Time was, everybody who watched TV or read magazines knew Allstate Insurance Co.'s familiar "You're in good hands" tag line, which was almost as ubiquitous as Trans World Airline's bright-red swinging-'60s logo. Both companies had managed to create a branded image that gave off an air of fresh enterprise for a new generation of young adults and, in turn, were able to reap handsome rewards.
But flash forward 30-some years, and you find those fresh, young consumers are facing retirement, and the brand names they responded to so loyally have lost their exclusivity after decades of industry turmoil and marketplace pressure.
To be sure, these two venerable companies are in very different situations: St. Louis-based TWA twice filed for bankruptcy protection in the 1990s, hasn't posted a profit in more than a decade and operates around a technology infrastructure that's 30 years old in places; Allstate, though facing a competitive and uncertain marketplace in the era of e-commerce, is a $26 billion company that remains the No. 2 insurer of homes and automobiles in the United States.
But they share a common strategy that's increasingly being adopted in other old-line industries--a concerted and very public commitment to use information technology to get closer to their customers and redeem themselves in the eyes of their respective investor communities.
In choosing IT as one of the key weapons in their arsenal as they fight to bolster their brand name among consumers, stave off the competition and gain operational and economic efficiencies, both TWA and Allstate find themselves relying on their information officers in ways that they haven't before--especially true for TWA, which hired its first CIO in February 2000.
Kenneth Wilcox, the man who now holds that title, was hired to help selectively upgrade and otherwise maintain a creaky application suite that's written in Cobol, assembler and a handful of other ancient languages; unearth and create useable customer and financial data that's currently buried in the airline's myriad systems; and develop new systems to make customers' in-airport experiences more efficient and pleasant.
Frank Pollard, Wilcox's counterpart at Allstate, is a 33-year company veteran now working to build a customer relationship management (CRM) system that will improve the efficiency and quality of Allstate's agent and customer relationships, roll out Web-enabled technology to the company's 70,000 desktops nationwide and launch an e-commerce project that in its first phase will allow customers in 15 states to purchase Allstate home and auto insurance online by the end of 2000.
And while both companies have issued ebullient press releases in the last year touting their newfound technology plans, it's still unclear over the long haul if the companies' technology plans are enough to guarantee growth and gain market share.
Obviously, it can be uncomfortable sitting in the hot seat, looking down a long and intimidating to-do list as Wall Street and Main Street tap their toes outside your door. Before the turnaround, CIO spoke with Wilcox and Pollard to find out just what they need to achieve, delve into how they plan to launch their various IT projects and determine what managerial skills they must bring to the table to lead in times of internal change.
TWA: Preparing for Takeoff
Wilcox took on the CIO role at TWA after serving as head of North American Research and Development IS for the drug company now known as Aventis Pharmaceuticals. When that company went up for sale in late 1999 for the third time in a decade, Wilcox decided to look for something different. In November 1999, he went through a couple of vetting sessions with an executive headhunter who told him of a CIO position at a large transportation company in Kansas City, Mo., where Wilcox was living. He thought it was a local trucking business.
When it turned out to be TWA, his heart sank. "I had done a tremendous amount of global business travel in the 1990s, and I know pretty well what makes for a good travel experience," Wilcox says. "I had had two very unpleasant experiences with TWA and encountered some really unfriendly customer service. I said, 'I don't want to work for that company.'" But before he withdrew his name from consideration, he did a little homework. True, the nation's eighth largest carrier hasn't had a profitable quarter in 10-plus years, but signs of an incipient turnaround were starting to crop up, at least in Wilcox's opinion. The airline was buying new aircraft, sprucing up its image in the airports, and--a key point for a travel veteran like Wilcox--TWA had in the past couple of years twice won the J.D. Power and Associates award for customer satisfaction and had posted some first-place numbers for on-time arrivals. TWA "had gone from being the worst to the best in on-time performance. That told me something was happening there," recalls Wilcox. "That doesn't come about because some senior manager banged his fist on the table. Every employee needs to be involved in an effort like that."
As it turned out, TWA CEO and President Bill Compton had expressly set out to hire a CIO who could integrate technology into the company's turnaround strategy. "Previously, technology was used merely as a tool for our various operating departments, and some of it is 20 and 30 years old," says Compton. "We now want our technology to be integrated into our business direction. We need to retool, we need to leapfrog the competition to deliver the best service possible to the customer, and we need technology to do that."
When Wilcox eventually met face-to-face with Compton and CFO Mike Palumbo, he found they already had a detailed idea of what they wanted from their future CIO. "Bill Compton and Mike Palumbo have a very clear strategy of how to return to profitability and a very clear vision of how technology should play into that turnaround," says Wilcox. "They fully recognise how technology supports modern business; they just needed someone with the background and skills to make the connections."
