When Colin Crook took over the top tech spot at Citicorp Inc., in late 1989, he thought he had it made. Working under legendary CEO John S. Reed, Crook had landed the CTO job at the country's largest bank. Fat with profits, Citicorp had an unbridled ambition to become the world's first global consumer-banking brand. At the time, he recalls, it was hard to imagine anything going wrong. In a few short months, however, he didn't have to use his imagination.
By the summer of 1990, it became apparent to the company, as well as to its shareholders and lenders, that Citicorp was in the midst of a mind-boggling capital crunch. Aggressive loans made to developing countries were faltering. And the company's leveraged-buyout and commercial real estate-lending businesses were under siege as a result of a weakening U.S. economy. Citicorp stock, once the best bet in the business, shed 51 percent of its value in just three months.
To say that Crook's perception of his new employer had changed is to grossly understate the professional anguish the prominent CTO underwent. "It was a phenomenal transformation," he remembers.
Eight years later, Crook left Citicorp in considerably better shape than he found it. And he credits his ability to adapt his "mental models" to the changing reality of the company's business climate. Thanks to Reed, a flexible and naturally curious CEO, and eight long years of cost-cutting, consolidation and forward-thinking technology decisions, the bank, renamed Citigroup Inc. after its 1998 merger with Travelers Group, once again enjoys an exalted status in the banking world.
Since his retirement in 1997, Crook has been working as a senior fellow at the Wharton School of Business, conducting research on so-called "mental models"the preconceived hypotheses by which people, including most business professionals, make decisionsand how those mental models can be altered to create adaptable businesses. Crook credits his own ability to change his thinking for some of the successes he enjoyed while engineering the technology turnaround at Citicorp throughout the 1990s, an effort that included aligning IT with the company's business goals and integrating its far-flung systems. And his research findings are lucidly explained in his recently published book, co-authored with Yoram Wind, entitled The Power of Impossible Thinking: Transform the Business of Your Life and the Life of Your Business (Wharton School Publishing, 2004).
Executive Editor Dan Briody tracked down Crook in the midst of his worldwide book tour to learn more about life at Citicorp and the role of mental models in modern business.
CIO Insight: Life at Citicorp didn't turn out the way you expected when you first took the job, did it?
CROOK: When I arrived, toward the end of 1989, Citicorp was this large, very successful financial institutionarguably the most profitable in the world. And I worked for CEO John Reed, who had a great reputation and hired a great group of people. Then suddenly, within about 18 months, we were in this sort of existential threat, and by that I mean a threat to the very existence of the bank. We were in very, very serious trouble. Even the government was worried about us.
And all of this engendered the most phenomenal journeyor transformationthat anyone could be fortunate, or unfortunate, enough to be engaged in. And it totally changed the public perception of what a CTO could do.
What was your role in that transformation?
When I joined the company, every unit was very successful, or at least they appeared to be, and so from a technological standpoint, we had classical stovepipes. Every line of business did its own thing. We had about 200 data centers around the world. Can you imagine that?
We had this fantastically disparate set of networks, all the software was different, and all the systems were duplicated left, right and center.
So as CTO, it started out as a major headache, looking at this and saying to the chairman, "Listen, this doesn't make a lot of technical sense, but also, and more important, it doesn't make a lot of business sense." So we began to engage in dialogues with all these lines of business. But to be blunt, all these guys had what I would now call mental models, which were "I'm running a very successful business, so get lost."
Then the financial picture changed?
Yes, then came the existential threat. John Reed told the company that we're going to have to do a turnaround, and that we're in desperate trouble. And suddenly the technology imperative became a corporate imperative, and it devastated all these parochial self-interests. Now, because the chairman said we have huge problems, it suddenly changed everybody's view of life.
So that gave you a mandate for technology change?
Correct. Three things happened that contributed to that. The first was this existential threat. I know it's horrible, but it's the most wonderful imperative to change things that simply could not be changed before. I mean, 200 data centers is ridiculous. And that was consolidated to around 20.
The second thing was that we needed to have one customer experience around the world, and you can't do that with 200 systems. We wanted to recognize the customer, any time they touched the bank anywhere, whether in Tokyo or London or New York.
And the third thing was that the world was in the midst of major technological change with the emergence of distributed computing. It was the alignment of these three things that suddenly made the CTO's job at this massive company actionable.
Were you able to cut costs while moving the technology forward?
