CASE STUDY: Stranger in a Strange Land

Reader ROI

This feature is part of CIO's Leadership Series, which began in the October, 1999 issue. Read this case study conclusion to learn how to mobilise resources, including ¥ Boosting team members' passion and motivation.

¥ Leveraging alliances to do more, faster.

¥ Getting tough with recalcitrant executive peers.

In the first two instalments of this three-part leadership case study, fictional CIO David Shepard suddenly found himself with a new boss, a new title and a new mission: to lead AusMed, his beleaguered pharmaceutical firm, through a turnaround using IT as a competitive weapon. Uneasy with the new role of enterprise leader, Shepard called on three veteran leaders to seek coaching on building relationships with the executive team and defusing political landmines (see "Stranger in a Strange Land", Part 1, CIO October, 1999). In part two, Shepard's coaches helped him focus his knowledge of IT and business process to develop a strategic plan (see "Stranger in a Strange Land", Part 2, CIO November, 1999). In this conclusion, Shepard must tap his new leadership skills to mobilise AusMed's resources to put the plan into action.

Enter the Executioner?

David Shepard bore down so hard, his pencil broke. He'd been trying to write an implementation checklist for his strategic initiatives, aligned with the business goals set forth by AusMed's new CEO, Maureen Carleton, but every time he started to write, he found a new roadblock -- and broke another pencil.

Shepard stared at his list:

1. Finish and market patient-record network. AusMed's partnership with hospitals to develop treatment protocols had led nowhere and was now being dissolved. But the treatment-data network it had built to facilitate the partnership was a technology gem, and AusMed had decided to accept consulting firm McEarnst & Co's offer to jointly develop a secure extranet component that would link the network to doctors in private practices. The resulting technology would then be commercially marketed, with AusMed's share of the earnings funnelled into Shepard's development budget.

2. Develop Home Remedy Consult Web sales channel. AusMed planned to create a Web-based direct sales channel for the company's expanding line of homeopathic remedies. Consumers would use the site, known as Home Remedy Consult, for order-taking, product education and managing their own patient case record. Shepard had imported parts of this concept from Amazon.com and its customer-profiling system. Pete Lucibelli, the typically uncooperative head of sales and marketing, had bought into the idea mainly because it came from Amazon. com, a company he respected.

3. Aid the integration of acquired biotech companies. The R&D units of the acquired companies would be integrated with AusMed's via a knowledge-sharing intranet that was already in place. The acquired companies' redundant back-office systems would be phased out quickly.

4. Partner with Aurora Technologies to create a modelling and simulation tool for new product development. The simulation tool would speed drug development 30 per cent to 40 per cent, giving AusMed an edge on even its fastest competitors. Shepard had already got a commitment from Aurora and the executive team.

It all sounded great, but getting from paper to execution was proving difficult. For starters, after weeks of research, the first two biotech companies targeted for acquisition accepted tender offers from AusMed's rivals. Shepard's integration team was devastated.

Next, the CIO of a prospective buyer of AusMed's patient-record network technology had asked to meet with Shepard personally and see a demo using her own data. That didn't seem a good use of his time. Why weren't the McEarnst consultants handling that?

Also, Shepard urgently needed to discuss the sim tool project with Aurora. The vendor was clamouring to get started, but Shepard had concerns about governance and resource sharing that he wanted to settle first.

The worst setback happened yesterday. One of his best people, network manager Greg Devlin, quit because of frustration with the sales and marketing group. Shepard had assigned Devlin to sales to co-manage the Home Remedy Consult project. But sales and marketing director Lucibelli had been dragging his feet for weeks and hadn't even designated a manager for Devlin to work with -- so Devlin walked. To top it all off, this morning the CEO's right-hand man, Richard Pepe, had informed Shepard that the CEO was anxious to see a demo of the Home Remedy Web site.

Shepard broke his last pencil and picked up the phone to call his leadership coaches.

