by Elana Varon

Enterprise Value Awards – A Brief History of IT Value

Feb 15, 200610 mins
IT Leadership

The English philosopher Francis Bacon in 1597 proposed that knowledge is power, and that the pursuit of scientific knowledge would lead mankind to master its environment. Some 400 years later, a corollary to Bacon’s proposition has become the guiding principle of IT: Data is power, and it’s the job of the IT department to develop systems that collect and distribute data so that we may master our competitors.

But day in and day out, the demands of systems and schedules, bugs and budgets—just getting the job done—can distract even the most visionary CIO from technology’s greater purpose. According to David Foote, president and chief research officer with Foote Partners, which studies the IT labor market, IT departments until recently tended to hire more experts in the management of systems than in the stewardship of information. This speaks to the distance that has long existed between the technologists who readied the data to be crunched by their Big Iron and those who defined and gathered it. From this arose the persistent problem of IT-business alignment and a host of other ills that culminated in last year’s hot-button question: Does IT matter?

Of course it does. That artificial separation between systems and their content is no longer sustainable. Information is power and information also generates enterprise value. And the value of technology—any technology—is indivisible from the data that it stores, calculates and transports. In the 14 years since CIO conferred its first Enterprise Value Awards, the conception of IT value has evolved from one focused on the simple ROI of technology investments to the business benefits generated by information.

The winners of the 2006 Enterprise Value Awards, including the Grand winner, General Motors’ OnStar system, and 10 other honorees in their respective industries, applied diverse technologies to their unique business problems. What they share is a commitment to generating enterprise value by unlocking information that either was buried in legacy systems or could never before be collected in a useful way.

“Great technology makes complex things simple,” notes William Wray, CIO with Citizens Financial Group and an Enterprise Value Awards judge, by collecting and distributing information and generating a result from it in a way that is invisible to end users. “A good example is a cell phone. We can call someone and talk to them from almost anywhere without even thinking about what it takes to deliver that capability.”

The Grand Enterprise Value Award Winner

This year’s Grand Enterprise Value Award Winner, General Motors’ OnStar system, exemplifies the power of IT to both define and deliver information, and in doing so provide value not only to a company but to the customer. With OnStar, GM pioneered the new field of telematics within the automotive industry: the practice of using telecommunications technology to collect data from sensors inside a system (in this case, a car) in order to monitor and improve performance. OnStar uses wireless and global positioning system (GPS) technology to gather information about a vehicle, such as problems with the antilock brakes or whether the oil needs changing. Used in a vehicle’s design phase, the data allows GM to head off potential problems with its cars before they come off the assembly line.

In this way, OnStar is helping GM improve its cars even in the midst of its well-documented financial troubles. But beyond the corporate walls, there’s incalculable value in OnStar’s ability to deliver lifesaving services. If an air bag deploys in an OnStar vehicle, the system automatically dials an OnStar call center, which delivers information about the vehicle’s location to the nearest emergency responders. A driver who is involved in or witnesses an accident, or suspects a problem with his vehicle, can press a button to call an OnStar operator, who relays information to emergency personnel or uses the sensor data to diagnose what’s happening with the driver’s car and what he should do about it. The system works even in remote areas where wireless phone service isn’t available. Andre Spatz, another judge, who is the UNICEF CIO, notes that OnStar “will transform other elements of society” by, for example, enabling emergency personnel to reach accidents more quickly. (To learn more, read “Highway to Value,” Page 66.)

The Industry Honorees

The remaining 10 industry honorees also found ways to deliver enterprise value by leveraging information and generating benefits from business process improvements.

Toshiba America Business Solutions (TABS) division, BellSouth and U.S. Bank responded to competition by building systems to drive sales through the delivery of more useful and manageable information to customers. When TABS, which lagged in domestic office equipment sales, focused on supporting and servicing any vendor’s equipment, it created the Encompass system to help its salespeople create detailed proposals for customers. Using Encompass, TABS salespeople can input data about customers’ needs and recommend the most cost-effective solution. BellSouth responded to demand for bundled telephone, television and data services by integrating more than a dozen systems containing ordering, pricing and billing information. Customers can now select the services they want and compare prices for different services online. Both TABS and BellSouth credit their systems for increases in sales.

Meanwhile, U.S. Bank, facing a loss of market share, built Access Online, a Web-enabled platform that its corporate credit card customers can use to access their account information and manage employee expenditures. U.S. Bank customers used the information to streamline their administrative processes and boost control over their spending, gaining $2.4 billion in overall savings for customers. Subsequently, U.S. Bank increased its customer base by nearly one-third.

