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Risks and rewards

Risks and rewards

They spotted opportunities unseen by colleagues and competitors while managing enterprise ICT. These CIOs have proved their mettle as entrepreneurs and share their insights on what encourages — and hinders — innovation.

John-Daniel Trask says he is not a CIO in the conventional mould, though he is in charge of “everything IT” at the small company YouTXT. He says his different perspective of the role is “a little to do with the scale of the company, but also with the way I prefer to operate”.

YouTXT provides information on demand through SMS text messages. Its initial service is FlightCheck, which gives up-to-date information on airline flights via text.

Trask is involved with several other ventures — “my day job is with Mindscape”, a software company specialising in tools for Microsoft .Net development. He is also involved with Value Cruncher, a venture that analyses the value of public companies.

“My background is as a software developer,” says Trask. He sees his role with YouTXT as “helping to find the technical direction of the company”. His business partner, Sam Allen, has the marketing background. “Sam had the idea for YouTXT, but it was my job to implement it.” This involved not only setting up the technical aspects of the innovation, but negotiating with the service providers in telecommunications and the travel industry.

“I think I bring more of a technical perspective to the job,” he says, when comparing himself with other CIOs. “That’s generally beneficial for a business this size.” It means he can see the business at different levels of detail from day-to-day. “I can move from business strategy to deciding the most efficient way to store certain items of information in a database.”

Trask says the biggest benefit of being involved with other companies at the same time as his YouTXT role, is in the networks he forms. His contacts in the travel industry, for example, have proved useful for his other interests.

People filling a CIO role are well situated for entrepreneurial ventures, he believes. They tend to have extensive contact networks, outside the ICT industry as well as in it, while also dealing day-to-day with the challenges of running a business within the business.

The CIO becomes knowledgeable in what is needed for the business and might decide to develop something to meet that need themselves, says Trask. A similar attitude is evident among entrepreneurs.

“I’m supportive of staff with ideas,” he says. A lot of New Zealand businesses claim to have that attitude, but they seize ownership of anything developed under their roof. “That’s the way to set things off on the wrong foot. As soon as you read in your contract — ‘The company will own whatever you do while you’re working for us’ — you know that’s a company you don’t want to work for.”

Trask admires the attitude of companies such as Google, which allows employees to spend 20 per cent of their working time on personal projects. If a company can be seen to help employee initiative in this way, it will enhance its reputation and attract the right kind of recruits.

A developer must acknowledge the limitations of their innovation, he says. YouTXT relies on the integrity of the SMS service, the providers of gateways to information services and the accuracy of information provided by third parties. When you’re sailing in uncharted territory, it is important to learn not to promise too much.

Checking the wilder, innovative ideas from staff should not be difficult, he says. “It comes down to having a strong and capable team. If you can’t control unrealistic ideas, then there’s something deeply wrong with the organisation.”

The work of an entrepreneur seldom stops. Interviewed in late 2008, Trask says he planned to spend his Christmas-New Year holidays strategising for expansion of his ventures. This is likely to involve taking YouTXT to other countries with a similar restricted competitive environment to New Zealand in mobile phones. “One positive point about the market here is that you only have two competitors to deal with,” he says.

New thinking

Ed Saul conceived the idea of an online technology-aided arrangement for insurance while he was CIO of Tower; but it is more than just a technology change, he says, it has a deep impact on the way the business is run.

“The technology itself is not difficult,” he says, “it’s the change in the business that demands new thinking.”

A conventional insurance business depends on a clutch of brokers who secure contracts and pass them through to the insurance company. Yet, the generation of 30-somethings who are used to banking and shopping online are not attuned to such a complex structure, Saul claims.

He considered setting up his own insurance company to pursue the idea, but then found Pinnacle, a small venture which was already involved in selling insurance by phone.

As a partner in Pinnacle, his responsibilities still include some of the facets of a CIO’s job. There is “more business and less IT” than his role at Tower, he says. “The IT component is [at a] high-level, to do with the architecture of the business model,” he says, though he clearly has a perspective on how the technology he created will best support that business model.

A typical CIO interfaces with business-model decisions, but does not usually get to influence the direction of the business as much as Saul does with Pinnacle.

The technology utilised by the online insurance system is owned by a separate company, Intelligent Life, of which Saul is a director. It has sold an exclusive licence to Pinnacle for New Zealand, but is still free to sell the concept overseas.

