2011 CIO 100 Winners: Setting the Pace for Growth With Innovative IT

Every year, the CIO 100 Awards recognize companies that are the best at using IT to achieve business value. We honor ingenuity as well as pragmatism: companies that take risks with new technologies as well as those that create change through sheer will and straightforward smarts.

The list of 2011 CIO 100 Award honorees is striking for how many of the winning projects comprise multiple steps on a continuum of corporate progress. Executing a project well is a given. Stringing several excellent projects together in support of evolving business strategy goes beyond alignment. It shows IT as the integral and powerful force needed to push companies to do more, be more, grow more.

For the complete list of honorees and descriptions of their projects, see our CIO 100 database. You can also learn how the winners were chosen and see the complete list of judges.

For example, Graham Group, a $2 billion construction company, built a strong technology infrastructure that allowed it to break into new markets, even during a recession. During the recent rise in personal bankruptcies, credit card issuer Discover Financial Services deployed analytics technology that helped it hold the line on bad-debt write-offs. Baker Hughes, a $14.4 billion oil and gas services firm, created video and collaboration applications to support its reservoir and rig consulting and services business and bring in extra revenue.

Other winners shook up business as usual so that their companies run better. PNC Financial Services developed patent-pending analytics technology that smoothed integration of its National City acquisition. Sprint Nextel mapped its entire technology infrastructure to the business tasks each piece of hardware and software performs so it could predict outages and improve uptime. HealthSouth, after pulling itself free of a financial scandal that sent senior executives to jail, set out on a path to increasing profits by using common metrics to manage its high-performing hospitals.

Like these CIO 100 winners, companies thrive when there is no divide between IT and business. “You have to have people in IT who know your business. Not just executive-level people, but all the way to individual contributors,” says Brannon McDaniel, vice president of IT at HealthSouth. Companies at their best have nothing to align, and they set the pace for their competitors.

Forget the Past

There is no better catalyst for bringing IT and the rest of the business together than the prospect of corporate death. The Securities and Exchange Commission, in 2003, accused HealthSouth of falsifying financial statements by up to $2.7 billion over several years. In 2005, former CFO William Owens received a five-year sentence, a portion of which he served in prison. Then-CIO Ken Livesay was sentenced to five months in 2010. (CEO Richard Scrushy was eventually acquitted.) The company hired new leaders who had to restate four years of financial results and steer HealthSouth away from bankruptcy.

McDaniel has been with the company for 13 years, which means she worked through the accounting scandal cleanup as a systems manager, then as a director of corporate systems. At the time, IT wasn’t regarded as strategic, McDaniel says. “We were not being used effectively.”

But IT’s help in putting together the financial restatements, while launching a new ERP system to shore up HealthSouth operations and accounting practices, improved the group’s reputation. The arrival of new leaders with new thinking at the top of the company also helped, she says. “We were able to show them what we could do.”

HealthSouth earned its CIO 100 Award for Beacon, an analytics system built on Oracle databases and QlikView reporting tools that, for the first time, gives HealthSouth’s 97 inpatient rehabilitation hospitals unified data in dozens of categories. These include labor and therapy productivity, supply-chain expenses, and patient satisfaction. All 97 hospitals run Beacon and are able to compare themselves against each other.

Although Beacon launched two years ago with just a few reports for all the hospitals, the system is now key to HealthSouth’s strategic plan for the next few years: to improve labor productivity while increasing patient satisfaction. Beacon analyzes metrics, including labor costs as a percent of revenue and employees per occupied bed; the numbers help executives decide how to change the way a given facility operates. CEO Jay Grinney and other top executives talk up Beacon in calls with Wall Street, saying IT has provided a competitive advantage. “It’s not often that you have an IT group that will come to operations saying, ‘How we can help bring value to you?’” Mark Tarr, executive vice president of operations, told investors last November. McDaniel was invited to present Beacon to the board of directors last year—a first for IT.

“We said to them, We have a pretty well-managed business with hospitals that do well financially. But they never had data to help them manage. With Beacon, think how much better we could be,” she said. “That resonated.”

