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Risks versus returns

Risks versus returns

There are instances where CIOs have to take a gamble when it comes to developing a commercial orientation — but the results are worth it.

You can reach the pinnacle of your career as a CIO of a major organisation and still have significant weaknesses in critical leadership competencies. Because of these weaknesses, we don’t represent a consistent brand to our customers.

The CEO brand stands for strategy and execution, which commands a degree of trust from day one. The CFO stands for financial excellence. But what does the CIO brand stand for? One of the ways we become top performers as business strategists, transformation experts, effective managers of people and masters of our IT domain is to hone our commercial instincts. We should be good at finding money-making opportunities.

Most of us (including me) become CIOs having had little experience with identifying and capitalising on commercial opportunities. Since I was formerly a military officer, my distinctive strengths are in team leadership, and I took these strengths with me to IT-related roles where I had a strong passion. I didn’t have a solid commercial orientation and experience in managing risk effectively.

However, innovating to increase revenue and improve productivity were among my key goals while I was at FirstGroup, the largest surface transportation company in the United Kingdom and now in the United States.

Here’s an example. When FirstGroup changed its organisational structure from one of multiple operating companies to a federal structure, IT identified the possibility of managing spare parts for bus fleets (part of our engineering function) in a more coherent way across the country. We asked why we needed to have multiple-parts stores around the country and why we purchased replacement parts for buses that were still under warranty, (in essence, paying for the parts twice). We stood to save a lot of money if we improved productivity and compliance.

The technology component for this initiative was a single, countrywide ERP platform based on SAP. From a commercial perspective, we thought of information within the system as currency that we put in the hands of key business decision makers. Today, the same system is used to procure new goods and services. It has enabled executives to understand the company’s spending in detail, to leverage economies of scale and to improve cash flow management.

Too achieve a better commercial orientation, I had to start by understanding more about risk. If you want to bring in more revenue or reduce the cost basis of operations, and if you want to be a profit centre, you have to understand enterprise risk management.

For example, we overhauled the legacy IT infrastructure at FirstGroup. This effort was initially seen as a risky technology project and many questioned whether it needed to be done at all. But the implementation of this global infrastructure model was a key component of the five-year IT strategic business plan. Commercially speaking, it was a foundation layer upon which to rationalise about 300 different and redundant business systems to a core set of applications based on a common architecture. Championing changes of such size and complexity means you must be prepared to educate your business on the risk of doing nothing versus the risk of doing something. In this case, doing nothing would not only have perpetuated escalating development and maintenance costs; the outdated infrastructure would have limited our ability to create new commercial applications.

I have also come to learn that many commercial innovations may not necessarily satisfy the internal financial criteria that we often associate with the business case for change. Some of the most innovative ideas I have seen would never get off the page if they were decided solely on financial criteria like payback period. For example, we initiated a centralised programme services office to manage how we did projects across the company. We knew we would need to demonstrate to the business that the disciplines of project management would enable the business to achieve better commercial results. But if we had to use normal business case metrics to justify it, the project might never have gotten off the ground.

This is not to say that such well-tested approaches are not necessary, but that you (and your company) should be open to the notion that some of the best commercial ideas may fall outside the criteria you use to assess business-as-usual activities.

I also realised that marketing skills are essential to a commercial orientation. I must be able to showcase a business opportunity and create momentum around it to appeal for resources. I market commercial ideas throughout the company (not just at the top) to build momentum, because if an idea takes off, I’ll need engagement at all levels.

One way to get your message across is to use every available resource on your team to help. I achieve this by creating very simple ‘elevator scripts’, which every IS staff member who may get an opportunity to market an idea can pass along. You need one or two paragraphs that you want not only the CEO to remember, but that even the desktop-support engineer will internalise and be able to bring up when he interacts with a business partner.

Another path to marketing success is to give your idea to someone else. I try to ensure that the executive who would be the natural beneficiary of a successful outcome, is the one who owns an initiative as part of his strategy. You might be the kick-starter for an idea, but you may not be the best-placed executive to promote or deliver on it.

Finally, let yourself participate in the commercial discussion. No one puts constraints around IT’s capability as much as we do ourselves, by limiting ourselves based on our job descriptions. All the job description does is tells you to run the engine room. If you want to expand your role to exercise business leadership no one’s going to stop you. Or tell you you’re not required or your comments aren’t valuable. When you’re wearing your business leadership hat, you have as much weight as anyone else.

Darin Brumby is director of business systems transformation at the Nationwide Building Society in the UK. He was formerly CIO of FirstGroup, based in Aberdeen.

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