If there's any meeting that should have Michael Young feeling a little nervous, it's this one. On a warm Tuesday afternoon in early February, the CIO and chief e-commerce officer of Hello Direct is preparing to present his IS plan for the coming year to the other five members of the company's executive staff.
His plan for the San Jose, California-based company, which develops and direct markets desktop telephony products, is ambitious: It includes 45 different projects that will require the participation and understanding of eight different functional groups within the company. And Hello Direct is facing some formidable challenges as it tries to meet industry changes and move itself from a direct-marketing model toward web-centric sales and customer service--straddling the old business model and the new, and making sure it doesn't fall into the gully that lies between. To make matters more complicated, Young has an audience today: a CIO reporter and a professor from Stanford University's Graduate School of Business who are there not only for the free lunch but to watch and analyse his every move. So why does this CIO look like he doesn't have a care in the world?
Because to hear Young tell it, he seems to have achieved that ideal whose refrain has become so tired it could use a good nap: Align IS with the business. But as the meeting begins, two questions emerge. First, has he really done it? And if so, how?
THE MEETING Hello Direct's six company officers meet every Tuesday, when travel schedules permit. Once a week may seem ambitious, but according to CEO Alec Glover such frequency helps the company keep its focus and reevaluate potential problems before they spiral out of control. Meetings, which start at noon and can go until four or five o'clock, take place in a glassed-in conference room. On one side of the meeting room is the inbound and outbound calling center--a collection of low cubes covered in cheerful red and green colours. On the other is the area where Hello Direct's engineers create the company's proprietary telephony products, such as cellular headsets, speech recognition software and digital recorders.
As this Tuesday's meeting begins, Glover, a five-year veteran of the company who served as executive vice president and president of Hello Direct after a long stint at Kransco, a toy and sporting goods company, passes out sheets of paper with the agenda for the meeting. Besides a business and operational review, the main item for this week is a report on IS plans for 2000. So after everyone is settled, Young launches into his plans for the year, which have three main components: web, web and more web. It quickly becomes clear to the observers that Hello Direct is undergoing a fundamental shift in the way it does business, and it's equally clear that the CIO is central to that.
THE COMPANY Born in 1987, Hello Direct sits just off Highway 101, the freeway that connects Los Angeles and San Francisco and runs through the center of Silicon Valley, in front of a breathtaking span of hills and valleys that screams developer's dream. The company's setting may look grand, but its target market is less so. Hello Direct aims its sales at small and midsize businesses and, increasingly, individuals whose growing love affair with telecommuting produces a market ripe for the company's products. Walk through the front doors of the building--where, oddly enough, the receptionist talks into a regular, old-fashioned receiver--and visitors can see that conference rooms are all named Hello in different languages; just beyond the entrance are Aloha and Ciao. And though the building's setting is cheerful and open--colourful cubes and mylar balloons from a recent team promotion reach to the high ceilings--a couple of years ago the business outlook was less than buoyant. In 1997, Glover explains, the company was not producing the kind of profits company officers and investors were hoping for. And at a time when the online revolution was sweeping the area, Hello Direct--though it had its Web site (www.hellodirect.com) in place--still made 80 per cent of its profits from catalog sales and only 2 per cent from e-commerce (the remainder came from outbound calling). It was clearly time for a change.
"In 1997 we kind of called a time-out," says Glover. "We took the company apart and put it back together again." This Humpty Dumpty approach included taking a careful look at how the company was serving customers and how that could be improved with new technologies. The outcome? Hello Direct resolved to shift its business model from direct mail to online customer support and sales. And that's where Young comes in.
Young and Glover first met when they worked together at Krans Glover joined Hello Direct in 1995, and Young worked there as a consultant until Glover managed to nab him full time in January 1999. "I just came for the free lunches," deadpans Young, but it's clear that an already strong relationship with Glover had a lot to do with his decision to join the company full time. (Note to ambitious CIOs: Wherever possible, try to work someplace where the CEO is your buddy.) When Young joined the company not only were direct marketing and manufacturing costs skyrocketing, but antiquated systems couldn't keep track of customers and address repeat problems. The marriage of business with technology was supposed to help with this, but, like many a modern union, the process involved heavy negotiation on both sides.
Now Hello Direct is in the middle of a five-year journey toward web-enabling the entire company that hopes to benefit both its customers and its sales and customer service centers. Today, even someone who buys products from the Web site has to pick up the phone to check order status; the plan is that by the end of the second quarter (June 30) all that functionality will be on the web. In addition, employees in the call center will use a new system called Knowledgebase--which stores technical specifications for Hello Direct's products and has natural language capabilities--to pinpoint customer problems or specific products with just a phrase. Plans for this year also include implementing Knowledgebase in the sales department and adding it to Hello Direct's Web site. Young has a separate team in San Francisco that handles the e-business side; like the San Jose office's IS group, it consists of six full-timers and 20 consultants.
