TWA and Allstate Use IT to Rejuvinate Their Brands

Time was, everybody who watched TV or read magazines knew Allstate Insurance Co.’s familiar "You’re in good hands" tag line, which was almost as ubiquitous as Trans World Airline’s bright-red swinging-’60s logo. Both companies had managed to create a branded image that gave off an air of fresh enterprise for a new generation of young adults and, in turn, were able to reap handsome rewards.

But flash forward 30-some years, and you find those fresh, young consumers are facing retirement, and the brand names they responded to so loyally have lost their exclusivity after decades of industry turmoil and marketplace pressure.

To be sure, these two venerable companies are in very different situations: St. Louis-based TWA twice filed for bankruptcy protection in the 1990s, hasn’t posted a profit in more than a decade and operates around a technology infrastructure that’s 30 years old in places; Allstate, though facing a competitive and uncertain marketplace in the era of e-commerce, is a $26 billion company that remains the No. 2 insurer of homes and automobiles in the United States.

But they share a common strategy that’s increasingly being adopted in other old-line industries—a concerted and very public commitment to use information technology to get closer to their customers and redeem themselves in the eyes of their respective investor communities.

In choosing IT as one of the key weapons in their arsenal as they fight to bolster their brand name among consumers, stave off the competition and gain operational and economic efficiencies, both TWA and Allstate find themselves relying on their information officers in ways that they haven’t before—especially true for TWA, which hired its first CIO in February 2000.

Kenneth Wilcox, the man who now holds that title, was hired to help selectively upgrade and otherwise maintain a creaky application suite that’s written in Cobol, assembler and a handful of other ancient languages; unearth and create usable customer and financial data that’s currently buried in the airline’s myriad systems; and develop new systems to make customers’ in-airport experiences more efficient and pleasant.

Frank Pollard, Wilcox’s counterpart at Allstate, is a 33-year company veteran now working to build a customer relationship management (CRM) system that will improve the efficiency and quality of Allstate’s agent and customer relationships, roll out Web-enabled technology to the company’s 70,000 desktops nationwide and launch an e-commerce project that in its first phase will allow customers in 15 states to purchase Allstate home and auto insurance online by the end of 2000.

And while both companies have issued ebullient press releases in the last year touting their newfound technology plans, it’s still unclear over the long haul if the companies’ technology plans are enough to guarantee growth and gain market share.

Obviously, it can be uncomfortable sitting in the hot seat, looking down a long and intimidating to-do list as Wall Street and Main Street tap their toes outside your door. Before the turnaround, CIO spoke with Wilcox and Pollard to find out just what they need to achieve, delve into how they plan to launch their various IT projects and determine what managerial skills they must bring to the table to lead in times of internal change.

TWA: Preparing for Takeoff

Wilcox took on the CIO role at TWA after serving as head of North American Research and Development IS for the drug company now known as Aventis Pharmaceuticals. When that company went up for sale in late 1999 for the third time in a decade, Wilcox decided to look for something different. In November 1999, he went through a couple of vetting sessions with an executive headhunter who told him of a CIO position at a large transportation company in Kansas City, Mo., where Wilcox was living. He thought it was a local trucking business.

When it turned out to be TWA, his heart sank. "I had done a tremendous amount of global business travel in the 1990s, and I know pretty well what makes for a good travel experience," Wilcox says. "I had had two very unpleasant experiences with TWA and encountered some really unfriendly customer service. I said, ’I don’t want to work for that company.’"

But before he withdrew his name from consideration, he did a little homework. True, the nation’s eighth largest carrier hasn’t had a profitable quarter in 10-plus years, but signs of an incipient turnaround were starting to crop up, at least in Wilcox’s opinion. The airline was buying new aircraft, sprucing up its image in the airports, and—a key point for a travel veteran like Wilcox—TWA had in the past couple of years twice won the J.D. Power and Associates award for customer satisfaction and had posted some first-place numbers for on-time arrivals. TWA "had gone from being the worst to the best in on-time performance. That told me something was happening there," recalls Wilcox. "That doesn’t come about because some senior manager banged his fist on the table. Every employee needs to be involved in an effort like that."

As it turned out, TWA CEO and President Bill Compton had expressly set out to hire a CIO who could integrate technology into the company’s turnaround strategy. "Previously, technology was used merely as a tool for our various operating departments, and some of it is 20 and 30 years old," says Compton. "We now want our technology to be integrated into our business direction. We need to retool, we need to leapfrog the competition to deliver the best service possible to the customer, and we need technology to do that."

When Wilcox eventually met face-to-face with Compton and CFO Mike Palumbo, he found they already had a detailed idea of what they wanted from their future CIO. "Bill Compton and Mike Palumbo have a very clear strategy of how to return to profitability and a very clear vision of how technology should play into that turnaround," says Wilcox. "They fully recognize how technology supports modern business; they just needed someone with the background and skills to make the connections."

Specifically, Wilcox would be expected to both maintain the operational IT organization and develop a technology strategy for executing the goals and objectives of the airline’s 59-point Vision 2000 turnaround plan. If the latter initiative sounded like a bit of fun—what with the potential to develop onsite customer kiosks or snazzy new systems and software for ticket and gate agents—the former challenge proved daunting, so much so that Wilcox swears that his second interview consisted of Compton and Palumbo trying to scare him off the job. "They wanted to make absolutely certain that, if I took the job, I understood all the problems and troubles," Wilcox says. "They said, ’We are under no illusion as to the magnitude of the problem. We’re not just talking about replacing dumb terminals here.’"

