Leading the Information Enterprise
CEOs are instrumental in transforming traditional companies into knowledge powerhouses. Their challenge? Mixing creativity and standardization.
May 1 2002 by Jennifer Pellet
Information forms the very core of Weight Watchers International’s $273.2 million business. After all, the company’s revenue depends entirely upon providing weight management information and counsel to its one million members in 30 countries. And those members, in turn, attend weekly meetings at which they willingly share a great deal of personal information about their lives with the company-affording the opportunity to amass great stores of detailed customer data.
It’s enough to make a CIO swoon. Yet CEO Linda Huett says that most of that information never travels from the company’s regional offices around the world to its Woodbury, N.Y., headquarters. And she’s not so sure that’s such a bad thing.
Huett knows that some of her customers, like those of any company in today’s information age, expect more than their predecessors did a decade ago. “If they have a problem and ring corporate [headquarters], they somehow magically expect us to know everything there is to know about them, and yet, for the most part, all of that information is not kept corporately and it certainly isn’t up to date and in real time,” she explains. “So for us to be able to fulfill their expectations would be impossible right now-and I don’t know that it would ever be worth our while to invest in that capability. Because out of the 4.5 million people who joined us last year, only a few hundred will have that need.”
Huett, like many of the CEOs who attended a roundtable jointly sponsored by Chief Executive and Oracle on how to lead an information enterprise, is struggling with the paradox of knowledge management. “We need information-real information in real time that is very detailed-for our manager to make decisions, but we also need to sort out what information is really important and to whom within the organization,” she asserts, adding that the challenge is one faced by many enterprise leaders. “If we, as CEOs, can do that in an effective way, maybe we will have better organizations and better decision making.”
Business leaders know that information, if used effectively, enables firms to adapt quickly, spot opportunities, and improve products and services. In fact, for most companies, accumulated knowledge about customer behavior, markets and suppliers is more valuable than any physical asset-factories, inventory, natural resources and even cash. But it’s also a heck of a lot harder to manage. Capturing the collective experience and knowledge of an enterprise is difficult enough; making it available to individual workers and ensuring it is used wisely and effectively is an even greater challenge. Too often, pools of information remain isolated from each other and, as a result, companies miss crucial opportunities to improve customer service and transform operations.
Yet there’s no shortage of technology tools geared toward information management, points out John Brandt, president, publisher and editorial director of Chief Executive Group. “Once upon a time, the lack of knowledge and management of information may have been due to a dearth of IT capabilities,” says Brandt. “But that’s no longer true. What we have right now is not legacy computer systems, but legacy thinking and legacy organizations. And often, we, as the CEOs of our organizations, are the problems, not part of the solution.”
Too many CEOs are all too willing to step back and let the tech gurus address the issue, agrees Robert Prieto, chairman of New York-based Parsons Brinckerhoff. “One of the risks is that there’s the high priest of IT in many organizations who says, €˜This is how it shall be,’ although they’ve never been out selling or delivering the work,” he says. “The responsibility for IT does not rest with the IT department, but along with everything else on the CEO’s desk.”
Stumbling over data
Getting caught up in the data, rather than its effective use, is one place where many companies stumble. From historical transaction information gathered through customer and supplier relationships to the knowledge-learned skills, experiences and insights-that resides in the minds of employees, the sheer amount of data can be overwhelming. “The central thing is not really data,” points out Timothy Chou, president of Redwood City, Calif.-based Oracle.com. “At the end of the day, the true value of computers is standardization of process-figuring out how to deliver the best service across every customer, across every instance, and embedding that in computer systems so that everyone is doing the same thing.”
Once the process is standardized, it becomes easier to track success and make incremental changes to improve on the effort, says Chou, who cautions that it’s essential for companies to be selective in determining which processes warrant attention. “There are probably 10 or 20 key processes-hiring, purchasing, service-that really matter to any individual company,” he says.
“Purchasing is a fabulous example,” agrees Kenneth Bauer, president and CEO of the MTA Long Island Rail Road. “In the government sector we spend way, way too much for different items. And that’s only because nobody has defined the right process by which to procure a wide variety of goods, so everybody is doing it differently.”
But not all processes, he is quick to add, lend themselves to standardization. “If you have different parts of your business where the variables are great, you have to go through a painstaking effort to define a process that takes in all these variables,” asserts Bauer. “And even then, the question is whether customers would be able to interpret and understand the answers that you come out with.”
Standardizing operations across borders may prove similarly problematic. Attempts to pack up best practices, ship them overseas and have them work the same way have floundered in the past. “Cultural differences around the world are an issue-and this is the risk of enterprise systems,” observes Prieto. “You start going to corporate standards that do not necessarily fit across each industry and across each culture.”
Standardization: A straitjacket?
Several CEOs also expressed concern about the effect on employees, charging that standardizing processes would bleed innovation from the corporate culture. “I’m concerned that as we use technology to enable these processes, we’re taking the true knowledge, which is in the individual, out of the loop,” says Prieto.