“Brannon is very well respected. The president and CEO know who she is,” says Darren Freeman, a systems manager who was instrumental in developing Beacon. “Our credibility [in IT] benefits from what she has accomplished.” And that, in turn, allows IT room to try new things. For example, Beacon will expand this year to cover care-management data, measuring 12 types of data, including which therapies are most effective in which circumstances. After that, blending care data with patient satisfaction data will show which HealthSouth hospitals produce the best patient outcomes and the highest level of patient satisfaction, pointing the way to best practices that all the company’s facilities can adopt, McDaniel says.

Think Long-Term

We often think of IT in terms of projects with clear start and end points, but IT also, and perhaps more importantly, performs long-term transformational work. Evolving IT infrastructure over time is vital to supporting evolving business strategy, says Jack Bergstrand, a CIO 100 judge and CEO of consultancy Brand Velocity.

“True strategy comes from making conscious decisions to feed certain things and starve other things and, most importantly, stop some things,” says Bergstrand, who is also a former IT executive at ­Coca-Cola.

Sometimes the seeds to produce a major business shift must be sown over a long period, agrees Kim Johnson, EVP of corporate development and CIO of ­Graham Group. The construction industry is among the first to feel changes in the economy, good or bad. The very largest construction firms are usually big enough to weather the storm—they have established bank credit and well-known names. The smallest also survive, usually by picking up more subcontracting work. But the middle suffers because these companies have a harder time finding financial backing for new projects, Johnson says. The competition intensifies.

Ten years ago, as the dotcom bubble burst, Graham Group’s senior leaders foresaw trouble unless the company could grab business from struggling competitors. Graham Group had a good reputation, Johnson says, but it had to improve its operations before it could go after bigger deals. The company had to, for example, be able to juggle several projects at once and better manage its staff costs.

Most importantly, according to Johnson, the company had to unify its technology and share best practices so it could streamline operations. Putting in a central IT infrastructure ticked off local offices that suddenly couldn’t make their own choices about technology, he recalls, “but it was the only way.”

The infrastructure and business process redesign work went on for several years, leading to Graham Toolbox, a collaboration system that runs in Graham Group’s private cloud and that earned Graham Group its CIO 100 Award this year. The investments are providing efficiencies that have helped the company transform its revenue mix. Graham Group ranks construction deals on a scale of one to five, from small to large. In 2001, nearly all of its revenue came from level two projects. Last year, half of its revenue came from level three or four projects—valued at up to $500 million. Average profit margins have more than doubled.

Graham Toolbox provides portals via Microsoft SharePoint and secure websites that allow employees in various roles, such as construction site managers and regional executives, to see custom views of building projects in progress. The system gives them images and data, plus the business intelligence tools to analyze the information. With access to business data from anywhere, the company is able to expand its reach geographically and win more lucrative business. For example, the Minneapolis branch is overseeing a project in Texas, with on-site supervision originating from California.

“Having consistent business processes and delivering them via the cloud allows us to much more easily monitor and support project operations at a distance,” Johnson says. “Toolbox makes it easier for managers to oversee more work across larger areas with less experienced staff.”

Now Graham Group is contemplating how to use the bad economy to make another step-change in its business, Johnson says, perhaps breaking into the ranks of Fortune 1000-caliber companies. “We’re looking at IT as a major driving force,” he says.

Winner Sprint Nextel has also traveled a continuum of IT change. The goal: to become an “intelligent enterprise” by simplifying IT. The telecommunications carrier, perpetually behind AT&T and Verizon in sales and customer satisfaction, wanted to consolidate servers and applications to eliminate points of failure, improve manageability and reduce costs. Doing so would enable IT to better anticipate technology problems and prevent outages, says Peter Campbell, senior vice president of IT.

