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.

Budget Cuts. Layoffs. Shrinking Revenues. When tough times hit, many executives have a hard time singing the praises of their companies' greatness. J. Barry Griswell, the retired CEO and former COB of the $11 billion Principal Financial Group, says adversity provides executives, as well as their employees, with an opportunity to make positive adjustments and then some. In fact, Griswell, along with Bob Jennings, has written a book called, The Adversity Paradox: An Unconventional Guide to Achieving Uncommon Business Success.

The personal adversity Griswell experienced growing up became the underpinning for much of his success as both a corporate leader and a humanitarian leader. While he was CEO of Principal, which offers 401(k) and retirement plans to businesses, he oversaw a $1.8 billion initial public offering (IPO), which helped the company's expand its product line. As of 2008, the company had $308 billion in assets under management and 19 million customers. Griswell serves of the boards of Herman Miller and Principal. Throughout his career, he has been active in various industry and community organizations. He has received many public service awards, such as the Horatio Alger Association Distinguished American Award and the Alexis de Tocqueville Society Award.

Enterpriseleadership.org recently sat down with Griswell to get his perspective on successful leadership, especially the role of a CIO. Here is what he had to say:

EL. Usually consultants and academics write books about effective corporate leadership. Why did you, as the former CEO of a major company, decide to write a leadership book focusing on adversity?

BG. If you want to have a successful book, you should write about something you care about and something that has touched you. I came from a tough background, riddled with much adversity. When I got into management and started recruiting people, I learned success, particularly for sales people, included learning from exposure to adversity. If you can overcome adversity, then you have a greater chance of being successful. You can learn the lessons of life -- tenacity, persistence, and optimism. I got so interested in this.

In 2003 when I got the Horatio Alger Award, I couldn't believe I was joining other award recipients, such as Oprah Winfrey, Denzel Washington, and Howard Schultz, CEO of Starbucks. Each one had overcome some type of adversity, learned from it, and then went on to achieve great success. Bob Jennings, my co-author, and I decided we wanted to study adversity and see what makes it happens. Of the 100 resumes we reviewed, we selected a number of top people to interview. Our goal was to come away with a number of lessons we could pass on to our readers about how to overcome adversity.

EL. Some management reports say that CEOs average about four years in a position. Some CEOs have gotten themselves in trouble. Where do some CEOs go wrong?

BG. Some CEOs forget where they came from and just look at where they want to go. A chapter in my book talks about what matters most on the job --integrity and moral development. Some people just do not have well- developed morals. These characteristics take years for people to develop. You need to make sure they are foundational and real. Some people who get to leadership levels lack moral development. It becomes apparent as time goes on. It is unfortunate. Letting power go to their head causes many people to get off track. They think they are invincible. Some CEOs think because they occupy the top spot in the company, they cannot do anything wrong. Not true! The CEOs I have seen fall possessed many of the negative qualities I have mentioned.

EL. How did you give back to the community so you just were not just a corporate person?

BG. Being on a corporate board is self-serving. People of means should give back their time and their energy, and their financial resources. They need to lead in that area. I have tried to do that. You need to do things to help your community and the people in need. That's how you can make a difference.

I have been extraordinarily involved in a number of things. Today, I still serve on the board of the United Way of America. I run our local campaign. I support the Boys and Girls Club, both locally and nationally. I am trying to help the people of the Crow Creek Native American Indian Reservation get back on their feet. I provide significant financial support to my alma mater, which is a local college.

EL. Do you look at that kind of character when you hire executives?

BG. Absolutely! You want to ask people: 'Give me some examples of how you have given back to the community over time.' It is so easy to spot. If someone says, 'I really believe in doing those things, but I'm so busy in my career. I haven't had time yet.' I don't like that answer. We need well-rounded individuals in corporate management. People can find time to give back a little bit of their time and money.

EL. You ran companies that had great financial strength. How did you balance that with philanthropic pursuits?

BG. The Principal exemplifies a company that has tried to balance its financial strength of earning money and returning profits to shareholders, but also doing what is right for employees and the community.  If you got one of these things out of kilter, it ultimately causes you to warble and have problems. For example, United Way named has as one of its

best supporters a couple of years ago. Latina Style named us the best employer for Latinos. Fortune magazine has named us to its 100 Best Places to Work in the United States seven years running. We have many philanthropic awards.

EL. What qualities did you expect your business leaders to possess?

