It’s a short week. I’ll get straight to the punch. I heard General Motors Co. CFO Dan Ammann being interviewed last week about GM’s strategy for running the business, one year after the carmaker’s initial public offering. CIOs should pay attention to what he said about lowering risk and investing in innovation. In fact, they should think of Dan Ammann as their canary in the coal mine.
GM has gone from losing billions of dollars to making money, $7 billion so far this year. Thanks to its reorganization and government bailout, North America’s largest car company is largely debt-free. Granted, Europe is a problem. Apparently the company is not doing so well in South America either, a big car market. And the stock price is not where it should be. But in distinction to life in pre-bankruptcy days, GM’s new executive management team now has the luxury of actually running the business (as opposed to lurching from crisis to crisis), Amman told The Wall Street Journal Senior Editor Darren McDermott during a session at the recent MIT Sloan CFO Summit in Boston.
What was GM’s strategy for lowering its risk profile? One big step was to dramatically reduce the company’s break-even point, Ammann said. “We had a huge fixed-cost base, so we had to build a certain number of vehicles to cover the fixed cost. We had a supply-push business model: You built the vehicles and then figured out how to sell them.”
“Getting the break-even point down allowed us to have a business model where we are building to demand, as opposed to building a particular level of volume, to allow the business to break even,” he added.
Building to demand: That should ring a bell for CIOs, I think. Calibrating IT supply to meet business demand is both tough and arguably more critical than ever if IT hopes to be a strategic partner. One way of building to demand is to build in the cloud, scaling up or back to keep the break-even point at a place where IT departments can spend less than their budgets. Why do that? So they can plow a predictable amount of money into innovation.
However, “you can’t cost-cut your way to prosperity,” said Ammann, whose New Zealand accent lends his statements a kind of matter-of-factness. GM invests about $16 billion a year in product development. The company needs to worry about whether it’s allocating the right amount and if it’s getting value for its money. With a debt-free balance sheet and low break-even point, on the other hand, GM can give its engineering department a predictable set of things to work on and a predictable amount of money to spend. And that, Ammann claimed, is the “best way to get efficiency into an engineering department.” That’s in distinction to the days when the fiscal crisis du jour resulted in billions wasted on engineering products that got canceled midstream.
To recap: Reducing the break-even point, so IT has a little money left over, makes it more likely that CIOs will have a predictable stream of revenue to plow into innovation.
Ammann didn’t get into the particulars of how that GM break-even point was lowered — the brutal job cuts, factory closings and production moved to China. That’s ancient history now. The current reality is that GM’s break-even production volume in North America is about half what it was pre-bankruptcy. And the executive team is relentlessly focused on keeping cost from creeping back in, he said. What’s important is that GM keeps “the break-even point down low enough so we are making money in basically any market environment,” he added. “It’s all about operational execution.”
One last observation, not exactly on point but germane: Ammann has inserted himself into GM’s product planning process — a nervy thing to do for a CFO, it seems. But product development is important for GM, so naturally he “went and got in the middle of it.”
“The role of finance … is that we are there to bring the information and insights to enable the right business decisions. And there are a lot of really important business decisions getting made when you are setting your future product portfolio and future investment strategy,” he said.
Ammann’s advice to the CFOs in the audience: “If you show an interest in the business, the business will show an interest back.” The same could be said to CIOs.
Who says enterprise architecture frameworks are worse than useless? Vivek Kundra, that’s who. The former CIO of the United States made a blistering case against enterprise architecture in his keynote at the 43rd Society for Information Management (SIM) meeting this week. It came in a talk on his efforts to reform the federal IT program with initiatives like IT dashboards and a cloud-first policy. The remarks were especially exciting because they followed a passionate argument for the value of enterprise architecture by John Zachman, an early pioneer of enterprise architecture frameworks.
When an audience member asked Kundra to clarify remarks suggesting that “enterprise architecture was secondary, maybe even tertiary” to the IT discipline, Kundra responded:
“My view is, absolutely architecture is secondary. And the reason is because I am confronting the truth as is, not as I wish it were,” said Kundra, who left his post in August for a fellowship at Harvard.
What idealists get, he contended, are ERP implementations like the one he found as the assistant secretary of commerce and technology for the state of Virginia. The $30 million project was funded by taxpayer money — and had nothing to show but paper two years into the project. “I kept pushing the person [in charge of the project], ‘What did we get, what did we get, what did we get?’ And ultimately it ended up being this book.”
Everybody has lost their way in enterprise architecture, Kundra said, especially enterprise architects. “They focus on documenting the current state or what the future state should be. By the time they are done with their architectural artifact, a new technology has already killed whatever they are working on,” he said.
