Trends: Change Agents

By CIOinsight  |  Posted 05-01-2001

Trends: Change Agents

 

Introduction

As a technology executive in the cement business, Dave Codack has never been on the cutting edge of the Internet revolution. But this spring, Codack suddenly finds himself front and center. He is leading one of the most ambitious SWAT teams in the business world these days. Called iSTARK, its mission is to move Swiss cement giant Holderbank Inc.'s loose collection of 73 European and North American member companies onto the Net, and then teach them how to use it to cut costs, boost efficiency, and change the way they interact with customers and suppliers.

Why the rush? Holderbank, the world's leading cement producer, boasts operations in more than 70 countries, on every continent, with 2000 sales of $8.2 billion. With what cement industry analysts cite as a paltry 3 percent return on assets in North America last year, the company needs its new SWAT teams to help its member companies get leaner and more productive—fast. Rivals are beginning to chip away at its lead: The world's second-largest cement company, Mexico's Cemex, with $5.6 billion in 2000 revenues, already uses a combination of the Net, wireless and GPS systems to get cement to customers faster, decrease order errors and use fewer trucks to do more work. The result: Cemex's worldwide return on assets reached 17 percent last year.

Holderbank isn't there yet, says Codack. "Most stuff in this business is still done with a pencil on the backs of envelopes," he says. But with energy costs rising—and the power of the Net to cut waste and costs—"we're going to use technology to help us get more efficient," he says. As CEO of iSTARK, Codack has high hopes: He's shooting for a 1 percent to 2 percent reduction in production costs and a 50 percent to 75 percent decrease in error rates on deliveries, just for starters.

It's a tall order, and the most challenging assignment of Codack's 15-year technology career. But the hardest part isn't the technology; it's the cultural issues. Team-building is difficult at any time, but in Codack's case, the nine-month-old, 15-member, multinational project team he's created is half-virtual—it often meets via e-mail and conference calls—and it's facing more than the usual cultural challenges. "The French dream a lot, have a lot of great ideas and can't execute, where Belgians are practical and less visionary. And what's built in Belgium won't be accepted carte blanche in France," he says.

What's more, Codack's team grapples with all of the usual frictions that arise when tech people have to work closely with business people on critical e-business projects. It's all the more difficult when team members are culled from four nations, speak eight different languages and are dispatched as a mobile, quick-response unit to wire up tech-starved companies within the Holderbank consortium. So far, the iSTARK team is helping them build Web sites and digitizing their company inventories, transportation systems and sales forecasting methods. But in the process, Codack's team is also rebuilding the corporate culture and expanding the role of the CIO. "What's required on the technical side is significant enough," Codack says, "but it's everything else that keeps me up at night."

Peek at the Future

Peek at the Future

To be sure, there's nothing especially new about a business-technology project team. But iSTARK—"stark" means ultra-strong in German—provides a peek at the future. Codack's team is one of the early examples of the kinds of teams that Stamford, Conn.-based research firm Gartner, Inc., for one, says a majority of companies will be creating over the next six years to wire up their operations to the Net, both here and abroad. The iSTARK team is elite, it's got clout that goes well beyond the IT department, and, like an Alpha squad on the front lines of battle, it's being charged with instigating global e-business projects that will give Holderbank's member companies the technology they need to drive the business and compete better against rivals. Such operational teams represent a new trend in technology-business teamwork that's just starting to take hold at companies around the world. While iSTARK may be more ambitious than most, dozens of companies—from Bayer to Shell Oil to Ingram Micro—are deploying these new types of CIO-led project teams to boost productivity, cut costs, and respond faster to customers at home and abroad.

"It's no longer the case that companies are just forming teams within their own walls," says Jessica Lipnack, co-author of Virtual Teams. "Now they're forming teams across company lines and national borders. So you have teams that are cross-organizational, cross-company, cross-culture, cross-hierarchy, cross-technologies, cross-languages, cross-functional—cross-everything."

A recent Gartner study says the spread of globalization, e-commerce and the cost-cutting potential of the Net have made these projects "mission-critical to many enterprises." More than ever, the study notes, "technology is critical to the business, and companies need to take further steps to reduce the threat of cancelled technology projects, ballooning costs and ever-receding delivery dates."

