Keeping your IT operations lean during periods of business growth will help prepare you for the next economic downturn. Flextronics SVP/CIO David Smoley shares his top three priorities for keeping IT running at its best during good times and bad.
02-14-2011
By Peter High
Flextronics: Keeping IT Running On ‘Just Enough’
In his role as SVP/CIO at Flextronics, David Smoley has had to work within the constraints of a business that is a leader in the application of Lean manufacturing techniques. Rather than view that as a problem for IT, however, Smoley has embraced Lean practices in his own department.
Flextronics is a provider of vertically integrated advanced design and electronics manufacturing services (EMS) to original equipment manufacturers (OEMs). When Smoley took over his current post in 2006, the company, and the economy, were doing well. Rather than use this as justification to invest in a wide array of new technologies — as many IT executives do in good times — he instilled a disciplined team culture around the theme “just enough.”
To read the remainder of the article, please visit CIO Insight.
World-class IT requires the IT group to function as the central nervous system of the organization.
ON Magazine Second Quarter 2010
by Peter High
This is an exciting time for information technology executives. Not so long ago, business executives thought of the CIO as less than a peer—a “C-level” executive in name only. This was due to a combination of factors such as a lack of appreciation for what IT can do for a company, differing educational and skill backgrounds, and an inability among some IT executives to speak the business’s language. In fact, one did not need to go too deeply into the IT organization to find people who had difficulty articulating what the business did on a day-to-day basis.
The past decade has brought about a shift in many IT departments. The best CIOs realize they have a unique perch in the organization, which, if understood well, allows them to weave the IT function into the fabric of all other divisions in a way no other group has the reason or the means to do. There are opportunities for creative and forward-looking IT executives to champion innovative initiatives that serve many parts of the organization. Similarly, IT is in a position to recognize where there are redundancies, inefficiencies, excess capacity, or systems that are working at cross-purposes.
To read the remainder of this article, please visit page 27 of the Second Quarter 2010 publication of ON Magazine.
The article covers:
IT’s Role as the Central Nervous System
Strengthening the Weaker Links
Five principles that contribute to IT excellence
Enterpriseleadership.org recently sat down with Peter High, founder of Metis Strategy and author of the book World Class IT: Why Businesses Succeed When IT Triumph. Peter talks about the changing roles and importance of CIOs within a business’s infrastructure
By Elizabeth Ferrarini
May 19, 2010
EL. What motivated you to write a strategy book for enterprise IT?
PH. For years, CIOs ranked as second-class citizens in the corporate structure. During the past decade, however, the best CIOs have recognized that they occupy a unique perch within that structure. Their relationship with the business units (like Marketing, Operations, Finance, Human Resources, Operations, and the like) can often times run deeper than the relationship the business units have with each other. As a result, the best CIOs can leverage this relationship to add value and to build the top and the bottom line of the corporation. Likewise, they can drive innovation, as it is prudent for them to engage the very players that are mentioned . I have seen many cases where having the right IT leader in a well-oiled organization can help to bring a diverse group of people to talk about innovation on behalf of the company and on behalf of the customer. Thus, the CIO can facilitate a level of collaboration that does not normally happen. We are on the cusp of a real boom in the power of the CIO role. In fact, more and more CIOs are taking their rightful place as true peers of the other C-level leaders in the organization.
EL. Have you come across organizations that have separate IT innovation groups?
PH. Harrah’s innovation group, for example, evolved from IT into something separate. In the beginning, many of Harrah’s IT people populated this innovation group. As time went on, it drew from people across the organization, in areas such as Operations and Gaming Products. Tim Stanley, Harrah’s CIO, was chosen to head this group. As the story goes, during a meeting with the CEO and other executives, Stanley wrote down on a note that the company needed an innovation team. He added a P.S. that he did not want to be the head of the team, however. The CEO convinced Stanley to assume the other “CIO” role- chief innovation officer-as well. As time evolved, the group had a link to IT through Stanley. The separation from IT gave the innovation group a separate degree of visibility. Stanley spent two days a week on innovation and the other three days on IT and product development.