Some Assembly Required

Patricia Wallington: Dave, the reason a lot of leaders fail is that they skip the mobilisation step and try to go right from the business plan to execution. They don't assemble all the resources they need. They try to deliver what they can with what they've got, but it's never going to be enough to satisfy expectations.

Shepard: I've got five IT people working full-time on acquisition integration, another three committed to the extranet development and three -- make that two -- people on Home Remedy Consult. And I basically replaced myself as day-to-day IT director by promoting someone to that role.

John Cross: It's not just getting your own resources lined up. It's getting the commitments from the line executives.

Wallington: Right, and that's what's different about leadership today. You used to be able to get your part of it done without anybody else getting involved.

Cross: Precisely. Mobilisation today is building a wider team of committed people and businesses. When you get to the rocky rapids that you always hit in any project, the quality of how well you ride them out is a function of how your team is working together. Again, this goes back to the importance of relationships that we talked about earlier.

Shepard: I thought I'd accomplished that. The business executives signed off on the plan. Some even agreed to cancel projects and reallocate the money to fund it.

Cross: Yes, but this is a journey, not a project. These solutions are increasingly a dynamic set of options, and they will change frequently. You need more than sign-off; you need ownership of the processes and their progress. I like to see the business owning the project processes. Clearly, that hasn't happened in your sales and marketing department.

Christopher Hoenig: I also find that by the time you get to mobilisation, and you're talking about lots of specifics, things have changed and people have forgotten what the goal is. It's really important to keep redefining the goal clearly and relentlessly breaking down the problem into components, making sure everyone knows who's accountable and what your risk factors are.

Cross: It sounds overdone, but it's simply governance.

Shepard: I suppose it's not too early to start providing status reports to the executive team. Then they'll see where we're being stalled or undermined, and they'll see who's responsible.

Cross: That's one way to do it. You need a process that keeps the business actively engaged and involved in the progress of the projects. For your executive team, this is part of learning that these things are explorations -- we're not laying out specifications that are guaranteed.

Hoenig: You've got to keep them informed. You can convene an investment review board or publish portfolio management reports that show where the money is going and what the returns are so far. I've worked with a client who set up a Web site so that executives could look at the investments on a portfolio or project level and get one-page status reports.

Shepard: In the near term, I've got some specific snags. First, I've got a really bummed-out integration team. The companies they helped target for acquisition were snatched up by our competitors. Now they have to go back to square one.

Cross: Motivation is synonymous with mobilisation. This should be a time when clarity of the endgame is paramount and the goals and ambitions are exciting ones. So the competitors beat you to those companies. But that shows you at least picked worthy targets. You have to try again -- now you have the added excitement of beating the competition the next time.

Wallington: Specific things you could try would be to make it a campaign, give it a name and give it symbols. Remember to recognise interim goals as the staff meets them.

Hoenig: You've always got to anticipate surprise moves from the competition. Nothing stays still and waits for you to mobilise and execute. Make it clear to everyone that they're in a race.

Cross: Yes, it's like the start of a race, and you want your athletes hyped up to win. To do that, David, you've got to be seen as very active and passionate about the process. That's a key test for a leader.

Shepard: How about very active and stressed out?

Hoenig: Well, the CIO may not be able to generate the excitement all by himself. It may be good to call in the CEO or someone else to help generate it.

Wallington: That's true. If you're not an inspirational or visionary leader -- and I'm not saying you're not, but clearly there are some people who are not going to be -- then how do you get that kind of passion into your organisation? You can get help in jazzing up your presentation. Bring in others to help. But you should work to develop your own skills. Get feedback and act on it. The more you do this, the better you'll get and the more comfortable you'll become.

Hoenig: Try sharing your feelings and motivations with your staff. Tell them why you've accepted this increased responsibility, and let them know you believe in the company. Explain how you're stimulated and excited by these new challenges.

Shepard: Then there's the joint development with Aurora. The company is pressing to start serious work on the drug modelling and simulation system, but we haven't worked out all the details to my satisfaction. I don't want to derail the project, but . . .

