As CIO and Chief Innovation Officer, Ben Allen of Mash & McLennan strives to drive collaboration and synergies across four multi-billion dollar operating companies.
by Peter High, published on Forbes.com
01-21-2013
Ben Allen has had an unusual path to his current role as chief information officer and chief innovation officer at Marsh & McLennan. He rose to the role of president and chief executive officer of Kroll, Inc., which was an operating company within Marsh & McLennan until it was sold by that company to Altegrity, Inc. in August 2010. Soon after the divestiture, Allen re-joined Marsh & McLennan with the first of his CIO titles, that of chief innovation officer. He was the first person to hold that title in the company. A large portion of his responsibilities were centered on facilitating greater collaboration and value creation from across the company. Interestingly enough, that is a role the best chief information officers play, as they have reason to collaborate with leaders of each business unit and division of a company often in ways that those leaders do not with each other. These similarities were not lost on Allen, who assumed his second CIO role, that of chief information officer, less than a year after his return to Marsh & McLennan.
(This is the seventh in the CIO-plus series. To read the prior six interviews with the CIO-pluses from Waste Management, McKesson, Merck, Red Robin Gourmet Burgers, Ameristar Casinos, and Owens Corning, please click this link. To receive notice about future interviews in the series with CIO-pluses of ADP, the San Francisco Giants, and P&G, please click visit the column’s page. in the weeks to come. To listen to a podcast interview I recently conducted with Ben Allen, please visit this link.)
Peter High: Ben, let’s begin with your path to the CIO-squared role that you have, as chief information officer and chief innovation officer. You used to be the CEO of one of Marsh & McLennan’s operating companies, Kroll. After that business was divested, you rejoined Marsh & McLennan as chief innovation officer first, and then as chief information officer second. Now that you provide services to your former peers, what advantages have you seen by having walked a mile in their shoes?
Ben Allen: It’s always easier to be successful serving a customer/client when you’ve walked in their shoes. You more fully appreciate what they are trying to accomplish and the difficult trade-off decisions that need to be made. The Marsh & McLennan business leaders know that I’ve run a global P&L and carried the pressures associated with that responsibility. We speak the same language and want the same outcome, and there is no doubt that makes a big difference.
Frankly, I also was a tough customer of the IT function when I was on the other side of the fence. I recall what I liked about it, and where I saw room for improvement. That has given me different perspective and rationale in approaching the second of my CIO roles, that of chief information officer.
Additional topics covered in the article include:
To read the full article, please visit Forbes.com
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To explore the Technovation Column library, please click here.
To listen to Ben Allen’s Forum on World Class IT podcast interview, please click here.
In an installment of the CIO-Plus Series in Peter High’s Forbes Technovation column, Chris Laping, SVP of Business Transformation and CIO of Red Robin Gourmet Burgers talks about how to be a change agent from the perch of an IT leader.
12-03-2012
In a recent article, I mentioned the trend in companies around the US and beyond of expanding the CIO’s responsibilities based on the translation of good work done in IT into other divisions and departments in the company. I refer to this phenomenon as the CIO-plus role. I kicked off the series last week with an interview with Puneet Bhasin, the Senior Vice President – Technology, Logistics and Customer Service, Chief Information Officer of Waste Management. (Past articles in the series can be found here) This week, I am delighted to continue the series with Chris Laping, the Senior Vice President of Business Transformation and Chief Information Officer of Red Robin Gourmet Burgers (NASDAQ: RRGB).
Laping has what I believe to be the ideal background for a CIO. He has an engineering degree as an undergraduate, an MBA, he spent time as a consultant, and though he is not yet 40, he has been a CIO for ten years. He joined Red Robin as CIO in June of 2007, and after transforming that organization, added the role of SVP of Business Transformation to his title in February of 2011, noting that the company hoped that his “transformation” activities would not be limited to IT. Now it seems that each analyst call that Red Robin CEO Stephen Carley leads features initiatives that Laping and his team leads or co-leads, such as the development of the Red Royalty customer loyalty program that he oversaw in concert with the company’s CMO, which has contributed substantial sales lift in those stores where it has been fully implemented.
