The US Division CIO of Wacker Chemie says tech chiefs should think beyond run, grow, and transform, and consider how they are uniquely positioned to promote social values across the business and beyond.
This article was originally published on CIO.com by Michael Bertha, Partner at Metis Strategy and Duke Dyksterhouse, Senior Associate at Metis Strategy
CIOs hear constantly that their position has evolved, that it’s now a business position. But whenever this is pointed out, the emphasis tends to fall on the tactical responsibilities of such a position—the “plan, build, and run” of it all. But just as important now are holistic matters of people—diversity, inclusivity, employee welfare, and so on, and perhaps few technical leaders have concerned themselves with these as enthusiastically as Raj Polanki, the US Division CIO of Wacker, the seven-billion-dollar German chemical manufacturer, and the co-lead of its DEI council.
“The way I see it,” he says, “the CIO role obviously needs to make sure the business can run while contributing to growth and transformation. All those are well and good, but the current, evolving CIO role, it’s not just about going from technology to business, but from business to people. As a technology executive, I have a unique position to contribute to the human aspects of it all…DEI aspects.” And accordingly, since coming to Wacker in 2018, Polanki has worked both to embody Wacker’s DEI principles and, alongside his fellow council members, to inject such principles into the organization’s ethos.
Now, he hopes to amplify his impact by sharing some of what he’s learned with other technical officers who might themselves hope to make a bigger and longer-lasting impact. “What leaders get wrong about DEI is that it concerns much more than what can be observed by the naked eye. We are all shaped by our experiences, and the better we understand each others’, the more we can achieve.” Indeed, Polanki suggests that any leader can reap better outcomes across all their responsibilities by embracing this philosophy. Here he offers five steps for doing so.
Be the change you wish to see. It’s a well-known adage and clearly present in Polanki’s first bit of advice: “Start with self-awareness. Look inward.”
Embedded in this philosophy are two propositions. The first is that you do in fact want to change something. Therefore, a good place to start might be to understand why you do. While it’s fine to cite common talking points about the benefits of DEI, you’ll find yourself more motivated (and therefore more able) to employ such principles if they mean something to you personally. Polanki, for example, found inspiration in his background, in which technology and business overlapped significantly. “I’ve always thought in terms of how I could bring these things together to create real value for people, and value can mean many things. I recognized that Wacker’s DEI council would present a great opportunity to provide an important value pulling on both business and technology.”
The second proposition is that you must embody the change, and as Polanki suggests, you can do this in few ways more effective than to consider your own unconscious biases. He implores leaders to constantly ask themselves: “Am I jumping too soon to a conclusion? Am I assuming certain things?” And if you think you don’t have any biases, congratulations: You just discovered your first. It’s called objectivity illusion—the belief that we are more objective and less biased than others—and it underscores the gravity of Polanki’s advice. Everyone has biases, and they shape our societies. They lead us to elect taller CEOs, hire certain candidates, and sink money into failing projects. According to one survey, unconscious biases may cost the workplace $64 billion annually. Having biases doesn’t make you a bad person, but making yourself aware of them, as Polanki suggests, can free you to make better decisions and thereby become a better leader.
Next, start embodying your principles among the circles that you immediately influence—like the teams you oversee. When Polanki came to Wacker, he inherited a team whose previous manager had served the company for thirty years. Although that leader had left behind a solid team, Polanki wanted to suffuse it with his own ideals, two in particular.
“One was self-respect and respect within the team,” he recalls. “Yes, I had a list of things they could do better, but I started by respecting [the team]. I used not just my words, but showed it in my actions. I recognized them for the things they didn’t even know they were doing well, and with time, they would even come to me and say, ‘You don’t seem to get upset easily. You really maintain your composure.’” Soon, Polanki’s reports began imposing the same warmth, patience, and appreciation on their own teams, and the respect collectively expressed across the department grew steadily. It also nurtured Polanki’s second ideal, “customer oriented.”
“Because I came from an outside consulting and value-driven mindset,” explains Polanki, I put the customer in the front. I would tell my team, “If the business comes to us with a problem, we’re not trying to fix the problem alone; we’re trying to save their day to be more productive and efficient. That means we directly affect the business. We are not just a back office. We are sitting with the business. We are partnering with them to support them, and we should take pride in what we do.” He recalls evoking a sentiment he had once heard from Starbucks: “I asked them, if ninety-nine out a hundred coffees are right but the hundredth is wrong, is that acceptable? I explained that this was part of taking pride in yourself.”
And pride they took. Together, these two ideals—respect and customer oriented—energized the team and propelled what became a virtuous feedback loop. It improved morale as the teams began to celebrate small wins and to believe in themselves as more than order-takers. And the changes showed. Polanki recalls that the business partners would remark, “Your team is really solving issues, and they’re very approachable.” And in one of the team’s internal customer-satisfaction surveys, they scored 97% positive feedback—one of their highest scores ever.
After you’ve proven that you can instill DEI principles among your own teams, you can become a catalyst for wider adoption through mechanisms like your company’s DEI council. Or, if your company has no such council, you can start it.“The first thing you’ll want to do, if it hasn’t been done already, is specify the council’s DEI principles. And don’t squander this opportunity”, warns Polanki. Too many councils adopt principles that are either generic or otherwise similar to another company’s. Contemplate what DEI really means to your organization and connect it to the goals and mission of the enterprise. At Wacker, Polanki and his fellow council members conducted extensive internal research to ensure they did just that, and in the end, even became an advisory council to the executive team.Next, you have to spread the word—and show your employees that you stand behind it. “After we had defined our principles,” recalls Polanki, “we published them on posters, which were put up across Wacker’s offices. They had our signatures on them, and the executives’, so people knew we meant it.” Polanki and his council also took advantage of town halls and modified several of the company’s programs—including the leadership and management development programs and new-hire orientation—such that they incorporated DEI principles. “We even hired an external person to help us connect the content to the programs.” They also dedicated a SharePoint site and several communication channels to the cause, and instituted internal advocacy groups, including one for LGBTQ+ members and one for veterans. Polanki says more will follow.