BG. Everyone would probably give you the same list. I always start with honesty, integrity, and then reliability. If you do not think someone is speaking the truth, then that's a red flag citing a potential risk factor. People need good intellect in order to play in the game. We all want to have people who like being on a team. It looks good for the cause. You also want people who have their own ambitions. On the other hand, if their own ambitions outweigh the good of the organization, that you have a problematic situation. You look for some flexibility and some collegiality. Of course, you want them to have a strong passion and drive for what they do. It is a blend of all those.

EL. Because CIOs work with colleagues across multiple business units, they need to work from a position of influence. How did you work with your CIO?

BG. When I was CEO, our CIO reported to me. That person now reports to the current CEO. Every company has its own way of handling the reporting structure for the CIO. We have gone back and forth with this issue. Today, we have a very strong CIO. We expect him to set standards, drive efficiencies, and drive platforms that the business units can use. At the same time, each business unit has its own CIO who is responsible for driving the use of technology within the business unit. You need to have strong central leadership along with some business unit leadership. It's about creating balance. My company has had a skewed IT organization on several occasions. If you let the business units run the show, then you do not get the advantages of the common platforms and efficiencies. Conversely, if you just have the corporate CIO running everything, then you do not get the best use of applications at the local level or business unit level. We have achieved the right blend of IT management.

Because our business relies on technology, the CIO role is important to us. We are the leader in administering 401(k) plans, daily values, and paperless movement of data. We do millions and millions of transactions. We would be swamped if we weren't innovative with our technology. In fact, In 2008 Computerworld recognized us as one of its Premier 100, the top 100 companies with innovative uses of technology

EL. Is there a process you followed to make the right investments, especially in technology?

BG. Like every major corporations, Principal has to quantify the return on investment. When I was CEO, we had a Web-based ROI computation that had many inputs. Each business unit's project management handled large technology projects.

Although corporate uses uniform tools, we also recognized the need for judgment and gut feeling if we in the early stages of dealing with something new. We want to be on the leading edge, not on the bleeding edge.

EL.Does your CIO deal with the board at all?

BG. He does to some extent, but he deals directly with our board's audit committee. He reports regularly on a number or things. He occasionally attends a full board meeting, but he regular attends the audit committee meeting.

EL. What have you learned from your CIO?

BG. He is a very calm, methodical, good thinker who approaches things at a very high level. He has a calming effect on us all. I have enjoyed dabbling in technology. In fact, I have tried to be out front about the technology we deployed. When the Internet became in vogue, I remember our CIO telling board members at a retreat how the Internet would change business. What he said motivated me to take a more hands-on approach to technology.

EL. What important technology investments did you make during your tenure?

BG.  We made numerous technology investments. After I became CEO, we made one of the most massive investments in our company's history. Our joint project with IBM, called Express Processing, was a massive effort to automate all of our systems. We went from 100 percent paper driven, or process driven, or telephone driven to almost 100 percent Web-based processing. The technology also allowed us to establish remote processing offices around the country. As a result, we could enter cases immediately into our system as we received them, and then we could move them instantly to one of those processing centers for adoption. That's was our greatest technology investment.

We also took our basic pension system and we replicated it with a version that had international values. PIIS or the Principal Insurance Information Systems is our standard, global defined-contribution record keeping system. If we go into a new country, we can plug in this adaptable system. We made some changes for language and regulatory purposes.

EL. If you were to look back at your career, what is the one thing you would have done differently?

BG. I don't spend much time looking back. Some of my decisions did not pan out as we expected. A large acquisition we made in Australia turned out to be a bad move. We eventually sold that business. We have stayed in some businesses longer than we should have and have gotten out of some too soon. We have tried to learn from those mistakes. We always do look-back analysis to determine what we did wrong and how we can avoid making the same mistake.

EL. Can you tell me a story about a professional adversity you had to overcome?

BG. In 2001, we were in the process of going from a mutual company to a publicly traded company. We had been working on the IPO for several years. On Tuesday, September 11, 2001, we were in our hotel room getting ready hold a briefing about our IPO. Of course, 9ll happened. We stayed in Paris until that Friday. We fly from Paris to Reykjavik, Iceland, where we spent the night. We then took a plane to Winnipeg Canada, where we rented a van to drive to Des Moines. A few miles after we entered the United States, we had a terrible accident with the van. Although we all had some sort of injury, we managed to regroup and make it to Des Moines. On October 23, we became the first company to go public following 911.

EL. Now, can you give me a more personal vignette about what you learned from an adverse situation?

