CIO — This is a good year for enterprise value. The protracted economic slump has placed a white-hot financial spotlight on IT investments. If 2002 was the year of IT budget and staff cuts, cost reduction and contract renegotiation, then 2003 is the year of value, ROI and bang for the buck. Investment decisions will be simple?no value, no funding.
While not every company will calculate the dollar payback of every IT investment, few will buy or build systems without knowing when, where and how they will pay off. CIOs, CFOs, line of business executives and IT vendors will team up to build value-based business cases grounded in reality rather than wishful thinking. We will not repeat the sins of the past, when an estimated $62 billion was wasted on IT spending in 1999 and 2000 during what George Colony, CEO of Cambridge, Mass.-based Forrester Research, calls a frat party of naked technology?IT that was not clothed in enterprise value. The five winners and two runners-up, singled out from the 80 companies that competed in CIO’s 11th annual Enterprise Value Awards, set an example for this new value era. Though most of them made their investment decisions in the mid- to late 1990s (the award rules state that submitted systems must be operational for at least two years), they were not investing in naked technology but in systems that had sound business cases.
Their value took many forms?ranging from transformational to operational; though, interestingly, the majority of the honored systems facilitate and optimize data collection, analysis and retrieval. But what all the companies had in common was a crystal clear understanding of their core business value; the courage to reexamine what they do, how they do it and with whom they do it; and a commitment to careful change management.
Eye on the Prize
"The difference between the winners of an Enterprise Value Award and those who come very close is the extent to which those winners understand the value proposition of their business, and the degree to which they orient their work to that business value," says Carolyn T. Purcell, CIO for the state of Texas and Enterprise Value Awards judge.
The value proposition was eminently clear to Enterprise Value Award winner Con-Way Transportation Services. Its core business model, which is fairly unique in Con-Way’s overnight trucking niche, was the value engine, not any IT system. "That model is the key to Con-Way’s competitive edge," says Douglas W. Stotlar, executive vice president and COO of the Ann Arbor, Mich.-based freight shipper. Expert system technology was available from academic labs that could help Con-Way automate its nightly freight routing, but Con-Way would have had to adapt its business model to the technology. "There was no way we would ever touch our business model to accommodate an outside system," says Stotlar. Instead, the company spent $3 million and several years to internally develop what may be the first system of its kind in the industry (see "Cruise Control," Page 60).