Once you’ve spread your principles, and others have started acting on them, you can further amplify their effects, says Polanki, by “starting with the data.” It makes sense. ESG-related efforts are driven heavily by metrics, and so few tools can propel you toward your DEI goals as forcibly as data can. And as a technology leader, few have the power that you do to mobilize that data and to do so not only for your department but for others.
Polanki recommends that, above all, to employ your data more meaningfully, you make it more visible, which you can do even by simply starting conversations with other leaders, since many of them will hesitate to ask what’s possible. He recalls one such conversation with Wacker’s very own ESG team: “We asked them, what can we do for you? What’s on your mind? And it was only then that they said, ‘Well, actually, we’re having a lot of containers shipped to California and we’re concerned about the waste.’ I explained that we could give them some visibility by pulling data about those containers—what materials they contain, whether they’re recyclable, and so on. They didn’t know we could do that, and it helped them act much more effectively.”
The other tool is longstanding data solutions, like dashboards and accompanying analysis, both of which Polanki’s team constructed for Wacker’s Environmental Health and Safety group. As a result, the group could now get, in mere hours, data that once took them at least days to collect. And it came with trends, to boot. “We could now ask questions like, okay, where is it happening? Is it a seasonal thing? Why does this one area have so much variation?”
Polanki plans to resign as the co-lead of Wacker’s DEI council later this year. He feels that he and his fellow members have built a sturdy foundation from which the next leaders can further expand the council’s influence. “If you think in terms of crawl-walk-run,” he says, “we’re finally walking. The next council can take it further. They can set up new resource groups, engender more inclusivity, and start to have a more direct impact on the business.”
Yet Polanki’s far from finished improving the welfare of the people around him. A graduate of University of Michigan’s Ross School of Business, Polanki has been approached by that community to become more involved with certain university activities, like becoming a resident council member for the university’s Flint division technology and innovation center. When asked by the university, Polanki asked Wacker whether they saw any conflict. They didn’t, and encouraged him to participate, knowing that his doing so would advance their own mission to “make the world a better place with our solutions.”
This outward growth demonstrates Polanki’s last bit of advice for looking beyond your traditional responsibilities as a technology leader. “Be thinking, can I help my communities where we operate? Can I partner with the local community? With universities? How can we make a bigger difference?” Leaders who ask these kinds of questions and embrace these responsibilities, he says, will find they create better results across the board, in part because they have wide-ranging intangible effects.
Company-first CIO Krzysztof Soltan and his team helped transform the construction-aggregates giant with a focus on digitizing operations, modernizing infrastructure, and overhauling how IT goes about its business.
This article was originally published on CIO.com by Mike Bertha, Partner at Metis Strategy and Chris Boyd, Manager at Metis Strategy.
In a recent “all-hands” meeting, Krzysztof Soltan, CIO of Vulcan Materials, announced his IT organization would continue its “laser focus on digital transformation.”
Digital technology, he explained, would remain a central focus of the construction-aggregates industry and would underpin customer-grade experiences increasingly expected from industry leaders. Vulcan, based in Birmingham, Ala., is the nation’s largest construction aggregates company, producing materials such as crushed stone, sand, and gravel, with strategic downstream assets like asphalt and ready-mixed in select markets. Soltan, previously a tech leader at Johnson Controls, ABB, and GE, became the company’s first CIO just two years ago and is at the forefront of the company’s digital transformation efforts.
Soltan and his fellow leaders attribute Vulcan’s success to many things, but chief among them is the company’s attitude toward key activities like operating and selling — “The Vulcan Way,” as it is widely referred to within the company. This orienting force has become so strong that, to Soltan and his team, it seemed only right that they should rethink IT in terms of how it might amplify the approach. As Soltan explains: “If we were going to keep up with the pace of change in the industry, IT would have to be recalibrated.”
Here, Soltan and his IT leadership team share the story behind those efforts. They highlight the mindset and approach necessary to leverage new technologies to best compete in the digital age.
As Soltan’s IT leadership team explains, Vulcan’s digital transformation turned a corner with the advent of the Vulcan Way of Selling, an enterprise-wide initiative that, through technology, aimed to turn the company’s highly manual relationship-based sales model on its head. And so it did.
Since the initiative’s launch in 2017, Vulcan has deployed myriad proprietary technology solutions that serve up real-time market insights, thereby improving experiences for sales reps, customers, and the truckers responsible for transporting goods to job sites. For sales reps, these improvements show up as more time spent talking about solutions with customers, and less time on administrative work like quoting. For customers, real-time location-tracking of materials shipment translates to better labor planning. For truckers, a seamless, paperless experience when picking up materials at a Vulcan quarry means faster delivery.
As Vulcan SVP Jerry Perkins put it at the company’s 2022 investor day, “Time is money in the construction and trucking industry, and these tools make our truckers and customers much more efficient and productive.”
The success of the Vulcan Way of Selling brought the company to an inflection point. Enterprise-wide, tech-enabled transformation programs would no longer be one-off events; instead, they were destined to become fixtures in Vulcan’s pursuit for continuous improvement.
