Antoine Melo's blog
Wednesday, June 30, 2004
  Creation d'entreprise: Analyse en profondeur...

Suite de http://melo.ch/blog/2004/06/avril-2004-cest-dcid-je-me-lance.html

L'étape de préparation m'a permis de réorienter le projet de reprise initial vers un projet de création, moins gourmand en capitaux. Voyons un peu à quoi ressemble ce projet, et de la façon dont il est né.

Petit retrour en arrière : alors que j'occupais encore mon ancien poste, mon frère, qui vit depuis dix ans en Amérique du Sud me propose une collaboration. Il est propriétaire d'une société d'édition de logiciels utilisant la technologique Web et souhaite étendre ses activités en Europe. A l'époque, mon projet initial repose sur la reprise d'une entreprise industrielle. Malgré tout, je souhaite en connaître davantage sur ce projet proposé par mon frère. Un rapide séjour en Amérique du Sud me permet de découvrir plus en détail les produits et les concepts. L'intérêt suscité fait alors naître de nombreuses questions. De celles-ci naîtra le projet définitif.

Le concept technologique du projet est basé sur l'exploitation des possibilités du Web dès le stade de la création dans une approche "clients légers". Plusieurs produits existent déjà sur ce marché, dont certains au stade de tests réels chez des clients, d'autres au stade de la commercialisation. Plusieurs de ces produits, répondant aux besoins de "niches" encore inexploitées, sont sans concurrence.

Le concept de l'offre répond aux constats suivants :
- les besoins d'informations des entreprises sont chaque jour plus importants
- les ressources financières et humaines nécessaires au système d'information sont chaque jour davantage en conflit avec le "core business"

- les entreprises souhaitent réduire leurs risques (financier, humain et technologique) dans un monde qui évolue très vite et où l'adaptation est vitale

- l'offre existante, répond assez peu à ces contraintes nouvelles, même l'ASP qui est fréquemment une location financière.

Le choix se porte sur le statut SARL"

Je décide donc de réaliser une analyse approfondie des produits et concepts (experts, analyse du marché, prospects, base documentaire du Journal du Net - Ndlr : un site Benchmark Group, l'éditeur du Journal du Management) qui confirme l'intérêt du marché pour ces produits de niches et ces concepts, même si la culture de la "propriété" est encore forte.

A ce stade du projet, plusieurs points sont à analyser en profondeur :
- Le montage juridique de l'entreprise doit pouvoir répondre aux besoins de partenaires, en nombre limité dans un premier temps, mais permettant de suivre le développement futur.

- Le choix se porte pour la société en France sur le statut SARL, simple à faire vivre.
- L'analyse marketing du projet permet de répondre aux questions : attentes, concurrence, prix, avantages concurrentiels, freins...

- Le développement commercial doit être étudié séparément pour chacune des sociétés. En effet en Amérique du Sud, les produits disposent de références client et sont en phase de commercialisation. En France, tout est à créer, l'objectif de départ étant d'acquérir des références client.

Mais avant l'étape des chiffres, il faut encore à répondre à quelques questions de fond tels que l'organisation, la définition des fonctions (en quantité et en qualité), le choix de certaines fonctions (internes ou externes), le recrutement (profil, expérience, salaire), les prestataires et fournisseurs (choix d'organisation, sous-traitants, distributeurs) et la rémunération des associés (en salaire ou en résultat, à quel niveau ?).

L'étape des chiffres est surtout celle de la cohérence entre les objectifs, les moyens et les résultats. Les multiples allers-retours font apprécier d'avoir bien préparer son tableur. Les moyens identifiés en amont permettant d'atteindre les objectifs fixés, ainsi que le besoin en fond de roulement, doivent être financés par le capital social, par des emprunts ou par des aides et subventions. La consolidation des hypothèses, des moyens et desrésultats donne le "premier CR prévisionnel" et le "premier plan d'affaire".

Dossier

Création d'entreprise

Pour synthétiser, mes principaux enseignements de cette étape, cruciale, sont :
- L'analyse marketing, et surtout le plan de développement commercial, sont les moments les plus délicats de cette étape, d'autant plus sur des concepts "produit, technologie et service" nouveaux.

- Dès ce niveau, il faut s'associer avec un expert comptable qui comprenne à la fois le projet et le concept.
- Le temps nécessaire pour cette étape ne doit pas être sous-estimé, il dure parfois plusieurs mois. Car il vaut mieux avoir parcouru tous les aspects du projet avant d'engager la suite.

Désormais, il faut s'attaquer à la recherche de financement...

La suite de "Ma petite entreprise" le mois prochain, dans Le Journal du Management.
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  11:38 AM 0 Comments
Thursday, June 24, 2004
 

Relates to "Managing Change Through an Aligned and Cascading Balanced Scorecard: A Case Study" articles
  7:14 PM 0 Comments
  Managing Change Through an Aligned and Cascading Balanced Scoreca rd: A Case Study

By Georgia M. Harrigan and Ruth E. Miller
Naval Undersea Warfare Center Division

Executive Summary
In 1996, the Naval Undersea Warfare Center Division, Newport, RI, began a process to establish and implement a customer-driven performance measurement system. For the past two years, the Division has used a balanced scorecard approach and finds that this methodology enables the leadership to communicate strategic direction both externally and internally and to measure progress toward strategic goals. This article discusses the relationship between a customer-driven performance measurement system and a customer-driven organization, describes the development of the system at NUWC Division Newport, and discusses the balanced scorecard evolution, implementation, and potential applications.

