New CIO - Phase 1 - Learn!

I just finished my first 5 weeks in a new CIO position. Fun. Hectic. A ton of learning. I set out with a 90 day plan divided into 3 phases. The first phase focused on learning, the second on analysis, and the third on planning.

During the first phase - roughly the first month - I focused on learning two areas: the business and current IT environment. My new position is with a mid-size fast growing retailer - an industry where I have minimal experience. Learning our business in particular - and the retail business/industry in general - were equally important. On the business side, I first sat down with the IT management team and reviewed the business end-to-end from an IT perspective, i.e., what were the major systems and the major interfaces as you follow our product from conception through sales. I then had meetings with each department/business unit to learn about their business functions, their major systems, and their view on what makes us unique. This last point will become critical as we move forward with long term IT planning to make sure we understand how and where to prioritize investment dollars.

The second area of learning focused on the IT environment itself. People, processes, technology. I reviewed our many lists of tasks and projects. I reviewed the inventory of systems, technologies, tools, etc. I reviewed the relationships with existing partners and contractors. At this point, I have a handle on our current business and IT environment and can start working to identify areas for improvement and growth.

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Popping the Bubble

If you rub your hand along a carpet starting along one wall and continue to the opposite wall, your hand will always move steadily and level but a bubble will slowly grow. Eventually, you'll have to pop the bubble to reach the opposite wall.

Many projects, especially IT related projects, develop a bubble throughout the project. In fact, many projects appear to move steadily onward while the bubble grows larger. The challenge for project managers is to identify the growing bubble and do whatever it takes to stop the bubble from growing. In most cases, any problems or issues should be resolved promptly - don't let them add to the bubble and potentially create other dependent problems and issues. Sometimes it's not clear that a bubble exists.

With our recent warehouse automation initiative, we did not identify all the corrupt data until the 11th hour. During our pilot, we actually were compounding the problem due to an internal system error. Eventually, we tackled the problem (literally) using a small army of employees to correct the data over a period of several days. During our postmortem, I remembered the "popping the carpet bubble" metaphor as we discussed the series of events that led to our final push to complete the project.

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Build vs. Buy

I was reminded today about one of the key decisions a CIO must make when evaluating new applications - build vs. buy. Building a custom application is time consuming, costly, risky, and often painful. However, sometimes it does make sense.

The key to the decision lies in the business strategy and the key differentiators for the business. Jim Collins, in his book "Good to Great," talks about the hedgehog concept - the idea that a company should focus all resources on the areas where they excel. This includes IT resources.

If the business has found a way to perform a particular function in a unique manner that provides competitive advantage - then it would be hard to find a pre-built solution that you can buy to automate this function. This is the area where it's worth building a custom solution and maintaining that competitive advantage.

However, other areas of the business that do not directly contribute to a unique differentiator should easily be satisfied with off-the-shelf solutions.

The bottom line: Invest in the aspects of the business that set you apart from the pack and don't worry about using standard common tools for those aspects that don't.

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PPG - A management tool for Predictable Profitable Growth

Predictability. Profitability. Growth. You need all three to achieve maximum results and stakeholder value.

1. If you have profitable growth but actual results are out of line with forecasts then you inevitably have many operational inefficiencies to handle the variances.
2. If you have predictable profits but no growth then you're most likely missing out on many opportunities to leverage a solid foundation for growth. In a public company, the stock price multiple will lag far behind competitors that have all three attributes.
3. If you have predictable growth without profits then you need to take a good hard look at the core business and strategy.

What I love about PPG is that you can use it as a management tool to guide a company and management team. If you identify one or two areas of strength, then you can focus on the other areas. You can develop specific projects and tactics to help develop the model and you can rally a management team around the whole philosophy.

At PL Developments, we had strong profitable growth but limited predictability. The company had grown from a small family-owned business where it was easy to react to variations in demand, supply, and production. As the company grew, it became harder and harder to react without accurate predictions. We put in place initiatives to improve predictability throughout the organization, including:

• sales forecasting and tracking (we could predict what, when, and how much would sell)
• purchasing and scheduling (improved our processes to plan what, when, and how much to make and what, when, and how much to buy)
• production metrics and forecasting (we could predict what, when, and how much to make and it's associated costs!)