Specifically, Wilcox would be expected to both maintain the operational IT organisation and develop a technology strategy for executing the goals and objectives of the airline's 59-point Vision 2000 turnaround plan. If the latter initiative sounded like a bit of fun--what with the potential to develop onsite customer kiosks or snazzy new systems and software for ticket and gate agents--the former challenge proved daunting, so much so that Wilcox swears that his second interview consisted of Compton and Palumbo trying to scare him off the job. "They wanted to make absolutely certain that, if I took the job, I understood all the problems and troubles," Wilcox says. "They said, 'We are under no illusion as to the magnitude of the problem. We're not just talking about replacing dumb terminals here.'" What they were referring to was an IT infrastructure that hadn't been state-of-the-art since the early 1970s. "TWA had stopped investing in computing technology. There was a deficit of investment going back 25 to 30 years," says Wilcox. That means TWA's large portfolio of business and operational systems like finance, revenue, accounting, scheduling and planning are written in assembler code, Cobol, Cobol2 or Fortran and accessed by employees typing arcane codes into 6,000 green-screen dumb terminals hooked up to IBM Corp. 3270 mainframes.
None of these applications is in any way related to the safety and security of the airline, Wilcox stresses. And most still work just fine. Nevertheless, it's a bit of a high-wire act to maintain them, routine upgrades are essentially out of the question, and when they do go down, the company potentially starts losing money almost instantly. For example, if TWA's airlines operations software, which tracks the location of all aircraft and staff on a minute-by-minute basis and controls all maintenance schedules, goes down, the carrier is forced to begin cancelling flights almost immediately. "Some of these programs are absolutely mission critical. If they go down, we're facing literally millions of dollars a day in lost revenue," says Wilcox. His near-term solution is to leave some applications where they are and bring others forward on a case-by-case basis to a Web or client/server environment.
On the strategic front, Wilcox and TWA's executive managers identified three key areas that needed to be aligned with the company's goals and objectives: the quality of technology, the quality of people in the IT organisation, and the quality of processes TWA uses to select, deliver and support technology. In midsummer 2000, Wilcox had just finished wrapping up the data-collection phase of a laborious report that takes "a long, hard look at the current state" of each of those areas and tries to articulate a vision for the future.
Just what is that future vision? In the technology category, the list is long. Wilcox and his team already have a plan in place to stabilise and upgrade the airline's basic network connectivity configurations. Another large project is to identify, surface and conceptualise financial, marketing and sales data that's currently scattered throughout various systems. This will allow executives to react more quickly and accurately to market changes--by being able to determine in days rather than weeks if a particular fare sale is working, or being able to create marketing campaigns that are much more closely aligned with various subgroups of consumers.
Inside the airport itself, Wilcox's goal is to introduce and integrate technology that improves the flow of people from the curbside to the aircraft door. Upgrading the agent's software and systems will go a long way toward reaching that goal by giving agents faster and more logically organised access to a larger volume of operational and customer information.
Right now, agents interact with reservation, ticketing and baggage systems by memorising cryptic codes, an increasing liability in the age of Web-enabled graphical applications.
"The old systems work effectively, but they're impossible to train new employees on," says Wilcox. "Our goal is to reach a state of intuitive use of applications." Wilcox and his staffers are currently in the design stage of building a new front end. He hopes to be rolling out new software and new PCs to some 1,100 airport agents by the first quarter of 2001.
On the personnel front, Wilcox inherited a set of workers skilled in systems development from another generation of technology who were primarily concerned with maintenance and support, a mentality he attributes to living in a culture of survival over many years of tough times. While TWA still needs those skills, particularly to keep those aging applications up and running, Wilcox is also looking to change the mind-set of IT by hiring some 50 new workers and otherwise encouraging the members of his existing workforce, which numbers between 430 and 480, to become more customer-focused and more proactive in their use of technology. "We want leadership, we want calculated risk-takers, we want people who will sell the idea of technology rather than waiting to be asked to implement something," Wilcox says.
Finally, in trying to streamline the airline's Byzantine approval and purchasing processes, Wilcox is working with senior executives to hammer out a system that still ensures fiscal responsibility but cuts out as much bureaucracy as possible with the intent of allowing the IT organisation to become more nimble and responsive.
Wilcox's operational IT budget was $76 million in 2000, and he has asked (but not yet won approval) for an additional $51 million in capital investment for 2001, which will be funded by revenue, shifted allocations from other areas of the company and strategic partnerships with technology firms with whom TWA might enter into long-term leasing arrangements, for example, as a way to keep up-front capital costs down.
Is all of this work for naught at a company that insiders and analysts alike insist is ripe for a buyout? Wilcox and CEO Compton each declined to comment on what would happen to the company's IT initiatives in such a scenario, but industry watchers believe it's likely the company will at least partner with an equal or bigger airline to gain back the air routes and market clout it's lost during years of financial instability.