BG. My parents got divorced when I was very young. My father was an alcoholic. During the last part of my MBA program, my father committed suicide. My brother and I had to deal with that horrible situation. Unfortunately, my father died with no life insurance. He left a small business ridden with debt. My brother and I took out loans to help my family move forward. Because of this experience, I decided to pursue a career in life insurance. I did not want to see families go through a situation like mine, if they can avoid it.

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

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

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

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

EL. What is it like working for Governor Schwarzenegger?

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

EL. Can you describe the structure of your organization?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

EL. What are you looking for in a CIO?

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

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

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

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

In 2007, Adrian Fenty, the mayor of the District of Columbia, went on a mission to invest in making his municipal administration more responsive to constituents' needs. He appointed Vivek Kundra to serve as chief technology officer for the District of Columbia. Working with Mayor Fenty, Kundra successfully leveraged sizable technology investments to make government smaller, more open, and more accountable to the city, its employees, and its citizens. For example, Kundra eliminated unnecessary costs by the use of commercial software, and increased efficiency by streaming processes, such as the movement of paper.

During his campaign, Barack Obama said he would appoint a chief information officer to oversee the U.S. Federal Government's $71 billion annual IT budget. A month after taking office, President Obama appointed Vivek Kundra to oversee the world's largest IT budget. Kundra plans to focus on getting the entire federal government to make the appropriate investments and to have good oversight for the annual IT budget. Kundra's proposed agenda also resembles what he did as CTO for the District of Columbia -- lowering of the cost of government operations, driving innovation, driving transparency and accountability, and at the same time, ensuring a secure computing environment.

Enterpriseleadership.org recently sat down with Kundra to discuss how he plans to carry out his agenda while improving the way federal agencies use technology.

EL. What challenges have federal CIOs faced trying to be good oversight stewards for their department's technology budget?

VK. To begin with, technology has some macro challenges. Look at the scientific evidence around Moore's Law for how technology evolves and how you get new systems in place. You need creativity, and new approaches to solve the problems the federal government faces. Now put that against the backdrop of the institutions in the federal government. They have specific processes for how you evaluate most of the systems across the government. These processes are not very agile. For example, it can take anywhere from 12 months to 18 months for a procurement to go through. During this time, the requirements might have changed, the business case might have morphed, and the technology itself might have changed. Many federal CIOs have to look at things in this context as they run their agencies.

The federal government has 100s of bureaus and agencies, more than 10,000 IT systems, and 24,000 Web sites. When people hear the number of Web sites, they immediately say, 'Why so many?' It is because of the way the government has organized itself. Moreover, the federal CIOs have focused primarily on enforcing policies rather than rolling out solutions. The federal government has no central IT organization. Each agency does its own thing. It becomes difficult to have oversight based on business requirements. For example, the Federal Aviation Administration differs significantly from the National Institute of Health, which differs from the Dept of Labor. CIOs in each of these agencies approach problems in a different way. They need to look at areas where technology is a commodity.

EL. The Clinger-Cohen Act is supposed to provide some discipline and a set of controls for how departments manage technology across the federal government, but some CIOs say there are many inconsistencies across federal departments. Given that, what types of controls are you going to put in place to correct these problems so there is consistency and the rules are enforced?

VK. We need to rationalize how CIOs report information. The government is evolving in terms of technology. The Clinger-Cohen Act created the CIO role across the federal government, and put in an oversight process in place around the technology spend, especially for the annual government budget. As a function of the rigorous oversight reporting, I want to make sure that CIOs rationalize these reports, that we leverage IT to collect the data we need. We do not need any more actors in between when it comes to creating reports, scrubbing the data, and trying to glean insight from that data. An entire cottage industry has grown up around reporting and submitting reports.

After we have rationalized many of these reports, we want to make sure we are extremely transparent. We can do this in parallel when it comes to how we procure technology, what we procure it for, and where we stand with vendor performance.  By being transparent, we can divest ourselves of projects or initiatives that have not performed well or that have outlived their usefulness. In turn, we can invest in projects and initiatives that add the most value.

EL. Federal CIOs include a mix of political appointments and career CIOs? Do you intend to change that?

VK. I am not concerned how the CIO got his or her job. The important issue is to make sure we have the right person onboard. CIOs must know how to focus on business transformation so they understand how to leverage the power of technology. It is not about technology for technology's sake.

EL. What are you doing to eliminate redundant investments such as multiple networks or data centers? Do you have plans to aggregate some of these networks and data centers?