Enter Soltan. After learning the business and getting acclimated with the effort to integrate US Concrete, which the company had recently acquired, Soltan got to work charting IT’s path forward. “Between the US Concrete acquisition and other major initiatives, we hadn’t taken a step back in awhile to reflect on how we were managing our own shop,” Soltan says, noting this isn’t unusual for companies during periods of growth.
The path to cementing Vulcan IT’s value proposition, says Soltan, would be two-fold: Invest continuously in enabling business-driven initiatives, and modernize how they manage the business of IT.
As just one example, the company has commenced VulcanX, an initiative that extends the Vulcan Way of Selling by providing best-in-class tools to the company’s Sales teams to help them win more business and deliver better experiences to customers, in the form of seamless and secure interactions. These efficiencies, the company hopes, will drive more quotes and, subsequently, higher quote-to-order conversions, all while allowing the team to spend less time on administrative tasks.
Just as important is the technical foundation on which Vulcan operates its plants. And so the company has launched another initiative in partnership with its business units to modernize the organization’s technical infrastructure, including improving the speed, connectivity, and mobility of its networks in service of Vulcan’s 10,000+ employees — qualities that will become only more vital as the company multiplies its digital capabilities.
“One reality of our business is that we have to enable modern day technology in the rugged, remote locations that are home to our plants and quarries,” says Soltan. “VulcanX enables scale and mobility in the plant with cloud-based solutions, and our modernized networks will improve our ability to capture data and to quickly drive insights for the folks running our operations.”
Vulcan’s employees can leverage digital capabilities in the field only to the extent that the company’s IT and OT systems are integrated. This reality — understood by Vulcan’s business unit leaders as well as anyone — has ultimately stood to justify, incentivize, and propel the company’s transformation.
A great deal of Vulcan’s success in managing the business of IT can be traced back to the department’s operating model. “The capabilities you deliver within IT the roles and responsibilities, and the ways of working — getting these things right — creates a solid foundation for execution,” Soltan says. To Vulcan’s leaders, it made sense, then, that the operating model should be among the first things they strove to modernize.
First, there was talent strategy — how the company would recruit and train. Of particular concern was the department’s IT career paths, which stood to be refreshed. As Soltan recalls, “We needed our paths to be more indicative of the work we’re doing. This not only helps us attract new talent but allows our team to feel confident they are adding modern skills to their toolkits.”
To this end, Vulcan leaders did two things. First, they developed a new set of career paths, including specific tracks for product management, DevOps, Data Engineering, and other sets of skills that, as Vulcan advances, will become indispensable. Second, the leaders expanded its talent pool by opening a second hub in Dallas, home to Vulcan’s US Concrete acquisition, and the fourth largest metropolitan area in the United States.
The second facet concerned projects, which experienced high demand. As Soltan explains, when digitally transforming at the pace Vulcan has, “priorities change daily, and without rigorous governance processes, it’s nearly impossible to have visibility into your IT investment portfolio.”
To rein in demand, and ensure resources were allocated impactfully, Vulcan formalized its IT Project Management Office (PMO). “The goal is to manage IT like a business,” says Soltan. “That means being clear about investment criteria for IT projects and establishing expectations for project execution that allow us to monitor value capture.”
For Vulcan, each new project introduces new applications and integration patterns into the technical estate. To ensure these can be properly absorbed, Vulcan also invested in maturing its enterprise architecture muscle. “Standards around technologies, integration patterns, and security are becoming more important,” says Soltan.
“Architecture ensures that new solutions do not render old ones redundant and that we construct things in a manner conducive to easily capturing and integrating data,” he explains, noting this will only become more important as IT/OT convergence accelerates to enable capabilities such as predictive maintenance in the plants.
For CIOs in similar sectors just starting out on digital journeys, the prospect can be unsettling, especially in light of recent technological changes — the AI craze, the pace at which IT and OT are converging — not to mention the list of demands from the business. And still, as Soltan says, one thing is certain: Technology will increasingly enable you to compete and differentiate yourself.
So if your company is like Vulcan Materials, if it has climbed to great heights despite preceding the dawn of digital, Soltan suggests you get started: “Your business leaders are smart. They know the importance of technology and of modernizing IT to compete. They have your back. So look honestly at where you are, rip off the band-aid, and start moving, piece by piece, towards your future state.”
First-ever McWane CIO Lynn Lovelady fast-tracked the global manufacturer’s corporate IT makeover by emphasizing A-teams, smart centralization, and establishing trust.
This article was originally published on CIO.com by Mike Bertha, Partner at Metis Strategy.
In 2018, the day after his employer publicly announced it was being acquired, Lynn Lovelady, then VP of IT at Energen, received a pivotal phone call that would reshape his career.
It was from Charlie Nowlin, then CFO at McWane, who for more than a year had been searching for the company’s first chief information officer.
After a long courtship that included lunches with members of McWane’s C-suite to ensure a cultural fit, Lovelady signed on to helm IT as CIO at the global manufacturer of ductile iron products, valves, hydrants, fittings, plumbing products, fire extinguishers and suppression systems, and steel pressure vessels.
The Birmingham, Ala.-based McWane’s growing corporate IT department had existed only since 2008, and for Lovelady there was a lot of work to do. =
“We were transitioning from a decentralized IT model to one that increasingly relied on corporate IT, which necessitated enhancing the planning process, governance, and implementing consistent policies on cybersecurity,” says Lovelady, reflecting on a department that was responsible for supporting the more than 20 operationally diverse businesses under the McWane umbrella.