During today's meeting--in the Hello room--Young mandates that all new purchases must contribute to the company's web-enabling goals--if they don't, the CIO has to approve them personally. The company has already gone through the hard part of creating a solid infrastructure--a process that involved some definite haggling. "If you'd come to our meetings then it would have been a slightly different environment," says Young of the earlier days. "I had to prove myself and my team [in the beginning]. We were under the usual pressure for about the first six months." But now officers are making room for technology. "We've even got Denny [Waldera, vice president of direct marketing] using Microsoft Outlook now," jokes Young. CEO Glover admits that he and Waldera are the dinosaurs when it comes to getting used to new technology.
ISSUES? WHAT ISSUES? Young takes the other officers through the pages of his presentation: eleven sheets of bright blue and white PowerPoint printouts (he intimates that the colour is there only to impress the visitors) with just a few lines of text. It's easily digestible, listing IS goals, such as customer personalization and back-end systems, with just a phrase or sentence to explain. Young moves quickly through the presentation; it's up to the officers to figure out what page he's on and follow his thoughts. And if Young's manner isn't brusque, it's not exactly coddling either--he's not asking for permission or approval, just showing what he has.
But while the PowerPoint outline is easily swallowed, the specifics of the IS initiative crowd together in a tiny font on two other sheets of paper. The list is long, and there's a lot of information to take in at once. The projects are organised by type (back-end, business-to-business, e-commerce, personalization) and this list also catalogs each project's name, a brief description, the benefited groups, completion date and labor costs. Projects include automated credit card approval, specialized web pricing based on customer profiles and a managed mass e-mail system.
By now the food has arrived. The room falls silent for a few minutes as everyone takes in both lunch and the project list. Then Glover and Vice President of Product Marketing Ron Becht wonder if maybe the plan is too ambitious. No, says Young, gently but firmly. The only way to keep the highly valued consultants and IS staff coming back is to give them plenty of projects that will challenge them; if Young doesn't, Hello Direct will lose its talent to the yawning mouth of the Silicon Valley monster. Then Young acquiesces slightly. What if we make web enabling the call center an A priority and web enabling the customer a B priority? OK, say the others through their salads and sandwiches. Sounds good.
But wait a second. Are these guys for real? What happened to conflict, to CIOs fighting tooth and nail to defend their plans and secure their budgets?
Later conversations reveal that this isn't the first time the IT plans are appearing. "We use a top-down and bottom-up approach," explains Glover. The officer group works with the senior managers--a group of 20 divided into functional areas--who are apprised of plans as they develop. Debate over priorities often takes place in those meetings. Each project has a team that includes an information systems champion and a senior management champion. For example, the key person implementing the outbound contact management system is the director of corporate accounts. "If he and his managers aren't present at the training, and if they don't sign off on how it's actually going to work in their departments, we won't do it," Young says.
"It's probably taken the group two years to get to this point of commitment," Waldera explains later. "We have had from time to time different points of view regarding how fast and aggressive we should be." Waldera classifies his own approach as staying "on the curve" rather than ahead or behind it; at times that was at odds with Young's full-steam-ahead approach.
But what comes through loud and clear in the meeting is that the expansion of technology brings in issues that hit everyone close to their own departments. For Ruth Grouell, vice president of organisational development, new IT initiatives mean new training for the staff in the call center, where turnover is high and employees don't always want to take the time to learn new systems.
Glover reveals that at a recent employees' lunch the staff expressed concern about the time they spent training. "I think they question the timing," says Grouell, who points out that the new system appeared at a busy time in the call center rather than in January, when the phones were quiet. "Could we not have organised it better?" Young laughs ruefully. "Yeah, we could have." But employees have come a long way, he reminds them. "We had keyboard training only 18 months ago." Waldera joins the discussion: "[Employees] bear the predictable brunt of doing it one way on Friday, learning a new way on Saturday and not having to miss too many beats come Monday." While the company is undertaking a fundamental transition, it doesn't have the luxury of relaxing short-term performance metrics.
Maybe everyone seems so agreeable because somehow Young has a knack for introducing the technology without making a big fanfare about it. When Young first brought in the system that later became Knowledgebase he eschewed the usual practice of asking for approval to set it up. Instead, he worked on the sly with the vendor to set up a minipilot, which he then showed to the other officers. The approval was unanimous. Call it what you will: self-assurance, daring, supreme confidence. Success.
