Try to get six people to agree on anything -- Thai or Indian food, blockbuster or art film, or even when to slow down for a yellow light. Now try to get six executives to agree on the basic principles that lead to well-aligned companies. Sound impossible? We knew it wouldn't be easy, but we had to try.
For the flagship piece of this "Closing the Gap" special issue, we assembled a dream team of sorts -- three CIOs, a CEO, a head of administration and finance, and a head of sales and marketing -- for some frank talk about the fuzzy and far-reaching subject of alignment. These brave panelists were handpicked from companies (old and new, big and bigger, and from a variety of industries) that in one way or another are making serious efforts to integrate IT into business planning. (See our panelists' introductions, left.) With the help of moderator Thornton May of Guardent, a digital security company based in Waltham, Mass., this gang tackled some tough questions: What is right and wrong with the alignment of IT and business strategy? What causes misalignment? Where do business and IT leaders fall short? And most important, what can be done on both sides to better align business and IT strategy?
The answers may surprise you, but the big shock for us was how our panelists easily agreed on these points. "It's interesting how all of us are thinking alike," said Starbucks CIO Ted DellaVecchia during our discussion. Operating outside of one company's politics or the constraints of a particular project, the panelists agreed on some basic tenets.
The Panelists Jack Brennan
Chairman and CEO
CIO and vice president of corporate centers
Former CIO and senior vice president
Dell Computer Corp.
CIO and senior vice president
Starbucks Coffee Co.
Former senior vice president of sales and marketing
Stride Rite Corp.'s Keds division
Executive vice president and chief administrative officer
Naturally, there was polite dissension. The panelists were divided on the role business executives should play in vendor management and even on the most basic question of whether alignment has improved in the past two decades. "My first year in IT we talked about alignment," lamented former Dell CIO Jerry Gregoire, "and 27 years later, we're still talking about alignment." Here's hoping that 27 years from now, CIO will report on "What Ever Happened to Misalignment?" In the meantime, read on for the insights and experiences that led to "The 8 Commandments of Alignment".
Thornton May, moderator: Jack, I thought we might start [by hearing your perspective on alignment] as a CEO and as a person who didn't pop out of the womb being a technologist, if you will.
Jack Brennan, chairman and CEO of Vanguard Group: Seven or eight years ago we started something called our IT voyage. Everything at Vanguard is nautical. Our logo is a ship, and we have crew members and we eat in galleys. The idea was encapsulated in one statement that our CIO reminds people of all the time: If there's a failure, it's the head of the business who gets fired. That statement was intended to make everybody acknowledge that, one, the IS department is integral to the business, and two, it has no money. Nobody other than [Vanguard] pays them. We've been through a radical shift philosophically and operationally; we've tried to integrate the business and technology units and people as tightly as possible. It took a lot of trauma. Many people who don't work here anymore couldn't make the adjustment. They wanted to be able to blame IS when things didn't go well. And it took cross-ferttilization of IT people working in the business and vice versa. It's never good enough, but I feel great relative to where we were when we started this voyage.
I spend three hours every two weeks with the senior leadership team on nothing but IT issues. We're not micromanaging, I hope, but we are looking at IT strategy, opportunities and challenges. A full 30 percent or 40 percent of my time is spent on IT-related issues.
Lori Thompson, former senior vice president of sales and marketing at the Keds division of Stride Rite Corp.: Sitting here listening to Jack, I'm completely jealous. The fact that he spends 30 percent to 40 percent of his time on IT clearly indicates that there isn't going to be as big an opportunity [for there to be] misalignment. If you read everybody's scenarios [distributed to the panelists by CIO before the forum and appearing throughout this article], probably the biggest message that came out was communication. Without communication there is a big problem -- just trying to get a handle on all the tools that are available, and how [IT] can understand the end result that we're trying to accomplish and then help us develop programs and tools to make it work. A lot of it has to do with the corporation's point of view. If the corporation believes that IT is indeed important, and needs to be integrated in the business, it will be. But if there is a "let's wait and see" [attitude] -- "maybe the Internet will be important, or maybe it won't; maybe e-commerce will be important, or maybe it won't" -- then the corporation is not going to move forward.
- Emphasize communication. Divisions should share information and try to use one another's language.
- Make symbolic gestures to show that the organization is ripe for alignment. For instance, when a CEO befriends the CIO and makes effective use of electronic communication, he shows an understanding of technology's value.
- The CIO must report directly to the CEO, chairman or president.
- Know that alignment will not happen on its own. Establish a structural process where business and IS units can work together.
- Have cross-fertilization between business and IT leaders. Business leaders should rotate through IT positions and vice versa.
