The Nature of Excellence

CIO Magazine
By Carol Hildebrand
August 1, 1997

There's little doubt that technology is good for the corporate soul; indeed, most organizations would be consigned to purgatory without it. But IS organizations have never found measuring the value of their work to be easy. While the bulk of CEOs equate IS performance with using technology to boost business goals, this intangible business/IS link is difficult to quantify. Moreover, the CIO also must satisfy simultaneously the more mundane requirements of cost-effective, reliable technology and service if the IS group is to succeed.

The conflicting demands of running an efficient technical infrastructure and creating an IS group adept at business practices frequently evokes a fractured response from IS, says Fred Magee, vice president and research director at Gartner Group Inc. in Stamford, Conn. "Who are they going to be, Dr. Jekyll or Mr. Hyde?" he asks. "Providing efficient, stable, secure technical structure and support has very little to do with business effectiveness, with its emphasis on the creation of new products, expansion of markets and the integration of new customer channels."

Still, CIOs directing high-performing IS groups have found a way to reconcile the warring masters of technical efficiency and business innovation. "Attaining Top-Level IS Performance," a report by consultants Mary Silva Doctor and Richard W. Swanborg Jr. (from Omega Point Consulting and ICEX Inc., respectively), examines the practices of 20 IS organizations in Fortune 500 companies. Swanborg and Silva Doctor suggest that IS groups must ascend a pyramid of capabilities. Before reaching the highest level, at which an IS organization creates business value, an organization must first deliver a sound technical infrastructure as well as build competence and credibility through excellent service (see "Pyramid Power,").

Excellence on all levels is difficult to attain, but this year's honorees have succeeded in bringing a consciousness of IS innovation to their companies by attention to best practices in infrastructure management, internal customer service, internal operations, IT and business alignment, and innovation and learning. Our five categories of best practices fit nicely within Swanborg and Silva Doctor's three-tiered pyramid.

Silva Doctor points out that most IS organizations function at the first level of performance, delivering just the basics of IS support. But this year's CIO-100 honorees succeed by striving for a delicate equilibrium among infrastructure, service and business value creation. It's a constant struggle of balancing often-conflicting needs, but top-level IS groups have learned the skills needed to provide the basics while still functioning as business consultants for the enterprise.

Swanborg says that when they talked to CIOs of Level 3 IS groups, the level at which IS organizations make a consistent and distinct contribution to the business, the two consultants found that even the high flyers started at the bottom. "They all said the same thing. They spent a lot of time working with infrastructure management," he says. "You've got to have the base down to work your way up the pyramid. And by the way, you're not going to get a lot of thanks for getting the basics right."

John Gerdelman, president of networkMCI Services, the IS arm of MCI Communications Corp., in Washington, says his operation works on those three levels. "Reliability is the foundation," he says. "If the data center isn't operating and the network isn't up, you don't get to get in there and talk about innovation." Next in importance, he says, is making sure that business users get dependable service. A project development team, for example, commits to delivering projects on time and on budget. "If you have a [scheduled] release date of May 1, you should know in January if it's going to be on time or not" and communicate that information accordingly, Gerdelman says. "Innovation is last," he says. "If you do the first two right, you get to play in the final arena, which is where people have the most fun."

It's just like Mom and Dad told you; before you can go out to play, you've got to do your homework. And if you want to build the multilevel IS organization, you've got a lot of homework to do.

Level 1:
A Reliable Infrastructure and Flexible Architecture

This, the least glamorous level of IS performance, cannot be ignored, says Silva Doctor. "At the end of the day, the expectations of an IS organization are still that they will run systems. Until you're doing that, it's very hard to move ahead." But execution is a different matter than expectation. Consider that IS must build an infrastructure that users can depend on, but it also must be able to accommodate the latest technology at a cost that satisfies the budgeteers. After all, nobody wants to budget money for a project that has no quantifiable payoff.

There's an inherent difficulty with building an infrastructure that's simultaneously scalable, implying that frequent upgrades or new technology additions are to be expected-and as stable as a rock, says Robert Walker, former vice president and CIO at Hewlett-Packard Co. in Palo Alto, Calif. (Walker's current position is vice president and general manager of the Professional Services Business Unit in HP's Software & Services Group.) "It's like running a marathon and partway through needing a heart-and-lung transplant," he says. "That's really the job we face in infrastructure."

Most CIOs rely on metrics such as tracking network uptime to measure infrastructure reliability. But many experts say that building a successful infrastructure also requires input from the business side. After all, if a business unit decides on a particular strategic tool, in order to build appropriate capabilities into the infrastructure, IS should be involved at the outset. Otherwise, you have the classic user/IS bind: The business folks complain that IS isn't responsive, while IS people complain of being asked to deliver immediately something that takes months to execute. "Ultimately, the toughest issue is getting the business to understand the infrastructure," says Roger Walters, vice president of strategic technologies at management and technology consulting firm Booz, Allen & Hamilton Inc. in McLean. Va.

