The Blueprint in Brief

Todays CIOs have unprecedented influence on the profitability of their companies. The
CIO now sets the direction for the company, changing the future of the business with
their technology decisions. Because of this rising importance, the CIO must be focused
more than ever on increasing his or her companys profitability. The four essential
strategies for increasing profits are: integrating the business, mining business
intelligence, using project management, and standardizing communications. Integrating
the business functions across vertical business units allows IT departments to centralize
and standardize processes and increase efficiency. Mining business intelligence with
new IT processes or tools can offer new insights into customer data and identify new
profit areas. Project management frees companies from project overload and directs
funds to those projects with the highest profit potential. Standardizing communication
throughout the infrastructure eliminates the need for translation and results in a simpler,
more efficient information technology infrastructure. These strategies, combined with a
focus on the end user, are the keys to effectively increasing company profits.
Action Points
I. Four Specific Strategies for Increasing Profits
Integrate the business. Mine your business intelligence. Use project
management. Standardize communications.
II. The Bottom Line: Using Money Efficiently
Understanding the various business units, and staffing your department wisely,
will help you be effective in formulating cost-efficient solutions.
III. Must-Have Questions for Process Improvement
The CIO needs to be process-oriented and process-knowledgeable, and ask
specific questions of each business process.
IV. The Golden Rules for IT Communication
Focus on listening, learn from the front line, and adopt a service orientation.
V. Essential Take-Aways
CIOs change the future of their business through innovation, through thinking
outside of the box, and by looking at the rapidly changing business issues to find
innovative ways to use information to make the business more successful.








CIO Strategies to Increase ProfitsFour Specific
Strategies
Strategies for Using Money Efficiently


by Basil Kanno, Chief Information Officer

PowerNet Global Communications
In the next year, companies will continue looking internally to
streamline their operations, which in turn will reduce its operational
expenses, thus yielding higher profit margins. CIOs must position
themselves to play an integral role in these efforts.
Has over twelve years of comprehensive information systems
experience
Former senior consultant with Ernst & Young
Joined PNG as chief information officer in 1999
Key contributor to the companys tenfold growth since 1999

Using common sense always lends itself to smart spending. That, coupled with the
need to understand the various business units and their processes, will help you be
effective in formulating a cost-efficient solution.
Staffing your organization wisely is another key method of efficient spending. Chief
information officers (CIOs) should strive for their organization to be as lean as possible
at all times. This is tricky, though. You dont want to be too lean to the point where it
becomes a deterrent to the company. Unfortunately, there is no magical formula that
can tell you how much to staff. Common sense, awareness of whats going on in the
field, and insight into upcoming initiatives/projects should be your key guidelines on
determining staffing requirements.
Lastly, strong and effective negotiating skills are another key method of efficient
spending. CIOs must never take no for an answer, and they should never be afraid to
ask for what they want. How to negotiate effectively is beyond the scope of this chapter;
however, effective negotiating skills can help CIOs stretch their dollar greatly.
Strategies for Increasing Profits
One strategy a CIO can assist with to increase profits is implementing tight quality
controls in various organizations of the company to minimize revenue leakage. One
example of revenue leakage is when your company under-bills or does not bill its
customers for services rendered. Another example is when your company overpays its
service provider for services based on the negotiated rates. Typically, the larger the
company is, the greater the likelihood that it will encounter revenue leakage.
Another strategy is the whole concept of business intelligence. Typically, companies
store valuable data about their customers, which is untapped. CIOs can help various
organizations within the company make sense of that data though the use of reports,
analytical tools, and so on. This, in essence, could translate into increased profit
opportunity. For example, CIOs could help their marketing department analyze their
customers profile, spending habits, usage habits, and so on to formulate up-sell
opportunities.
In a typical corporate environment, the number of initiatives/projects surpasses the limit
that the companys support functions can handle. This can easily bring a company to its
knees from a productivity perspective, and it can be quite costly, thus reducing profits.
Therefore, a thirdstrategy CIOs can use to increase profits is to put into place a
mechanism that can bring sanity to that environment. This mechanism should prioritize
these initiatives/projects based on the effort involved in implementing and supporting
them and the value they yield. This mechanism will also ensure that the CIOs team is
always working on the right thing as opposed to just doing busy work, which brings no
value to a company. Working on the right things can have a direct and significant impact
on a companys profits.

