The ultimate dream for most IT departments is to contribute to the top-line growth of the business. Intel’s IT department was no different. But to achieve this, it first had to transform itself into an innovation machine of note.
In the late-1990s, the company did not see IT as a department in its own right. Intel IT put on an extraordinary performance that restored its popularity among business executives and users. The first act entailed the transformation of the IT department, and the second act focused on building capacity for IT-assisted innovation. Martin Curley, currently the Global Director of IT Innovation, was asked to lead this career-challenging endeavour in 1999. Read on to see how IT grew to become a hero within Intel!
Vote of no-confidence
As is the case at most organisations, IT is seen as one of the mission-critical components within Intel’s business as well. However, the IT department was hardly seen as a main contributor to the maturation of the power of information technology - a paradox that will sound familiar to many top managers. IT is usually seen as a millstone rather than a strategic gain. “That was also the case at Intel,” recalls Curley. “The 1 April edition of Intel’s company journal even featured a main article entitled: ‘Intel IT wins Intel Achievement Award’. Soon after this cynical vote of no-confidence, we launched a 6-year transformation programme that allowed IT to grow from an average organisation to a strategic business partner. No mean feat if you consider that the IT division of large enterprises is inevitably linked to legacy systems, outdated infrastructures and overly complex procedures. It usually runs a succession of systems that have been in use for decades and are ageing at an alarming pace. No wonder that the largest chunk of the budget disappears into what is known as ‘keeping the lights burning’. Despite the rise of IT governance, enterprise architecture and frameworks in the field of best practices, such as CMMi and ITIL, IT has not yet been transformed into a true business partner. Pointing fingers is senseless, transforming is not. Nobody in the boardroom wants IT to become a competitive disadvantage. A makeover of the IT function is possible with a little help from ambitious CIOs and other IT managers who possess passion and leadership qualities. What we did, others can do too.”
Act one: Drafting the transformation agenda
The power of transformation does not lie in planning but in the power of execution. Many companies fail on this point and become stuck midway into a transformation. Instead of resolving the lack of execution power, they come up with a new plan. Intel was rigorous in its execution efforts. Curley: “In hindsight, four strategies proved to be particularly crucial for the success of Intel’s IT transformation.
Managing the IT budget. Financial performance must be predictable. Budget overruns and underspending used to be at the order of the day at Intel. Nowadays the actual spending deviates less than 0.5 percent from the budget. IT departments first need to gain control over the planned expenditures. Only then can they introduce systematic cost savings to create room for strategic investments. All of this is aimed at optimising the business value of IT. The most costly IT products and services can be made less expensive by negotiating with suppliers, by cherishing disruptive technologies and by banishing inefficiencies from your processes. Double work, errors and poor support come at a price. When the quality of the service rises, the costs decline. We were able to reduce our workshop costs dramatically. Our desktop support followed a one-on-one model, which kept a whole lot of technicians occupied. Support followed a push mode; agreements to resolve problems went pear-shaped because employees weren’t sitting behind their desks. Most employees are mobile and therefore use laptops. By switching from a push to a pull mode, where users can bring their notebook into a service centre, the mean time to repair was reduced and the general level of user satisfaction increased.
Managing IT goods and value chains. Three assets are crucial: IT infrastructure, IT people and IT business relations. Intel’s IT infrastructure was radically simplified to provide more consistent support to demanding and flexible employees. The second asset, IT people, was systematically improved with the aid of the Software Engineering Institute’s people capability maturity model (P-CMM). Infrastructure and people are tangible assets. The third, IT business relations, might sound soft but is nonetheless crucial. We wanted 80 percent of the business executives to regard the IT organisation as a strategic partner. We examined the issue regularly, listened carefully, identified points for improvement and took direct action. In 2002, three years after the launch, we reached a peak of 95 percent. Our end users’ satisfaction level was almost on par with that of the executives - a sure sign of our immense progress. As the transformation continued, it gradually became clear that Intel IT had a fourth asset as well: intellectual capital. While sales and marketing entered into partnerships with IT to benefit from the latter’s experience, under the banner of ‘IT@Intel’, our progressive use of IT within Intel served to inspire clients. It was unusual for sales to treat the IT guys as a partner in the generation of turnover. They have learnt from this, IT has delivered and Intel IT is currently a catalyst for the use of new Intel products. ‘Eat your own dog food’ made people sit up and notice IT and it convinced customers to choose in favour of the next generation of technology. Though most companies are not in the technical sector, many industries show closer relations between IT, increased competition and value propositions. This is not only because core products are becoming digitalised - aeroplanes, food and chemical products are still made up of atoms - but because more and more processes are being innovated on the basis of bits. This varies from product design to guarantee-related processes. Smart internal use of ERP makes vendor-managed inventory (VMI) possible, so that new solutions can be developed for customers, or so that 3D computer-friendly design processes can make co-innovation in new product launches possible. Most top managers equate intellectual property with patents, but there’s a lot more to it than that. It’s about cooperation and creating value for your customers.