Since implementing the balanced scorecard as a strategic management tool, the Division has made positive changes, and it recognizes the need for continual adaptation. The organization has used the scorecard to define a roadmap for future change and to redefine relationships that are key to organizational success.

Introduction
In 1996, NUWC Division Newport began a "Journey of Change" to respond to key customer feedback, to effect cultural change, and to position for the 21st century. This article discusses how the Division established and implemented a customer-driven performance measurement system that is critical to its mission and strategic plan and used it to define and communicate the business culture of the organization to support the Journey of Change. The performance measurement system was heavily influenced by articles in the Harvard Business Review by Robert S. Kaplan and David P. Norton ("The Balanced Scorecard--Measures that Drive Performance," January-February 1992; "Putting the Balanced Scorecard to Work," September-October 1993; and "Using the Balanced Scorecard as a Strategic Management System," January-February 1996), and by their book, The Balanced Scorecard: Translating Strategy into Action. NUWC Division Newport has used the Balanced Scorecard (BSC) approach for four full years and continues to use it. The organization has found that the BSC methodology allows the leadership to communicate strategic direction both externally and internally throughout the organization and to measure progress toward strategic goal attainment on a systematic basis.

The goal of this article is to present an integrated view of the theoretical and practical application of the BSC. Isolating only the theoretical perspective leads to an academic reading that presents the ideal scenario, without considering that the BSC application in an organization is a chaotic, messy, and complex job. Considering only the practitioner's view leads to a list of events because practitioners are so inundated that they often act without the 40,000-foot view or they neglect to take time for reflection. By combining the two perspectives, the authors intend to provide an informative and practical discussion, which will help other organizations apply the BSC methodology to their strategic planning and performance measurement initiatives.

This article is organized as follows. Section 1 is a general discussion of the relationship between a customer-driven performance measurement system and a customer-driven organization. Section 2 is a description of the development of the NUWC Division Newport performance measurement system. Section 3 provides the evolution of the scorecard and the results of two significant improvement efforts. Section 4 is a discussion of the effort to achieve strategic alignment both external and internal to the organization. Finally, Section 5 provides the "next steps" for the scorecard: how the system could be applied to create a "learning organization."

1. How a Customer-Driven Performance Measurement System Creates a Customer-Driven Organization
Premise: If an organization can establish and implement a customer-driven performance measurement system, it will have made great strides toward becoming a customer-driven organization.

This premise is based on the insight that structure influences behavior. The systems perspective tells us we must look beyond personalities and events and into the underlying structures that shape individual actions and create conditions in which a type of event becomes likely. Peter Senge1 noted, "When placed in the same system, people, however different, tend to produce similar results."

The term structure does not mean the logical structure of a carefully developed argument or the reporting structure shown by an organization chart; it refers to a systemic structure, which is concerned with the key interrelationships that influence behavior over time.2 This systemic structure is created with interconnected information-feedback loops. Feedback loops form the central structures that control change in all systems. All change takes place within the control of feedback loops.3

If this insight that "structure determines behavior" and the premise are accepted, then it follows that a customer-driven organization is the result of a customer-driven performance measurement system. Exhibit 1 illustrates this relationship by describing the steps an organization takes to develop and implement the system. To achieve a customer-driven organization, it is not enough to have a customer-focused mission; that mission is implicit to an organization because a mission is an organization's reason for being and must be clear and coherent. With this in mind, an organization defines its desired future state, its vision. Both internal and external factors define today's organization and determine what conditions or actions influence its ability to meet its mission, so the organization must consider the gap between today's organization and the desired future state-then it must develop strategic goals to bridge the two. The strategic goals translate the vision into specific outcomes that the organization must create to realize its vision and close the gap.

Once the mission, vision, and strategic goals are defined, the customer-driven performance measurement system can be developed. The organization defines actions (which Kaplan and Norton refer to as objectives) to further translate the goals. The actions (objectives) are grouped within five perspectives: financial, customer, internal business, employee/learning and growth, and stakeholder. The actions (objectives) provide a framework for many critical management processes and influence the operation of the organization and the delivery of products and services, in turn affecting customers, employees, stakeholders, and partners.

Each specific action has one or more metrics associated with it, which provide an understanding of the status or the evaluation of the action. The actual measured values are gathered by feedback from customers, employees, and stakeholders. Each metric has an associated targeted value toward which the organization strives. In a customer-driven performance measurement system, these targeted values are developed from the perspectives of the customers, employees, and stakeholders by considering their needs and expectations.

