IT as cost center, move aside. Attendees at the Fusion CEO-CIO Symposium 2013 heard three inspiring stories of products managed or created by IT that generate revenue and deepen customer relationships.
They started in different ways, but these projects at Trek Bicycle, Sears Holdings, and CUNA Mutual Group all got CIOs thinking about how they could bring revenue-generating ideas to their own businesses.
That’s the exception, not the rule, said Rick Davidson, founder and CEO of Cimphoni and conference chair. “It’s the ability to play at the executive level and influence executive leadership in the business,” he said.
For Waterloo, Wis.-based Trek Bicycle, the idea to provide point-of-sale (POS) software named Ascend to dealers came from the top. Trek’s CEO originated it 8 years ago based on input from regular dealer roundtables. But it’s an IT-run project.
“We in IT really own the business side of it, but there’s a lot of direction coming from the business side as well,” said Brent Leland, CIO at Trek.
“In addition to most IT functions where you have support, development, and analysis, we have sales and marketing,” he said.
Trek originally evaluated several existing POS options, and ended up licensing, and later buying, one developed by a doctor in La Crosse.
At CUNA Mutual Group, the story is almost the opposite. CUNA Mutual Group, based in Madison, Wis., provides financial services to credit unions, and now it also provides a web-based mobile app that lets credit-union members get loan offers as they are shopping, for example, for cars.
The app started at a kitchen table, a real skunkworks project by developers who prototyped it quietly only went up the chain when they had something to show and needed funding.
“It was completely unencumbered by the myriad of processes that a company like ours has, which is probably why it was successful,” said Rick Roy, SVP and CIO at CUNA Mutual Group.
While it was originated in IT, it found a place in CUNA Mutual Group’s products group, Roy said.
When you think of Sears, you probably think of department stores before software, but an adventurous new IT project is expanding into big data using the platform Hadoop. What started as an internal project to help Sears analyze its own data turned into a services and consulting subsidiary called Metascale.
Metascale also started under the radar, and a small group nurtured it until it grew to the point where it became its own legal entity, and it now has its own P&L statement (which is not unusual for Sears Holdings, where the IT department itself is a separate business with P&L that competes with outside vendors).
“The traditional data warehouse vendors are taking us seriously as a competitor, which I hadn’t expected,” said Phil Shelley, CTO at Sears Holdings.
Business impact, business skills
Shelley had experience as both a CIO and a business manager for several years, which helped him start Metascale. He now spends 30% of his time there, he said.
The upside is in both revenue and Sears’ internal analytics. The same people and resources are assigned to both Sears and external projects, Shelley said.
A number of key team members at CUNA Mutual Group grew up in software companies, Roy said, which gave them the background to see the overall picture of development as well as sales, marketing, and distribution. He also cited his prior experience being a customer of IT as being helpful, saying it’s powerful to be able to tell IT staff, “what it can be like to be a customer of IT.”
Roy sees the CIO role as uniquely positioned to provide this kind of value, as did others at Fusion 2013, as it blends business and IT.
“I think it is one of very few roles in the company where you have that vantage point,” he said. “You don’t need one hand to count the number of seats that truly look across the enterprise.”
As a CEO-initiated project, Trek’s POS system may have had few problems from the start with IT-business alignment. It not only generates revenue — it’s competitively priced with other POS offerings, Leland said — but it deepens dealer relationships and allows Trek to leverage its knowledge of the market.
“You can almost see the needs of customers better than the outside software vendors,” Leland said.
Many IT leaders like the idea of being responsible for directly adding to the bottom line, but projects such as these three create additional challenges, effectively adding new distribution and support requirements to companies that were not previously in the software business.
For Trek, that means competing openly with much larger software vendors, such as Microsoft, of which they are also a customer. Since Trek’s value-add is knowledge of the bike business, not necessarily other POS features, Leland said they are constantly re-evaluating what they can do to focus on their core value. Recently, key competition has been coming from MerchantOS, a software-as-a-service offering, and Trek has been working on a cloud transition.
CUNA Mutual Group is working on setting up an incubator to find the “next idea” in a more structured way, Roy said.
“It’s opened our eyes to what else we can do, not so much with this particular offering, but ideation with other offerings like it,” he said. “What other opportunities like this are in front of our nose but we’re just not seeing them?”
He noted a paradox of this kind of innovation: “To create it, you want to be outside the processes and be able to innovate freely, but to run it you want infrastructure support and to leverage the resources of the whole business.”
Since advanced Hadoop skills are still uncommon, Metascale’s challenges include talent retention, Shelley said. They trained most of their own people, but have started to exchange talent with other vendors, he said.
“I found it fascinating that the events each of the three CIOs talked about in terms of becoming the rainmaker were all opportunistic,” said Frank Ace, CIO of the Wisconsin Department of Justice and a conference advisory board member. “There were no patterns I think that anyone could have followed, except take advantage of opportunities.”
Most innovation programs are generally opportunistic, rather than systematic, said Tom Koulopoulos, president of Delphi Group and author on innovation. Structured innovation programs may take years to initially set up and then to become integrated into the culture and produce regular results.
“There’s usually some person who takes it upon themselves to be the point person for innovation,” he said.