Holding on tight

CEO2CEO DISCUSSION

How do you know what's right and what's wrong when it comes to technology? in these turbulent economic times, when we're hearing dire predictions about companies cutting IT spending in half, what are your rives up to? Will you fall behind if you make the wrong choices right now?

Gretchen Morgenson, financial writer for the New York Times, described business two years ago as like a fisherman who rows to the middle of the lake and the fish jump into the boat. Today, she said, "the boat is the Andrea Gail in The Perfect Storm, and we're all trying to find our way back to the tiller, trying to figure out which end is up and how to navigate."

What's going down in companies since the deflation of the technology euphoria? What should you do? What should you expect from your CIO? And what technology pitfalls can you dodge? Those were some of the questions Morgenson and five IT leaders tried to answer in the CE02CEO panel, "How to Survive in the Technology Jungle."

TAKING A DEEP BREATH. Sandra Peterson, senior vice president and general manager of health businesses at Merck-Medco, admits to actually enjoying the demise of the tech hoopla. "We spent the last five years telling everyone that the Internet was not going to transform the health care industry. There were many companies out there that said, `I've got a great idea,' and got money to figure something out, and most just don't exist anymore," she said. Post-- bubble, she "now can have the right dialogue with clients, with physicians and with consumers."

Harvey Seegers, CEO of GE Global eXchange, sees his customers "taking a long, deep breath," and, like Peterson, considers that a good thing. He found that companies "rushed to judgment" over the past five years, making quick decisions about how to implement Internet technologies for transformational change. As a result, he said, they often made the wrong selection based on Internet hype or, more often, were disappointed by results from the initial implementations.

Andrew Winer, chief information officer of Myers Industries, a manufacturer of plastic and rubber products, pointed to the key reason for such disappointment: companies often failed to align their IT direction with their strategy. Seegers concurred, saying that his customers currently are rethinking their strategies in a much more deliberate fashion.

"There was a widespread belief that the Internet would solve world hunger," Seegers said. "IT provides an awful lot more capability than we had before, but it's still a hard thing to get right. I think history has shown that any disruptive technology like the Internet overpromises in the short term and underpromises in the long term." He is confident that his customers' reevaluations will show they were not "too far off course."

THE CIO AS OPPORTUNITY PROVIDER. Winer champions the CIO role at the strategic level, lobbying for the position as an "opportunity provider" instead of a provider of solutions. Many of his colleagues have yet to envision themselves with this responsibility, but he hopes soon to see more CIOs stepping confidently into the role of strategist.

In fact, CIOs at many companies are no longer housewives for IT. According to a survey by Spencer Stuart, 65 percent of CIOs report directly to the CEO, and 80 percent of those belong to the senior management team, making decisions on company strategy, reported Steve Zales, president and CEO of Spencer Stuart Talent Network. Two-- thirds of CIOs have taken their jobs only in the past two and a half years. Said Zales, "Today's CIO is a new breed. Companies are looking for a person with an equal balance of technology and management, someone who has run a division or a business."

FINDING NEW APPLICATIONS FOR EXISTING SYSTEMS. Many chief executives are using this time to rethink applications of the technology they already have. (See "War Efforts," page 8.) Steven T. Racz, CEO of technology staffing company PeopleFlow, tells CEOs to consider upgrading. He advises his customers to look at the technology he has already implemented to adjust their business processes and work with it. Human capital is "underserved in corporate America," he believes, and notes that many companies still have budget money allocated to this area. "I can't push as hard as I used to," Racz said, but he nonetheless offers diagnostic tools that show return on upgrades in human capital management.

Zales has seen the recruiting business tank in the wake of layoffs and expenditure reductions internationally. A switch of focus helped Spencer Stuart capitalize on IT and on the flood of unemployed.

"Executives at levels below CEO

usually have a hard time getting through to Spencer Stuart" when jobhunting, said Zales, "but we've created a career development resource and level of interactivity enabled by the Internet that allows us to work with these individuals as never before." This new use of technology gives the company tons of talent for the next economic upturn, he added.

Winer highlighted another new use of extant technology: sorting through massive amounts of e-mail to glean trends and significance (see "IT as a Means of Achieving Performance, "page 14). "Technology can now do what CEOs don't have time to do; it can do what strategic thinkers do," he said.

WHEN GREAT IDEAS GO BAD. Even companies with the most successful IT ventures, like Merck-Medco and GE Global eXchange, have had their fair share of bloopers. For instance, in its zeal to use the Internet to save money, Merck-Medco created electronic customer service representatives (ECSRs) to answer customers' questions about prescriptions and benefits. "We got too excited about this wonderful tool and didn't understand its implications," Peterson said, such as complicated questions that take time for a real human being to research. "It turned out to be twice as costly to have questions sent in by the Internet as just to have that person talk to us on the phone," she explained. With Internet customers expecting rapid responses, ECSRs were doomed.

Seegers also learned from mistakes. When making acquisitions, GE Global eXchange moved to unite the various companies on a single ERP system. It invested time and money, didn't have time for business engineering and, said Seegers, "we hadn't gained anything." Since then "We discovered how to connect everybody regardless of what systems they're on, working together in a quick change mode. It's not necessary for everyone to be on a single system."

THE FUTURE OF PRODUCTIVITY. If you want to keep up with the Joneses -- like Merck-Medco and GE Global eXchange - you must act now, agreed the experts. Peterson reported that her company has not slowed IT investments and continues to "plug away." "Transformation of an infrastructure with masses of unconnected data doesn't happen overnight," she said. "The Internet and IT in general will enable it, but it will take many years." Yet even before the system's completion, Merck-Medco has removed many costs from the business and enhanced service. Indeed, its IT initiative has brought it market dominance.

Seegers and others extolled what the Internet will do in the future for business. As the session's philosopher, Seegers mused that "we're at that inflection point right now, where customers have been disappointed with the results they have seen. They're under more pressure to show ROI on their Internet technology investments, and many are having second thoughts about whether the Internet is just another one of those things, and this, too, shall pass.

"From my standpoint, and from the perspective of General Electric, that's not the case," he continued. "We believe that the Internet and associated technologies will provide the foundation for the next great wave of productivity both inside the corporation and across the supply chain." He added that new GE Chief Executive Jeffrey Immelt has taken up the IT banner of predecessor Jack Welch, who decreed, "No matter how bad things get, we're not going to cut back on IT." If anything, said Seegers, Immelt will accelerate business process re-engineering around the Internet.