Zachman, the inventor of The Zachman Framework for Enterprise Architecture, delivered an equally rapid-fire presentation (and with way more jokes), promoting the need for enterprise architecture frameworks. The 76-year-old Zachman argued that the extreme complexity of technology coupled with the extreme rates of change in the information age have made architecture more essential than ever to enterprise computing. IT has always been between a rock and a hard place in designing systems that align with the business. “Hey you guys, we’re never going to be able to produce implementations that are aligned with what you’re thinking about until we have a way to transcribe what you are thinking about,” he said.
IT people confuse building systems — the manufacture of IT products — with architecture. But if the current state of IT has proved anything, it is that anyone can build and run enterprise systems — bolting products upon products as technology and business needs change. Enterprise architecture is about drafting models for systems that will be integrative, flexible, interoperable, reusable and aligned with the enterprise. For people who confuse building and running systems with enterprise architecture, Zachman had this warning: “A cloud is in your future.”
His Zachman framework, more accurately called ontology, is akin to the periodic table. It is a schema or classification that requires architects to answer what, how, where, when and why, and thus to describe what they intend to build — before they build. “You get flexibility by separating the entities, and you don’t build until you are ready to build.”
Kundra made a polite nod to the guru of the Zachman framework, stating that he and Zachman were in agreement that architecture must not become “dogmatic.” Kundra comes at enterprise architecture from a business perspective. “But I have huge disdain for architects and the practice of architecture where all you are producing is paper that nobody ever reads.”
By the way, Kundra did not get off scot-free, fielding several questions — and pointed criticism — on the government’s track record on security during his reign. Who says rubber chicken events have to be bland?
Social business process management, or social BPM, promises to address the age-old problem of having a small group of business analysts or technicians create business processes, only to get pushback from frontline users.
The team has good intentions, but the people actually involved in making the business process happen end up saying, “This isn’t how we do it,” or “This isn’t what we had in mind.”
Employees end up reverting to the old way of doing business, and either all that business process improvement work goes down the drain or the BPM tools don’t get used.
With social BPM, employees — and in some cases, customers — are involved up front in changing and improving and even creating new business processes. Also called collaborative modeling by Forrester Research Inc. analyst Clay Richardson, the idea behind social BPM is to involve employees and customers in the design and planning stage. “Right now, it’s mostly top-down BPM; social BPM flips this model,” he said.
Richardson has written several blog posts on the subject, with one that discusses big process thinking, an approach that includes tying the customer experience to process improvement.
Richardson is seeing it happen among his client base. When a large health cooperative needed to transform its business processes, it brought customers into the conversation, worked with the customers’ employees and asked, “How do you think we should improve our processes?” he said.
With social BPM, a process can be changed midstream. “What’s critical is not just inundating people in the organization with a whole bunch of [business process] data, but putting it into the context of a work in progress so participants can take action on it real-time,” said Elise Olding, a research director in Gartner’s BPM practice.
Social BPM is one piece of the BPM strategy puzzle. We’ll be exploring other factors behind successful BPM strategies — and common mistakes — next week on SearchCIO.com.
Let us know what you think about this blog post; email: Christina Torode, News Director
“People always ask for more than they can use, and more than they need. Less is more.”
Thanksgiving is around the corner, so today’s brief missive is devoted to the eyes-are-bigger-than-the-stomach syndrome — in this case with regard to real-time business intelligence (BI).
Analyst Roy Schulte, the Gartner Inc. expert quoted above, was talking about the mistakes to be avoided when presenting operational BI. (Let’s ignore for now the semantic debate about whether real-time BI and operational BI are one and the same.) The point he was making is that when it comes to the intelligence aimed at decision making in the moment, both digital providers and digital users err on the side of too much. Our stomach for information is bigger than our capacity to process it.
The result is that the pertinent data is obscured and people are overwhelmed with information they thought they needed to help them work — but don’t. Less is more.
Schulte offered the advice at a session at the recent Gartner Sympoisum/ITxpo show. Here are three pointers (heavily paraphrased from the talk) that will improve operational BI.
Don’t junk it up with pictures. Nonessential clip art, logos and decorations actually slow down decision making. Unless you’re a genius at accessorizing — and maybe even if you are — don’t go there. The 3-D graphics that are all the rage in BI reports? Also a no-no. They can obscure the attributes you are trying to show.
Stop with the metrics already! People always want more metrics than they can use. If users ask for a bunch of metrics, it’s hard not to oblige and keep your job. But you can keep to your less is more rule by showing users the pertinent metrics, and making the other metrics optional behind a click-on icon, Schulte says. “Most times, after a couple of weeks people find they are not using that additional information.” (How to separate the wheat from the chaff on metrics is a topic for another story.)
