Shared Vision: It's a Gas

Former ANZ Bank CIO David Boyles spent six months fine-tuning the IT shop at AGL before handing over the reins to Cesare Tizi, ex CIO of Transurban. The result is a textbook example of how to manage a smooth transition.

David Boyles and Cesare Tizi are so in harmony about how vital sharp and accomplished individuals are to the success of any IT endeavour that you could be forgiven for imagining their ideas had been forged in the fire of a shared struggle to turn IT into a core corporate asset.

Just listen to the old guard - Boyles - describing the priority he gave to building the strongest possible IT team during the six months he spent knocking AGL into shape for Tizi, his successor, before Tizi took over the reins as CIO in August:

What I and the IT team did when I came on board is we sat down and looked very closely at what AGL as a company was trying to do, and what each of the major business units were focused on, in terms of their goals. We had some pretty substantial discussion over a period of time about what kind of IT organization we needed to be, that would match up and deliver to the overall enterprise goals and to the individual business unit goals.

. . . And my team - and this is us [IT] talking about ourselves - came up with a real focus on people and leadership as something we needed to do. We felt that we could do much better around people development: That we could be more structured in the way that we hired and developed people, and that we could actually raise the bar for all of our specialists. So whether you are a project manager or a software developer, we felt that through a combination of recruitment and internal development we could actually achieve new levels of performance there.

Then listen to the new guard - Tizi - speaking two days later as he contemplated the shipshape IT shop Boyles has left him to play with and build on as he takes AGL into the future:

I've known David as a colleague in the IT industry for a few years, and we do think alike in many ways. We both believe that having high-performance teams is a key to successful IT. The technology is quite easy - I'll say that openly. The technology can be done by a lot of people, but having teams that work together and efficiently and who all work together and pull in the same direction is the tough part . . .

What's happened is that David, who is a very experienced guy in the IT world, has created some fantastic foundations for me at a human level. He's rebuilt the team, he's restructured the team in the sense of the way it engages with the business, and he's created some fantastic governance frameworks that we can use quite effectively to manage the IT team and also make sure the IT team is aligned to the business processes. So what he's handing over to me is the human resource, very well structured . . .

What I've got to do now, and what I plan to do . . . is to use that human resource - those teams, those skills, those people - to build the technology framework and the type of agility in the IT systems that AGL needs to move forward in its business endeavours, its business strategy.

Indeed Boyles and Tizi are so in tune on so many areas of IT that you would think they must have worked together for aeons in one of those close-knit teams they both laud. Yet although the pair has known each other as fellow IT travellers for some years, and think very much alike in many ways, they had not actually worked together until Tizi took up his post at AGL and worked with the semi-retired Boyles for a few days as Boyles handed over the AGL IT baton.

Boyles, fresh from transforming IT at the ANZ (see "Over and Out", CIO February), was drafted in February on a part-time basis to lay the foundations of a tight and professional IT shop and to lead the search for a permanent CIO. After an extensive search he chose Tizi for the significant stripes he had earned at Transurban for his success in steering Melbourne's troubled CityLink toll road back on track (see "For Whom the Road Tolls", CIO September 2003), believing he was primed for new and bigger challenges.

"There's a very natural progression from Transurban to AGL," Tizi says. "Transurban went through a very similar cycle, with a large customer database with a large number of transactions of very low value, so we required a certain level of efficiency and performance from systems, and it was a fantastic challenge because we really drove some incredible bottom line savings at Transurban.

"What AGL offers me is a bigger scale of doing something similar . . . it's got a larger scale in customers, the transaction volumes are greater and the transaction values are greater. Some of the things I learned in the Transurban model I would like to apply to AGL, and there are also some new things. I've got some ideas about how to manage large customer relationships, large customer databases, large building-type systems."

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Essential AGL

Australia's second oldest company, Australian Gas Light, was established by private interests in New South Wales on September 7, 1837 to light the streets of Sydney with coal gas. It remains Australia's leading energy provider, its wholesale and retail marketing businesses selling natural gas, electricity and associated products and services to approximately three million Australian customers.

AGL has an extensive portfolio of wholly- and partially-owned investments in energy infrastructure, infrastructure management and other energy businesses, including Agility, the Australian Pipeline Trust (APT), Elgas, NGC Holdings of New Zealand and HC Extractions. It seeks to capture the quintessence of its business in something it calls "The Essential AGL", which it says "summarizes the core of what defines us today and encapsulates those things that will guide us on our journey of profitably growing and developing AGL". At the core of The Essential AGL is so-called Energy Know-How: the expertise, skills and problem-solving capability that collectively drive service to customers, employees, shareholders and the community.

