by Diane Frank

Innovative CIOs Show How to Make Money With IT

Nov 30, 201217 mins
CIOInnovationIT Strategy

A select few CIOs are generating cold hard cash through innovation and collaboration. We rounded up examples of CIOs who generate revenue with IT, either by boosting sales or developing a product or service sold externally.

Advisor Group, a subsidiary of multinational insurance company AIG, was on the brink of being sold or disbanded five years ago because it was losing business. The broker-dealers and investment advisers who used the company’s client-management tools and forms were not seeing enough value to convince them to stay–until IT stepped up to give them a reason.

“We spent a lot of time over the last couple years almost reinventing ourselves,” says David Ballard, who was recently promoted from CIO to COO. By developing a one-stop online portal for all the services and processes that used to be scattered and paper-based, IT created a service that made advisers’ daily work lives better. Now they are choosing Advisor Group in numbers the company hasn’t seen in years. The adviser retention rate has grown steadily from 86 percent in 2009 to 98 percent in 2012.

Top-notch CIOs in various industries are creating new ways to pull in revenue at their companies. The techniques vary widely: Some use IT to boost showroom sales, or sell homegrown software to other companies. Others take the valuable data they produce in-house and turn it into a saleable information service.

[Sidebar: Crowdsourcing Fosters IT Innovation]

These standout CIOs look beyond the company’s walls and are viewed as full peers by the rest of the C-suite. They are at the top of what Ballard and other members of the CIO Executive Council, a global peer advisory service and professional association founded by CIO‘s publisher, call the Future-State CIO Journey. CIOs who make their way through the journey’s framework begin with being seen as credible service providers, evolve to being influential and transformational business partners, and finally become strategic business peers who boost the bottom line.

The CIO position has always had the potential to generate revenue, says consultant Peter High, founder of Metis Strategy and author of World Class IT: Why Businesses Succeed When IT Triumphs. But he estimates that less than 25 percent of all CIOs have taken the leap to becoming revenue producers.

“It’s the particularly clever CIOs who recognize this advantage and grab hold of it,” he says. “It’s not the average CIO by any stretch of the imagination.”

There is no one path to becoming a revenue-generating CIO. Some CIOs are in the game from the start with the full backing of the CEO, the board and other power brokers in the company. Others must battle from behind to prove they should be there.

Find Out What Customers Need

Advisor Group survives because, for a $1,000 fee, independent financial advisers affiliate with one of Advisor Group’s broker-dealers for access to an array of services, including technology and regulatory compliance. The brokers are usually small businesses, and the more time they spend on chores like filling out forms and collecting paperwork, the less time they can spend with their clients.

Five years ago, IT at Advisor Group was considered a support function, Ballard says. “The business had no confidence that the IT organization could support the business model of providing tools to advisers,” but the business also realized that under the status quo, it was in deep trouble.

Ballard met with leaders throughout the company, then personally visited the advisers and broker-dealers to figure out what they really needed. He learned that the existing, primarily paper-based tools were adequate and that competitors didn’t have anything better. But Ballard quickly realized that his company could leapfrog the competition if IT could provide a one-stop, accessible-anywhere portal with automated versions of those tools.

The online CRM portal isn’t revolutionary, but it makes a significant difference in the day-to-day work of advisers, Ballard says. Every time advisers can take advantage of pre-populated forms, that’s one less time they have to start from scratch for each new transaction with an existing client. And allowing electronic signatures and digital images of paperwork means transactions can be completed on-site rather through mail and faxes.

“Now we like to say that we’ve got what everyone else has, but no one has what we have,” Ballard says.

Organizing for Success

Boeing makes its money in two very different markets. The commercial air division sells planes and related services, while the defense division relies primarily on winning government contracts. CIO Kim Hammonds has spent the last few years positioning her group to make it easier for the defense sector to achieve that goal, and they are succeeding. In 2010, Boeing’s UK defense subsidiary won a $1.1 billion contract to support the British Ministry of Defence’s sea, air and land logistics. The organization that is providing that logistical support: Boeing IT.

