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The Dynamics Of Realignment

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DQI Bureau
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Whose problem is this, anyway? The pressure for better alignment is coming from the business units, but the IT manager or CIO has to engage both the user community and IT professionals in a partnership effort to assess problems and invent new alignment strategies. Upon creating the partnership, the CIO should act as a communications bridge between IT, senior management and users. But the CIO’s most important job here is to realign old work values, particularly, to legitimize an emphasis on effectiveness versus efficiency and to speed up delivery of new competitive or business-critical systems.






It is also important to remember that IT does not operate in a vacuum. Companies need to align compensation policies, customer service goals and other elements of the organization with strategic objectives. Adjusting IT by itself will mean nothing. Too often, we hear IT managers say, “Let the users go ahead and do their own systems. They’ll come running back when they fail!” When IT management resists working creatively on the alignment problem, pressure can build and cause an explosion of user and senior management frustration, leaving no time for rational planning and preparation for change.

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Furthermore, where are the productivity improvements? Many people are troubled by the productivity statistics periodically released by the Commerce Department and other agencies. Some analysts worry because the statistics do not seem to reflect the billions of dollars invested in IT deployed specifically to raise productivity. Others, like me, are troubled by the lack of precision of the statistical process itself. When it comes to measuring the impact of IT, current statistical processes are woefully inadequate.

The productivity paradox



I am convinced that, statistics to the contrary, there is, in fact, no productivity paradox. By every measure I apply in my day-to-day activities, I see tremendous impacts on my own productivity of people I encounter. This position is supported by a 1994 report called ‘Impact of IT on Service Sector Activities,’ issued by the National Academy of Sciences. For service sector companies, this report refutes the assertions of Dr Stephen Roach and others that there is no direct link between IT and productivity.

Other economists are finally expressing the obvious–there is no productivity paradox and there probably never was one. For example, the Fortune 500 companies investigated by MIT Sloan School of Management economists Erik Brynjolfsson and Lorin Hitt earned an eye-popping 67% return after depreciation on their investments in IT. The MIT Sloan School study regards productivity in the light of the modern service economy. “If there ever was a productivity paradox,” says Brynjolfsson, “it disappeared by the late 1980s.” 

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Better service, increased productivity



Managers invest in IT to achieve a variety of impacts that have traditionally not been well reflected in industry or macroeconomic measures of productivity. These new service-oriented measures include:

  • PRESERVING OR EXPANDING MARKET SHARE: Market share is a key measure of competitive success and a basis for gaining relative marketing or purchasing power as well as improved economies of scale. To maintain their market share, all companies in an industry may be forced to invest in IT, even though it does not increase their own output. Thus, investments increase, but company or industry volume and profits may not.
  • AVOIDING RISKS OR ALTERNATIVE COSTS: Executives often invest in computer systems to avoid risks, for example, malpractice suits in health care or accidents in the airline industry. The benefits of avoiding losses by using better systems are very real to a company, but only the costs of achieving them show up in productivity measures.
  • CREATING FLEXIBILITY FOR CHANGING BUSINESS

    ENVIRONMENTS
    : Changes in the business environment may require unforeseeable changes in the way a company operates. As many financial services and banking firms have learned, a flexible information technology system may be essential to the very survival of the company as it attempts to cope with rapidly changing business conditions. In other cases, companies invest in IT to provide a flexible future platform for creating new products that may not yet have been planned or even conceived.
  • IMPROVING THE INTERNAL ENVIRONMENT: Firms often invest in IT to provide a great degree of predictability or stability to their operations. Such investments help companies avoid undue fluctuations in sales or profitability. Other firms invest in systems to improve employee relations. Properly installed, computers can eliminate tedious tasks, make jobs more attractive or shorten training cycles.
  • IMPROVING THE QUALITY OF PRODUCTS AND INTERACTIONS WITH

    CUSTOMERS
    : Companies increasingly compete on their quality of customer service. Computer systems have been especially useful in helping to improve reliability, ensuring more consistent levels of performance and minimizing errors.

Onus on IT investments



That said, IT people have been less than honest in admitting that a number of major investments in IT have not paid off. There is nothing surprising in this. Investments in machine tools and bridges have occasionally not paid off either. So here is a deal. As a CEO, I will accept that IT can improve productivity, if CIOs will admit when it does not.