So it is only natural that it should have turned to a man with considerable know-how - Boyles - to knock its IT into shape. Boyles had most recently transformed the way ANZ's technology team related to its customers (internal business units); the way it dealt with its people; the consistency and quality of its processes, and its infrastructure. But at 55, he was keen to move into semi-retirement from permanent "corporate warrior-hood".

Neither the retirement nor the "semi" lasted very long.

After signing on at AGL Boyles spent three days a week there for six months (working at Microsoft for another couple of days a week - an odd kind of retirement) putting in place what he believes is an "outstanding IT road map" then starting AGL down the defined path.

He says when he first started with AGL he found a fairly typical IT organization, where the businesses thought IT was not properly aligned with them and the IT folks feared the businesses were not thinking far enough into the future to put necessary infrastructure in place. Remediation began with extensive discussions, brainstorming and prioritization. Strengthening the IT team was an early emphasis, starting with the introduction of a true competency-based hiring model. That meant examining the competencies and capabilities IT was trying to deliver to the business, and then determining whether the skill sets were available to deliver on those needs.

"So we actually went through our whole leadership team - three levels of leadership team - and redefined our organization to match up with the business capabilities that we needed to deliver," Boyles says. "Then we took each job position and defined it in terms of technical competence, leadership competence, and values and behaviour. And we wrote pretty rigorous descriptions around those, and then we actually spilled and filled the organization to match up to those competencies. And we had a structured hiring process that we used in that process."

However, Boyles also knows that to strengthen IT means having clear development paths for the people in IT, so he defined a stratified development plan and strategy for employees, with specific programs to keep specialists' skills up to speed.

"The next level of development is for high-potential people," he says. "It's early days on that, but one of the things I did was to start meeting with high-potential people and actually engaged them in the definition of our vision. So part of their development in this case was a special project, and the project was to have them break up into small groups and to talk about IT and to come up with their ideas about how IT should run. And we took that information to build into our overall IT vision and road map.

"Then the final segment of the development strategy has to do with leaders, and we haven't really finalized this but we're in the process - in fact we just talked about it earlier this week - of defining the details of our leadership road map. And we will have a very specific development program for all IT leaders at AGL going into the future."

Next came the vision, encapsulated in the phrase "Driving Excellence", and embracing IT's strategy, objectives and the ways IT would explain itself to itself in order to get "everybody on the bus as part of the team". At its most basic, Driving Excellence is about having the best people, fact-based decisions, robust and flexible infrastructure, rigorous processes, value for money and an intense focus on strategic alignment with the business.

"We came up with a vision around Driving Excellence, but we got very specific," Boyles says. "It wasn't just: 'Here's a phrase: Driving Excellence'. We have a complete and very detailed road map about how that's going to be done over an extended period of time. It's actually a three- to five-year plan."

Determined to strengthen alignment, Boyles took the kind of governance model he set up at ANZ, with its multiple IT units and thousands of employees, and translated it, albeit in a modified manner, to AGL for its hundreds of IT people, after some rigorous benchmarking of best practice at organizations of similar size. Primarily that meant setting up an IT Executive Council - chaired by Boyles then and Tizi now - comprising all senior business people and key IT people. The ITEC meets monthly and works extremely well, he says.

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"Another area we looked at was processes and tools. Again, like most IT shops, we were a bit all over the map, and by that I mean we had lots of processes and lots of tools," Boyles says. "We decided that in order to really be an example of IT excellence we had to standardize and rationalize on those, and to improve - raise the bar in every one of those. So we looked at things like QA, information security, release management, software development, and again put in place a very specific road map. There are some very specific actions and activities and outcomes from each of these areas."

Boyles identified a dozen key processes in IT, including project management, software development, release management, information security, business continuity, disaster recovery and vendor management, and assigned one of the executives on his team responsibility for each. Then as part of the road map the team laid out how IT as a team and each executive individually would ensure AGL excelled in those areas over a period of time. In Boyles's judgment, IT operations seemed to be running pretty well, but were definitely not at best practice. The team decided to put increased focus on the reliability of operations and to aim to reach best practice as a utility company over a period of time, as per available benchmarks.

On the software development side he again took a similar approach to that which had worked so well for ANZ, starting the organization up the Capability Maturity Model (CMM) ladder. The first step was to introduce the Fagan Inspection Process, which Boyles calls "one of the most effective and efficient ways to move an organization up the CMM ladder without even talking about CMM".

