ATK CIO Says Metrics-Driven IT Paves the Way for Innovation

As CIO for ATK, Jeff Kubacki has instituted a rigorous benchmarking approach aimed at delivering world-class IT at continually improving cost. Kubacki has built a strong rapport with his CEO and other business leaders because he runs IT operations like a business and speaks the results-centered language of his peers at ATK.

In this installment of the IDG Enterprise CIO Interview Series, Kubacki talked with Chief Content Officer John Gallant about the realities of moving to a metrics-driven IT operation and how it has paved the way to more trust and visibility for IT. Furthermore, this discipline has freed IT to focus more on the innovations that are fueling the $5 billion diversified company’s growth.

Kubacki is a member of the CIO Executive Council — IDG’s peer-based global community of leading CIOs. For more information on the Council, click here.

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CIO.com: Jeff, let’s start by talking about the business opportunities and challenges facing ATK.

Kubacki: ATK is a little over a $5 billion company focused in three main areas: aerospace, defense and our commercial sporting business. That provides some unique opportunities for IT when we look at the needs of an aerospace and defense company vs. the needs of a commercial sporting goods company. That makes our IT strategy a little more complex than the typical company.

From a corporate perspective, it provides great diversification of our portfolio: as one business may be leveling off another one is growing.

I’ve been the CIO for now almost four years. Market conditions are changing, certainly in the aerospace and defense business and even in the sporting business, which has driven us to look at more international growth. We’ve been primarily a domestic company for a long time but now we’re focused on international growth, certainly in the defense business. It caused us to take another look at how we use our cash and to create a more balanced capital deployment strategy, so we’ve done a lot of work around what types of targeted investments we want to make in IT and other areas of the business.

Do we want to do acquisitions to help grow the company and what are we going to do around the dividend payments to our shareholders? We’ve looked at capital deployment every which way you can and, I believe, have come up with a pretty balanced set of strategies there.

Lastly, driven by the changing market conditions, our aerospace group has really focused on enhancing our position with commercial opportunities. We were big with NASA, providing solid rocket boosters for the Space Shuttle program for many years. That program ended and you have to find ways to replace that revenue. We’ve focused on commercial growth in our aero-structures business, as an example, with products and programs that we’re working on now with Airbus, Boeing, Rolls Royce and some others. We’ve changed our strategy when we need to, to meet the changing market conditions.

CIO.com: How does all that translate into your strategy for IT?

Kubacki: When I started as the CIO, almost four years ago, Mark DeYoung, our president and CEO, asked me to do two really basic things.

One was to create, in collaboration with the business, an actionable and affordable IT strategic plan. We didn’t have one for a while and it [couldn’t be] just any old plan. It had to be actionable and affordable, one that was developed with the business and was clearly focused on the things that they needed to drive their businesses forward in these changing market conditions. He also asked IT to transition from being tactical, keep-the-lights-on operations to being strategic business partners and to come to the conversation with new and innovative ideas on how we could use technology more efficiently to help us meet not only the IT strategic plan but the goals as articulated throughout the business plans as well.

CIO.com: Let’s drill into that. What are the key elements of the strategic plan?

Kubacki: We’ve had the same basic objectives since I presented the first plan to the board way back in August 2011. There wasn’t a CIO here for quite some time and we were very decentralized. The divisions had a lot of autonomy in making decisions around applications, infrastructure and security. We were running email at 17 different locations. We had five service desks, eight ERP systems. It was a hodgepodge of different things. We had to create a new ATK IT culture and bring all these disparate, decentralized business units, groups and corporate into a common way of doing things.

I felt the best way to do that was to move forward with the implementation of a world-class IT framework. I chose one developed by Peter High, who has written a book on this topic. I had Peter come in and assess the organization against the five principles of world class IT and the 33 subprinciples. We had our scorecard of reds, greens and yellows and we created action plans over the past three years to get us closer to world-class IT. It’s certainly a journey. It’s a destination. I don’t know if we’ll ever get there but we’re a lot closer now than we were three years ago.

I visited as many of the manufacturing sites as I could when I joined the company. I wanted to see how we used technology in manufacturing across the supply chain, in finance, the back office, etc. What I found was that we used technology differently in every business. So one of our strategic objectives was focused on increased automation and integration across the supply chain and getting to a common ERP system and doing the same thing around supplier portals and those types of things with the goal, obviously, of helping to drive cost out of the business and improve our overall EBITDA performance.