Managing IT as added value for the business. Intel’s CIO at that time, Doug Busch, set the IT objective to provide USD 100 million in new business value without increasing expenditure. The scouting, financing, drafting and implementing of projects that provide value through savings, avoidance of costs, increased productivity and direct turnover requires a data-driven approach. We developed the business value index (BVI), a series of hard and soft metrics that provide decision makers with insight into the value of the proposed investments. We weigh criteria according to three vectors: business value, IT efficiency and financial appeal. The BVI was approved by Intel’s financial department. It is used not only in the constant monitoring and adjusting of the innovation projects, but also to take hard decisions: pulling the plug on projects that run too slowly or that generate a negative net present value (NPV). Innovation is no longer a valid excuse for hobby projects. Thanks to the BVI, we now have a consistent and reliable system for measuring the actual value that IT brings to the business. This has helped a great deal in the forming of internal partnerships and in 3D computer-based design processes, but also in the development of tools in cooperation with other companies, in best practices and in obtaining valuable insight into managing IT value and IT-assisted innovation. To this end, Intel established the Innovation Value Institute (IVI) in cooperation with the National University of Ireland.
Managing IT as a business. IT is neither the business nor the core, but it still needs to be managed as a business to create maximum value. The IT department needs standard business practices; practices for improving performance and a regime for operational excellence. One of the basic elements to achieve this was consumption-based charge-back. IT was seen as an expense, even though it was unclear what expenses exactly it incurred. IT asset management, configuration management databases and other tools were implemented to reveal the general cohesion between the various costs. We developed a comprehensive cost overview of the IT products and services - an indispensable instrument for managing the demand and anticipated cost savings. A second basic element to manage IT as a business is adopting a service-minded approach and assuming end-to-end responsibility for the defining, pricing and delivery of IT services. Being a market-driven and service-oriented organisation does not automatically make you a strategic asset, but it will certainly bring you a few notches higher on Maslow’s hierarchy of needs.”
Act two: IT-assisted innovation
Martin Curley was appointed by Doug Busch in 2003 to lead the next phase: IT-assisted innovation. According to Curley, innovation is: “the introduction of something new that creates value for the organisation using it. This definition is customer-oriented; innovation is a team sport and there’s no ‘I’ in ‘team’. A centralised group will never achieve the required creativity and insight into the business. You need to stay on top of the business, where the rubber meets the road so to speak. Employees, partners, customers and even sections of society form part of this. We developed the Skoool Technology platform in conjunction with ministries of education. You cannot launch such an innovation ecosystem from nothing. To begin with, you need to have the capacity to create. To this end, we developed IT tools and solutions for improving the innovation process within Intel. The use of game theories and risk management methods led to improved predictions for new product introductions. In addition, a new solution with real-time manufacturer’s information would accelerate the time to market of new Intel products. To boost the innovation process, we set up an Innovation Delivery Team, which implemented proofs of concept and ensured that innovations would indeed be used. An e-learning solution was developed for PC novices. This solution is now available in 15 languages and 250,000 copies have already been dispatched. We also built a network of 12 physical innovation centres to come up with innovations. Each of these is a model centre that acts as a catalyst for the individuals and teams who visit it. These centres are exceptionally useful. The Russian centre, for example, came up with the Wimax Car Project and mobile telemedication solutions. The advantages of this business approach to IT are that you create value and generate money. IT is no longer an expense. Creating love for this IT department is closely related to doing exciting things for the business.”
When growth stagnates
Since economic decline is a fact of life for organisations worldwide, IT has to be able to reduce costs where necessary. “When you go in search of ways to prune expenditure,” explains Curley, “you must remember that the IT department is capable of providing long-term value. IT is expected to contribute as soon as business starts picking up again. IT can’t afford to lag behind, and should be able to respond to business changes immediately. The IT transformation within Intel gave us great insight into the actual costs, so that we were able to implement the correct savings. We also continuously invest in disruptive technologies and in the computerisation of services in an effort to create smart efficiency. This cost transparency prevents panicky play and chainsaw cutbacks when all lights turn red.”
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