For many CIOs, the idea of transforming the business through a synergistic marriage of IT and the lines of business is like a Leaf fan’s dreams of winning the Stanley Cup – great to imagine but not happening in this lifetime.
And then there are the lucky ones, like George Postalian, who get to live the dream. Of course it helps if you have a Scotty Bowman-like knack for landing with the right organization. In Postalian’s case, that means plying his management skills for the Canadian arm of IBM Global Services, which has its sights firmly set on being a league leader in business transformation.
Four dimensions of an ‘on demand’ business
According to IBM, there are the four primary attributes of an ‘on demand’ business: responsive, variable, focussed, and resilient. Here’s a description of each.
Responsive: A responsive company has the ability to “sense and respond” – to sense changes in its environment and respond in an integrated manner in real time, whether to unpredictable fluctuations in supply or demand; emerging customer, partner, supplier and employee needs; or unexpected moves by their competition.
Variable: The variable dimension relates to having a cost structure that is flexible and adaptable. Companies that can adapt to cost structures and business processes flexibly can reduce risk and drive performance at higher levels of productivity, cost control, capital efficiency and financial predictability.
Focussed: The focussed company is one that is zeroed in on its core competencies – those processes that drive competitive advantage. Processes that are not core are outsourced to tightly integrated strategic partners that manage tasks, ranging from manufacturing, logistics and fulfillment to HR and financial operations.
Resilient: Resiliency relates to the company’s ability to make its information and services available 7 X 24 X 365 to its customers, employees and suppliers. The ‘on demand’ company employs a flexible operating environment that can manage changes and threats with consistent availability, security and privacy, whether those threats are manmade (e.g. viruses and hackers) or are related to natural disasters (e.g. fire and flood)
Advice From The Business Transformation Executive
As IBM Global Services’ BTE and CIO, George Postalian has gained some valuable insights into the process of business transformation and moving towards an ‘on demand’ organization. Here are some of his top tips:
- As the CIO, you must make sure that you understand that your job is as a business advisor. The technology will inherently follow. You must also be committed to communicating constantly with your customers, making sure that you remain in sync with them and very focussed on those things that provide them the greatest value.You need to have a deep understanding of the businesses, the core competencies, the core processes and the transformational activities you want to undertake relative to the customers, suppliers, partners and employees you’re serving.Finally, there has to be a cultural acceptance of this model. In the end it’s a cultural decision. The very senior levels of the business must be committed to moving to this model, which will add huge value to their organization. Putting the right senior management team together to make that change happen is a significant challenge.
In addition to being CIO of IBM Global Services, Postalian also carries the title of Business Transformation Executive (BTE). As such, a big part of his job is helping the company practice what it preaches. And for the past couple of years it has been preaching the virtues of what it now calls becoming an ‘on demand’ organization.
What is an ‘on demand’ organization? According to Ginni Rometty, the global head of IBM Business Consulting Services, it is “a business whose processes – integrated end-to-end across the company and with key partners, suppliers and customers – can respond with speed to any customer demand, market opportunity or external threat.”
Postalian notes that organizations go through three phases of E-business maturity: the access phase, the integration phase, and the ‘on demand’ phase. In the access phase, companies essentially have a brochureware Web presence, with nominal transactional activity on the site. In the integration phase, they put in place vertical process integration, reengineering areas such as procurement, supply chain, and customer relationship management. (Many companies, including IBM Global Services, are in this second phase.) In the ‘on demand’ phase, the holy grail is the end-to-end process integration described above.
Postialian’s challenge, as BTE, is to help IBM Global Services move to the ‘on demand’ phase. Fortunately, like the Scotty Bowmans of this world, he has the luxury of being able to rely on a prodigious talent pool to help him accomplish this task.
The Corporate Push To ‘On Demand’
The basic framework for the business transformational model is determined at the IBM corporate level, where there is a single CIO. Postalian is a manifestation of that CIO in Canada. An organization at the top called the Business Transformation Executive Council represents the IT needs of all of IBM’s major lines of business globally, as well as the CIO office. The Council sets global strategic directions and frameworks, and then that information or structure is brought down to the various geographic and country levels.
“That’s not to say that whatever is good for the global team is good for Canada. A lot of the design is left to our accord because Canada has its own distinct set of dynamics – geography, language issues, tax issues, size and demographics of customers, etc. – and we must find ways of adapting the framework to best suit our needs,” said Postalian. “It’s a little bit like being provided portions of the story. We then have to fill it in to make the transformation a reality.”
