StrategyThe Blueprint in Brief

8/10/2019 StrategyThe Blueprint in Brief

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The Blueprint in BriefTodays CIOs have unprecedented influence on the profitability of their companies. TheCIO now sets the direction for the company, changing the future of the business withtheir technology decisions. Because of this rising importance, the CIO must be focused

more than ever on increasing his or her companys profitability. The four essentialstrategies for increasing profits are: integrating the business, mining businessintelligence, using project management, and standardizing communications. Integratingthe business functions across vertical business units allows IT departments to centralizeand standardize processes and increase efficiency. Mining business intelligence withnew IT processes or tools can offer new insights into customer data and identify newprofit areas. Project management frees companies from project overload and directsfunds to those projects with the highest profit potential. Standardizing communicationthroughout the infrastructure eliminates the need for translation and results in a simpler,more efficient information technology infrastructure. These strategies, combined with afocus on the end user, are the keys to effectively increasing company profits.

Action Points

I. Four Specific Strategies for Increasing Profits

Integrate the business. Mine your business intelligence. Use projectmanagement. Standardize communications.

II. The Bottom Line: Using Money Efficiently

Understanding the various business units, and staffing your department wisely,will help you be effective in formulating cost-efficient solutions.

III. Must-Have Questions for Process Improvement

The CIO needs to be process-oriented and process-knowledgeable, and askspecific questions of each business process.

IV. The Golden Rules for IT Communication

Focus on listening, learn from the front line, and adopt a service orientation.V. Essential Take-Aways

CIOs change the future of their business through innovation, through thinkingoutside of the box, and by looking at the rapidly changing business issues to findinnovative ways to use information to make the business more successful.


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CIO Strategies to Increase ProfitsFour SpecificStrategies

Strategies for Using Money Efficiently

byBasil Kanno,Chief Information Officer

PowerNet Global Communications

In the next year, companies will continue looking internally tostreamline their operations, which in turn will reduce its operationalexpenses, thus yielding higher profit margins. CIOs must positionthemselves to play an integral role in these efforts.

Has over twelve years of comprehensive information systemsexperience

Former senior consultant with Ernst & YoungJoined PNG as chief information officer in 1999Key contributor to the companys tenfold growth since 1999

Using common sense always lends itself to smart spending. That, coupled with theneed to understand the various business units and their processes, will help you beeffective in formulating a cost-efficient solution.

Staffing your organization wisely is another key method of efficient spending. Chiefinformation officers (CIOs) should strive for their organization to be as lean as possibleat all times. This is tricky, though. You dont want to be too lean to the point where itbecomes a deterrent to the company. Unfortunately, there is no magical formula thatcan tell you how much to staff. Common sense, awareness of whats going on in thefield, and insight into upcoming initiatives/projects should be your key guidelines ondetermining staffing requirements.

Lastly, strong and effective negotiating skills are another key method of efficientspending. CIOs must never take no for an answer, and they should never be afraid toask for what they want. How to negotiate effectively is beyond the scope of this chapter;however, effective negotiating skills can help CIOs stretch their dollar greatly.
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Strategies for Increasing Profits

One strategya CIO can assist with to increase profits is implementing tight qualitycontrols in various organizations of the company to minimize revenue leakage. Oneexample of revenue leakage is when your company under-bills or does not bill itscustomers for services rendered. Another example is when your company overpays itsservice provider for services based on the negotiated rates. Typically, the larger thecompany is, the greater the likelihood that it will encounter revenue leakage.

Another strategyis the whole concept of business intelligence. Typically, companiesstore valuable data about their customers, which is untapped. CIOs can help variousorganizations within the company make sense of that data though the use of reports,analytical tools, and so on. This, in essence, could translate into increased profitopportunity. For example, CIOs could help their marketing department analyze theircustomers profile, spending habits, usage habits, and so on to formulate up-sellopportunities.

