by Bruce J. Goodman

How to Stay Focused on the Business Results of IT

Feb 21, 20086 mins
Business IT AlignmentCIO

Humana CIO Bruce Goodman learned how to reap financial results from IT by understanding in detail the ways his company makes money.

When I started in IT at MetLife in 1970, my background was as far away from insurance as you could possibly imagine. I was an engineer and studied toward a doctorate in solid-state physics. I decided that to succeed, I had to understand what made the business go and what contributed to the top and bottom lines. So I took the same courses that somebody who sells the product needed to take, and I passed 10 different exams to become a chartered life underwriter. Once I understood how we created and sold insurance products, I knew I could use technology to influence business results.

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Strategic Leadership Competencies

The Limits of Running IT Like a Business

This orientation toward business results—driving new sales and productivity, increasing customer retention, reducing administrative costs and increasing profit—became my success formula for creating value with IT. MetLife was the first large life insurance company to automate its sales offices, and it gave us a competitive advantage. At the time, a lot of people were skeptical of the initiative, but because of my knowledge of how agents made sales, I was able to make the case to the executive vice president of individual insurance operations how different the world would be if we took advantage of then-emerging minicomputers to move systems out to the sales offices.

It’s All About the Numbers

By far, the largest expense in the insurance business is paying claims. The obvious question becomes, How can IT help the business drive that cost down? When we do so, we drive those savings right to the bottom line. The impact can be measured in the millions of dollars.

For a health plan like Humana, we accomplish this by providing integrated tools that offer transparency to patients about their healthcare utilization, its costs and options they can discuss with their doctor (such as the potential to switch to a lower-cost, generic drug). We implemented an IT-enabled program called Maximize Your Benefits that creates value both for our members and the company.

We use outbound automated calling, personalized monthly statements and pop-up customer care screen alerts to advise our members of opportunities to switch from a brand-name medication to a lower-cost generic. We also let members know that they could save money using our mail-order facility to fill recurring prescriptions instead of going to a pharmacy. We then use analytics to measure the results—for example, by tracking whether individual members took our recommendations. We can see which type of message is most effective in changing behavior, and we can calculate the savings. The results have been significant and are directly attributable to IT.

Learn How to Run a Business

How do you learn to key into business drivers and results? Probably the best training is to run a P&L yourself. When I had gone through a few different IT roles at MetLife, the folks there said to me, If you want to be CIO of the company, we want to see you run a business for two years first. They gave me a business that was losing money and told me to make it profitable. If I succeeded, I’d get to be CIO (and that’s what happened). Through that experience, I learned first-hand the pressures of responsibility for business results and what it takes to make a business viable and healthy.

Short of running your own business, you could run your IT organization as a business within a business. Deliver IT services, pitch your products, make your numbers. You may never sell your company’s product, but you should understand selling and budgeting. You should also report to the CEO and have a seat at the table. As a member of the Humana executive committee I hear about all the important issues the company is facing. While I’m listening to my colleagues I’m thinking about and responding with ideas for how IT can help. If you aren’t at executive committee meetings, you can get yourself on the distribution lists for internal reports about business results, and you can network with your fellow businesspeople to understand their issues.

If you report to the CFO, you can still cultivate a business-results focus. In fact, this is an area of common ground with your boss since the CFO is the master of business results. At Humana, if we in IT have an idea, we have one of our financial analysts within IT review its potential costs and benefits and determine what the results of a pilot would need to be to justify further investment. If you don’t have your own financial people, borrow one from the CFO’s organization. Then the CFO will know you are serious about finding out whether your ideas make business sense.

Get Results, Help Your Career

I have no doubt that business competency and a focus on results is a boon to any IT executive’s career. First, it makes a huge difference in how the CEO views you. If the CEO sees the IT head as a technologist who is not an active partner in trying to achieve business results, that CIO is probably not going to have a long-term future at that company. He’ll get out of step with business goals and people will complain that they can’t get what they need out of IT.

Second, a strong results focus positions you for further opportunities. In addition to my CIO role, I also run the entire service operation at Humana, a combined organization of about 10,000 people. The services group is responsible for controlling administrative costs and also, through operation of our call centers, has a big impact on customer retention.

I got this role because I made the case that if IT and service operations reported to the same person, we’d work better together to define priorities and deliver systems that drive results. In companies where IT and services are separate, IT is only responsible to deliver the project while the operations group is responsible for requirements and deriving the value. That can lead to finger pointing if the payoff doesn’t go as expected.

One word of caution: It’s possible that a CIO can become so business focused that he or she doesnt pay enough attention to executing reliable IT service. You have basic blocking and tackling responsibilities that you can’t ignore. You can delegate that, but you still have to ask the right questions of those to whom you delegate and make them show you their metrics.

Looking back at my career, there are three things that I believe have been essential to my success: understanding business processes, knowing where the leverage points are to improve top- and bottom-line performance, and developing strategic partnerships with the business. By focusing on these areas, any CIO is positioned to fulfill a strategic role.

Bruce J. Goodman is senior vice president and chief service and information officer at Humana, and is a member of the CIO Executive Council. He has also been CEO of Prudential Service and CIO of MetLife.