Comparisons between the actual measured values and the targeted values reveal a delta. This analysis becomes available for the next iteration of defining the current state of the organization--it becomes an internal factor. The measures and values cause "internalizing" of the customer needs and expectations; hence a customer-driven organization is created.

2. Development of the NUWC Division Newport Performance Measurement System
NUWC Division Newport began exploring "performance measurement linked to enterprise performance and goals" around 1994, when performance reporting emerged as a major focus of the 1990s throughout government agencies. Significant legislation was passed during those years, most notably the Government Performance and Results Act (GPRA) of 1993. The GPRA stated: "...Federal managers are seriously disadvantaged in their efforts to improve program efficiency and effectiveness, because of ... inadequate information on program performance; and ...congressional policymaking, spending decisions and program oversight are seriously handicapped by insufficient attention to program performance and results."

The GPRA was not the only legislation passed; there was the Government Management Reform Act of 1994 and the Information Technology Management Reform Act of 1996, which required federal agencies to:

Although the GPRA was intended only for the top, direct reports to Congress (i.e., DoD) and not for all organizational levels of the government, NUWC Division Newport used the law to build internal support for its performance measurement initiative. The concept of enterprise performance measurement was deployed organizationally through the Division's annual planning process. This 1994 initiative laid the groundwork for later BSC introduction and implementation throughout the Division's line and staff organizations. From 1994 to 1997, the Division collected and reported quarterly "Key Performance Indicators." The quarterly assessment consisted of eight metrics, which were primarily financial in nature but included several human-resources and innovation measures. The goal of which was to provide a single-page presentation of the health of the organization in an effort to improve organizational efficiency and effectiveness. The quarterly assessment reports were well received throughout the organization because before that time, although the data were always available, the information was not routinely synthesized for use in decision-making. The quarterly assessment report provided a cohesive look at the data; for example, hiring decisions could now be made by combining core competencies of the workforce with the business data forecasts to target employees with certain abilities.

In March 1997, NUWC Division Newport was introduced to the BSC concept and held workshop sessions to further the understanding of the BSC concept. The workshop sessions consisted of a short lecture and discussion on the background, theory, realities, and techniques involved in measuring what the organization does and how it relates to its goals and objectives. Then, teams formed and actually began developing scorecards-outcome measures and action plans.

To build the scorecard, the teams looked at five perspectives: the traditional four perspectives of the BSC (financial, customer, internal business, and learning and growth) and a government-added fifth perspective, employee. Adding the fifth perspective to the NUWC Division Newport BSC proved to be essential at that time because the Base Realignment and Closure activities were impacting at least 50 percent of the organization. Employees and work were being transferred and relocated to NUWC Division Newport from New London, CT; San Diego, CA; Norfolk, VA; and Orlando, FL. Leadership was trying to minimize the disruption, while addressing the challenge to craft a common culture from the distinct cultures joining the Newport site, by focusing on employees.

For each perspective, the process was to develop an objective related to the organization's mission. After these workshops, several of the NUWC product lines continued to develop their directorate or department scorecards. First drafts of these scorecards were submitted to Division management in August of 1997 as part of the yearly planning process (five-year plan). A Division-wide Balanced Performance Measures Team was formed in July of 1997 with the objective of developing the set of measures at the executive level for inclusion in the Division's strategic plan. In September of 1997 the scorecard was accepted by the senior leadership team and incorporated into the FY98 Strategic Plan. Although it was agreed that there were too many measures in this initial product, getting started and documenting the measures enabled NUWC Division Newport to surmount the initial hurdle and start the learning/experiential process. It was expected that through the use of the scorecard the "extra" measures would fall out during use or in the review process that is built into the strategic planning process.

This was just the beginning of the implementation, and the Division later realized that it was the "easy part" of the process. Successful implementation requires more than administrative structures, plans, and matrices. The scorecard is not a substitute for a sound strategy, clear focus, and strong alignment energies within the organization. The challenges to the organization, and specifically to top management, are developing faith in the organization's ability to achieve the goals, motivating it to do so, and focusing its attention long enough to internalize new capabilities.

3. The Evolution of the NUWC Division Newport Scorecard
NUWC Division Newport accepted that defining the measures to truly reflect the organization's strategy and vision is an iterative process in which continuous improvement is a critical and constant objective. The Division expected that the scorecard had to evolve if it was to be a viable and useful tool for the management of the organization. Integral to the Division's BSC process is a yearly assessment of the BSC-identifying problems/ weaknesses in the process and key areas of improvements. To date, this yearly assessment process brought about two of the most significant impacts to the evolution of the NUWC Division Newport.