Laping does not hide his desire to take on even greater responsibility in the future, and he pays much more than lip-service to this ambition, as he continues to drive value from his CIO-plus perch within his company.
Peter High: You have been a Chief Information Officer since your late 20s, Chris. When you started as CIO, what did you hope to do in that role?
Chris Laping: If I honestly reflect on my goals at age 29 as a CIO in the GMAC world, it really boiled down to a few things: 1) be a leader that focused more on WE than ME; 2) be transformative and care about my company’s business more than my passion for technology and; 3) innovate in new ways that weren’t just limited to the technology toolbox.
Ultimately though, the number one metric I used to understand if I was succeeding was progress. I’ve never believed that people expect perfection or the total solution overnight; they are happy if you are making meaningful progress on a daily basis.
To listen to Chris Laping’s interview on The Forum on World Class IT, please click here.
Being a CIO for a company with “Data” in the name means you need to be on the leading edge of innovation. ADP CIO, Mike Capone, fosters a culture of innovation within his team to do just that.
10-15-2012
The unemployment figures sometimes mask the fact that there is a war for IT talent in corporate America and beyond. As companies across a large number of industries have awakened to the fact that technology has a major role to play in their operations, internally and customer-facing, they have understood that solid IT resources are a must. Add to that the fact that outsourcing has stripped many IT departments of the commoditized work, meaning that the average IT employee must be of a higher quality and contribute to a higher level of value. Lastly, Silicon Valley and the tech start-up community is again white hot, and that is drawing some the best and brightest engineering talent who might otherwise choose to join IT departments.
Late last month, Mike Capone, the Global CIO of Automatic Data Processing (ADP) asked me to speak with his team about IT led innovation and to facilitate a brainstorming session with his team. The approach used was truly novel.
To provide some context, ADP is one of the last four AAA-rated companies in the United States. Its growth has been steady, and one might suspect that that would translate into a conservative culture, but in recent years, the company has developed an emphasis on innovation. Traditionally known for being the unquestioned leader in Payroll Services, ADP has transformed itself into a full Human Capital Management provider over the last decade. Well established in the Cloud before the term became fashionable, ADP now counts over 300,000 clients leveraging their internet solutions. In May of 2006, the company developed the ADP National Employment Report, recognizing that in providing one in every six checks in the US, it had statistical significance when it came to employment figures. Capone and his team have been at the forefront of that change, as well, developing a vast array of innovative product offerings through its Innovation Lab. ADP’s Mobile Solutions, advanced Semantic Search engine and a behavioral intelligence algorithm based on Big Data are some examples of ADP’s investment on research and focus on innovation.
The three steps from the remainder of the article are:
Brainstorm Scenarios that are Several Years Ahead
Engage High-Potential Future Leaders of IT
Live the Future You Hope to Create
Peter High and Chris Laping, CIO of Red Robin Gourmet Burgers, speak with XChange Events at their Midsize Enterprise Summit 2012 in San Antonio, Texas after their on-stage interview for the Forum on World Class IT.
Meet the new IT leader—an executive intensely focused on building out an unparalleled IT core while increasing the business value of IT. Those two initiatives are what motivate the next-gen CIO. This session will unlock the secrets to breaking through by sharing innovative ways to manage projects, forge partnerships with internal departments and influencers and execute on a vision for driving business value and change. No matter what the critics say IT is uniquely equipped to drive change and foster innovation.
This interview is with Chris Laping, who is not only the CIO of Red Robin Gourmet Burgers but the Vice President of Business Transformation and Peter High, President of Metis Strategy.
