In the first instalment of this three-part case study on leadership, fictional CIO David Shepard suddenly found himself with a new boss, a new title and a mandate to leverage IT to help lead his beleaguered pharmaceutical firm, AusMed, through a turnaround.
Uneasy with the role of enterprise leader that the new CEO had given him, Shepard called on three experienced executives -- John Cross, Christopher Hoenig and Patricia Wallington -- seeking advice on how to build relationships with the executive team and defuse political landmines (see "Stranger in a Strange Land", Part 1, October 1999). In this second instalment, Shepard must bring his knowledge of technology and business to bear on AusMed's fledgling strategy.
Dead Man on Campus?
Previous meetings of AusMed's reconstituted executive team had the flavour of revival meetings, as new CEO Maureen Carleton and her strategy czar Richard Pepe expounded their vision for reviving the company. The aim had been to rally the group and convince them that there was indeed light at the end of the tunnel. But this latest meeting felt more like a war-room session. Carleton laid out her to-do list like a battle plan:
¥ Revive AusMed's rapidly ageing product line by acquiring boutique biotech companies.
¥ Speed product-development time.
¥ Sell directly to consumers in the fast-growing and lucrative homeopathic-remedy category.
¥ Stop the fiscal haemorrhaging by pulling out of the disappointing treatment-protocol development partnerships AusMed had made with health-care providers.
Carleton then fired off directives to her lieutenants.
To long-time AusMed chief operating officer Robert Matson: "All we want from the companies we acquire is their R&D. We don't want their administrative overhead or their back offices. We have to absorb these companies quickly and get their research groups integrated with ours. Rob, I want you in charge of the integration."
"Matson knows how companies operate," Shepard thought. "But integrating systems . . . he won't have a clue about that."
To Pete Lucibelli, director of sales and marketing -- and Shepard's nemesis: "Pete, we need a plan to sell our homeopathic-remedy line directly to consumers. We'll bypass the chemists and keep more of the profit."
"Lucibelli's expertise is all about chemists," thought Shepard, mildly amused. "This will be a bear for him. Still, at least it's a nice, specific assignment."
To Shepard: "Dave, I need you to tell me how to get more out of the considerable IT investments we've already made. And more important, I'm relying on you to tell us what's out there technologically, what's coming and what the possibilities are for speeding drug development."
"I'm a dead man," Shepard whispered.
As Shepard walked back to his office after the meeting, he knew this would be a critical test. In the past, he'd responded to other people's requests, working to meet other people's needs. Now he was expected to come up with the ideas himself. And he'd have to do that while wringing more value out of the company's IT investments.
Then there were the other executives' marching orders. Should he be working with them as well? Carleton wanted Matson to lead the effort to integrate the biotech companies AusMed planned to acquire, but Matson didn't know anything about how to merge the new R&D groups' systems with AusMed's. How would Shepard get involved without stepping on his friend's toes?
Lucibelli, on the other hand, was not his friend. He always went around Shepard to get what he wanted. But now Lucibelli had his hands full, figuring out how to sell directly to consumers. Shepard's coaches advised him to make Pete an ally. Maybe this was the opportunity.
And lastly, Shepard knew that although some people probably thought AusMed's back-office systems and supply chain links ran themselves, they didn't. If those areas suffered while his attention was focused elsewhere, all the technological "possibilities" he might uncover wouldn't be enough to save his job.
With these questions ringing in his head, he shut his door and phoned his coaches.
In Pursuit of Knowledge
Shepard: How would an enterprise leader tackle these CEO mandates?
Christopher Hoenig: It will take time to figure this out. You've got to create personal time for yourself and the only way you'll do that is to make an aggressive move. Pick your best IT guy and promote him to a leadership position. Give him your former job of IT director to make sure the hatches stay battened down in your department.
Shepard: I've got a couple of people who I think could take that on.
Patricia Wallington: Remember, this person's former peers will now report to him. You'll have to deal with personnel issues like: Why did you pick this particular person? What does it mean to the careers of the people who now have another layer between them and you? But there's no question about it; you've got to create space for yourself.
Shepard: Then I work on my strategy.
John Cross: Not just your strategy, but AusMed's strategy. This is the moment when you can be a part of the company's strategic planning. If you can be involved in that discussion, that would send a very important signal about IT's role in the organisation.
Hoenig: That's a key objective: to be a participant in identifying the first set of major strategic decisions that are going to flow out of the CEO's strategy. At the very least, you've got to push for more granularity -- break down these mandates into specific deliverables. When you start to prioritise, you'll have more options because you've broken down the deliverables into many specifics.
Wallington: You'll need to find a way to get time with Pepe and the other project owners. Work individually with them. Some will want to talk informally. Others may want to sit down and create a highly structured strategic plan.