“We have the challenge of making things standardized without letting standardization itself become the new straitjacket,” agrees Huett. “First, I believe that it may kill off common sense-for which I have a high regard-because people honestly believe that the system is what you want them to do, rather than what is sensible. And second, I think it’s the mavericks and maverick thinkers in all of our organizations who really bring the best innovations and improvements.”
An enterprise too mired in defined processes, goes the argument, stifles its employees’ creativity-a valuable and elusive property. “No great work of art, whether it be literature or music, was ever created through any kind of standardization of process,” says Sheldon Kravitz, president and CEO of Plus Media Buying Services in New York. “We need knowledge and credible information. The last thing we need is standardization. In fact, that would be an anathema. We’re interested in the human element.”
Adds John Maloney, CEO of M&R Capital Management in New York, “Some of the biggest improvements to our database to serve clients have come from individual employees, not from the CEOs.”
But Chou argues that not only is it possible for individual creativity and standardization to coexist, but instilling more defined processes can actually facilitate innovation. Ideally, he says, processes should be restructured not to constrain employees, but to minimize time spent on mundane tasks. “A lot of smart people at all of our companies are spending a lot of time doing stupid stuff,” explains Chou. “If we can reduce the time spent on mundane tasks, it gives those people a lot more room to do creative things.”
Furthermore, standardizing knowledge-sharing processes can spur creativity by facilitating, and in some cases mandating, the flow of information among employees, as well as with customers and suppliers. “About 20 years ago, we put in place a set of knowledge-sharing processes among professionals in like disciplines, so that our bridge engineers worldwide would talk to each other,” reports Prieto. “Now we use technology as an enabler to facilitate the communication and the storage of that knowledge.”
The art of spreading knowledge
Ideally, such systems will be used both to facilitate communications and to enable enterprises to capture employees’ knowledge and experiences and disseminate them to shorten the learning curve for others. “If all the managers putting information into a system feel they’re part of a single engine that drives the information flow for the business, we can actually galvanize and instruct and retain the knowledge of our global organization within the context of a single system,” asserts Jon Robson, CEO of New York-based Moneyline Telerate. “But that system has to be very much driven and architected around the business objectives so that everyone who touches it knows that by following the rules within that model he or she is contributing to the objectives of the firm globally.”
Already, communications advances have made strides. For example, the ability to use email to swiftly exchange documents has transformed both internal and external communications. “I think a big part of the role of IT today is providing a common communication platform,” says Prieto. “There’s a methodology. If I send you an email, I have a method to do that that’s probably not all that different than yours.”
Some signs now suggest that workers are more than eager to make the transition from rapid interactions to real-time electronic dialogues. “Email got abused for a while, but now people have gotten organized into workgroups and communicate and distribute information among themselves naturally,” Robson notes. “I think what’s coming next, and will likely soon overtake email, is instant messaging.”
New challenges in data collection
As instant messaging becomes more prevalent, Prieto suggests, it will become a new and favored tool for information dissemination. “You can view it as the modern-day equivalent of a brainstorming session, where all you captured at the end of the day was the solution to the particular problem that you set out to solve, but it was a high-value solution. Did we capture all of the points made? No, but we didn’t in the past either. What we’ve done is reduce the cost of that brainstorming.”
While companies have clearly benefited from advances in information sharing, the new business practices delivered by that capability have raised a host of questions. “It’s hard enough to do this inside a company, where you actually own a process and can control it,” points out Brandt. “When you start trying to share information with your customers and your suppliers and do collaborative commerce, you raise a whole series of issues around ownership of the data, the customer and the process.”
In retailing, notes Harvey Seegers, president and CEO of Gaithersburg, Md.-based GE Global Exchange Services, bigger players have clout and are all too likely to wield it. Retailers that once required that only their top suppliers go digital are now pushing 100 percent of vendors to become digitally enabled. “It’s getting to a point where if their invoice doesn’t come electronically, [they shouldn't] expect to get a payment,” says Seegers. “It’s not very intellectually fulfilling to talk about the exercise of market power to bring your partners online. But, in fact, that’s how it takes place most of the time.”
Worse yet, some companies are finding that their customers are taking information sharing as a license-and a means-to steal. “We’re having a serious problem with this,” says John Doddridge, chairman and CEO of Troy, Mich.-based Intermet. “We’re more process- than product-oriented, so our business is not patentable. Our customers in the automotive industry are dictating to us what data we will transfer to them, and they’re sending it to South Korea for [companies there] to bid on. So they’re using that as a weapon against us.”
CEO action: Louder than words
Finally, even the most well-planned information-management initiative is doomed to fail if an enterprise and its CEO are unable to deploy it effectively. Unfortunately, that’s no easy feat. After spending hefty sums on IT systems, companies are often hard-pressed to show a return on the investment. In a review of more than 1,000 customer relationship management initiatives across 226 companies, for example, Insight Technology Group of Boulder, Colo., and CRM Insights of Danville, Calif., found that only 25 percent were yielding real benefits.
