Nearly every CIO I have ever met would like to change the IT conversation from one of cost to one of value. A lot goes into driving this change, but the first step is getting a handle on what the company is actually spending on IT.
When John Kehoe became CIO of $2.6 billion industrial manufacturer Valmont Industries in 2014, he found that people talked about IT costs, but they were only telling part of the story. “When I arrived here, our key leaders and IT staff members would quote the costs of IT as a percentage of sales; they knew those numbers,” Kehoe says, “but with five autonomous businesses, they did not have a central view of what the company was actually spending on IT.” Kehoe’s peers tended to include only pieces of costs in their dialogue; they did not have a consistent view into the higher value IT spend, which was often driven within the divisions.
By working with local IT in each of the divisions, Kehoe and his small centralized team were able to get a clear view as to what the company as a whole was spending on IT. “Once we had the complete picture, we could see that we were spending more on sustaining activities and infrastructure,” Kehoe says. “These elements alone won’t win the day; if we are not moving up the value curve by standardizing business processes and using cloud services, we are just managing the daily work, not setting key strategies from within IT.”
Value Conversations About IT
But even when you know what you’re spending on IT, don’t bother attempting to move up the value curve without a detailed understanding of the problems the business is trying to solve. “Traditionally, the pattern was that IT would walk into a meeting with a business leader, the dialog would be good, but sometimes was lacking the key strategic need or might include support for just one group’s needs,’” says Kehoe. “We had no enterprise lens across the divisions; in some cases, we already owned a solution that could meet the business needs. Also, with our divisional alignment, we would encounter situations where a supplier had multiple software contracts with us, inhibiting our ability to leverage our collective buying power.”
So, Kehoe and his team started to change the conversation. When the business needed a new HR platform, IT suggested purchasing one for the entire company rather than for just the one division or international location. “That discussion then became a larger conversation about efficiencies and enterprise scale,” says Kehoe. “Once we were talking about an enterprise platform, we could start having ‘value conversations’ about what shared data might tell us, for example, about lowering the cost of steel purchases.”
While Kehoe was getting his business partners to start thinking about standardized, enterprise solutions, he also coached the IT team about the value of thinking about the enterprise. The first order of business was to inventory all applications and look for redundancies. “I asked the team, ‘even if we had the money, could we sustain this many applications long term?’”
“Seeing the Light” on Standardization
Once the team acknowledged that the proliferation of duplicate applications would no longer meet growing business needs, Kehoe encouraged the IT leaders of the different divisions (who reported directly to their business presidents) to think about how unique their business processes actually were. “We took freight as an example,” says Kehoe. “We need to control how product inventory leaves our factories and where it goes. What the trucks are actually carrying may be different, but the process is the same.”
The five IT leaders, who for years had been running separate systems, saw the light of standardization and implemented, for the first time in the history of the company, a centralized transportation management system. “The transportation system was the first beachhead,” Kehoe says. “We now have enterprise systems in planning for procurement, aspects of finance are in use today, and there is more on the way.”
Now that IT sees the benefits of enterprise systems, Kehoe is taking modernization another step forward. He just announced a new shared services organization with IT leaders, previously reporting into their business, now reporting into IT. “We are rebranding our leaders with business relationship management titles,” he says. “They will be dotted-line to their group president with a hard line to me; that’s a huge change in regard to improving IT’s ability to standardize and become more agile.”
Kehoe, his IT team, and their business partners all recognize that standardization works in some instances but not in others. “If a business has a unique process and wants to pay for it, we don’t block them,” says Kehoe. “We call those ‘divisional applications’ and they are usually tied back to specific regulations or unique processes that require a custom solution.”
Moving from “distributed needs” to a centralized model of pooled IT resources and standardized systems is a major cultural change for everyone involved.
Define the problem. “Really make sure you are solving a real business problem and not just a feeling,” says Kehoe. “More often than not, I had people tell me they thought something was broken but after further analysis the root of the problem was not clear.” Kehoe asked his business partners to write down their problems in a few sentences. “Once you see a problem in written form, it becomes clear and people remember it.” With clarity around which problems the businesses were trying to solve, Kehoe and his team could better identify commonalities. “We just went through this exercise with factory optimization,” he says. “We realized that we already have the IT tools we need; what we need is not new technology but a standard way of working.”
Kehoe also recommends that you listen more than you talk. Prior to joining Valmont, he had been in aerospace for many years. “This was the first time I was in a heavy steel industry,” says Kehoe. “I needed to understand how people thought: how unique is their thinking? Are their challenges tactical or strategic?” One tactical decision each business had made was to buy steel through service vendors; but when Kehoe and his team worked with the divisions, they realized that if they pooled their resources, they could go straight to the mills and get better prices; the discussion became strategic.
You know the old saying: “I love standards! Just pick mine!” Business leaders who control their own IT resources and make their own technology decisions can be resistant to moving to a shared services IT organization and standardized processes. How did Kehoe know the time was right to make the move? “When the businesses started to let their own IT resources move to a central pool, that was strong evidence of their support.”
About John Kehoe
John Kehoe serves as Vice President, Information Technology and CIO for Valmont Industries, since he joined the firm in June 2014. Previously, Kehoe was the Executive Leader – IT Shared Services with Rockwell Collins for more than 10 years. He also held prior IT roles at Vertex Aerospace and Raytheon. Kehoe received a BS in MIS from Friends University and a MBA from Belhaven University.