To read the remainder of the interview, please visit Enterprise Leadership.
By Brian P. Watson 2009-11-11
Plenty of CIOs consider their IT operations to be “world class,” but what does that really mean? In his new book, World Class IT: Why Businesses Succeed When Technology Triumphs, Peter High chronicles five essential ingredients for meeting this lofty, and often misused, designation…
To read more, please visit CIO Insight.
Several publications have recognized Peter High’s 2009 management book World Class IT: Why Businesses Succeed When IT Triumphs. A sample of that recognition is below:
For more information on World Class IT: Why Businesses Succeed When IT Triumphs, please visit our book page.
What IT leaders need to consider during mergers and acquisitions
CIOs have a complex undertaking during mergers and acquisitions: They often have to reconcile people and systems of multiple companies while being a driver of cost reduction once a merger is completed. Most mergers fail to deliver anticipated value due to risks that are not fully contemplated and mitigated.
Harrah’s Entertainment has seen tremendous growth over the past decade, much of it fueled by acquisitions. In 2004 the company announced it would acquire Caesars Entertainment. Previously its acquisitions had been mostly one or two properties at a time, but Caesars owned 15 casinos worldwide and the merger would nearly double the company’s size.
Harrah’s IT department has long been a significant driver of business value for the company. In the years before the Caesars acquisition, the department focused on projects that enhanced the bottom line. As a result, other important projects became lower priorities, such as increasing the high availability of systems, knowledge management, and training initiatives.
Faced with doubling its size, Harrah’s IT confronted critical risks associated with systems availability and business process knowledge. IT leadership used the acquisition as a catalyst to push forward on initiatives that had value beyond the acquisition.
Heath Daughtrey, Harrah’s vice president of IT services and integration, was ultimately responsible.
He says, “If planning and execution are done well, these landmark events should incubate competencies that transfer beyond mergers and acquisitions to serve the everyday operations of the company.”
In order to integrate Caesars, Daughtrey focused on innovation, process, and partnerships. Innovation came in areas such as training and testing automation. In the past, training concentrated on the systems, specifically the online menus and reporting. Daughtrey decided to incorporate more business process training. He realized that in order to train more than 5,000 Caesars property staff members about Harrah’s capabilities, the training should focus on the end-to-end business process.
Now, rather than just providing training on the system menus and reporting of a casino management system, training materials explain the flows and logic through all systems on the gaming floor, tailored to each casino’s unique operational model. New hires can obtain a broader understanding of business processes, automated versus manual processes, intradepartmental dependencies, and customer touch points.
Daughtrey also realized that in order to integrate all Caesars properties over a five-month period, there needed to be a focus on automating data conversion and data validation. Harrah’s ran multiple automated data integrity queries and checks. These routines verified accuracy of more than 90 percent of all data, allowing the property data validation teams to focus on a smaller subset of the data and important nuances.
Harrah’s chose to invest in the high availability and scalability of systems. After the integration, all of Harrah’s properties benefited by improved uptime in the core operational and marketing system. Harrah’s campaign management system and Harrahs.com now have full business and system resumption in less than one hour versus 72 hours previously. Harrah’s also used the acquisition to evaluate strategic partnerships and forge relationships with others that could assist with Caesars and also with more long-term global expansion. Specifically, Harrah’s needed partners who could help open and convert dozens of properties worldwide.
A merger or a joint venture is a major business challenge. To ensure that the acquiring organization is positioned to absorb the acquired entity while minimizing risk, it is vital to consider previously neglected areas.
CIOs should view such events as a reason to find ways to improve the outcome of the acquisition, while also creating longer term value for the combined entity.
Originally published in CIO Digest, July 2007 , Copyright © 2007 Symantec Corporation, republished with permission.