To watch Chris’ full video interview with Peter, please visit his interview page on the Forum on World Class IT.
by Kalhan Koul May 2012
Please click here to download the PDF of this article
As the pace of technology progresses rapidly, it has become vital for CIOs and IT leaders to keep an eye out for transformative technologies that help increase efficiency, drive revenue, and more. Thus, since 2010, we have asked interviewees on Metis Strategy’s Forum on World Class IT podcast series to provide their thoughts on upcoming trends in IT; our team has tracked the results and elucidated several interesting patterns, some of which will be highlighted in this paper.
Overall, 51 individuals, ranging from active CIOs, CTOs, CEOs, CFOs, CAOs, professors in IT-related fields, among others, provided their input concerning future trends. The graphs in this article demonstrate which areas IT thought leaders believed to be most compelling in the near future.
Figures 1 and 2 illustrate the top trends identified over the course of the podcast series, and consist of some of the “usual suspects” such as cloud computing, mobility, etc. Figure 3 provides a breakdown of trends identified in 2010 vs. 2011, and Figure 4 takes the data a step further to demonstrate the change in percentage of identified trends. Together, these charts convey some interesting revelations, such as the emergence of trends like the consumerization of IT, the increased role of IT in the business, and the power of computing, as well as the decline or stagnation of trends such as social media. Although the identification of prominent and emerging trends provides interesting food for thought in itself, simply identifying trends without a broader context does not do the insights justice; thus, this article will further build upon these insights and present context concerning the emergence, decline, or persistence of specific trends in order to provide IT leaders greater visibility into what technologies will gain a foothold and should be considered sooner rather than later.
Figure 1: Top Trends Identified by Interviewees N = 51
Where the chart above provides the number of interviewees identifying trends, the chart below demonstrates trends identified as a percentage of interviewees.
Figure 2: Top Trends Identified – Percentage of Interviewees N = 51
The top few trends identified by the podcast interviewees, as shown in Figure 1 and Figure 2, have been prominent in the IT realm for some time, and for good reason. Cloud computing, which essentially provides shared resources, software, and information on demand, enables increased flexibility in IT spend, as it entails not only a significant reduction in fixed costs, but the ability to focus time and resources on better supporting the business and aligning to their objectives, a proposition tantalizing to many CIOs. For example, Curt Edge, CIO of The First Church of Christ, Scientist, states that “about 4-5 years ago [prior to moving to the cloud], we spent about 80% of our time working on maintenance …today we spend anywhere from 60-65% of our time working with the businesses.[1] ” It should be noted that some of the identified trends, such as Software-as-a-Service (SaaS) and virtualization remain closely linked to cloud computing: virtualization enables the movement of major infrastructure components to the cloud, and SaaS essentially acts as a subset of cloud computing, with software and associated data being centrally hosted in the cloud. For the purposes of this paper, these trends will be treated as distinct entities despite their linkage.
As mobile technologies improve at a rapid pace, employees have the ability to utilize mobile devices to conduct business and access internal networks, so that they may be productive anywhere. For instance, David McCue, CIO of Computer Sciences Corporation, states that “we’re all beginning to appreciate what the convergence of the last few years of ubiquitous available bandwidth, thick pipes, and powerful handheld devices means…we’ve learned that being able to do anything, anytime, anywhere is the direction we’re going.[2] ” Furthermore, what has partially enabled the advent of mobility has been the consumerization of IT, where a plethora of ever-improving mobile computing devices such as smartphones and tablets have begun to permeate the business world.
Taken together, these trends do not seem surprising at all, as they have been widely recognized in a variety of publications and numerous companies have begun implementing projects in relation to them; however, further delving into the data provides significant insights into the shifting priorities of IT leaders (see Figure 3 and Figure 4).
Figure 3: Trends Identified in 2010 and 2011 N = 48
Evidently, the data illustrates significant changes in trends identified between 2010 and 2011. Figure 4 provides the difference in percentage from 2010 to 2011, and reveals several interesting details concerning trend trajectories.