Expert Advice
Roadblocks are things CIOs must deal with on a constant basis.
While each situation has its unique approach and solution, there
are certain basic guidelines CIOs can follow when trying to
maneuver through these roadblocks. First and foremost is the use
of common sense. Second, CIOs must be able to see things from
other peoples perspectives. And third, CIOs must be open and
flexible to new or alternative ideas and approaches.
Benchmarking Success
In benchmarking the success of initiatives, projects, or strategies, you have to compare
three components:
The performance metrics of the old way
The anticipated performance metrics of the new way
The actual performance metrics of the new way
Ultimately, the new way should produce better performance metrics than the old
way. This indicates that you have achieved an improvement. Furthermore, you would
ultimately like the performance metrics of the anticipated new way to equal that of the
actual new way. This indicates that your return on investment analysis was extremely
accurate.




















Approaches to Saving Money


by Irving H. Tyler, Vice President of
Administration and Chief Information
Officer

Quaker Chemical Corporation
We CIOs must work to make our
services and the technology we provide
more useful, easier, and more a basic
part of the business process.
Developed a global information
technology organization for
Quaker
Oversees all of Quakers
information services on a
global basis
Quaker is a worldwide company,
with customers in over forty
countries and operations
throughout Europe, the
Americas, and Asia Pacific