IBM’s own corporate makeover – from a collection of siloed business units anchored in the mainframe world to a highly distributed E-business – began in the mid-nineties. The business transformational activity surrounding this radical makeover required the company to take a hard look at its core competencies and what businesses it needed to be in. Much of that transformation involved optimizing a number of core processes that were supporting the business: HR, finance, procurement and the internal systems supporting employees.
“We looked at a number of dimensions – how we supported and partnered with our customers, suppliers, business partners, as well as our employees in providing a very effective organization,” said Postalian.
As the company moved through this phase, it eventually came to the realization that it must move into a new phase of transformation, involving the end-to-end horizontal integration of processes. And so was born IBM’s view of the ‘on demand’ organization.
As the company went through its transformational activities, it also realized that it would have to put in place a much more variable-based cost model in order to be successful. Instead of fixed-price models, it moved to variable costs, in which users would pay for the services they use.
“We methodically went through our business transformation ensuring that all of the IT services we were providing were as much as possible a usage-based model,” said Postalian. “We will get to a point where we are much more variable in providing sets of services that are far more granular and that will allow the users much more control over the costs they have today.”
Four dimensions of an ‘on demand’ business
According to IBM, there are the four primary attributes of an ‘on demand’ business: responsive, variable, focussed, and resilient. Here’s a description of each.
Responsive: A responsive company has the ability to “sense and respond” – to sense changes in its environment and respond in an integrated manner in real time, whether to unpredictable fluctuations in supply or demand; emerging customer, partner, supplier and employee needs; or unexpected moves by their competition.
Variable: The variable dimension relates to having a cost structure that is flexible and adaptable. Companies that can adapt to cost structures and business processes flexibly can reduce risk and drive performance at higher levels of productivity, cost control, capital efficiency and financial predictability.
Focussed: The focussed company is one that is zeroed in on its core competencies – those processes that drive competitive advantage. Processes that are not core are outsourced to tightly integrated strategic partners that manage tasks, ranging from manufacturing, logistics and fulfillment to HR and financial operations.
Resilient: Resiliency relates to the company’s ability to make its information and services available 7 X 24 X 365 to its customers, employees and suppliers. The ‘on demand’ company employs a flexible operating environment that can manage changes and threats with consistent availability, security and privacy, whether those threats are manmade (e.g. viruses and hackers) or are related to natural disasters (e.g. fire and flood)
Advice From The Business Transformation Executive
As IBM Global Services’ BTE and CIO, George Postalian has gained some valuable insights into the process of business transformation and moving towards an ‘on demand’ organization. Here are some of his top tips:
- As the CIO, you must make sure that you understand that your job is as a business advisor. The technology will inherently follow. You must also be committed to communicating constantly with your customers, making sure that you remain in sync with them and very focussed on those things that provide them the greatest value.You need to have a deep understanding of the businesses, the core competencies, the core processes and the transformational activities you want to undertake relative to the customers, suppliers, partners and employees you’re serving.Finally, there has to be a cultural acceptance of this model. In the end it’s a cultural decision. The very senior levels of the business must be committed to moving to this model, which will add huge value to their organization. Putting the right senior management team together to make that change happen is a significant challenge.
Tight linkages with the lines
When Postalian took over his present post a little over three years ago, the company had already gone through its large-grain transformational activities and had decided what to transform. Postalian has been involved in the local implementation of those transformation objectives, translating them into the specific activities that had to occur in Canada, specifically for IBM Global Services.
Postalian describes his role as the Business Transformation Executive as “the glue that binds the IT organization with the line organizations as we transform their businesses.”
He believes strongly that successful transformation depends a great deal on the linkages between the IT organization and the various lines of business. Decisions around IT and IT transformation related to the business must be a cooperative decision with the line executives and the CIO.
So strong is this commitment to work together that the line executives and their associated teams must be in complete agreement with the IT teams in terms of those initiatives that provide the largest impact or value to the business, be it short-term small projects of importance to the specific line, or large-grained projects of importance to the country or globally.
Those IT/business relationships are fostered on a monthly and semi-annual basis through the planning process. Semi-annual meetings are held with each of the lines. Although there may be many people in the meeting, the three primary executives involved are Postalian, representing the IT organization, and two senior executives a notch below the level of general manager, representing the lines. The two line executives – a functional operational manager and a financial manager – balance the business needs and wants against the financial liability of the IT initiatives.
The spring meeting is forward-looking, dealing primarily with strategic business initiatives that the line and the company want to move forward with. The fall meeting tends to be a review of how things have progressed throughout the year, as well as a look at short-term initiatives that might be set for the subsequent year. So in essence there is a strategic planning cycle (spring) and a more formal tactical planning cycle (fall).