Why the fizzle? Return on investment can be hindered by a host of factors, including employees who thwart progress by resisting change, misguided attempts to cobble new technology onto older systems, and inadequate training and implementation programs. These, and most hurdles, can be traced back to a lack of oversight by the chief executive, contends Ron Ponder, CEO of Cap Gemini Ernst & Young Telecom Media Networks in Clark, N.J. “The most common mistake CEOs make is failing to come forward,” says Ponder. “A CEO needs to be aware of the impact the CIO and the technology have on his or her organization. And the CIO or the person doing the work should report directly to the CEO so he or she stays in that loop. It shouldn’t be two levels down.”
It’s also essential to communicate the strategy behind the new technology to employees, motivate them to use the new tools and take steps to track the results. “We’ve found that you have to compensate people,” adds Ponder. “We’ve had to make it their job and to say, €˜You’ll get a lot of money if you capture this knowledge.’”
In planning a process change-over, a mandatory sunset date in retiring old processes can also be instrumental in a successful transition. “If you as CEO communicate throughout your organization a date to shut down the parallel process that you are automating, the likelihood that you will be on schedule and within budget increases exponentially,” Seegers asserts. “Companies that don’t do that-whether because they don’t have the self confidence that the new processes will be automated effectively, or they have more of a consensus environment-almost always fail to get the cost savings they’re looking for. We call it the Viking strategy. Burn the ships right on the shore.”
But direct, hands-on involvement is the real key, he adds. “We probably have to be more active and more disciplined in our involvement in IT [decisions] than in almost any other decision we make inside the enterprise,” says Seeger. “We also need to be in there challenging our people to really make what we are trying to improve work and to have a clear line of sight between the investment levels, the payback and the amount of benefit to our customers.”
As companies continue to grapple with the challenge of creating solid processes for identifying, sharing and managing pools of information, it’s clear that CEOs must lead the charge to transform their firms from passive conduits of information to active managers of intelligence. “The role of the CEO is to keep the systems perspective in the biggest sense of the word,” asserts Prieto. “We can’t be experts in IT, but I think we can ask the hard questions-the whys and the why nots-and not let go until we’re satisfied that we’re getting the answer we want.”
I THINK ONE OF THE BIGGEEST challenges many companies face is understanding what information really matters. Even in a business as simple as ours, I see that the more information we give our front-line managers, the more they become enamored of information. And they want to drill deeper and deeper. They feel that the more information they get, the better their decisions can be. In fact, the truth is, they almost become paralyzed-paralysis by analysis-because there is always more information you can get before you make a decision, whatever it is. So filtering out the non-key information, and almost protecting the rest of the people from the information they don’t need, is one of the most important things we as CEOs can do.
I’m also concerned about standardization, which I don’t think is always the cure. Our Swedish operation, for example, has done more innovative things than our other offices, and that’s really because nobody at headquarters can read Swedish. We told them what to do, and they said, “yes,” and then went off and did what they decided to do. Since we couldn’t read it, we didn’t know unless there was an [issue] that made us say, “What is this?” Then they’d own up to some experiment that they had been trying. And a lot of our best ideas came through these operations that just refused to be standardized.
I would hate for my kind of company, which is so dependent on constant innovation, change and improvement, to standardize that kind of thinking out of the organization. But at the same time, we really do need to be able to get information, and to be able to get it quickly. I think that puts real demands on a company like ours.
Live and Learn
I WAS ON THE CORPORATE SIDE of the world buying IT services for a long time. And now, for the last five years, I’ve been outside trying to sell into the corporation as a consultant, which is quite a different side of the food chain. During that time, one of the most interesting things I’ve found out about knowledge management has been what it can do for institutional learning.
In my business, when you go out and work with an alliance partner doing a solution for the first time, you have to convince all of your salespeople, your technical people and your lead analysts to go out and sell that. You are taking a new product and a bunch of people and bringing them together. So it’s a lot of learning because it’s all new.
But if you can put the discipline around that project to capture that knowledge, put it into a knowledge base and make it available to the next team, it becomes a cookie-cutter process. I’ve seen this happen consistently. I have seen an eight-week installation-product and service combined-with a margin of 10 percent go to half that installation time and a margin of 25 to 30 percent. With sufficient re-use of knowledge, the relearning is instant.
The idea of capturing that knowledge, storing it and reusing it always sounds very theoretical. Knowledge management-especially to CEOs-sounds theoretical. But I’ve seen it make literal cookie cutters out of sellable, repeatable solutions. Each time you sell one, it’s faster and you make more money. When you talk to a lot of CEOs and you say knowledge management, they’re gone. They don’t hear you. Yet it’s actually a very practical way of doubling your margins.