What makes you think that when you become the CIO that you’ll be able to run things better than the current CIO is doing? Do you posses some magical management ring or have a bag of IT / business alignment powder that you can sprinkle on your staff that will transform today’s issues into tomorrow’s pillars of success? I don’t think so.

Maybe a better approach would be to go look for some help. One place where you can find out how to run a successful IT department comes from, of all places, the world of finance. Let’s talk with the big and powerful private equity firms and see what they have to teach us…

Just What Is A Private Equity Firm?

You’re good at IT; however, you may not be in the business of keeping up with just what private equity firms do. Let me explain. Private equity firms are basically combo consulting / banking firms. They scour the market looking for under performing companies. When they find one, they swoop in and buy them. Often times they need to borrow a lot of money to make this purchase so it’s called a “leveraged buy-out”.

Once they are in control, more often than not they take the company private – that means that they buy back all of the outstanding public stock. When they no longer have to worry about what the shareholders think, they get to work. Their overall goal is to boost the company’s profits so that they can turn around and sell it for more than they paid for it.

One way to boost profits is to slash costs to the bone, the other way is to boost profits. If you can do both, then you’ve succeeded. A few years down the road when the company is sold, the money from that sale is used to pay off the remaining bank loan and then everything left over is pure profit. A lot of profit.

Run Your IT Department Like A Private Equity Firm Would

So if you were a CIO who wanted to wring the maximum value out of your department, just how could you go about doing this? The big boy private equity firms (Blackstone; Kohlberg, Kravis, Roberts; and Bain Capital) have basically boiled what you need to do down to six steps:

1. Define Your Department’s Full Potential: If you want to maximize the value of your IT department, then you are going to have to do the due diligence needed to know what that “full value” looks like otherwise you’ll never know if you’ve reached it.
2. Create a blueprint: Once you know what you want to achieve, you’re going to need a plan for how you’re going to get there. The key here is that the blueprint needs to be detailed – who is going to do what and when are they going to do it.
3. Match: you’ve got to move fast if you want to have any hope of pulling this transformation off. That means that you’re going to have to match the right people to the right jobs and you’re going to have to start measuring the right things.
4. Hiring: you can’t get “there” if you don’t have the right people working in your department. This is why you always see such staff turnover after private equity gets involved – they don’t tolerate slackers.
5. Make Your Money Work: Although your IT department can’t borrow the way that a private equity firm does, you sure can make the capital that you have work as hard as possible for you. If it doesn’t contribute to your bottom line, you shouldn’t be spending on it.
6. Results: Make it so everyone in the IT department has a results focus – adopt the mindset of a private equity investor.

What All Of This Means For You

One of the big challenges of being the CIO is that it can be very unclear just exactly what you are supposed to do after your big promotion. The rest of the company thinks that you will just magically make all of their IT problems go away. The IT department thinks that you’ll provide them with clear strategic direction. Great – what’s a CIO to do?

In a nutshell, you can’t go wrong if you adopt the mindset of a private equity investor. Since they view a business completely from a revenue generating perspective, they are able to see through all of the clutter and focus on only the parts that really matter. This is exactly what you need to do.

No, you can’t do a leveraged buy-out of the IT department and then turn it around and sell it back to the company in a couple of years. However, you can work with your staff and using private equity thinking to pull off an amazing transformation. Once you’ve done this, it will be time for you to move on to your next challenge. How’s that for a Wall Street pay off?

Author: Dr. Jim Anderson
Article Source: EzineArticles.com

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• April 1, 2009 -- How crisis shapes the corporate model (0)

Ever since the financial crisis broke in earnest last September, history has been mined for nuggets of insight. The Great Depression, the Panic of 1907, Japan’s lost decade of the 1990s, the Swedish banking crash in the late 1990s, and so on. Each time, though, the focus has tended to be on the lessons learned for economic policy and theory.

Let’s try a different lens. How have past crises shaped management thinking and strategy? Innovation in management, after all, is adaptive. Management is not a science, like physics, with immutable laws and testable theories. Instead, management, at its best, is an intelligent response to outside forces, often disruptive ones.Times of severe economic duress, management experts say, can serve to sharply accelerate trends already under way.