Launched by Michael Fagan in 1975, the Fagan Inspection Process is widely used by very knowledgeable people who want to shorten cycle times and reduce bugs in code. Both the ANZ's Bangalore IT shop in India, which made it to CMM Level 5 during Boyles's tenure, and its Investment Bank unit in Melbourne, used TQM and the Fagan process to move up the CMM ladder. As a way of getting everyone using the same processes and ways of doing things, Boyles says, Fagan is very effective, providing immediate benefits in cycle times and quality. Just about every AGL development staff member has now been schooled in the Fagan Inspection Process.

"The thing about IT shops that you rarely see is this sort of really, really long-term focus on identifying what best practice is," Boyles says. "With Fagan and software development we could have said we're going to be CMM Level 5 right out of the chute and we could have done something to get to that. Instead we said we're actually going to get to CMM Level 5, here are the baby steps we're going to take along the way. We made them quite specific, the actions that have been taken to move us in that direction, in the knowledge that if we do these baby steps correctly we'll get there."

However, Boyles also decided AGL needed to adopt a particular process for agile programming. He settled on Scrum, beginning with a project - a marketing initiative - considered hugely important to one of AGL's businesses. "That has worked extraordinarily well," Boyles says. "I have gotten any number of e-mails about the outcome of it, the speed with which it has delivered solutions and the quality of the solutions."

Boyles says Scrum is a personal favourite because it gives a project team the option of adopting an extremely rigorous high-level programmer administration approach to provide strong control mechanisms while still allowing very fast outcomes. And because Scrum teams are composed of business and IT people, and because Scrum allows regular iterations (many people implement Scrum with monthly iterations, Boyles has routinely adopted weekly iterations ever since his time at American Express), it is a powerful force helping to ensure alignment.

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Dial Tone

In terms of the looking at the big picture of IT and how AGL wants to move it forward, the team has focused on a robust and flexible architecture as the key lever for delivery. Boyles says that architecture will include the network components, both hardware and software; the "primary compute components" embracing everything that sits in the data centre, the mainframes, the mid-ranges, the servers; and the desktop applications that sit on top of that - what he calls the "dial tone".

"We've taken a very strong look at our whole architecture, and decided that to get the sort of flexibility and robustness that we want, we're going to have a very prescriptive architecture," he says. "Basically the idea is to make sure that every business initiative that we do can be accommodated on top of a flexible and robust infrastructure, and lets us over time - and again it's going to take several years once this is completely decided and agreed upon by the business heads along with the IT people - start building everything on top of this completely prescriptive architecture.

To this end Boyles has laid out a bare-boned approach to architecture that Tizi and the ITEC will go over in detail over the next few months. That includes a three-year-long journey towards a service-oriented architecture (SOA), components of which have already been put in place. But Boyles says as in most other organizations, the biggest impediments to adopting an SOA are likely to be cultural, with "box huggers" and "software huggers" tending to reflexively oppose SOA-type solutions.

"There are in my opinion - and I think I managed to prove this in a couple of big projects - no impediments to fully implementing service-oriented architecture, or Web component architecture, whatever you want to call it. Plus it's flexible, it's interoperable, because it's standards-based. You don't have to stick with a single vendor. And I believe any organization that is not fully focused on SOA and building things around portals and with Web components is going to miss the boat," he says.

"With the architecture then, what we're driving from that is how infrastructure will be built, and in fact how we will go back and rebuild infrastructure in some cases; how applications will be developed and what platforms they will run on, defining open standards-based applications through the use of XML and SOAP and other SOA components."

The kind of IT organization these changes ultimately create, Boyles says, is largely up to Tizi.

"What I think we've done is put the foundation in place - a good structure to build from," he says. "You can't change an organization in six months; it's a three- to five-year process to get really dramatic and lasting change. So Chez [Cesare] and I have had a couple of interesting conversations where I've told him more than once that he'll have plenty to do.

"He'll have lots of challenges and lots of fun, because I've found this in every job I've taken on: You can get everybody focused on the right things and put your road map in place and start improving your processes in a structured way in six to 12 months; but probably the toughest part of any job, and the reason why I've typically stayed in any job I've taken on for six to 10 years, is that week-to-week, maniacal focus on the road map then to actually deliver the outcomes. Because if you just talk about CMM5, if you're not actually taking the baby steps every month, you're not going to get there.

"It has to involve real cultural change, it's a three- to five-year process, and real cultural change comes about as a result of actually changing behaviour, changing the way things are done."

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Meet the New Boss, Same as the Old Boss

As Tizi takes the reins at AGL, he says he is delighted with the human resources capability Boyles has handed him. "The key is making sure you have the right people in the team, and then cascading across a 'culture' from the leadership level all the way down," he says.