Beware of alert fatigue. Alert clutter is just as counterproductive as information clutter.
The pointers, as I mentioned, came in Schulte’s talk about mistakes that even the pros make in operational BI. But these presentation rules spill over to all sorts of applications. The bigger message for CIOs — and one that I’ve been hearing at conferences and from IT people in the trenches — is the need to focus on people-centric design. If time is money, success will depend on designing applications and platforms that quickly adapt to and reflect how people think and work. And, just to make things more complicated, IT also needs to make these people-centric applications and platforms adaptable to a ton of devices. Less is more. And more is needed.
There are some worrisome predictions swirling around technology staffing, or a lack thereof.
Gartner Inc. predicts that because of technology staffing shortfalls, three out of 10 Global 2000 companies will miss their public business targets for “growth that is driven by information and technology.” This prediction reaches as far out as 2016, and that does not bode well for the CIO job.
The Corporate Executive Board (CEB) believes that a business services, not an IT services, organization is the wave of the future. The CIO won’t necessarily be in charge of this shared services organization. A service broker management office, a separate shared services unit or a new position title that does not come from the IT ranks could well be in charge of this function and the staff behind it, according to Washington, D.C.-based CEB.
The demand for people with new types of skills and for IT to drive new business is “soaring,” according to Gartner analyst Diane Morello. “Meanwhile, access and the ability to find and bring people up to speed at the quantity and pace the business needs are staying static,” she said during a presentation at the recent Gartner Symposium/ITxpo in Orlando.
Some CIOs, like Frank Wander at The Guardian Life Insurance Company of America, are focusing on developing and maintaining existing skills. Read more about his strategy to create a “healthy social environment” for the IT knowledge worker.
Maintaining is not enough, however. CIOs need to be prepared to fill a number of new IT roles: collaboration or social media evangelist, service architect, technology broker, cloud integration specialist, information insight enabler, and user experience designer, to name a few, according to CEB.
What is alarming is the disconnect between CEOs’ and CIOs’ staffing priorities. A survey of 350 senior executives and CEOs ranked the attraction and retention of talented people as their No. 2 priority in 2011. A similar 2011 survey of CIOs ranked technology staffing as their No. 6 priority, according to Gartner.
We’d like to hear about your staffing priorities, predictions and advice; email Christina Torode, News Director.
I don’t know many CIOs for whom the company’s CFO does not loom large. People responsible for what is often the business’s single largest capital expense don’t fly under the radar of the CFO, no matter whom they report to. But how does the relationship between CIO and CFO actually work?
When the CFO and the CIO get together, they both bring something to the table, but what is each one’s role in that meeting? How do the goals of the CFO for technology investments differ from those of the CIO? Do they value the value of IT to the business in the same way? And, if they do, does the CFO then loom less large? Who gets the final say on an IT investment? How do they relate?
That’s a mystery SearchCIO.com and CFO magazine hope to get the bottom of in an upcoming survey of CIOs and CFOs. Feel free to send me questions that might illuminate, preferably with multiple-choice answers.
One thing I already know is that the CIO-CFO relationship tends to be fraught. I was reminded of that at a recent dinner gathering of CIOs. Sparks flew when the reporting question was put to the table. There was some name-calling (eek!). Bean counters. Number crunchers. One MBA’d CIO claimed that most CFOs came up through the accounting ranks and knew less about business goals than CIOs. Glorified accountants! If the ambition is to make IT strategic to the business, CIOs need to answer to the CEO, period: That’s what the table more or less concurred, echoing what’s become the standard view.
The outcry was a nice setup for Faisal Hoque, the speaker that evening, there to talk about his management theories about how to get the business and IT to work together. He spells it out in a new book, The Power of Convergence. (Hint: the CFO can’t be the enemy.) I’m going to read it as soon as my editorial director lets me borrow his copy.
In the meantime, I heard what just may be the most interesting paradigm for the future of IT-business relationships from one of the guests, the CIO of a prominent architectural firm. She’s come to think of IT-business projects as serial movie productions: intense, immense collaborations among IT, the firm and its scores of partners — with the CIO as director! And the CFO’s role? Why, producer, of course. (So, who would be the assistant director?)
I’d like to hear about your relationship with your CFO. You can reach me at email@example.com.
A discussion among the CIOs at the recent Massachusetts Technology Leadership Council (MassTLC) summit on cloud computing strategies got me thinking about Eleanor Roosevelt. No, really.