Figure 4: Change in Trend Identification from 2010 to 2011 – Percentage of Interviewees N = 48
First, the number of interviewees identifying social media and collaboration technologies (both internally and externally facing) as a major IT trend decreased dramatically; over the past two years, this trend dropped from first to fourth overall (see Figure 1).
So, what has caused this dramatic decrease in recognition? Some plausible explanations include the increased awareness of social media platforms, such as Facebook, that were more front-of-mind due to their exponential growth in use by the general population, or by the significant level of media exposure these platforms received. Another explanation could be that organizations recognized the potential of these platforms early and sought to implement technologies to take advantage of them. For instance, Microsoft witnessed a significant increase in sales of SharePoint [3] (which enables collaboration), indicating that more companies have sought this type of solution, and have addressed this trend. On the flipside, however, as detailed in a recent InformationWeek article, numerous internal social networking initiatives have faced lackluster adoption [4] ; one possible consequence could be that IT leaders have shifted focus elsewhere. Whatever the explanation, this precipitous decline in focus on social media remains an interesting topic that merits further monitoring.
It comes as no surprise that consumerization of IT, which concerns the impact that consumer-originated technologies have on enterprises, has witnessed the greatest increase in being identified as a trend from 2010 to 2011. The rise of tablet technologies likely acts as one of the primary drivers for this increase, particularly the release of the Apple iPad. Although consumerization of IT has been increasing in prominence as consumer technology becomes more sophisticated, it appears that the release and the widespread adoption of the iPad (approximately 55 million sold to date [5] ) has opened the floodgates and has caused this topic to considerably rise in prominence. In fact, Metis Strategy has advised several clients who have sought to implement tablets within their own organization in recent years; overall, despite concerns of security of information in adopting tablets and other consumer originated technologies, the majority of organizations have found benefits through a combination of increased productivity, employee satisfaction, and reduced cost. Furthermore, as the capabilities of consumer technologies expand, we have also seen an increase in organizations employing “Bring Your Own Device” programs, which leverage not only the familiarity employees have with their own devices, but the reduction in support necessary for these devices. For instance, Bruce Leidal, CIO of CareStream Health, states that “people own their own devices and they would just as soon use those for work…and we’re putting in the right infrastructure so that we can make sure that that happens. I think the benefits [are that] we have basically eliminated all of the support costs…it reduces our call volume and also takes a lot of noise out of our support environment. [6] ” Thus, overall, the rise in consumerization of IT makes sense given the parallel advancements and capabilities of consumer technology.
An additional trend that is rising in prominence includes an increased IT role in the business. In numerous organizations Metis Strategy has advised, IT has historically been regarded as an “order-taker”, and not seen as integral to driving the business; however, as technology becomes vital in how business operates in contemporary times, we have begun to see a shift towards increasing IT involvement in the business. Although this trend has yet to become pervasive, it appears to be a logical successor to other prominent trends. For instance, we have seen several of our clients try to unburden their resources by adopting cloud computing solutions, significantly increase virtualization, or leverage consumerization of IT programs such as ‘Bring Your Own Device’; not only do these initiatives decrease fixed costs related to hardware, but they drastically reduce ongoing maintenance and support of the hardware. Consequently, IT employees have increased opportunity to partner with the business so as to focus on value-oriented and revenue driving initiatives. For example, Jim Knight, EVP and Global CIO of Chubb & Son, states that “what we have found the last couple of years is not only are we the fuel for managing expenses…we’re also the engine for the business…because technology can get us there…there are absolutely expectations of us that our operations will be streamlined and [as] cost-effective as possible, but they are also investing in programs to bolster up the business. [7]” In addition, as the general consumer of technology becomes more tech savvy, it becomes necessary for businesses to connect with these consumers utilizing the same technology; as a result, IT can naturally team with other functions to drive business’ strategy through leveraging new tech-enabled customer touch points.