Over four years, Sprint reduced the number of applications it supports by 30 percent while virtualizing servers and storage. The company won the CIO 100 Award for a Web-based knowledge-management system that lets employees perform incident, change, configuration management and business-service management through one door. Previously, they used a number of tools, many of which were homegrown and had different interfaces. The new system, built on Hewlett-Packard’s Service Manager, monitors and reports on the performance of Sprint’s IT systems so the IT group and other employees can spot issues sooner.

But Campbell, working with Josh Morton, Sprint’s vice president of enterprise services, wants to streamline further. For example, late last year, the company launched an all-out effort to find systems that were underused or not used at all. Meanwhile, Sprint is mapping its software and hardware to the exact selling, servicing or billing service each piece of technology enables. The IT map shows connections among servers, software and networking equipment, but it also shows which business systems rely on which pieces of infrastructure, Morton says. Whenever someone at Sprint tweaks code or reconfigures a server, IT and business operations staff will be able to know precisely which tasks may be affected. The information will help IT perform better for Sprint colleagues and, in turn, Sprint customers.

As a result of these efforts, the company has eliminated 35,000 spreadsheets it had produced, showing thousands of daily IT infrastructure issues and changes. The HP tools now track everything in one place. With the new map and consolidated data, Sprint expects to decrease unplanned downtime of its systems by 20 percent this year, Morton says.

But IT no longer has to wait for end users to report technology problems like network slowdowns or outages, Campbell says. “Sometimes, we call a business unit and say, ‘You might not have noticed it yet, but we had this problem and you might get a call. We just wanted to let you know we fixed it,’” he says. “That’s a nice call to make.”

Enable Rapid Response

Building an accurate early-warning system is a sure way to increase the love between IT and non-IT functions. But first, the IT group and end users must understand and agree on how marketplace activity affects the company and vice versa, says Glenn Schneider, CIO of Discover. This goes not just for the CIO and senior colleagues, but for everyone who helps build a new IT system, Schneider says. Development of Discover’s CIO 100-winning customer analytics system is a case in point.

As the recession took hold in 2008, Discover had wanted to make better use of data about its credit card customers. But typically by the time IT released new applications, the atmosphere had shifted and so had the problems users wanted to solve, Schneider says. “The business was frustrated. We all were.”

A big part of the delay: It could take months to populate Discover’s data warehouses with information that analysts wanted. With a 32 percent spike in personal bankruptcies between 2008 and 2009, Discover needed to know more quickly which customers were at risk. More than that, managers wanted to spot risks before they bloomed, Schneider says. “Write-offs were going up, receivables were declining. How could we get in front of it?”

An important aspect of Discover’s CIO 100 Award is a process the IT group developed for making data available more rapidly. On the IT side, Schneider stepped up the use of agile development methods, including frequently consulting with business-side counterparts about which new data to incorporate into the warehouse. Frequent prototyping of applications, another agile development hallmark, ensures IT stays in sync with what users request.

But speeding up IT wasn’t enough. Schneider also had his team analyze the interactions between IT and the ultimate users of the new systems. They concluded that business units weren’t sending staffers with decision-making authority to the IT meetings. That hampered project delivery, because it required follow-up and more meetings to get the right people to approve project proposals, requirements and changes.

Schneider told his executive counterparts they had to send their best people to IT meetings. They complied, and now Discover has streamlined interactions between technical and business colleagues. Data sourcing projects are delivered 65 percent faster, Schneider says, and Discover can respond to market changes more quickly. For example, if some customers steadily decrease the amount they pay each month, Discover debt counselors can call these customers. “These are not necessarily conversations about sending your minimum due,” he says. “There are people who are struggling, and we like to think we can give them guidance.”

In May, when tornadoes wrecked Joplin, Mo., Discover analyzed geospacial data to identify customers there who might appreciate offers to reset the terms of their credit card agreements. And what began as a way to stem corporate losses lives on as a tool for long-term growth. Discover’s financial and technology experts suggest data points to add for more accurate and creative analysis. Schneider thinks customer loyalty will improve if the company helps people manage their debt. Write-offs at Discover have been lower than at competing credit card companies recently, he says. “That didn’t happen just by luck.”

