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Three To-Do Lists For Building An Innovative IT Department

Big-business IT departments have their eyes on the ground, focused on day-to-day issues of keeping the business running. That leaves CIOs locked out of the room when CEOs are deciding the direction of the company. To get a seat at the table, CIOs and IT managers need to transform their organizations to focus on innovation. Management consultant Ram Charan described what IT managers need to do to make the change.

Charan has worked with top management at companies including General Electric, Verizon, DuPont, Honeywell, and Bank of America, at solving business problems. Charan wrote several books, including Execution: The Discipline of Getting Things Done, and Confronting Reality.

Speaking at the InformationWeek 500 conference in Tucson, Ariz. , Charan outlined a five-point plan for making IT departments innovative.

"Are you looking over the horizon to see where your business is going? The keyword is 'business,' not 'IT,'" Charan told several hundred CIOs and IT managers Monday morning. CIOs and their departments need to focus on improving the company as a whole, not just technology and their organizations.

Figure out how the company needs to be repositioned, Charan said. To do that, IT managers need to talk to customers.

Create a three-part budget. Part 1: Current services, keeping the things IT currently does running. Part 2: Improving productivity. Part 3: Transforming the business -- not necessarily transforming IT.

Charan outlined five tips for transforming the business.

Develop ideas to improve revenue growth. That's what CEOs are focused on -- not cost-cutting, Charan said.

Increase margins.

Improve cash flow. That means optimizing inventory, replenishment, and receivables -- in other words, supply chain management.

Enhance the brand.

Increase customer consumption of your company's product, not just market share.

Participate in true, innovative growth projects for business. "Growth and innovational projects build muscle," Charan said. Participating in growth and innovation projects requires IT managers to work horizontally with business managers. That's how Kevin Turner became CIO of Wal-Mart and, from there, chief operating officer of Microsoft, Charan said. (Turner was one of the presenters at Sunday night's IW500 discussion, outlining how Microsoft consolidated its internal IT operation.).

Move young people to line functions. Hire 27- and 28-year old IT managers, have them work in the IT department for about three years, then rotate them out to other business units so they can learn how the company works, Charan said.

Apple's Steve Jobs is an example of someone who transformed his company, Charan said. Apple's board ousted Jobs, went through four additional CEOs, and tried to sell Apple to Dell, Compaq, IBM, and AT&T. Ony then did they come back to Jobs, who transformed Apple into an entertainment company, coming out with the iPod, iTunes, and the iPhone.

The iPhone, in particular, transformed the handset and telecommunications industries. Other than the iPhone, handsets are commodities, but Jobs insisted that telcos selling the iPhone needed to cut Apple in on a share of the revenue. Eventually, AT&T took the deal.

Nokia, likewise, is transforming from a handset vendor to an Internet company, Charan said.

IT managers need to change their organizations' social systems -- the way of working -- to innovate, Sharam said. That's what Jobs had to do when he came back to Apple. "Those people had failed under four CEOs," Charan said. IT managers often have to change cost-cutting mentality to a mindset that goes after revenue growth.

Another tip for innovation: Talk to business managers in the company about their issues. "Please don't ask the question, 'What's your vision?' They're tired of it. Don't talk about what's your strategy," Charan said. Instead, focus the discussion on increasing revenue, margins, and outside challenges.

He provided two additional tips:

• When recruiting young people, recruit some who will be leaders, not just performers. Too many companies focus exclusively on hiring the best and brightest, and fail to devote attention to finding leaders.
• Also recruit people with business acumen -- people who are, or could be, broadened to work in company business units.

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