While some CEOs recognize the expanding role that the IT organization must play as a partner in creating new value, there are still too many companies where IT is perceived as a nonstrategic service provider or cost center. So how can CIOs change this perception and break down the internal boundary separating IT from the rest of the business?
CIO Executive Council members at Quest Diagnostics, Medco Health Solutions and YRC Worldwide have gone beyond the basics of alignment and banning techno-speak to reshape the IT culture, refocus on the end customer and reallocate funding to drive business. They offer the following advice.
Shift your spending. At $6.7 billion Quest Diagnostics, CIO Mary Hall Gregg met with her CEO three years ago to set a target for IT’s budget that would focus on strategic growth rather than keep-the-lights-on maintenance. Today, she and her team are in the process of more than doubling the percentage of budget allocated to business-growth initiatives.
How to Reshape IT
I don’t want to create a strategic vision in a vacuum. How can I involve my team to help brainstorm what IT should focus on and look like a few years out?
I took a select group of leaders from the IT organization to brainstorm what the vision for the department should be. I didn’t just take my direct reports; I handpicked people that I thought would contribute most to the work. This also worked to my advantage in creating a bit of buzz around the initiative within the department. Output from the initial meeting included a strategic vision of the IT function five years out and a list of specific actions to engage others in meeting these goals.
We created four “vision teams,” each with 10 to 12 participants and different focus areas. The first was charged with creating transparency through metrics and value demonstrations. The second was to improve success and progress of maintenance projects. The third was to drive effectiveness through a centralized PMO, and the fourth was tasked with eliminating bureaucracy and redundancy through process redesign.
I picked leaders for the teams and meet with each quarterly. Some of their deliverables so far have included a balanced scorecard of IT metrics, a new IT PMO and improved programming practices.
-Mary Hall Gregg
One project that boosted bottom-line growth was the launch of an online appointment scheduling system for blood testing, which got a positive response from customers. Ultimately, increased patient satisfaction translates into physician and insurance plan satisfaction, and that helps the bottom line, says Gregg. “Continually increasing the percentage of IT work that is earmarked for new product development is an annual goal in IT,” she says.
Medco also increased funding for growth-related initiatives, which magnified IT’s business impact at the $50 billion healthcare company. “One of our first steps was to really understand what drives our cost structure and where IT can assist with driving cash to the bottom line,” says CIO Mark Halloran. Halloran found that new product development was an area of the business where IT could really make a monetary difference by getting involved at a strategic partner level. On average, 60 percent of IT capital investment is now aligned with new product development, he says.
Maintain a small-town feel. With the trend toward mergers and acquisitions, companies intent on centralizing previously independent IT groups risk harm to the tight business ties those units had forged. Michael Rapken, executive VP and CIO at YRC Worldwide, faced that issue when he took over as CIO shortly after the USF acquisition by Yellow Roadway, which created a combined $10 billion transportation company. “I was in charge of three very different IT groups that had strategic ties to their businesses and were now thrown together and asked to act as one,” says Rapken. (Watch Our Outlook Series with Michael Rapken where he discusses the CIO’s role in leading change.)
To replicate the close-knit relationship at the corporate level, Rapken helped to redesign the project prioritization process and created separate spending accounts for the operating companies to approve their own small projects. This allowed them to directly control a portion of the IT investment, while large project prioritization was performed at an enterprise level. This ensured that IT was working on the most meaningful projects for the corporation while also working on projects specifically directed by the operating companies.
Focus on the end customer. Medco’s products and services are heavily customized for its biggest clients. Many of those services are IT-intensive, such as the online pharmacy. So IT needed to be flexible and responsive to client needs and reduce market delivery times, says Halloran. He knew his team needed to be empowered to make resourcing and scheduling changes required to meet client expectations around service and product delivery. “I told the account teams that we needed to keep the commitments that we made to the customer, so we really had to understand their [IT-related] needs,” he says.
Halloran established an IT Leadership Program to give his staff the leadership skills to deal with customers, training them to engage business partners on their terms. The training has been so successful that it is now provided to all middle and senior managers across the company. Today, Medco IT staff is aligned with individual client segments such as small business or health plan. IT members attend monthly team meetings with the client and sit with the account managers.
Build business-oriented IT managers. Gregg developed a new career path for IT that ensures her senior managers will have a strong business sensibility. “Today, our career paths are not just about an upward progression but about getting experience across a spectrum of the business,” she says.
The career path experience enables her staff to think more strategically about the business. These managers are also developing strategic and business-partnering skills in their staff. And Gregg tasked her directors with improving their ability to brainstorm new ideas and to get others to think more innovatively.