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While organizations have evolved reliable methods for quantifying financial performance, they have not developed ways to accurately measure their information needs or the performance of their IT systems. Information resources are not allocated properly because managers do not have a gauge of costs and benefits. This leads to ineffective performance and few, if any, productivity gains. The key lies in senior management participating in IT planning and establishing precise metrics for measuring the performance of IT.

IT-savvy management, informed decisions 



In my visits to conferences, trade shows and Computer Associates (CA) customers around the world, I have ample opportunities to validate an observation–organizations not keenly attuned to the possibilities of using IT in support of their customers, are usually headed by a CEO aloof from the critical issues of IT. In most cases, a true partnership between the CEO and CIO was lacking, resulting in costs that could have been lower, product timetables that could have been faster and customer service levels that could have been higher. These encounters redoubled my conviction that for the sake of their organizations in the last few years of the twentieth century, CEOs need to understand the broad issues of IT and CIOs must understand the broad business issues driving organizations.

As my thinking crystallized, I became convinced that a gathering of CEOs in a relaxed setting dedicated to the subject of IT would be very useful. I suggested that CA organize a series of conferences for CEOs to explore IT strategies and demystify IT. Although the dynamic I subsequently labeled ‘the disconnect’ was not well formulated in my mind, I was pretty sure that a carefully designed conference could accomplish two important goals. First, I wanted to put a dent in the incredible level of technophobia displayed by many CEOs. I had a hunch that many CEOs secretly hungered for technical information, even as they argued they were too busy and it was somebody else’s responsibility. Second, I wanted to start a productive discussion between CEOs and CIOs. This happy event, I surmised, was eminently feasible, but only after CEOs became a little more familiar with technology. Thus was born a series of CEO technology retreats called ‘The CEO in a Wired World.’ These retreats aim to empower CEOs to face the challenges of doing business in the global economy. More specifically, the conferences challenge CEOs to begin the difficult task of dismantling the effects of the disconnect and to form a productive partnership with

CIOs.

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Empowering CEOs



Corporate executives can absorb a lot of technology in a little time. An  impressive number of chief executives have taken time out of their extremely busy lives to attend. These executives–chairs, presidents and chief operating officers of some of the largest companies in the world–committed themselves to three rigorous days of hands-on workshops, seminars, program topics and panel sessions.

The organizers of the first conference seriously underestimated how serious the CEOs were. They built in plenty of time for discussion as well as for recreation and soft sessions like a computer golf tournament. The evaluations at the need of the first conference surprised us. The CEOs wanted more, not fewer, hands-on sessions with the hardware and more time experimenting with the software. It seems that CEOs are very serious about this subject. At check-in, delegates to the retreat are issued technology kits including a notebook computer, portable printer and popular application software for spreadsheets, calendaring, scheduling, project management, word processing, faxing and electronic mail. The kit emphasizes connectivity software, including an electronic mail account and hundreds of dollars of services.

Each CEO is then assigned a personal technology advisor to accompany him or her throughout the presentations, seminars and hands-on workshops. This level of one-on-one assistance proves invaluable. The retreat’s relaxed atmosphere inspires an easy rapport that encourages the CEOs to ask questions and try new skills. In addition to the hands-on workshops, the conference also includes technical presentations, panel discussions and speakers as illustrious as Peter Drucker, MIT’s Nicholas Negroponte and futurist Alvin

Toffler.

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Demystifying IT



The computer literacy of CEOs is usually all over the map. Some delegates have literally never touched a keyboard, while others are comfortable with word processors and electronic mail. But all of the CEOs, regardless of experience, are committed to demystifying IT and pushing themselves to learn more about IT. Some CEOs come with a specific IT agenda. They want to know more about database technology or networking because their companies are embarking on major database or networking projects. Others have no agenda beyond getting familiar with the basics.

Most CEOs have a dual strategy for attending the retreat. First, they want practice with the technologies that could immediately benefit them in their day-to-day activities. Second, they seek a better understanding of the technology issues and trends that will be needed to prepare their enterprises for the rigors of the twenty-first century.

One of the explicit aims of the conference is to bridge the gulf that has evolved between financial or-marketing-oriented CEOs and their technologically-oriented IT managers. Another objective of the retreat is skill transfer. We accomplish this by taking the CEOs to the edge of the envelope in their understanding of IT. From the beginning, the conference offers the perspective that the vision for an enterprise’s comprehensive IT strategy must come from the very top. For that reason, CEOs must be as informed about IT as they are about the myriad other compelling business issues that require their understanding. After a handful of successful conferences, I am confident enough to pass on some of my own conclusions as well as share the observations of some of the CEO participants. The bottomline conclusion is that CEOs acknowledge that they must reengineer their attitudes toward IT in order to survive in today’s increasingly competitive climate. This embrace must be direct, personal and hands-on.

