Profit Talking

Improving communication between technology specialists and other managers may be a key to getting more bang for your technology buck.Today's chief executives are a good deal more technology savvy than they were even five years ago and, what's more, they regard technology as essential to the future success of their businesses. Satisfaction with the return on technology investments, however, is another

Improving communication between technology specialists and other managers may be a key to getting more bang for your technology buck.

Today's chief executives are a good deal more technology savvy than they were even five years ago and, what's more, they regard technology as essential to the future success of their businesses. Satisfaction with the return on technology investments, however, is another matter entirely.

Almost 80% of the 213 CEOs and other board-level executives surveyed by A.T. Kearney Inc. in 1998, for example, agreed that technology has 'definite profit implications,' but only 13% said that they were 'very satisfied' with their own company's information technology (IT) returns. Another 56% gave a tepid 'only partially satisfied' rating to their technology return on investment (ROI), and 24% confessed outright dissatisfaction. In spite of this lukewarm assessment, however, most executives surveyed expected to increase spending on technology. What's going on here?

'While business increasingly depends on IT, senior managers often believe that IT costs are too high and business returns are too low. The situation is aggravated when IT managers justify these costs in technical terms, not business terms,' offers Robert J. Benson, principal of the St. Louis-based Beta Group. 'Business managers are not comfortable with how some IT managers explain the connection between IT projects and business objectives.'

Tom Brier, instructor for IBM's Advanced Business Institute, agrees. 'In order to derive benefit from IT initiatives,' he says, 'information technology strategy must be aligned with the attainment of business goals. The process of getting and staying aligned ideally involves an interrelated set of organizational behaviors, but a climate of clear communication is an absolute necessity.

'My 1995 survey of 225 executives on the factors involved in implementing new technologies resulted in the clear finding that skills in project management are always important,' Brier adds, 'but skills in people management are more critical than ever. This is a major shift for many IT professionals who have always focused on technical expertise.'

CEOs and CIOs Like animals of the same species long separated by geographic barriers, many CEOs and CIOs have evolved distinctly different views of the business environment and different languages to describe them. 'Technology training and their job experiences leave CIOs unprepared for the politics of the executive suite,' observes Greg Miller, staff writer for the The Los Angeles Times in his article, 'The Power of Nerds,' January 12, 1997.

'CEOs, on the other hand,' he notes, 'have usually come up through an organization's sales, marketing or manufacturing ranks and regard technology as a budgetary black hole and a mystery.' In support of his comment, Miller cites the Forbes ASAP magazine and Sterling software survey of top executives, 70% of whom admitted they would like to 'jettison their tech department and start from scratch.' Ouch.

What to do? 'Speak business English' is the blunt advice many management consultants offer to technology specialists. 'If you want to be a member of the executive team, you've got to lose the jargon and speak the language of the end-user.'

Winning teams In the trucking industry, of course, there are many fleets that have always profited from good company-wide communications, so extending it to the technology arena was simply not an issue. 'Our CIO, Norman Thomas, reports directly to me,' says Max Fuller, co-chairman of U.S. Xpress Enterprises. 'He helps us determine how to utilize technology to achieve our business goals.

'The chief executive is responsible for clearly communicating what those business goals are,' Fuller adds. 'He or she also has to champion technology initiatives so that the end users of a new technology understand why it is important to the business and deploy it properly. New systems, no matter how sophisticated, have to become an accepted part of the company culture in order to be successful, to deliver the benefits you expect.'

At Schneider National Inc., Dr. Christopher Lofgren, the chief technology officer, reports directly to Don Schneider, the company president. 'Close communication between the CEO and the CIO is essential for effective alignment of technology with business goals, and better alignment means a better ROI,' Schneider observes. 'One of the reasons why this is the case is that the CEO is typically a generalist ' someone who must involve himself or herself in a great number of activities throughout the organization. Without the specific technical knowledge of the CIO, the CEO can't make good technology decisions. Combining their judgement results in better decisions and a better return on capital utilized.

'If they work separately,' he continues, 'then the assumptions of the CEO and the assumptions of the CIO may not meet, and that gap between assumptions is where misunderstandings take place.'

'Business executives and IT absolutely must have an open communication channel,' agrees Angelo Ianello, senior vp-finance, with responsibility for IT at Contract Freighters Inc. (CFI). 'Problems occur when IT managers are not brought into the strategic planning process. We're especially fortunate that our vice president of IT has been with CFI for 18 years. He has grown up with the business and has a very good sense of the overall operation besides having technology know-how. Today, we both meet with our chairman and president, Glenn Brown, monthly to identify all the important issues.'

Decoder rings and other things For fleets not already blessed with business-smart technology managers and technology-savvy CEOs, however, scheduling monthly meetings may not bridge the communication gap between the technology tribe and other business executives. In other words, if IT insists on speaking in protocols when the boss knows only profits, everyone may as well save their breath. It's enough to make you start shaking cereal boxes for Captain Technology decoder rings.