There was a lot of opportunity. We had some aging equipment and data centers. We had too many data centers. We really wanted to run IT like a business and have increased cost discipline across the IT infrastructure. Drive out cost and centralize and consolidate as much as humanly possible and leave the competitive-differentiating applications down at the division level.

I wanted to make sure that we had a very formal IT risk management program in place, with one of the goals being to improve our maturity around information security. I’m talking in our unclassified environments, not the classified environments. We identified our risks, our mitigations and have a very formal program in place now of assessing risk and that really drives a lot of our investment decisions and priorities each budget cycle. It fit in nicely with the overall risk management program that the corporation has.

Our last objective was: What things could IT be doing to help improve employee performance and productivity? Were they entering the same data into two different systems? Did they have the tools that they needed to do effective collaboration on programs and projects? We emphasized providing better tools to our office and technology workers so that they could improve their own performance and productivity, so that we could perhaps design new systems or new programs for our customers faster. If we can get more productivity out of our engineers, that’s a huge advantage to this company, since we do develop a lot of pretty innovative things for our customers.

CIO.com: I want to dive in on this world-class IT model. How did you get this started? What had to happen in changing the mindset and getting people to support it, number one?

Kubacki: There are a couple things I had to do there. One is I reviewed the leadership team that I inherited when I first got here and I reviewed the leaders and the managers down at the groups and the divisions. Frankly, we had to make some changes. If I aspired to move us closer to being a world-class IT organization we needed to have great leaders in the organization that could create that vision and motivate everyone in IT to move towards this.

I wanted the CEO of the company, my boss, Mark DeYoung, and the board to understand the model and why I felt it was important and the benefits to the business because it did require division IT and group IT folks doing things differently and in a more standard manner. There was going to be cultural change and I needed the entire executive team and the board to be supportive of the direction and the vision.

CIO.com: At the outset, how do you determine what the key things to measure are?

Kubacki: Peter has done a great job in his book and he articulates five key principles of what a world-class IT organization should look like. It all starts with people. Do we have the right programs in place, clear titles, roles and responsibilities? Do we do performance reviews? Is there a culture? Do we do workforce planning? There’s a whole set of subprinciples under people, but people really drives the rest of the model.

Principle two, infrastructure is broadly defined as infrastructure applications, information security, your service desk. Do we have a roadmap in place, a lifecycle? Do we have enterprise architecture standards? Do we have a common service desk and processes around information security? There was a lot of work for us to do there because we needed to retire some older assets, which was going to help us drive cost out of IT.

The third principle was around common project and portfolio management processes. Do we do every project — or the large ones, at least — the same way?

Principle four focused on IT and business partner communications. With the amount of change that we wanted to implement in a pretty short period of time, communications was critical. We did a ton of work improving internal IT communications so that the 400 folks in IT knew exactly what we were intending to do, the impact on them and how they could help.

Lastly, it’s helpful that a year into the role I also took over responsibility for our corporate supply chain management function. It was great timing because principle five in the world-class IT model is all around external partnerships and doing vendor segmentation. [It’s about] setting expectations with the vendors and how they can transition to become partners. We hold an annual vendor day, as an example, and go through our objectives.

Those are the five key principles. Again, [there are] 33 subprinciples. We measured all of them and we focused on the ones that were the bright red, which was significant opportunity for improvement. That was how we chose to prioritize.

CIO.com: How long does it actually take to change the culture, to get people around that metric-driven approach to IT?

Kubacki: The good news is that ATK is a very metrics-driven organization. We have metrics at all levels of the organization. We all have metrics that we share with the CEO and our peers on the executive team each month and they’re either red or they’re green. We got rid of yellow and said: If it’s red you have to show your return-to-green plan and we want to hit those metrics every month. It was really in the DNA or the culture of the company since Mark took over as CEO four or five years ago.

Having metrics in IT and demonstrating that we were, in fact, running IT like a business is pretty darned important. You measure unplanned outages on a manufacturing line. Well the same thing is true in IT. I have operating availability of our key enterprise applications. It’s not that I’m measuring whether the server or the network is up, but can the users access the enterprise applications whenever they need to? We do a lot of things to measure our operating availability and we call it that so that the business knows exactly what we’re talking about. They don’t care if my server is up. They care if their application is available when they need it.

