A CEO’s Guide to Computer Systems
Picture this: You’re the chief executive of a medium-sized business poised for expansion. Your accounting, marketing, sales, operations and information services managers say everything is in place except for one thing: a new computer system.
And not just an update to the old accounting-billing-order-processing setup that’s wheezing along on everyone’s desktop.
You, however, are not completely comfortable, because while you’ve been growing the business, information technology has mushroomed into a dizzying array of options. How can you be sure what you need and when? Can you simply trust your technology chief to make the right decisions?
Well, you can relax a little, because the experts say the answer doesn’t lie in your knowledge of the inner workings of the technology. But you do need to have an overall idea about how each piece of technology affects your bottom line. And if your company is to stay competitive, technology needs to be part of the plan.
The key element, however, is still good, old-fashioned management basics: Make sure your managers understand the growth plan and goals, and get the right information from the right people.
First stop: your top information systems person. In big companies, that’s a chief information officer. You’re not that big? Don’t worry, the fundamentals still apply.
Abbie Lundberg, editor in chief of CIO magazine, recommends viewing the top information systems person’s role the way you would any other top manager.
“You have to look at it in context of how you look at other functions, such as finance. The CFO and COO really understand the business and market,” and the CIO should too, Lundberg says.
Lew Leeburg, director of the Information Systems Research Program at the Anderson School at UCLA, concurs. “The CIO needs to be as good as his peers at the company.”
To that end, your technology chief needs to be able to present the options to you without using software salesman’s lingo, just as your finance officer would neatly sum up the pros and cons of a particular business loan.
Often, Leeburg says, the most important skill your technology chief needs is a good sense of timing--knowing what to do or not to do, and when.
Consultant Robert Kriegel, who owns the San Francisco Bay Area consulting firm Kriegel Squared and is co-author of “Sacred Cows Make the Best Burgers,” says your technology staff should know how a piece of software or hardware will add value to the business.
“A lot of [technology people] keep up with the technology for the technology’s sake instead of for the business’ sake,” Kriegel says. The critical thing for information technology people is to stay abreast [of] the changing aspects of the company’s business, he says.
Information systems people “need to get out on the factory floor and in the field with the sales force,” Kriegel says. The person in charge of technology at your company needs to be customer-driven, whether that “customer” is one of your managers or the potential new client who just walked in the door. In short, he says, a company’s high-tech people need one-on-one human contact.
Kriegel cites a pharmaceutical company that asked its information services department to provide laptop computers to the salespeople. The manufacturing manager wanted more information about customers’ anticipated orders so production could be more efficient.
An information systems staff member went out with the salespeople to better evaluate what he was dealing with. He discovered that the sales force was buried by paperwork, Kriegel recalls. Instead of just picking a laptop and software to satisfy the manufacturing manager’s needs, he also developed a solution to reduce the paperwork.
Result: Salespeople had enough time to make one to two more sales calls each day.
Now that we’ve defined the technology chief’s role, step two is your turn.
Nearly everyone has come to you with their concept of a “perfect” system. Sales wants the paperwork burden lifted. But marketing wants more information from sales and more quickly. Operations wants more data from sales too, so it can anticipate heavy and slow cycles. Accounting wants more detailed and up-to-date data because, well, they’re accountants. UCLA’s Leeburg says this is where a chief executive’s role moves front and center.
“A CIO can suggest systems that have certain abilities and suggest solutions, but the CEO needs to make the decision,” he says.
More important, Leeburg says, “the [CEO’s] perspective has to be [that information technology] is an asset to be optimized, as opposed to an expense to be minimized.”
And, he adds, having the latest software or hardware isn’t always that critical. Most of the high- performing organizations, Leeburg says, aren’t always the ones with the latest technology. The top performer is often the company that might be a couple of versions behind but uses what it has to the fullest extent.
Your counterparts at mature companies are increasingly aware of how technology integrates with their businesses, Lundberg says.
She cites a recent study by Chicago-based consulting firm A.T. Kearny in which half of chief executives and senior management said they believe that “technology decisions are an integral part of the strategic decision process.”
While the Kearny study surveyed 100 of the largest companies in Europe and the Western Hemisphere, Lundberg says it also offers insights for mid-tier and emerging companies.
The Kearny study says 91% of senior managers say their “technology investment is important in helping them to realize corporate goals and objectives.”
If you’re saying to yourself that this sounds costly, it can be. But costs can be controlled, Leeburg says, while getting the most out of what you have and what you add.
He says there are three cost categories to look at: new systems, maintenance of current systems and infrastructure support. The latter can run as high as 50% of the total information technology expenditures.
To better get a grip on those expenditures and some perspective on how to evaluate your options, Leeburg says you need to do some homework inside and outside the company.
When dealing with technology’s contribution to profit, Leeburg says, don’t get too hung up on having a full return-on-investment analysis. You need a general idea of the payback so you can fulfill your role of evaluating what the downstream effects might be for each option.
The Kearny study also concluded that senior management at big companies must come to grips with how hard it can be to accurately quantify the results. While less than half--44%--of managers surveyed say they’re very or fairly successful in measuring technology’s bottom-line contribution, 74% say they’re at least fairly satisfied with the level of return.
This is where Leeburg’s outside homework comes in: Talk to chief executives at similar-size companies that aren’t direct competitors so you can get an idea of what their experience has been with expenses versus returns.
Third step: How fast should you bring new technology online?
That depends on how fast your company is growing and on how fast your staff can get comfortable with new skills.
CIO’s Lundberg says: “You’ve got to understand the implications of your growth and your capacity to manage it. It’s tempting to grow as fast as you can, but if you’re depending on technologies that can’t grow with you, that would be a huge mistake.
“You have to build infrastructure that’s replaceable as you grow,” she says. “The CEO and [technology chief] need to have a common statement of purpose . . . that’s critical.” If you’re on the fast track, you can’t afford to be inflexible; the system might have a few blemishes, but that’s far less important than being able to add, subtract and move pieces around.
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This Will Be on the Final
Lew Leeburg, director of the Information Systems Research Program at UCLA, recommends that chief executives do some research to help them make good decisions about technology.
Internal homework
1. Find out what the costs are and look at all three expense areas: new systems, existing systems and infrastructure (hardware, software and the people who support it).
2. Ask peer executives of the technology chief how they rate the value to them of what’s in place and what’s planned.
3. Ask the technology chief how current expenditures can be leveraged for new systems and how the new systems’ expense can contribute to the business. This doesn’t necessarily mean doing a full return-on-investment analysis.
External homework
1. Talk to other chief executives. Not your direct competitors, but execs at same-sized companies in a similar industry. Find out what their experiences are and how that compares with what you’re hearing.
2. Bring in outside help to take a look at the plan, but seek guidance from more than one source. You’re looking for a high-level examination. Is the infrastructure correct? Does the solution fit the business plan now? Will it in two years?