In the meantime, using technology to woo savvy customers--with, say, self-serve kiosks in airports--is a good idea, says Glenn Engel, an airline analyst with Goldman Sachs in New York City, but it will never give TWA a competitive advantage for more than a few months. Larger, more capitalised airlines can easily play catch-up, he points out. "You need money to do those kinds of things. All the airlines spend on technology, but TWA doesn't have that kind of money. It can't afford to experiment."
Engel's long-term prognosis for TWA is decidedly downbeat, but he does see one silver lining in its IT plans: TWA can and should use technology as a way of bringing its costs more in line with its revenue. "As TWA has shrunk over the years, it has not been able to bring down its infrastructure costs as quickly. Technology could be a way for it to do so efficiently," he says.
Amid the marketplace uncertainty, CEO Compton's singular and oft-repeated message to his troops is that TWA's only goal is to return to a profitable and competitive state under its own steam. For his part, Wilcox is adamantly focusing on the to-do list in front of him rather than wondering about the long-term fate of his company. Still, he admits, anxiety is part and parcel of holding down a high position in a precarious company, but he considers it worth the trade-off to be able to enjoy the level of autonomy he does at TWA.
"This position is different than many other roles I've had. There's more authority, more freedom on the use of technology, and I can use my own skills to make decisions that have an impact on a multimillion dollar company," Wilcox sums up. "In other companies, even in the lead position, you're just not that influential. It's exhilarating to have that role."
Allstate: A New Policy
At Allstate, CIO and Senior Vice President Pollard finds himself enjoying a similar level of responsibility and prominence, a change he attributes to a corporate shift in thinking about technology that dates back to 1995 when Allstate was spun out of the Sears empire. "In the last four or five years, technology has become a pretty good driver for business. I think [Allstate management] understands that better than most business people," says Pollard. "Lots of people view IT as nothing more than an expense, but it is an investment, and at the end of the day, you cannot run a business without it."
Allstate is, in fact, betting a big chunk of its business on technology. Since its split with Sears, the Northbrook, Ill., company has pursued a three-part strategy to position itself in a changing, competitive market. After improving its financial picture and completing an intense study of customer behaviours, needs and attitudes, Allstate was ready in November 1999 to tackle Phase 3: a wholesale business transformation aimed at expanding the company's reach in the Internet age.
To that end, Allstate announced with much flourish that it was going to "multichannel, multibrand and multiproduct." To reach that first goal--that is, to be able to sell insurance any other way than through its agents--Allstate first eliminated its 6,500-strong "captive" agent staff (that is, full-time Allstate employees who sell nothing but Allstate insurance) by giving them the option of joining the company's ranks of independent contractors. Some 15 percent opted to leave the company, bringing the total number of agents, all of whom are now independent contractors, to about 13,000 by the end of 2000.
That move, considered bold in the staid insurance industry, cleared the way for Allstate to begin selling insurance via other means--specifically, over the Web and through direct call centers--without creating channel conflict with its agents. "The goal is to give customers the option of using the Internet, [calling] from home through a call center, [speaking] in person with a traditional agent relationship, or by writing a letter," explains Pollard. "That's what we mean by multichannel."
But that goal also meant Allstate needed updated call centres and, most important, an e-commerce-enabled website on the double. And double-quick was about how fast it happened, Pollard says. "Between November 1999 and May 2000 a minor miracle occurred, meaning we were able to get the [e-commerce] Internet site up and running," he says. In May 2000, Oregon became the first state to sell Allstate auto insurance online, with Colorado and Louisiana signing on in July; in total, 15 states are due to be operational by the end of the year, with the remainder allowable by state law to be up and running by the end of 2001. In addition, Allstate customers nationwide who are PC-enabled can now log on to the company's password-protected website and use their customer ID number to request changes to certain parts of their records (such as their address), obtain general information about their various policies, file and check the status of claims and "self-educate" themselves on their insurance options.
Though the company previously had a public Web presence--a site Pollard calls "clumsy"--as well as what he characterises as a very strong intranet environment for employees, Pollard chose to outsource the e-commerce project (with a handful of vendors he prefers not to name) rather than build it in-house. "We're not an Internet dotcom," he says, "so we partnered with outside firms to get the job done."
Internal partnering is also the order of the day: As part of an IT restructuring a few years back, every technology initiative must now have a business-side owner, and, in the case of the company's e-commerce plans, Allstate International President Steven Groot is that man. Groot, who on a broader level is responsible for executing the company's entire multichannel/multibrand/multiproduct strategy, says technology is crucial to the plan's success, but the focus is and must always be on business needs rather than technology for technology's sake.