Support in this case involves building data centers, integrating the ministry’s approximately 200 logistics applications, and more. This is only one of several big contracts that Hammonds’ IT staff is part of, and she has plans for that role to grow by working even more closely with company leaders. “I want to heighten awareness of this capability,” she says.

IT staffers dedicated to this effort collaborate with business leaders to develop IT strategies for responding to government RFPs. Hammonds wants to let everyone know what this group can do. In some cases, the IT role will make proposals stronger and increase the chance of winning the contract, and in others it will enable the company to compete for contracts that might have been out of its reach before.

Hammonds is also looking at how IT could increase the services sold by the commercial air sector. “We’re working on solutions to help our airline customers,” she says, “as planes become more digital and more data comes off those planes.”

But Hammonds is aware that improving productivity within Boeing is IT’s primary job. Only about 10 percent of her organization currently works on revenue-driving efforts, and the people who do so are mostly dedicated to that role. While that group may grow in the future, the rest of the IT organization is still focused on internal productivity, Hammonds says.

This kind of split is usually necessary, says Peter High. Chasing revenue could easily become a distraction from maintaining the infrastructure of the business. Balance is required. “CIOs must be cognizant of how they are going to divide their time,” he says. Some of the IT leaders he works with assign days to work on core versus revenue-driving efforts, while others pick direct reports to have daily responsibility for each area while the CIO oversees them both. Whatever they do, they can’t forget that IT is still in charge of maintaining the tech infrastructure or they will find that the trust that allows them to work on revenue-producing services disappears, High says.

Unlike aerospace, the housing market isn’t a place people often look for IT innovation. But for Hovnanian Enterprises, as it adapts to today’s home-buying patterns, technology is essential. Vice President and CIO Nicholas Colisto has formed such a tight partnership with his VP of marketing and sales that “these days, we finish each others’ sentences,” he says.

When the marketing group found that homebuyers like to research houses online, just as they research consumer appliances, the marketing and IT teams worked together to create a product called Style Suite, which launched last summer. This online design tool allows homebuyers to review options–such as available lots and floor plans, or design elements like cabinets and lighting–but does not provide pricing or allow purchases. The buyer portal is in a limited pilot in New Jersey, but will be rolling out to a wider group in the coming months.

In just the few months since the site’s launch, the company has already increased the value of individual sales because customers are now choosing to include options that they didn’t know about before. In this pilot, Colisto expects Hovnanian will see a 15 percent average increase in the dollar value of option sales per home, a figure promised by the Style Suite software vendor, New Home Technologies.

“We’re turning what is a very long, laborious process into a friendly education and buying experience,” Colisto says.

Another new product tackles the other side of the buying process: The people who prefer to visit an on-site sales center so they can see options in person and talk to a sales associate. Prospects often do this on weekends, which creates a swarm of people who have to wait for an available sales associate and mill around looking at static information, like a poster or a brochure.

Colisto’s group plans to offer those waiting customers access to Hovnanian’s real-time information on homes and options, much like Style Suite, but through a touch-screen interface in the sales center. Customers will be able to do research on-site and even create their own customized brochure that can be used as a launching point when they do speak with a sales associate.

“We’re not about alienating the customer from the sales associate, but this will create a more productive, happier visit,” Colisto says. The company expects to see gains in sales from this tool similar to what it’s already experiencing from Style Suite.

Seek Out Profitable Partnerships

Six years after online stock trading company OptionMonster Holdings was founded, the IT organization not only provides the technology foundation for the business, it is also now responsible for a significant portion of the company’s revenue. And CTO Sanjib Sahoo sees that future growing brighter.

The company, which includes retail brokerage TradeMonster, has established a reputation for excellent service–earlier this year, TradeMonster received four and a half stars in the annual Barron’s ranking of online brokers. Sahoo wants more.

One product IT put into the market is an API that sits on top of the company’s trading platform and allows partners to integrate TradingMonster’s brokerage functionality into their own sites. For example, when people are reading research or educational material from a partner firm, they can click on companies’ names and trade stocks or options within that research site. These tools already represent 10 to 12 percent of the company’s overall revenue, Sahoo says, and executives want to boost that figure to 50 percent within the next year.