The business cares about on-time delivery, they have on-time delivery metrics. Well, no surprise in IT we have an on-time delivery metric. We measure our commitments on key milestones of projects and if we are hitting those commitments or not. I tried to make our metrics very much sound and act a lot like the metrics in the business so that we were measuring things that were important to the business. It probably took 12-18 months to really get that program going and being consistent across the company but it was certainly well worth the journey.

CIO.com: That’s been in place for how long now, Jeff?

Kubacki: We’ve been doing that for the last two, almost three years. It’s part of what we call our strategy deployment process, which is how we take high-level objectives and cascade them down throughout the organization. We use this thing called the strategy deployment process. It has your objectives, but it also has your key performance indicators and that’s been something the CEO has expected to see over the last three planning cycles.

CIO.com: Where would you say you’ve made the biggest gains? Where was this most important in driving change?

Kubacki: It helped a lot as we were doing consolidation, centralization and standardization. As we moved to two ERP systems instead of eight, as we consolidated small computer rooms into the corporate data centers, as we were able to add services that they hadn’t seen before, operating availability and on-time delivery were important metrics to communicate to IT as well as to the business. We could demonstrate that our plans were working and that, although there was perhaps a perceived loss of control at the division level, we were delivering better service at a lower cost in most cases than what they were doing locally.

Once you show them the metrics plus what it was doing on our financial run rates people got more interested in the conversation.

CIO.com: Let’s talk about that conversation. How did this metrics focus change the relationship and the conversations with the business side?

Kubacki: One of the key things we do, in terms of not only cross-IT communications but IT business partner communications, is an IT monthly report that gets sent to the CEO and the executive staff, a few of our board members, all of IT, the GMs, as many people that wanted to sign up for the report as possible.

The first page is the CIO corner where I talk about things that I think the overall enterprise is going to be interested in hearing about. The next page is all around the details of our IT financials, so that we’re providing transparency to our expense capital and head count numbers. There’s no surprise what we’re spending on IT. Then each of my direct reports writes a section about what’s going on in aerospace, in defense, sporting and the corporate functions in business terms, not that we installed 17 new virtual servers. Nobody cares about that, but they want to know what new things are coming that are going to make their life better and more productive. We use that mechanism as one of our key communication tools.

Then on a quarterly basis I have to do an IT business update with the CEO and the rest of the executive staff and we go into a little bit more detail on our strategy deployment process again, those objectives and metrics. Annually I do an update with the board which the executive team sits on so they’re also hearing what I’m telling the board. There’s a fair amount of communication with the business side. At the end of the day it’s about delivering value to the business every day and it’s through those mechanisms that we attempt to demonstrate that we are in fact delivering that value.

CIO.com: That touches on a point I really wanted to dig into, which is one of the challenges that a lot of IT folks face. Communicating the value of IT is always challenging because people have heard the story that investments will help but primarily that’s communicated in soft terms. How does this metrics-driven approach make it more efficient or easier, whichever is the right word, to show that the things you want to move toward, the things that you want to invest in, will actually deliver what you say they’ll deliver?

Kubacki: Certainly the metrics play a key role in that but I also like to stress that the business had an opportunity to buy off on the IT strategic plan. They knew where we were going. A lot of business partners were on the strategic planning team so we got their perspectives on things as well, which certainly helped with buy-in and support. Then I presented it to the group president and the rest of the staff even before I ever presented it to the CEO or to the board. I needed broad support of that plan and then by providing updates on a regular basis they know that we’ve made very significant progress on implementing that plan.

My last update was just with the board at the end of July and I used some Harvey balls to visually show progress on those key objectives I talked about. Some of those Harvey balls are filled in 100%, some maybe only 75%, but at least we could show, from my perspective, that we had made significant progress. The strategic plan was important, the set of annual objectives and budgets, achievement of budgets.

You don’t just set a budget, you’ve got to hit the budget or beat it. We put significant management challenges in those, certainly in the corporate IT budget each year. So you find a way to save another ‘X’ million dollars each year. I challenged my direct reports to come up with creative ways to deliver everything we said we were going to deliver but for a million dollars less, as an example, than what we told them we were going to spend. That’s built into their objectives and incentive plans, etc. Then the metrics certainly helped too.