VK. Much of that work has begun to happen with our Smart Buy initiative. I am working on initiatives that are central to this administration. I have begun to push forward how we can create cloud computing within the federal government and how we can leverage the consumer cloud. These things will enable us to move toward more secure computing, and lower operational costs. We do not want to build 24,000 Web sites.

EL. Do you plan to use social media to share resources across the federal government?

VK. We need to do more of that. To date, it has been happening in a fragmented way. Let me give you a simple example about the public interaction with the federal government. Each federal agency has its own identity management system. If you wanted to participate in social media with the EPA versus the White House, you would have to log on to all of these multiple systems. When you look at social media, citizens want to be able to interact with one government, not with the multiple agencies. That is part of what we want to do. We want to create platforms that agencies can leverage through the cloud infrastructure, rather than rolling out independent solutions. We need to have an open ID platform across the entire federal government -- one that has to leverage the toolset instead of rolling out multiple ID systems.

EL. Every federal agency has a technology investment board and a capital planning board. Do you plan to put some of their information on data.gov?

VK. We are also looking to put more information on the projects themselves and the health of those projects. We need to evaluate which projects are sensitive or classified versus which ones we can put in the public domain. As with any information we share, we need to make sure that Web sites are easy to use, and do not use federal jargon. We want to expend much energy around that to make sure that information is readily available.

EL. How do you plan to leverage technology innovations either in the government or in the private sector when they may be buried deep in these organizations?

VK. I believe in the need to tap into the ingenuity not only of the American people but the federal workforce. I plan to spend much time with those people who are on the front lines because they are the closest source to the pulse of the customers. For example, I have been spending much time with the intelligence community and its Intellipedia collaboration project. I want to learn how we can scale some of these initiatives. We do not want to reinvent initiatives that are successful, but we want to scale those.

We need to look at what innovative solutions each agency has brought to bear, and how we can scale it cross the federal government. Many of these well-tested initiatives have started at the grassroots level by passionate people. We need to deal with the scaling problem, which is a problem I love to solve. I intend to spend much time with both folks who focus on policy, and those front-line people who implement these solutions.  I have already started my technology tour across the federal government to visit every single CIO and his or her staff. I want to understand all of the issues and to meet with some of the key employees who are driving change within those agencies.

EL. Will creating more transparency affect the way CIOs do their job?

VK. It will also not only affect the federal CIOs but everyone in the technology community. We are advancing a mission. It could be discovering biomedical knowledge at the National Institute of Health or the looking at how the Federal Drug Administration can protect consumers from bad drugs. Using technology to advance the core mission of government will force federal CIOs to become change agents. We know that change is a good disinfectant. Even better, it will fundamentally transform the way the federal government works. It will not happen overnight and it will not be easy. You can see that we are moving in a direction with recovery.gov. The president is committed to making this process transparent the same way he did during the administration transition. He posted documents online and collaborated with voters about what he did each day. He took questions online. These structural changes in the government's mission will make government more visible and accountable in citizens' eyes.

EL. What are you going to be doing to help the United States Postal Service keep from loosing money?

VK. The USPS's business has gone through massive transformation. Some of it has been successful, and some not so successful. Transparency and open government alone will not solve the USPS's business problems per se. We do not want to look at how transparency can ensure faster delivery of mail. Instead, we need to focus on how can we leverage technology to rethink what the 21st century post office should look like.

EL. Are you going to eliminate the practice where CIOs have to budget two years in advance?

VK. That issue is part of a larger federal budgeting policy. The issue is not limited to technology. It is much broader across the entire federal government. Whether it is procurement or the budget and the way the institutions were created, technology changes so fast and evolves so quickly that we need to relook at many of those policies. I am open to doing that.

EL. What valuable lessons have you learned from your experience working as the CTO for the District of Columbia?

VK. Having transparency and actually delivering on the promise of it can fundamentally change and transform the government. The power of innovation and a participatory democracy can really help us rethink how we look at the public, and how we treat the public and the role of government. The government does not need to look at citizens as subjects, but we can look at citizens as a public of co-creators of democracy and engage citizens to come in and help solve some of the toughest problems government faces. We do not have to do it alone and we do not have a monopoly on ideas. That was one of the most powerful lessons I learned as I engaged people in different areas. I advanced this entire notion of a digital public square where people can have access to government data, where they can see how their government is performing, where they can hold us accountable, and where they can help co-create solutions to solve big problems.

