New Kid on the BlockBy Edward Cone | Posted 10-15-2004
New Kid on the Block
Dana Deasy's first morning on the job as chief information officer at Tyco International Ltd. was a lonely one. The conglomerate had operations on six continents, sales of more than $35 billion, and zero corporate information-technology staff. "When I showed up, there was not a single IT person to turn to," says Deasy, who joined the company in July 2003. His job was to build a corporate information-technology organization from scratch.
New management, led by Edward Breen, former president and chief operating officer at Motorola Inc., and overseen by a high-profile independent board, is remaking scandal-scarred Tyco. The holding company that was loosely assembled from hundreds of acquisitions is morphing into an operating company that hopes to leverage its size and shared assets around the globe.
"The first thing I did was pick up the phone and introduce myself to the various presidents of our business segments so I could get a little history on how things got done around here," says Deasy, who must align his nascent organization with a broad array of different players and plans.
Deasy's new corporate shop needs to work with Tyco's five heterogeneous business segmentseach a going concern with its own products, culture, strategy and level of internal cohesivenessas the segments shift their focus from acquisition to organic growth. It also has to support other corporate functions, such as human resources and global operations, as they come into being for the first time. And all this comes as Tyco, perhaps best known for former chief executive Dennis Kozlowski's scandalous compensation and decadent lifestyle, creates its first global governance systems. "I am creating an organization that never existed, as all the functions of the corporation are being created, and aligning it back out to businesses that are changing too," says Deasy.
Tyco's goal: to capture the efficiencies of an integrated operation. That means using its size to negotiate better prices on goods and services, and reducing its investment in real estate by sharing facilities instead of maintaining multiple offices in one city. It also means sharing information, processes and practices across the company, and using shared IT services whenever feasible. "All these areas have a significant IT need associated with them," says Naren Gursahaney, Tyco's senior vice president of operational excellence. "We buy nearly $16 billion worth of stuff every year, and to negotiate those purchases we have to share quality information in close to real timewe need 260,000 people buying off a new contract. We can't do that now."
Tyco also wants to pay down its $17 billion in debt and invest in new-product development, so it's aiming to free $3 billion in cash from its operating budget by 2006. For the 12 months ended June 30, 2004, Tyco had an operating profit of $3.1 billion on revenue of $40.3 billion.
Company | Tyco International Ltd.
Corporate Headquarters | Bermuda
U.S. Corporate Headquarters | Princeton, N.J.
Senior Vice President and CIO | Dana Deasy
Revenues | $40.3 billion (trailing twelve months)
Profits | $3.1 billion (TTM)
Stock performance | 52 week high-low: $33.26$20.30 Oct. 8: $30.64
Source: Tyco;Yahoo! Finance
Aligning information technology with all of these moving parts is "critical" to Tyco's success, says Gursahaney, the former chief executive of GE Medical Systems (now GE Healthcare Technologies) in Asia and the Pacific, who now runs Tyco's Six Sigma, strategic sourcing, real estate and working capital initiatives. "IT is a huge enabler of what we are trying to do," he says. "It would be destructive for them to be off doing something independent, because it would dilute the financial and people resources, and the focus of our management team."
To that end, Deasy is putting in the building blocks for companywide communication and working to foster a common culture where none has existed before. The new Tyco will remain decentralized, rather than run from corporate headquarters, but the level of shared resources and human interaction will increase dramatically. Deasy has unveiled an ambitious plan, called the "IT Vision and Roadmap," which defines his course for the next three years. It identifies five "must-do" projects, along with nine "selected opportunities" that involve business segments according to their particular needs and circumstances.
The must-do list is not a litany of sexy tech projects. Instead, it includes foundational and cultural items, things Deasy says "any good corporate CIO should do," including enhancing network security, ensuring business continuity, providing thought leadership across the company, creating uniform policies and procedures, and rationalizing vendor management. Deasy calls this list "non-negotiable."
The list of opportunities involves the wiring, plumbing and procedures that will make those five must-do's possible. Among them: the One Tyco Network, a global network for companywide communications and applications; an Enterprise Directory to replace about 150 current directories and allow people across Tyco to find each other; an outsourcing strategy; data-center consolidation; IT asset management, for tracking and standardizing equipment and software; a global finance assessment to look for chances for better reporting and more financial flexibility; annual strategic planning and portfolio-management programs; centralized IT program management; and identifying better ways and means of sharing information and knowledge across the company.
Focus was a fundamental issue. "We didn't want to simply assume that we need one network, or one corporate directory," says Deasy, although those projects did end up as priorities. "We need the basic plumbing and connectivity, so there is opportunity in infrastructure. We went after areas where we could establish common building blocks."