To address the growing pains, Lovelady reinforced the importance of strategic planning for IT. In addition to rationalizing applications and other tactics you would expect, Lovelady knew establishing influence across McWane would be essential for the IT makeover to succeed, and that in turn would require over-communicating, driving accountability, measuring success, and rewarding high performance. With these principles in mind, Lovelady and his team launched their strategy, dubbing it “fifteen in five,” representing their bold ambition to drive fifteen years’ worth of transformation in the next five, and to shore up IT capabilities in doing so.
But executing wouldn’t come without challenges: multiple ERP implementations, a reluctance to adapt to new ways of working at a storied company, and perhaps most daunting, the reality that IT in each of the 20-plus businesses had grown accustomed to operating independently.
According to Lovelady, his team’s ability to overcome these headwinds hinged on three pillars that go beyond technical implementation.
Lovelady admits that in the early innings there were some who questioned whether hiring a CIO was necessary. The company, after all, had been successful historically.
To buck the trend, Lovelady prioritized meeting with all senior executives upon his arrival: to sell his strategic plan, share how he planned to make improvements, and most importantly, state his intention to earn their trust by establishing a relationship based on frequent and transparent communication. “Whether they’re personal or business, relationships take work, but that work is how you establish trust,” says Lovelady, “and picking up the phone or walking down the hall fills the trust bank over time.”
Lovelady’s focus on communication earned him respect and support from the executive team, which included the general managers of the 20-plus portfolio businesses. It showed when he presented to them. Mr. McWane himself and other EVPs started endorsing Lovelady’s initiatives, and “this backing, coupled with some early efficiency wins, helped the GMs get behind the vision and get comfortable with the new chargebacks,” Lovelady says.
To ensure his team embraced and embodied his philosophy, Lovelady purchased everyone a copy of Excellence Wins, by Horst Schulze. “While we can’t do everything the Ritz Carlton does, I think the spirit of having a customer-first mindset is critical. Following up, not assuming a problem is solved, paying attention: It’s critical we all share these values.”
Before Lovelady arrived, many major IT initiatives, especially those — like ERP projects — meant to drive efficiency across the businesses, were viewed as non-strategic. This kept top talent on the sidelines. Lovelady turned this approach upside down. “Do you really want the software you are going to run for the next 15 to 20 years being designed by just anyone?” posits Lovelady. “Or do you want it designed by your A players?”
Combined with an outstanding internal ERP implementation team, Lovelady worked with business units to put their best talent on the ERP initiatives, which in 2023 alone, led to four on-time deployments. It also led to the consolidation of seven separate CRM environments. Those two efforts combined have enabled for the first time ever end-to-end visibility of McWane’s value chain for select businesses, from the manufacturing of products, through the sales process, all the way to recognizing revenue.
An ERP veteran, Lovelady knows that technology alone isn’t what makes ERP implementation successful. “It’s about having the right people, following the right processes, and avoiding common pitfalls like customization.”
And for Lovelady and McWane, the right people are often those with substantial IT experience. “Around here, young talent are people in their thirties,” explains Lovelady, “and a lot of our team members came with backgrounds as directors, vice presidents, or even CIOs at well-respected companies.”
It is to this talent philosophy Lovelady attributes McWane’s ability to service their approximately 6,000 employees across its global footprint with less than 30 full-time corporate IT employees, and only a handful of longstanding strategic partners.
Key to reigning in and forging partnerships with the portfolio of operationally diverse companies was the deployment of what McWane refers to as “smart centralization.” Through this strategy, Lovelady and his team have struck the often difficult to balance attributes of business unit flexibility with enterprise scale.
“At corporate, we focus on things that can be done globally,” says Lovelady. These include network management, help desk, establishing and enforcing policies related to information security and risk management, and several other IT functions. “These are strategic capabilities for IT, and we have more purchasing power when we address them horizontally across our portfolio,” says Lovelady. “Besides, our businesses shouldn’t have to worry that outdated network equipment is putting their operation at risk.”
Still, the businesses operate with a high degree of local decision-making authority, Lovelady says. “We’ve simply implemented guardrails and policies to make sure we are influencing the domains where we have expertise, and we are making decisions that serve the greater good of McWane, not just an individual business.”
About five years have passed since Charlie Nowlin phoned Lovelady in 2018, and McWane’s corporate IT is firing on all cylinders. IT’s seat at the table has been cemented for many reasons. Chief among them are a rationalized, simplified, cost-effective ERP footprint; a maturing IT security and risk management capability that includes regular audits; a help desk that receives positive ratings from more than 90% of users; and a successful data center migration, which included moving more than 400 servers in real-time, so seamlessly, Lovelady says, that nobody even noticed.
Communication from corporate IT is proactive, includes regular site visits, frequent updates to demonstrate progress against the strategic plan, and plentiful impromptu calls and drop-ins. Business and IT are rowing in the same direction, with the shared goal of making the right decisions for the greater good of McWane.
Lovelady, who announced his retirement in the fourth quarter of 2023, will leave a legacy of transformation at McWane — one that will be synonymous with service excellence, integrity, and collaboration. The results he achieved are enviable, so we asked him what advice he’d share with CIOs pursuing similar journeys. He vehemently referred to the annual strategic plan that started it all, highlighting the importance of trust.
“It takes years of hard work to build trust, and it can be lost in an instant,” says Lovelady. “Don’t breach that trust, and you’ll go far.”
Companies that educate, explore, experiment, and expand, perpetually, with the right pace and sequencing, are most likely to win with AI
This article was originally published on CIO.com
AI never sleeps. With every new claim that AI will be the biggest technological breakthrough since the internet, CIOs feel the pressure mount. For every new headline, they face a dozen new questions. Some are basic: What is generative AI? Others are more consequential: How do we diffuse AI through every dimension of our business?