Asked later what it is that makes the communication between IS and the business successful, Young answers with a laugh that stops just this side of cocky. "This is going to sound awful. But it's me." In addition, he gives credit to a bunch of talented people working for him and the organisation's emphasis on teams and training that makes it easier for the business and technology sides to come together.
What about the concerns of some of the officers that the plans for 2000 are too ambitious? "I knew they were going to say that," he admits. Sure, he harbors a doubt or two that his team will complete every single thing on that list. "But what I have no doubt about is that we will do what they expect and more."
ANALYSE THIS But what's going on under the surface? Michael Morris, an associate professor of organisational behavior at the Stanford Graduate School of Business, has studied and written about interpersonal and intergroup conflict resolution. What, according to Morris, does Young have going for him?
It never hurts, for one, to have years of experience working with the CEO in your favour. But beyond that, observes Morris, Young knows he's a hot commodity in a labor market that's tighter than the turns on Lombard Street. And he's done a crafty thing by keeping the San Francisco office that handles e-business a good 50 miles away from the rest of the group. Whether this is by accident or design, it means that Young is the only one who communicates e-business to the officers. "A person holds the power when he controls the resources at a particular point in time," Morris says. "This company has a chance to get on the web bandwagon and [Young] can make that happen." In addition, Young's interpersonal mechanisms pass the test: He's polite, considerate, upbeat. "He doesn't react when people get critical or defensive," says Morris.
Young's faux pas? Organizing the list of IS projects in a seemingly arbitrary fashion was asking for people to be overwhelmed by it, Morris says. And so it was natural that each of the officers would automatically want to see it reorganised from his or her own point of view. Grouell made the point that her list should be sorted by which employee group is affected; Brecht wanted it sorted by products, and CFO Kip Witter by cost. Morris points out that Young could be more sensitive to that natural propensity and offer information in a way that makes sense to each functional area.
As for Hello Direct's top-down and bottom-up approach to IT initiatives, Morris points out that most of the people hawking headsets in the call center are not necessarily there for the long haul; the illusion that they're helping to set business strategy might not compel them into acceptance of a plan that requires extensive training. In addition, the fact that Young spends only two days a week in the San Jose office means that other officers have more of a feel for what's going on in the rest of the company. Grouell and Brecht both expressed concern about making sure the IT decisions are understood companywide; for Young that's easy to overlook. So while he has the power, he trades it for some of the inside knowledge.
Also, Morris points out, despite Hello Direct's claims of success, the company's stock price has not exactly skyrocketed. And in stock-crazy Silicon Valley, that speaks volumes.
So has Young achieved that perfect balance of IS and business that many CIOs seek? According to what happened on this particular Tuesday, sure. But the next Tuesday holds another meeting. And another opportunity for the officers to embrace or challenge Young's vision.
EXPERT COMMENTARY FIGHTING THE CURSE OF KNOWLEDGE by Michael Morris Information technology divisions have become increasingly differentiated within organisations. A CIO may lead a group of specialists with technical languages and occupational cultures distinct from the rest of the company. Sometimes the division is even located separately as well. Hence the CIO in a top management team must act not only as a technical planner and problem solver but also as a translator and ambassador. Many a technically competent CIO has foundered in these latter roles.
More generally, technical divisions of large organisations--for example, Xerox Parc in the 1970s--have often failed miserably in transferring knowledge. In recent research, Chip Heath, a professor at Duke University's Fuqua Business School, and I have maintained that some failures of knowledge transfer stem from social psychological dynamics--obstacles that, once understood, can be overcome.
The meeting at Hello Direct illustrates these challenges well because, although CIO Michael Young is an experienced communicator, signs of strain in cross-functional communication are nevertheless present. To understand failures in communication between specialists, it's important to recognize the "curse of knowledge"--that phenomenon where possession of expert knowledge of a particular kind makes it more difficult to remember or imagine what it is like to not possess the knowledge. As the reader may recall from university days, a professor's subject expertise can often get in the way of clear communication. Likewise for a CIO trying to explain a futuristic information system to the rest of the organisation, the shared knowledge, language and culture of the IT group becomes an impediment.
At Hello Direct, Young's lucid report to the board no doubt benefited from his years of experience outside of IT, yet even he lapsed into opaque specialist language when he became excited about particular projects. At these moments, some of the other executives glazed over and others interrupted with demands for clarification. More important than these lexical lapses, "the curse" also manifested itself in recurrent failures in the past year to budget sufficient time for employee training and adjustment to new systems. In sum, while Young's experience outside of IT enabled perspective-taking, which helped him as a translator and ambassador, some minor failings revealed a vulnerability to letting his knowledge impede his estimation of the difficulty of knowledge transfer.