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First impressions



Delegates to ‘The CEO in a Wired World’ retreats are remarkably forthcoming in their reasons for attending and their hopes for how the retreat will make a difference in their companies. I have followed up on a few of the delegates to recent conferences. Here is a brief summary of what a few of them told me.

“IT is not absolute magic, or an impossible hurdle,” Christopher R Castroviejo told me. Managing Partner of Parallax Partners, LP, New York, Castroviejo is a hedge fund manager who used the retreat to help overcome a long-standing fear of IT. Castroviejo is a textbook example of an executive who used technology wisely on behalf of his organization, but was personally threatened by it. While a partner of Bear Strearns & Company, Castroviejo managed discretionary accounts and consulted for institutions with an emphasis on computer-generated timing models for stocks, debt instruments and financial futures. In support of these information-driven investment models, Castoviejo drove the development of state-of-the-art trading stations and associated software for brokers. Now he wanted to get more comfortable with the tools he used so well in the hope that he could use them even more effectively. He attended the CEO retreat to get more comfortable with the latest generation of notebooks, business and communications software.

An empowered Castroviejo quickly put the lessons of the retreat to good use. “The bottom line is that the retreat made me more reluctant to accept ‘no’ for an answer,” he reported. “I am a little quicker to question certain people’s theories. If our analyst voices a theory, I may be much more likely to engage in debate. I may say, ‘Tell me where that assumption is coming from.” Within weeks of his return from the retreat, this prediction proved to be true. Castroviejo had been frustrated with the inability of Parallax Partners’ information provider to format reports in a requested manner. The mainframe-based service company routinely resisted his company’s requests for certain reports. “I was being given gobbledygook by the service provider as to why my requests were impossible,” he said. “In the past I might have accepted that. Now I called a meeting and laid down the law. I told them that this was just a formatting issue, the data was available and there was no reason why it could not be arrayed in the manner I wanted. I told them to get it done and within days it was done,” he added. 

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In the past, Castroviejo explained, he would have accepted a computer programmer’s explanation of why something was not possible. “Before attending the retreat, I just assumed that things in the IT world are what they are and that I was powerless,” he said. “Now I understand that IT is just another tool. If someone tells me it is impossible to develop a machine tool, for example, that makes a certain part in a certain way, I say ‘Don’t be ridiculous! If you can’t do it, I’ll find someone who can.” The retreat also validated Castroviejo’s intuition that most organizations are better off staying a little behind the technology curve rather than pioneering in front of it. “Although I did not have to know anything about computers to learn this particular lesson the hard way,” he observed.

Incorporating IT knowledge



Roger N McMennamy, President and CEO, Cooper Communities Inc, Arkansas, a privately held company that specializes in the building of master-planned recreational or retirement communities in Arkanasas, Tennessee and South Carolina, decided to attend the retreat because he was determined to model the computer-literate CEO. “In the first two days, I saw specific applications, both strategic and tactical, that I have taken back to my business. I have never used a PC on a regular basis. After seeing what the technology can do, I came away with the objective of making IT a regular part of my daily regimen,” he said.

Cooper Communities installed a relational database management system that eliminated three to six weeks that executives had to wait for certain kinds of sales information. “My goal was to eliminate the daily hardcopy sales report. Executives should be able to access up-to-the-minute information on their screens, analyze graphs and perform historical analysis and exception reporting,” McMennamy said. “One of the principal things the retreat did for me was to let me see how far technology has come. Before the conference, I bought into the mystique that it takes a genius to do the simplest things on computers. Now that I have seen all the things I can do, I’m much less likely to accept statements like ‘It can’t be done’ from IT.”

While some CEOs primarily resonated to technology struggles internal to their organizations, others looked beyond the walls of the corporation. “We’re being driven by our customers,” said Ralston Purina’s VP and CFO, James R Elsesser, explaining why every senior executive must understand issues such as electronic data interchange (EDI). Elsesser noted that Ralston Purina–a manufacturer of products such as dry dog and cat foods, Eveready batteries and Wonder bread–must comply with Wal-Mart’s policy of “No EDI, no PO. “In other words, if a company is not prepared to exchange sales and inventory information electronically, there won’t be a purchase order from the world’s most successful retailer. That’s a powerful motivator for understanding EDI. “The answers are out there,” Elsesser said. “You can’t get there by a dialogue with yourself.