Tactically, you can answer these questions in any number of ways. You can build an AI Center of Excellence (COE), launch a strategic task force, or designate a deputy to lead the charge. But whatever you do—if our advisory work and discussions with leading CIOs suggest anything—you’ll have to drive excellence in four related, though not necessarily sequential, streams of work: Educate, Explore, Experiment, Expand. It’s around these four work streams that leading organizations are positioning themselves to mature their data strategies and, in doing so, answer not only today’s AI questions but tomorrow’s.
Educate. You can’t wrangle AI by yourself. Your journey will be fruitful only to the extent that you can instill in those with whom you go to market a digital fluency and a confidence in your ecosystem.
Accordingly, many CIOs have fashioned themselves into the de facto AI professor within their organizations—developing 101 materials and conducting roadshows to build awareness, explain how generative AI differs from other types, and discuss its risks.
To ease collaboration on the topic where it’s likely to surface, Digi-key Electronics, a leading electronic component distributor in North America, has even built networks of influencers. As the company’s CIO, Ramesh Babu, explains, “We identify ambassadors in the organization and position them in the right meetings to drive a common understanding of the many terms floating around.”
Babu also warns against discussing only the benefits of AI. He and his peers make a point of emphasizing the risks. “We’re trying to have balanced conversations,” he says, a practice that underscores the duty CIOs have to develop appropriate policies and usage guidelines in order to mitigate the downsides of AI.
To help educate your own workforce about AI, provide them materials on the topic. Include common definitions, reimagined future states, risks, and policies and guidelines for usage. Have them ready for impromptu meetings, town hall presentations, and other settings. And direct your colleagues to self-service channels so that they may access materials and learn at their own pace.
Explore. To explore is to pose the question: How can I make AI work for my organization?Since the AI landscape is both large and complex, take a two-pronged approach: analyze internally and marry that analysis to marketplace activity.
Internally, start by looking at your value chain or the capabilities that deliver your value proposition. Brainstorm how generative AI could make your processes (and the people supporting those processes) more intelligent and productive. If you’re already using AI for some of the use-cases you brainstorm, no matter – record those too. And pay special attention to use-cases that concern customer service: Of the executives surveyed at the latest Metis Strategy Digital Symposium, 43% said their organizations are prioritizing customer service use-cases for generative AI in 2023.
From all of these sources, compile your use-cases into a backlog and rank them by impact and feasibility. You’ll learn where you can create new ways to win in both the short and long terms while weeding out those cases that are too difficult for their value.
Next, examine the market. At first, you might struggle to wrap your head around the size of it—a $150B addressable market, as estimated by Goldman Sachs—but by doing so you set in motion what should be a continuous evaluation. Search first for vertical-specific and enterprise-wide AI solutions. Categorize them by the capabilities they support. And if your organization permits it, maybe even ask ChatGPT.
Compare and contrast what’s available in the market to your top-ranked use cases and the capabilities you already have. Where an internal capability does not already exist, and the case relies on a large language model (LLM), you will need to determine how you want to proceed: by training and fine-tuning an off-the-shelf model, like Morgan Stanley did with OpenAI; or by building your own, like Bloomberg did.
Experiment. To experiment well is to work through your backlog with urgency and agility and—especially in the case of AI—with a bias for incremental progress. As Baker Tilly CIO Allen Smith explained at a recent panel, “There’s a difference between home runs and singles.” The singles are your friends, says Smith, and a great way to show something tangible, build momentum, and create a vehicle to fuel other interesting ideas.
At the tech juggernaut Lenovo, CIO Art Hu is taking a similar approach. Hu says they are running dozens of proofs of concept. One consequence of being in the early innings of Generative AI, according to Hu, is the rapid pace of development. “Because it’s fast, you can run proofs of concept for not massive investments.” This demonstrates how his team stays in lockstep with the business on investment priorities in a period where economic uncertainty has narrowed the scope of technology investment. “That’s the way you want it. You want small steps for the business without spending or committing a lot of money. They can see the result and decide ‘OK, double down, or shift the investment elsewhere.’”
Many attribute generative AI’s promise to its ascent to the very top of the tech stack, a promise that makes it more approachable than other disruptive technologies that, while undeniably promising, still require technical expertise to be exploited. Acknowledging this nuance, many companies have built experimentation sandboxes in which users from across the organization can try their hand at AI in a controlled environment.
Expand. Research reports have dangled that generative AI could add trillions to the global economy. But generally, these reports assume that AI can be implemented at scale. Here, AI leaps from the Batcave to the streets of Gotham, confronting a new set of challenges.
With regard to creating that scale, Chris Davis, a Partner at the digital advisory Metis Strategy and a leader of his firm’s AI practice, worries less about scaling the technology than he does about people’s role in that scale. “Someone has to develop, train, and supervise the models,” he explains. “…the irony is that people could actually be the limiting factor.”
As a means of overcoming this limitation, he stresses how necessary it is that organizations revisit—and where appropriate, revise—their operating models. “You need to re-envision business strategies with the exponential scale of AI in mind,” he says. “And train product managers on how they might weave AI into anything—core digital products, customer experiences, employee experiences, and so on.” He goes on to explain, that means also ironing out the roles and responsibilities among various players in your organization: “AI laboratories, data scientists, product teams—they all have to know how to work together efficiently every step of the way, from identifying use-cases to building algorithms and models, from following AI operating procedures to monitoring any models that are already in use.”
And there’s plenty of evidence to support Davis’s point. For example, after recently redefining the roles, responsibilities, and delivery methods of its IT product teams to suit its specific AI ambitions, a global financial services provider discovered many gaps in its capacity: some that it could address through upskilling, but also some that would require it to hire new people.