Wallington: You're doing the right thing in partnering with an outside vendor. Strategic alliances are a key mobilisation strategy that CIOs are increasingly turning to. For us at Xerox, it was outsourcing. But you can't let yourself be pressured to start just because the vendor is ready to start. Working with a vendor doesn't mean the accountability goes to the vendor; accountability stays with the leader. So you have to have the time, space and resources to manage the vendor. That's a key point. Many CIOs just hand things off to the consultant, and [the project] goes down the tubes.

Shepard: I don't really have anyone who can handle that oversight now. I think it'll have to be me.

Hoenig: If you can set up someone to do it -- with you as a coach -- then you should because you'll train that person to take over and help develop that person's confidence as a leader.

Wallington: I've felt it's best to develop people on the job, to take some risk -- put them in a position they aren't quite ready for -- and coach them. You can talk to them about different options as they make decisions and ask them to consider what the results of each alternative might be. It teaches them to think about what they are doing as they're doing it.

Hoenig: I have one other word of caution about this partnership with Aurora. Don't become entranced with a particular vendor. Make sure you're aware of what its competitors are doing and, if you can get them, have multiple suppliers.

Wallington: You should RFP the project. That's how you build your network and find out what other people are capable of.

Shepard: Even if I have a relationship with this vendor?

Hoenig: If it's a good relationship and they're a really good vendor, then they'll understand the process.

Wallington: And if they win it, it will be on an objective basis.

Cross: As for your partnership with McEarnst, it sounds like you expect the company to be pitching prospective customers for your network technology.

Shepard: Not only do I have that expectation, it's built right into our contract.

Cross: Well, this could be a situation where you have to do a little disciplining. Show them they've got to stick to the agreement.

Hoenig: Yes, but you don't want to go in waving the contract around. Go back to them and review the original goals and expectations in the agreement. Talk about whether you're both going to live by them or whether they need to be changed. That will force a resolution.

Shepard: I've saved my biggest mobilisation problem for last. Just like I figured, Pete Lucibelli in sales and marketing isn't cooperating. We're supposed to be working on Home Remedy Consult with that department. It's his project, and I gave him some dedicated IT staff, including my best network guy, Greg Devlin, one of those leaders I'm supposed to be developing. Well, Greg resigned this morning because he could not get anything done; there was no one from sales to work with.

Wallington: You've tried several things to win over Lucibelli. You've offered him a clean-slate relationship; you've given him your best people. Now you've got to get tough.

Cross: Pat's recommending violence again.

Wallington: Not really. But consider: AusMed has limited resources. You've scrutinised your investments down to the dollar and you have someone dragging his feet, putting a project in jeopardy. The CIO has the responsibility to make this problem clear and visible to the executive team. You should recommend pulling Lucibelli's money, pulling his project and putting the money back in the investment pool for reallocation. This way you bring it right back to the senior team and make Lucibelli explain why he has put the project in this position.

This kind of conflict resolution isn't easy for the typical CIO personality. Rather than incur the wrath of the Lucibellis of this world and jeopardise relationships by putting them on the hot spot, the IT guy will generally try to keep the project going. Then, in the end, he fails and the IT organisation takes the heat. It's a killer conflict.

Shepard: You're right, it's not easy. But it's part of my obligation to the company. I'll explain the options to Lucibelli, and his response will determine my next move.

Wallington: Good luck, Dave.

Epilogue

After a long, closed-door conversation with Shepard, vice president of sales and marketing Pete Lucibelli expressed a sudden and sincere desire to develop a better working relationship with the IT group and made a commitment to get the Home Remedy Consult project going immediately. Lucibelli began the relaunch by personally convincing Greg Devlin to return to the project. Back on the job, Devlin was teamed with two high-level marketing and sales managers. Eight days later, Lucibelli and Devlin led a demonstration of a prototype Home Remedy Web interface during a lavish project launch party. CEO Maureen Carleton was delighted, as was David Shepard, CIO and budding enterprise leader.