It was important to know what not to spend on, too. "We've never done anything together. No systems are tied together. So what value is there in assessing the application landscape? We are not about to go build the mother of all ERP systems." That would be too costly and time-consuming; instead, Deasy will use the global financial assessment on the "opportunities" list to find ways to make financial reporting more efficient.
The roadmap was announced in April. Getting to that point was a daunting journey, and a huge job remains. But Deasy, the former chief information officer for Siemens AG's North and South American operations, says the challenge, when offered, was irresistible. "My God, why wouldn't you come? It's a green field, an enormous start-up."
: Planning Ahead">
Deasy began without a clear picture of the road ahead. "There was no charter to do one thing first," he says. "Breen's premise was to go out to the vast array of Tyco businesses to figure out what we can do together."
So on that first lonely day at Tyco's Manhattan headquarters (the company has since relocated to Princeton, N.J.), Deasy took off for a tour of Tyco's five business segments: Tyco Fire & Security (including ADT Security Services, Inc. and other brands); Tyco Electronics (including AMP); Tyco Healthcare (medical devices); Tyco Plastics & Adhesives; and Tyco Engineered Products & Services. (A fiber-optic network unit is up for sale.) "The week I joined was the week Ed Breen started the first-ever strategic planning reviews with our companies," he says. "That night I was on a plane to begin two solid weeks of reviewing all five operating and strategic plans. It gave me a sense of where they were on technology, how they used it, or not."
The trip was important to managers in the field, too. "A lot of people felt wronged by the scandal," says Ronald Vance, CIO of Tyco Electronics. "They were doing their jobsthis was no Enron. New management walked into the middle of it, and credibility had to be earned." Deasy's visit was critical to turning that perception around.
Kozlowski had acquired more than 1,000 companies, many of them market leaders, and they had been integrated willy-nilly into their respective business segments according to each organization's prevailing culture.
One priority for Deasy was people: He had to build a corporate staff, and he needed help in the business segments. There were incumbent CIOs at Healthcare and Electronics, but the other three had never had a CIO. Deasy worked with the segment presidents and the corporate staff to get agreement on the need for segment IT chiefs.
Deasy also worked with consulting firm DiamondCluster International Inc. on a companywide inventory of people and property. An earlier audit of enterprise risk gave him some leads, but much of the world map was still white space. "We didn't know what we spent on IT," he says. "I had no idea of the state of IT at the unitshow many IT professionals we had, where they are, what they do."
A critical first step was an inventory of the company's human assets. Deasy prepared a framework, called IT Decision Domain, that describes the world of IT at Tyco, and which is used to set discussions and decisions around where corporate executives should focus their IT efforts across the company. Deasy also learned that Tyco had over 1,600 unique IT vendors, more than 100 for telecom alone. There were 140 separate networks in the company, some 500 payroll and 400 ERP systems. "Everybody had gone out and bought and built a complete IT set of infrastructure and capabilities, and never connected them."
Next, Deasy brainstormed with his corporate staff, business segment leaders and the consultants. That produced a list of more than 200 projects and priorities. "We realized that we needed a fundamental approach," says Deasy. "We asked the businesses what they had underway in terms of new data centers, or redesigning networks, or improving communications to employees, and we said maybe we should look at doing those things once instead of repeating them."
An important question, says Gursahaney, was how much change an organization can digest at one time. "Any corporate-driven initiative is virtually brand-new in our culture," he says. "Two years ago, corporate was here to do deals. Period. We will find ways to make use of the synergies between the segments and meet the needs from the corporate side, too."
: Band of Brothers">
Band of Brothers
Tyco's transformation was far from a unilateral process dictated by Deasy. The business segments are so different that a top-down, one-size-fits-all approach wouldn't have worked, even if he had tried it. Deasy had to align to diverse needs and capabilities, and he needed to work with the business segments to do it. "There was not a sense of Dana laying it all out," says Gursahaney. "This was iterative, with CIOs and presidents from all segments weighing in, along with functional leaders like myself." But the new global culture and IT initiatives can't get in the way of the ongoing businesses. "We have to deliver on the financial side at the same time that we are moving down the track with the IT vision."
Deasy worked carefully with the people who actually make money for Tyco's shareholders. "In one case, I was being pushed by a segment chief executive to get him a CIO," he says. "In two others, there was education required as to why they needed a CIO at all. That's alignment, convincing them of the need."
So Deasy became a cheerleader. He produced a video and a flipbook for internal consumption, and used the marketing slogan "Feel the Difference" on documents and slides. He formed technology councils with the segments to focus on specific projects and needs. "We used to have limited opportunities to engage with our peers in other segments," says Vance. "The knowledge you share, the relationships you formit's important to the business. It helps us align our needs and capabilities."