Successful M&As are often those that make IT integration a priority
Mergers occur for a variety of reasons. Some companies want access to new geographies; others seek a quick path toward new products and services that complement their own; still others believe they can run the acquired entity more efficiently. The key to the successful integration of two enterprises is having a good, honest, accurate view of each company’s capabilities, systems, and infrastructure. The acquiring company must understand the other’s core business processes and the systems that support them in order to more easily map those processes into its own.
Companies that acquire within their own industry often inherit similar core systems. In the banking industry, for instance, many aspects of information technology are highly standardized.
By contrast, McKesson Corporation is not nearly so standardized. The San Francisco-based company is the largest healthcare company in the United States, and its business lines are diverse, including pharmaceutical solutions, medical-surgical solutions, and provider technologies.
Randy Spratt became McKesson’s executive vice president and CIO in 2005, joining the company through its acquisition of HBOC in 1999, and is tasked with managing several technology businesses as well as strategic planning and process re-engineering for McKesson’s technology division. Having experienced life as the acquired and as the acquirer, Spratt has learned many lessons that apply to any large acquisitive company.
A typical acquisition affects every function in both companies. As part of the acquisition process, integration teams are formed for key functions such as HR and finance. Since IT changes are often core to the acquisition, there is an emerging trend to have IT play a central role in overseeing these changes.
Although all acquisitions are different, at McKesson Spratt’s team guides the process with a variety of standardized templates and tools. The company has a set of bylaws for integration, and Spratt introduces these to the project team early in the process. Once the project team is formed and “kick-started” down the integration path, Spratt’s group steps aside into more of an advisory role, focusing on capturing lessons for future integration projects.
On November 6, 2006, McKesson announced it would acquire Per-Se Technologies for $1.8 billion. Sixteen work streams were identified for the merger integration, and each had a manager who reported to the overall Per Se integration manager. The integration managers reported jointly to Spratt and the key operational executive. Each integration manager developed a plan independently, then presented it to Spratt, the operational executive, and the other managers at a two-day session. Adjustments were made to ensure the plans fit together and then published on an intranet site. As the integration proceeded, progress was charted online so all relevant constituents could track where the project stood.
As Spratt notes, “We put a lot of money into buying a company, and if we do not focus on capturing the synergies right away, the anticipated value creation will vanish.”
What really helps is identifying which aspects of the acquisition are sine qua non for success. At McKesson, there are several non-negotiables when it comes to systems. In Spratt’s opinion, McKesson standards for acquired companies are:
Through this process of IT and business integration, executives leading the acquisition must act quickly and decisively, and communicate regularly with employees. The degree of change needed can understandably lead to considerable churn within the acquired organization. The faster, more deliberate, and transparent the change, the more quickly people can return to doing business with confidence.
Peter High is president of Metis Strategy, a Washington, D.C.-based consulting firm specializing in the intersection of business strategy and IT.
Originally published in CIO Digest, October 2007 , Copyright © 2007 Symantec Corporation, republished with permission.