Lessons in Leadership

When CIO approached me with an idea to present a series of leadership articles, I was intrigued enough to sign aboard, mainly because I'm worried about the chief information officer. In the realm of enterprise information and the systems that generate, move and manipulate it, lacklustre leadership has never been more potentially lethal.

The Internet has profoundly changed everything, and the role of information in the new economy is critical to the survival -- not just the success -- of any institution. If an organisation wants to still be in the phone book in 2002, that realisation has got to sink in now.

In the next millennium, the major challenge for leaders will continue to be releasing the brainpower of the workforce. Competitive advantage will depend on leaders' abilities to create the social architecture capable of generating intellectual capital, which is the engine of growth, productivity and profits. It's true that information systems are the conduits for intellectual capital. But that does not mean that you, the CIO, are merely the chief traffic cop and maintenance person. With your peers and bosses on the executive team, you have an obligation to envision, promote and execute the how, where, when and sometimes why of harnessing intellectual capital.

Unfortunately, times are tough for leaders. I've been studying, writing about and consulting on leadership for decades, and I believe the problems facing today's leaders are more daunting than ever before. Whether the task is building a global business or discovering the mysteries of the human brain, there are simply too many problems, too many connections to be made, too much blurring, spastic hyperturbulent change for any single solution to work. Or any single leader to solve. As I argued in a recent article in Organization Dynamics, the Lone Ranger hero-leaders of today, the Jack Welches and Michael Eisners, will need to become connoisseurs of talent, more curators than creators, in the business world of tomorrow.

-- Warren Bennis

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 corporate-wide 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 corporate-wide 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.

Warren Bennis's Commentary

Fired Up or Fired Period

A big part of improving the ability to mobilise is knowing why mobilisation doesn't happen easily. To make things happen, CIOs should first understand the dynamics of bureaucracy and resistance to change in their organisations. For example, in knowledge management, information delivery is only part of the equation. People hoard data or ignore it because of a not-invented-here attitude. CIOs need to understand these resistance factors in order to motivate people to use, share and disseminate knowledge. Many CIOs don't do a good job of this, and that's probably why you see a bifurcation in the role, with companies having a chief knowledge or learning officer as well as a CIO. That bifurcation is ridiculous. CIOs should not be relegated to gathering data while other officers promote its use; the CIO should be doing both.

We know that the rate of technological change surpasses the capacity of human beings to change. So executives desperately need someone to explain the significance and meaning of the fast-moving technologies of the Internet era. This is an obligation of CIOs and an important application of their strategic knowledge. It's also a mobilisation strategy because if the CIO does this well, the executives will recognise the imperative to marshal the manpower, financial resources and commitment to make change happen.

I agree with David's coaches that, as part of mobilisation, he must demonstrate more passion and thus generate hope and optimism. These feelings are important, because investments in technology are, by their nature, investments in the future, and those can be unnerving. CIOs must encourage people up and down the line to see these investments as opportunity enablers. If David followed the recommendations in my previous case commentary -- to conduct executive education seminars, form a technology review committee and address the board of directors regularly -- I think he would be able to keep his executive team emotionally and physically involved. Status reports alone won't do it. In fact, status reports are the weakest tool of influence known to mankind.

Having reached the conclusion of this case study, I'm still very concerned about David. I don't think he understands, nor has he convinced AusMed's executive team, that the CIO role is critical to the company's strategy. Even his last statement in this instalment makes me wonder if he really gets it. He says: "I'll explain the options to Lucibelli, and his response will determine my next move." He's still waiting to see how people will react. Where is the leadership? If he doesn't get moving and show results soon, I think he'll be fired. I hope you, the reader, won't share that fate.

Warren Bennis is university professor and distinguished professor of the Marshall School of Business at the University of Southern California and a consultant to multinational companies and governments worldwide. He's authored such seminal leadership books as Why Leaders Can't Lead; On Becoming a Leader and Organising Genius: The Secrets of Creative Collaboration. His latest book, co-authored with David Heenan, is Co-Leaders: The Power of Great Partnerships (John Wiley & Sons). Bennis has been an adviser to four US presidents, served as president of the University of Cincinnati and, in the mid-1960s, predicted the inevitable demise of communism and the bureaucratic organisation.