We did. We're talking about 100 million customers. We're not talking about a few thousand accounts. So we had this massive data consolidation. Through that, we were able to integrate customer credit cards with retail banking and so on, so you could look at all the accounts online and integrate them. But the most important thing we did was to take out enormous costs, which, of course, was the whole reason for doing this. So because we were standardizing our software and eliminating all these duplicated banking systems, we took a lot of costs out of development groups, out of operations, and out of the technical infrastructure.
Let's talk about your book. What exactly is a mental model?
Mental models are the internal predetermined hypotheses you have about the way your world works. A mental model is the way you make sense of the world. People think that the way they operate is that they come into a situation and they look at it as though it is data, and then they analyze the data and make absolute sense of it.
But all the research has shown that the brain is hypothesis-driven, which means that people say, "Here's how I think the way things work"it's already predetermined in your head. Then you look at the data. The problems arise when the data really doesn't match your speculation, your hypothesis.
Are mental models a bad thing?
No, it's just the way we operate. That's why we're so successful. Evolution has given us this capacity to quickly size up a situation in less than a second and decide upon a very effective course of action. We're phenomenal at doing this. Computer scientists have tried to emulate and to recreate these capabilities, and it's extremely difficult.
But they can be limiting.
Absolutely. Especially when you begin to get experience, and that is the big threat for senior managers. "Been there, done that; been there, seen that." They start to categorize anything that's going on around them on the basis of their experience.
How is changing your mental model any different from "shifting your paradigm" or "thinking outside the box"?
We're looking at this in a comprehensive way based on the latest thinking in neuroscience and complexity theory. John Seeley Brown said, "It's more important now to make sense than to make products." That's a hell of a good phrase. The difference here is the mental-model approach that we've adopted gets down to a real core basis of how we work, and it's avoiding the fad issue, which we're all so vulnerable to.
This is pretty abstract stuff. Do you think CIOs can use this concept?
This is all based upon the research we did at Wharton. We put an immense amount of effort into giving lots of examples, in order to give it real, hard, practical traction, because we're a business school, and we're focused on actionable concepts.
So you're absolutely correct that the neuroscience and the underlying theory is quite, well, extremely complicated. The real issue, though, is how to make it communicable to practitioners. We wanted to make a cookbook, and not something that becomes so esoteric that people put it down.
What self-limiting mental models do you think CIOs suffer from today?
I think the CIO still suffers from being painted into a corner and not understanding the business issues. The profession has defined itself in a very unfortunate way, andat least it's my mental modeltechnology is so pervasive that the practitioner of IT has really got to become much more of a renaissance person, rather than the narrowly defined sort of person that used to be, say, the classic 1980s model.
What mental models are holding industries back today?
We were talking to the guys in the entertainment industry in Hollywood last January. Everything has changed in this business: the very business model, the way they thought about the consumer. And the consumers themselves have changed. All of a sudden, there were millions of self-empowered consumers, a lot of them very young people, sharing files. And this has become a major technological issue. But it's also a cultural issue and a major business issue. And guess what? The CIO ought to be right in the thick of those kinds of discussions.
Apple has finally come out and done something innovative. But a lot of the entertainment industry simply couldn't come to terms with the way the world was going. This is a classic mental model: Something's going on and I don't get it.
So much of a CIO's time is spent on day- to-day problems. How can they get the broader perspective they need to address these bigger issues?
When you're a CIO, you have to handle multiple sets of demands. You have to reprioritize and refocus constantly, according to the shifting dynamics of what's happening in the company. So what we prescribe is shifting the areas of focus until you make sense of it. When you want to take action, you pull back and look at the context. Then once you've got the context, you focus in again. It's called zooming in and zooming out.
If you don't understand the context of what the hell you're doing, you get into big problems. You have to discard this idea that there's only one absolute priority in your company. The world is simply too complicated. So if you're a CIO, you have to spend time making sure you know what's going on around you. At Citicorp, I had a program where once a quarter I would take John Reed to hang out for a day with interesting people. The idea was to keep plugged into what's going on in the world.
Any examples of companies in the IT industry that have changed their mental models?
It's a well-known example, but let's take Microsoft and the Internet. It was a classical mental-model example, whereby the lines of business really didn't want to come to terms with the Internet. And yet a lot of technical people inside Microsoft got it.
It took the chief architectwhich is what Gates's job really was even before he redefined himselfto go away for a couple of weeks and then come back and announce the vision. And suddenly everybody said, "Well, now we get it," because the chairman, Gates, this charismatic figure, suddenly got it. Then he transformed Microsoft. If they had not done that, this would have been a major, major issue for Microsoft.
And we'd be living in a Netscape world.
This article was originally published on 12-01-2004
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