According to Sarah Moulton Reger, a teams expert at IBM's Business Innovations Services, e-business requires companies to create a powerful new kind of team to be able to meet the unique complexity and speed challenges involved in wiring up operations to the Net. "The fact that e-business touches all functions, can change the culture and requires companies to move fast to implement these projects means you have to bring a lot of people together quickly to keep your rivals from eating your lunch," Reger says. Building new cross-functional, cross-operational teams can boost companies' chances for success.

Unlike traditional technology project teams, this new breed is more global, more disciplined and more accountable. So far, says Jim Johnson, chairman of The Standish Group International, a research firm based in West Yarmouth, Mass., these new teams can, on average, cut error rates and waste, for example, by 30 percent to 40 percent.

What makes these teams so effective? For one, in most cases, they're being modeled after—or becoming extensions of—the crisis management teams or "war-rooms" built by companies to beat the Y2K bug on time, within budget and at minimal disruption to day-to-day operations. Gartner says that 40 percent of its corporate clients still have these project management offices in place, and most of them are being retooled to better manage future e-business rollouts. "These offices are the chief way that many companies will gear up for e-business over the next four to five years, says Matt Light, a Gartner research director.

Not all the teams are alike. "These new teams are smaller, more user-friendly and more highly focused on results, so their success rate is prone to be much higher, and user needs can be satisfied more quickly," says Standish Group's Johnson. "If the application is critical to the business, the business naturally is going to benefit."

Typically, these new teams have extensive representation from the business side. Codack's team, for example, includes a project sponsor from manufacturing; a full-time CTO; two full-time people who focus on content management; sales, administration and engineering representatives, and various project analysts and account managers. Each time the team moves into a new country, Codack uses his account managers to acclimate local staffers to the project, get their buy-in, and brief them on scheduling and project details. "They get close to the locals and get them jazzed about all the changes that are coming," says Terry Stuart, a partner at Deloitte and Touche who is helping Codack create the initiative for Holderbank (which will change its name to Holcim Ltd. this summer). Codack then sends team analysts into client companies to size up their systems, find out what versions of software they're running and what sorts of middleware is best suited to tie them into the overall IS operation.

"One of my key challenges is to retain as much consistency with the system as possible while providing the flexibility customers in each country require," Codack says.

But speedier, payoff-conscious tech rollouts aren't the only benefit of these new-age teams. By their very scope and nature, they are also starting to rewire the corporate culture. At Ingram Micro, for example, a set of eight high-powered tech-business teams are completely replacing the company's old departmental structure (see Case in Point) to make the whole company more customer-centric. In place of the accounting department, for example, now there's a team composed of people from sales, IT, marketing and finance who work together to figure out such traditional accounting tasks as pricing.

"We're dividing work into teams based on function, not process," says Ingram Micro CIO Guy Abramo. "People see their jobs differently now and are more focused on the customer. We're more focused on competitors, too, now that there's less rivalry internally."

Another benefit of these teams is that they can cut through old-style corporate bureaucracy to speed decision-making on key projects. GFInet, a Wall Street brokerage, uses companywide cross-functional teams to help move new financial services products to market. GFInet CIO Russ Lewis recently reorganized the 14-year-old business into three teams. Called the Triangle, these teams are divided into product development, business payoff and technology solution groups.

Early results are good: Lewis estimates that the use of these teams has cut by one-third the time it takes to initiate a new tech project. "Turnaround time is much faster," Lewis says. "With teams organized by function, you have all the players you need to make decisions in the right place at any given time. A lot of time on these technology-business projects is spent simply getting to the point of 'go' or 'no-go.' By using these new teams, that time has been reduced significantly."

The CIO as CPO

The CIO as CPO

Inevitably, these new business-technology teams are also redefining the role of the CIO. As the teams take on more responsibility for Net-focused, corporatewide cost-cutting initiatives, CIOs must become more skilled at business strategy and managing change. They must also be willing and able to operate at higher levels within the organization. "The CIO is emerging as the driving force behind these challenging new implementations," says Johnson, "as a kind of chief project officer."

The CPO, says Gartner, is a CIO who has companywide responsibility for e-business and other technology projects. He or she must function like a field general, commanding a view of what everyone is trying to do, and then making sure all of the various technology initiatives work when wired together.

"The CIO as CPO has to enforce an integrated approach to project management," says Jim Duffy, a partner with Deloitte.

