The business CIO

Don R. Riley knows what it takes to run a profitable business.

So during the past several months, as his company zeroed in on cash flow and bottom-line earnings to cope with the increasingly shaky economy, Riley knew he had to reorganize his department's priorities. He pushed up projects that delivered the biggest returns at the quickest pace, even if they were more expensive and carried higher risks than other initiatives.

Case in point: his decision to move on a complex $8 million business system implementation with a high return on investment instead of a $3 million one with lower expected returns.

Moving ahead with an expensive project at a time when most companies are tightening their belts might seem counterintuitive, but Riley, CIO at Mohawk Industries Inc., an $8 billion flooring company in Dalton, Ga., says it was right for his business. He knows this because he has experience running a business unit with its own profit-and-loss pressures.

"You have that different viewpoint when your career is on the line if you don't get it right, if you don't connect with the customers, if you don't bring a product that has value," Riley says.

Riley's path to the CIO role has involved much more than IT gigs. He has held business jobs, too, including sales and marketing and product management positions at Electronic Data Systems Corp. He's one of many top IT executives among Computerworld's recent classes of Premier 100 IT Leader honorees who listed business-side jobs as a significant part of their professional experience.

Several of these IT leaders agreed to discuss the benefits of having a background in business. They say it has given them the ability to better understand the challenges and requirements of their companies as a whole, especially in this difficult economy. And that, they say, translates into technology projects that deliver stronger ROI and better support the company's goals and vision .

A Different View

"The opportunities for innovation often are made visible when someone has had different perspectives," says Eden S. Fisher, a professor at Carnegie Mellon University and executive director of its Engineering and Technology Innovation Management Program. "People who come from different experiences have the ability to offer new perspectives that could be of value."

That value isn't just esoteric. It can translate into real dollars and cents.

Tim Ramsay, associate vice president for IT at the University of Miami in Coral Gables, Fla., used his financial and business experience as the university's former director of business services when considering whether to upgrade a mainframe back in 2005.

During class-registration periods, Ramsay's IT staff saw usage spikes that made computers sluggish. But he resisted pressure to upgrade, opting instead to buy capacity on demand from vendors to cover those spikes. As a result, he says his department avoided incurring a $300,000 annual cost.

"We've been able to avoid major CPU upgrades by simply taking a variable cost approach and rethinking the paradigm of when we need to upgrade and when we don't," says Ramsay.

CEOs are indicating that that's the kind of business-savvy thinking they want in their IT chiefs.

When research firm Gartner Inc. asked the largest IT recruiters to discuss what their clients want in current and future CIOs, it found that they're increasingly looking for people with professional experiences outside of the IT department. Specifically, it found that senior executives want CIOs who have managed a non-IT business unit at some point in their careers.

"We've heard for a couple of decades that the IT delivery mechanism can be enhanced when driven by people who are more acquainted with the business. It's also very clear that that was inadequate for many, many companies. Therefore, they've raised the bar," says analyst Ken McGee , who wrote the January 2008 Gartner report "Meet Your Next CIO."

"Not only must you have experience from the business side," he says, "but now you have to have that profit-and-loss experience; you must really have guided a department or a division other than IT."

CIOs who have such experience have a business sense regarding what works and what doesn't, and regarding what should be undertaken and what shouldn't, McGee says.

"You have a capacity, which is very difficult to teach, that determines from the outset whether an IT idea is worth pursuing in support of the business or whether it's nice to have but won't do anything to improve the income statement," he adds.

Few CIOs today have had P&L responsibility, even though more companies are looking for it, McGee says. That type of experience is particularly important now, given the current economic volatility.

"This is a hugely turbulent environment, but business has to continue in the face of all that, so someone in IT -- where expenses are not small and impacts are not small -- has to understand how IT can move the business," says Barbara T. Grabowski, a professor of MIS and director of the master's in MIS program at Benedictine University in Lisle, Ill.

While acknowledging that leaders who move up the IT ranks can do that, Grabowski says that those with broader experience bring a broader view that can help them formulate an IT strategy that best fits with an organization's wider agenda.

"Anyone coming up through any specific unit is going to have the same narrow view. If I'm an IT expert, I'm going to see everything through the lenses of IT, just as if I'm a financial person, that's the lens I'm going to have," Grabowski says. "But moving around the organization adds some dimension that a single, vertical path won't have."

Riley concurs. He says his experience in product management, sales and marketing gave him a perspective on business requirements that can be gained only by doing such jobs. Specific skills he honed in those roles include building relationships, packaging a vision and communicating that vision's value.

Going Deeper

But business-side experience is about more than developing certain skills, Riley says. It's about understanding what makes the business tick.

As a product manager, for example, he had to have a constant focus on service because the customers could leave if they were unhappy. Riley says he had to make sure he was delivering value to those customers but also providing a profit to the company. And he had to learn to present his ideas to his CEO and the board.

"Those are all great skills you can get in some IT organizations, but you generally don't get them to the degree you do when it's your livelihood," Riley says.

Consider the case of Robert J. Dowd, who says his business and finance background landed him the CIO job at Sonora Quest Laboratories LLC over candidates with much stronger IT experience.

"I came into the CIO job during a very difficult situation, when people were questioning whether this [company] would survive," says Dowd, who had been Tempe, Ariz.-based Sonora Quest's director of revenue service prior to his promotion. "And I perceived that what they needed was someone who could speak to the business and articulate to the board the things we needed to do to turn around."

Dowd says he understood the company's financials well beyond just how the IT budget fit into them. That understanding helped him persuade other senior executives and the board to spend millions of dollars in 2001 to replace outdated systems, despite the sagging economy. He positioned his request in financial terms because, he says, "you're not selling the architecture, you're selling the concept." He told them it would improve costs and deliver returns.

"Convincing people to spend more money when we're already losing money wasn't easy to do," Dowd says. "But coming from the finance side, I knew how to justify it, and they knew -- because I came from the finance side -- that I don't ask for things that I don't need."

Although Dowd had never held an IT position before becoming CIO, he says his lack of formal technical credentials has not hindered him from successfully doing his job. (During his tenure as CIO, the company experienced double-digit annual growth.) To get the IT expertise he needs as CIO, Dowd surrounds himself with technical experts.

The Hybrid Ideal

Nonetheless, not all companies are seeking business leaders to lead IT, says John Estes, vice president of strategic alliances at Robert Half Technology , an IT staffing firm in Menlo Park, Calif.

"You have people who say the CIO doesn't need any technical background. I think that's too extreme," he says. "The people in the trenches say the CIO doesn't need to know exactly what they're working on but that they'd like him to have an idea about what they're doing."

Gartner found in its CIO survey that more companies are looking for candidates who came up through the IT ranks but spent time in business, or for business executives who have a deep knowledge of IT. More important, perhaps, they're looking for candidates with leadership skills -- which transcend any one particular job title.

Peter R. Walton, who retired in April as vice president and CIO at Hess Corp., says he firmly believes that.

Walton, a former Navy pilot, spent 15 years working at and later running a small manufacturing company in New Jersey. Following his time there as CEO, he became director of IT structure and operations and then CIO at Hess, an energy company in New York.

He says his work at the manufacturing company gave him a deep understanding of business financials, human resources and management -- all of which made him a better CIO.

Moreover, he says his past experiences taught him how to lead -- how to focus on what would make the company, his boss and his team successful, without telling them that that was what he was doing.

"Whether you're coming up from IT or through the business ranks," he says, "I think that's the bottom line: being a good leader."

Computerworld contributing writer in Waltham, Mass. Contact her atmarykpratt@verizon.net .

This story, "The business CIO" was originally published by Computerworld.

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