During the first yearly assessment, the key weakness identified was the increasing number of measures and more disconcerting the ad-hoc fashion that this measures were being added. As the leadership and the external environment changed, new measures were gradually being added to the (already "too many measures") original scorecard. This was contrary to the process of considering the mission and defining objectives and measures that support the strategy of the organization. Furthermore there was a paradox: On one hand, the leadership was adding measures; but on the other hand, the leadership was asking that only the top-level measures, which require direct action on their part, be included. There was no mechanism to discern whether a new measure should or should not be added, and consequently the number of measures continued to grow. The root of the problem was because of the initial process used to develop the scorecard. It was done perspective by perspective and there was no consideration to defining how the perspectives, objectives or measures linked to each other. The absence of the linkage chart between the measures and objectives was what had allowed the ad hoc addition of measures. The first step was to begin linking the objectives within each perspective. The objectives were linked to define the cause-and-effect relationships. This exercise helped the team to further define the objectives and to consider which of them were truly related to the overall strategy and mission of the organization. It also became clear that the employee and the learning and growth perspective should be one perspective. Although emphasis on employees is a basic tenet at Division Newport, the objectives are inherently linked and cannot be viewed separately from the learning and growth perspective.

The next critical step in the process was to link the perspectives. This linkage defines the organization's strategy as it relates to the mission. Kaplan and Norton state: "The strategy is a set of hypotheses about cause and effect. The measurement system should make relationships (hypotheses) among objectives in the various perspectives explicit so that they can be managed and validated."4

The process to develop the hypotheses for the model that best describes NUWC Division Newport reconfirmed the team's earlier decision to combine the employee and learning and growth perspectives. The team also discovered a missing perspective: the stakeholder perspective. Up to this point, the stakeholder had been combined with the customer perspective. However, the team realized that although some customers may have been dual-hatted as stakeholders, there were clearly two different perspectives. Because NUWC Division Newport's mission involves national security, there are stakeholder interests that are vital for the success of the organization and are not entirely included in the customer perspective. Stakeholders, for example, include the Fleet, the sailor, Congress, and the U.S. taxpayers. The Fleet and the sailor can be included as customers, but customers are better described as the organizations and program managers that actually pay directly for the products and services offered by NUWC Division Newport (e.g., Program Executive Officers and the Naval Sea Systems Command).

The hypothesis that NUWC Division Newport accepted is shown in Exhibit 2. This model differs from the traditional industry model, where the financial perspective is the key driver (top of the cause-and-effect diagram). However, NUWC Division Newport's model cannot apply the traditional government model where the financial perspective (i.e., budget) is the foundation of the organization, because it is not an "institutionally funded" organization. NUWC Division Newport is part of the Navy Working Capital Fund and has to operate more like a business than do traditional government organizations.

An unexpected outcome of the hypotheses and the linkage chart was the emergence of three organizational themes: innovation, affordability, and customer first. The emergence of the three themes signaled to the team that the system of measures was fully aligned with the strategic direction of the Division and represented a critical validation of the scorecard construct. These themes, which were not prescribed, are the essence of NUWC Division Newport meeting its mission and represent the fundamental strategy concerns for the organization. This alignment provided the team with a sense of validation and additional merit to the balanced scorecard methodology.

The second significant impact to the evolution was an unexpected outcome to our effort to improve the efficiency in administering the scorecard. In FY01 NUWC Division Newport embarked on a pilot program whose purpose was to automate BSC data collection, maintenance, and reporting as much as possible, making it more efficient. Key personnel were introduced and trained, and the architecture was developed. Data from the Executive Business Information System is now automatically imported. Data from Customer and Employee Surveys is input. The data are the measure results, which are then compared to current Fiscal Year Targets and Stretch Targets (goals five years out). The system's architecture makes it easy to view the progress to our strategic goals, through an intuitive "Red Yellow Green" Scoring. Furthermore this "rating" is then enhanced because the measure owners then provide analysis, comment, and action plans (as required) for each measure. The unexpected outcome was that through this automation process we were able to gain a deeper understanding of our scorecard and the measurement process. Prior to this effort, the only expected outcome was the increased efficiency. However implementing the system helped us focus on the importance of target performance comparison and has led to the establishment of more challenging performance goals. It has also expanded the number of people with "first-hand" contact with the actual scorecard process.

4. Vertical Alignment and Empowerment
There is a widely accepted dichotomy between formulation and implementation of the organization's top-level goals. Senior managers formulate the goals, and the lower levels are expected to achieve them. Without a clear understanding of the organization's top-level goals and of the outcomes that are expected, employees are not positioned for success in attaining the goals. An effective performance measurement system can provide the necessary understanding.

Organizations need a clear and cohesive performance measurement framework that supports both the objectives and the collection of results. All levels of the organization must understand the framework, especially those entrusted with and expected to achieve performance goals and targets. They must clearly understand how success is defined and what their roles are in achieving that success. As a management instrument that translates an organization's mission and strategy into a comprehensive set of performance measures and also provides a framework for strategic measurement and management, the BSC can provide needed definition and structure to the organization.

NUWC Division Newport has found that the BSC methodology allows the leadership to communicate strategic direction internally throughout the organization to achieve top-down alignment. The results of the Employee Opinion Survey (EOS) provide data supporting the top-to-bottom alignment of strategy that has been achieved using the BSC methodology.

The BSC methodology also supports external alignment. Exhibit 3 shows how the NUWC Division Newport mission and vision are linked to the missions of the organizations that are above NUWC in the hierarchy. In an ideal world the process of NUWC Division Newport's BSC development would have started with direction from higher Navy and higher Department of Defense scorecards. More often, as in the Division's case, there are no scorecards above the organization. However, by considering the missions of the organizations above, NUWC Division Newport was able to develop a scorecard that aligned with those of the external organizations once they developed their own BSCs.