IS groups that work from a clearly articulated business vision run the best chance of building an infrastructure that answers business needs, says Jeanne W. Ross, research scientist at MIT's Center for Information Systems Research in Cambridge, Mass. And, she adds, the vision had better be more than the standard mission-statement pabulum. "Being one of the two top companies in a market isn't a vision; it's a goal. It tells nothing about what IT will need." Ross says companies that can analyze the business elements they will need most also will be able to make intelligent decisions about funding corresponding infrastructure projects. "Some companies need good economies of scale, while others need good information flow," she says. "Different kinds of businesses require different kinds of vision, both IT and corporate."

For example, financial services giant Fidelity Investments' business essentially is to sell information-so system failure is not an option, says Steven Akin, president of Fidelity Investments Systems Co., Fidelity's IT division. Consequently, his network operates at what he calls a "99.9-plus" level of reliability. "We built our whole system with contingency and redundancy in mind," he says. "We've got two feeds for telephone lines and have enough network capacity to spare should some part of it crash. When there are major activities or disasters in one geographic region, we're able to move traffic around very rapidly to accommodate."

Carolyn G. Osborne, former CIO and now vice president of information and telecommunications services at Carolina Power & Light in Raleigh, N.C., has spent the past two years revamping the utility's infrastructure. Competitive changes brought on by deregulation caused her to revamp completely the architecture from a mainframe environment with its disparate "islands of information" to a companywide network-centric client/server model. The project cost millions, she says, but senior management's awareness and support of a common companywide architecture "helped us bite the bullet and make the change. You need to look at the whole work process and understand what advantages you have."

But what about cost-effectiveness? Here, both CIOs and experts contend that uniform systems are vital. "Once you get a standard architecture and platform, companies can cut down on the cost of support and improve quality of service," says Walters. When IS has a fixed menu and a set number of systems they know they must support, the need to service many disparate technologies-with the attendant cost of paying many disparate service personnel-will disappear. Moreover, companies can plan to build cross-functional systems such as data warehouses without worrying whether the marketing department's LAN will be able to speak to its counterpart in engineering.

Charles Paulk, managing partner and CIO at Andersen Consulting in Chicago, agrees on the importance of standards. "We have a constant challenge of updating technology while staying in an acceptable cost window," he says. "We believe standards are key for that."

When a new standard is needed, his group puts together a global IS research team to identify a standard, which is then reviewed by the IT and business community at large. "If it doesn't get adequate buy-in from the rest of group, we'll reassess." If he tried to dictate standards, he says, they'd never stick.

Level 2:
Constructing Credibility Through Service

The second level of performance raises the value bar, says Silva Doctor. Once the technical infrastructure has been stabilized, IS must strive to satisfy users' need for superior technical support and on-time project delivery. Silva Doctor says organizations at Level 2 "have an unrelenting drive to meet or exceed expectations," and as a result, many of them develop a new focus on hiring and retaining talented help.

Of course, IS organizations need to get some help from the business folks in order to satisfy in-house customer expectations, particularly since funding constraints mean that not every item on a business wish list can be implemented.

Achieving excellence is a matter of arriving at a mutually agreeable level of cost versus service, says N. Frank Barbee, manager of information technology at Phillips Petroleum Co. in Bartlesville, Okla. "I could drive costs very low and have lousy service," he points out. Barbee says that service-level agreements between IS and its business-unit clientele serve a twofold purpose. First, they help Barbee's group refocus from its traditional cost and efficiency focus to one of customer support; second, agreements provide measurable benchmarks that clearly reveal to all parties whether IS is living up to expectations. "By measuring our performance against a service level, we make sure that everything we do is a value-add," says Barbee. "And we do it by getting the customer to measure for us."

Moreover, customers can see where their money is going. If you increase service levels, says Barbee, IT costs will increase. He shows business people a rising customer value curve along with the IT cost curve. "If the value rate is going up at a steeper rate, [business executives] will leave me alone." This year, his group is revamping an IT billing system to itemize costs and services. "If there's some service in there that's of no value to the business unit, they can then identify it and we'll remove [the service]. That way, when the president wants to know what IS costs are all about, [the group will] know-and understand."

Excellent service requires excellent personnel, as anybody who's had a surly waiter ruin a meal can attest, and IS staffing is no different. "There's no substitute for talent," says John Glaser, vice president and CIO of Boston-based Partners HealthCare System Inc., which was formed in 1994 as a result of the joining of Massachusetts General Hospital and 1997 CIO-100 honoree Brigham and Women's Hospital. "You need really good people who are smart, have integrity, are passionate about work and respect as well as work well with colleagues." But finding and keeping good help is an ongoing challenge for CIOs, who often find themselves in bidding wars for people with the hottest technical skills. One must also consider intangible motivators, Glaser says. "What is it that makes a person look forward to going to work?" he asks. "The answer is, 'I really like the tasks that I do; the work is interesting and valuable. I really like the people I work with, and I'm proud of the place where I work.' That's quite different from salary stuff, and you have to pay attention to both."