There are two approaches to saving the company money. First is controlling your own
IT costs. Second is using information technology (IT) capabilities to reduce the cost of
other processes.
To reduce the cost of the delivery of information, you have to start accepting a utility
mentality a model of IT which is that of a utility company. Information must be seen
as an asset, and as such, value comes through its use and the greatest value comes
when the asset is delivered in the lowest-cost way, to as many people who can use it as
possible, and in such a way that it is easy to use. We all use such assets every day. We
get up in the morning and turn on the faucets at our sinks and out comes clean water,
which we use as we need to. We dont have to worry much about what will come out of
the faucet or when or at what speed. It will come out today pretty much like it did
yesterday. We can take any electrical appliance and find an electrical outlet in our
building and plug it in and the appliance will work. Again, we dont worry about the
electricity being the right amount or the right speed or whatever. This is the model we
must push for in terms of information. The user turns on the faucet and out comes
clean, useful information in the amount the user needs for their immediate purposes.
The goal of IT in the future is to apply this pipeline process to the information delivery
approach it is responsible for. The pipeline needs to be simple, easy to monitor, and
have as few moving parts as possible. That goal moves IT to take decisions around
centralization. It is simple: the more distributed the information delivery process is, the
more moving parts youre going to have. In the pipeline approach, you work to remove
parts by doing more work at the beginning of the pipeline and keep the end point a
simple delivery mechanism, such as the faucet. With this approach, you need to have
less equipment, less of everything. But with greater centralization, the greater the need
is to have the same of everything at all stages so the pipes will fit together and each
faucet works in a consistent way. The more differences you have between one moving
part and another, the more issues there are in these parts working together and talking
to each other.
The single biggest issue I think everybody faces in their infrastructure is that a piece of
equipment may or may not talk to another piece of equipment in the way they need to.
So then we add new pieces of equipment or software to make the translations. And then
this leads to a lot of time and energy to get them to talk to each other. A way to
eliminate that is by having everybody speak the same language, have all the equipment
come from the same source. Its simplification, centralization, and standardization. I
believe strongly in the TCO concept. I do not want to go out and try to get five different
vendors to bid against each other. I want to find two or three vendors to provide as
much of my structure as I possibly can, and stick with them. I also want them to show
interest in our enterprise, to demonstrate partnership, and to help me accomplish this
simplification, centralization, and standardization.
While the chief information officer (CIO) must work to simplify the information delivery
process and make it a utility, I think he or she needs to be process-oriented and
process-knowledgeable. They need to put themselves and their team into the thick of
things within any given business process:
What is the work of a given process?
How does the process do its work?
How does the process team move information around and between their team
members?
How does the process team use our existing technologies, applications, and
infrastructure to accomplish their objectives? Are they getting the most value out
of this effort?
A CIO must really understand the answers to these questions in an intimate way, and
he or she must be proactive in looking for ways to use IT to improve the process using
this knowledge.
Focus on the End User
In my firm, we have delivered the foundation for delivering information globally. Now, we
need to focus more on each discreet process. We need to work with individual users
and smaller groups of people to help them become more efficient using the foundation
capabilities in new and innovative ways. Its not as easy as having one big model and
having everybody work to it. We in IT are going to have to get closer to the individual
user and understand their part of the given process. By doing that, we can help them
think about how to reduce the time they need to do the work, and thereby take their
costs down.
How do you use technology that is available and start building on the foundation laid up
to this point? How do you use technology to help process owners take cost out of their
process? There are many new avenues to achieve this. For example, technology like
interactive voice response (IVR), where systems can truly interact via speech in a
normal way with customers, can save a lot of time and energy to collect the basic
information needed to process business transactions. And information technologies like
radio frequency identification (RFID) are promising because if the firm can track the
inventory accurately throughout the supply chain, we can reduce the amount of surge
inventory I have to keep in the supply chain to prevent stock outs. In almost every
product business, significant levels of inventory are produced and stored because the
firm cannot accurately know where its products are in the total chain. We can reduce
the amount of extra inventory needed if we can track the inventory from the point of
production through to the point of consumption by the end users. IVR and RFID are just
two examples of new technologies that are not perfected, but that offer possible
solutions even in their unperfected states. These are the kinds of capabilities the CIO
has to start thinking about and talking about with the end users. CIOs must get more
involved with their information consumers to determine how to reduce their cost by
applying new approaches to existing business challenges.
To get to know our users in a more intimate way, and thereby be better prepared to help
them succeed, weve done some segmentation of our user base. We try to assign our IT
associates to work with users in certain groups or teams, so they develop a relationship
and become more familiar with those people and their work processes. This works well,
especially in the areas of application evolution and development. Our IT associates
learn to think like their customers, and when problems arise they dont have to learn the
basics of the issue before starting to develop a solution. This saves our information
customers time and reduces the overall cycle time in our IT effort to provide solutions.

Exp
ert
Adv
ice
In some cases, IT is the service to the end customer (i.e., the one who is
buying and paying for things), and its value is evident. In our company, where
IT is not a service we sell to our customers, we are a support process to those
who make, sell, account for, and manage the products sold to the customers.
As a result, it is more difficult for top management to understand how IT can
really help them accomplish their mission. They dont come from those
backgrounds, and they know IT only as an individual consumer of IT services.
Thats where a CIO needs to get involved and work with peers and leaders to
help them realize where the opportunities for savings are that IT can provide.