In a typical corporate environment, the number of initiatives/projects surpasses the limitthat the companys support functions can handle. This can easily bring a company to itsknees from a productivity perspective, and it can be quite costly, thus reducing profits.Therefore, a thirdstrategyCIOs can use to increase profits is to put into place amechanism that can bring sanity to that environment. This mechanism should prioritizethese initiatives/projects based on the effort involved in implementing and supportingthem and the value they yield. This mechanism will also ensure that the CIOs team isalways working on the right thing as opposed to just doing busy work, which brings novalue to a company. Working on the right things can have a direct and significant impacton a companys profits.

Expert Advice

Roadblocks are things CIOs must deal with on a constant basis.

While each situation has its unique approach and solution, thereare certain basic guidelines CIOs can follow when trying tomaneuver through these roadblocks. First and foremost is the useof common sense. Second, CIOs must be able to see things fromother peoples perspectives. And third, CIOs must be open andflexible to new or alternative ideas and approaches.

Benchmarking Success

In benchmarking the success of initiatives, projects, or strategies, you have to comparethree components:

The performance metrics of the old way The anticipated performance metrics of the new way The actual performance metrics of the new way

Ultimately, the new way should produce better performance metrics than the oldway. This indicates that you have achieved an improvement. Furthermore, you wouldultimately like the performance metrics of the anticipated new way to equal that of the


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actual new way. This indicates that your return on investment analysis was extremelyaccurate.
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Approaches to Saving Money

byIrving H. Tyler,Vice President of

Administration and Chief Information

Officer

Quaker Chemical Corporation

We CIOs must work to make ourservices and the technology we providemore useful, easier, and more a basicpart of the business process.

Developed a global informationtechnology organization forQuaker

Oversees all of Quakersinformation services on aglobal basis

Quaker is a worldwide company,with customers in over fortycountries and operationsthroughout Europe, the

Americas, and Asia Pacific

There are two approaches to saving the company money. First is controlling your ownIT costs. Second is using information technology (IT) capabilities to reduce the cost ofother processes.

To reduce the cost of the delivery of information, you have to start accepting a utility

mentality a model of IT which is that of a utility company. Information must be seenas an asset, and as such, value comes through its use and the greatest value comeswhen the asset is delivered in the lowest-cost way, to as many people who can use it aspossible, and in such a way that it is easy to use. We all use such assets every day. Weget up in the morning and turn on the faucets at our sinks and out comes clean water,which we use as we need to. We dont have toworry much about what will come out ofthe faucet or when or at what speed. It will come out today pretty much like it didyesterday. We can take any electrical appliance and find an electrical outlet in our


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building and plug it in and the appliance will work. Again, we dont worry about theelectricity being the right amount or the right speed or whatever. This is the model wemust push for in terms of information. The user turns on the faucet and out comesclean, useful information in the amount the user needs for their immediate purposes.

The goal of IT in the future is to apply this pipeline process to the information deliveryapproach it is responsible for. The pipeline needs to be simple, easy to monitor, andhave as few moving parts as possible. That goal moves IT to take decisions aroundcentralization. It is simple: the more distributed the information delivery process is, themore moving parts youre going to have. In the pipeline approach, you work to removeparts by doing more work at the beginning of the pipeline and keep the end point asimple delivery mechanism, such as the faucet. With this approach, you need to haveless equipment, less of everything. But with greater centralization, the greater the needis to have the same of everything at all stages so the pipes will fit together and eachfaucet works in a consistent way. The more differences you have between one movingpart and another, the more issues there are in these parts working together and talkingto each other.

The single biggest issue I think everybody faces in their infrastructure is that a piece ofequipment may or may not talk to another piece of equipment in the way they need to.So then we add new pieces of equipment or software to make the translations. And thenthis leads to a lot of time and energy to get them to talk to each other. A way toeliminate that is by having everybody speak the same language, have all the equipmentcome from the same source. Its simplification, centralization, and standardization. Ibelieve strongly in the TCO concept. I do not want to go out and try to get five differentvendors to bid against each other. I want to find two or three vendors to provide asmuch of my structure as I possibly can, and stick with them. I also want them to showinterest in our enterprise, to demonstrate partnership, and to help me accomplish this

simplification, centralization, and standardization.