"AGL has got a great leadership team, and what David has done is extended that leadership thinking and that approach to leadership down through the IT organization. He also put the right people in the right jobs as well. AGL, like a lot of companies, has grown through mergers and acquisitions, which means you've got a lot of people who've come in from different organizations. Now the temptation is - and the actual state of people is - to stay in their historical organizational groups, and that may not be the ideal for the whole company in the new model."

Now Tizi is keen to focus on making AGL an infinitely more agile company.

"AGL is a growing company. It's an acquiring company. It's reacting to market forces. It also wants to react quickly to the business needs in the sense of what customers are after, to be competitive," he says. "Now, like many other companies, AGL has electronically automated everything, and whenever it changes, whenever the business changes, it looks to IT to change the automation processes to match the business changes after. The key thing though is that it wants that to happen quickly and at a rate that matches its appetite for change."

For IT to be able to deliver on that agility, speed and performance, it will mean doing some "very clever work" in the platforms, software and infrastructure AGL uses and the way that people respond to change, Tizi says. In other words, it will mean being highly efficient in development processes, being very careful in managing risks and doing things in ways that are consistent with what the business wants by way of speed and responsiveness.

SOA will be a major part of that, Tizi says, but so will aggregation of technologies and platforms.

"We can no longer have hundreds of servers in a computer room; we have to aggregate those into something like blade technology at some point in the future," he says. "We have to aggregate storage because storage is becoming a significant part of use in there, created by such soft storage requirements as e-mail but also hard storage of transactions. We have to literally create an abstraction layer between the infrastructure and the applications, so that the applications can be modified, enabled very quickly and the infrastructure can be configured and provided to the application people efficiently."

Tizi also plans to shift the focus to electronic channels. While he was at Transurban he was able to shift about 40 per cent of customer interactions from the call centre into electronic channels. The kiosk was "super successful", the Web channel was "very successful", while the Transurban experience with interactive voice response (IVR) was mixed, he says.

"People find different types of channels [offer] different benefits, but if they don't get something back, something better than the human channel, then it's not as successful as it can be," he says. "So one of the success stories we've had at Transurban, which I plan to repeat here, is to try and shift people away from the human channels to the electronic channels, but all in a way that's engaging to the customer."

To move to electronic channels you need to have a 360-degree view of the customer. If a customer is using one of many channels, or swaps between channels, he wants to be able to see the same information. That means creating a real-time enterprise with some sort of integration layer, to allow any channel to get access to data in real time. "Now, we're not there yet. That has got to be an aim for any organization, and that is why we are going to go there," Tizi says.

Also drawing on his experience at Transurban, he plans to improve the management of contracts. The Transurban way of managing contracts is very much oriented towards the construction industry and incorporates a very mature risk modelling technique. Too many IT contracts fail to have a risk focus, Tizi believes. That failure to incorporate a clear statement of who is managing what risk all too often leads to a very ugly fight between vendor and client, he says.

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CIO's Role

Tizi is pleased that at AGL he will report to managing director Greg Martin, because he believes being at that level facilitates discussions with other C-suite executives. A CIO has to manage a lot of expectations and frequently has to deliver both positive and negative messages. Being a CIO at the right level in the organization, he believes, makes it easier to negotiate the best outcomes with colleagues in the best interests of the company, while CIOs at lower levels can find themselves driven by demand that may not be in the best interests of the company.

He sees his first priority is gaining a broad understanding of the needs of his fellow executives and what they will look for from their systems in the future. "I'm expecting my colleagues to measure my success," Tizi says. "If you ask any of my colleagues in the senior management team, in the leadership team, [whether they] get from IT what [they] want and they say: 'Yes I do', then I know I have been successful."

The departing Boyles also has some thoughts on the evolving role of the CIO.

"Look, I'm probably an outlier on my thinking on this, but I actually believe that CIOs should be outstanding technologists," Boyles says. "I think it's absolute rubbish [not needing an IT background], the stuff of marketing-type CIOs, or whatever. The reason for that is this is like any other specialized profession. How do you really understand things like architecture and infrastructure and the role of these things, and the future of a company, if you don't actually understand what's happening with technology?

"First and foremost, I would say that a lot of the models that I have seen in people's discussions publicly are just strange. So you have to be a good technologist. Secondly, and just about as important, you have to be a good business person. So I do agree with the statement that a good business person should be able to run IT. I say: 'Yes, a good businessperson who happens to be a great technologist can run IT.'"

Boyles fully expects IT to get far more complex over time, meaning the CIO's role is likely to remain of vital significance. As he eases his way into another few years of a retirement that isn't, he can expect plenty of time to observe the wisdom of his prediction, as the future unfolds.