Creative CIOs

Dec. 21, 2004
They're moving out of the back office and into the mainstream of companies -- with dramatic results.

When David W. Smith joined Pittsburgh-based PPG Industries Inc. as vice president of IT, one of the company's core businesses, automotive glass, was foundering. At the time, insurance companies were becoming increasingly reluctant to process the high volume of customer-replacement claims, a process that was costly, slow, and error-prone. For consumers getting a claim resolved often was an exercise in frustration that involved multiple calls to the insurance agent and glass-installation shops. Meanwhile, the big glass chains were setting up their own EDI networks and using their negotiating clout to drive down glass prices and drive a number of independent shops out of business. The bottom line: PPG was losing customers and seeing margins for automotive glass shrink. PPG's response to this challenge was to have IT, along with marketing, purchasing, and a number of other departments, create a new line of business called LYNX Services. This automated claims center manages auto-glass claims for insurance companies by arranging with glass service shops for policyholders to have their car windows replaced or repaired. Using state-of-the-art switching and communications technology from Lucent Technologies Inc. and other vendors, the center also handles billing and payment. The center, which went into operation about 18 months ago, now ranks as the nation's largest auto-glass claims processor and will have about 900 employees when a third service center opens soon in Paducah, Ky. "LYNX Services represents a unique partnership between insurance companies, independent glass installers, and PPG to provide one-call service to consumers," Smith says. "The integrated telephone and computing technologies supporting LYNX form a new core competence for PPG, which we expect many other business units to use to build additional customer partnerships." LYNX Services clearly is having a positive impact on PPG's business, as are similar IT-driven initiatives in other companies. As an example, Sea-Land Service Inc., Charlotte, N.C., is introducing a new technology system for the management of customer cargo and attendant information requirements. The technology initiative, a proprietary system called Shipment Management, will allow vast improvements for customers including:

