I have often written about improving information management in large organisations, and was delighted to be able to spend some time with an experienced CIO to gain his perspective.
Tony Ecclestonis someone I know well, having worked with him at Shell. He has had a meteoric career, having been CIO of a €10bn business at DHL, a big-four consulting partner, and an adviser to leaders of major companies. Tony has been instrumental in initiating and delivering some very successful information management projects.
Tony’s advice is never to start out with a stand-alone information project. Too often projects are initiated with a mandate to ‘show the business what we can do with technology’. Not surprisingly these often lose momentum after consuming energy and spend, while sapping IT credibility.
“One such organisation had spent two years and £18m with a major systems integrator, the only output of any note being a data warehouse blueprint; it was time to stop the project and rethink,” Tony said.
Successful information projects start with a business issue such as how to better understand customer needs and behaviour. Tony explained how he initiated a project for a division of a FTSE100 company to improve understanding of their customers. This involved extensive market research with a cross-section of customers before relating this to internal company measures.
Although on the surface profitability appeared reasonable it turned out that some major customers were not profitable at all, since the promotional mix was poorly targeted, with pricing based on a commitment to certain order volumes. Yet the sales commission strategy gave sales staff no financial incentive to go back and ensure that the promised orders were being fulfilled.
Unsurprisingly, in many cases expected orders did not appear, but the company had no effective way of tracking this. By fixing this they were able to avert millions of pounds of unnecessary revenue leakage.
“The funny thing is, we didn’t lose any of the unprofitable customers. Most were simply surprised they were able to get away with it for so long,” Tony noted.
An additional benefit was more effective customer segmentation. Some were interested in a long-term relationship and effectiveness of service, others were focused purely on price, yet the organisation did not take into account these preferences. It was assumed that large customers wanted face-to-face contact, whereas in fact many preferred cheaper phone and e-commerce channels.
“By using integrated information we were able to differentiate our approach to customers’ needs with confidence. We were able to drive greater client satisfaction and take out poorly targeted costs,” Tony explains.
The result of all this was dramatic: a 40 per cent increase in annual profitability of a £400m business. The information environment was seen as the key, described by the MD as the ‘cornerstone’ of the business strategy.
On another project, the manufacturing division of a global pharmaceutical had over 50 manufacturing sites. Issues included concerns over wasted costs through suboptimal inventory and capacity management, the ability to meet projected volumes and provide a secure source of supply. Despite an ERP rollout, information was fragmented, making it difficult to analyse at the corporate level.
In response, they produced a balanced scorecard with the ability to drill into the detail. For example, although capacity utilisation appeared on target at the global level, some manufacturing sites were operating flat-out while others were below capacity.
In some cases orders had not been fulfilled as it appeared that there was no spare capacity, whereas in fact there was idle capacity in other countries. Moreover, since continuity of supply was key, sites tended to build up inventory when such needs could have been supplied from elsewhere.
This led to a major restructuring of the global supply chain and £600m of hard business benefits. A common theme in these projects was to start with a limited focus and rapidly deliver tangible benefit in one area. Additional resources and active buy-in of other businesses soon follow.
So what is Tony’s advice in engaging with the business on such projects? “Cross-functional engagement is key; the board should actively sponsor such projects, not merely endorse them. For this to happen you need to speak the language of business and focus on business priorities, not technology.
“The CIO is better positioned than any other executive to champion driving value from information, but they should do so as a business leader.”
CIOs should ask themselves if they have an information strategy, and if so, is it aligned with the business agenda?
Andy Hayler is founder of research company The Information Difference. Previously, he founded data management firm Kalido after commercialising an in-house project at Shell Successful information projects start with a business issue such as how to better understand customer behaviour