This also helps IT help our users to better understand the meaning of data that comes
out of various systems, or that goes into various systems. We find that a major problem
is many users dont understand the basic data their systems use to do the work, and
they often misinterpret the data and make incorrect decisions because of this. We feel
strongly that the more the user understands what that data is and what it means, the
better. Therefore, our IT associates need to have an even better understanding of the
data used in the processes they support and what it represents in business terms, not in
terms of the software code or data storage protocols. With a solid understanding and
education generated by having IT people working on a continuing basis with the same
groups, the IT team can learn more about the local process. Once they have a deep
understanding of the local process, they can add more value and even be brokers of
best practices between teams. This is an important value of IT in our enterprise. One of
our associates might work with a team in the United States to solve a given problem.
And because they are in fact a part of the solution and understand all aspects, not just
the systems parts, they can then take that solution and use it when they work with
similar teams in other regions, or even with other processes that might have similar
problems. This generates leverage and makes the IT investment more powerful. The
bottom line is that it is about getting your people to quit thinking about technology and
get them to think about what their mission is: to serve people and help them get things
done, and to spread knowledge.
Driving Company Profits
The best practice for driving company profits is communication and listening. If IT will
take the time and make the effort to listen to its customers and to have active
communications, then IT will find the best solutions at the best cost. This is not
something that always happens. Historically, IT operated somewhat independently in
most firms. It was a black box that crunched up stuff and spewed out reports. IT
decided what kind of equipment it needed and it provided applications to users that they
had to incorporate into their work processes, or even adjust their work processes to the
applications provided. In todays competitive and very global world, this model is all but
gone, and we need to continue to get IT closer to its business customers.
In the future, all decisions about what IT is needed must be pulled from the front line.
IT should fill an identified business need, and not develop interesting applications just to
provide an opportunity for someone to use it. A best practice is having the mindset in IT
that you are not in this alone; you are a service provider and your success is measured
by the total success of the business. Thats why we changed the name of our function
from information technology to information services. We want every associate on our
team to think like a service provider and seek to deliver what the customer needs to be
successful. The best practices for a service provider are different than those for a
hardware provider, and we want our people to understand the difference. The CIO must
lead this change in mindset and demonstrate the desire to provide value to the firm
through providing information services. Often, this means the solution to a problem is
not a new software or piece of hardware, but just a more efficient use of what is already
there. Again, the key is for the CIO to focus on process and lead the team in this
approach.
The most common roadblock to saving the company money through better use of IT is a
lack of understanding of the business model by IT. Generally, this happens because IT
is not a part of the key business decisions or is not a member of the key projects. Its
not traditionally evident, and its hard in some cases to get the people who are working
with the customers or operations to stop and think that they need to bring the CIO and
his/her team into the business discussion. Typically, they have a discussion and
describe their problem after the fact (after signing contracts or taking other decisions),
and the CIO is put into a crunch at the end of the process to find a fast solution. To be
most effective, CIOs must find ways to overcome this and get into the meetings ahead
of the curve, and be proactive rather than reactive. The CIO has to be a part of the
decision and design process. This means changing the mindset of current business
leaders. The CIO must convince their peers that they are not only a technical person,
but also a businessperson.
Future Opportunities
CIOs change the future of their business through innovation, through thinking outside of
the box, and by looking at the rapidly changing business issues to find innovative ways
to use information to make the business more successful. As leaders, we must discard
old prejudices, and come up with innovative ways to drive the support of the business.
This does not mean the future is about changing out all of our existing tools every few
years or replacing our equipment every time a faster machine comes along. In my view,
the contrary position is needed. CIOs have to look hard at their existing toolkits of
systems and equipment to make sure their firms are getting the value out of the money
theyre putting in. Our function has to focus on what weve already invested in, making
those existing tools more useful and adapting them, as opposed to continually adding
new things. In some ways, we actually need to slow down the pace of change, in that
we must make sure every change we make is for the right reason and delivers value
fast. We must, in fact, take more of an evolutionary view of our services and not always
seek to be revolutionary in our approach.
This does not mean we are idle, and merely sit and keep the machines running. We
must innovate and improve continuously the capabilities we provide. But the pace of our
changes must be in alignment with the pace of the business changes we serve.
And it does not mean we dont invest in out-of-the-box thinking and dont look to find
new ways to do things. However, the key is to innovate and not just invent. Innovation
is, by design, a practice that is built on the foundation of what is already known and
accomplished. It takes something that exists and seeks to creatively improve the
situation. Innovation often incorporates invention. But invention then is by design, as
opposed to by default. I believe CIOs must learn to be innovators. They must learn the
business models of the firms they serve, and then lead their teams to explore with their
customers ways to make their firms more successful. This is the greatest opportunity for
the CIO in the future.