"A lot of these projects have dependencies and interdependencies that lend themselves to a kind of Desert Storm approach to managing change."

But not every CIO will be up to the job: According to Harvey Robbins, author of The New Why Teams Don't Work, team members dispatched to these new projects sometimes aren't as skilled as they need to be. "They've overblown their capabilities, and as a result something may go wrong," he says. "The CIO has to come to the rescue in those cases" and is far more likely to take the blame for failed projects.

If CIOs are to evolve into skilled project managers, whole new skills may be required—from the ability to recruit top talent and build teams that work well together, to diplomacy and consensus building and a knack for winning top corporate buy-in for key projects. Another plus: having input into issues once left solely to marketing. Just ask Codack. "In my last job, I was a CIO," he says. "I didn't normally get involved in areas like branding, marketing and business development. Now I spend 30 percent to 40 percent of my time on those types of things."

What's more, CIOs as project managers are more visible inside the company—and more vulnerable politically. "It used to be that if an installation didn't work, it was a tech department problem," says author Lipnack. "Now, if a CPO blows a CRM installation, it's an enterprisewide problem, and everybody knows it; it's damaging to the bottom line, and the CPO is the one who gets the blame."

The new trends also mean that some existing CIO skills just got more important. In the new role of a CPO, for example, there's even more pressure on CIOs to learn how to lead, juggle three or four different projects at a time, and mitigate cultural differences in-house, across industries and across borders. The stakes of failing are higher than ever, says Gartner.

CIOs see the writing on the wall. Michael Earl, professor of information management at the London Business School, says LBS survey data shows that CIOs understand all too well that more is being expected of them—and more still over the next four to five years. "The new CIO is quite different from the CIO or IT chief of old," says Earl, "and the expectations of top management are likely to keep rising."

Over the next four to five years, Gartner analysts say, all CIOs will begin to take on some or all of the companywide project management responsibility. Whatever the team structure, Gartner recommends that CIOs first set up a formal project management office—or expand the one that was created to make Y2K fixes. This, Gartner says, will bring heightened awareness and discipline to new technology rollouts—chiefly e-business initiatives.

"With the trend toward more matrixed organizations, less defined job roles and more enterprise work being structured into projects, some form of project office is essential to help executive management get a grip on project portfolios," says Light. He cites a 30 percent to 40 percent increase in the past two years of companywide work being assigned to project teams. "There's a lot of nervousness being caused by [top corporate] execs having little visibility into projects," he says.

Two Different Models

Two Different Models

According to Gartner, two main types of PMOs are being formed from the Y2K offices of old. One is a kind of project office that serves mostly as a passive data repository to help guide the teams and log their progress and activities. At Shell Oil, the Y2K project management office has been reconfigured into a kind of central repository for information about past projects and best practices, methodology and content—even previous Web site design templates. Teams can use the office for resources and for some help in project monitoring. "This way, when future stuff comes up, you don't have to reinvent the wheel," Light says.

But elsewhere, the PMO functions more like a command-and-control center, charged with overseeing projects from start to finish—and actively enforcing project budget, quality and deadline requirements every step of the way. At Bayer, the old Y2K project management office is being elevated into the prime contractor for e-business project consultants, vendors and integrators. It oversees responsibility for all tech-business projects, as well as being responsible for assessing their scope, allocating resources and verifying time, budget, risk and impact assumptions.

These types of PMOs are also being used as coaching and team mentoring centers, where executives with years of project and team experience can help train young recruits in the art of companywide project management skills, project deadlines and scheduling details.

At the end of each project at Hughes Aircraft, PMO coaches can help train team members by going over final cost, errors and defects—"the kind of information you can learn from and improve upon," Light says.

The biggest benefit of these offices? They minimize risk, especially on big, complex projects. In some cases, the CIO is the team coach. "A lot of companies dodged the bullet around the Y2K effort, and they did it with a lot of project management," says Light.

A Critical Change

A Critical Change

The trend, experts believe, is the beginning of a fundamental shift in how companies will be organized in the future, so as to accommodate and take advantage of information networks. Stephen Haeckel, director of strategic studies at IBM's Advanced Business Institute, says the creation of high-powered, cross-functional, cross-company business-technology teams is one key way that firms are beginning to transform themselves to become more responsive to customers. In the process, these teams begin to organize themselves around functions rather than departments, as in the old corporate hierarchical order of things. "This is critical to changing how companies respond to customers and define the very reason they are in business," Haeckel says. "With hierarchies and silo-departments of old, it has been much easier to forget the whole point of why you're in business. If you organize by function, though, the entire organization becomes more responsive to customers and adaptive to changing market trends."