Those factors vary from one segment to the next. Consider two huge businesses with very different IT historiesone a "have" and the other a "have-not," in Deasy's terms. Tyco Electronics, with $10.4 billion in 2003 revenue, had an experienced CIO and well-integrated systems. Tyco Fire & Security was a $11.3 billion business with nobody in charge of information technology.
Tyco Electronics was built around AMP Inc., the venerable component-maker acquired by Tyco in 1999. AMP had undergone its own process of creating a global IT organization under Vance, who became the then-independent company's first CIO in 1996. He integrated 93 acquired companies, each within six months, in the two years after Tyco bought AMP. His mature, shared-services organization looks a lot like what Deasy is creating at the corporate level. "We are a role model for Tyco as an entity," says Vance. "Dana has leveraged existing expertise and best practices. Part of the success factor is that he is willing to share the credit." Tyco's directory and network is being built on systems in use within Electronics.
Vance's focus is on selling components. "The alignment of Ed's strategy and business segment strategy is in lockstep," says Vance. "Tyco always starved R&D. They just wanted us to send money. But Breen gets R&D as a key to top-line growth." One important new project: a global account-management program to let accounts across different industries use common parts numbers and account data.
|Greater than the Whole|
|Tyco International Ltd. sprawls around the world with five big business segments, each with its own IT landscape and culture. Dana Deasy's job is to tie them together so Tyco can use its size to advantage. The players:|
Company | Tyco Electronics
Corporate Headquarters | Harrisburg, Pa.
CIO | Ron Vance
Revenues (FY 2003)| $10.4 billion
Company | Tyco Engineered Products & Services
Corporate Headquarters | Exeter, N.H.
CIO | pending
Revenues (FY 2003)| $4.7 billion
Company | Tyco Fire & Security
Corporate Headquarters | Boca Raton, Fla.
CIO | Ina Kamenz
Revenues (FY 2003)| $11.3 billion
Company | Tyco Healthcare
Corporate Headquarters | Mansfield, Mass.
CIO | Steve McManama
Revenues (FY 2003)| $8.6 billion
Company | Tyco Plastics & Adhesives
Corporate Headquarters | Princeton, N.J.
CIO | Kevin McCarthy
Revenues (FY 2003)| $1.9 billion
Things were different at the Fire & Security segment, which includes some 60 brands, products and services. The unit had never had a CIO before Ina Kamenz was recruited by Deasy, from Marriott International Inc., in October 2003. "I asked in the interview, 'How many IT pros do we have? What's the budget, what systems are there?'," says Kamenz, a hint of her native North Carolina in her accent. "Dana said, 'If you need to know the answers now, you are not my gal, because we don't know.'
But Kamenz knew she would be aligning with a receptive business. "There was a clear, strong interest by my boss, Dave Robinson, the president of Fire & Security, to achieve integrated IT within the segment," she says. During her first week she attended Breen's initial global leadership meeting, which brought together 300 executives from across the company. While Deasy did his global assessment, Kamenz did a similar job within her own segment. "First I had to find my IT managers," she says.
Now she has nine regional CIOs who report to their own presidents and to her. They are working together on a three-year plan to do things like reduce the number of ERP systems to perhaps two or three across the huge segment. And always, she says, "We are letting changes in the business drive our decisions."
Aligning her IT shop with corporate has been a collaborative effort. "Dana dug deep on some things, and sailed high on others; I fed information up to him." Fire & Security is following the data-center-consolidation plan and looking forward to the global network. "I need that bandwidth to support a global inventory project we are doing," she says. The enterprise directory is less of a priority for her, if only because she has so much else on her plate.
"I don't need Dana's sign-off to do something, but I do need support," she says. "I talk with him weekly, and I keep in the loop on his initiatives and what is happening at our other business segments." Part of her role is to drive toward a segmentwide integrated planning methodology that will keep business and IT planning aligned.
"Every month, I attend the operating reviews of our business units, sit through the financial reports, marketing programs, and legal presentations," says Kamenz. "I'm always looking for common business processes I can leverage. If we have a success with ERP in Germany, we want those people to work on ERP in Asia. We have common processes that drive earnings across the company, when in the past people didn't even know each other." Everything, she says, is driven by the business priority, not technology. "Our goal is to help generate revenue in a way that gets value to shareholders."
Deasy and his lieutenants understand that alignment is a moving target. Already they have their eyes on Tyco's next business strategy transformationa return to buying more companies. "Ideally, in the second half of 2005, we will start modest, accretive acquisitions," says Gursahaney. By then, Deasy's grand plan should be realizing resultsjust in time to support the next phase of Tyco's reinvention.
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