Change the Rules

Transformative investment often changes the rules for how you do business, but it may also set a new bar for other companies in your industry.

In 2008, PNC Financial Services Group spent $5.6 billion to buy National City, a bank troubled by bad mortgage investments. The acquisition was PNC’s biggest, doubling its customer base to 12 million. Compared to other large acquisitions PNC had made in recent years, “it was lot more complex,” says CIO Anuj Dhanda.

In a typical integration, PNC’s IT group might create databases of incoming customers to assign new account numbers, then run tests to be sure file mergers went OK. This time, Dhanda wanted to do as much pre-integration troubleshooting as he could. One reason: The bank wanted to quickly realize the $1.2 billion in savings that executives promised when they announced the deal (they ultimately saved $1.8 billion). Doing so would help to keep PNC strong compared to its competition, even as other banks were going under. The IT group built a predictive modeling system to simulate integration of customer accounts and uncover potential problems. Customers with the same name, for example, might have their accounts confused. Or a corporate customer with accounts in several regions might not convert its accounts all at once.

The application used tools such as Informatica analytics to analyze 12 billion possible account variations. It correctly predicted potential problems with an error rate of less than one in 4 million. PNC finished the integration in 18 months—six months ahead of schedule—without major problems, Dhanda says.

Aside from the IT benefits, PNC’s customer service department was able to contact National City customers with specific information about when and how their accounts would be converted. Customer service agents could mail, email and call customers, as well as include letters in bank statements—45 million opportunities to interact, which, Dhanda says, helped keep customers’ confidence that they wouldn’t be lost in the merger. The system also suggested the best methods for contacting customers, based on how they do business with PNC.

Retention was in the high 90 percent range for individuals, he says, and PNC held on to National City’s largest commercial accounts. Dhanda says the technology gives PNC a competitive advantage as the banking industry continues to consolidate. PNC applied for a patent on the system last year and awaits approval. “This is exciting stuff,” he says, and it will change how PNC does acquisitions in the future.

What consultant and CIO 100 judge Louis Gutierrez calls “extraordinary customer empathy” on the part of IT can also produce game-changing applications—and can immerse IT in setting strategy. Clif Triplett, CIO of Baker Hughes, is among the CIOs who have parlayed an IT idea into a new business model. Baker Hughes manages rigs and provides equipment and personnel to oil and gas companies such as Exxon and Anadarko. Its CIO 100 Award-winning project is a new service based on electronic collaboration and information management—a revenue-generating line of business that originated in the IT group. The system, called Beacon (unrelated to HealthSouth’s system), combines mobile applications with video and Cisco unified communications technology to monitor oil and gas exploration projects in remote areas.

If a piece of equipment on an oil rig in the North Sea breaks, workers there can use a mobile device to initiate a videoconference with an expert at Baker Hughes. They can beam video of the problem via satellite and comb email exchanges for keywords that may help diagnose the failure. “You’re in the jungle or the desert. You encounter an issue and need to bring a geoscientist on location,” he explains. “With video and data services, we can essentially bring the right person from anywhere in the world to that site.” With access to offsite expertise, the number of people needed to run a rig could be cut by half, which is a hefty cost savings, he says.

As of December, Baker Hughes had signed up 99 customers for its new services, including some that weren’t using any other products from the company on the rig where the services are deployed, Triplett says. The company says it is the first to offer such technology, and Triplett expects data services to dominate future business initiatives.

Guille Arango, the IT vice president appointed to lead the development of Beacon, also sits on the company’s technology leadership council to ensure that any new oil exploration products it builds will support Beacon. Engineers must, for example, consider data transmission mechanisms when building a new piece of equipment, Triplett says. While Baker Hughes can’t predict every data stream that will be valuable down the road, the company should anticipate that many will be, and so should build in ways that allow it to mine information from sensors, video and other sources, he says.

Beacon, Triplett says, shows that IT “is an enabler for profitability.”

Follow Senior Editor Kim S. Nash on Twitter: @knash99.