Transformation and the CEO

These days, Dan Fortin, president and CEO of IBM Canada spends a lot of time thinking about business transformation. But before selling his customers on the idea of transformation, he realizes IBM had to transform itself first. In recent years, it has sold off its PC division, bolstered its service division by adding 500 consultants and refreshed its entire product line with a view of running virtually every aspect of a company’s IT infrastructure.

“We have changed the profile of the company significantly,” says Fortin. IBM will move beyond traditional IT outsourcing (servers, security, business recovery, help desk) and into business services (procurement, HR, finance).

He recently spoke with EDGE magazine at IBM Canada’s head office in Markham, Ont.

EDGE: What do you see as the next big thing?

FORTIN: The part that is really emerging in Canada is business transformation outsourcing. And that has become a fascinating market. Let’s take procurement and finance. It used to be ‘I’ll outsource my IT (only).’ Now people are looking across the board and thinking somebody else can do it better, and by the way, when we are done transforming it, we will also run it for you.

EDGE: It sounds huge, where do you start?

FORTIN: We begin with a concept called component-based modeling. We say, ‘Hey CEO, why don’t you and your executive team spend some quality time with us?” We then basically break down your company into components. Once you do that, you can start to decide what to do with the particular components. Is that component really crucial to your business? Do you need to transform it? Do you need to update it? Do you need to outsource it?

EDGE: What advice would you give to executives who are thinking about transforming their business?

FORTIN: Although I am pleased with how CIOs and CEOs are reacting to all this, you need to ensure you are making quality decisions. The only thing I can tell them is that, somewhere along the way, something is going to go wrong. Therefore, what is the governance model that you have established. It is not if we are going to have a problem but what is the resolution for dealing with this problem. Second, if you have an agreement, make sure your supplier is profitable because bad thing happen when they are not.

Transformation takes time
Why are other companies in Canada still lagging? What needs to happen?

Collectively, the signs are good.

As a percentage of total revenue, investments in IT continue to increase, ranging from three to 15 per cent, which largely depending on which industry you are referring.

New technologies are coming on stream showing a lot of promise.

Financial systems, supply chain logistics and sales effectiveness/customer relations software top most lists but of course there are many others.

The technology works. PCs are reliable, networks don’t go down nearly as often and software continues to advance. Take enterprise resource planning (ERP) software as an example. Ten years ago, every ERP system required a custom-install with a lengthy implementation period whereas now it is almost off-the-shelf. We spoke to John Hughes of Deloitte about some of the issues.

EDGE: Where do you think the problem lies?

HUGHES: Companies know they have to do that but what they are struggling with is the payback. If make a half-million dollar investment in technology, where am I getting the payback.

EDGE: Technology has come a long way, do you see this changing?

HUGHES: Although the technology works a lot better, it’s tougher to find the right people and the CIO position is a prime area where this skills shortage exists. Transformation is seldom just about technology, it is also about people and processes, so it stands to reason you need a CIO with a different skill set than an IT director.

EDGE: Where do you get companies to start?

HUGHES: It really is difficult to get organizations to think about transformation. Looking at Canada’s best-run companies, one thing is consistent. All the best companies have developed a pattern of sustained and systematic growth. We are NOT talking about organizations that are one-year wonders with a shining star CEO or a hot new product, it really goes far beyond that. Transformation takes time.

Transformation starts at the top
Geoff Smith, CEO of Ellis-Don believes that more than just contribute to business efficiency, IT is transformative and can translate into competitive advantage. And in an industry that would prefer to invest in an excavator much rather than in anything to do with IT, he is still the exception.

Ellis-Don is a commercial real estate developer based in Toronto. Its claim to fame includes the Rogers Centre, the Art Gallery of Ontario, London’s Canary Wharf and it takes IT very seriously.

“The construction industry is all about information,”? he says. And that is why Smith pays close to attention to his software system.

The company, for example, built a complex application called Edgebuilder that it uses to automate all the documents and processes around construction management. It also takes advantage of the Internet to communicate with its thousands of contractors and hundreds of consultants located at job sites and offices everywhere.

The review of EllisDon’s needs began in 1999. With the realization that there was nothing on the market that would do the job in the way that Ellis-Don wanted it done, the development of Edgebuilder began. Working closely with CIO Bruce Fleming, a rough and ready prototype was put in place by June 2000. It was rolled out to the entire company by 2003.

Smith says Edgebuilder is much more than a software project. It is the process by which Ellis-Don does business with all of its customers, project managers and superintendents, and he suspects it will be the platform that the company will be using for quite some time.

And he is convinced it has paid off.

“It is hard to measure,” he concedes. “We have doubled our volumes but our overhead is the same.”

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