- Allow room for mistakes -- as long as they are small, educational mistakes from which the organization can learn and quickly recover.
- Don't spend too much time planning. Value delivered to the organization is alignment's ultimate watermark.
- Processes must be ongoing. Alignment has a rhythm that everyone must continually try to be part of; it's not a theoretical, one-time agreement on a few specific points.
Jerry Gregoire, former CIO and senior vice president of Dell Computer Corp.: When I joined Dell, IS was reporting through finance. One of my requirements was that the CIO's role take on a peer relationship with all the other departments, which was not the solution to alignment but it sure was a help. We learned a lot of valuable things about alignment because, during the last two years I was with Dell, we were growing $1 billion every six weeks. To manage that kind of growth, we were continually realigning the entire company. Among the conclusions that we came to was alignment has as much to do with the architectural choices you make as with the mind-set of the management team. Some new technologies have come along that allow you to integrate your company not at the application layer but at the data layer. And by [doing this], you can give development resources back to the divisions and say, "Look. Build what you want to build, in whatever order you want to build it, and fund it at a level that you think is appropriate. The only thing that we ask is that you build it in this way."
May: When you first came [to Dell], you guys were going down that SAP rat hole.
Gregoire: A mutual friend described SAP as pouring wet cement over your company. Michael [Dell, chairman and CEO of Dell] had sold the idea to the board that SAP would solve the problems of having a global understanding of what was going on in the company. [The company] spent $67 million on the project before I even arrived. After spending six months with it, I went back to Michael and said, "I think we can get the software to run at these kinds of volumes, but here are all the bad things that are going to happen if we do." And to his credit, he went back to the board and said, "I was wrong." Every once in a while I call it right. Had we gone ahead with SAP, we would not have been able to sustain that billion-dollars-every-six-weeks growth. ERP assumes that no matter what state this portion of your business is in, everybody is going to do it the same wway. That's at the opposite end of the spectrum from alignment.
Ted DellaVecchia, CIO and senior vice president of Starbucks Coffee Co.: If you take my fundamental approach to IT, and that of the companies that I tend to work with, our approach is alignment of all business units -- IS being one of them -- recognized as a discipline just as important as marketing or sales. That requires, however, a general management approach, and it requires CIOs and top leadership to have had some form of business experience. People who have managed P&Ls or have been part of marketing organizations and so on have a clearer view of how information and technology can be directed toward business goals. I look at the CIO's role as making all of the executives better information executives, and providing them with the what-ifs: "What could you do differently if you had this information? How, when and where do you need this information delivered?" Lori mentioned communication being a fundamental approach to repairing some of these issues. It's not just communication between the divisions and departments; it's the communication of business information that helps businesses succeed.
May: Starbucks is all about brand. What role does IT play in that?
DellaVecchia: The brand is built around our corporate passions and what people perceive that name to mean. The IT function must act within the core values of the company -- passion, appreciation for our customers, seeking quality in what we do, partnership with our employees and representing Starbucks as people would expect.
John Mahoney, executive vice president and chief administrative officer of Staples: Even though we don't grow $1 billion every six weeks, we've had very significant growth. Staples started an IS department probably the way anybody in a great entrepreneurial environment would start one: We did what was necessary to be able to record transactions and share information. We did it largely with applications that we integrated from packages. We got to the point where, like a lot of companies, you have the IS team in a pit. You'd throw some meat over the top of the pit every once in a while to keep them sustained, and you'd ask them for things. And they'd push things out over the top, and you'd either like it or not. Then along came the Web revolution. We have 1,000 stores, direct-marketing businesses and warehouses all over the country, so many of the things that we do day-to-day could be done better using the Web. We started at that point to say that we weren't going to have the IS folks taking orders but at the table involved with the business strategy. We have a fairly elaborate business strategy process that we go through every year, and the CIO has an important influence on the business decisions. Particularly in the last two years or so we've created great cooperation among the business units. Only when you get the good alignment do you get the kind of rapid improvement that we've been able to see.
Sue Kozik, CIO and vice president of corporate centers at Lucent Technologies: Some of my observations will be from someone just beginning to work with an organization that uses IT very differently. Lucent has prided itself on being different from Ma Bell, and there's still a lot of talk about that. We develop technology, so the question about the value of a centralized IS group is still under some discussion. Jerry mentioned that when he joined Dell he said, "Listen, the IS organization needs to be a part of the business," and that's happened here. In the six months since our CIO joined, he went from reporting to the CFO to reporting to the chairman and CEO. We're now in a role to really address some of the issues that you've all mentioned.