The Future Company

The role of the CIO and the IT department

Copenhagen, December 2002

Is this the status of your present IT department?Constantly having your hands in the dirt trying to maintain adequate velocity

Leverage systems toward new business!Trying to gather information in order to obtain an overview but it seems impossible

Looking at best pratice!Fierce competition in the marketplace combined with more rapid product cycles

Lanell is a part of the WM-data Stratevo network

Agenda

1.1. Lanell Innovation is a part of a pan European NetworkLanell Innovation is a part of a pan European Network

2.2. Innovation and the IT organizationInnovation and the IT organization

3.3. How to apply innovation in a working organizationHow to apply innovation in a working organization

Virtual Organization Structure

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What is a Virtual Organization?

Facilitates the workflow of a group of users across multiple domains who share [some of] their resources to solve particular classes of problems

Collates and presents information about these resources in a uniform view

Members configure project teams in order to meet customer needs quickly

Lanell Innovation is a networking company with a virtual organization

Networks are a realityTechnology now allows networks both to become easier and to expand

Networking is basic

Virtual organization stripped of its technological aspect - has always existed

what is new - is technology now allowing such activities both to become easier and to expand; barriers of distance and time are no longer constraints for business in communicating with employees, suppliers, customers, partners

What is new in networking

Barriers of distance and time are no longer constraints for business in communicating with employees, suppliers, customers, partners.

Enabling temporary operational units based on market opportunity

Facilitating that partners contribute only with their strengths (core competencies)

Forces feeding the power of networkingAbility to respond requires a new flexibility that affects our traditional ideas of organization and management

Effects driving networks

Growth in importance of the individual who values loyalty to a profession above loyalty to one organization - and who values their private and working lives equally

Disappearance of the job for live and of progress up the career ladder

Shift from manufacturing-based to information-based economy

Organizational structures and management concepts of the past are no longer viable in market place of rapid change

Technologies are now converging to support the flexibility demanded by organizations

Lanell is a part of a pan European network

Lanell Innovation is the network facilitator that initiates Virtual Organization, maintains relationship between the member companies, facilitates the formation of market and customer driven temporary Virtual Corporation,

Lanell Innovation is based on: Partner Equality Boundary Crossing Geographical Dispersion Complementary Core Competencies Pooling of Resources Changing Participants Electronic Communication

Infinite innovationSustain constant product development and accelerate product cycles in the organisation

What Lanell Innovation does differently

Share knowledge and add value to corporate knowledge

Based on equality of Partners

Innovative and Flexible with a small core organization “Stripped” to “core competencies

Use of Information and Communication Technology

Focus on the essentials

Outsourcing all non-essential

Lanell Infinity model

Agenda

1.1. Lanell Innovation is a part of a pna European NetworkLanell Innovation is a part of a pna European Network

2.2. Innovation and the IT organizationInnovation and the IT organization

3.3. How to apply innovation in a working organizationHow to apply innovation in a working organization

Proposed closing the US patent office in the late 1700’s because everything necessary had

already been invented

John Adams

Proposed closing the US patent office in the late 1700’s because everything necessary had

already been invented

John Adams

Does innovation matter ?

Innovation matters!

Average annual shareholder return 1986–99

Innovativeness

20 %

10 %

0 %

–10 %

–20 %(Sample: 600 U.S. corporations)

Arthur D. Little research has shown the explicit link between innovativeness and shareholder return

Innovation for sustained value creationLeading companies have been able to capture the Innovation Premium by making innovation their main strategic thrust

01992 1993 1994 1995 1996 1997 1998

Average of oil & gasindustry

Premium

600

400

200

01992 1993 1994 1995 1996 1997 1998

Average of personalproducts industry

Premium

300200100

400500600700800900

300

200

100

400

0

Premium

Premium

1992 1993 1994 1995 1996 1997 1998 1992 1993 1994 1995 1996 1997 1998

200

400

600

0

Average of photograficsupplier industry

Average of majordrug manufacturers

01992 1993 1994 1995 1996 1997 1998

Average of oil & gasindustry

Premium

600

400

200

01992 1993 1994 1995 1996 1997 1998

Average of personalproducts industry

Premium

300200100

400500600700800900

300

200

100

400

0

Premium

Premium

1992 1993 1994 1995 1996 1997 1998 1992 1993 1994 1995 1996 1997 1998

200

400

600

0

Average of photograficsupplier industry

Average of majordrug manufacturers

Reven

ue

(M

M D

KK

)

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0

10

20

30

40

50

60

70

80

90

100

Today 2007 Target

Market Expansion

Base Revenue

Traditional Mergers and Acquisitions

New Products Currently in Pipeline

Growth Gap

Target

The CIO play a major role in closing the growth gap.

To do this the CIO needs:

In-depth knowledge of IT and the capacity to apply IT strategically.

Streamline IT department

Along with general business experience outside of IT and the ability to get messages to top management.

Illustrative

Where do future revenue growth come from?Companies need to recognize that innovation is the key element in closing the growth gap - this involves the CIO.

Profile of typical CIOThe CIO needs to stay focused on the big picture while constantly improvising.

Profile

90 percent are male.64 percent have IT backgrounds.Of those with non-IT backgrounds, most have experience in finance or operations.Nine percent are expatriates.

The CIO face challenges:

Make the shift from playing a more tactical role, to becoming an integral part of strategic planning and knowledge management.

Make high-stakes decisions and big-ticket expenditures in areas that the company’s top decision-makers may not understand.

Be an effective team player while shaking up the status quo.

Contact with CEO

15 percent of U.S. CIOs have no interaction with the CEO.17 percent interact with the CEO less than once a year.11 percent interact less than once a month.