It is possible for almost any IT department to accomplish extraordinary things by Peter High Clients often ask me how their IT performance compares to world-class organizations. The term “world-class” is a bit loaded since it can’t be measured objectively, but it can be defined subjectively and used as a standard against which firms can measure performance. When assessing IT performance, many factors must be taken into account. To get the full picture, I ask the following questions: Is information technology central to the business? For some industries, such as financial services, technology is at the heart of business operations; for others, weaving IT into the business requires more effort. Are business leaders progressive in using technology? Some leaders eagerly embrace technology and invest more in technological systems. Can the organization recruit top IT staff? Favorable scenarios include proximity to a university or a technology hub. While these factors often lead to IT excellence, some companies without these advantages still manage to operate at a world-class level. One client, a US$3-billion-a-year leader in the consumer packaged goods (CPG) industry, provides an interesting example. Relative to other industries, CPG is in the bottom third of technology investment, and this company is low even within this lower third. The company’s executives approach IT conservatively, insisting on a ROI for all significant expenditures. Its rural location limits the IT talent it can attract, further inhibiting the company from having a natural technological bent. Nevertheless, IT leaders at the company have pursued a conscious strategy of turning each of these potential weaknesses into strengths. Limited funds for technology means IT must be highly disciplined in its spending. To ensure that each investment has maximum impact, IT has developed a tight relationship with its business partners. This collaboration means allocating IT spending to areas of the highest strategic priority companywide. The key to risk management in ERP programs (and many other business programs) is to focus on what we don’t know. IT staff gets to know each segment of the business. They ride with the trucks hauling products to retailers and spend time with HR and other business units. IT can then tailor systems that best serve each business function. The company sells perishable goods, so late shipments immediately impact revenues. Efficient supply chain management and systems that flawlessly track products from development to sales are critical. Because backup systems are vital, disaster recovery gets high priority. Limited budgets underscore the need to be careful with investments. If an investment is losing revenue it is canceled quickly so the dollars can be redirected toward higher value investments. This requires a project and portfolio management process that tracks investments from idea to implementation, with regular “gates” to assess project performance relative to expected time, budget, and scope. Finally, due to the challenge of recruiting in rural areas, the company provides incentives for the most talented employees to stay. It determines which skills are needed and can be developed, and which are best outsourced. It also establishes relationships with local universities to identify and recruit talented students early on through intern programs. Through realistic assessments of strengths and weaknesses and a disciplined approach to ensure that weaknesses and risks are mitigated, it is possible for almost any IT department to accomplish extraordinary things on behalf of its business and truly be world-class. Originally published in CIO Digest March/April 2007. Copyright © 2007 Symantec Corporation, republished with permission.
It is possible for almost any IT department to accomplish extraordinary things
Clients often ask me how their IT performance compares to world-class organizations. The term “world-class” is a bit loaded since it can’t be measured objectively, but it can be defined subjectively and used as a standard against which firms can measure performance.
When assessing IT performance, many factors must be taken into account. To get the full picture, I ask the following questions:
Is information technology central to the business? For some industries, such as financial services, technology is at the heart of business operations; for others, weaving IT into the business requires more effort.
Are business leaders progressive in using technology? Some leaders eagerly embrace technology and invest more in technological systems.
Can the organization recruit top IT staff? Favorable scenarios include proximity to a university or a technology hub.
While these factors often lead to IT excellence, some companies without these advantages still manage to operate at a world-class level. One client, a US$3-billion-a-year leader in the consumer packaged goods (CPG) industry, provides an interesting example.
Relative to other industries, CPG is in the bottom third of technology investment, and this company is low even within this lower third. The company’s executives approach IT conservatively, insisting on a ROI for all significant expenditures. Its rural location limits the IT talent it can attract, further inhibiting the company from having a natural technological bent.
Nevertheless, IT leaders at the company have pursued a conscious strategy of turning each of these potential weaknesses into strengths.
Limited funds for technology means IT must be highly disciplined in its spending. To ensure that each investment has maximum impact, IT has developed a tight relationship with its business partners. This collaboration means allocating IT spending to areas of the highest strategic priority companywide.
The key to risk management in ERP programs (and many other business programs) is to focus on what we don’t know.
IT staff gets to know each segment of the business. They ride with the trucks hauling products to retailers and spend time with HR and other business units. IT can then tailor systems that best serve each business function.
The company sells perishable goods, so late shipments immediately impact revenues. Efficient supply chain management and systems that flawlessly track products from development to sales are critical. Because backup systems are vital, disaster recovery gets high priority.
Limited budgets underscore the need to be careful with investments. If an investment is losing revenue it is canceled quickly so the dollars can be redirected toward higher value investments. This requires a project and portfolio management process that tracks investments from idea to implementation, with regular “gates” to assess project performance relative to expected time, budget, and scope.