Surely you’ve seen it on bumper stickers or tacked to a classroom wall — that ubiquitous inspirational utterance: “No one can make you feel inferior without your consent.”
At an event generously populated by cloud service vendors encouraging each other to ignore the CIO and sell to the business, what several CIOs said would have done the former first lady proud. According to the event’s preprinted agenda, the CIOs were there to chat about using Platform as a Service, or PaaS. Instead, they wound up championing the place of the CIO in the cloud and across enterprise IT.
In essence, they weren’t about to let the cloud services vendors make them feel inferior. Inspiring bons mots not your thing? How about a football analogy? These CIOs proved vendors can’t achieve a successful end run around your IT department if you’ve set up a strong defense. And better still, if you’ve put up enough offense to be ahead of their game already.
As with any winning franchise, staying ahead requires strong leadership and teamwork. Take Tom McLain, CIO at Old Mutual (US) Holdings Inc. His cloud computing strategy is focused on creating strong relationships with the company’s head of compliance and head of legal. As leaders, they set the ground rules for vendor interaction that are so necessary in their highly regulated industry.
There will always be “renegades” — the workers in the business who go off and find their own cloud solutions. But even in less strictly regulated spaces, there are ways to remain in control. One way is to play along with them. Larry Bolick, CIO at Boston-based Aquent LLC, noted that early adopters can actually be integral team players. Identifying those who are eager to get their hands on the latest app can be hugely important to your cloud computing strategy going forward. Bolick did this with a Skype pilot program years ago.
“Fast-forward to today, and those folks are out in the Google space trying all kinds of things,” Bolick said. Knowing they have support behind their exploration makes them less likely to sneak in their own solutions. If they discover something of potential value, he said, they bring it to him.
Another important thing to note about these CIOs: To them, “going cloud” wasn’t and isn’t drudgery, a chore or some sort of panic move. (OK, maybe there was a little panic there; the looming recession was a potent prod for many CIOs to adopt cloud services.) Rather, it was seen as a challenge, a problem to solve. And lo and behold, once it got rolling, they began enjoying the process.
This wasn’t simply creating and implementing solutions to save time and money. In fact, the act of going to the cloud was in and of itself an opportunity to be innovative. As a result, these CIOs are left with more time and tools to, yup, be innovative — and perhaps feel a wee bit superior.
An average 13.5% of your IT organization’s time is spent on vendor management and procurement. That’s based on Gartner Inc.’s recent polling of more than 1,300 organizations. It’s an activity, Gartner suggests, that takes too big a chunk of your staff’s time for you not to manage it strategically. And guess what? No matter how much of your time is devoted to managing the vendor relationship, it’s too much.
“Your time is very expensive. Your employees need that time. Your executives need that time — and vendors are consuming that time,” Gartner analyst William Snyder said. “Time is squandered.”
And it’s squandered on a relationship where data shows that the other party — your vendor — often has the upper hand. An average 50% of your vendors have key cards for access to your data center, according to Gartner’s research. Having a key card allows unfettered access to your staff, which means that these vendors almost certainly know more about your staff than you do, Snyder said. They have free rein to sell to your staff. “The key card is access into a sales goldmine,” he said.
As a way of regaining control of their environments, some CIOs have revoked all vendor key cards until they can determine which vendors need or deserve that access — a step Gartner does not necessarily recommend taking. What Gartner terms the dissymmetry in information in the vendor relationship, however, must be closed, or CIOs will be at a disadvantage in any dispute with vendors. Moreover, many vendors come into any disagreement knowing that switching vendors comes with risks and is not worth the hassle.
These cautions came up in a session at last week’s Gartner Symposium/ITxpo that was billed as a CIO guide to managing vendors. The session laid out the common mistakes CIOs make in managing vendor relationships, and offered what seemed to me a lot of practical advice for improving those relationships, for example, by:
- Using lightweight crowdsourcing to develop a more objective view of the vendor. Rather than rely on one manager’s opinion, find 10 staff members who deal with the vendor, and poll them regularly over a period of time to develop a vendor scorecard.
- Dealing with the vendors on their turf, not yours. You need to know as much about your vendors as they know about your organization. That means staying on top of how their companies are doing in the marketplace, changes in the executive ranks, and financial analyst ratings.
I’ll be looking at some of these mistakes and pointers in more depth in coming weeks, but here’s some food for thought in the meantime. Snyder’s big takeaway is that CIOs should not — repeat not — meet with all their vendors. It’s important that you meet with the vendors that make a difference to your organization. The CIO role carries weight. Use it effectively, he urged. “If you don’t use it selectively, what ends up happening is, you don’t have gravitas,” he added. “Reserve the power that is embedded in your role.”