What they were referring to was an IT infrastructure that hadn’t been state-of-the-art since the early 1970s. "TWA had stopped investing in computing technology. There was a deficit of investment going back 25 to 30 years," says Wilcox. That means TWA’s large portfolio of business and operational systems like finance, revenue, accounting, scheduling and planning are written in assembler code, Cobol, Cobol2 or Fortran and accessed by employees typing arcane codes into 6,000 green-screen dumb terminals hooked up to IBM 3270 mainframes.

None of these applications is in any way related to the safety and security of the airline, Wilcox stresses. And most still work just fine. Nevertheless, it’s a bit of a high-wire act to maintain them, routine upgrades are essentially out of the question, and when they do go down, the company potentially starts losing money almost instantly. For example, if TWA’s airlines operations software, which tracks the location of all aircraft and staff on a minute-by-minute basis and controls all maintenance schedules, goes down, the carrier is forced to begin canceling flights almost immediately. "Some of these programs are absolutely mission critical. If they go down, we’re facing literally millions of dollars a day in lost revenue," says Wilcox. His near-term solution is to leave some applications where they are and bring others forward on a case-by-case basis to a Web or client/server environment.

On the strategic front, Wilcox and TWA’s executive managers identified three key areas that needed to be aligned with the company’s goals and objectives: the quality of technology, the quality of people in the IT organization, and the quality of processes TWA uses to select, deliver and support technology. In midsummer 2000, Wilcox had just finished wrapping up the data-collection phase of a laborious report that takes "a long, hard look at the current state" of each of those areas and tries to articulate a vision for the future.

Just what is that future vision? In the technology category, the list is long. Wilcox and his team already have a plan in place to stabilize and upgrade the airline’s basic network connectivity configurations. Another large project is to identify, surface and contextualize financial, marketing and sales data that’s currently scattered throughout various systems. This will allow executives to react more quickly and accurately to market changes—by being able to determine in days rather than weeks if a particular fare sale is working, or being able to create marketing campaigns that are much more closely aligned with various subgroups of consumers.

Inside the airport itself, Wilcox’s goal is to introduce and integrate technology that improves the flow of people from the curbside to the aircraft door. Upgrading the agent’s software and systems will go a long way toward reaching that goal by giving agents faster and more logically organized access to a larger volume of operational and customer information.

Right now, agents interact with reservation, ticketing and baggage systems by memorizing cryptic codes, an increasing liability in the age of Web-enabled graphical applications.

"The old systems work effectively, but they’re impossible to train new employees on," says Wilcox. "Our goal is to reach a state of intuitive use of applications." Wilcox and his staffers are currently in the design stage of building a new front end. He hopes to be rolling out new software and new PCs to some 1,100 airport agents by the first quarter of 2001.

On the personnel front, Wilcox inherited a set of workers skilled in systems development from another generation of technology who were primarily concerned with maintenance and support, a mentality he attributes to living in a culture of survival over many years of tough times. While TWA still needs those skills, particularly to keep those aging applications up and running, Wilcox is also looking to change the mind-set of IT by hiring some 50 new workers and otherwise encouraging the members of his existing workforce, which numbers between 430 and 480, to become more customer-focused and more proactive in their use of technology. "We want leadership, we want calculated risk-takers, we want people who will sell the idea of technology rather than waiting to be asked to implement something," Wilcox says.

Finally, in trying to streamline the airline’s Byzantine approval and purchasing processes, Wilcox is working with senior executives to hammer out a system that still ensures fiscal responsibility but cuts out as much bureaucracy as possible with the intent of allowing the IT organization to become more nimble and responsive.

Wilcox’s operational IT budget was $76 million in 2000, and he has asked (but not yet won approval) for an additional $51 million in capital investment for 2001, which will be funded by revenue, shifted allocations from other areas of the company and strategic partnerships with technology firms with whom TWA might enter into long-term leasing arrangements, for example, as a way to keep up-front capital costs down.

Is all of this work for naught at a company that insiders and analysts alike insist is ripe for a buyout? Wilcox and CEO Compton each declined to comment on what would happen to the company’s IT initiatives in such a scenario, but industry watchers believe it’s likely the company will at least partner with an equal or bigger airline to gain back the air routes and market clout it’s lost during years of financial instability.

In the meantime, using technology to woo savvy customers—with, say, self-serve kiosks in airports—is a good idea, says Glenn Engel, an airline analyst with Goldman Sachs in New York City, but it will never give TWA a competitive advantage for more than a few months. Larger, more capitalized airlines can easily play catch-up, he points out. "You need money to do those kinds of things. All the airlines spend on technology, but TWA doesn’t have that kind of money. It can’t afford to experiment."

Engel’s long-term prognosis for TWA is decidedly downbeat, but he does see one silver lining in its IT plans: TWA can and should use technology as a way of bringing its costs more in line with its revenue. "As TWA has shrunk over the years, it has not been able to bring down its infrastructure costs as quickly. Technology could be a way for it to do so efficiently," he says.

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