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Want To Go Digital? Fix IT Fundamentals First

Zimmer Holdings had to go back to basics in its journey toward becoming a more digital business.

It always amuses me when IT folks talk about whatever-the-new-thing-is as if it's a silver bullet, as if common sense and fundamentals cease to matter. That's why I found the messages of one keynote speaker at this week's Frost & Sullivan CIO conference to be so refreshing and on point.

Cloud ERP: 9 Emerging Options
Cloud ERP: 9 Emerging Options
(Click image for larger view and slideshow.)

Scott Caudill, VP of application & solution delivery for Zimmer Holdings, a medical device company, showed how there are no silver bullets, and how a focus on business fundamentals is indispensable when getting our organizations up to speed on new technologies and practices. In Zimmer Holdings' case, the new thing was digital business.

Caudill described Zimmer Holdings in 2010. IT spending was growing at a faster rate than that of larger organizations. Lots of shadow IT existed. There was no tight connection or alignment between IT and business units. Its ERP was 23 years old, and the infrastructure similarly venerable. The company had 500 systems and 1,000 disparate interfaces to those systems. Employees often scraped data into Excel and Access databases, instead of relying on enterprise systems.

The lofty goal was to change the 90-year old orthopedic business model to be patient specific. That is, in the same way that FitBit helps you customize your workout plan, Zimmer sought to customize the patient's medical care. Specifically, the management team wanted to move into new products and services, including digital products, such as the ability to personalize knee surgery to allow the surgeon a greater degree of accuracy. Caudill said that those efforts are now bearing fruit. But to get there, the company needed to fix IT.

The first task was re-connecting IT workers to the organization's mission. Caudill said that meant getting the IT team to understand how the work it does actually creates value for the business. You can't get more fundamental than that.

As a consultant and as a turnaround CIO, my observation is that most dysfunctional IT organizations have their problems rooted in just this type of disconnect. If IT workers don't understand why new projects and applications matter for the business mission, no amount of new management, technology, or techniques will save that organization.

Caudill also emphasized quick wins. "Quick wins let you drip new capabilities to the organization while turning the IT battleship around," he said.

I give this a big amen as well. If IT has underperformed, business-unit leaders develop a learned hopelessness and don't really believe that things are going to change, even if a new, seasoned IT leader takes the helm. You can tell them all you want, but until you show them, they won't really believe it. Those quick wins are the key way to show, not tell.

Accountability is a two-way street

Quick wins, and bringing mission, purpose, and accountability to IT are important fundamentals.

But another fundamental to good IT is making business units accountable as well. They, too, are sometimes part of the technology problem.

Caudill's first business accountability mechanism was to implement activity-based costing, where every IT request has a price, and is either reported or even charged back to business units. This practice makes sure that service users understand the financial, not just operational, impacts of their decisions. He said this practice was a significant component of his digital IT transformation.

I asked him if there had been any challenges with implementing activity-based costing. "Yeah," he said with a laugh. "We found that the operations group had been getting a free ride to the tune of $8 million a year." Ha-ha -- only serious.

Activity-based costing is notoriously challenging, especially if IT is actually charging back the cost of services. Caudill said that they implemented reporting (sometimes called "showback" instead of chargeback) in the first year, followed by chargebacks in following years. "It was a partnership with finance," he says.

It absolutely must be. You don't like rogue IT; finance doesn't like rogue finance.

Though he emphasized partnership, Caudill also showed what peer accountability looks like. While some less functional IT organizations ruefully plow ahead when departmental stakeholders disengage from projects, Caudill takes a tough love approach. "If business leaders don't show up to status calls, we stop the project," he said.

Those who think that digital initiatives, or any other aspirational or innovative business change, can be slapped on like paint on a broken-down barn have it all wrong. All you'll get is a broken-down barn with a shiny coat. It won't actually keep the rain out. Caudill's story shows that your organization can get there, too. It just takes the courage to focus on the foundation while everybody else is talking about the coat of paint.

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