\fa


Business Integration


by G. Patrick Thompson, Jr., Senior Vice President and
Chief Information Officer

Shaw Group
Alignment between IT and the
business should be a fifty-two-week
process, not a one-time event.
Worked for the worlds largest
business consulting firm,
Andersen Consulting,
directing the development of
the companys business
systems consulting practice
On the board of supervisors
for management information
systems at Louisiana State
University
Qualified consultant in Six
Sigma, Balanced Scorecard,
and Strategic Planning
processes, and has assisted
over fifty large organizations
with strategic execution
plans

Business integration is one of the main information technology (IT) strategies today to
increase profits. Integrating the business functions across vertical business units is
one strategy a company could use to reduce costs. Specifically, the IT departments are
spearheading the integration of business processes and functions. There are business
functions that can be centralized to serve the operating units, such as human resources,
IT, accounting, procurement functions, and other areas of business can all be integrated
to serve multiple business units. A company can use technology to allow for that
integration to take place and to put people on common practices, procedures, and
processes so back offices and data centers can be consolidated from multiple points to
a single point.
Business Alignment
A chief information officer (CIO) and his or her team should have an alignment process
or methodology in place to help drive profits. The process should culminate in an annual
meeting where the business units present their strategies for the year, and the IT
department develops projects that help enable business strategy. Throughout the year,
the IT department should meet on a weekly basis with functional groups via staff
meetings or conference calls. During these meetings, ideas and opportunities for
continuous improvement should be on the agenda in order to help make the company
better, faster, quicker, and more efficient.
Optimizing the Business
There are three easy ways a CIO can help lower costs. The first is to use business
integration. That will earn the company the biggest return on investment. The second
way to help lower cost is through preventative cost management techniques. The CIO
should have a challenging return on investment process in place so employees dont
just buy technology for the sake of buying technology. Before a capital expenditure is
approved, the CIO should set up a due diligence process that really challenges the
opportunities. He or she needs to make sure the IT department is making the right
investments. The third way to lower costs is to step beyond the IT role and wear a
business hat. The CIO should look for inefficiencies and opportunities within the
business outside of the IT department to help the company make money. A CIO should
be a businessperson first, and an IT person second, in order to add value to the bottom
line.

Expert Advice
In the next twelve months, opportunities for CIOs and their
departments to help drive profits will arise from integration,
increased visibility of information, and simplifying information to
make more timely critical decisions.
Three Specific Ways to Drive Profits
There are several ways a CIO can help drive profits. The first would be to provide on-
demand services to clients allowing them to have access to information thats critical to
them and would help meet their specific needs. The second way to help drive profits
would be allowing the business to have clear visibility to make clear decisions on
business performance. The third way a CIO could help drive profits would be by
providing tool sets to the operational people to make them best-in-class in the industry,
more efficient, and faster than the competitor.
The CIO should set IT alignment meetings to implement any of the above ways to help
drive profits. Strategies are driven from those initiatives, and they must focus on
profitability, cost reduction, or efficiency. Once the company engages in a project, its a
team effort between the business line and the IT organization to go after that project
and make sure the company gets the proper return on investment. The company must
be disciplined when it comes to initiating a project and making sure it reaches the return
on investment.
IT Benchmarks
A company can best benchmark the success of the CIOs group in driving profits by
using a combination of the annual budget the CIO is responsible for and IT portfolio
management, a combination of the projects that were identified by the business and IT
group, to identify those returns on investments. Those individual projects are then
measured at the end of the project to validate their success or failure. In essence, the
company can benchmark the success of IT almost like a scorecard process where the
IT budget is one point of reference and all the projects are measured on a case-by-case
basis. Benchmarking should be an ongoing fifty-two-week process.
The company should also use a formula to determine return on investment. The return
on investment should be measured in headcount reductions, facility cost reductions,
hardware and software cost reductions, and utilization improvement. Ultimately, the
company is measured by whether the G&A cost is growing at a slower pace than
revenue and profit margins.