That product is really for experienced traders, though. For newcomers, OptionMonster is working with partners to build educational services that in turn provide revenue for the company, Sahoo says.

When organizations such as the Chicago Board of Options Exchange (CBOE) offer classes and workshops, they often use a co-branded version of OptionMonster’s PaperTrade platform. By getting the class participants comfortable with online trading, “people tend to move on to us and open full accounts,” Sahoo says. This last year, the relationship with CBOE generated 30 to 35 percent of the new-account leads that OptionMonster converts to full accounts.

Solving the Big Problems

At Quintiles Transnational, CIO Richard Thomas and his staff are almost becoming old hands at commercializing IT. Quintiles helps its customers, biopharmaceutical companies, make the process of developing and bringing drugs to market faster, easier and more cost-efficient. So it wasn’t much of a stretch to take the systems Thomas’ group created for internal use and sell them to Quintiles’ customers.

The Infosario suite that resulted includes cloud-based services and software for all the processes involved in developing and bringing a drug to market, including big data analytics and software for drug marketing. In the last year, Infosario directly netted over $40 million in new business, Thomas says.

“For my industry, data is the underlying currency,” he says.

It wasn’t easy to get to this point. As High points out, the daily efforts to keep your own company running can consume a lot of an IT organization’s time. When Thomas came to Quintiles in 2005, he brought in new leadership to change the culture from the top and shift his people into also thinking about the problems the company is trying to solve for its customers.

“That work [on the infrastructure] can fill the day, and unless your focus is on the big problems, how can you know that you’re making a difference?” he says.

As the shift has taken hold, Thomas and his people have formed close relationships with the marketing and sales groups within Quintiles, since that is where the real expertise in turning services into product lives. He has also emphasized to his staff the importance of listening to external customers as well as the leaders within the company.

This process of learning about customer needs is creating another commercial service that could have a huge revenue potential, Thomas says. Over the past three years, Thomas’ staff has been working with global giant Eli Lilly to create a new service for designing clinical drug trials. They created a team of people from both companies, set up shop in Indianapolis, where Eli Lilly is headquartered, and spent almost three years creating a process that is heavily reliant on analytics and data visualization.

Now that work is bearing fruit. Eli Lilly has a service designed for its needs, and Quintiles is starting to market that service to other pharmaceutical companies. Full launch is still in the works, but Quintiles is already seeing more than $400 million in new business from early sales that include this new offering, Thomas says.

Consequently, executives decided to set up a new business unit for the service–called the Center for Integrated Drug Development–with its own P&L. Quintiles appointed Rick Sax, SVP and global head of integrated clinical services, to lead the unit. While Sax is staffing up the front office, Thomas’s IT staff is handling the technology back end, and what Thomas says was “just an exciting idea” three years ago is now on the verge of being another IT-driven service in Quintiles’ product portfolio.

Seizing the Opportunity

Technology can be especially powerful when it improves the sales process. TBC Corp. operates multiple tire and automotive services brands throughout the United States, Canada and Mexico, including Big O Tires, National Tire and Battery, and Midas. In every retail and service location, sales associates are faced with an overwhelming variety of options for the many makes, models and model years of vehicles. When the company decided to upgrade its existing point-of-sale systems, CIO Steve Smith saw an opportunity to streamline the sales process.

The new system, which is still in pilot, has a sexier acronym than name–Next Information Technology for Retail Operations, or NITRO–but the real excitement comes from what it enables. NITRO, which combines more than 35 data feeds about parts, service and tires into a single system that sales associates access via a cloud-based HTML5 touch-screen application, has already boosted overall sales by 5 to 15 percent. The reason: Associates only have to type in the vehicle identification number to get a display of exactly what parts it needs and what’s in stock and available to sell.

“Our associates are using the system to promote a wider array of vehicle maintenance services than just tire replacement,” Smith says. “They literally show the customer a graphical schematic of their vehicle, complete with the maintenance history and service recommendations based on manufacturer-provided guidelines.”