While the chief information officer (CIO) must work to simplify the information deliveryprocess and make it a utility, I think he or she needs to be process-oriented andprocess-knowledgeable. They need to put themselves and their team into the thick ofthings within any given business process:

What is the work of a given process? How does the process do its work? How does the process team move information around and between their team

members? How does the process team use our existing technologies, applications, and

infrastructure to accomplish their objectives? Are they getting the most value outof this effort?

A CIO must really understand the answers to these questions in an intimate way, andhe or she must be proactive in looking for ways to use IT to improve the process usingthis knowledge.


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Focus on the End User

In my firm, we have delivered the foundation for delivering information globally. Now, weneed to focus more on each discreet process. We need to work with individual usersand smaller groups of people to help them become more efficient using the foundationcapabilities in new and innovative ways. Its not as easy as having one big model andhaving everybody work to it. We in IT are going to have to get closer to the individualuser and understand their part of the given process. By doing that, we can help themthink about how to reduce the time they need to do the work, and thereby take theircosts down.

How do you use technology that is available and start building on the foundation laid upto this point? How do you use technology to help process owners take cost out of theirprocess? There are many new avenues to achieve this. For example, technology likeinteractive voice response (IVR), where systems can truly interact via speech in anormal way with customers, can save a lot of time and energy to collect the basicinformation needed to process business transactions. And information technologies like

radio frequency identification (RFID) are promising because if the firm can track theinventory accurately throughout the supply chain, we can reduce the amount of surgeinventory I have to keep in the supply chain to prevent stock outs. In almost everyproduct business, significant levels of inventory are produced and stored because thefirm cannot accurately know where its products are in the total chain. We can reducethe amount of extra inventory needed if we can track the inventory from the point ofproduction through to the point of consumption by the end users. IVR and RFID are justtwo examples of new technologies that are not perfected, but that offer possiblesolutions even in their unperfected states. These are the kinds of capabilities the CIOhas to start thinking about and talking about with the end users. CIOs must get moreinvolved with their information consumers to determine how to reduce their cost by

applying new approaches to existing business challenges.

To get to know our users in a more intimate way, and thereby be better prepared to helpthem succeed, weve done some segmentation of our user base. We try to assign our ITassociates to work with users in certain groups or teams, so they develop a relationshipand become more familiar with those people and their work processes. This works well,especially in the areas of application evolution and development. Our IT associateslearn to think like their customers, and when problems arise they dont have to learn thebasics of the issue before starting to develop a solution. This saves our informationcustomers time and reduces the overall cycle time in our IT effort to provide solutions.

Expert

Adv

ice

In some cases, IT is the service to the end customer (i.e., the one who is

buying and paying for things), and its value is evident. In our company, whereIT is not a service we sell to our customers, we are a support process to thosewho make, sell, account for, and manage the products sold to the customers.

As a result, it is more difficult for top management to understand how IT canreally help them accomplish their mission. They dont come from thosebackgrounds, and they know IT only as an individual consumer of IT services.Thats where a CIO needs to get involved and work with peers and leaders tohelp them realize where the opportunities for savings are that IT can provide.


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This also helps IT help our users to better understand the meaning of data that comesout of various systems, or that goes into various systems. We find that a major problemis many users dont understand the basic data their systems use to do the work, andthey often misinterpret the data and make incorrect decisions because of this. We feelstrongly that the more the user understands what that data is and what it means, thebetter. Therefore, our IT associates need to have an even better understanding of thedata used in the processes they support and what it represents in business terms, not interms of the software code or data storage protocols. With a solid understanding andeducation generated by having IT people working on a continuing basis with the same

groups, the IT team can learn more about the local process. Once they have a deepunderstanding of the local process, they can add more value and even be brokers ofbest practices between teams. This is an important value of IT in our enterprise. One ofour associates might work with a team in the United States to solve a given problem.

