Joseph Spagnoletti, former CIO of Campbell Soup Co., is deploying a framework that may provide an "aha moment" for IT. The general idea: Track returns on base systems and cut projects that don't generate cash.
Joseph Spagnoletti, former CIO of Campbell Soup Co., has an idea, model and methodology that could revamp how enterprises think about information technology and business alignment.
The concept is ridiculously simple yet hard to pull off. The mission: Deploy a framework for a transparent view of return on investment and focus on tech projects and services as if it were a financial portfolio.
Think about it. In IT, most of the budget goes to managing services and "keeping the lights on." These processes keep the business running, but the value to the business is largely unknown. There is no quarterly mutual fund statement for IT. For many of these systems, you could turn them off and see no harm to the company at all. It's quite possible that cash flow could improve by shutting down systems.
The kicker is that IT really doesn't know what the return is on their base systems. Why? They're too busy launching something new.
Now contrast that approach with an investment portfolio. If the base of your portfolio, say an index mutual fund, is not delivering the returns you're far more interested in that fact than buying something new.
Spagnoletti, now has his own consulting firm Spagnoletti & Associates, with a mission of making IT value obvious. "The key here is that every person around the table is looking at outcomes, performance, cost and risks. It's not about the system. Tactics can change continually," he said. If successful, IT can use this model to move across departments and bridge to more leadership roles.
Here are some highlights from my talk with Spagnoletti and some key takeaways.
How'd you get here? "When I took over at Campbell we were in the middle of a large SAP deployment. The company was focused on cost reduction and a savings program. IT had solved for the big ticket items that most big companies worry about. Largely things were going well, but we weren't spending our budget. Near end of year you'd be giving back because you couldn't execute.
The company didn't know what it was getting. We looked at the cash going out the door. You're always spending and becoming more dilutive to company. Then system goes in and proficiency drops. Before the company gets back to value you've already made investments in the next thing. It didn't make sense. These were good things to do but not making money."
Does tracking returns on investments change the conversation? "Once you institutionalize the need to track returns, you time your investments better. You're doing a better job with flow of cash out the door. If you are spending money on marginally valuable investments, you do less frequently. You look at how to make a dollar go farther. The transparency put the spotlight on projects that weren't making money."
Why do returns on base systems matter? "If you looked at any investment portfolio, it's clear the base drives the return. It's the opposite in IT. No one is held accountable for the base and the returns. You just spend. We're complacent with that. The opportunity is to drive the base returns and not the projects. Everyone spends time and money on what to change. Most investment dollars aren't tracked on the base.
The approach integrates base spending to cost and outcomes. It's one big pot of money and a decision process that considers business outcomes. When create that transparency of the dollars and outcomes you lose emotion about projects. You go where you get a better return. The service owner owns the outcome and a shared agenda."
How does a focus on investment returns affect leadership? "This is an interesting approach to any domain, but we're focused on IT. Focusing on returns develops leadership for future roles because you have idea of their contribution. We're not selling tools and technology, but coaching folks to think differently. A focus on returns creates a language and approach around business performance. It also creates a partnership with business leaders and CXO visibility. The return focus also creates a language for IT in the face of more disparate ownership of projects."
Is IT ready for an investment return focus? "What we've found so far is that business folks can jump on right away. The IT folks will take two months to get the numbers. IT may understand the tactics and processes, but doesn't understand an investment from a cost and resource perspective. IT people want to be partner at top, but business side wants you to be partner all the way through the business."