Looking forward. Meanwhile, hyperbolic headlines will continue to outpace adoption; yet, they won’t outpace the exponential rate at which the volume of data is growing, especially as technologies such as 5G and IoT hit their stride. So, if you, too, want to leverage AI to its fullest extent, you must first look in the mirror: Can I manage this growing volume of data? If you can’t convert the data into something meaningful, then, as Lenovo’s tech chief, Art Hu, suggests, you might lose ground: “If you don’t figure out as a company how to (manage a growing volume of data) effectively and efficiently, the competitor that does is potentially going to have a significant advantage.”
As you mature your data strategy, remember that you have many data-driven tools at your disposal, only one of which is AI. It’s wedged between an ocean of use-cases to the North and your core data foundation to the South, and progress in each of these layers is linked to the other two inextricably. There’s no use in thinking of your data strategy as something binary, as if it were a building under construction that will one day be complete. Those that educate, explore, experiment, and expand, perpetually, with the right pace and sequencing, are those most likely to win with AI.
Mike Bertha is a Partner at Metis Strategy
Chris Boyd co-wrote this article.
Leading digital transformations is the CEO’s top priority for CIOs, according to the 2020 IDG State of the CIO study. Doing so effectively requires an IT operating model that allows business and IT to work together to navigate a dynamic competitive landscape, a seemingly infinite set of digital tools and shifting stakeholder demands.
In our work with Fortune 500 companies, we have found IT organizations that use the traditional “plan, build, run” operating model struggle to conceptualize, launch and maintain momentum on digital transformations. To bolster their transformation capability, IT organizations across industries and geographies are shifting toward product-oriented operating models, or “product-based IT”. When done right, organizations experience increased agility, happier customers and more successful transformations.
A product is a capability brought to life through technology, business process and customer experience that creates a continuous value stream. Examples of products are eCommerce, supply chain, or HR. An operating model defines how an organization positions its people, process and technology to deliver value to both internal and external customers.
A product-oriented operating model, then, is one in which IT resources are organized around business capabilities or “products” instead of specific IT systems (e.g. SAP, CRM) or functions (QA, Engineering, Infrastructure). In this model, each product team works as if they are managing a market-facing product such as a consumer electronics device. They develop a product strategy and roadmap in lockstep with the business that clearly articulates how they will mature the product to better meet customer needs and optimize competitive positioning. Every feature on the roadmap is aligned with a measurable business outcome and goes through a rapid discovery phase to validate value, usability and feasibility before it is slotted in a sprint to achieve a minimum viable product.
Most organizations have honed their ability to deliver when the scope and desired outcome are static, but struggle when next steps aren’t defined or are painted with a broad brush. Several leading IT organizations have turned to product-based IT to cut through this ambiguity and elevate their role from service provider to business partner.
Art Hu, the global CIO of Lenovo, is one of the pioneers in the shift from project-to-product. He noted in a recent conversation that his organization grappled with the question of what to work on next after completing a series of legacy ERP integrations resulting from acquisitions. “The fundamental paradigm shift for us was that the level of uncertainty had changed when there was no longer one single imperative,” he said, referring to the ERP project. “When we took that away, it was a totally different world and traditional waterfall didn’t make sense anymore. Until we as an organization realized that, the business teams and my teams struggled.” Product-based organizations rely on continuous customer engagement to remove guesswork from the prioritization process, which often leads to better business outcomes and increased agility.
CIOs have targeted key behavioral changes to jumpstart the shift to a product-based operating model:
Project plans developed with fixed deliverables and timelines encourage predictability but rarely equate to business outcomes. This plan-driven work is increasingly yielding to continuous discovery and delivery, which seeks to answer two questions on a recurring basis: what should we build, and how should we build it? A discovery track intakes opportunities, ideas and problems to solve. Teams then engage with customers to validate that those ideas create value (desirability), will be used once released (usability) and are feasible in the current business model (feasibility/viability).
“Great companies that have built a product orientation start with desirability and leverage design thinking to have empathy-based conversations to get to the core of problems,” Srini Koushik, the CIO/CTO of Magellan Health, said during a recent product management panel. Ideas that make it through discovery are added to a product backlog and are slotted into sprints for delivery based on relative business priority. Discovery and delivery tracks operate concurrently to ensure that a steady stream of validated ideas and a working product that drives business outcomes is delivered at the end of each sprint.
In a recent strategic planning session, one CIO stated that “transformation is not a part time job,” noting that dedicated teams are critical for both digital transformation and building a product orientation in IT. Teams that are formed on a project-by-project basis spend valuable time ramping up subject matter expertise and building chemistry, but then are disbanded just when they start to hit their stride. Product-based IT organizations, on the other hand, favor dedicated teams that own a product from introduction until sunset, including the execution of discovery, delivery, testing and maintenance/support. In this model, the dedicated teams become true experts on the domain and avoid pitfalls resulting from intraorganizational handoffs and revolving resources.
The increased frequency and quality of customer interactions is a hallmark of product-based IT. Ideally, customers are engaged during the discovery phase to validate ideas and prototypes, and then provide feedback at regular intervals after the product is released. If your end customer is a business unit, you should strive to have even more interactions. Some organizations have business stakeholders participate in daily stand ups, and some may even have their product owners sourced directly from the business instead of IT.
