Name any industry that’s challenged operationally or facing an uncertain future. Take financial services. This industry has been acquisition-focused for years, including during the upheavals of the past few months. But in many cases, such transactions occur in name only.
The companies involved may change the signage and the stationery, but they don’t change their business processes. The synergies promised to justify the transaction cost show up often as little more than goodwill on the balance sheet. As a result, significant, unrealized value remains locked up in what we might call “deferred mergers.”
In this economy, there is greater urgency than ever to unlock that value, and I believe CIOs must be the architects who capture it (in partnership with the CEO or COO). CIOs are uniquely positioned for this role because they see the entire value chain, understand the costs of supporting multiple business models and architectures, and remain familiar with the technology road maps required to integrate businesses.
But not all CIOs apply this unique perspective in an activist way. Activist CIOs are businesspeople first and technologists second; they are focused on corporate business results and make their decisions through that lens. And they are willing to challenge the status quo as opposed to just asking the functional departments what their needs are every year.
Before coming to SAIC (Science Applications International Corporation), I often worked with companies that had deferred the integration of their acquisitions. I would lay out an integration strategy, quantify the costs incurred by the deferred integration and suggest ways to extract the trapped value. In some cases, I did that because the company’s internal CIO did not have the will to challenge the status quo or authority to bring these issues to the business’s attention. These CIOs had no voice at that table and were not materially involved when costs were originally estimated during due diligence.
In these engagements, as well as in my work at SAIC, I’ve learned several lessons about being an activist CIO in deferred merger environments.
Emphasize Materiality
Materiality—a case based on the hard facts—is the best approach to convince the business to attack its unrealized value.
Extracting value from a merger or acquisition is a business problem, not a technology problem. By presenting facts, you help people understand this problem from a dollars and cents perspective. It’s not an academic exercise. For example, SAIC has grown both organically and through acquisition. Much of our intellectual capital and technical know-how is embedded in the IT infrastructure of those once-independent organizations. We unlock that value by providing an agile platform for rapid response to the market, asymmetric innovation and collaboration capabilities.
To make this possible, the business wanted to get control of the line systems by migrating them to a centralized data center. But we in IT offered an alternative—a “virtual grid” that takes advantage of emerging technologies in cloud computing and virtualization. This approach reduces our energy and facility costs and provides enterprise IT governance without impairing line organization productivity. It’s less expensive, helps us get to market more quickly and is more consistent with our business strategy than the alternative.
The additional value you identify when you emphasize materiality doesn’t come just from taking out costs. You may have people in roles that they can’t get out of because technology will not allow them to. They may be doing manual processes when they should be doing analytics—but can’t move ahead because their systems and processes have become impossible to automate.
Refocus on Results
As a consultant, I had great clients who pushed me. I had the opportunity to witness GE under Jack Welch, and Honeywell under Larry Bossidy, and to work with Herb Kelleher and Gary Kelly at Southwest Airlines. All of these leaders taught me about staying focused on the results, applying just enough technology to get what you needed and always developing solutions through the lens of business results.
One of my clients struggled for years to achieve the synergies of a major acquisition. The company had enterprise systems, most of which were unique to a specific business or location. The systems locked-in legacy business models and created barriers to achieve the business’s vision. We rationalized those legacy systems by following a road map aligned with a business vision that was approved at the highest levels of the organization. Instead of reducing the number of systems to cut the operations and maintenance cost of IT, we instead followed a plan focused on improving operating margins of the company. Quarterly deployments demonstrated their value with quarterly improvements in multiple business metrics such as operating margins.
Become an Activist CIO
You don’t have to work for a global conglomerate or consulting firm to develop this business-results outlook. Simply reflect on your own professional development plan and ask yourself whether it aligns with being a business-results CIO. If it reads more like a series of technical seminars and vendor conferences, then you have work to do.
Consider enrolling in an executive education class at one of the top business schools. There you’ll find senior executives from multiple industries actively participating in the debate over IT’s role in business, and they will challenge your thinking in a safe environment. Contribute to the dialogue on business challenges in business terms. This is critical training that all CIOs should consider.
To be an effective activist—to engage the business when it’s wasting money or squandering opportunities for improved results—you also have to build relationships of trust. If the business leaders don’t see you as someone who can conduct a results-oriented analysis and bring that kind of rigor and discipline to the conversation, it’s going to be very difficult to get the opportunity.
It’s equally important to develop your influence. Making people want to change is the secret to making things happen. One of the ways I do that is by making my ideas their ideas—by getting people to adopt and champion the ideas, and giving them the credit for success. When your colleagues see how you enable success for others, they will stop resisting change and become eager to work with you.
Finally, and fundamentally, to be a successful results-oriented activist, you must match your expectations for the role with those of your company. If the business wants a CIO focused on managing the internal IT function, it needs someone who is good at IT administration and keeping things running. An activist CIO would be a mismatch in that job.
Charles Beard is senior VP and CIO of Science Applications InternationalCorp. (SAIC) and a member of the CIO Executive Council.