  • Customer profiles that contain critical information about customers' service preferences.
  • Customized reporting capabilities from a single data repository for all shipments.
  • An Electronic trip plan for each movement enabling full shipment life-cycle visibility.
  • Proactive event notification.
  • Instant response to inquiries about service requests, shipments, and documentation.
Similarly, DaimlerChrysler AG, which was struggling to overcome a highly inefficient communication system that linked the automaker with its 20,000 suppliers, worked with IBM Corp. to design an extranet called SPIN that anticipates and contends with the demands of the electronic economy. It unites radically different systems so that information can be shared globally and efficiently and gives DaimlerChrysler and its suppliers a cost-effective and secure way of communicating and tracking auto parts, packaging, and technology. What do such initiatives have in common? Many of them are being led by a creative CIO who has taken the initiative to move out of the back office and into the mainstream of the business. Admittedly, "creative" and "CIO" are words not usually uttered in the same breath, but recently a new breed of innovative, strategically oriented information chiefs has emerged. What's more, they're having considerable success in creating new products and even new ways of doing business. "The phenomenon of the creative CIO does exist," says George Lindamood, a vice president with GartnerGroup's IT Executive Program. "Frequently they're saying that rather than simply align IT with business, which is the old doctrine, let's use IT to take the company where it has never been before and create a new business. That was the case, for instance, with" "There are some innovative CIOs today who are really part of the business strategy for companies that view IT as strategic," adds Ray Hoving, an independent IT management consultant in New Tripoli, Pa. "As a result, we're seeing a tremendous amount of IT-enabled innovation coming across the business that has changed the whole value chain." "Today the CIO is at the center of many of the most volatile and costly changes in the life of a corporation," says Mark Polansky, managing director and information-technology partner at Korn/Ferry International. "Their role is growing fast in both numbers and importance, and it's evolving as it grows." Korn/Ferry recently completed a study of 340 CIOs in the U.S. and Europe called "The Changing Role of the Chief Information Officer" that underscores how quickly this evolution is taking place. Some key trends:
  • The role of the CIO is moving from technical planning to strategic planning.
  • The ideal qualifications for the CIO are changing as the IT function becomes more central to business planning.
  • The CIO will become increasingly involved with external- and internal-customer support.
  • CIOs, especially in the U.S., tend to be more strongly motivated by new and stimulating job challenges than by financial incentives.
The significance of the IT chief's new role is its meaning for companies that are moving to adopt new business models. Some traditional concerns are perfectly content to have their IT executives focus strictly on managing the technology function and overseeing creativity-numbing tasks such as Y2K fixes. But for businesses that are reinventing themselves in the age of the Internet -- what Lindamood describes as "dot.coming" themselves -- this new generation of IT execs can prove an invaluable resource. "We see clients shifting toward a more increasing-returns model, and the CIO often has a very important role in making that transition," says Charles Gottdiener, partner and strategy product liaison at Ernst & Young. New faces Some of the more innovative IT heads such as Robert Rubin, senior vice president and CIO at Elf Atochem North America Inc., have come up through the traditional IT environment and have adjusted deftly to get in tune with the times. However, they're the exception, not the rule. Typically, the new-breed of CIOs have business rather than technical backgrounds, Gottdiener explains. "They surround themselves with people who have the technical expertise to see through a lot of the hot air out there, but they themselves come out of finance or strategic planning." The Korn/Ferry study indicates that while some 64% of CIOs in the U.S. come from IT-based professional backgrounds today, 36% now have a non-IT-based background. Of this group about a third come from finance, 22% from operations, and l5% from sales and marketing and business management. One such example: Goodyear Tire & Rubber Co.'s vice president and CIO Debra M. Walker, who led the company's recent SAP implementation effort and came to IT from the business side. "Sometimes these CIOs have MBAs," adds Beverly Lieberman of Halbrecht Lieberman Associates Inc., a Stamford, Conn.-based recruitment firm that specializes in IT management. "But it's generally not the rsum alone that will tell you who this person is and if they're really tapped into the business. You have to meet them and find out what kind of an impact they've made in their last couple of environments. Usually they're much more enamored with solving the problems of the business than in the particular course of the technology they should take." At the same time, IT chiefs who successfully implement company-wide applications, such as enterprise resource planning (ERP) software, that impact business processes are earning reputations as innovative, strategically oriented executives. One reason: ERP gives them an overview of the entire company. "ERP or any enterprise-wide software application that gets the CIO embedded in all the company's business applications acts as a major catalyst in changing the role of the CIO," says Lieberman. "An ERP implementation is really what triggers the CIO having the knowledge to see above the technology department." Technology managers who can think beyond the confines of the proverbial box also are having a positive impact with high-speed networks that allow companies to operate globally on a real-time basis. They are employing new software applications that can enhance various aspects of the manufacturing process. As an example, Herman Miller Inc., the office-equipment manufacturer, recently improved its delivery performance by synchronizing operations at its five plants. "Synchronization is key to fulfilling customer demand," says the company's director of manufacturing operations and information systems Frank Mellon, who brought in a software suite called Rhythm from i2 Technologies Inc., Irving, Tex. That software allows the company to maintain customer identity throughout the manufacturing process, thereby ensuring that orders are completed simultaneously and shipped in the customer's preferred sequence. "This was the first time the plants could create schedules that they knew with 100% certainty they could produce," says Mellon. Perhaps the biggest benefits, however, have to do with innovative IT officers leveraging the potential of the Internet to create new opportunities for profitability. These include using the 'Net and electronic-commerce capabilities to make it easier for customers to select and order products. This drives down inventory levels, reduces leadtimes, collapses product life cycles, and improves trading relationships among the company, its suppliers, and business partners. "The Internet allows a business to outreach up and down the supply chain as well as to customers and business partners," says Hoving. "Today if your computer system doesn't have the ability to operate with other companies' systems, you're kind of out to lunch." Challenges In making the shift from a more tactical, traditional role to becoming an integral, innovative part of strategic planning, the CIO faces a number of challenges. "He or she has to make high-stakes decisions and sign off on big-ticket expenditures that the company's top decision-makers may not understand," Polansky says. The new breed also must stay focused on the big picture while constantly improvising and act as a team player while shaking up the status quo. Probably the biggest potential hurdle, though, is gaining access to key decision-makers and acceptance from senior management, especially the CEO. "If the CIO hasn't been admitted to the inner circle of people who think strategically about the business, it's very difficult to be innovative," notes Gartner's Lindamood. Clearly, CIOs have to earn that acceptance, which isn't always easy. "A lot of CEOs are not respective of the power of information," says Ernst & Young's Gottdiener. "They see it as a necessary evil." This view of the IT chief as simply a high-class technician is outdated and essentially counterproductive, consultant Hoving argues. Given that sea change, CEOs must make some major readjustments in their own thinking, Hoving believes. "The CEO no longer can just ignore IT," he says. "He [or she] has to reach out to understand the function. There are going to be some tough issues that the CIO needs to bring to the CEO, and the CEO has to be able to digest those as well as he [or she] does other issues. That requires a level of literacy and understanding that some CEOs don't have." In some companies that level of understanding may be a long time coming. The Korn/Ferry study indicates that despite the growing importance of IT to corporate success, more than 30% of CIOs today have no interaction at all with their CEOs or interact with them less than once a year. It's a good bet that the companies for which these CIOs work will be last in line to capitalize on the benefits of today's technology.

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