28 Jan Taking an Investment Management Approach to IT
I remember having a conversation with a CIO a few months ago who complained that her business partners thought IT was free. The business would have a need, tell IT all about it, and then be relatively oblivious about the true costs of the technology solutions that IT provided. What’s more, after the implementation, the business partner who requested the solution would fail to look back to determine if the business outcome bang was worth the investment buck. The business’s general lack of understanding of the true costs and business results of IT, this CIO found, created major problems in performance, business impact, and IT credibility.
This is not the case at Campbell Soup Company.
“Several years ago, we saw mounting demand and increased operating costs, so we decided to design the organization for the work we were going to be doing and not for the work we had been doing,” says Joe Spagnoletti, who has been CIO at Campbell since 2008. “We took a positon on the future of IT and designed an IT operating model that would allow us to be more adaptive, better integrated, and have higher business acumen to meet the changing flow of demand.”
Spagnoletti and his team used the concept of investment management to change IT from an order taking model to a “demand driving” model. “Now, we conceptualize IT as a portfolio that we invest in, where we are always making trade-offs about where to invest and how to balance the portfolio,” Spagnoletti says. “This new perspective has allowed us to shift from focusing exclusively on our IT operating costs to focusing on business outcomes. We now know which programs to put money behind and how we are impacting value.”
Educating the Business
Spagnoletti, his team, and his business partners all look at four characteristics when making IT investment decisions: business outcome, operating performance, cost to serve, and risk. “We’ve educated the executive teams and our business leaders about how to think of an IT investment more broadly,” says Spagnoletti. “In their personal lives, our business partners have investment brokers, and they ask them ‘how is my current portfolio doing?’ before they make more investment decisions. We are bringing that view to our service owners. We show them how their current portfolio is performing so they think, ‘In a silo, this one investment looks good, but how does it look as a part of a collection?’”
By exposing Campbell’s business leaders to all of the factors that go into an IT investment decision, Spagnoletti has handed them more accountability for those decisions. “We transferred more decision making authority for business services to the business owners,” he says. “We now drive decisions to where the value is realized. If the value is realized on the supply chain floor, then supply chain leaders have to own those IT investment decisions.”
Now, rather than ordering up new supply chain technology, for example, supply chain leaders have greater ability to make decisions about those IT investments. “We work with our business partners in a more tightly integrated way so they understand the impact of their choices,” says Spagnoletti. “We’ve taken it from ‘I want some technology’ to ‘how can we have this business outcome? Let’s work together to explore the options to getting there.’ Shaping demand is an investment management practice.”
Deciding who owns the decision: Getting business leaders to think about IT as an investment portfolio can be tougher than it sounds. “Our first challenge was to figure out which decision makers were actually involved in the investment discussion,” says Spagnoletti. “The right business leader is the one who needs to own the outcomes and accept the risk. That’s not always the person who has the money. We had to figure out the difference between the finance owner and the risk owner.”
Establishing transparency: Another challenge is establishing the right level of transparency between IT and its business partners. “We decided to make those costs visible to the company so that people would start taking ownership of their investment decisions,” says Spagnoletti. “It was important that they see the historical impact of the decisions they’ve made. Showing them the bill of goods for what they’ve invested in was eye-opening to them. It was hard to get them to understand what they owned. That was a real education process. But once they had that history, they were able to redirect those investments.”
Opening IT up for scrutiny: When you share IT costs with your business partners, you are also sharing information about IT’s performance, which means exposing your IT team to more scrutiny than they are used to. “We are not just putting the investments in the business’s lap,” says Spagnoletti. “We all have to take accountability for how we are managing our investments. We had to remove the emotional attachment to historical choices and just look at those investments as a collection of facts. This means that they have a better view as to where IT is performing well and where it needs improvement. When you open the kimono, you’ve got to open it all the way.”
As a result of exposing the business to their portfolio of IT investments and empowering them to make better decisions, Spagnoletti is seeing improvements in business performance. “Now that the business has a better view of the impact of IT, they are making smarter decisions and we are all seeing a positive impact,” he says.
As an example, Spagnoletti cites a department that wanted to implement a new transaction system and a new analytics system. “When we sat down with the service owners and showed them the current cost of the new systems and the outcome they were having, they decided to change their investment strategy. Rather than put in a new transaction system, they invested in an inexpensive analytics tool to understand their operating performance. They saved money with the analytics tool and with those savings were able to self-fund the new transaction system. Their TCO is noticeably down and their ROI is up.”
When IT investment decisions belong to IT alone, the business rarely gets what it needs. By introducing the concept of investment management to all of Campbell’s business leaders, Spagnoletti and his team have tightened the connection between IT investments and business outcomes at the $8B global company. Business leaders at Campbell are now asking: What are the things I can do to optimize my current portfolio and decide if I want to invest in this new technology? How do I use what I’ve got rather than just get something new? “We are seeing that across the company the value of IT investments are going up,” says Spagnoletti. “Those investments are having a better impact.”
About Joe Spagnoletti
Joe Spagnoletti was appointed Campbell’s Senior Vice President and Chief Information Officer in August 2008. He leads the company’s global information technology function, providing IT strategy to help Campbell meet its business goals. He joined the company in 1997. Additionally, Joe serves on the Campbell Soup Foundation Trustee Board, the Cooper Health System’s Board of Trustees and Audit and Ethics Committee, the Temple University Fox School of Business Advisory Board, and on the Board of Trustees for AJ’s Ribbons of Gold, which serves children with cancer. Previously, he was an Information Technology Director with Becton Dickinson, and he began his career developing and implementing financial systems for a New York City software development firm. Joe earned his B.S. degree in computer science and mathematics from Albright College in Reading, Pa.
About Campbell Soup Company
Campbell Soup Company is a growing global food company with annual sales of more than $8 billion and powerful brands in three core categories: Soup & Simple Meals, Snacks and Healthy Beverages. After almost 150 years, the company continues to focus on delighting consumers with great-tasting foods and beverages that meet their evolving preferences, needs and desires. Brands under its umbrella include: Campbell’s, Pepperidge Farm, V8, Pace, Prego, Swanson, Arnott’s, Bolthouse Farms, Plum, the Kjeldsens, and Royal Dansk. The Campbell Soup Company was founded in 1869 and is headquartered in Camden, New Jersey.
The opinions expressed herein or statements made in the above column are solely those of the author, and do not necessarily reflect the views of WTN Media, LLC. WTN accepts no legal liability or responsibility for any claims made or opinions expressed herein.