Stopping the Silver-Bullet Syndrome
July 1 2002 by Erik Sherman
Years before he became CEO of transportation firm Yellow Corp., based in Overland Park, Kan., Bill Zollars ran European logistics for Kodak, leading a four-year project to integrate the company’s technology across all European offices. “It was a disaster,” he says. “We had multiple companies and cultures and languages involved.” Even after importing a technology hotshot to help untangle the mess, Zollars had to kill the project within five months. “It was a solution looking for a problem, and as a result, it was going to be a mess.”
IT disaster is hardly a unique corporate experience, and failures can have increasingly disastrous consequences. “When businesses in the past had a hiccup, it might mean the payroll checks got put out two hours later [than usual],” says Bernard Hengesbaugh, CEO of $13.2 billion CNA insurance companies of Chicago. “Now you have major impacts on your customer relationships and your own operations.”
Trouble is, current technologies are often beyond the experience and knowledge of the CEO. Yet the chief is charged with signing off on increasingly complex and expensive projects. What to do?
According to CEOs who have been through the silicon grinder, the answer is to find a personal style of embracing it. “I read across a wide range of magazines and books,” says Gary Kusin, president and CEO of $2.2 billion Kinko’s, a Dallas-based printing and business services company. Kusin, like so many other CEOs, works closely with his CIO and other high-level technical staff. But he also looks to his customers and staff at branch locations to keep the discussions from becoming too theoretical. “It’s not technology for technology’s sake,” says Kusin. “It’s technology for finding solutions to your customers’ problems.”
Zollars agrees that information sources outside a company help maintain perspective. “I’m on a number of boards, so I get access to what’s going on at other companies,” he says. “Then I network with other CEOs to find out what’s happening.”
For Zollars, keeping abreast of technology is not a passing activity. Before 1997, the company did long-distance hauling of goods. Now, through its use of technology, Yellow handles a million shipments a month moving at different speeds, including expedited and time-definite international shipping, as well as transportation management for customers. The $3.2 billion company spends $80 million annually on technology, with 60 percent allocated to new technology and 40 percent to maintaining old systems. “You need to be relentless about the investment,” he says. “In the bad times, the four areas that companies usually cut are technology, travel and entertainment, marketing, and training. Although that may give you some short-term relief, it can have longer-term consequences.” On the other hand, he adds, “if it isn’t a solid business process in the first place, throwing technology money at it just confuses the issue.”
To avoid that kind of silver-bullet syndrome, a CEO must understand what technology can and cannot do. Before making a decision that will involve a significant purchase, Yellow examines the affected business processes to ensure they are up to snuff. Zollars also created Yellow Technologies, an operating group separate from the IT department, charged with investigating and developing new technologies. This separation ensures that new technology won’t simply be used as a quick solution to problems. To keep the two departments synchronized, the CIO is also the president of Yellow Technologies.
Yellow’s treatment of its CIO exemplifies the growing recognition among corporations that control of technology must fully enter the ranks of senior management. Crossmark, a Plano, Tex.-based sales and marketing services company, recently created a CIO position, moving responsibility for technology away from the CFO. The company no longer considers IT a cost center, says Chairman and CEO Butch Smith. “Now we consider it a strategic enterprise within our organization, and it reports to our COO.”
Getting a good CIO to manage the process of using technology is no easy feat. A good candidate must be as fluent in business as in tech, says Dane Brooksher, chairman and CEO of Aurora, Colo.-based distribution facility provider ProLogis. “In my case, I eventually found someone I could converse with about technology on a level that he could explain to me and I could understand what he was talking about,” he says, but adds that the ability to interact with the CEO is not enough. “He’s got to talk to all the other senior executives and help them achieve their objectives.” The CIO must help drive strategy by providing the proper technology solutions.
Brooksher depends on his CIO to provide insight and to answer questions, even about the CEO’s own reading and research. The head of ProLogis is open about his lack of technical knowledge, but he believes that understanding it at a business level is just as important.
In turn, the CEO must believe that the CIO has as much business as technology acumen, says Ric Andersen, managing partner for global business development at PwC Consulting, a Bermuda-based unit of Pricewaterhouse-Coopers. “CEOs have big egos and don’t want to feel they’re not the smartest person in the room. On the other hand, if they share a common language-this is our business-they can have a discussion where the CEO says, €˜Here is my business problem. You understand technology; what do we have to do to fix it?’”
It is at that intersection of technology and business that a CEO must not only communicate but be an effective leader. Dick Resch, CEO of Krueger International, a Green Bay, Wis., office furniture company, participates in quarterly priorities-setting meetings, where budgets are examined for the best split between new initiatives and maintaining the existing infrastructure. “I try and make the trade-offs [between departments],” says Resch. That keeps turf wars from interrupting strategic decision-making. “I find it more efficient to be involved, even though it takes more time.”
He insists that technology decisions occur at the strategic business unit level. Even when the IT department proposes a technology, the business unit still conducts a benefit-and-risk analysis. If the suggestion passes that hurdle, the company names a high-level executive sponsor, who meets with the technology specialists, the business-process specialists and somebody from the area it would affect, Resch says. “This team is then tasked with putting together a project plan. The key part for me is a pro forma payback analysis.” Should the project go forward, the company reviews results at six, 12, 18 and 24 months to be sure that costs and benefits are in line with projections. Without that pressure, departments often will not make the staff cuts and changes a particular technology was supposed to enable, either because a manager wants to build an empire or is just averse to change. But Resch is demanding when it comes to a return on multimillion-dollar investments. “You have to hold your organization’s feet to the fire to be sure you’re squeezing all the benefits of the technology you’ve just put in,” he says.
In addition to working with internal business and IT experts, some CEOs, like Dan Hesse, chairman, president and CEO of Seattle-based Terabeam and former CEO of AT&T Wireless, like to learn from the competition. At least once a year at his former job, Hesse took his senior leadership to Europe or Asia to meet with other wireless operators.
Consulting competitors was easier than it sounds. They weren’t direct competitors, Hesse notes, and even with global markets, there are often situations where competitors operate in distinct geographic spaces. Other companies were actually flattered. “They were thrilled that a senior major technology executive thought that the best technology ideas come from outside the U.S.,” he says. While abroad, Hesse and both his CTO and CIO met with equipment vendors who helped envision how technology might impact the telecommunications business in five to 10 years.
Ultimately, CEOs must struggle to understand technology, because, like any other business decision, if a strategy doesn’t work, they will have to answer to irate boards and shareholders. That’s why clarity is the CEO’s most effective weapon. “It is too easy for a CEO to be dazzled with fancy footwork about a particular project or the need for investment spending in technology,” says Kusin. “Unless I can explain it to someone in a degree of detail that they understand it, then I don’t understand it.”