Page Break

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.

Page Break

The CIO profession has won a perilous victory. Chief information officers have earned the right to be regarded as enterprise leaders transforming the business and steering the company to new and vital destinations. Enterprise leadership now comes with The CIO title. But with that mantle of leadership come thick new folds of complexity and uncertainty.

Unfortunately, experience running an information systems organisation does not guarantee success in enterprise leadership. A credibly run IS group is only a ticket to a seat at the executive table. Once seated, the CIO has to change; even his thought patterns must flow in new channels. Within an IS department, there's a technical right and wrong. The program either works or doesn't work. But enterprise leadership functions within a miasma of maybes, as politics and personalities work to obscure the best course of action. How can CIOs cut through the murk to influence and inspire people who don't owe them allegiance? What are the necessary tools, skills and disciplines? How do they avoid the traps and apply their expertise?

It's not easy for any executives to ask these questions, to admit their vulnerabilities and their need for guidance. However, we know many CIOs share these concerns, so we have addressed several of them in this three-part fictional case study, which will run throughout our summer issues. The scenarios, though simplified, depict the realities of leadership. David Shepard, a newly appointed CIO at a fictional pharmaceutical company that's on the ropes, has a small window of opportunity to prove himself an enterprise leader. He's got the guts to admit he doesn't have all the answers, and he's tapped into his network for help. Guiding him and the reader is CIO's leadership faculty of IT veterans -- John Cross, Christopher Hoenig and Patricia Wallington (for their credentials, see "Meet Shepard's Coaches").

Part 1 of the case study focuses on relationship-building, an art that's fundamental to successful leadership. Can our CIO build effective relationships with his executive team while navigating a political minefield that threatens them all? Read on and find out.

A CIO to the Rescue?

In his eight years at Ausmed, David Shepard had never been in the 14th-floor executive conference room. In fact, the last time he'd been on the floor was six months ago when he gave an e-mail training session to the recently departed CEO. The crash course in getting wired hadn't paid off; the board forced the CEO to retire a few months later.

Shepard, summoned by Maureen Carleton, the new CEO, found himself seated at the boardroom table with a handful of other AusMed officers. Shepard's nemesis, Pete Lucibelli, was there. Lucibelli had made a habit of bypassing the IS department, bringing in his own technology for his sales and marketing group while paying little heed to Shepard's IT architecture standards. Also at the table was chief operating officer Robert Matson, an AusMed veteran. Even though Shepard officially had reported to the finance director, it was Matson to whom he usually turned. Now his friend was in an awkward position, apparently passed over for the top job but asked to stay on for "operational continuity".

Matson looked uncomfortable, but Shepard considered himself easily the most nervous person in the room. He had been CIO for three days, reporting directly to Carleton, and Carleton, accustomed to the bleeding-edge technology of the biotech sector where she came from, wanted Shepard to use IT as a competitive weapon in his new role as member of the leadership team. She had explained that she'd promoted him from IT director because he was adept with technology and knew the company's business processes -- advantages she couldn't get from an outsider or a CIO candidate with only a business background.

She was right about his strengths. He knew IT and its application cold. But he still felt ill-prepared to be a peer executive leading the company.

The meeting began abruptly as Carleton outlined the basics of her turnaround strategy. Actually, it was her long-time associate Richard Pepe, AusMed's new manager of business strategy, who did most of the talking. And it was an impassioned speech. AusMed was being dragged down by its low-payoff protocol-development partnership with health-care providers. To put its resources into new opportunities, AusMed needed to cut its losses and pull out of the venture, Pepe said.

Shepard winced. The knowledge network that IS had built for these facilities to share treatment data had been a breakthrough IT accomplishment. Several health-care companies had asked to study and benchmark against it. Now it was being discarded. And its creator, network manager Greg Devlin, would probably follow it out the door in frustration.

