Upping the strategic ante

While some CEOs recognize the expanding role that the IT organization must play as a partner in creating new value, there are too many companies where the view of IT as a non-strategic service provider or cost centre still persists. CIOs at large and small companies struggle to change this perception and break down the internal boundary separating IT from the rest of the business.

CIO Executive Council members at Quest Diagnostics, Medco Health Solutions and YRC Worldwide have gone beyond the basics of alignment and banning techno-speak to reshape the IT culture, refocus on the end customer and reallocate funding to drive business.

Shift your spending. At US$6.7 billion Quest Diagnostics, CIO Mary Hall Gregg met with her CEO three years ago to set a target for the amount of IT budget that was to be focused on strategic growth rather than keep-the-lights-on maintenance. Today, she and her team are in the process of more than doubling the percentage of budget allocated to business-growth initiatives.

One project that has contributed to bottom-line growth was the launch of an online appointment scheduling system for blood testing, which got a positive response from customers. Ultimately, increased patient satisfaction translates into physician and insurance-plan satisfaction, which increases our bottom-line, notes Gregg. “Continually increasing the percentage of IT work that is earmarked for new product development is an annual goal in IT and is measured on a regular basis.”

Medco, the $50 billion health care company, has also increased funding for growth-related initiatives, which increased IT’s business impact. CIO Mark Halloran says “One of our first steps was to really understand what drives our cost structure and where IT can assist with driving cash to the bottom-line.”

In doing this, Halloran found that new product development was a specific area of the business where IT could really make a monetary difference by getting involved at a strategic partner level. On average, 60 percent of IT capital investment is now aligned with new product development, he says.

Maintain a small-town feel. With the trend toward mergers and acquisitions, many companies intent on centralizing previously independent IT groups risk harm to the tight business ties the IT units had forged. Michael Rapken, executive VP and CIO at YRC Worldwide, faced exactly that when he took over as CIO shortly after the USF acquisition by Yellow Roadway, which created a combined $10 billion transportation company. “I was now in charge of what used to be three very different IT groups who had strategic ties to their businesses and were now thrown together and asked to act as one,” remembers Rapken.

To replicate the close-knit relationship at the larger corporate level, Rapken helped to redesign the project prioritization process and created separate spending accounts for the operating companies to approve their own small projects. This allowed operating companies to directly control a portion of the IT investment while large project prioritization was performed at an enterprise level. This ensured that IT was working on the most meaningful projects for the corporation while simultaneously working on projects that were specifically directed by the operating companies.

Refocus on the end customer. One of Halloran’s goals was to enhance client servicing by bringing IT subject matter experts into front-line discussions with account management and Medco clients. Medco’s products and services are heavily customized for its biggest clients, and many of those services are IT-intensive. Because of this, the IT organization needed to be flexible and responsive to client needs and reduce market delivery times. Halloran knew his IT team had to be empowered to make those resourcing and scheduling changes required to meet client expectations around service and product delivery.

“I told the account teams that at the end of the day, we needed to keep the commitments that we make to the customer, so we really had to understand their [IT-related] needs,” he says. “Plus, I let them know that I wasn’t just going to put IT staff in front of customers without adequate training,” he adds.

Halloran established an IT Leadership Program to give his staff the leadership skills to interface with customers, training them to engage business partners on their terms and demonstrate quality- and service-centric capabilities. Instead of an IT manager saying “no” to an unreasonable client demand, the team can now effectively work with clients to reach an outcome which satisfies their needs. The leadership training has been so successful that it is now provided to all middle and senior managers across the company.

Build business-oriented IT managers. Gregg developed a new career path for IT that ensures her senior managers will have a strong business sensibility. “Today, our career paths are not just about an upward progression, but about getting experience across a spectrum of the business,” she says.

The career path experience enables her staff to think more strategically with the business. These managers also have a new obligation to develop strategic and business-partnering skills in their staff. Gregg recently added an innovation expectation, tasking her directors to improve their ability to brainstorm new ideas and to get others to think more innovatively.


Question: I don’t want to create a strategic vision in a vacuum. How can I involve my team to help brainstorm what IT should focus on and look like a few years out?

Hall Gregg, CIO, Quest Diagnostics: I took a select group of leaders from the IT organization to brainstorm what the IT vision should be. I didn’t just take my direct reports; I hand-picked people that I thought would contribute most to the work, which also worked to my advantage in creating a bit of buzz around the initiative within the department. Output from the initial meeting included a strategic vision of the IT function five years out and a list of specific actions to engage others in meeting these goals.

Following this, we created four “vision teams,” each with ten to twelve participants and different focus areas. The first was charged with creating transparency through metrics and value demonstrations; the second was to improve success and progress of maintenance projects; the third was to drive effectiveness through a centralized PMO; and the fourth was tasked with eliminating bureaucracy and redundancy through process redesign. I picked leaders for the teams and meet with each quarterly. Some of their deliverables so far include a balanced scorecard of IT metrics, a new IT PMO, and improved programming practices.

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Carrie Matthews is senior manager, member services, for the CIO Executive Council.

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