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These CIOs go way beyond IT-business alignment

Meet the pioneers of extreme IT-business convergence. At these companies, it's hard to tell IT and business apart.

By Julia King
May 24, 2010 06:00 AM ET

Computerworld - Paul Heller is CIO at Malvern, Pa.-based Vanguard Group Inc. -- at least for now. He could very easily be plucked out of that job and reassigned to lead the company's multibillion-dollar retail mutual funds business. In fact, he's been there, done that, swapping jobs in 2006 with former Vanguard CIO Tim Buckley, who now helms the retail investor group.

Las Vegas-based Zappos.com Inc. is the No. 1 seller of shoes online. In 2009, it racked up sales of more than $1 billion. It stocks some 3 million pairs of shoes, offers free next-day shipping on all purchases and is known for its generous 365-day return policy and top-notch customer service. Behind the scenes, IT is embedded in everything Zappos does, from engineering and continually enhancing the customer's online experience to coordinating the warehouse robot system.

Forget IT-business alignment. Vanguard and Zappos.com are two of a small number of companies where business and IT are virtually indistinguishable. Others on an admittedly unscientific short list of pioneers in IT-business convergence are The Progressive Corp., Southwest Airlines Co. and The Procter & Gamble Co.

IT Develops Products,
New Revenue Streams

Go to Zappos.com for, say, a pair of red Clarks sandals in a size 8½, and you can see all of the Clarks sandals available in stock.

Go to Clarks.com and you'll be able to find all of the same information just as quickly. That's because a Zappos unit called Powered by Zappos built and runs the Clarks Web site.

Launched a little under two years ago, Powered by Zappos is a revenue-producing business and a direct offshoot of Zappos.com's IT department.

"If you buy a product from Clarks online, it's all Zappos underneath," notes Zappos IT chief Brent Cromley.

At Southwest Airlines, IT has similarly been tapped to create new products and services, such as the airline's Early Bird online check-in service. For an extra $10, travelers can get a preferred seat 36 hours before their flight's scheduled departure time.

Meanwhile, at Progressive, seamless IT makes it appear to customers as if the company sells and services home insurance, yet the fact is that Progressive sells only vehicle insurance.

"But we have partnerships with other companies that sell home insurance," explains CIO Ray Voelker. "Today, we're integrating software from other [types of insurance companies] to make it look and feel as though it's all coming from Progressive," he says, noting that the strategy produces incremental revenue.

— Julia King

What all of these companies have in common is that IT doesn't just support the business; it enables and continually transforms the business, often creating new revenue and profit streams.

Moreover, CIOs and everyone else in IT at these companies know precisely how their businesses make money and lose money. In fact, it's not at all unusual for employees to rotate through several jobs, moving in and out of IT and business roles. "Rotation gives you context," says Buckley.

Another notable attribute: Customers of these companies are king, and customer service, both internal and external, is supreme. At Procter & Gamble, for example, dedicated client service teams from P&G's shared services group (which encompasses IT) meet with business unit presidents to discuss the terms of their IT supplier-customer relationship.

Not coincidentally, this is the same way P&G's sales teams do business with their giant retail customers. In fact, it was P&G's lead relationship manager on the Wal-Mart customer team who helped coach IT on how to make these internal relationships work, notes Jim Fortner, P&G's vice president of IT development and operations.

One Bull's Eye

At all five companies, IT and the business are not so interested in aligning but rather are fully engaged in converging on an enterprise vision or goal that hovers above every department and project plan and is crystal clear to each and every employee.

"These IT-savvy companies are very targeted in what they're doing," says Jeanne Ross, director of MIT's Center for Information Systems Research. "Even if it's a very huge company, it doesn't lose sight of how it's going to deliver value or make money. There's real clarity in how they're going to do it."