EL. Have you seen John Kao's book Innovation Nation which talks about carrying out a nationwide innovation program?

VK. I know about the book, but I have not read it. The function of some of our transformation includes channeling much of this energy around technology, engaging the public, and throwing ideas against the wall. We want to put the right resources behind solid, scalable, innovation ideas. Of course, we will use the scientific method to test many of these ideas. You will see innovation across the board, not just in one vertical whether that has to do with healthcare, energy, defense, or security. You are going to see innovation baked into the culture.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

EL. How do clinicians influence investment decisions in technology?

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

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

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

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

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

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

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

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

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

EL. What things is your organization working on now?

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

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

One of the largest privately held companies in the United States, Day & Zimmermann, which has annual revenues of $2.2 billion, provides government agencies and 60 percent of the Fortune 500 with contingent employees and services in the following areas:  engineering and construction, security, information technology, office administration, architecture, maritime, reprographics, and munitions.

Handling the paperwork to pay 24,000 employees who work for 1,300 customers at 150 worldwide locations can stretch the muscles of most IT departments. However, Anthony J. Bosco, Jr., the CIO and a 28-year veteran of Day & Zimmermann, has managed to outpace his competitors by using technology to automate a lot of employee paperwork, to speed up cost accounting of projects to customers, and to collect monies from customers sooner.  Bosco also spearheaded a system consolidation using SAP, which dramatically reduced overhead and interest costs.  In fact, the Yoh Exchange, a portal Bosco's group built for one of the company's operating businesses, received an Impact Award in 2004 from the America's SAP Users' Group.

Enterpriseleadership.org recently sat down with Bosco to talk about how the e-commerce initiatives have driven the company forward, and how the company has become more agile and innovative.  Here's what he had to say.

EL: Can you describe some of the IT initiatives that are making your company more customer centric?

AJB: In 2003, we built the Yoh Exchange, a SAP-based portal that exploits the entire supply chain and supplier management process.  It allows customers to see what's happening with their existing workforce in terms of time, expense, recording, and approval. It also delivers specific content to the workforce that may be particular to projects they're working on, or the location they're working at. We've been doing well for many years.

We've automated, not only the transaction flow between the customer and us, but us and the management of a number of subsuppliers who provide talent to our customer. We act as a clearinghouse. With one push of a button, we now disseminate information, everything from invoices to talent requisitions to a number of sub suppliers. The subsuppliers can only see their information.  It is from our perspective all within the same portal so the customer can see the activity, and we can see the activity. We've taken the management of the entire contingent workforce out of the email box, and put it in a portal that gives customers end-to-end transparency based on who they are, and where they are in the staffing process.

EL: Can you be more specific about the role of the sub supplier?

AJB: Subsuppliers can be competitors of ours. Large companies have a very diverse and extensive contingent workforce. One of our lines of business manages that contingent workforce on behalf of our customers. About 20 years ago, many companies decided to go with vendor consolidation. The process involves one key vendor entering into contractual relationships with the other suppliers, and thus eliminated the need for customers to deal with many subcontracts and subcontractors. As the managing vendor, we deal directly with all of the administration of the other contingent labor vendors that supply our customers. By negotiating the price, we enable customers to control their spend.

EL: How have you automated the requirements and approval process for getting talent?

AJB: A major customer might have anywhere from a dozen to 50 other staffing companies competing to fill that role. When we first built the Yoh Exchange, we provided a consolidated invoice. However, the requirement process and the approval process were still decentralized. In fact, if a customer got a huge invoice, department managers often argued that a purchase order hadn't been augmented. We enhanced the portal to enter requirements gathering, candidate sourcing, both from our internal database as well as our subsuppliers. We also disseminate the appropriate information back to the individual department managers.

The most important thing is that we put the best people in front of our customers quickly, and we can start evaluating how well our vendors are performing. For example, vendor one provides a customer with three resumes within a day, and each resume meets 90 percent of the customer's requirements. Meanwhile, within two hours, vendor two provides 10 resumes, which meet 20 percent of the requirements. It's obvious who is the better supplier. We track all of those types of statistics so we know who's performing and who is just throwing out resumes to customers.

EL: Can you customize the Yoh Exchange portal for specific customers?

