Don't Just Implement Strategy. Evolve It.By Marianne Broadbent | Posted 02-05-2005
I get nervous when CIOs explain to me that their primary focus is implementing business strategy. If they are new to their positions and they mean they are trying to fathom what the business strategy process is so they can be part of it, I relax a bit. But if they think their job starts and stops at merely following the business strategy, then I get nervous again.
A few weeks ago, I asked a group of about 70 CIOs to write down the words they use to explain to their executive colleagues and their IT teams how information and IT is helping build their organization's success. About 20 percent had no trouble at all, but the remainder seemed to find it a difficult exercise. A few skeptics even muttered that they "didn't believe in the vision thing."
The vision thing is not about using the very latest technology. It's about thinking creatively about new business opportunities, or how to reshape fundamental business problems and business processes. Effective CIOs create and communicate an IT-related vision for their enterpriseand there is both an "I" and a "T" in IT. It is why organizations appoint a chief information officer as their top IT-related business executive, rather than elevating an IT manager to be their most senior IT person.
Nor does the vision have to be grandiose. It can be as simple as "taking costs out of the supply chain." But the exercise left me wondering how that 80 percent conveyin deeds, not just wordstheir distinctive role to their colleagues. How do they lead and inspire their teams?
Consider Paul Martin, now CIO of Rexam plc, the world's leading beverage-can maker, with sales of £3.2 billion in 2003 and more than 20,000 employees. His vision of using technology to bind customers more tightly to Rexam, among the top five consumer packaging companies worldwide, shows how CIOs can be directly involved in creating significant new business opportunities.
In 2000, a year after Martin joined American National Can as CIO, the company was acquired by Rexam and became Rexam Beverage Can Americas. The beverage-can business is more than a century old, with business processes that have changed little in all that time. At the beginning of his tenure, Martin discovered that most orders were taken by phone or fax, keyed into a spreadsheet, held for days in anticipation of changes, and then faxed to a plant near the customer, where the orders were re-keyed into back-office systems. Martin perceived an opportunity to use technology to provide significant business benefits by reducing errors and costs in the ordering process and more tightly integrating customers into Rexam systems, and thereby making it harder for them to change to another vendor.
When he told his commercial and sales colleagues, "there's a way to leverage the Internet here," they insisted that Rexam customers would never enter an order online. He argued they would, "if we can demonstrate the value to them."
Rather than investing in a large customer-relationship management system, Martin's IT staff first built what they called "CRM made simple"a platform and some applications based on feedback from Rexam's commercial group and customers. Martin tested the system on one customer and one location. While the customer liked what he saw, he suggested a number of improvements, then rolled out the system to all locations and standardized its U.S. operations on Rexam's system. Martin's vision of using technology to bind customers was being fulfilledwith benefits for both Rexam and its customers. Rexam improved its cash flow by millions of dollars while reducing order errors to essentially zero. Customers enjoy convenience, a range of reports, and the ability to slice and dice their data in any number of ways. They can now inquire about order status online, and changes are handled automatically. The system allows more interaction but hides the complexity of the interactions, making work simpler for both sides.
The beverage-can business normally grows a mere 1 percent to 2 percent a year. Generally, the only way to improve margins is to cut costs. In late 2001, Rexam increased prices for the first time in 25 years. In renegotiating its contracts, Rexam's vice president of commercial sales added a clause that stated, in essence, "If Rexam delivers exceptional value to you, we will come back to you for another price increase."
Obviously, customers wanted to know what that meant. In response, Martin visited these customers and gave them presentations about what Rexam was doing and the potential benefits. Says Martin: "It's my job to translate our systems solutions to [our customers'] business problems. These are not IT projects. These are company projects." Martin spent as much time giving presentations to these stakeholders as he did educating Rexam employees.
In January 2004, Martin was named worldwide CIO of Rexam.
Clearly, Martin had a vision for his company built around IT as the way to create a competitive advantage in its relationships with its customers. Realizing that vision meant creating, developing and implementing the IT systems that would give shape to the opportunity. He didn't simply identify IT processes and services that would help implement business strategy. Instead his efforts evolved the business strategy, creating a new source of competitive leverage for Rexam.
CIOs who provide real value to their organizations play a key role in providing insight and foresight for their executive colleagues about the possibilities of technology. They don't just accept things the way they are. They have a vision for how IT can contribute to their organization's success. That means really understanding business directions as well as core business processes, and thinking through how emerging or even current technologies can get better competitive leverage for your business.
Some meaningful examples of "IT-enabled visions" from leading CIOs include "e-enabling the customer" (Paul Coby at British Airways), "transforming the organization" (Jane Treadwell at Australian government agency Centrelink), and "making work easier" (from a manufacturing firm headquartered in France). Each of these is grounded in deep knowledge of how IT can contribute to the business.
Of course, having a vision is not enough. You have to share it effectively with your IT team so they truly understand it and can play their part. There is nothing more powerful than the whole IT organization having a clear and simple "elevator pitch" about the role of IT and what their role is in the organization.
Then, you have to make it real for your business and IT colleagues. They have to believe you are authentic about it, by showing them what it means. That's what Martin did at Rexam. He took a "sense-and-respond" approach by testing the Internet-based approach in one location with one customer. Doing so let him test innovative ideas in small, risk-managed ways so he could demonstrate the reality of a potential business opportunity.
Every CIO position in midsize and large organizations should come with a health warning: "Be warned. If you wish to succeed in this position, you need to do more than just know what the business strategy looks like. You need to help shape it with your insight and expertise." If you're not part of the process and you wait to be asked, you'll always be playing catch-up.
Marianne Broadbent, associate dean at the Melbourne Business School and a Gartner Fellow, is focused on achieving business and IT synergy. Her next column will appear in May. \