Exhibit 4 provides an illustration of how the balanced scorecard in our chain of command, from the Undersecretary of Defense for Acquisition, Technology and Logistics (USD, AT&L) to ASN (RD&A) to the Naval Sea Systems Command to NUWC Headquarters to NUWC Division Newport to a NUWC Division Newport Technical Department, all align from the stakeholder perspective. The ASN (RD&A) has incorporated the BSC methodology in the 1999-2004 Strategic Plan. Although the terminology and the perspectives are different from NUWC Division Newport's, the general idea is similar. The Division has been able to align the objectives and perspectives for increased understanding of the actions it must take to contribute to the overall ASN(RD&A) strategy. This has often been described as "cascading" scorecards.

The authors advocate that it is unnecessary to have a one-to-one correspondence of each objective throughout the organization; however, where it is reasonable, the Division should have supporting objectives to contribute to the success of the Navy and Department of Defense. For example, the ASN (RD&A) has an objective to "decrease direct maintenance man hours per platform." Because this is not directly applicable to NUWC Division Newport, it would not make sense to force-fit an objective for the sake of uniformity. However, organizations can use the scorecards of organizations above them as guidance for their work, even though the measure is not explicitly on the scorecard. So by ASN (RD&A) providing their scorecards to NUWC Division Newport, the Division is able to become aware of ASN (RD&A)'s priorities and can check to ensure that organizations in the hierarchy are not pursuing projects that could have conflicting objectives. In other words, the ASN (RD&A)'s goal is to decrease direct maintenance man-hours per platform, so NUWC Division Newport, even though it is not monitoring this measure on the top-level organization's scorecard, should include maintenance man-hour measures in the product criteria so that they do not deliver products that increase direct maintenance man-hours per platform.

It is important to understand that the performance measurement system or BSC is not created--and does not exist--to control or measure the strategy, but rather acts as a lever to streamline and focus the strategy for overall breakthrough performance. To do this, the measures must have direct links to the strategic goals of the organization and must be focused to direct the attention of managers and employees to those factors that are expected to lead to competitive breakthroughs. The best balanced scorecards tell the story of the strategy so well that the strategy can be inferred by the collection of objectives and measures and by the linkages among them.5

5. Next Steps
The balanced scorecard initiative at NUWC Division Newport is an evolving effort that will continue to present opportunities and challenges for improvement.

Using the scorecard for organizational learning
In this turbulent and competitive environment, the strategies are not linear or stable. The challenges are to continue to learn how each objective, measure, and targeted value on the scorecard interacts with every other one, and to consider the implications of achieving goals and objectives established in this ever-changing nonlinear environment.

There are complex dynamics, and the BSC provides a framework for gaining an understanding of them. With its specification of the causal relationships between performance drivers and objectives, it allows management to evaluate the validity of strategy and quality of its execution, stimulating the managers to learn about the viability of the strategies.

The BSC allows the organization to think systemically about the strategy. For example, if employees and managers have delivered on the targeted measured values, then failure to achieve the expected outcomes is a signal that the theory underlying the strategy might not be valid. Managers should take such disconfirming evidence seriously and should reconsider their conclusions about market conditions, customer value propositions, competitors' behavior, and internal capabilities. This could result in reaffirmation of their belief in the current strategy, but it could also result in an adjustment to the quantitative values of the strategic measures. The team might conclude that they need a different strategy.5 This learning that produces a change in people's assumptions and theories about cause-and-effect relationships is referred to as double-loop learning. It occurs when managers question their assumptions and reflect on whether the theory under which they were operating is still consistent with current evidence, observation, and experience.6

Left to its own devices, double-loop learning can take a very long time because it involves shifts in basic assumptions and beliefs, and these shifts occur only through experience over time. Computer simulation is a means to accelerate double-loop learning. A strategic feedback system can be designed to test, validate, and modify the hypotheses embedded in the strategy. In creating the strategic feedback system, the emphasis is on constructing cause-and-effect relationships. Dynamic computer simulations are required because cause-and-effect relationships are often far removed from the symptoms, both in time and in space, which limits the usability of simple correlation analyses. The human mind is also limited, and people can deal with only three or four variables at a time, and through only one or two time iterations. Most of us focus on the effect we want to create and then look for the most immediate cause to create that effect. The computer simulations can be used to play back management's view of the market, the environment, and the competition. Dynamic computer models can help with the discovery of other trigger points, separated in time and place from the desired effect, and because of human limitations these trigger points and insights will most likely be counterintuitive.

Computer simulations will assist in the continued refinement and reflection on the balanced performance measures and are part of the organization's continuous improvement goals. An organization's ability to keep learning and developing will ensure that it continues to make excellent use of its resources, and that it will be appreciated by tomorrow's customers. It is a customer-driven organization.