“These meetings can take anywhere from two hours to a half day,” said Postalian. “But they tend to be very tight in terms of dealing with the objectives that we’re trying to achieve – essentially making sure we stay in lock step as we move forward together.”
In order to maintain close ties with the business, Postalian has key IT team members, called business information partners, that provide the lines with a single focal point into the IT organization. These individuals do this on a part-time basis, holding down other key roles, such as managing infrastructure.
The arrangement works in reverse as well – the business organizations have one or two focal points into their organization, so that IT doesn’t have to touch too many people in the line. The business contacts tend to be the same lead operational and financial managers present at the semi-annual meetings.
“It’s a simple organizational model,” said Postalian. “Those people that work for me [business information partners] represent the entire spectrum of the services and capabilities that we have as part of my team.”
Major challenges
Postalian said that the biggest challenge his organization has faced since he assumed his present position a little over three years ago is addressing transformational activities as quickly as possible.
“We pretty much know what we need to do. It’s a matter of getting it executed in synergy with the lines of business and delivering on the value we all collectively agree is important. So dealing with the material business value is critical for us,” he said.
“The other important thing,” he adds, “has been gaining the deep respect and understanding from the various lines of business that we are much more than a traditional IT shop, and that the value we provide in the transformational activities associated with the lines is critically important.”
Transformation, he points out, is fundamentally different from reengineering. Typically, reengineering tends to be focussed vertically on a specific process or set of processes, whereas transformation involves the entire spectrum across those sets of processes.
When contemplating transformation, Postalian says you must ask yourself a number of questions. What is the experience that you want to have from a supplier, a business partner, an employee, or a customer that is going to span those vertical dimensions? What is the value proposition? What are they asking for and how are you going to respond? Such considerations force you to rethink your entire business.
“It really involves taking a serious step back,” he noted. “It’s a cultural experience for the organization – an in-depth look at the design and processes of the business, and the IT operating environment as well.”
Postalian said that the difference between his IT organization and a more traditional IT shop starts with this predisposition towards transformation.
“First and foremost, we do not do anything without the lines’ one hundred percent agreement and approval,” he said. “Our model is very much predicated on a win-win relationship. Our lines hold the IT spending within their plan, then they give it back to me as the accountable individual to spend wisely on their behalf.”
He added that this ingrains a behavior that says: you the business are to work with the Business Transformation Executive, and you the BTE are to work with the lines to make sure you are optimizing the IT spending associated with these activities.
Reaping the benefits
Postalian claims that at an aggregated level, the company’s process-focussed transformation over the last eight years – spread across a number of different initiatives – has achieved more than $14.5 billion in benefits from $4.7 billion of investment.
One initiative that has proved quite successful is the move to distributed learning mechanisms. Forty-three per cent of the company’s employees are now trained using these methods, generating cost avoidance of more than $395 million.
IBM has also moved its procurement activities dramatically across from a traditional manual-based set of processes to the Internet. About 95 percent of the company’s goods and services are now electronically procured, saving a large amount of money in the process. And the savings are global, because the company has standardized its procurement processes throughout the world.
One of the things Postalian is most enthusiastic about is the company’s employee portal, or “W3” intranet environment.
IBM is integrating a number of different processes across the HR spectrum, from benefits to payroll to education, and this information is delivered through the W3 portal.
“We are moving to a role-based model that delivers timely information to employees, allowing them to do their job far more productively,” said Postalian. “Our W3 environment is an extremely interesting one because it will allow employees to sign on and get the information that they need on a day to day basis without having to navigate too broadly across the wide spectrum of Web sites and infrastructure we have.”
The goal is to move very aggressively into a role-based world where, in the future, much of the information users need would be almost at their fingertips as they sign on.
The end game
So will IBM be able to look down the road a year or two and call itself a full-fledged ‘on demand’ organization?
“Our view is that it is a journey,” said Postalian. “We will set specific objectives for ourselves over very short time frames to ensure we achieve the components of an ‘on demand’ business. But we’re going to be constantly looking at our business, at our business model, and at our transformation.
“I’d like to say that when we’re done ‘n’ initiatives we’ll be finished, but that’s not the reality. I think in the end it’s really about taking a constant look at yourself. You must constantly ask: are we the best we can be with regards to the types of solutions and services that our customers demand of us and the relationships we have with our suppliers, partners and employees.”
Just the kind of stuff Scotty Bowman would have asked, had he been a BTE.
David Carey is a veteran journalist specializing in information technology and IT management. Based in Toronto, he is managing editor of CIO Canada.