"Technology is the enabler of everything we're trying to do," says Groot, pointing out that the working relationship between the group developing the business rules and the group working on the technical infrastructure "is close enough that you can't tell the difference between the two." But in the end, the goal is always to fulfil the business need of improving customer service. "Through the use of technology, we're getting a higher set of values to pass on to our customers," he says.
Some Allstate agents also now have Internet access, which allows them to correspond with clients via e-mail. That facility, an extension of Microsoft Internet Explorer and the Microsoft Windows desktop, is just one of many folded into brand-new agent desktop software currently being rolled out to Allstate agents across the country. All told, between 60,000 and 70,000 desktops are due to be upgraded by the end of 2001 (about half are done now) with new Pentium machines, the software and dedicated lines into one of the two consolidated data centres, located in Dallas and Hudson, Ohio.
The new agent desktops' raison d'tre is to facilitate data sharing across the enterprise. "The benefit to agents is that they have more information available at their fingertips," explains Pollard. "We're tracking activities 24/7 from the call centres, agent locations and the Internet. So anyone who deals with a customer or prospect can view the status of that inquiry, including any quote requests or claim losses."
Like the e-commerce website, the agent front end, the call center software (which is also an extension of the agent desktop) and a new claims package that allows customers to report a claim interactively were all purchased from outside vendors and adapted accordingly for use at Allstate. "We never intended to build everything ourselves. It's a matter of looking at who on the outside has the things we want and who can interface most closely with our legacy systems."
Pollard allows that it can be quite a job to monitor a plethora of arrangements like these. "Chasing all these partners around is no small task," he says. "When you do buy or lease, the biggest challenge is scale. It could be wonderful software, but if we can't get it out to 70,000 desktops, it's not going to do us any good." Pollard keeps his sanity by relying on Allstate's in-house architect experts who take any potential software and its developers through a series of rigid tests beforehand.
With all of these GUI-based, Web-enabled, employee-empowering front ends in the works, Pollard is focusing his attention on the back-end engine that will make sense of it all: a customer relationship management system being pieced together from existing and new databases and lots of middleware. Pollard's goal is to be able to assemble a household view of any one person's complete Allstate portfolio and then easily move it around to any employee who needs to touch customer data (with, of course, the proper security and appropriate data partitions in place).
"I myself have 13 different policies with Allstate, and right now, I have 13 different ID numbers," Pollard says, explaining the current data setup. IBM AS400s currently house this data in various stovepipe configurations. "We have the client file, and we can inventory all of our customers, but none of this is interfaced or seamlessly connected," Pollard explains.
When the CRM project is complete, sales, claims and customer support employees will be able to access a range of data on the company's 18 million customers by keying in a single customer ID number. The project is in the early design stages, with marketing and technical input currently being hashed out, and Pollard says there is no hard date for a rollout other than as soon as possible.
For the most part, the data will stay where it is, with multiple middleware packages used to support, manage and segment the data appropriately. "The middleware piece is the hardest," Pollard says. "There's a collision of information going so fast. You've got to make sure it's connected and managed correctly, or it'll eat you alive."
To keep the monster at bay, Pollard established four or five dedicated new teams to monitor desktops, Web operations, servers and communications systems. Because Pollard is responsible for operations as well as information technology, it's difficult to determine an IT-specific head count, but he estimates that 3,000 of the 10,000 employees who report to him are responsible for IT-related activities. Funding for the e-commerce and call-center projects will come from $600 million raised by consolidating data centres, closing four regional offices, and reducing staff through layoffs and attrition over time.
Amid all this front-end, back-end and middleware activity, Pollard is able, for the most part, to take the long view of what Allstate is trying to achieve via technology. "Right now we are in inning No. 1," he says of the company's e-commerce push, "but a lot of other companies haven't made it to the ballpark yet"--an observation that's essentially fair in an industry that analysts say has been one of the very last to embrace the Internet. Internet-driven business retooling is expensive and complicated, and for now returns are low (Allstate expects between 1 percent and 3 percent of its business to come in over the Net this year), but Net-based customer interactions are unarguably a new part of doing business, Pollard says. "Five years from now when we're in the fifth inning and the explosion is finally occurring, we don't want to be caught out."
Allstate is on the right track in eliminating its captive agents and announcing plans to sell insurance via the Web and call centres, says Forrester Research Senior Analyst Todd Eyler, but the company still may not be a player in the coming years unless it is willing to push the envelope online. The company's rather conservative forays into selling auto insurance online are a good first step, but Allstate needs to follow that with more aggressive, Web-customised packages and pricing. "As price competition increases, insurers won't be able to keep spending on technology without increasing efficiency," Eyler observes. "Allstate's going to need to offer a truly direct [buying] experience on the Web, create new products at better prices and deliver better experience for the consumer. The next couple of years will tell," he says.
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