When explaining the power of computing and analytics as a rising trend, it makes sense to take a step back and assess the progress of technology as a whole. For instance, Moore’s Law, one measure of technology progress, states that the number of transistors that can affordably be placed on an integrated chip doubles approximately every two years (and is hence associated with growth in processing speed, memory, etc.), and illustrates the dramatic pace at which computing improves. Furthermore, recent developments where research teams have taken significant strides in quantum computing (e.g., IBM physicists at the Watson Research Center advancing superconducting qubits [8]) indicate that a new era in the scale of computing power may not be too far off. However, the real appeal lies in what can be done with this computing power, and how it can be utilized to drive business. June Drewry, former CIO of Chubb Insurance and Aon Corporation, states that “over the years…we’ve collected so much data that we’re not sure we know how to make information out of it in some cases; well, now we’re learning, and now there’s a thirst for it in the business. [9]”
The ability to process and analyze massive amounts of data, currently referred to as Big Data in IT circles, to form conclusions that can be acted upon will be invaluable, allowing businesses to discern customer behavior and other patterns. One of the reasons why this capability will be so valuable derives from the fact that many correlations that can be discovered through this type of analytics are not intuitive in nature. For instance, the New York Times recently published an article detailing how Target was able to utilize statistical correlations to predict which of its consumers were pregnant, and thus create tailored promotions to that demographic; other correlations included finding that newly-married individuals are more likely to begin purchasing a new type of coffee, or when individuals divorce, they tend to change brands of beer [10]. These behaviors do not appear to have inherently intuitive explanations, yet they exist and can be discovered and leveraged through analytics as enabled by computing power. Thus, the rise in the power of computing, and the correlated capability to conduct extensive analysis to discover valuable insights, will become a source of competitive advantage in the future, and likely explains why this trend has been increasing in prominence.
The analysis of the data obtained from the Forum on World Class IT podcast series reveals interesting insights concerning the trends that are front of mind for IT thought leaders. Not only does the data point to top trends such as cloud computing and mobility, but it also demonstrates trends rising in prominence such as consumerization of IT, the power of computing, and the increased IT role in the business, as well as trends on the decline such as social media.
From Metis Strategy’s perspective, we feel that IT’s increased role in the business, as well as the power of computing and analytics, will continue to be pertinent for business leaders, and will rise in prominence in the coming years. As many resource-consuming aspects of IT move to the cloud, such as purchasing and maintaining servers, network equipment, data center space, business applications, etc., IT organizations will thus be able to focus more on driving business strategy. One method of IT supporting the business, as we have seen in several organizations, entails enabling a strong business intelligence function, which is closely associated with the power of computing and analytics. As the amount of consumer information gathered and analyzed continues to grow, it will become essential for IT to develop methods to effectively consume and utilize this information to influence business decisions.
We feel that consumerization of IT, although experiencing a drastic increase in recognition in recent times, will level out somewhat. This is not to say that this trend has been ‘over-hyped’, but that the advantages of consumer-originated technology entering the business landscape have become much clearer recently, and many of our clients actively pursue opportunities to incorporate these technologies in their businesses. Similarly, when considering cloud computing, we feel this trend will begin to even out in the near future; cloud computing has been a topic of discussion among IT leaders for several years now, and we have begun to observe numerous companies moving ‘to the cloud’. In the coming years, cloud computing will be in essence ubiquitous, less of a consideration and more of a necessity, and will be intrinsic in how IT operates.
Overall, these insights bolster the notion that the landscape of IT continuously shifts and progresses at a rapid pace, and it becomes ever more important to keep our fingers on the pulse of IT and understand how these constantly emerging innovative technologies can be harnessed to propel business to a new level. Furthermore, what is truly exciting about all of these mentioned trends is that the majority of them provide tremendous opportunities for CIOs to collaborate with peers across the company, putting IT in the center of interesting conversations that could determine business direction. These trends have deep-seated business implications that should be taken advantage of to increase the curiosity and enthusiasm about how IT can help drive the business as opposed to merely supporting it.