MCI's Gerdelman agrees. For example, he organizes an annual getaway for top-performing IS employees, similar to those trips traditionally awarded to salespeople. But while the location is just as enticing as that of a typical sales junket (the sunwashed beaches of Puerto Rico, this year), the content is not. Gerdelman says IT folks tend to be less social than salespeople, so rather than schedule lots of networking schmooze time, he plans roundtables hosted by top MCI executives, such as Bert C. Roberts Jr., chairman of MCI Communications. "It's an investment in time for these executives, but it says that folks in IT and networks are as important as top salespeople," Gerdelman notes.

Level 2 IS organizations also evolve higher-level project management skills. Delivering projects on time and within budget becomes a key measure of success. Carolina Power's Osborne discovered that expectation when she reorganized her entire IS group along with her infrastructure. The new project mandate was that 90 percent of projects should be able to be completed in 90 days. Osborne laid off 20 percent of her workers and hired people with a broader array of skills such as project management and communications. The project management emphasis really paid off when it came time to talk to the business side of the house, she says. "It's like a relay race. Successful teams win because they practice smooth handoffs, not because they practice sprinting. If you get really good at handoffs, you're going to win."

Level 3:
Creating Value Through IT/Business Collaboration and Learning

IS organizations operating at the top level create value for the business. They are characterized by one word, says Silva Doctor. "Passion. That's really the only way to describe it. They have a passion for using technology to enable business change." Because that passion for value translates into business payoffs, these groups have earned credibility with their business peers and are viewed as partners rather than suppliers.

"To be really effective, [an organization] needs to have credibility," says Hewlett-Packard's Walker. He tells of a conference where someone suggested a typical IT-type definition of credibility: "He said it was a mathematical product of two terms. One is empathy, that is to say, understanding what users need and being able to convey that understanding. The other is performance, or delivering on what users think they ought to be doing. Mathematically speaking, if either term is zero, you have no credibility."

CIOs at third-level IS organizations cultivate the partnership between IS and the business. At The Gillette Co. in Boston, Vice President of Corporate Information Technology Patrick J. Zilvitis makes sure business executives lead new technical programs, while the IS group names a project manager to work with them. Zilvitis himself pays his share of sales calls and visits to Gillette plants. "I'm both a missionary and an educator. I can't apply technology to improve business environments unless I understand both," he says.

At Eli Lilly and Co., Vice President and CIO Thomas Trainer involves senior business executives at the earliest stages of IS strategic planning. For example, at one offsite meeting, top IS executives heard updates on the business-not IS -strategies from the heads of Eli Lilly's various business units, from research to marketing. "We had five of the top 15 executives in the entire company," says Trainer. "They spent the day giving us strategic updates, and then we participated in panels, playing back what we heard from them." So thorough an indoctrination in business thinking helps IS executives internalize those goals and makes it easier for them to turn strategies into true business applications, he says.

Creating value also means that Level 3 IS groups have an appetite for constant innovation and learning, which helps them identify and communicate new ideas for making money with technology. At this level of IT practice, the focus shifts from the efficiency-oriented measurement of the lower levels to more intangible benchmarks, says Larry Prusak, managing principal in knowledge management at IBM Corp.'s Consulting Group in Boston. "[Value is] usually measured by narrative or story rather than hard numbers because that's how innovative ideas are born," he says. "Innovation occurs in the spaces between workers and work, and between functions. The best innovations slowly leak between boundaries," he says. He cites 3M Corp. as a company "that allows quite a bit of time for somebody to work on whatever projects they want to. Innovation cannot occur without some sort of reflection on learning."

HP's Walker says that building innovative thinking and learning into the IT organization is much easier if the rest of the company also works the same way. "HP fundamentally has a culture that encourages innovation and learning," he says. "A lot of it comes from our scientific and engineering bent." Walker says the creative process requires diversity, different points of view and inclusion, the notion that all perspectives are legitimate and so can be discussed on merits. "At the best HP organizations, when you have both, it's wonderfully creative," he notes. Partners' Glaser would add one more thing: the freedom to make mistakes. He gives his top performers lots of freedom to experiment. "That means that sometimes they'll trip up; but to experiment, you have to take risks and recognize that periodically these things will blow up."

An IS group faces the same problem as journalists. We're only as good as our most recent story, and IS groups are only as good as the most recent really cool application. IS reputations can go from hot to shot in a short time. CIOs constantly must be on the lookout for the weighty issues that can disrupt their groups' hard-earned balance of competencies. For many IS executives, that means recognizing when to change the focus from higher-end partnering skills to Level 1 or 2 issues, says Silva Doctor. "CIOs need to recognize when they should move between particular levels," she says. "If one of the key initiatives of the year is around the delivery of a system, that's where your attention should be." IS organizations that function as true business partners should be proud of their achievements-that's as good as it gets.

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