AJB: We can customize the customer's view of the portal to go beyond transaction processing to include services that empower the contingent workforce. For example, we supply contingent security guards for one of the largest petrochemical companies in the world.  Safety is the number one concern of the guards who staff the company's refineries, plants, and office buildings.  The guards use the portal to process all types of OSHA violations and other types of security incidents. Depending on the type of issue and the location, the information flashes in a real time across the dashboard of key security personnel.

In addition to transaction processing information, the NBC portal provides continent workers with content they might need on the job. It could include the signup to visit a particular studio or particular site, or orientation information for a new employee at a specific site. We can push that content out so when that employee goes to the site, he or she knows what to expect.

When NBC was covering the 2004 Olympics, people found the portal to be a good way to communicate with others working at different location. For some engineering and construction companies, we made certain equipment manuals, drawings, and collateral available through the portal. When an employee goes to work at that location, he or she doesn't have to search the Web or to look internally for specific documents they might need.

EL: Where are you getting this information from for the customizing of a customer's portal?

AJB: Some of the information comes from the customers. Some of it comes from work we've done, such as proprietary designs we've built. We might provide links to customer sites for particular collateral that exits. Again, people can find information on their own. If we know the content they need exists, we'll make it available. We believe that employees should have the tools to work more effectively and more successfully.

EL: Does the portal create more revenue for your company?

AJB: We don't typically charge extra for the portal service. It creates more revenue for us because it enables us to differentiate ourselves from our competitors. When you're competing for a job, you need to present good talent that meets the customer's requirements.  We can attract high quality employees who know they can be more successful here than the company down the street.

EL: What changes did you make in IT processes to drive innovation and agility?

AJB: We changed our IT structure from shared services, to decentralized services, back to shared services and now to selective shared services. Because of this process, we've become very mature with a time-tested IT infrastructure. We can retrofit a process very quickly. We can do what is best for our customers or our business during a particular time in the economy or a cycle of a business.

For example, we took the hands-off, forms-based recruiting process and created an online recruiting system where candidates submit their resumes online. As an applicant, you can have an account with us. A manager can see the status of how many jobs have come in, how many candidates have been screened, how many candidates are waiting for interviews, and where we are with background checks or drug screens. We've made this process more transparent.

EL: How are you driving cost out of the organization?

AJB: We don't have a manufacturing system where we can change a process and drive dramatic cost savings. As a service organization, we have to focus on transparency so people act more productive. Our business depends on speed and accuracy of information. We've been able to increase our asset turns by 30 percent where our number of days' sales outstanding has dropped by 35 percent or 40 percent. This decrease has resulted in major economic benefit. By eliminating some departments, we've been able to drive down the cost of our internal processing. We continue to tweak it.

The various improvements we've made have given everyone from business unit managers to project mangers the right kind of organizational transparency into what's happening in the organization. In fact, transparency into everything from an employee-related issue to a supplier matter, not only raises the level of accountability, but it enables us to mitigate issues before they get out of hand.

EL: How do you measure the effectiveness of your organization?

AJB: Our tools and the techniques have helped us to cut the time of customer projects, such as building a refinery. I have a whole set of tools and templates we use. Every internal project has a SharePoint site. We have certain templates we follow. We use project-based tools and techniques that have been around the construction industry for years. All of our projects have critical path methods.

I have a bet with some of our businesses that they can acquire a company similar to us, and we can implement a core ERP system, which goes from core financials to procure, in 60 days.

Our basic business metric is asset turns. We know that our technology enables us to build faster, and to provide more accurate information.  If you're accurate, you'll get paid faster. IT is part of our business strategy. Our IT metrics look at how much money we spend on innovation and front-facing issues versus how much it costs us to operate and keep the lights on. In 2008, we cracked the 55 percent level of how much goes for innovation and front-facing business support of the customer.  I won't be happy until we get to 60 percent. Business transaction processing has nothing to do with keeping the lights on. It's about creating customer value beyond what you think of for IT.

We spend less than one percent of the company's revenue on IT, but we have a 55 percent level of spend for innovation and the like. I challenge my CFO colleague to spend less on financial processing in the organization than I do for IT. We have an internal initiative where we look at process improvement as a way to exploit some of the features in our technology toolset to drive the CFO's cost down. There was a point in time where our costs as a percent of revenue were at par with one another. The CFO's costs have crept up and mine have gone down.