Of course there were many facets to these initiatives and they all required technology and systems support, business process change, and most importantly - a change in culture.

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Making warehouse automation stick

Warehouse Automation systems, like other systems, sometimes create more work (or at least perceived more work) for warehouse personnel.

Taking a warehouse and logistics facility from a paper based organization to a systems based organization presents many technical and managerial challenges. Keeping inventory accurate using handheld computers for recording material movements and inventory transactions can be an arduous process for warehouse employees. The 'big' benefits from a warehouse automation initiative are often in other functional areas of the company - not just the warehouse.

Like most other systems' initiatives, include the users in key steps of the implementation process to create ownership and awareness. For example:

• The handhelds are new toys - include all members of the warehouse when selecting and evaluating the new toys. Options include keyboard layout, displays (color or monochrome), keyboard size (watch out for those big fingers!), form ('gun style', 'brick style', 'PDA style', 'tablet style', etc.)
  
• Warehouse location labeling has many options - create a focus group to help design the layout and have warehouse employees practice finding locations using different labeling and numbering schemes

The more employees are included in the design and implementation of the new system, the more they'll understand the issues, challenges, and ultimate benefits.

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The Pendulum Effect

I had a good conversation today about the role of senior management to balance the sometimes conflicting needs of different departments while optimizing the overall business - and the pitfalls of allowing the "pendulum" to swing back and forth between which metrics (and therefore, which departments) are "optimized" at any particular time.

For example, a production department would prefer to have large production runs to minimize changeovers and maximize overall output even though this may create more raw material and finished goods inventory. Production planning would prefer more frequent small production runs to minimize inventory and provide flexibility to meet urgent customer demands even though it might reduce production utilization. Sales and customer service would like a ton of inventory to maintain the highest customer service levels and promise any customer any product at any time. Of course this assumes that the departments are primarily focused on different metrics, e.g., overall production output, inventory turns, and customer service.

Senior management is focused on overall growth and profitability - for both the short term and the long term. If a senior management team is not careful, they can drive undesirable behaviors based on the metrics that departments think are most important.

For example, if senior management only asks about overall production output for 6 months and then goes wild about growing inventory they will create a "pendulum effect" where the organization swings from trying to optimize for one goal and then the other. What's the answer? Senior management must engage all departments in the primary overall objective of the company, help everybody understand the interdependencies, and consistently use a set of metrics to measure and manage progress that minimizes large swings in direction and helps the organization build momentum in one direction.

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Quality & Production: Too many cooks ...

Or too many inspections in this case. It's human nature. If two people are told to count the pages in a book and record the results - it's natural that if one does it before the other one, then the 2nd person might rely on the results of the 1st person.

During a review of common and frequent problems on our production lines, I believe that we have too many checks and double-checks and overlapping responsibilities between the Quality department and the Production department.

It's too easy for the production line supervisor to rely on the Quality inspector and visa-versa. It's not a true separate independent check.

Production needs to take responsibility and make sure the production line supervisors are not relying on the quality inspector to "catch" any problems. The current in-process quality inspection should actually be reduced and moved to the end of the production line.

In a recent book, The Tipping Point: How Little Things Can Make a Big Difference, the author refers to this problem as the "broken windows theory" and sites studies where crimes witnessed by multiple observers are reported less often than crimes witnessed by one observer. With multiple observers, everybody thinks someone else will report the crime. Another recent story centered around the number of editors involved in a book publication at a major publishing house. Over the years, the organization kept adding more editors to the review process only to discover after several years that they had 11 editor reviews and errors were not reduced. Everybody thought everybody else would catch the errors.

More people is not the solution. The right person doing the job right the first time is the answer. They need to have responsibility and not rely on downstream checks and double-checks.

Get the extra cooks out of the kitchen.

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