Atticus Tysen, the Chief Information Security, Anti-Fraud and Information Officer at Intuit, is another pioneer in the shift from project to product. At the 2019 Metis Strategy Summit, he emphasized that true product organizations reflect on key questions that demonstrate their strong relationships with customers. For example, do you really know who your customers are, and are you organized around serving them? Do you have metrics to measure customer happiness and show you are working with them in the correct way? “You have to have customers if you’re going to have a product organization,” Tysen said. “Product managers in a lot of ways are relationship managers.”
To achieve the benefits of a product-centric operating model, the funding model must shift as well. Rather than funding a project for a specific amount of time based on estimated requirements, teams instead are funded on an annual basis. Also known as perpetual funding, this setup provides IT product teams with stable funding that can be reallocated as the needs of the business change. It also allows teams to spend time reducing technical debt or improving internal processes as they see fit, which can improve productivity and quality in the long run.
Here are a few key steps to begin the journey…
Organizations should first and foremost target business impact when shifting to product-based IT. For example, one Fortune 500 client chose to measure Net Promotor Score to assess business satisfaction, product team velocity to assess speed to market and the number of critical defects per product to assess quality. It is also prudent to create metrics that track the adoption of key aspects of the working model. For example, you may track the percentage of product teams that have developed strategic roadmaps, or survey product teams on a regular basis to see how many feel like they have the skills needed to succeed in the product-based operating model.
Start by identifying the highest-level customer-facing and internal capabilities in the organization, such as Product Development, Sales, Marketing, Supply Chain, HR and Finance. At the highest level, these are your Product Groups, or “Level 1.” If your organization is smaller and has a relatively simple technical estate, you may not need to break this down any further.
However, we have found most enterprises with multiple business units and geographies need to do so. Inside the Sales group at a SaaS company, business processes would likely include steps such as Discovery, Lead to Cash and Customer Success (which includes activation, adoption, expansion and renewals). These may become your product groups since each of these steps involves different business stakeholders, targeted KPIs and technology components. However, the way you design your product teams will ultimately depend on the intricacies of your organization.
Absent a one-size-fits-all approach, we suggest the following guiding principles:
A key to product-based IT is building cross-functional teams that have the business and technical skills needed to accomplish most tasks inside their teams. The most important role in your product team will be the Product Owner (or Product Manager). Referred to as unicorns by some, these individuals possess the unique blend of business (strategy, competitive analysis), technical (architectural vision, technical project management) and leadership (decision-making, stakeholder management) skills and are responsible for driving the product vision and strategy and leading execution.
To fill this role, many organizations will conduct a skill assessment with their organizations to determine the skills needed to be successful, gather an inventory of available skill sets and shape a training program to fill gaps. As you structure the rest of the product team, think about how the skills of other team members can complement the product owner skill set so you are creating a strong blend of business, technical and leadership skills in the team. Beyond the Product Owner, you may have a Business Analyst that serves as a Junior Product Owner and supports detailed data and process analysis. A Scrum Master would drive Agile ceremonies, a Technical Lead would create a solution architecture and orchestrate technical activities, and an Engineering/QA team would ensure delivery of a high-quality product.
Think about IT services that are BU agnostic, needed across all product teams and in demand only on a part-time basis by the product group. These are your Shared Services. Shared Services cut horizontally across the product groups and teams. Just like products, these specialized groups endeavor to mature and develop new capabilities and empower their customers (in this case the product teams themselves).
Typical Shared Service groups include Enterprise Architecture, Infrastructure & Cloud, Security, DevOps, Customer/User Experience, Data & Analytics, Integration, Program/Vendor Management and IT Operations/Support. The Office of the CIO is an increasingly prevalent Shared Service that is responsible for defining the enterprise IT strategy, setting metrics and measuring success. Each Shared Service should publish a service catalog detailing their offerings and processes for engagement with a bias towards self-service (where possible). Shared service resources can be “loaned” to product teams if there is demand for an extended period.
IT often starts with feasibility and viability, approaching desirability only if the former two boxes are checked. Product managers need to start with desirability and build the ability to adapt their storyline based on the audience. Avoiding technical speak and endless strings of three letter acronyms will also go far in building this rapport.
Shifting to product-based IT is a major cultural and operational change. When done well, it can result in better relationships with customers and business partners, increased agility and improved business outcomes.
This article originally appeared on CIO.com. Chris Boyd co-authored the piece.
As technology departments shift from traditional project management frameworks to treating IT as a product, it is triggering a broader re-think about how technology initiatives are funded.
Under the existing “plan, build, run” model, a business unit starts by sending project requirements to IT. The IT team then estimates the project costs, works with the business to agree on a budget, and gets to work.
This setup has several flaws that hamper agility and cause headaches for all involved. Cost estimates often occur before the scope of the project is truly evaluated and understood, and any variations in the plan are subject to an arduous change control process. What’s more, funding for these projects usually is locked in for the fiscal year, regardless of shifting enterprise priorities or changing market dynamics.
To achieve the benefits of a product-centric operating model, the funding model must shift as well. Rather than funding a project for a specific amount of time based on estimated requirements, teams instead are funded on an annual basis (also known as “perpetual funding”). This provides IT product teams with stable funding that can be reallocated as the needs of the business change. It also allows teams to spend time reducing technical debt or improving internal processes as they see fit, improving productivity and quality in the long run.
“We have to adapt with governance, with spending models, with prioritization,” Intuit CIO Atticus Tysen said during a 2019 panel discussion. “The days of fixing the budget at the beginning of the year and then diligently forging ahead and delivering it with business cases are over. That’s very out of date.”