Shepard: On the technology side, the CEO has asked me to find out what's coming and what the possibilities are for speeding product development. Talk about broad assignments! Besides checking with Giga and the other services, how should I proceed?
Cross: You could pick a particular area of your business agenda, like product testing, and then assemble a variety of external experts in technologies associated with that area. It's a good leadership process -- you put the external experts and internal IT and business executives together to spend two or three days brainstorming. The purpose is twofold. It gets the external knowledge of technology well debated and understood by your internal tech guys. But second, and more important, it gives the ultimate ownership of the solution to your business. You can use the meeting to demo some of the technology. The fact that the business guys can feel and touch some of this stuff gives them a little more confidence in it.
Shepard: I've got some contacts with a CAD/CAM vendor that's dabbling in a new type of modelling and simulation technology, which I can see being applied to drug development. But they don't have anything ready to pilot yet.
Cross: You could partner with them. Vendors are often very happy to put up some initial money. In the beginning it doesn't have to cost you much, if anything. They write it off of the marketing budget as a way to get it launched.
Wallington: Underscoring a lot of these leadership strategies is the need for the CIO to go outside his own organisation for answers. Don't just sit there and try to apply only your own knowledge.
Shepard: I know we're going to have to use technology in developing a new direct-to-consumer sales channel for our homeopathic-remedy line. But that initiative is Lucibelli's. I tried talking to him to get some kind of clean-slate working relationship started, but he was pretty unresponsive. He hasn't taken me up on my offer to dedicate one of my best IT people to his sales group. I don't know what else to do.
Hoenig: If you can find some key knowledge outside and bring it back to help Lucibelli, it's a chance to take that relationship to a different place.
Wallington: That sounds like what I do when I have a really resistant person. I try to find out who he respects and then bring in ideas through that person. Say Lucibelli had worked for another company and was always talking about how it did things. You could get ideas from that company and leverage its credibility with him.
Hoenig: That's an elegant solution because you do two things at once: You're bringing in outside knowledge and you're defusing a conflict. You can improve your relationship with Lucibelli by creating a win for him that gives him public credit.
Wallington: You should always allow the business person to take the credit.
Shepard: I thought I was supposed to be building my credibility with the CEO.
Wallington: The CEO always knows what's going on. Your success in her eyes will lie in the collaborative relationship you build, not just the project's technical success.
Shepard: I've been thinking about how Amazon.com and other retail Web sites build customer loyalty. They provide tons of information about the products and let the users select preferences, building their personal profiles. We might be able to create some sort of consumer educational network for our homeopathic-remedy line. We could even create patient-case files that customers could access and manage.
Wallington: That sounds interesting. You'd leverage AusMed's brand name in homeopathic medicine. You'd bring legitimacy to those kinds of products, and the case histories could create customer loyalty.
Shepard: I know Lucibelli owns stock in Amazon, so he may respect what it's doing.
Hoenig: Sounds like a plan.
Shepard: The third thing I have to figure out is how to help Matson with the acquisitions without looking like I'm poaching on his territory.
Cross: Helping the integrations go smoothly will be an enormous help, so I wouldn't worry about seeming to step on his toes. In acquisitions, the CIO can help in two areas: one, the speed with which you release the cash from the redundant back-office systems, and two, how you build the knowledge infrastructure. So I'd make certain Matson has two IT people able to attend to both agendas.
Shepard: I shouldn't be involved personally? This is a really important issue for the company.
Cross: As soon as you see what the solution to the problem is, delegate. You can't be an effective leader and do all the day-to-day yourself. Besides, you've still got Matson as a friend and a backstop. He'll give you a call if he's getting into trouble. That's the beauty of having a good relationship.
Shepard: Now the hard part. I'm supposed to get all this done on the same budget I had last year.
Wallington: Even if you weren't restricted to your current budget, you can't keep coming back to say, "I need more money."
Cross: This is a great way to show the CEO that you can make some significant investments without asking for a single extra dime from the company. Maybe you can even hand cash back.
Shepard: I can save a little by pulling people off the treatment-protocol network we built for the hospital partnerships we're dissolving. I'll also be pulling the plug on that network's secure extranet development. But this won't free enough to cover the new initiatives.
Wallington: Maybe you can't just reallocate your own funds. You might have to get inside other departments and have them drop something they're working on. Your relationship-building can yield this kind of cooperation.
Cross: It's tough to get businesses to slash and burn if they can't see what else is coming. If you can show them that by giving something up they're getting something more attractive, I've found that people are willing to be very tough with their own budgets. That's a great way for the CIO to create the elbow room he needs for further investment in fresh technology.
