Transform Your Techie

Essentials: The third of Chief Executive’s six-part series on boosting personal effectiveness

Part I: How To Use Your “New” CFO
Part II: Managing a CEO’s Scarcest Resource -Time

Coming in future issues:
How to get the most from your CMO
When and how should you blog…if at all?
How to get the most from your HR chief

Michael J. Naatz was the chief information officer at transportation company USF Corp. in 2005, when it was acquired by what is now YRC Worldwide, (a $4.3 billion, Kansas-based global transportation and logistics services company). Within four years he was promoted to that same title at the new company. But he found out that at YRC, being CIO meant a lot more than running computers.

First, CEO William D. Zollars put his CIO to improve cash flow and speed up payment of accounts receivable. A few months later, freight bill entry and cargo claims administration were added. “Eight months after that I was asked to take on the sales organization,” Naatz recalls. From there, Naatz decided to start analyzing client data, breaking it down by geography, industry, and size “to identify opportunities to grow the business.”

The upshot: In April 2010, Naatz added the title of chief customer officer, and the size of his department quadrupled to 1,200 people.

“Because generally there’s technology involved in all aspects of the business,” Naatz says, “the CIO has the opportunity to see across the entire organization. I know generally what’s happening in operations, what’s happening in finance, how they use the tools to do their job. It provides us with unique insight.”

Indeed, the job of overseeing technology at corporations is changing as fast as the technology itself. No longer is the chief information officer the “nerd-in-chief,” merely chasing after viruses and ordering new mouse pads. Now the CIO is finding ways to utilize hardware and software for strategic business purposes, such as discerning market opportunities and improving customer service. The high-tech tools of choice can include sophisticated data mining like Naatz did at YRC, social networking, and enhancements to the company website.

“The CIO has risen to a point where he or she is a contributor to strategy, using information as a transforming tool to help the CEO to drive the business better,” says Mark White, the CTO of Deloitte’s Technology Practice.

And if the CEO doesn’t realize the tech department’s potential contribution, his or her employees and customers do. “There is a shift in expectations, particularly among the younger generation,” White says. “They have the expectation of free availability, the expectation that information automation is embedded in their work life.” For the CIO, that can mean constant demands for new ways to incorporate mobile devices, social networking, and cloud computing into business functions.

Of course the CIO still needs to do the traditional, hard-core techie work of maintaining and upgrading the operating systems, including hardware, software, and e-mail. But a lot of that has become so routine that it can be handled by lower-level staff, says Mark Settle, the CIO of $1.9 billion Houston-based BMC Software. Deloitte’s White says that this “caretaking” function is shifting from being 80 percent of the job to 70 percent.

The first stage in the CIO’s transformation, starting maybe a decade ago, was to harness technology to increase efficiency, not just of the technology itself, but company-wide. That was a fairly straightforward expansion of responsibility, stemming directly from the office’s core functions.

For instance, White says that the CIO of a large consumer-products retailer two years ago suggested adding more tech-enhanced methods for shoppers to contact the customer-service department, via instant-messaging, the company’s Facebook page, the corporate website, and Twitter. When Settle was the chief information officer at Arrow Electronics, a global distributor of electronic components, from 2001 to 2006, he turned the company’s internal tracking service into a marketing tool by showing prospective clients how Arrow could save them the hassle of tracking their suppliers.

The next step in sophistication—and probably the most widespread—is for CIOs to burrow into the mounds of data collected by the systems they maintain, to discern details and trends about customers and market opportunities.

“The CIO has risen to a pointwhere he or she is a contributorto strategy, using information as a transformingtool to help the CEO drive the business better.”

Whenever a customer places an order, requests service or files a complaint, information on that customer’s name, address, type of product ordered, price, number of items and order history automatically flows into the IT department’s coffers. From the marketing department comes information about the company’s sales force in the customer’s neighborhood. To supplement that, says Chris Curran, the PwC principal who specializes in technology strategy, the CIO can purchase broader demographic information, such as population density and neighborhood sales trends, from market analysis firms. “Merge those things together” for the entire customer base, Curran says, and the CIO can study questions like: “Is this territory over-penetrated or under-penetrated? What kind of mix is being purchased in Illinois or Texas?”