The application guides associates through the entire process. This makes sure they can’t get anything wrong–creating greater trust with the customers–and also makes them more efficient. The more efficient they are, the more sales they do each day. And with each sale coming in at a higher return, revenue should keep growing as the system is rolled out across the company. (See more about NITRO in “Work with Sales to Create Sales Solutions.”)

Selling Homegrown Tech

Sales, however, are not the goal at Christiana Care Health System–it’s improving patient care and regulatory compliance, says CIO Randy Gaboriault. But some of the healthcare IT advances developed at the hospital can be packaged up and offered to other hospitals. For example, Christiana Care created a telemedicine command center for intensive care units (ICU). This improves patient care by having experienced doctors and nurses remotely monitoring multiple ICU patients and taking fast action when life-threatening symptoms occur. As a bonus, it also generates revenue. Christiana Care brought in tens of millions of dollars in the last year by selling eCare ICU and other telemedicine services to fellow hospitals, the company says.

To become a revenue-generator like this, you must separate core processes from the ones that could be key competitive differentiators, Gaboriault says. Improving the billing process, for example, is important, but in an industry with such tight margins, it’s the services that will get a patient a quicker response and treatment that will make a competitive difference to a teaching hospital like Christiana Care.

“There’s not a magic way of saying we’re going to drive business, but it’s IT’s job to take the business goal and translate it into what could differentiate what we offer from everyone else,” Gaboriault says.

IT is also helping Christiana Care win federal grants for healthcare reform. In June, the hospital won a $10 million grant from the Center for Medicare and Medicaid Innovation to create a model for coordinating care of patients who have been discharged from hospitals after a cardiac event. A key step is consolidating the information that is collected and created about each patient, and making it possible for that information to travel with the person. Gaboriault, who is at the forefront of this effort as the chair of the Delaware Health Information Network, says the results could be turned into additional products and used across the United States.

Robert Laskowski, president and CEO of Christiana Care, knows the value of having his organization’s CIO serving as what he calls an “operational strategist,” turning mission needs into practical action and tools. “The way [Gaboriault] conceives of the CIO role is exactly what we need,” he says.

And when those tools bring in money, the company can provide even better treatment. “IT here is not a technology issue for us, or even a means to an end,” Laskowski says, “but a catalytic enabler of a whole new way to practice our profession.”

An experienced CIO says crowdsourcing tools can help IT staffers at all levels contribute their innovative ideas

Michelle McKenna-Doyle, who joined the National Football League in September as a CIO focused on creating new services for fans, says the path to generating revenue starts with innovation.

However, she cautions CIOs not to carve out a special innovation shop, because there’s a danger that the more functional positions in the IT group will be seen as unglamorous or undesirable, which can trigger a split in the IT department. “Innovation,” she says, “has to weave its way through the whole organization.”

At several companies she’s worked for, McKenna-Doyle has created an innovation council within IT that people routinely rotate through. Council members come from various IT disciplines, so everyone gets a say in the new ideas.

“A lot of the revenue-driving ideas actually live at the base level of the people keeping the lights on,” she says. “They’re the ones who will see the most waste or the most opportunity.”

But it’s not easy to get IT people at that level to speak up, especially in a meeting with talkative marketing staff. McKenna-Doyle suggests taking advantage of the social media tools now available to help IT people make contributions.

When she was CIO at Constellation Energy, McKenna-Doyle deployed innovation-management software called Spigit. This idea-generation tool awards points for contributing innovative ideas, then rewards people for having the most ideas. But it would be easy for these suggestions to simply go into a bucket and be forgotten. To ensure that didn’t happen, McKenna-Doyle created a process for the group to decide which submissions should get a chance to move forward. The people associated with those proposals then have a role in shepherding them to fruition.

Using these crowdsourcing tools and keeping everyone involved in innovation, McKenna-Doyle says, will help IT organizations be seen as a source of ideas, value and revenue. (For more, see “CIOs Can Make Money With IT.”)

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