Types of turnaround CIOs
The quintessential turnaround job is the company in crisis. A sense of urgency hangs over a CIO's every decision. OfficeMax suffered from numerous, interwoven problems, some of which could be directly linked to trouble in the IT shop, Burdick says. For example, because of fundamental problems in the way IT functioned, sales reports took too long to generate to be useful. A lack of technology standards made it difficult to operate the business as a single enterprise and take advantage of economies of scale.
Dana Deasy faced an even greater sense of impending doom in July 2003 when he became the first-ever CIO at manufacturing and electronics conglomerate Tyco International. The company was reeling from an Enron-like scandal in which its former CEO, Dennis Kozlowski, was under investigation for allegedly misappropriating more than $US600 million from the company (in June he was found guilty of grand larceny, among other charges); its entire board of directors had been replaced; and it was facing bankruptcy with no way to pay $US11 billion coming due. It also had no central IT organization, common infrastructure or common data structure to speak of.
But Deasy simply viewed the job as a start-up - albeit a very large one - just as he had his previous two CIO posts: at electronics giant Siemens, where he led the effort to develop a CIO Americas office, and before that at General Motors, where he was a divisional CIO in charge of building an IT organization after the GM spin-off of EDS. "I tend to walk into a position where there is nothing, somewhere where you have to put something in place," Deasy says. "Even though Tyco brought with it crisis management, I viewed it more with a start-up mentality."
A second type of turnaround situation for CIOs is the company with fundamentally flawed IT. When John Nordin became CIO at Insurance Auto Auctions (IAA) in November 2003, the IT department was spending more money than it was delivering in business value, was not delivering systems on time or in some cases at all, and was poorly managed. IAA, which contracts with insurance and car rental companies to sell off cars that are considered total losses in wrecks, was spending a lot of money on IT (between $US5 million and $US10 million a year) but getting very little in return, Nordin says.
In his first 12 months, he focused on renegotiating leases and contracts, such as a telecommunications contract for data services, saving IAA nearly $US1 million, which dropped straight to the company's bottom line. Nordin also focused on serving IAA's external customers. For example, for IAA's buy-side Internet auction system, used by companies that consign wrecked cars to IAA and those that buy them, Nordin chose to team up with outside contractors to build the system. In the past, IAA staff would have built the entire system, slowing down the delivery.
A third type of turnaround is the business transformation, in which the company is betting its success on a new strategy. Usually IT is a critical part of the change. "What happens under those conditions, those companies get more strategic in view and increase their peripheral vision," says Stephen Mader, vice chair of executive search firm Christian and Timbers. "When the companies do that, they begin to notice the information they want and don't have."
That's when transformational companies need a CIO like Robert Moon, who in February joined LeapFrog, a maker of electronic educational toys. IT systems at LeapFrog have not kept up with the company's growth. (Two class-action lawsuits filed in June alleged that LeapFrog's failure to correct IT and supply chain problems had led directly to missed earnings estimates in 2004.)
Moon quickly planned a three-phase upgrade. First, ERP applications and Oracle databases are being brought up to date, since hundreds of interfaces currently require updating every time an application is upgraded. Phase two will be an upgrade of LeapFrog's supply chain, which now comprises eight software systems, making it difficult to communicate quickly with business partners. In phase three, Moon plans to build a CRM system to streamline the marketing group's and sales force's systems.
Transformational turnarounds are becoming more common - or at least more commonly warranted. "I think the need for these kinds of CIOs is becoming more immediate now," says Charlie Feld, former CEO of the Feld Group, a CIO-for-hire consultancy that turned around several large companies before it was acquired by EDS in 2004. "In every industry now there is a Wal-Mart or a Dell that is changing the game. The older companies need to transform their legacy systems that need to enable, not inhibit, the speed and agility of business."
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