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Additional Reading - Sponsor Link:
Managing the Business of IT: Maximizing the Power of Service Resource Planning, the Next Step in Business Service Management
Understanding ITIL® Service Portfolio Management and the Service Catalog

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

How do you get more value out of IT, if not your CIO? How can technology teams make the strategic value of IT real for executives? George Westerman, a research scientist at the Center for Information Systems Research at MIT's Sloan School of Management, says it mostly boils down to one key concept: business agility. However, reliable and sustainable agility depends on a set of essential IT capabilities, ranging from on-going delivery of basic IT services, to accountability for IT. In fact, his book, IT Risk, Turning Business Threats into Competitive Advantage (co-authored with Richard Hunter),Westerman provides some rigorous research-driven advice and tools for treating IT risk as business risk in order to achieving strategic advantage.

Enterpriseleadership.org recently sat down with Westerman to discuss the research findings in his book, and the ways CIO can manage risk to improve their business agility. Here's what he had to say:

EL: What types of agility does an organization need in order to respond to different types of change?

GW: In the book, we define agility as the ability to change with managed cost and speed. That doesn’t mean being infinitely responsive. You need to understand what types of agility you are most likely to need. Are you integrating new acquisitions or launching new products? Are you changing business processes or reacting to unexpected daily events? Some of my other research shows that the ability to change business processes is the most commonly needed type of agility. That’s not the sexy kind of agility to launch new products or enter new markets, but it does appear to be what many organizations need most.

A well-structured, well-managed foundation of IT assets that is only as complex as necessary can better enable IT agility. But even then, organizations can have a tough time managing different types of agility at the same time. And, although IT is essential to some forms of agility, it's not the only element. Agility also requires the right kinds of people, empowered and able to make decisions. And it also requires leadership to manage organizational changes.

The mix of organizational, leadership, and technological requirement varies for different types of agility. It’s also important to understand that, just as different parts of a company may need different types of systems and processes, they also may need different types of agility.

EL: What changes have you seen in IT to make companies more agile?

GW: Our research shows that agility for IT comes from a couple of elements. You need first to get to the point where you have a very solid, well defined, and a well understood platform of technologies, business processes, and knowledge. If the platform is very well structured and very well understood, then you know where you need to make each change, and you can do it. When you make a change, you make it in one place and in one way, as opposed to all over the place like firms must with legacy spaghetti. And you know the links to business process and organizational elements so you can help your colleagues change those too. The well-structured, well-managed IT foundation forms the basis for many types of agility you need to get done.

EL: Can elaborate on the qualities of a well-managed IT foundation?

GW: So, one of IT’s key jobs is to make this foundation happen. Some firms with very well-structured foundations, such as TD Banknorth that can acquire new banks very rapidly and can expand services in a straightforward way. That's a great way to start. But most firms don't have that well-structured foundation. They need to gradually transition from their existing complexity into a more rationally-defined foundation. Firms in this situation improve agility gradually by helping people understand that each new change they want to make has to be part of a larger goal. Each change has to help move your platform strategy forward as opposed to taking you away from it. Governance processes that help everyone understand how to move the foundation in the right direction can help you gradually improve agility from IT.

Building on a solid foundation, governance, relationships, and project delivery processes must be improved to increase agility. Governance processes cannot become so bogged down in bureaucracy that they restrict speed. But they also cannot be so loose that they allow the foundation to become more complex. Project delivery processes must include the necessary controls to manage risk, but also must be agile enough to respond rapidly to changes in the business. And relationships must be strong enough to not only think about the future but also to have the tough conversations.

EL: Before you can get to agility, you need to think of risk. How do you define risk?

GW: Most people, when asked about IT risk management, think only about avoiding the downside or negative consequences of IT. To these people, IT risk falls into two categories: business continuity and security. What happens if our systems go down? What happens if a hacker gets into our system and causes havoc, or if somebody sells confidential data about our customers or products? But there’s more to IT risk.

Risk management can have an upside. If you want to take a risk, you can gain a tremendous return on it. You have to be willing to manage the downside, but you shouldn’t avoid risks because they have a potential downside. Many innovators and investors think about risk this way. But people don't often think about that for IT. And they should.

Our research shows, although risk is part of every major IT decision, decision makers need to think about IT risk more broadly than they typically do. IT risk is not just technical risk. Today, technology underpins all of our processes. Many of our decisions can affect business risk. And, managing risk not only avoids loss of value, but can also increase value available from IT.

EL: Can you describe the four elements of IT risk mentioned in your book?

GW: Availability refers to how can you keep the processes running and what happens if we don't. Access determines if you can provide information to the right people and not to the wrong people. These two risks fall clearly into most peoples’ preconceptions about IT risk. But there are two more that are equally important, though less-often considered when thinking about IT risk.