And because they are in fact a part of the solution and understand all aspects, not justthe systems parts, they can then take that solution and use it when they work withsimilar teams in other regions, or even with other processes that might have similarproblems. This generates leverage and makes the IT investment more powerful. Thebottom line is that it is about getting your people to quit thinking about technology andget them to think about what their mission is: to serve people and help them get thingsdone, and to spread knowledge.

Driving Company Profits

The best practice for driving company profits is communication and listening. If IT willtake the time and make the effort to listen to its customers and to have activecommunications, then IT will find the best solutions at the best cost. This is notsomething that always happens. Historically, IT operated somewhat independently inmost firms. It was a black box that crunched up stuff and spewed out reports. IT


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decided what kind of equipment it needed and it provided applications to users that theyhad to incorporate into their work processes, or even adjust their work processes to theapplications provided. In todays competitive and very global world, this model is all butgone, and we need to continue to get IT closer to its business customers.

In the future, all decisions about what IT is needed must be pulled from the front line.IT should fill an identified business need, and not develop interesting applications just toprovide an opportunity for someone to use it. A best practice is having the mindset in ITthat you are not in this alone; you are a service provider and your success is measuredby the total success of the business. Thats why we changed the name of our functionfrom information technology to information services. We want every associate on ourteam to think like a service provider and seek to deliver what the customer needs to besuccessful. The best practices for a service provider are different than those for ahardware provider, and we want our people to understand the difference. The CIO mustlead this change in mindset and demonstrate the desire to provide value to the firmthrough providing information services. Often, this means the solution to a problem isnot a new software or piece of hardware, but just a more efficient use of what is alreadythere. Again, the key is for the CIO to focus on process and lead the team in thisapproach.

The most common roadblock to saving the company money through better use of IT is alack of understanding of the business model by IT. Generally, this happens because ITis not a part of the key business decisions or is not a member of the key projects. Itsnot traditionally evident, and its hard in some cases to get the people who are workingwith the customers or operations to stop and think that they need to bring the CIO andhis/her team into the business discussion. Typically, they have a discussion anddescribe their problem after the fact (after signing contracts or taking other decisions),and the CIO is put into a crunch at the end of the process to find a fast solution. To be

most effective, CIOs must find ways to overcome this and get into the meetings aheadof the curve, and be proactive rather than reactive. The CIO has to be a part of thedecision and design process. This means changing the mindset of current businessleaders. The CIO must convince their peers that they are not only a technical person,but also a businessperson.

Future Opportunities

CIOs change the future of their business through innovation, through thinking outside ofthe box, and by looking at the rapidly changing business issues to find innovative waysto use information to make the business more successful. As leaders, we must discard

old prejudices, and come up with innovative ways to drive the support of the business.

This does not mean the future is about changing out all of our existing tools every fewyears or replacing our equipment every time a faster machine comes along. In my view,the contrary position is needed. CIOs have to look hard at their existing toolkits ofsystems and equipment to make sure their firms are getting the value out of the moneytheyre putting in. Our function has to focus on what weve already invested in, makingthose existing tools more useful and adapting them, as opposed to continually adding


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new things. In some ways, we actually need to slow down the pace of change, in thatwe must make sure every change we make is for the right reason and delivers valuefast. We must, in fact, take more of an evolutionary view of our services and not alwaysseek to be revolutionary in our approach.

This does not mean we are idle, and merely sit and keep the machines running. Wemust innovate and improve continuously the capabilities we provide. But the pace of ourchanges must be in alignment with the pace of the business changes we serve.