Seems like wise advice.
Let us know what you think about this blog post; email Linda Tucci, Senior News Writer.
I recently heard an interesting twist on crowdsourcing. It wasn’t about the marketing group combing social media sites for new promotional ideas, or businesses having online contests to gather new product ideas from consumers. It was about CIOs and their business peers gathering with customers to come up with new products and services.
Called customer crowdsourcing by some, the idea is to get customers involved in the product and services design process. Now, this is nothing new for software vendors. Customers are often involved in the development and patch cycles, especially in these days of frequent Software as a Service release cycles. What I haven’t heard of as much, until recently, is a push by businesses outside the technology area to involve customers in product design and conceptualization. Talk about having the inside scoop! These customers are being treated almost as extensions of the product maker’s workforce.
Harvey Koeppel, executive director of the Center for CIO Leadership in New York, brought the subject up recently during a call with SearchCIO.com. The center taps its 2,100 members to conduct research on the latest permutations of the CIO role and technology trends. He said that customer crowdsourcing is a “hot topic” among his members, and one that we will surely be hearing more about from CIOs.
So I asked the very next CIO I talked to, Frank Wander, CIO of Guardian Life Insurance Company of America. And sure enough, Frank said that Guardian was hip to crowdsourcing — actually for some time now. While the company is not using a crowdsourcing platform or system to collect data, he told me that gathering input from customers has been part of Guardian’s product development process for years.
“Through sales, we’re always hearing what the customers are asking for,” and those ideas are incorporated in the development process, he said.
I’m wondering just how involved customers are becoming in the product design process — outside of software development. There are crowdsourcing vendors that will connect you with thousands of potential customers online for new ideas. But will we soon see a crop of crowdsourcing platforms that automate the collection of your own customers’ ideas?
It’s already interesting to watch the effects that the consumerization of IT is having on the way technology is now delivered to employees. Perhaps customer crowdsourcing will fundamentally change the way companies develop new products. If anything, it’s another opportunity for CIOs to foster and automate such a process, and directly contribute to the company’s bottom line.
Let us know what you think about this blog post; email Christina Torode, News Director.
The technology priorities of CEOs and those of CIOs differ greatly as those executives move into 2012. That difference is largely due to uncertainties surrounding the economy, a talent deficit, and fluctuating pricing for goods and services. Such was the buzz this week at the Gartner Symposium/ITxpo in Orlando.
Cloud computing, social media and mobility are top of mind for many CIOs, but CEOs are more concerned with traditional IT investments — think ERP and customer relationship management (CRM) — according to a Gartner survey of 220 CEOs employed by large organizations around the world.
“Mobile, social, cloud, and the nexus [of the three] — CEOs in midsized to large global companies don’t understand those words,” said Mark Raskino, Gartner Fellow in the research firm’s executive leadership and innovation group. “They do not volunteer terms like [cloud or social], and they do not understand how such concepts transform the fortune of their company.”
What these business executives do understand is that ERP helps them run the business and CRM helps them win new customers, Raskino said. In fact, anything related to customer wins is the top priority of the CEOs surveyed.
Another discrepancy in terms of priorities? Talent. CIOs are not very concerned about a talent deficit, while CEOs list it as a top concern. “Even though it may not be a top concern for you, it is for your business leaders and you need to be aware of that,” Raskino warned CIOs. CEOs are concerned that too much talent is tied up in a few midrange experts who do most of the work. They would like to see this talent spread out more across the employee base, and technology is one way of making that happen, he said.
The good news is that boards of directors’ expectations of IT are rising, and they are putting that focus on the CEO, who will need to work hand-in-hand with the CIO to figure out how technology will provide a competitive advantage.
“Board members are not saying, we need more social and mobile; but they do have a sense that IT is what helped us become more productive following past recessions in the ’80s, ’90s and 2001,” Raskino said.
Here’s a rundown of CEO top technology priorities for 2012:
- Specific business-line applications.
- E-commerce expansion.
- General IT modernization.
- IT infrastructure improvements.
- Business mobility as it relates to major platforms.
- Business intelligence.
- Supply chain management.
Yet another discrepancy? Business intelligence often ranks among CIOs’ top priorities in Gartner surveys, but BI technology was much farther down on the list of CEOs’ priorities.
In the end, CIOs need to help CEOs recognize the need for such newer technology concepts as the cloud, mobility, grid computing and business process reengineering, Raskino said. IT executives have to do this because they are the ones who will make it possible for their businesses to increase productivity, create growth and help solve our economic problems.