CIO.com: I’m going to switch gears and talk about a couple of other things specific to your role. There hadn’t been a CIO for some time prior to you. That’s a tough situation to come into. How did you navigate that?

Kubacki: I was very fortunate that Mark was a new CEO. He’d been in his job about a year, I think, before he hired me. Mark has been with the company, though, for a very long time and had moved into the CEO role and decided that he wanted to do some things differently. IT was one of those areas that we felt we were sub-optimizing by having it be so division-focused and managed because, again, we lacked standards and consolidation and we weren’t looking at things broadly.

I’ve told Mark publicly and privately that he is the most supportive CEO I’ve ever worked for in my 30-plus years of doing this, which helps a tremendous amount. You can’t monetize that. It’s huge. Then we have the support of the board and there are several board members who like to get very personally involved in what’s going on in IT. I love that involvement and getting their thoughts on our strategy and ways to tweak it a bit to make it even more meaningful. Again, that’s great advice and counsel that I enjoy getting.

With that air cover, then, of course, it was up to us to execute. The CEO clearly articulated to all of my peers on the executive team his expectations around me in the CIO role and IT in total and so that, again, was a huge help. He has continued to be a very vocal and visible supporter of IT and the implementation of our strategic plan over the last three or four years and that’s just huge.

CIO.com: With all that, how did you have to change the IT organization? Were there different kinds of roles that were needed or different kinds of executives that were needed to make this work?

Kubacki: I have a process I’ve used at several companies to come in and assess what’s going on. Generally, I’ve been hired to fix something.

That just seems to be the way it’s worked out over the last 15 or 20 years: I was hired to fix something for a variety of different reasons. And I love doing that kind of work.

You can pretty quickly assess the leadership team that you’ve inherited just by how they choose to communicate what they do on a day-to- day basis and how they approach their job, how they lead their teams and how they interact with the business partners. You learn a lot in the first couple of conversations. You develop a perception about whether they are going to be the right people to have on the bus as we moved forward with a pretty significant IT transformation at ATK. I did have to make some changes. I wanted to have infrastructure and operations.

There was a lot of opportunity there for consolidation and centralization and a huge opportunity to drive out cost and I went with somebody who I’ve known for 10 years and who had a track record of doing this at large companies. We get along great, so it was: Hey, would you like to join me? Here’s the problem we need to solve together. He couldn’t wait to start.

I needed a chief information security officer. We didn’t have one when I got here. Somebody was doing it on a part-time basis and we have a lot of data that needs to be protected. It’s called ITAR-controlled data (International Traffic in Arms Regulations). You can’t have it fall into the wrong hands. I wanted to spend more money in that area and improve our maturity and I felt I needed an experienced leader to help me with that. I hired someone that I had worked with in the past and I think he started here the same day that my infrastructure guy did. It made for a pretty strong team.

We made some changes out in the groups and even in some of the divisions, but the first thing I wanted to do was get my corporate team in order because, again, corporate was going to provide more services to the company than what he had done historically.

CIO.com: When you think about the organization moving forward and the things that are critical to address, what are the skill sets that you think will be increasingly in demand in your organization for the future?

Kubacki: A long time ago, [I knew the] CFO of a company and he was recruiting a new CIO. He said there are three key characteristics of a CIO that he’s focused on seeing: business acumen, leadership and technical skills, in that priority order. He needed someone that could think, act and communicate like a business person and that you’re not leading in talking about server virtualization or the ERP system or this data center or that. That’s a yawner for most business partners. Find someone who can understand the business and the challenges and then come forward with creative solutions to those challenges. Once we all agree on what those things are, do you have the leadership skills you need to be able to get up in front of a group of people and motivate them to get on the bus with you? This is going to be exciting. I want to be part of that journey. You need to motivate them and have a certain amount of charisma and get people excited about what you’re trying to do.

Lastly, you need some technical skills. You have to be able to challenge your team when it comes to architecture or networking, that you’ve had experience in applications and infrastructure and security so that you can provide strong guidance, that you have an educated voice in that discussion. When I interview people for my direct reports or even their direct reports, I look for that same set of three skills. I’m hiring today the future leaders and I want to make sure that business acumen and leadership are core competencies that they have, not that they just bring a nice portfolio of technical skills.

