Interview: Larry Bossidy on Competitiveness

CIO (US) interviewed Bossidy, the former chairman and CEO of Honeywell International, for insights into how IT changes corporate competitiveness and how CIOs can make use of the business model

CIO Magazine: Your book paints a picture of an ever-more competitive global marketplace. What is IT's role in that?

Larry Bossidy: The reason for what's happened [with global competitiveness] is the explosion of telecommunications and the Internet. The problem is that the more you have a global environment, the more data you have - and the more data you have, the harder it is to figure out what's important. You need a systems capability to be able to process that information.

CIO:From your perspective as a former CEO, what kinds of IT systems are most useful?

Bossidy:One of the ways to improve internal operations is to capture data - for instance, in the Six Sigma method. More broadly, companies without an advantage of some information systems data will fall behind those that do. If you take a look at company cultures that are progressive, they embrace data and [data-gathering] systems.

I'm not a whacko about being out in front on IT systems. You don't need the latest thing, because that can be very expensive, but you need contemporary systems. Contemporary means capable of meeting your information needs and consistently providing direction in a way that's up to speed [with competitors].

IT systems have to be an inherent part of strategy. They're sometimes done on an ad-hoc basis. For instance, we've got too many knowledge management systems being offered without a proper assessment of need. From what I've seen, knowledge management systems can make a major impact, but too often they're installed without a sense of how they're going to be used.

CIO:How can CIOs contribute to a good business model?

Bossidy:What I would do if I were the CIO is focus on external and internal realities [which are two components of the business model].

External realities include the industry you're in, who's doing well in it, and regulations that affect it. A CIO has to get more involved in the assessment of competition. There are cases out there where a competitor's supply chain or just a superior system is a competitive advantage. For instance, with Wal-Mart, its supply chain is not talked about very much as its source of competitive advantage. But CIOs recognize that importance [of the supply chain].

Then a CIO should devote more time to what the company's [IT] systems need to be - that's the internal realities piece. For instance, SAP has been popular in many companies, and rightly so, but what's the next system that you need? It's been proven that if you lag, you're going to pay the price.

CIO:What's your view of the trend toward outsourced jobs?

Bossidy:I know it's controversial, but it's here to stay. A lot of jobs that were previously done in the United States simply aren't competitive any more. [Outsourcing] is part of the increased global competitiveness. Sending jobs to India: You can only do that if you have [IT] systems in place. Outsourcing increases the need for systems.

But there's not a clear trend [with outsourcing]. You look at JP Morgan Chase (I'm on the board, by the way). They outsourced most of their IT to IBM. IBM did a good job with it. But when the merger with Bank One occurred [last January], the Bank One CIO [Austin Adams, who became the CIO for the merged entity] felt it was a competitive advantage to have IT in-house, especially for a huge consumer franchise. Outsourcing made sense for a commercial bank, but keeping the jobs in-house makes sense for a consumer bank.