Summary
The inclusion of the BSC in the NUWC Division Newport strategic management process provided the lever for implementation and assessment of planned organizational change. Much of the change derived from externalities, such as the end of the Cold War era, budget realities, and the resultant downsizing and consolidation of defense assets. Rather than take a reactive posture, however, Division leadership chose to effect change initiatives and to bring the entire workforce along on the journey. Today the Division is an organization that has made tremendous positive change and is an organization that is not complacent about the need for continuing adaptation to an accelerating rate and scope of change in the technological and business environments. As a strategic management tool used within the strategic management process, the BSC has enabled the definition of a roadmap and markers to effect the desired changes, both within the organization and externally, to redefine customer, supplier, and stakeholder relationships that are key to future organizational success. It is an essential element of the Division's "Journey of Change."

Additional Information:
Endnotes

Ms. Georgia M. Harrigan leads strategic initiatives in the organizational transformation of the Naval Undersea Warfare Center Division, Newport, Rhode Island. These initiatives include support to the Office of Naval Research, in the area of Technology Insertion Strategies and Knowledge Management initiatives. Ms. Harrigan has a Masters of Business Administration degree from the University of Rhode Island and an undergraduate degree in Mathematics from Boston College.

Ms. Ruth E. Miller, the Director for Strategy and Planning, is responsible for the NUWC and NUWC Division Newport's strategic management processes, which includes strategic planning, goal setting, performance measurement, operational planning, resource allocation, and the design and implementation of change strategies. Ms. Miller has a Masters of Business Administration from the University of Rhode Island's Executive MBA Program and an undergraduate degree in Political Science from Tufts University.

Ms. Harrigan and Ms. Miller have been invited to present the NUWC Division Newport experience with the Balanced Scorecard at a number of government and industry conferences.

This article is part of the Performance Management in the Public Sector Learning Series.
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  7:08 PM 0 Comments
  Basel II for Operational Risk and Sarbanes-Oxley (SOX): Are They in Conflict?

Craig Spielmann - JPMorgan Treasury Services
Operational risk has become a defining business issue of our times. The new Sarbanes-Oxley Act of 2002 and the proposed Basle Capital Accord (Basle II), reflect heightened regulatory concerns over operating risk. Implicit in those concerns is the recognition that operating risk exposure has been a key element in recent headlines, including corporate governance and the increased threat of business disruption from terrorism. Sarbanes-Oxley, which applies to all public corporations in America, and Basle II, which covers financial institutions in over 100 countries, are part of a new wave of regulations mandating that the financial and corporate communities regularly assess their processes to ensure transparency and protect shareholder value.

Heavy fines and even imprisonment for senior executives (CEO's, CFO's, etc.) are no doubt strong incentives for businesses to satisfy the new U.S. Sarbanes-Oxley regulations. In addition, banks may face higher capital reserves under Basle II if they do not use an advanced measurement approach. Beyond this, the potential negative impact to businesses - and even economies - from adverse operational risk exposure and loss has pushed companies to focus in on better techniques for managing operational risk.

Understanding Operational Risk: A Preliminary to Effective Management
While the precise definition of operational risk may vary between and amongst banks and companies, a clear understanding of the term is a prerequisite for its effective management, mitigation, and control. The Basel Committee on Banking Supervision (the Committee) has developed a list of the types of operational risk events that can lead to significant losses. These categories include: "internal fraud; external fraud; employment practices and workplace safety; clients, products and business practices; damage to physical assets; business disruption and system failures; and execution, delivery, and process management."1

Operational risk, unlike risk taken for economic reward, is an inherent part of running a business. It is a fundamental element of all business activity and must be a measured component of any entity's risk profile, to ensure its proper management.

Sarbanes-Oxley and Basle II: A Brief Look at Compliance
Sarbanes-Oxley, enacted to restore investor confidence, mandates far-reaching actions concerning financial reporting, conflicts of interest, corporate ethics, and accounting oversight. Certain provisions became effective immediately upon the President signing the Act. (Other provisions must await the promulgation of further rules by the SEC, before subsequent corporate action can occur.) Section 906, which is effective immediately, details corporate responsibility for financial reports. It mandates executive certification of financial statements and establishes more severe consequences for noncompliance.

Included among the other major sections of the Act are Sections 404 and 409, which deal respectively with management's assessment of internal controls and real-time issuer disclosures. Section 404 requires each annual report to contain an internal control report. The report accomplishes two things: first, it states management's responsibility for creating and maintaining an adequate control structure and procedures for financial reporting, and second, it assesses the structure and procedures currently in place. To further protect investors and safeguard public interest, Section 409 calls for the timely public disclosure of material changes in financial condition or operation, for those firms reporting under section 13 (a) or 15 (d) of the Securities Exchange Act of 1934.

Basle II reflects the recognition by the Committee that operational risk management, while always a central focus of banks, is increasingly viewed as a comprehensive discipline equal in stature to the management of credit or market risk. Beyond the more frequent, high-profile operational-loss events, the Committee points to a number of trends within the banking industry that are driving the changing view towards operating risk. E-commerce, industry consolidation, the emergence of high-volume service providers, and a high degree of automation-to name a few-all increase the complexity of risk profiles.