Robert Benson and his colleagues have been helping technology managers and other executives craft a common business lexicon for the past several years. They call their system 'The Profit Model.' It not only offers guidelines for establishing a clear communication channel between technology managers and other company executives, but it also helpscompanies clarify and articulate their business strategies.

'Companies tend to have very florid statements about what they are going to achieve, but they don't always connect those pronouncements to initiatives, to things that people will actually do,' says Benson. 'IT managers must build a cause-and-effect case for how technology will improve business performance by demonstrating how it relates to achieving the CEO's strategic performance improvement goals. Then all technology projects should be prioritized according to their profit potential.

'In order to accomplish this, technology managers must be able to answer three key questions:

1. What are the company's profit drivers? That is, what business activities create profit either directly or indirectly, and how do we measure performance in those areas?

2. What does senior management intend to do to improve the performance of profit drivers?

3. What can technology do to support management's intentions?

'Many CIOs and other technology managers have had a two-fold problem,' Benson adds. 'First of all, they have often worked in a vacuum, isolated from the strategic business information that should be directing their efforts, either because no clear strategy exists or because they have not been a party to it. Secondly, they have not been effective in communicating the ways in which technology can improve performance to impact the bottom line ' effective enough that other senior managers understand and buy into the project.'

It's all well and good to talk about talking. However, any senior executive worth his or her executive bonus plan knows that, in the real world, managers do what gets recognized and rewarded. Anything else is doomed to back-burner status.

'In business schools, we teach the original concepts from Adam Smith about division of labor,' observes Jeffrey Barber, vp-quality, communications, marketing for Ruan Transportation Management Systems. 'Smith was right of course, but in large-scale enterprises, fragmentation of work does not work anymore. We also teach rewarding each work segment, creating even bigger chasms between various business operations.

'In other words, colleges teach and companies reward sub-optimization. Then we put technology to it and expect it to make a difference. It's enough to make you crazy.

'Technical people, along with other company executives, must first understand their business strategy, the total system that delivers an output of value to the customer and a margin of profit to the company,' Barber continues. 'Then they can decide together what kinds of technology to use to support which parts of the system ' to enable it to deliver better output, better performance. If we really want to improve profitability,' he adds, 'we've also got to find better ways to measure performance improvements, and we must reward people for the activities like communication and cooperation that enable it.'

Interestingly enough, it's the technology specialists who will be out of the computer room and on the field in the future, helping to lead businesses on to their optimal performance levels. There are two major reasons why: Competitive forces will require it, and technology managers themselves are starting to train seriously to make the executive varsity team.

Creating value with IT 'Aligning information technology strategies to existing business strategies used to be sufficient to achieve competitive advantage ' or at least parity with competitors. But in the digital economy, companies can no longer simply support existing business strategies,' explains Tom Nickles, vice president for A.T. Kearney, in his white paper, Information Technology Alignment: Creating Value in the Digital Economy. 'Instead, they must use IT to enable new roles and capabilities; in many cases, roles and capabilities never envisioned nor planned for by management.'

Nickles is not alone in this opinion. A.T. Kearney's research suggests that a growing number of CEOs are already including the CIO in strategic planning, rather than simply expecting IT to follow the business direction decisions. 'There is an almost equal split between the number of CEOs who believe that technology decisions generally follow strategy and business direction decisions and those who believe that technology decisions are an integral part of the strategic decision-making process,' they note. 'Over the last two years, the number of those who support the latter view has grown from 50% to 55%.'

While this may at first sound like hair-splitting, the distinction is important. Only when IT is part of strategic planning can executives see and consider any new performance capabilities that technology might enable. Otherwise, IT is likely to remain simply a new tool applied to old problems.

Many technology specialists are also preparing themselves to assume more strategic roles within their organizations. Some are going back to school for MBAs or volunteering for other 'rotational' duties within their organizations, such as internal audit, to get a better sense for the whole business, to learn the language of the enterprise.

Even universities, such as Stanford and UCLA, are altering their coursework for future CIOs and CEOs to reflect the changing roles. 'A new breed of cross-trained executives is emerging, people with both management skills and technology smarts,' observes Greg Miller in his article for The Los Angeles Times. 'In the future, it may be hard to tell a CIO's resume from a CEO's.'

This is good news for businesses, particularly for companies in industries as results-oriented as trucking. 'In the trucking business, customers don't care about a fleet's investment in technology,' observes Don Schneider. 'They only care about performance ' about results ' so the pressure is always on to find new ways to improve service and lower costs. Technology is a method to do this.

'Realistically, we are not going to be able to educate every manager in every discipline to become a technology expert,' he adds, 'so that places the burden on the CIO to understand the business and how technology can strategically reduce costs and create value.'

Now you're talking, talking about what it will take for fleets to reach even higher levels of success in that future just visible through the opening door of the 21st century.

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