Ideas to Build Upon and Action Points
I. Four Specific Strategies for Increasing Profits
Integrate the business.
Business integration is one of the main IT strategies today to increase profits.
Integrating the business functions across vertical business units can greatly
reduce costs.
IT departments must spearhead the integration of business processes and
functions.
When business processes are integrated, this allows the company to centralize
processes, saving money and creating common practices and communications.
Mine your business intelligence.
Companies collect and store valuable data about their customers; this can only
be tapped with the CIOs leadership.
CIOs can help various organizations within the company make sense of this data
though the use of reports, analytical tools, and software.
Mining this data will translate into increased profit opportunity.
Use project management.
Every company has more initiatives or projects than it can handle. This
disorganization can be very costly.
CIOs can increase profits by instituting a mechanism to prioritize
initiatives/projects based on the effort involved in implementing and supporting
them, and the value they yield.
This will focus the efforts of both the IT department and the entire company on
the highest-yield projects, identify areas of synergy, and have an impact on the
bottom line.
Standardize communications.
The single biggest issue everybody faces in their infrastructure is information
delivery between programs and pieces of equipment.
One solution to this is using fewer vendors as partners.
CIOs must initiate a process of simplification, centralization, and standardization.




II. The Bottom Line: Using Money Efficiently
Understanding the various business units and their processes will help you be effective
in formulating cost-efficient solutions.
Staffing your organization wisely is another key method of efficient spending.
CIOs should strive for their organization to be as lean as possible while still
performing all tasks well.
The key guidelines for determining the optimal staffing requirements are:
o Common sense
o Awareness of whats going on in the field
o Insight into upcoming initiatives/projects
Strong and effective negotiating skills are another key method of efficient
spending.
CIOs must never take no for an answer, and they should never be afraid to ask
for what they want.
Effective negotiating skills can help CIOs stretch their dollars greatly.
III. Must-Have Questions for Process Improvement
The CIO needs to be process-oriented and process-knowledgeable. They must ask of
every business process:
What is the work of a given process?
How does the process do its work?
How does the process team move information around and between their team
members?
How does the process team use existing technologies, applications, and
infrastructure to accomplish objectives? Are we getting the most value out of this
effort?
A CIO must really understand the answers to these questions in an intimate way, and
he or she must be proactive in looking for ways to use IT to improve the process using
this knowledge.
IV. The Golden Rules for IT Communication
Focus on listening.
Finding the best solutions at the best cost is a natural byproduct of taking the
time to listen to ITs customers and having active communications with them.
IT has historically been a hermetic organization; it must instead learn to listen
and communicate throughout the enterprise.
Learn from the front line.
All decisions about what IT is needed must be pulled from the front line.
IT should always fill an identified business need, instead of developing interesting
applications for their own sake.
Adopt a service orientation.
A best practice is having the mindset that you are not in this alone; you are a
service provider, and your success is measured by the total success of the
business.
Every IT associate should think like a service provider, and seek to deliver what
the customer needs to be successful.
The CIO must lead this change in mindset and must demonstrate the desire to
provide value to the firm through providing information services.
V. Essential Take-Aways
CIOs change the future of their business through innovation, through thinking outside of
the box, and by looking at the rapidly changing business issues to find innovative ways
to use information to make the business more successful. As leaders, CIOs must
discard old prejudices, and come up with innovative ways to drive the support of the
business.
The future of IT is driven by the customer. The CIO must always look to the end user; in
doing so, he or she will find new opportunities for saving money and increasing profits.
10 Key Questions and Discussion Points
1. What best practices should a CIO and his/her team have in place around saving
the company money?
2. What best practices should a CIO and his/her team have in place around driving
company profits?
3. What are the three easiest ways CIOs can help lower costs?
4. What are the three easiest ways CIOs can help drive profits?
5. What strategies have you employed in your department to help drive profits?
6. In developing a profit-producing plan, what considerations must CIOs and their
departments make before moving into action?
7. What ramification might a department have as a result of a strategy that draws
on department resources?
8. Does the management team look to the CIO to help increase profits? In what
way?
9. How often do you assess profit-making opportunities?
10. How can a company best benchmark the success of the CIOs group in driving
profits? How long does it take to produce an ROI of this nature?