Beyond Alignment

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

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To enable this level of data transparency, IT developed software that allows Progressive to quickly extract pricing data filed with government regulators.

Progressive CIO Ray Voelker
IT workers at Progressive need to understand how insurance pricing works, says CIO Ray Voelker.

"If State Farm changes its rates in Ohio, for example, we would immediately stop giving out State Farm rates and use our software to produce a rating algorithm that reproduces State Farm's rates," explains CIO Ray Voelker. "We needed to create a tool that lets our business people read a state regulatory filing and glean the key data to determine a rating algorithm for our competitors."

There is no way that an IT team could build such a system if it didn't thoroughly understand how insurance pricing works and how price fluctuations impact Progressive, says Voelker.

"Just having technical knowledge doesn't really help," he says. "We really stress that we want people to be conversant in technology but also understand the insurance business. Once you understand the insurance business, you know how important the cost structure is to the business. I never forget I'm in the insurance business. Technology is just part of the rhythm."

That's why virtually all new hires at Progressive take a core insurance curriculum at the company's IT University. After that, they spend at least a few years out in the business units "on assignments with lots of repetition," says Voelker, who spent several years early in his career in the claims business.

"I understand all of the [claims] issues, and I speak the same language," he says. In IT, "we have folks who understand the way a product works maybe even more than the product manager. Unless you're a hard-core infrastructure guy, it's hard to be effective in your job if you can't speak the language and understand all of the terms and the dynamics of the business."

Information transparency is a common denominator at companies where IT and the business are fully converged.

Southwest Airlines CIO Jan Marshall
Southwest Airlines hires IT pros based on attitude first and then on technical and business skills, says CIO Jan Marshall.

"It's everything from sharing financials to sharing project plans and statuses and issues," says Southwest Airlines CIO Jan Marshall. "I don't think there is anything within the context of the technology organization that I wouldn't feel comfortable sharing with my business customers."

This is essential because virtually all of the products Southwest has developed and implemented have been enabled by technology.

The airline's Early Bird check-in service is a prime example. For an extra $10 each way, travelers can purchase this option via the Web site, which automatically checks them in 36 hours before their flight's scheduled departure time, securing them an earlier boarding position. (Other passengers can check in electronically a maximum of 24 hours before flight time.) Like most everything else at Southwest, this is all done online.

Marshall emphasizes that information transparency and clear communication channels are absolutely critical because Southwest's "whole customer thread and all of our fundamental transactions are very, very tightly integrated. If you make a change with the airline schedule, it has implications for how our flight crews are scheduled to work, how our airport operations might be affected and how we market our flight schedule on our Web site. We need to understand all of the implications when we make business or process change decisions."

To do this well requires team players, which is why Southwest hires IT professionals based on attitude first and then on technical and business skills. What constitutes the right attitude, Marshall says, is a passion for customer service and open communication. These are absolutely critical in the airline's 850-person IT group "because it is technology that is our product," she says.

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