On top of that, IS was three months and several thousand dollars into development of a second generation of the network, under the co-leadership of Devlin and McEarnst & Co consultant Roberta Sedaille. This would have linked providers to their affiliated private practice physicians through a secured extranet.

Pepe outlined the second piece of the strategy: broader, faster revenue streams. AusMed's drugs were ageing; the company needed new high-margin products fast. Not surprising, given their background, Carleton and Pepe wanted to acquire boutique biotech and biogen companies to gain access to products in development. (Also not surprising, they'd got rid of AusMed's head of product development and were now trying to recruit someone from another pharmaceutical maker.) But new products in the pipeline wouldn't be enough, Pepe added. AusMed needed a more rapid rollout process to move products through their clinical trials faster than their competitors did. And the company needed to explore new markets and new delivery mechanisms. One of Pepe's ideas was to bypass pharmacies and go right to the public for non-prescription products such as AusMed's herbal line.

Shepard found himself thinking, How can we possibly fund all this?

Carleton spoke up. "We'll borrow to fund the acquisitions. The rest we'll have to accomplish on our internal budget -- which will be the same as last year's."

Great, thought Shepard. She can read minds too.

Shepard wanted to make the most of this opportunity, but he knew Carleton wouldn't have much patience with him. But how could he work with her when he barely knew her? And what would happen when she started talking to Lucibelli? He'd probably tell her to outsource, something he had proposed before.

On the other hand, Shepard's IT department was clearly doing well. The numbers were high on the last two user satisfaction surveys. His staff turnover matched the industry average (at least for now, he thought, picturing Devlin, his network manager, walking out the door).

But the efficient, effective IT organisation he'd built was just table stakes now. The credibility it provided him simply allowed Carleton to give him the benefit of the doubt.

That night, Shepard made a call to a friend, Alana Jones, a partner at an executive search firm. Until a couple of years ago, Jones was AusMed's HR director. She was very connected. Maybe, Shepard thought, she could give him the scoop on Carleton and how to handle her.

Jones didn't know anything about the CEO, but she quickly pinpointed Shepard's problems. His priority right now was relationships. To have any chance of being an effective leader, he first had to work out his relationships both with the new executives and the old. With whom should he ally himself? How should he handle the politics? What was the best way to reach his new boss? How would his promotion affect his relationships with his IT staff?

Jones suggested he tap his network for proven leaders and "go get some coaching".

Help Is on the Way

The conference call in Shepard's office went off without a hitch. On the line were three people who he felt had helped define CIO leadership: John Cross, who'd just left his post as head of IT at BP Amoco PLC; Christopher Hoenig, former director for information management and technology issues at the US General Accounting Office; and Patricia Wallington, recently retired CIO of Xerox. Shepard outlined his situation and then shut up and listened.

Patricia Wallington: Two things have happened, David, that make your relationships important. You've moved into the executive ranks, and your peers are different from who they were yesterday. Now you have to re-establish the relationships because the chemistry is different. And you have a new CEO among that set of peers.

John Cross: It's these relationships that will unlock your capacity to gather votes to sustain an idea, to create enthusiasm to support it, to marshal the investment to develop it -- in effect, to lead.

Shepard: Since I'm reporting to her, I'm most worried about my relationship with the CEO. How can I develop it quickly and well?

Christopher Hoenig: The new CEO is a double-edged sword. The big opportunity is that you've got a new CEO under a lot of competitive pressure who needs to succeed.

Wallington: And someone who sees technology as very competitive.

Hoenig: Right, but that's also one of the biggest hazards. If you have an impatient CEO who wants action and that converges with a powerful enemy or difficult circumstances, it could be hazardous to your health.

Shepard: I've been thinking that I've got to impress her quickly. What should I do? Or not do?

Cross: If you do something too smart, simple and glitzy, it may come around later to bite you. On the other hand, if she's in a hurry, it's important that you're seen as proactive with some of her agenda items. You can do that in part by testing her on the clarity of her intentions. At this stage, she will be just as impressed with the right questions as with the right answers.