[1] Peter High, “Metis Strategy’s Forum on World Class IT,” podcast interview with Curt Edge, March 26, 2012. [2] Peter High, “Metis Strategy’s Forum on World Class IT,” podcast interview with David McCue, April 9, 2012. [3] Mary Jo Foley, “Microsoft: We’re adding 20,000 new SharePoint users a day.” March 24, 2011. http://www.zdnet.com/blog/microsoft/microsoft-were-adding-20000-new-sharepoint-users-a-day/9011 [4] Healey, Mike. “Enterprise Social Networks: Dislike,” InformationWeek, February 2, 2012. [5] Sam Gustin, “How Many iPads Can Apple Sell?” Time Business, March 16, 2012. [6] Peter High, “Metis Strategy’s Forum on World Class IT,” podcast interview with Bruce Leidal, November 21, 2011. [7] Peter High, “Metis Strategy’s Forum on World Class IT,” podcast interview with Jim Knight, January 3, 2012. [8] Cade Metz, “IBM Busts Record for ‘Superconducting’ Quantum Computer,” Wired Enterprise, February 28, 2012. [9] Peter High, “Metis Strategy’s Forum on World Class IT,” podcast interview with June Drewry, December 5, 2011. [10] Charles Duhigg, “How Companies Learn Your Secrets,” The New York Times, February 16, 2012.
Please visit The Forum on World Class IT to listen to the podcasts and trends mentioned in this article.
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.
by Peter High
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.
The bankrupt airline is unique, both in terms of its investment in IT, and the inventive collaborative strategy devised by CIO Nirup Krishnamurthy that has contributed significantly to addressing United’s dueling needs to cut costs and create revenue-generating programs.
September 11, 2001 was a watershed moment for the airline industry. Prior to that tragic event, revenues and profits were climbing like a Boeing 777, marking the most successful period in airline history. Although this rosy outlook had already begun to fade in mid-2001, the prospects of the industry dramatically worsened in the aftermath of that infamous Tuesday.
The consequences of the terrorist attacks on the larger, older airlines have been the most profound, thanks to a confluence of factors that included increased fuel prices, a sharp drop in travel, and ticket prices that plummeted to 10-year lows. United Airlines was one of the companies hardest hit, and that “perfect storm” of events forced it into Chapter 11 protection in December of 2002, where it has remained. Much of the period between then and now has seemed grim, and United – like so many other carriers – has emphasized cost-cutting and increased efficiency to redress its financial woes.
But in late 2003, United CIO Nirup Krishnamurthy began to utilize IT as a strategic weapon in the quest to become more efficient. His success has been such that United’s senior management has since committed to investing in IT – even as rival carriers cut IT costs – while demand for IT services has simultaneously expanded. What inspired United to pursue a distinctive IT strategy?
IT Transformation
In diverse segments of the business, United’s business leaders came to the realization that IT was a key enabler to increasing efficiency. “We realized that using IT would be a critical component to mitigating the issues we faced,” said Pete McDonald, EVP and Chief Operating Officer at United Airlines. In fact, measuring efficiency often required technology solutions. But the IT department, meanwhile, had lost half its resources and leadership in the months after 9/11. And Krishnamurthy was beginning to feel the pressure as demand for IT services started to expand in mid-2003.
As the business units began to think about their plans for the future independently, it turned out that a high percentage of those plans had an IT underpinning. Krishnamurthy soon realized that without a strategic plan for himself, his department soon would be overwhelmed. And so by the fourth quarter of 2003, he had United IT embarking upon a program they called “IT Transformation.”
IT Transformation had three main objectives. First, Krishnamurthy wanted to centralize the investment process, i.e. budget breakdown, to make the most of each dollar spent. Second, in order to ensure IT could meet the business’ demands over the long term, he wanted to implement a coherent infrastructure management plan that methodically reduced IT’s complexity and risk. And third, he wanted to put in place the IT leadership and processes capable of efficiently carrying out the mission ahead.