Under Basle II, financial institutions must more actively manage operational risk in order to reduce capital reserves. The accord provides three methods of calculating reserve requirements. First, firms can take what regulators enforce, which means holding up to 12 percent of gross revenues in reserves-a burden on working capital efficiency. Second, firms can allocate a different percentage of reserves by segregating their lines of business based on the type of activity. The final method, the Active Management Approach (AMA), motivates firms to proactively manage operational risk in return for reduced reserves. Firms must analyze their historical losses and other key risk indicators on a regular basis, justify their level of controls, and develop a model for assessing the correct amount of reserves. Although compliance must occur by the end of 2006, the real deadline is far closer. Approval under AMA requires three years of historical-loss data and up to two years of running a parallel model to prove to regulators that effective risk management is firmly in place.

The U.S. Response to Basel II
Basel II faces many obstacles in the U.S., as well as other areas of the globe. Questions on the capital charges, and the methodology used to derive them, are growing more persistent. There is the "home-host" issue over regulatory cooperation and trust that does not appear to be going away soon. In addition, we see three specific concerns for U.S. financial institutions:

Our view is that regardless of the Basel II challenges, it has been monumental in energizing operational risk management efforts around the globe. The issues, though formidable, will be worked out as more people develop practical methodologies that make sense to their businesses and regulators. However, financial institutions, whether they agree with Basel II or not, would be hard pressed to dispute the benefits of some key components of the AMA, which improve how they manage their institutions. For example, self-assessment is a proven vehicle to building a better risk management culture that helps facilitate transparency from top to bottom. Most business managers will see the value of gaining a greater understanding of how their people, processes, technology and other risk may impede their business goals. Tracking losses and non-financial events that can impact business goals is a great indicator of control effectiveness, and can trigger questions about when trends start to shift in the wrong direction. Audit is essential to the process, and considering audit's input helps to present a balanced view of risk. At JPMorgan, we developed this type of philosophy in our technology risk management group in 1996. We call it the "Triangle Approach" to operational risk management.

The Benefits of the Triangle Approach
JPMorgan's triangle approach to risk management (which underlies JPMorgan's Horizon solution), is suited to the management of operational risk for both Basel II and SOX. The first leg involves self-assessment, which enables individual departments to assess their control effectiveness against an established template, rate their own level of compliance, develop action plans to address gaps, and monitor progress. The second leg involves testing, where auditors validate the self-assessment to ensure its accuracy. Finally, the third leg employs Loss Events/Key Risk Indicators, which act as a management control by quantifying and tracking the organization's actual performance. If any leg of the triangle is out of sync, management should question it and make adjustments to restore balance.

This enables the triangle to be far reaching and broad, allowing universal access of shared information throughout an organization. Such solutions create transparency by enabling senior management to get an organization-wide view of operational risk. They also deliver the flexibility to view information from different perspectives, including regionally, globally and functionally. Management also must be able to drill down to the level of a specific individual. This ensures accountability by helping managers understand the status of operational risk management issues for each key activity globally, and to monitor progress against action plans. It can facilitate a clear understanding of priorities and strategy, which helps an organization to align strategy with execution.

Basel II vs. SOX
Basel II and SOX, which some people look at as separate efforts, are really similar in that they require a common type of framework and governance model to be successful. They both need a group to manage policies around the effort, define the risk and approach, perform training, quality assurance, action plan tracking, issue analysis, testing and management reporting.

In addition, SOX requires strong accounting and financial controls, which we believe should be a key part of a businesses self-assessment. The goal should be that a business completes a comprehensive and holistic self-assessment that feeds all the necessary regulatory reporting requirements without creating wasteful separate efforts, or using separate tools. In this light, we see SOX (404) as a subset of the businesses self-assessment that could be required for the Basel II AMA approach.

In conclusion, financial institutions should implement the key practical pieces of the AMA approach to better manage their operational risk regardless of their overall Basel II position. This will also help institutions with their SOX efforts whose scope could expand in the future.

Today the pull for resources over Basel II and SOX are in conflict, but not the initiative's intent, which is to create stronger public companies and financial institutions to protect shareholders and depositors thru effective operational risk management.

1 "Sound Practices for the Management and Supervision of Operational Risk," published by the Bank for International Settlement, February 2003.

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  6:33 PM 0 Comments
Tuesday, June 22, 2004
  THE EUROPEAN BW50

JUNE 28, 2004

Online Extra: The Key: Catering to Customers   
Most European companies are notoriously slack on this score. Those that aren't are winning
       
The main message to come out of BusinessWeek's second annual ranking of Europe's best 50 companies is this: Enterprises that know what their customers want and can provide it efficiently outperform their rivals. That's as true of a huge natural-resources conglomerate like London-listed BHP Billiton (No. 2), which is known for its competitively priced quality products and timely deliveries, as it is for Swedish clothes retailer H&M Hennes & Mauritz (No. 37), which wows fashion-conscious young women with chic clothes at knock-down prices.