Accuracy refers to whether the business is getting accurate, timely, and complete information, and the negative consequences if it doesn’t. In the wake of Sarbanes Oxley, managers are paying attention to accuracy of financial information. But accuracy risk goes well beyond financials. Accuracy can also be the single view of your supply chain, or your customer, or your global view of what the organization might need to make decisions. Some inaccuracies, such as inventory record inaccuracy, create insidious problems that often fly below the radar. Others, such as inaccurate information on prescriptions or medical tests, can be life-threatening.

The last element is agility. People rarely think of agility as being a risk for IT, except it is -- all of the time. But, when people are resigned to delays and inflexibility from IT, they don’t always think of these issues as something they can manage; an option they can trade off against other options.

EL: Can you give an example of a company that could move fast enough to carry out a strategic opportunity?

GW: We studied Textronix, a prime example of this. In the late 1990s, Tektronix couldn't divest a division because its systems were too intertwined. To do so, Textronix would've needed to give a copy of all of its systems to the buyer of that division. Textronix spent three years and many millions of dollars untangling its systems. The transformation not only enabled it to divest and acquire businesses more easily, but also improved its global management visibility and customer responsiveness.

Insidious agility and accuracy risks can slow down the way you act. You figure IT isn't going to get things done fast enough, or you can't count on IT to deliver. As a result, business executives build shadow systems or they find other ways around the core IT group. And that adds complexity that increases all four IT risks.

EL: Which of the four risks is most important?

GW: All are important. But at a given time, for a given firm, one is usually more important than the others. For example, some financial services firms are considered "national financial infrastructure critical", meaning that, if their processes fail, markets fail. Availability is a critical risk for them. But, once they have the right availability safeguards in place, they can focus on other risks.

We find that people often focus most on the most visible IT risks: availability and access, and don’t always focus on accuracy and agility. But, accuracy and agility often are the most damaging to the firm in terms of financial impact. It’s just that the impacts are not as apparent as they are, for example, in a major outage.

EL: You write that the CIO often gets stuck carrying the burden of IT risk.

GW: Much of the cause of IT risk in the organization does not stem from mismanagement. Of course, some firms just don’t manage their IT operations very well. That's a problem. But, much of IT risk occurs because of complexity. That often arises from IT continually trying to meet today’s business needs without being able to impose the kinds of standards and strategic viewpoint that can lead to the well-structured foundation we discussed earlier. You wind up with the kind of legacy spaghetti that many managers have experienced in their firms. Complexity makes it difficult to manage for availability. It's tough to grant and control access. It's difficult to get accurate information when you are linking all of these disparate systems. And it’s just not very agile.

Business folks tend to delegate IT risk to IT folks because it contains two very naughty words -- one is IT and the other is risk. Many business executives don’t feel comfortable discussing IT – they just don't feel they understand it enough to have conversations about it. And, of course, very few people enjoy talking about risk.

As a result, business executives delegate IT risk management to the CIO. But, the CIO is not equipped to manage all of the elements of IT risk. He or she can manage infrastructure-related risks – a big component of availability and access risks -- but cannot even do those alone. The CIO cannot make changes that affect business process without business involvement. And, without business involvement, CIOs cannot put the policies and decision frameworks in place to prevent risk from increasing in the future.

EL: Isn't it the CIO's job to know how to speak to the business units?

GW: They should be able to. And many good IT executives can – both at the CIO level and lower in the organization. But even they can improve their conversations by discussing risk systematically.

Many discussions and debates between IT and business are really about differing views of risk. What is the tradeoff between having something that is more bulletproof versus something that is more flexible? Do you want to make something so easy to access that we can’t secure it properly? Do we need to meet our big deadline at all costs, or can we delay the deadline so we can do things a little bit better?

We have found that non-IT executives are comfortable using these four A's to have conversations about risk. They've done been able to do this before. They can quantify the importance of how to get better availability and what it's worth to them. They can quantify the cost of missing a major strategic change and what they are willing to do on that. They know how to talk in these terms. Now they have conversations about what risk tolerance and what are tradeoffs on the four A's. They no longer hand off risk to the CIO. Talking in terms of the four A’s allows you to make the decisions you can make, and gives IT people the information they need to do what they’re best at.

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Additional Reading - Sponsor Link:
Managing the Business of IT: Maximizing the Power of Service Resource Planning, the Next Step in Business Service Management

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