Hoenig: Exactly. If you make an accurate assessment of the problem and determine what needs to be done now, you can set yourself up to intelligently overdeliver.

Wallington: I never got the art of that. I always intelligently overcommitted.

Shepard: So I should seek her out for clarification. You know, our new manager of business strategy, Rich Pepe, seems to be her right-hand man. Do I have to find a way to go around him?

Wallington: No, you can use him. Pepe has all this experience with the CEO and he can coach you on how best to meet her expectations -- what she likes and doesn't like, what she really means when she says something. He's a diamond sitting there waiting to be collected.

Cross: We had a chief of staff at BP who I reported to for a period. He proved to be a great way to get access to the CEO more quickly than anyone else because this guy was the CEO's confidant. Because he had such frequent access, if you wanted to test ideas, he could do it for you quickly. He was a sound barometer to how something was likely to play.

Hoenig: I'll throw out one caution here, though. Going into any relationship with a new confidant like that, you have to get as much intelligence as you can so you get to know what type of person he is.

Wallington: You mean Pepe could be a snake in the grass?

Hoenig: He could be protective of his access to the CEO or be out to build his own power base.

Shepard: I've never liked playing politics, and now it sounds like that's a lot of what I'll be doing. How would you proceed?

Hoenig: You have to understand the politics but not fall prey to them. You need to be the kind of person who can come in and solve problems and disagree if necessary and be an independent force. To project this, I try hard in any one-on-one conversation to have the same conversation I'd have if there were other people in the room listening to us. I try to project as much of that independence and desire to get the right solution for the company as possible. It's a very tough thing to pull off, but it's really important.

Wallington: The key to what Chris said is to get the right answer for the company, not the right answer for one person or the safest answer for you politically or careerwise. That's putting your personal courage and conviction out there.

Hoenig: If you are that kind of person, other people are going to want to have a relationship with you.

Wallington: And you will end up getting called in on lots of decisions because people will know that you can't be manipulated, that you will always be objective and above board.

Shepard: I guess it's also a political issue, but I'm not sure what will happen with my friend Rob Matson, our COO. Anything I can do here?

Cross: In too many cases I've observed that the Matsons of this world actually don't survive. They're kept on for their institutional memory, but those words usually mean they are there for a bit of transition and a year later they're gone. If that's a possibility, you have to be careful that, despite the fact that you're good friends with this guy, you aren't simply seen as an old extension of Matson's environment. Be careful about leaning too heavily on old dependencies.

Hoenig: If you haven't proved yourself yet as an independent thinker, you might want to openly disagree with Matson in an initial meeting to show that you're willing to take an independent point of view on an issue.

Shepard: I see what you're getting at, though I don't like it. I've got to figure this out.

Cross: Partly because I'm uneasy as to whether Matson is a long-term player, I'd rather spend my time figuring out Pete Lucibelli, your sales and marketing head. As a matter of practice, I always pick the three or so most difficult guys in the organisation who are at critical points and make sure they become future friends and allies.

Shepard: Lucibelli is definitely a problem. He could undermine my position before I even get these new relationships going. I don't know about making him an ally, but can I do anything to neutralise him?

Wallington: Try having an upfront conversation with him. "It's a clean slate, we have a new CEO, let's get off on the right foot." Tell him you want to understand his expectations, but he needs to understand things from your side, such as the need for standards. Then pick a person, or let him pick your very best IT person who will be his contact. Then he's got some control because he's got the person.

Shepard: I don't know if that will work. This is a guy who has broached outsourcing with the other execs in the past.

Hoenig: If there's a threat in terms of outsourcing and big consultants coming in and taking over the job, that's also something to be proactive about. Pull together the benchmarking data and take an aggressive posture on outsourcing options so that you are in control of the agenda and no one else is setting it for you.

Cross: David, if I may, one thing that's essential at this stage that goes along with working out your relationships with these people is establishing clear accountability and authority.

Shepard: For . . . ?

