Not Your Father’s IT

Today’s IT leaders are helping to design, evolve and innovate new business models.

As CIO and senior vice president of engineering and development at Reynolds & Reynolds, Yen-Ping Shan’s calendar listed a regular weekly meeting with the Dayton, Ohio-based company’s CEO.

At Sonora Quest Laboratories LLC, CIO Bob Dowd has a list of assigned customers — mostly big, multilocation health clinics — that he visits each quarter.

On any given day, Darryl Lemecha, ChoicePoint Inc.’s CIO and senior vice president of shared services, is just as likely to be meeting with a venture capitalist to get information about a small but promising technology firm as he is to be walking a key client through ChoicePoint’s business strategy.

Three different calendars tell strikingly similar stories about the changing role of IT executives. No longer are CIOs and other IT leaders simply supporting their companies’ business strategies. Instead, many of this year’s Premier 100 IT Leaders are helping to design, evolve and innovate business models as their companies increasingly look to IT to create revenue streams.

“Anytime you go to market to sell some new business, technology is always a topic, whether it comes up as speed of delivery, service quality or product innovation,” Lemecha says. “I don’t believe you can talk about business strategy independent of a technology strategy anymore. They are one and the same.”

“IT is embedded in everything we do,” says Monsanto Co. CIO Mark Showers. “The idea of [systems] integration and needing information across all components to effectively run the business is absolutely mainstream now.” What’s more, “IT is all about helping the company to grow, not just run the business,” he adds.

Monsanto’s new pricing model, which enables the company to charge for various agricultural and biotech products based on their value to customers in different agronomic zones, is a prime example. The model was developed by combining and optimizing customer, product and market data previously contained in separate data silos. Now, for example, the St. Louis-based company can charge a premium to customers whose corn crops are susceptible to European corn-borer insect larvae, because Monsanto’s seed contains a trait that kills off the crop-eating predator. Buyers in other areas of the country pay less for the product.

“Depending on where you are in the country, the insect pressure varies substantially, so you’d like to charge more in places where there is a high insect pressure, because those customers get more value from the product. It’s a classic price-to-value scenario,” Showers explains.

“It’s a far more complex pricing model than has ever before been used in our business,” he adds, “but we’ve been able to increase revenue through this very information-intensive model.”

Indeed, managing information — as opposed to managing computer systems and software — is a recurring theme among this year’s Premier 100 honorees.

“The evolution of IT is clearly moving away from the management of technology to the management of information,” says John Hinkle, vice president and CIO at Albany, N.Y.-based Trans World Entertainment Corp., which operates more than 800 music stores nationwide. Among the company’s latest IT-enabled revenue streams is its “mix and burn” service, which enables customers in stores to create customized CDs by compiling digital music tracks from various artists onto a single disc.

Managing information requires different abilities than the purely technical skills associated with IT, Hinkle says. “The IT organization has to marry well with the business organization, not just the business goals and objectives,” he says. That requires matching the right personalities and IT staffers with sales, marketing and other business functions at the company.

To accomplish this, Trans World has developed a project management office that includes managers who have developed expertise and a special rapport with the specific business functions to which they are dedicated. As CIO, Hinkle oversees this PMO in addition to serving on the company’s executive board, and he is deeply entrenched in all business decisions.

“I’m involved in merchandising, store planning and in every other core strategic meeting at the company,” he says. “I’m expected to be very well versed in these things, and I’m also expected to answer more than the IT questions. I’m part of the strategy brainstorming.”

The Customer Connection

As technology either enables or is built into more and more products and services, IT leaders say it is imperative for IT departments to get closer to customers of both.

“Time and again, when we go and visit customers, we have a big ‘aha,’” says Shan, who was chairman of Reynolds & Reynolds China and left the company in October. In one case, Shan and his team learned that its customer base of car dealers had little or no interest in a feature they had been planning to incorporate into a software product. In another case, learning firsthand about a customer’s need to implement software in a certain way saved Reynolds and Reynolds 12 months of development time.

“It’s not so much that IT is taking the lead with business strategy or with customers, but it is getting involved much earlier in the process,” Shan explains. “By engaging early enough and showing value, IT is actually able to influence the business proc­ess and the business model. You can see the technical insights and business insights married together upfront.”

At J.B. Hunt Transport Services Inc., Vice President of IT Tracy Black says her team is at the table from the beginning, during business strategy and goal-setting sessions, so it can help define the business strategy early on. IT is currently working with the company’s trucks business unit to help define how it can change its processes to win the 20% of bids it is now losing to competitors, she says.

“It’s not something IT would have even done three years ago,” Black says. “Instead, the business unit would figure out that here’s the 20% of business we want to go after, and it would think up a solution and then just tell IT to go and execute the idea.”

Today, in contrast, “there’s a big focus on project management, and we’ve really pushed collaboration [with the business units],” Black says.

ChoicePoint’s Lemecha says CIOs are in a unique position to drive innovation because they have responsibility for all operational systems and understand all of a company’s business proc­esses as well. “We also understand the technological capabilities of the company and what those capabilities could be. Couple that with business strategy, and I think CIOs are in a great position to drive innovation throughout the organization,” he says.

But IT’s evolution from business enabler to business model innovator requires IT executives to shift their focus away from traditional return-oninvestment measures, says Steve Olive, vice president of information solutions and CIO at Raytheon Co. Integrated Defense Systems in Billerica, Mass.

“It used to be that dollars and cents were a reasonable payback [and] that if there was a reasonable payback, it was a good project,” Olive says. “Now, it’s all about attacking the value proposition for the business.” This shift has in turn changed how Raytheon recruits employees to its recently renamed Information Solutions organization. “We want people to think of IT as providing solutions, not technology,” he says.

“The IT professional I look for now is much more savvy in business than technology,” Olive says. Looking ahead, “IT is going to continue to evolve, getting further away from tools and more into data. We’ll be inserting ourselves even more into the business and have a seat at the board table, not just the conference table.”

Copyright © 2006 IDG Communications, Inc.

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