That type of data mining is exactly what Naatz did at YRC. Once he’d analyzed the client data, trends emerged. “We found that we were growing with customers that had certain attributes and were shrinking with customers that had other attributes,” he recalls. “When we identified those attributes, we were able to target that [underutilized] segment,” such as small and medium-size companies, and certain geographical areas.

Through this pinpoint analysis, Naatz says, “we arrested a decline in market share and we’ve grown market share for the first time in three years,” up 4.4 percent since last spring.

At the consumer-products retailer that Deloitte’s White described, the CIO who had suggested more communication methods for the call center was able to use the additional data those methods generated, to improve service even further. “They go and mine the history of those transactions to discover patterns, to better know the customers’ relationships with products, so they can feed that back into the customer-care scripts,” White explains.

Such customer and marketing analysis is far beyond the bits and bytes of the traditional CIO job. It might have previously been done by the head of marketing or customer service, the chief operating officer, or possibly the chief executive—but only if those managers were aware of the wealth of data available and the technological possibilities.

“The logic in how you connect these things, and what you need for good execution, is not something in the forefront of a [non-CIO] business executive’s mind,” says Thomas Reichert, the senior partner who leads Boston Consulting Group’s global IT practice.

The most sophisticated CEOs and their CIOs are taking the tech expertise to even further dimensions.

Last year’s Dodd-Frank Wall Street Reform and Consumer Protection Act created several new openings for the tech chief’s unique skills. “One of the biggest issues for CEOs and boards now is ‘say on pay,’ ” the law’s requirement for a non-binding proxy vote on executive compensation, points out Richard V. Smith, a senior vice president and head of the executive compensation practice at Sibson Consulting, the HR consulting division of New York-based Segal Co. “Nobody wants to be the first to get a ‘no’ vote.”

Where does the CIO come in? “The CIO, who has more access to data than anyone else in the organization, should be used in helping craft a message to the shareholders, along with the corporate secretary, the compensation committee, and the head of HR,” Smith advises. “It’s going to require them to pull data internally that they probably haven’t looked at before, about pay, equity programs, stock options.” Moreover, the CIO should add links to the website making it easy for shareholders to pull up specific data or “communicate directly with members of the compensation committee, before the vote.”

In other words, the CIO can be crucial in making nice to the people whose votes could really embarrass the CEO.

Making the Most of Mobility

More opportunities lie in the growing realms of mobile communications and social networking. “The company has to plan for a future where everything is mobile,” warns Curran of PwC. Someone—presumably, the CIO—should be investigating the devices and data that a mobile sales force will need, whether it’s to place orders, check inventory, or run pricing models. While the equipment itself, like GPS receivers or iPhones, may be available off-the-shelf, “it’s up to the CIO to understand how you would apply a generic program and make it applicable to the company,” Curran says.

Similarly, social networking can be a great tool for communicating both internally and externally, but only if someone in the company knows how to manage it. Again, that someone is the CIO.

At YRC, Naatz works with his marketing department to set up Twitter feeds and apps for mobile devices. Deloitte’s White says the CIO at one tech client is constantly using crowd-sourcing techniques to create ad hoc networks of experts to tackle particular projects, which change depending on the topic. “It’s bigger and more effective than water-cooler networks,” as he puts it.

Neal Sanger, the CIO of Mayo Health Systems—a three-state network of clinics and hospitals owned by the Mayo Clinic—had to develop extra algorithms to protect privacy when his physicians wanted to access patient medical records on their smartphones. Then his staff demanded: “Why can’t I click on electronic records and do simple word searches, like Google?” That required working with an outside vendor to reconfigure huge text blocks into search terms. “The generation of physicians and nurses that’s coming in are leveraging IT in ways different from previous generations,” Sanger says.