Fairfax County Public Schools, Providence Health System—Oregon and Hilton Hotels each turned to IT in order to deliver information employees and clients needed to make better decisions. Fairfax County schools used the Education Decision Support Library to put grades and test scores directly into the hands of administrators and teachers. The school department also uses the data to assess staff performance and student needs. Providence Health System uses its Disease Management System to allow physicians to coordinate the care of patients with chronic conditions. Doctors can view all the data about patients with the same disease to determine the best way to allocate treatment resources.

Hilton used the occasion of a merger to integrate the chain’s property operations systems with its call center, reservations and customer loyalty systems. Hilton’s OnQ suite of applications gives hotel employees access to a complete guest profile at check-in, allowing them to tailor welcome messages and anticipate customers’ needs. Hilton’s internal metrics credit the system with increases in customer loyalty.

Even when the greatest benefit of a system is the efficiencies it creates, those efficiencies are due at least in part to more effective use of business data. Fleet management company PHH Arval was looking for a way to cut the cost of sending messages to its employees, customers and suppliers when it built its Notification Service. It pleased the company’s drivers because they were able to choose both the information they wanted to receive (for example, about vehicle maintenance or renewing registrations) and the format (snail mail, fax or e-mail). When ADP Dealer Services, which supplies technology and business services to vehicle dealers, replaced a dozen call centers with a virtual customer service organization, it implemented a scheduling tool to ensure that staff with the correct skills would be available when customers called.

Meanwhile, the Defense Department’s Standard Procurement System has helped military purchasing agents deliver goods and services more quickly, in part by ensuring that vendor contracts contain all the information needed for them to be processed. And The Hartford Financial Services Group captured more customers for its small-business commercial insurance products using its Icon 2.0 system. This set of Web-based applications simplifies the process for selling new policies, in part by tailoring the information agents have to collect from potential customers according to the type of policy they’re requesting. (Find out more about all the winning systems in the “Winners Guide,” Page 76.)

Value’s Journey

When CIO launched the Enterprise Value Awards in 1993, IT was on the cusp of transformation. The desktop computer and the spreadsheet were barely a decade old. The Internet was the province of early adopters conversant with Unix commands. The value of technology in 1993 was measured in dollars, and the benefits tended to accrue from improvements to internal functions. The first Enterprise Value Awards honorees were organizations whose systems saved money by automating processes and reducing headcount.

Among the factors used to judge applicants in those early years was whether the business need could have been satisfied without technology, or whether IT was the best way to get the job done. Five years later, the definition of IT value had shifted. IT departments were redefining themselves as strategic contributors to the business. And the question for Enterprise Value Awards judges was not whether a technology was necessary, but whether the applicants had deployed it in a way that maximized the benefits it brought to the company and its customers.

Judges in 1998 weighed the technical excellence of a system against its alignment with the organization’s key strategies, and a winning system had to advance an organization’s business objectives. Based on these criteria, the New York City Department of Finance was honored for a database used to track fees and fines levied on business owners and helped the city reclaim lost revenue. At the same time, State Street Global Advisors received an award for creating a new customer service system that helped attract clients to its retirement plan management services, rocketing the company from 10th place to third in market share for its industry.

A mere three years later, IT wasn’t just making business processes more efficient, or enabling better service for customers; technology was generating value by extending its benefits beyond the productivity of a single department or support of a single product line. Judges chose honorees that were transforming their companies, or even their industries. One 2001 honoree, Harrah’s, built a CRM system that transformed how Harrah’s viewed its customers—from “belonging” to the casino they visited most often to customers of the entire company. The system enabled the company to double its revenue through cross-marketing. The value of Harrah’s system and those of other honorees that year lay in how the winning companies imagined the use of information.

The economic slump and recovery that followed raised the stakes for IT value. More than ever, technology investments needed a clear payoff. That payoff—and the criteria by which the Enterprise Value Awards are judged—is increasingly measured in business terms: increased market share, new revenue, more choices for customers, higher margins, and improvements to education, health, safety and the environment. And it is achieved by putting critical information in the hands of employees, customers and suppliers in a form they can use.

“We watched technology evolve from supporting, to enabling, to being central and a key part of the whole value proposition” of a business, says Doug Barker, former CIO of The Nature Conservancy and an Enterprise Value Awards judge from 2001 to 2003. Barker, now a consultant, was a member of the independent review board that researched the 2006 applications.