Business unit leaders may be skeptical at first glance: why pay upfront for more services than we know we need right now? A closer look reveals that this model often delivers more value to the business per dollar spent. For example:
Shifting away from old ways and adapting a new funding model can seem like a daunting task, but you can get started by taking the following first steps:
First, establish the baseline to which you will measure the funding shift’s effectiveness. A technology leader must consider all the dimensions of service that will improve when making the shift. Two areas of improvement that have high business impact are service quality and price. To establish the baseline for service quality, it is important to measure things like cycle time, defects, net promotor score, and critical business metrics that are heavily influenced by IT solutions.
The price baseline is a little more difficult to establish. The most straightforward way we have found to do this is to look at the projects completed in the last fiscal year and tally the resources it took to complete them. Start with a breakdown of team members’ total compensation (salary plus benefits), add overhead (cost of hardware/software per employee, licenses, etc.) and then communicate that in terms of business value delivered. For example, “project A cost $1.2M using 6 FTE and improved sales associates productivity by 10%”. When phrased this way, your audience will have a clear picture of what was delivered and how much it cost. This clear baseline of cost per business outcome delivered will serve as a helpful comparison when you shift to perpetual funding and need to demonstrate the impact.
The shift to a new funding model will be highly visible to all business leaders. To create the greatest chance of success, focus on selecting the right teams to trial the shift. The best candidates for early adoption are high-performing teams that know their roles in the product operating model, have strong credibility with business unit stakeholders, and experience continuous demand.
In our work with large organizations piloting this shift, e-commerce teams often fit the mold because they have a clear business stakeholder and have developed the skills and relationships needed to succeed in a product-based model. Customer success teams with direct influence on the growth and longevity of recurring revenue streams are also strong candidates as their solutions (such as customer portals and knowledge bases) directly influence the degree to which a customer adopts, expands, and renews a subscription product.
Estimation in the product-based funding model is different than in the project model. Under the new model, teams are funded annually (or another agreed-upon funding cycle) by business units. As funding shifts to an annual basis, so should cost estimation. Rather than scoping the price of a project and then building a temporary team to execute it (and then disbanding after execution), leaders should determine the size and price of the team that will be needed to support anticipated demand for the year, and then direct that team to initiate an ongoing dialogue with the business to continuously prioritize targeted business outcomes.
When completing a team-based cost estimation, it is important to include the same cost elements ( salary, benefits, hardware, licenses, etc.) that were used to establish your baseline so that you are comparing apples to apples when demonstrating the ROI of product-based funding. Where you will see a difference in the team-based model is resource capacity needed to deliver demand. In a product model, a cross-functional team is perpetually dedicated to a business domain, and there is often zero ramp-up time to acquire needed business and technical knowledge.
Since the teams have been perpetually dedicated to the domain, they are encouraged to take a longitudinal view of the technology estate and are able to quickly identify and make use of reusable components such as APIs and microservices, significantly improving time to market. For these reasons, among others, teams in the product-based operating model with perpetual funding can achieve more business value for less cost.
Pilot teams should work closely with the BU leadership providing the funding. Stakeholders should work together to generate a list of quantitative and qualitative business outcomes for the year (or other funding cycle) that also satisfy any requirements for existing funding processes operating on “project by project” basis.
If you don’t already have a great relationship with finance, start working on it now. Your partnership with finance at the corporate and BU level will be critical to executing your pilot and paving the way to wider enterprise adoption of team-based funding models. Ideally. Leaders should engage with finance before, during, and after the team-based funding model so that everyone is in lockstep with you throughout the pilot. This alignment can help bolster adoption with other areas of the enterprise.
Each finance department has unique processes, cultures, and relationships with IT, so while you will need to tailor your approach, you should broach the following topics:
You will need to achieve success in the pilot to bolster adoption in other areas of the business. Your success needs to be communicated in terms that resonate with the business. As your pilot comes to an end, gather your baseline data and match it up with the results of your pilot. Put together a “roadshow deck” to show a side-by-side comparison of costs, resources, and business outcomes (Business KPIs, quality metrics, cycle times, NPS, etc.) before and after the shift to team-based funding.
Depending on your organization, it may be prudent to include other observations such as the number of change control meetings required under each funding model, indicators of team morale, and other qualitative benefits such as flexibility. Have conversations with other areas of the business that may benefit from team-based funding (start off with 1-on-1 meetings) and offer to bring in your partners from finance and the product teams as the discussion evolves. The most important part of your story is that the team-based funding model delivers more business impact at a lower cost than the old model.
Establish light and flexible governance mechanisms to monitor performance of the teams operating in the teams-based model. The purpose of these mechanisms is to validate that the increased level of autonomy is leading to high-priority business outcomes, not to review progress on design specs or other paper-based milestones. A $40B global manufacturing client adopting the team-based funding model established quarterly portfolio reviews with BU leadership and the CIO to review results. BU leadership reviews results of the teams and the planned roadmap for the subsequent quarter. BU leadership is then given the opportunity to reallocate investment based on changing business needs or can recommend the team proceed as planned.
It is important to communicate that this process requires constant buy-in from business units. While funds will be allocated annually, demand will need to be analyzed and projected on at least a quarterly basis, and funds should be reallocated accordingly. In cases where investments need to be altered in the middle of a fiscal year, it is important to note that the unit of growth in this model is a new cross-functional team focused on a targeted set of business outcomes. The idea is to create several high-performing, longstanding, cross-functional teams that have the resources needed to achieve targeted business outcomes, rather than throw additional contracted developers at teams as new scope is introduced.
Making the shift from project-based funding to product team-based funding is a major cultural and operational change that requires patience and a willingness to iterate over time. When executed successfully, CIOs often have closer relationships with their business partners, as well as less expensive, more efficient ways to deliver higher-quality products.