Not surprisingly, the trend of a super-enabled CIO started in industries heavily reliant on data, including financial services and health care. Next to innovate were the services and retail sectors, which need to track a plethora of customer data. Now, experts say, change is coming to manufacturing, where tracking is also important, as Settle found at Arrow Electronics.

To keep up with these changing responsibilities, the job and department titles have also been evolving. “Going back 20 years, it was data processing—meaning, ‘back office,’ ” White points out. “Then it was information systems, which was going beyond data into systems, automating the things we do.” But that still doesn’t encompass the CIO’s full potential. So today, White says, the term of art is “information technology,” which he says implies the Internet as well as hardware. “And let’s put the emphasis on the information, not the technology,” he adds.

Says Settle of BMC, “To understand the power of the data, the CIO is now also the chief quality assurance officer or chief information security officer.”

That “C” in the title is particularly tricky. Where the CIO used to report to the chief financial officer or chief operating officer, now this person is supposed to be an equal member of the management team. “That often is a very delicate balance,” warns Reichert of Boston Consulting.

At one big Northeast banking corporation that Reichert worked with about a year ago, the CEO had to negotiate between a new CIO and the head of retail banking. The CIO wanted to reorganize operations because key information wasn’t getting to customer service reps. But the banking chief, Reichert says, “was of the view that it was all about people providing excellent customer interaction. He thought, ‘IT has never delivered for me.’” Over the course of three months, the CEO carefully encouraged the two people to get together, with comments like, “We’ve got a new guy here, and given where he’s worked before, he might have some good ideas. We should have a three-way conversation.”

As the CIO job expands so dramatically, a key question for the chief executive is whether the geek who feels comfortable only with a keyboard can handle all these responsibilities. Today, the CIO may be working directly with board members and marketing. He or she now has to undertake customer-service, marketing, and new-product analysis. This can require “people” and analytic skills in addition to advanced e-knowledge. “More and more, CIOs are called upon to think like business people,” says Sanger of Mayo Health. Will the CEO have to fire the old techie and find a new super-manager?

“It’s very challenging for the CIO to balance the things they’re supposed to deal with,” PwC’s Curran acknowledges.

“It depends on how techie they are,” adds Smith of Sibson.

Naatz of YRC suggests that the CIO may need to get an MBA—which he himself picked up from Northwestern University in 2001, because “I thought it would help make me a better business person.” Another solution: “That’s why it’s important to have a CIO who’s good at building teams,” Curran says. “They can partner with the chief strategy officer and marketing and operations and finance to fill in the gaps.”

But with the right person running the information systems, the chief executive will find that the company has a brand-new asset.

“The CIO is an underused resource for the CEO,” BMC’s Settle says. Of course, he’s trying to make sure that’s not true in his case.

At small companies, no room for a big CIO

The chief information officer job isn’t changing as dramatically at smaller companies, for one main reason: it probably doesn’t exist.

“Someone [at a lower level] like the IT manager is responsible for business systems,” says Chris Curran, a principal at PwC, who specializes in technology strategy. A lot of data-collection functions, particularly payroll and call center operations, can be easily outsourced. Moreover, because these companies are often just starting out, “the person who runs IT is only equipped with the basic technology. First he has to get things off the ground,” says Thomas Reichert, head of Boston Consulting Group’s global IT practice.

Nor is a CIO much needed for shareholder communications, because many small companies aren’t publicly traded. If they are, “the CEO probably has a fairly personal relationship already with the big shareholders.” says Richard Smith of Sibson Consulting.

However, Reichert also sees openings for the IT person—whatever the title—to do as much strategic work as at a big company. “The responsibilities are less structured, so people are doing more things,” he says.

How technology has become a strategic tool

Credit: Deloitte Consulting

Key Takeaways

1. The CIO has a unique window into the entire company, because all data flows through that department
2. Data can be a strategic weapon for discerning new market opportunities
3. Employees and customers expect sophisticated mobile and social networking capabilities