And it does not mean we dont invest in out-of-the-box thinking and dont look to findnew ways to do things. However, the key is to innovate and not just invent. Innovationis, by design, a practice that is built on the foundation of what is already known andaccomplished. It takes something that exists and seeks to creatively improve thesituation. Innovation often incorporates invention. But invention then is by design, asopposed to by default. I believe CIOs must learn to be innovators. They must learn thebusiness models of the firms they serve, and then lead their teams to explore with theircustomers ways to make their firms more successful. This is the greatest opportunity for

the CIO in the future.

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Business Integration

byG. Patrick Thompson, Jr.,Senior Vice President and

Chief Information Officer

Shaw Group

Alignment between IT and thebusiness should be a fifty-two-weekprocess, not a one-time event.

Worked for the worlds largestbusiness consulting firm,

Andersen Consulting,

directing the development ofthe companys businesssystems consulting practice

On the board of supervisorsfor management informationsystems at Louisiana StateUniversity

Qualified consultant in SixSigma, Balanced Scorecard,and Strategic Planningprocesses, and has assisted

over fifty large organizationswith strategic executionplans

Business integration is one of the main information technology (IT) strategies today toincrease profits. Integrating the business functions across vertical business units isone strategya company could use to reduce costs. Specifically, the IT departments arespearheading the integration of business processes and functions. There are businessfunctions that can be centralized to serve the operating units, such as human resources,IT, accounting, procurement functions, and other areas of business can all be integrated

to serve multiple business units. A company can use technology to allow for thatintegration to take place and to put people on common practices, procedures, andprocesses so back offices and data centers can be consolidated from multiple points toa single point.


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Business Alignment

A chief information officer (CIO) and his or her team should have an alignment processor methodology in place to help drive profits. The process should culminate in an annualmeeting where the business units present their strategies for the year, and the ITdepartment develops projects that help enable business strategy. Throughout the year,the IT department should meet on a weekly basis with functional groups via staffmeetings or conference calls. During these meetings, ideas and opportunities forcontinuous improvement should be on the agenda in order to help make the companybetter, faster, quicker, and more efficient.

Optimizing the Business

There are three easy ways a CIO can help lower costs. The first is to use businessintegration. That will earn the company the biggest return on investment. The secondway to help lower cost is through preventative cost management techniques. The CIOshould have a challenging return on investment process in place so employees dont

just buy technology for the sake of buying technology. Before a capital expenditure isapproved, the CIO should set up a due diligence process that really challenges theopportunities. He or she needs to make sure the IT department is making the rightinvestments. The third way to lower costs is to step beyond the IT role and wear abusiness hat. The CIO should look for inefficiencies and opportunities within thebusiness outside of the IT department to help the company make money. A CIO shouldbe a businessperson first, and an IT person second, in order to add value to the bottomline.

Expert AdviceIn the next twelve months, opportunities for CIOs and theirdepartments to help drive profits will arise from integration,increased visibility of information, and simplifying information to

make more timely critical decisions.

Three Specific Ways to Drive Profits

There are several ways a CIO can help drive profits. The first would be to provide on-demand services to clients allowing them to have access to information thats critical tothem and would help meet their specific needs. The second way to help drive profitswould be allowing the business to have clear visibility to make clear decisions onbusiness performance. The third way a CIO could help drive profits would be byproviding tool sets to the operational people to make them best-in-class in the industry,more efficient, and faster than the competitor.

The CIO should set IT alignment meetings to implement any of the above ways to helpdrive profits. Strategies are driven from those initiatives, and they must focus onprofitability, cost reduction, or efficiency. Once the company engages in a project, its ateam effort between the business line and the IT organization to go after that projectand make sure the company gets the proper return on investment. The company mustbe disciplined when it comes to initiating a project and making sure it reaches the returnon investment.


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Ideas to Build Upon and Action Points

I. Four Specific Strategies for Increasing Profits

Integrate the business. Business integration is one of the main IT strategies today to increase profits. Integrating the business functions across vertical business units can greatly

reduce costs. IT departments must spearhead the integration of business processes and

functions. When business processes are integrated, this allows the company to centralize

processes, saving money and creating common practices and communications.