Shepard: To get that kind of cross-departmental cooperation, I'll need an investment portfolio outlining the possibilities for new initiatives as well as the projects we've got going. Then I can lay it all out for them to choose what they want and what they can do without.
Wallington: And then all hell will break loose. Trying to manage an investment portfolio by consensus entails a lot of conflict. The last time I did it at Xerox, the CEO at the time, Paul Allaire, said he didn't want to have to do it again.
Hoenig: Try to create win-win scenarios. If two executives are fighting over money for their projects, maybe you can analyse what they need deeply enough so that you discover that their needs overlap, and perhaps one system can satisfy them both.
Cross: Another possibility is instead of looking for new technologies, first see what technologies you've got that might be under-utilised or adapted to one of your new projects.
Shepard: We've got our fledgling R&D intranet that should be expandable to include our acquisitions. We've also sunk a lot of money into the treatment-protocol network. It's a shame we've got to the pull the plug on that.
Wallington: You know David, no offence, but it seems like you've got the aye, aye syndrome. Whatever the CEO says, it's aye, aye -- we'll drop this network. There's no discussion or thought about whether this is really the right thing to do. Is there a different way to do this that accomplishes the objective of dissolving the protocol partnership but maintains some aspect of it? When you're an executive, you don't just salute everything the CEO says. You have your own thoughts and your own opinions as to what's right. Then, whatever gets decided, you execute.
Shepard: Well . . .
Wallington: Suppose pulling the plug on the partnerships turns out to be the dumbest thing the CEO ever did? Sooner or later someone will ask you, "Why didn't you tell us? You knew, why didn't you tell us?" So it comes back to bite you anyway.
Shepard: I was going to say that Roberta Sedaille, the McEarnst consultant we've been working with, asked me to consider marketing and selling the treatment-protocol technology. She's really eager to keep going on the secure extranet add-on to make it a stronger system. She thinks we could sell it to hospitals that want to link their patient-record system to their affiliates and private physicians. Maybe if we spend a little more on that, we could reap some outside revenue.
Hoenig: Then you could pump those funds into the new projects. You're still pulling out of the partnership with the hospitals, like the CEO wants, but you'll have turned a retreat into a resource.
Epilogue
CIO David Shepard spent several weeks helping to refine AusMed's business plan and working out the fine points of the IT strategy. After a painful process, the executive team agreed to fund the pool for new IT-business projects by cancelling or postponing low-priority projects and non-standard systems. CEO Carleton tapped Shepard to steward this collectively owned investment pool. AusMed formed a partnership with McEarnst & Company to develop and market a secure health care patient-record network. Shepard also persuaded a CAD/CAM vendor to jointly develop a system for drug-compound modelling and simulation.
Within his IT group, Shepard promoted his senior business analyst to IT director and assigned several people to the new projects and the acquisition-integration team. The director of sales and marketing, Pete Lucibelli, liked the idea, borrowed from Amazon.com, of creating a Web site that takes orders and provides education, generating customer loyalty for AusMed's homeopathic-remedy line. Network manager Greg Devlin agreed, with some trepidation, to join the sales and marketing group to co-develop the system.
Coming in Part 3
In the December issue of CIO, join Shepard as he taps new leadership skills to mobilise resources and put his plan into action.
Curricula Vitae
Meet Shepard's Coaches
In early 1999 John Cross retired from his position as head of IT at BP Amoco PLC. Beginning in 1990, Cross presided over a radical corporatewide transformation, cutting IT costs by 50 per cent while implementing a full-scale client/server migration. In the process, he changed the core mission of IS from providing transactional support services to acting as a strategic business partner. Cross was named by US CIO as one of the decade's 12 most influential IT executives. He is now an executive vice president with AppNet, an Internet consulting and services start-up in Bethesda, Maryland.
As director for information management and technology issues at the US General Accounting Office, Christopher Hoenig was responsible to Congress for $US25 billion in federal IT spending. He led a historic reform that for the first time brought private sector best practice principles (and the CIO position) to the federal government. He has also been an IT management consultant with McKinsey & Company and is the author of a forthcoming book from Perseus Books based on a decade of research on world-class problem-solving and leadership techniques for the knowledge age. He is now CEO of Exolve, a Washington, DC-based consulting firm.
In 1999 Patricia Wallington retired as Xerox corporate vice president and CIO. At Xerox, Wallington forged a close relationship with CEO (now Chairman) Paul Allaire and established a corporatewide leadership training program. One of her biggest accomplishments was an outsourcing arrangement that reduced Xerox's IT costs and enabled development of a new global strategy, IM2000. In 1997 Wallington was inducted into the Women in Science and Technology Hall of Fame and named by US CIO as one of the 12 most influential IT executives of the decade. Now based in Sarasota, Florida, Wallington is consulting part time for Xerox and others.
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