The Pinnacle online system provides would-be insurance customers with convenient access; while it also automates much of the underwriting process, by which the degree of risk is judged and insurance provided for an appropriate premium.

The customer fills in details on an online form; the underwriter then checks the applicant’s eligibility and may ask further questions through the online channel. The decision whether to approve a policy is assessed using pre-written rules; it’s an expert system, Saul says.

He has always had entrepreneurial instincts — “a bit of a bent to do my own thing”. He has run small businesses before, such as a venture importing overseas magazines. This attitude means that even when working as a CIO, “I look at the business as though it were my own”, he says. That has sometimes brought him into conflict with other managers. “But you can’t be running on the leading edge and not be entrepreneurial.”

Nor is entrepreneurialism the preserve of one person in the company or even a small team. “You can’t have one pocket of entrepreneurialism in a company; it comes down to the culture of the business,” he says.

The entrepreneurial attitude means “going out on a limb”, even though it will be a mistake about 20 per cent of the time. Management in too many companies comes down heavily on mistaken courses of action and this encourages a cautious attitude, Saul says. The first reaction to a misjudgement is to “cover your arse” — to make it appear that you played no part in the unsuccessful course.

At the same time, these risk-averse managers significantly fail to dish out praise and reward when things go right, Saul says.

There is always a balance between adventurousness and taking ill-advised risks, “but good governance is about measuring risk”.

The effort wasted in undue deliberation should instead be going into out-thinking the competition, even at some risk, he says. A lot of companies subject every suggested innovation to a committee “and they ratchet it down to a lowest common denominator, when they should be aiming for the highest common multiple”.

Good CIOs should be entrepreneurial, Saul says, because technology, offers a good opportunity to pull strings by which you can transform the business. CIOs need to be looking at new ways the business can leverage technology, and should cultivate the skills to sell their ideas.

Self-starter

Derek Gaeth began his IT career in 1995 as a network administrator, before moving to Global Solutions in 1997 as a network/systems engineer. He was asked to join Global to assist with an educational initiative — to provide secure, filtered internet to a number of Auckland schools, as well as building and deploying accounting systems.

In 1998, Gaeth joined internet service provider Onthenet as the first employee of the company. He covered general system administration and the helpdesk.

“That was just at the beginning of the boom [in public internet service] and I got the opportunity to learn quickly. I’m a self-starting sort of person,” he says. “I love a challenge and I like to keep progressing and learning.”

Onthenet grew rapidly and became Radionet specialising in wireless broadband. During this dynamic period of growth, Gaeth was promoted to technical manager.

Radionet grew to be one of the largest ISPs in New Zealand, employing 32 staff. Following the sale of the company to Compass Communications in 2001, Gaeth decided to work as an independent consultant.

During this time, he helped found another company specialising in marine wireless broadband. He worked with the America’s Cup in Europe and on other wireless projects around the world, as well as in New Zealand.

After spending time in Europe in 2004, due to the America’s Cup project, he returned to the country and took up the role as network/technical manager for Maxnet. This included managing systems, the network and the datacentre.

Derek says his time at Maxnet has been a steep learning curve, as he had to quickly get up to speed with a datacentre and all the systems needed to operate it. He soon realised there were a number of ways to improve and enhance the datacentre Maxnet had bought; in particular, the power handling was not adequate to provide for the growth in the company’s workload. The necessary improvements required a rebuild of the infrastructure.

The company upgraded the power system from 200KVA to 1MVA in 2005, along with adding more capacity and redundancy to the chilled water system. This year the company has begun another upgrade, taking its capacity to 4MVA with 2N redundancy.

In 2008, Gaeth took up the position of chief technical officer.

“The CTO has a broader scope than a typical CIO,” he says. “A lot of my time goes into managing the datacentre, but I have a strategic role too.”

Since 2004, the company has more then doubled in turnover and in staff numbers. Maxnet currently employs 54 people.

Like Ed Saul, Gaeth sees many companies as risk-averse in the application of their technology. It helps if the board of directors has some technical knowledge, as Maxnet’s directors have. “We’re on the front foot, pushing them all the time and the board is used to it.”

A lack of technical knowledge begets caution, he says. “A company has to cultivate entrepreneurialism to progress and stay competitive, but you’ve got to understand how you’re going to arrive at your goals.”

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