Mine your business intelligence. Companies collect and store valuable data about their customers; this can only

be tapped with the CIOs leadership. CIOs can help various organizations within the company make sense of this data

though the use of reports, analytical tools, and software. Mining this data will translate into increased profit opportunity.

Use project management. Every company has more initiatives or projects than it can handle. This

disorganization can be very costly. CIOs can increase profits by instituting a mechanism to prioritize

initiatives/projects based on the effort involved in implementing and supportingthem, and the value they yield.

This will focus the efforts of both the IT department and the entire company onthe highest-yield projects, identify areas of synergy, and have an impact on thebottom line.

Standardize communications.

The single biggest issue everybody faces in their infrastructure is informationdelivery between programs and pieces of equipment. One solution to this is using fewer vendors as partners. CIOs must initiate a process of simplification, centralization, and standardization.


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II. The Bottom Line: Using Money Efficiently

Understanding the various business units and their processes will help you be effectivein formulating cost-efficient solutions.

Staffing your organization wisely is another key method of efficient spending. CIOs should strive for their organization to be as lean as possible while still

performing all tasks well. The key guidelines for determining the optimal staffing requirements are:

o Common senseo Awareness of whats going on in the fieldo Insight into upcoming initiatives/projects

Strong and effective negotiating skills are another key method of efficientspending.

CIOs must never take no for an answer, and they should never be afraid to askfor what they want.

Effective negotiating skills can help CIOs stretch their dollars greatly.

III. Must-Have Questions for Process Improvement

The CIO needs to be process-oriented and process-knowledgeable. They must ask ofevery business process:

What is the work of a given process? How does the process do its work? How does the process team move information around and between their team

members? How does the process team use existing technologies, applications, and

infrastructure to accomplish objectives? Are we getting the most value out of thiseffort?

A CIO must really understand the answers to these questions in an intimate way, andhe or she must be proactive in looking for ways to use IT to improve the process usingthis knowledge.

IV. The Golden Rules for IT Communication

Focus on listening. Finding the best solutions at the best cost is a natural byproduct of taking the

time to listen to ITs customers and having activecommunications with them. IT has historically been a hermetic organization; it must instead learn to listen

and communicate throughout the enterprise.

Learn from the front line. All decisions about what IT is needed must be pulled from the front line. IT should always fill an identified business need, instead of developing interesting

applications for their own sake.

Adopt a service orientation.


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A best practice is having the mindset that you are not in this alone; you are aservice provider, and your success is measured by the total success of thebusiness.

Every IT associate should think like a service provider, and seek to deliver whatthe customer needs to be successful.

The CIO must lead this change in mindset and must demonstrate the desire toprovide value to the firm through providing information services.

V. Essential Take-Aways

CIOs change the future of their business through innovation, through thinking outside ofthe box, and by looking at the rapidly changing business issues to find innovative waysto use information to make the business more successful. As leaders, CIOs mustdiscard old prejudices, and come up with innovative ways to drive the support of thebusiness.

The future of IT is driven by the customer. The CIO must always look to the end user; indoing so, he or she will find new opportunities for saving money and increasing profits.

10 Key Questions and Discussion Points1. What best practices should a CIO and his/her team have in place around saving

the company money?2. What best practices should a CIO and his/her team have in place around driving

company profits?3. What are the three easiest ways CIOs can help lower costs?4. What are the three easiest ways CIOs can help drive profits?5. What strategies have you employed in your department to help drive profits?6. In developing a profit-producing plan, what considerations must CIOs and their

departments make before moving into action?

7. What ramification might a department have as a result of a strategythat drawson department resources?

8. Does the management team look to the CIO to help increase profits? In whatway?

9. How often do you assess profit-making opportunities?10.How can a company best benchmark the success of the CIOs group in driving

profits? How long does it take to produce an ROI of this nature?


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StrategyThe Blueprint in Brief

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