support the work of each business unit. To this end, my charter is very simple -- help give each business unit a competitive edge and to achieve customer satisfaction.

EL: What do you get out of venues such as the CIO Executive Summit?

GC: Venues such as the by-invitation-only CIO Executive Summit give me tremendous network opportunities. That's the most important thing that comes out of it. Second, I get to discuss common challenges or technologies or industry threats. The most common discussion among peers deals with the latest virus threat on the horizon. These venues also expose you to lot of new IT talent or new suppliers. If you select your venues wisely, you can spend several days looking at a lot of new technologies. This process eliminates the need to have vendors parade through your office.

EL: You spoke at the Hackett Group's 17th Annual Best Practices Conference. What did you have to tell attendees?

GC: We've used the Hackett Group to benchmark some of the processes we are doing, as well as to assess how well we are doing with some of our best practices. This year I spoke about Textron's IT transformation and the best practices we deployed. The group of 100 really wanted to know what best practices worked and what best practices didn't work in our environment and why.

EL: So what things didn't work?

GC: We had a strong business case for many of the things we planned to do. Communication seems to be fairly robust. On the other hand, we grossly underestimated employees'

resistance to change. We had to do a lot of front-end work on change management. If I had to do things over again, I would've put more emphasis on this.

EL: What best practices did you find to be ineffective?

GC: Our change management process, which is based on Six Sigma, worked very well. This seven-phase-gate approach requires you to define everything from business case to stakeholder involvement. It worked well for the high-risk, high-changes areas. When it came to routine activities, it didn't hold up for us. That's where we could've done a better job of selecting a better methodology.

EL: One of your IT teams is looking at virtual teaming. What are your thoughts about 3D virtual worlds such as Second Life?

GC: I'm not sure what to do with it. It's not based on reality in the first place. If someone can help me understand the applications for Second Life, I'd be glad to listen.

EL: You were one of the nominees for the Information Security Executive Award from this year’s Northeast division of the ISE. What initiative did you get nominated for?

GC: We've had a comprehensive push on consolidating perimeter security, along with improving other areas of security. The nine acquisitions Textron made presented IT with the challenge of how to handle disparate approaches to security. We also focused on how to extend secure wireless connectivity to all of our Textron locations. Here, we sewed up all of the areas for possible data loss. Next, we overwhelmed our disaster recovery and business continuity programs to focus on our consolidated data centers. We also carried out a program to educate employees about security.

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