Charlie Feld has a message for CFOs: when it comes to information technology, chill out. It’s no more difficult to get your arms around what you need to know about IT than it is for any other important company function.
CFOs, of course, often don’t see it that way. And many have grown jaded over the years about relying on business advice from IT leaders, convinced that they just don’t get it.
Feld is no ordinary IT leader, though. After 12 years as chief information officer at Frito Lay, in 1992 he formed The Feld Group. The firm gained a near-iconic status within technology circles for IT turnarounds at troubled or rapidly changing companies such as Burlington Northern, Coca-Cola, Home Depot, Delta Air Lines, Southwest Airlines, and Electronic Data Systems (EDS), among dozens of others.
EDS was so impressed after working with The Feld Group for three months in 2004 that it bought the firm and gave Feld and several of his associates top executive positions. Feld retired when Hewlett-Packard purchased EDS in 2008, but he’s back in the spotlight with a new book, Blind Spot: A Leader’s Guide To IT-Enabled Business Transformation (Olive Press, 2010).
The book’s basic theme is this: from a business executive’s point of view, IT is, in fact, simple to understand. The following is an edited version of CFO’s recent interview with Feld.
In the title of your book, what does “Blind Spot” refer to?
Every senior executive I’ve worked with knew a lot about finance, marketing, operations, legal, and human resources. But IT is a blind spot. Most don’t understand it, they don’t manage it, they don’t even engage in a dialogue about it. They just trust that if they spend $500 million on it, something good is going to happen. There are write-offs and projects that go sour, and the CIO gets fired every couple of years.
In my 45 years in IT until my retirement — actually, when I started, it was called data processing — the technology landscape matured in a breathtaking way, but how to manage it and get real business value from it did not mature at nearly the same rate.
Yet you say that IT is simple. If it’s so simple, why don’t executives get it?
At one level IT is complicated, but it’s simple at the level that executives need to think about it. If you want to implement IT-enabled business change, you only need to know four things: why, what, how, and who. First, why are you changing? Second, what needs to change — what is the business model going forward?
One reason that Feld Group was so successful was that we went into companies and focused on the “why” early on. Too often IT starts with “how.” Without a “why” and a “what,” you’ll never sustain a transformation.
Starting with “how” would be saying, for example, “We’ve got to implement SAP.” If someone asks why, you might say, “Because our systems are getting old.” Starting with a “why” and then a “what” would be: “We want to become a global competitor, so we have to have a global supply chain so we can compete on price. Since we have a different procurement system in every country, we’ve got to have a global SAP system.”
The key is, the “why” and the “what” are not IT things. They are business things.
But the third part, “how,” is all about IT, isn’t it?
It’s more of an IT thing. What kinds of systems and processes do you need to support the business model? There are certain things that you need to know about IT projects, but no more than you would need to know about any other capital project.
Compare it to building a plant. You wouldn’t start it without a blueprint, so you want to make sure you have that. But an executive doesn’t need to see wiring diagrams and know all about load-bearing walls. He needs to know what the plant’s throughput and labor costs are going to be.
As a CFO, you need to know a lot about FASB and Sarbanes-Oxley, but the CEO just needs to know certain things about tax and that you can’t move revenue or expenses from one quarter to the next. Every place I’ve been successful, I’ve kept the executives away from my version of FASB and Sarbanes-Oxley.
But executives don’t think about it that way. They get stunned with things like IP networks and Cisco routers.
Where the IT department reports to finance, shouldn’t the CFO know more?
No, not really. I will say, though, that IT knowledge used to be more important. Now, because of technology-industry consolidation, a server is a server is a server, whether you buy it from HP or IBM or Sun.
If executives don’t know any of the details, are they taking a lot on faith?
Part of the “how” is the blueprint, but it also includes having a common development methodology and standards across the IT organization, so the executive should ask whether those are in place. Finally, he should ask about the program’s management structure, the milestones, so that if a project is in trouble, he knows about it.
The fourth part of your framework is “who.” What’s that about?
There are four basic principles to the “who”: organization, leadership, talent, and culture. Take them one at a time, looking at the ways IT can fall down.
Organization: If the company is decentralized and IT is centralized, you’ve got real impedance problems. You need to get your decision rights along those same kinds of corridors.
Leadership: Most IT leaders either know a lot about business and don’t know enough about technology or, more often, grew up in technology and don’t understand business or how to communicate.
Talent: People are not fungible. If you allow me to have 100 people, and I pick them, I’ll succeed every time. If you give me 100 people that are not as talented, I might need 200 more to get it done.
Culture: This brings it back full circle to the “why.” IT transformation requires a culture of collaboration and willingness to change, but that requires an understanding of why change is needed.
Is it really that simple?
I think finance is a heck of a lot more complicated than IT. There are new laws and rules every day. If you’re in 160 countries, how do you keep track of all the tax codes?
All you need is a framework. If you had three CFOs in 10 years, the variation between them in terms of closing the books and outputs would be pretty close, because they had a framework. They didn’t just come in and make it up. If you had three CIOs in 10 years, you’re probably going to have three different approaches, because there is usually no framework.