Finally, due to the challenge of recruiting in rural areas, the company provides incentives for the most talented employees to stay. It determines which skills are needed and can be developed, and which are best outsourced. It also establishes relationships with local universities to identify and recruit talented students early on through intern programs.
Through realistic assessments of strengths and weaknesses and a disciplined approach to ensure that weaknesses and risks are mitigated, it is possible for almost any IT department to accomplish extraordinary things on behalf of its business and truly be world-class.
Originally published in CIO Digest March/April 2007. Copyright © 2007 Symantec Corporation, republished with permission.
Hugging the business too closely can squeeze the lifeblood out of IT
Much has been written about the need for information technology departments to align with the business units within their companies. IT should understand the company’s strategic direction, so the thinking goes, and develop solutions to meet those needs. This trend led many IT departments to develop a return on investment (ROI) analysis for each project.
Although the advantages of IT’s intimacy with the business abound, the concept raises the question: Is it possible for IT to focus on the business at its own expense?
As IT achieves more value on behalf of the business, it tends to focus less on IT, reminding us that IT’s alignment with business must be balanced with an alignment of business to IT. The former has been sacrosanct, whereas the latter is rarely considered. For a true partnership between business and IT, IT must manage its infrastructure and educate the business about technology. If IT ignores its own needs, the business suffers from increased downtime and IT’s inability to scale appropriately.
In the late 1990s, the IT department at Hilton Hotels performed well, but was viewed as supportive to the business. Underscoring that role, the then-CIO reported into hotel operations.
After acquiring Promus Hotel in 1999, the organization began viewing IT differently.
Promus had developed a property management technology called System21. Under the stewardship of Tim Harvey, Hilton’s executive vice president and chief information officer, the company leveraged System21, now called OnQ, into a tool that integrates reservation management, property management, CRM, revenue management, forecast and content management, Balanced Scorecard activities, and a host of other services for all the Hilton brands. Unlike competitors who have different solutions for these functions, now, as Hilton adds about 300 hotels annually, each one need only invest in OnQ, and a holistic technology solution is in place. Although Hilton remains a hospitality company, technology is one of the main sources of its competitive advantage.
As Hilton IT delivered increased value, Harvey realized the business needed to be educated about IT to ensure enough attention was spent managing systems infrastructure. He ensured IT staff spent time with business colleagues to understand their needs and to learn business language. This enabled Hilton IT to better communicate its plans, including metrics related to on-time, on-scope, and on-budget.
For many companies, infrastructure remains the domain of techies. At Hilton, IT communicates its plans to improve the infrastructure across the business.
Dean Permenter, vice president, shared infra-structure services, explains, “We are constantly improving infrastructure efficiency through virtualization, where several applications share the server, storage, or backup capacity. The result: A true enterprise solution instead of individual systems requiring additional management and resources such as power and cooling.”
Hilton IT decreased baseline costs (those costs required to “keep the lights on”) even as the hotel grew. By providing the business with value metrics to represent such infrastructure successes, the inner workings of IT become tangible.
Too often, business-IT alignment is taken in that order. To be truly consultative to the business, IT must educate the business on its own needs and constraints and how its capabilities can serve the business.
Aligning IT to the business is just the first step toward opening the lines of communication, which should flow in both directions if companies wish to fully leverage IT.
Originally published in CIO Digest, January/February 2007 . Copyright ©2007 Symantec Corporation, republished with permission.
United’s IT Department devised a seven-tiered approach to bringing its business units together with each other – and IT – and managed to save money and create new opportunities in the process.
A closer look at CIO Nirup Krishnamurthy’s Strategic Themes reveals how United was able to re-conceptualize IT’s relationship to the business units in a way that integrated the disparate entities’ business units making them more collaborative.