CIO.com: Are there particular areas or skills sets around, say, cloud or big data or mobile or BYOD that you’re looking to add in coming years?

Kubacki: Our sporting business is going to be spun off as a stand-alone public company. As a stand-alone public company, that business is going to be able to enjoy looking at cloud offerings and Software-as-a-Service and those types of services that historically we couldn’t look at as part of a larger aerospace and defense company. I don’t have a lot of skill sets on the staff right now in those cloud offerings, whether it’s Platform-as-a-Service or software-defined networks and data centers. I’m going to be looking for that kind of skill set as we start building out the IT organization for the new sporting public company.

CIO.com: The CIO role is under a lot of stresses these days, lots of change on the technology front, changing expectations on the business front. How do you see the role of the CIO changing in order to stay powerful and relevant?

Kubacki: As I coach and advise people who aspire to be CIOs, I still talk about those three sets of skills around business acumen, leadership and technical skills. I also advise them that it’s helpful to have an MBA, that you have that mindset every day when you come into the office: I’m running a business. I’m running a $100 million P&L or whatever the IT budget is. You’re running a P&L so you’re the president of the IT Company, and you need to think about it that way.

There are so many options now, even more every year with cloud and external hosting and outsourcing, that we have to make sure we’re delivering value at a competitive cost to the business or they have every right to look for that IT service from a different service provider. I need to be able to compete with external service providers, we have to be running IT like it’s our own business and we don’t want to get thrown out of the account, so to speak. Lately, and it’s really part of the world class IT model as well, [it’s about] idea generation and innovation. Are there ways to leverage technology more than we’ve ever done in the past to help facilitate affordable innovation in the business so that we can be developing the next bullet, missile system, rocket motor, you name it? Can we figure out a way to do that faster and at lower cost so that we can get these products to market faster? IT can play a role in that.

When you look at today’s CIOs and the idea of CIO plus, meaning you wear a couple different hats, or even CIOs who go on to be COOs, that’s the mindset we all need to have, even if that’s not what you aspire to be. I think that’s table stakes these days. It’s not just can you keep email up. That used to be it. To keep your seat at the table it’s so much more than that now, which makes the job even more fun than it’s ever been.

CIO.com: One of the issues that we hear when we deal with CIOs is about managing in an environment where consumers are bringing technology in and experimenting with their own ways to approach things. How do you manage that shadow IT or shadow innovation, depending on how positive you want to be about it?

Kubacki: I think it’s easier in my current environment, again because of having an aerospace and defense business and a huge emphasis on information security. I don’t have a bring-your-own-device policy and probably won’t have one. We do allow iPhones and iPads, because we’ve enhanced our capabilities around mobile device management.

When I first got here you could have anything you wanted as long as it was a BlackBerry. I can securely support having iPhones and iPads and now I have very few BlackBerries and almost everyone converted over. I have to control that and I do via policy. We obviously know what’s connected to the network and if someone tries connecting something to the network that they shouldn’t, we have so many tools in place now that we know that’s happened and we can have a discussion or conversation with that person and explain why perhaps they shouldn’t be doing that anymore.

In the spinoff of our commercial sporting business we will look at creative ways to do things. Perhaps we will have a BYOD policy and open it up a little bit more but I think we’re going to go after that on a more controlled basis. For me, it’s all about understanding the risk that would be introduced into the environment and is the CEO and the staff comfortable with taking on that risk? If we’re not then we won’t do it.

CIO.com: What’s on your agenda for the year ahead?

Kubacki: The company announced back in April that we are spinning off our commercial sporting business and then we are merging our aerospace and defense business with Orbital Sciences. We’re doing a lot of planning for that and what needs to be available on day one after the transaction closes and what doesn’t need to be available and how we continue to find ways to improve our service offerings while driving cost out of the environment. That’s really what’s occupying most of our time right now.

We still have a couple of active ERP implementations going on. Again, our strategy was to get down to two ERP systems. We’re almost there. We have a go-live on a key one in aerospace the first of April and there’s a lot of time and attention being spent on that. We’re doing a new ERP system in sporting that’s also taking a lot of time and attention. We’ve still got a few things left to do to finish the implementation of the strategic plan. That’s really what’s driving my personal time.