Ranjay Gulati, professor of e-business at Northwestern University's Kellogg Graduate School of Management, says that more and more companies will begin to use these types of teams to build new links between partners, suppliers and customers. "Teams have been around forever," Gulati says, "but what is unique is that e-business teams now include suppliers, engineering, customers working together—and companies are outsourcing these activities to these teams." Examples of such teams exist at Ford and such software development companies as Cadence Technologies.

But Gulati notes that such teams won't preempt organizational structures in all companies. "Many still need geographically-focused units, and individual accountability still prevails," he says. Still, such teams are being used by more and more companies to implement e-business, because "e-business is transfunctional—not IT, sales or marketing alone but cross-enterprise. You need cross-functional teams to implement this, and these teams are helping to focus companies around technology as drivers of business."

Don't balk now. Gartner predicts that e-business initiatives are going to be the central focus of CIOs for the next six years. Demand for e-enabling technologies is expected to remain strong through 2004, despite the slowing economy, Gartner says.

Codack, for one, hopes Gartner is right. "There's no turning back for us and for other companies who need to get more competitive, and quickly," he says. Bottom line? New teams, managed well, can get you there faster and more cheaply.

Laton McCartney is a veteran technology and business journalist who is the author of the national bestseller Friends In High Places and is an editor at Sm@rt Partner, a Ziff Davis publication.

Case in Point

Bridging the Gap: Ingram Micro

Ask CIO Guy Abramo what's up at Ingram Micro these days, and he'll tell you he's blowing up the company's old management structure. He's not exaggerating. Abramo has been spending the past year rewiring the Santa Ana, Calif.-based technology distributor for the Net—and restructuring the company's culture in the process. His goal: Do away with the company's old departments, organized by business functions such as billing or purchasing, and replace them with eight different business project teams organized by process—such as pricing.

It's sweeping stuff. "In the past, when setting a price, purchasing needed to say what customers paid, operations had to weigh in with what the customer should pay and then sales would offer an opinion on what they thought Ingram should charge," Abramo says. "Everyone was working on pricing but nobody was working together because people were organized into departments." Now, though, with the help of a new in-house networking system, everyone works together as a team, digitally, to set a price. As a result, price-setting can be done in a fraction of the time. IM also hopes that in-house efficiency, customer response times and, eventually, revenues also will increase.

Why do this now? Abramo believes his new teams will help IM stay competitive in an industry where, in the past year alone, profit margins have dipped to as low as 1 percent on some products, and consolidation has shrunk the number of players from five to two—IM and Tech Data.

Sure, it's risky. But the hardest thing about rewiring IM is not the technology; it's choosing the right people for the right teams. IM rates people on their analytical and critical skills, and Abramo gives them personality tests to determine who's fit to be on a particular team and who's fit to lead one. "This is hard stuff," agrees Abramo. No kidding. Still, it's a lot easier to rethink an infrastructure than to build a whole new one from scratch.

Ed Sperling is a veteran technology editor and writer, and editor-in-chief of Sm@rt Partner magazine.

Teams

: Why They Fail">

Teams: Why They Fail

A lack of clarity around goals and objectives

A lack of clarity around roles and responsibilities

Unforeseen barriers: political or structural walls that sidetrack collaborative efforts

Lack of collaborative environment and open communications

A lack of performance feedback and rewards

Source: The New Why Teams Don't Work, by Harvey A. Robbins and Michael Finley

Resources

Resources

Books

The New Why Teams Don't Work: What Goes Wrong and How to Make It Right
Harvey A. Robbins and Michael Finley.
Berret-Koehler Publishing, 2000.

Virtual Teams: People Working Across Boundaries with Technology
Jessica Lipnack and Jeffrey Stamps.
John Wiley & Sons, Inc., 2000

White Papers

The Project Office: Teams, Processes and Tools, Strategic Analysis Report
M. Light and T. Berg.
Gartner, 2001.

Organizing for E-Commerce
The Boston Consulting Group, 2000.