Cost Leadership – ensuring a low-cost structure – had been an ongoing effort for two years prior to the IT Transformation project, but it had previously been thought about in silos. So while cost-cutting activities were not new, this theme brought together different business units to identify new ways to work together to cut costs. Business units were able to share ideas more effectively. For example, several resource planning initiatives had developed independently across business units. Flight dispatch and aircraft maintenance, for instance had each developed manpower planning processes that were redundant. Through Theme Management, these redundancies were identified and eliminated, and cost-cutting initiatives are now weighted by how broadly they can be applied across the organization.
The Customer Experience theme has brought together the customer-facing divisions of Marketing, Sales, Airport Operations and Onboard Operations. New initiatives for United.com, for instance, reflect how IT and the business units have closely aligned their efforts. Over the next 12 months, United.com will be enhanced with a new booking engine and customer user interface that will improve the customer buying experience. These technological improvements will implement features that customers have been asking for, such as improved calendar capability and ease of use. Today, more than 13% of United’s tickets are booked on United.com, and the site serves more than 7 million customers every month. Both of these numbers are anticipated to grow as a result of the enhancements to United.com.
United IT is also engaged in a budding effort to ensure consistent customer treatment – whether through Easy Check-in kiosks, online check-in, telephone reservations, or an airport check-in desk – for travelers of the 16 airline partners that make up the Star Alliance partnership for United’s elite travelers. As part of this, IT signed a common platform contract with Lufthansa and Amadeus as a provider to put all reservations systems into one platform, replacing its own legacy systems in the process. The new system offers enhanced customer service for both sales and airport environments, and includes functionality such as schedule, availability, inventory, reservations, fare quote and ticketing, as well as passenger check-in.
The technology implications of the customer service initiative are numerous, and have become a long-term focus for Krishnamurthy and his team. For instance, United has been a leader in utilizing Computer Telephony Integration (CTI). Using this technology, a customer who has filled in a significant portion of his reservation, but for some reason cannot complete it online (due to personal preference or due to a technology error), can call a sales agent, who will be able to access all of the information input to that point, so that it does not have to be re-entered. Therefore, United’s IT has taken a strong role in integrating technology and human interfaces.
Just as the Customer Experience theme brings together the customer-facing divisions, the Revenue Optimization theme brings together United’s revenue-focused divisions – Marketing, Sales, and Planning. Through IT’s own research and statistical modeling, and that of an external consulting firm, IT has developed a technology-based solution that both maximizes United’s passenger yield and provides the pricing flexibility that United needs to compete with low-cost carriers.
The complexity arises from the fact that United’s network is constructed in such a way that benefits both point-to-point customers (e.g., San Francisco to Los Angeles) and connecting customers (e.g., Tokyo to San Francisco to Los Angeles), each of which have very different profiles and needs. The technology solution maximizes overall revenue by forecasting and optimizing both kinds of traffic. “This technology will truly be a game changing one for United by providing us the ability to profitably compete in a marketplace with different segments of customers with varying needs, expectations and revenue potential,” says Raj Sivakumar, United’s Managing Director for Business Technology Consulting.
Once the above themes were under way by second quarter of 2004, the IT leadership team had a better idea of how to efficiently coordinate its efforts with the business units. The IT Infrastructure theme enabled the department to do this while addressing the need to reduce IT’s complexity and risk. One of the problems they faced is that the industry is notorious for its legacy technologies – decades-old systems that are maintained by cobbling together upgrades over the years, ever increasing IT’s complexity in the process. And then there were upgrades done on an as-needed basis – such as United’s desktop upgrades – instead of as part of a coordinated, standardized plan. “This behavior created a nightmare IT environment – with 15-plus hardware types, seven operating systems, and 100-plus system images,” said Krishnamurthy.
To address this, the IT Infrastructure effort is undertaking a broad initiative to appropriately source (be it outsource, insource, or whatever is most appropriate) its commoditized functions, and to facilitate the development of more common platforms across the business units.
Originally published in Information Week, November 9, 2005. Copyright © 2005 CMP Media LLC (now UBM), republished with permission.