The Depression and its immediate aftermath, they say, was such a catalyst for forces already in motion. The main development, they note, was the rise of the modern multidivisional enterprise like General Electric, DuPont and General Motors. It was made possible by the mature technologies of transportation and communication — railroads, the telephone and the telegraph.

The technologies made it possible to monitor and coordinate business operations as never before. And the Depression made it imperative for managers to achieve efficient economies of scale to tap national markets, ensuring corporate survival amid a downward spiral in total demand.

A modern version of that kind of technology-aided shift in management practice and corporate organization could be in the offing, says John Hagel III, the co-director of the Deloitte Center for Edge Innovation, a research arm of the consulting firm.

The sharp downturn, according to Hagel, will force companies to go beyond simple cost-cutting to take a hard look at the economics of their businesses. Most companies, he says, are actually bundles of three different businesses: infrastructure management, product and service development and commercialization, and customer relations.

The current crisis, Hagel says, opens the door to “an unbundling of the corporation” to achieve greater efficiency and profitability. The trend, he says, is already exemplified by specialist companies that focus on particular infrastructure fields. In logistics, Hagel says, many companies farm out those chores to FedEx and UPS; in call centers, he points to Convergys; and in contract manufacturing, to Flextronics.

Of the three business areas, new product development is the one that lends itself not to size, but to small creative teams, and thus is the most difficult for large corporations. Hagel cites Procter & Gamble as a big company that understands the benefits of unbundling. It has set a goal of getting half its new-product innovations from outside the company, through licensing and collaboration with partners. And P&G, Hagel says, has invested heavily in Web technology and clever software to analyze and nurture customer relations.

To Hagel, such developments look like an Internet-era rerun of the corporate transformation of the 1930s and 1940s.

“We’re facing the potential to have that play out again — this time with digital infrastructures that allow companies to organize and manage their activities in new ways,” he said.

Manufacturing innovations and distribution patterns have been powerfully shaped by economic shifts. Japan’s just-in-time, lean manufacturing system, management experts note, was an adaptation to postwar poverty, a shortage of capital and scarce land for factories, while pro-market policies in China and India opened the door to globalization.

There may well be a ­different pattern of global production and distribution when the world economy emerges from the current crisis, says George Stalk, senior adviser to the Boston Consulting Group. Assuming that long-term oil prices average US$80 a barrel or so, and that roads, ports and airports continue to be congested, smaller factories closer to home — in the Midwest or Mexico, for example — may be more economical and flexible than those in Asia.

“For a lot of goods, China will no longer be the preferred source,” Stalk said.

Times of turmoil also bring changes in social attitudes and politics, which ripple into new management practices. Labor unions, for example, rose to prominence during the Depression. Unions brought large companies a needed dose of industrial stability, as the earlier ideological wars between labor and capital receded. If the workers were less likely to be radicals, the days of robber-baron owners were in eclipse as well.

Their power was supplanted by “a new subspecies of economic man — the salaried manager,” wrote Alfred Chandler Jr, in his Pulitzer Prize-­winning history, The Visible Hand: The Managerial Revolution in American Business (Harvard, 1977). Chandler called the model “managerial capitalism,” and the role of management was to balance the interests of a diverse group of stakeholders including workers, government and shareholders.

That model held sway until the 1980s, when the stagnation of economic growth and corporate profits of the 1970s brought a narrowed focus on stock-market returns as the primary measure of management performance. In politics, the Reagan revolution decreed that government was not the solution, but the problem.

Today, the pendulum is swinging back to a model in which corporations will be regarded more as social organizations, whose obligations extend well beyond Wall Street, according to Rakesh Khurana, a professor at Harvard Business School. He says that in seeking government aid, the automakers portray themselves as “pillars of their communities and pillars of American manufacturing, not purely economic entities.”

“The narrative for corporate America has changed,” Khurana observed. “Government is not seen in opposition to the firm, but as a partner.”

Such swings, it seems, are the norm historically.

“If there’s an ideology of management,” he said, “it is pragmatism.”
Source: NY times

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