“The legacy of the last 30 years of IT has been largely unfulfilled expectations,” said Robert B Peterson, Chairman and CEO of Imperial Oil, Toronto, Ontario. “What’s worse is that now IT actually represents an obstacle, in many cases, to the critical need for business process reengineering. I’m here on reconnaissance because we have to do better.” “IT is holding us back because the business planning cycle is so long, it takes forever to see the benefits of change,” said George D Wells, President, Exar Corp, San Jose, California. “I want to tell IT: we–the company–are the customers, you’re the supplier. If you can’t deliver, we’ll find someone who can.” Wells insisted that only when IT can demonstrate success in bringing systems to bear quickly and reliably will it be increasingly invited to participate in the strategic business decisions of the company.

Spreading awareness



One of the most stimulating segments of each conference is a panel discussion of CIOs. This no-holds-barred session allows CEOs to understand the constraints CIOs have had to live with. As a result, some CEOs expressed a newfound sympathy for CIOs. On the other hand, the conference made other executives much less tolerant of any obstructionist role their CIOs might take in the future. The gap between CEOs and IT took years to develop and will not be bridged overnight. Yet if organizations are to exploit IT to its maximum potential, the assumptions and objectives of the individuals charged with setting the direction for the organization and those charged with deploying IT solutions, must be aligned. After all, two heads–in this case business or financial and technological–are still better than one.

Getting these two heads together would not be easy. I hope conferences like these make a contribution. New organizational approaches such as downsizing and business process reengineering will also help. But CEOs and CIOs must also reengineer their attitudes toward IT, or abdicate responsibility for

increasingly strategic and technically complex business decisions. The first thing we can do is to demystify IT–take a look at the technology, without the myths or the hype, and see what is really value to our businesses. The CEO technology retreats have prepared over 700 business leaders for the challenges of twenty-fist century technology. Leveraging the demonstrated success of these retreats, we have extended the learning opportunity to benefit CEOs, CIOs and CFOs all over the world.

For example, CA and the New York Stock Exchange (NYSE) designed a series of IT workshops geared specifically for NYSE-listed companies. The one-and-a-half day workshops have been designed to boost the IT skill sets of NYSE-listed companies by providing hands-on training in emerging technologies, one-on-one classes on the practical implementation of technology in financial securities and lectures by industry experts. Inspired by Richard A Grasso, Chairman and CEO, NYSE and a member of CA’s Board of Directors, the workshops address the IT concerns facing all NYSE-listed companies. “The workshops focus on keeping NYSE-listed companies at the forefront of developments in technology that most directly impact their bottom line,” Grasso said. “Technology is rearranging the playing field of global business. By staying at the forefront of change, the NYSE has been able to enhance its leadership position among world equity markets.” In format, the CA or NYSE technology retreats are similar to the CEO retreats. These new workshops preserve the one-on-one training that is generally credited with the effectiveness of the CEO retreats.

Inferring value



I have found it extremely useful to attend every conference. Although they are structured in basically the same way, I find I learn something new from each one. It is a privilege to observe CEOs as they learn and work with the latest tools. I have come away with powerful insights into product design, documentation and customer support issues that will make future releases of CA software even better. If one of my marketing managers had come to me three years ago and said, “Charles, I can get a roomful of Fortune 1000 CEOs to sit down, play with our latest software and give you feedback,” I would have been skeptical. Even if you could get the busiest people in the world to come together for this purpose, I would have asked, how could anyone afford it? Well, not only do the CEOs come to work with the world-class software we provide, but they pay for the privilege! They are dong it to make themselves stronger managers for their organizations. CEOs want to look at technology for what it is and then decide how to apply it wisely. While they are eager to take advantage of the many benefits of new technology, they also want to hedge their bets in the technology horse race.

Excerpted from Techno Vision

II By Charles Wang Published by McGraw-Hill Courtesy: Comuter Associates

The CEOs have found the ‘CEO in a Wired World’ conferences useful for this purpose. As they acknowledge the critical importance of IT to the survival of the enterprise, the CEOs also acknowledge that they need to shape the enterprise’s vision with the help of their CIOs. By the end of a ‘CEO in a Wired World’ conference, many CEOs find a renewed sense of their mission, as well as specific ideas for helping to bridge the gulf that has existed between senior management and IT.

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