Needed skills

65 percent of U.S. CIOs believe that their successors will have a different skill set than they have.80 percent think a grounding in business skills or an MBA is important to their success.Most of those who say that their current job is NOT a route to the top cite insufficient business or functional experience.

Analyzing the IT organization

Added

value

Impact

Cost efficienc

y

Computer operations

Systems DevelopmentAnd maintenance

Systems and Information Architecture

BusinessRequirementsIdentification

The traditional IT department has undergone huge evolution – Information technology is on the track to become basic business

The traditional set of tasks for IT department has included:

Managing operations of data centers, remote systems, and networks

Managing corporate data

Performing systems analysis and design, and constructing new systems

Systems planning

Identifying opportunities for new systems

IT knowledge

Businessknowledge

Balance of expertise required

Changes in traditional functions

Added

value

Impact

Cost efficienc

y

Computer operations

Systems DevelopmentAnd maintenance

Systems and Information Architecture

BusinessRequirementsIdentification

Different forces are pushing the traditional functions

IT knowledge

Businessknowledge

Balance of expertise required

Growing external services

Growing capability of users

The following trends are moving their performance out of the IT department:

Distributed systems

More knowledgeable users

Better application packages

Outsourcing

OrganizationalEffectiveness5.Restructuring the

industry6.Restructuring the

organization7.Growth and

Increase in market Share

Operational control2.Asset management3.Process

management

Management focus

Remain in Business5. People Systems

Knowledge controlMake Money4. Megadecisions5. Marketing,

distribution, customer service

Save Money2. Financial,

manufacturing, services

3. Administrative

Functional use

Tuning management focus towards real application

benefit

Reducing costs

1

2

Leveraging Investments

3Enhancing products and services

4

Enhancing executive decision making

5Reaching the consumer

Above the lineAbove the line

Below the lineBelow the line

Where do traditional IT functions stop and key business processes start?

Changes in the roles of the IT department

Added

value

Impact

Cost efficienc

yIT knowledge

Businessknowledge

Computer operations

Systems DevelopmentAnd maintenance

Systems and Information Architecture

BusinessRequirementsIdentification

Balance of expertise required

CIO’s must start reshaping the way the enterprise and IT department works and competes

IT departments have two missions: maintain today’s systems and work on tomorrow’s systems.

The “Today” operation should concentrate on providing services, while the “Tomorrow” operations need to focus on helping the businesses operate better.

The IT department must keep performing while transforming

New Roles in IT

Broker

Business

and

Info

rmatio

n Arc

hitectu

re

Keeping up speed

The CIO play a major role laying out the playing field.

To do this the CIO needs to:

Have IT performance analysis, indicating problems and need in current operations

Encourage project teams to study the marketplace

They are becoming more “proactive” by helping to create a vision of the firm’s future and its use of IT and selling those ideas to others

Develop a competent business driven IT staff and IT-savvy users

Implement systems that helps leverage information and cross department strategies

Establish close relations between IT executives and general management

CIO’s are required to bridge the innovative gap between IT optimizing initiatives and business development

Agenda

1.1. Lanell Innovation is a part of a pna European NetworkLanell Innovation is a part of a pna European Network

2.2. Innovation and the IT organizationInnovation and the IT organization

3.3. How to apply innovation in a working organizationHow to apply innovation in a working organization

“Normal people can and will innovate of their own initiatives if enabling conditions are

present.”

A. Van de Ven

“Normal people can and will innovate of their own initiatives if enabling conditions are

present.”

A. Van de Ven

Can your organization become highly innovative?

Initiate a plan for innovation

Creating an organization culture that enables innovation

Vision – Declare the importance of innovation; make it part of the company’s self-image

Foresight – Find out where technologies and markets are going. Identify articulated and unarticulated needs of the customers

Stretch goals – to make quantum improvement

Empowerment – Hire good people, trust them, delegate, provide slack, and get the #$%& out of the way

Communications – Open, extensive exchanges according to ground rules in forums for sharing ideas, and where networking is each person’s responsibility

Rewards and recognition – Innovation is an intensely human activity. Keep good people happy.

It is imperative that CIO’s and general management articulate the companies’s innovation policy

Knowledge that one has is critical to personal success

Knowledge that one has and shares is critical to personal success

Reuse destroys creativity Reuse can fuel innovation

Value is derived only from personal creativity

Better ideas can be generated from interaction and collaboration

The right mindset is essential

Routinely seeks knowledge to increase effectiveness

Occasionally seeks knowledge to fill gaps

Leverages institutional networks Leverages personal network

Routinely captures and shares knowledge with global network

Occasionally captures and shares knowledge with personal network

Beh

avio

rB

eliefs

Practitioner Knowledge worker

It is vital to nourish the beliefs and behaviors of the knowledge worker

The Lanell workflow for applying innovation Before embarking on the innovation mission ensure that you have the right setup in place

Setup the company for innovation

Mentorboard – Establish a mentor board with senior employees from all parts of the organization

Develop Business Case tools – Set a standard for BC’s that enables Value driving decision making

Define hierarchies – Don’t realize too late that ideas are the main business asset

Define rewards – Fuel the idea process

“Never time to do it right,

always time to do it over!”

“Never time to do it right,

always time to do it over!”

Be cautious of harmfull agility

Lanell Innovator helps accentuate innovation Supporting the process of knowledge and innovation driven organizations

Niels Stenfeldt PoulsenManaging Director

nipo@lanell.com

Lanell InnovationMosede Højvej 24

DK 2670 GreveDenmark

Website: www.lanell.com

Niels Stenfeldt PoulsenManaging Director

nipo@lanell.com

Lanell InnovationMosede Højvej 24

DK 2670 GreveDenmark

Website: www.lanell.com