Business Technology: FedEx Delivers Innovation - InformationWeek

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Business Technology: FedEx Delivers Innovation

How many of your employers have an Audit Committee within the board of directors? I'd have to guess the answer would be 100%, and if it's not, those companies in the "not me" category are probably going to face some pretty heavy scrutiny in these days of intense concern over corporate accounting and accountability.

But how many of your companies have within their boards of directors an Information Technology Oversight Committee? And what value would such a group offer to the company, to shareholders, to customers, and employees?

My guess is there aren't too many examples to look at--it's a pretty dramatic initiative for a company to undertake, particularly since there are still some businesses that look on business technology as a cost center, as the province of nerdy types who wouldn't know a customer from a custom application. (I would further guess that companies that think that way won't be alive for long, but that's a discussion for another day.)

Since Sept. 11, the owners of signature skyscrapers have been trying to find ways to calm jittery tenants and make the buildings more durable if catastrophe strikes. Perhaps nowhere has anyone thought longer and harder about that challenge than at Citigroup Center, the 59-story tower on East 53rd St. with the distinctive triangular top. ... Crews are making major structural improvements designed to ward off the kind of forces that would be produced not by wind, but by a street-level explosion, according to experts who have seen the plans. ... For all its secrecy, the project is a vivid example of a highly focused, structurally sophisticated and quite expensive effort--the cost could be several million dollars--to buttress a building against threats that suddenly seem to be everywhere, from the sky to the street, in the post-9/11 world.

-- New York Times, Aug. 15

A living and breathing example of such progressive and productive thinking, though, can be found at FedEx, where founder Fred Smith began to build an Information Technology Oversight Committee early last year. To be sure, FedEx is not your average company when it comes to attitudes toward and dependence upon business technology--29 years ago, when Smith started the company, he foresaw that there would come a time when the information about the package being shipped would be of enormous value. From those earliest days, Smith believed that "advanced IT capabilities would be a key element in establishing competitive differentiation, service excellence, and process improvement."

So perhaps it's not surprising that Smith and FedEx were among the first companies to establish an IT-focused subset of the board to help develop appropriate strategies and stress-test new technology initiatives and decisions. "I began to notice over and over that the Audit Committee--which at our company is absolutely terrific, very strong, and has been that way long [before] it became the fashionable thing for companies to do--was having discussions that were drifting into systems discussions and technology discussions," Smith said in a conversation last week. "The Audit Committee would be looking into certain results from our audits, and maybe they had to do with revenue systems or airplane-management systems or a related area, and the conversations would almost inevitably move into systems discussions" because the Audit Committee was trying to improve the timeliness and other qualities of the information.

"And that bothered me," Smith continued, "because these conversations, while valuable, were causing the Audit Committee to take their eyes off the ball of the financial operations that are their primary responsibility." And a second factor behind Smith's decision to form the committee was the possibility that this intensely IT-dependent company would make a less-than-ideal decision on some strategic business-technology issue that could directly damage the company's ability to run its business in the most effective way.

"So I saw the need for an oversight committee that could opine on strategic matters and work closely on those" with executive VP and CIO Rob Carter, a member of the ITOC, Smith said. "So I set out to recruit board members with extensive IT knowledge: Shirley Jackson, the president of Rensselaer Polytechnic Institute; Jim Barksdale, who at one time was the CIO here and then was CEO of Netscape; and Judy Estrin, who's a brilliant computer scientist and accomplished entrepreneur."

Carter said the ITOC offers the board and the executive team "unbelievably great thinking on not just technology but also control, risk, security, and other issues that are so critical to FedEx right now."

Anyone out there have a similar group at your company? Tell me about it, and you'll receive a complimentary registration to InformationWeek's Fall Conference, Business Agility: Readiness And Resilience, which will be next month in Tucson, Ariz. (For more information, visit

Bob Evans
[email protected]

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