Cross: A new CEO comes in and fires off a lot of directives. Who will be accountable for what? If you and the others are going to make strategic decisions and investments, the CEO needs to be very clear who is going to drive that, and it needs to be known in your executive pool. If you're not careful, everybody bolts back down their various rabbit holes with huge new requirements. Then you can actually lose control. They'll say, "The CEO wants all these things done tomorrow, and I have to get on with it. I haven't got time for you."

Wallington: One thing you could do that would help your CEO (because she obviously didn't think of it) is to go forward with a proposal of how you see your role and ask her to comment and codify it as she sees it. Then suggest that this would be a good thing for everybody to do so that they could all help her do what needs to be done.

Hoenig: Define what you'll be responsible for and what you're not going to be responsible for. And negotiate for the authority you need to get the job done, things like setting and enforcing standards or allocating funds.

Shepard: I'll try that. You know, this reassessment of relationships has got to extend to my IT people as well. I'm going to have morale problems if they pull the plug on our treatment-protocols knowledge net and the extranet add-on. I may lose my ace network manager over that.

Wallington: I would do at least two things there. I'd have a communication meeting, just an open meeting, and walk everybody through what I know. I'd try to get people to understand that there will be lots of change, and change brings excitement. Nobody's talked about layoffs. Maybe you can transfer people to new projects. Without the meeting, people will speculate and worry. If you don't know everything, commit to tell them when you do know. The fact that your position has been elevated means their position in the organisation also has been elevated.

Then I'd pull key people who are particularly worried and have one-on-one conversations. Find out specifically what they're worried about and find out what they'd like to do. Maybe Devlin is sick to death of this project and would like to do something else. Give them the opportunity to talk to you.

Epilogue

David Shepard described his proposed responsibilities to the CEO, and she agreed with the suggestion that she clarify accountabilities across the executive team. Shepard also began cultivating a friendly relationship with her confidant, manager of business strategy Rich Pepe, who turned out to be as big a St Kilda fan as Shepard. After allaying fears within the IT group, Shepard identified several people eager for new challenges including, as it turned out, network guru Greg Devlin. Unfortunately, sales and marketing chief Pete Lucibelli didn't seem receptive to Shepard's proposal that they start over with a clean slate. Obviously it will take more time to build and solidify these relationships, but Shepard can't afford to wait for everything to gel; he now has to bring his strategic knowledge of technology and business process to bear on AusMed's still-fledgling turnaround strategy.

AusMed: Turnaround Plan

Company: AusMed Pty Ltd, a medium-size Victoria-based pharmaceutical company.

Competitive climate: AusMed has lost money in five of the last six quarters. Its rivals are getting bigger and stronger by acquiring other pharmaceutical companies and increasing the number of new drugs in their pipelines. AusMed's product base, on the other hand, is among the most aged in the industry.

Obstacles: AusMed's attempt to boost sales through partnerships with health-care providers has been a failure. The company teamed with hospitals and long-term care facilities to develop disease-management protocols. AusMed expected the use of these protocols to lead to more prescriptions for AusMed medications. But protocol development is proceeding slowly, and physicians are resisting the protocols (which they regard as "cookbook medicine").

Recovery strategy: The company's board of directors has decided on a strategy to stem the losses and to catch and surpass the competition. The turnaround plan is three-pronged: kill unprofitable alliances, jump-start product development through new acquisitions and create new revenue opportunities -- all the while adhering to a conservative budget.

Actions: To spearhead the changes, the board replaced AusMed's long-time CEO with a new executive from outside the company. New CEO Maureen Carleton, most recently head of a small, fast-growing biotech firm, believes that information technology must provide a competitive advantage -- a stark contrast to the outgoing CEO who saw IT as a support function. One of Carleton's first acts is to elevate AusMed IT Director David Shepard to the new position of CIO. She has made it clear that she expects Shepard to be an enterprise leader.

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 magazine 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 & Co 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 the same year named by US CIO magazine 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.

Coming in Part 2

In the November, 1999 issue of CIO, join Shepard and his leadership coaches as he figures out how to enable AusMed's turnaround and lead his company in promising, yet risky, new directions.