There were added bonuses. For example, the corporation set out to modify the way in which IT investments were aligned, and ended up changing the strategic planning method in the process. Traditionally, business units independently determined their own investment needs with IT simply reacting to their demands. Mismatched goals and duplicated efforts were the result. To improve upon this ad hoc approach, Krishnamurthy realigned IT expenditures to connect them to what he called “Strategic Themes.” Each of the seven themes crossed divisions of the organization, and at least one senior member of the airline’s Executive Council oversaw each theme together with Krishnamurthy.
The strategic themes included: Cost Leadership, Customer Experience, Revenue Optimization, IT Infrastructure, Shared Services Optimization, Safety and Compliance and Employee Engagement. The goal of the themes was to involve the business units in IT’s strategic planning exercises and project decisions, while improving the value realization of all IT investments. “The support of United’s senior leadership is critical to ensuring that IT investments and priorities are best aligned with the corporate business plan,” Krishnamurthy explains. And yet, only when United’s traditional IT investment approach was strained to the breaking point were the business units prepared to realign IT expenditures in this more rational way. This is classic corporate behavior: organizational change typically awaits a crisis.
To date, the themes have been successful, bringing together IT and the business units to eliminate waste and redundancy, significantly improve the customer experience and cut project development time, as well as open the door to new revenue generating and cost-cutting initiatives. For specific examples of how each theme has played out, see related story, “United IT Employs “Strategic Themes” To Cut Cost, Enable Collaboration.”
Cross-pollination of IT Transformation’s seven Strategic Themes has been facilitated by the new connections the initiative has made across business units, which in turn allows the company to achieve multiple goals via one project. For example, Easy Check-In kiosks are a great example of a Cost Leadership initiative being leveraged in new ways across Customer Experience and Revenue Optimization.
The kiosks were initially conceived as tools that would reduce costs, improve service efficiency and free up staff to focus on the more complex customer transactions. Later, the kiosks served to enhance the Customer Experience by repositioning them in airports to shorten lines for passengers checking bags. Today they are also used for Revenue Optimization by offering passengers the opportunity to pay for an upgrade. In brief, the Strategic Themes of IT Transformation are fostering thinking about IT services as they apply to the business as a whole.
This new way of thinking has already help to identify the need for wireless capabilities across the corporation and even aboard aircraft. As a result, the IT infrastructure team has begun work on a comprehensive wireless strategy that will improve productivity, increase speed-to-market for technologies that support the business, and lower costs.
Krishnamurthy also needed to revise the organizational structure of IT itself in order to increase its efficiency in support of the IT Transformation project’s goals. A key restructuring point involved creating distinct departments for IT’s business-interfacing function, its solutions-elivery function, and its operations function. Whereas in the past, IT staff would perform tasks relating to all three of these areas – invariably prioritizing business-facing activities at the expense of the other two – Krishnamurthy’s decision to dedicate personnel to each of these three functions has ensured that they all receive the attention and time they require.
In Krishnamurthy’s words, “The transformation is enabling us to put the pieces in place so that we can hold ourselves to a higher standard in terms of how efficient we are, and how much value we can generate for the corporation.”
The proof is in the results: the return on investment on IT investments more than doubled in 2004 as compared to 2003, reflecting an improvement in the quality of investments. Additionally, now a little less than two years into the three-year IT Transformation program, developer productivity gains of more than 15% have been achieved, putting United’s IT team well on the way to beating the target of 20% for the full three years. There has been much change over the first two years of IT Transformation. The plan for year three is for IT to stabilize around this change and execute on the portfolio of ideas that have emerged. “IT has helped us pollinate ideas across the organization. Now we need them to execute on them,” says McDonald. Given the dramatic improvements that have been made thus far– in costs, revenue, service delivery and in product innovation-IT appears poised to get an old icon of the skies back on track.
Originally published in Information Week, November 9, 2005. Copyright ©2005 CMP Media LLC (now UBM), republished with permission.