"The top firms are obsessed about what their customers want," says Sean Meehan, professor of marketing at the IMD business school in Lausanne, Switzerland. "They know that clients value companies that give them what they promised they would on time." The result: bigger revenues and fatter profits.

Among the companies in the European BW50 that Meehan particularly admires is British food retailer Tesco (No. 12), which he says is "way up there" because of the efforts it makes to find out what its customers want. Tesco mines the huge amounts of data it collects through its Clubcard loyalty program to discover trends in taste and fashion just as they're beginning. And it regularly interviews Clubcard members over the phone and polls them through written surveys to determine their shopping preferences. One discovery: Customers want more information than they have traditionally been given about the contents of the food they buy.

KEEPING IT SIMPLE.  Meehan also likes Shell Transport & Trading (No. 30). Although the British energy giant has infuriated investors by downgrading the size of its oil and gas reserves four times this year, Meehan says Shell -- which is one of Europe's biggest retailers as well a major gasoline supplier -- has kept customers happy with its generous Shell pluspoints loyalty program and the wide range of competitively priced products it sells at its filling stations.

"A key thing about Shell is that it hasn't lost sight of what unites people," says Meehan. "It knows what the common denominator is and doesn't try to be too sophisticated." In other words, it provides a reasonable range of groceries and other products at its filling-station convenience stores, but it doesn't befuddle the customer -- who likes to be in and out of the store as quickly as possible -- with too much variety.

A number of other customer-aware companies -- such as German auto maker Porsche (No. 1), London-headquartered brewery group SABMiller (No. 3), and Danish energy-to-shipping group A.P. Moeller-Maersk (No. 13) -- feature in the European BW50. But beyond this group's confines, such companies are few and far between. The vast majority have little real understanding of what their clients want and make little real effort to find it out, Meehan says.

MOUNTING DISSATISFACTION.  "Many senior managers are out of touch," he says. "The average manager spends only 15% of his or her time with customers." Take retailers: "Managers at the best-performing stores walk up and down the aisles," says Meehan. "They stand behind the check-in desk and want to know everything that's going on." In underperforming stores, they tend to spend most of their time in their offices.

Meehan reckons that 75% of customers are dissatisfied with the service they get -- a huge proportion. But few of them switch allegiances. In part, that's because of their own inertia. In part, it's because other companies aren't any better. Either way, "the customer is not the king," says Meehan.

Still, things may be changing. Customers are becoming more militant and increasingly less forgiving of mistakes and bad service. One company that has spotted the trend is Barclays (No. 24). The British bank recently unveiled plans to put 1,000 more tellers in its branches, which it will pay for by axing 800 middle-management jobs. The aim: to serve customers more quickly and make them happier. The bank is also increasing the salaries of many branch staff by way above inflation levels in a bid to improve morale and encourage a friendlier and more efficient interchange with customers.

The question now is whether other European companies will get the message. If they do, the competition for top slots in the European BW50 could be a lot tougher next year.

By David Fairlamb in Frankfurt
[AM-E5DCIG2]

  12:08 AM 0 Comments
  Weekly dollar analysis 21/06/04

by Investica Ltd.

Deficits unsettle dollar
The dollar and Euro will find it difficult to secure a decisive near-term advantage, especially with volatility in expectations over US interest rates. The dollar has discounted a rate increase of 0.75% over the next three months and the US currency will be vulnerable if these expectations are not met. The dollar will continue to be unsettled by the weak underlying fundamentals, especially after the poor current account figures. At best, the deficits will slow the dollar's advance, at worst they could provoke a sharp retreat. The dollar will also be undermined if there is evidence of a slowdown in the US economy and security fears will also persist. Overall, the US currency is liable to depreciate on a medium-term view.

US data releases

Market analysis
The dollar and Euro have both struggled to make a decisive break over the past week, fluctuating in relatively narrow ranges. The Euro was unable to break resistance at EUR1.2150/US$ while the dollar was unable to sustain a push through 1.20, weakening back to 1.2140 on Friday after the poor current account figures.

Retail sales rose 1.2% in May after a 0.5% decline for the previous month, while the University of Michigan consumer confidence index rose to 95.2 in June from 89.9 in May. Industrial production rose by a strong 1.1% and the Philadelphia Fed index rose to 28.9 in June from 25.0 the previous month. The inflation figures have remained important, especially with uncertainty over interest rate trends. Headline consumer prices rose by 0.6% for May, but the core increase was held at 0.2%. Inflationary pressure is certainly building, but the increase is from a low base which will make judging the appropriate rate of monetary tightening more difficult for the Fed.

The comments from Fed officials have been slightly more benign over the past week with Fed Chairman Greenspan stating that rate rise were likely to be gradual while inflationary pressure should remain under control. These comments have eased immediate fears of an aggressive tightening and, although markets are still uncertain over the Fed's actions at the end of June, the comments from Greenspan will push expectations back towards a 0.25% rate increase. If the Fed sticks to 0.25% increases at the June and August meetings, there is scope for a dollar retreat.

The long-term structural dollar weaknesses have remained in focus. The April trade deficit rose to a record US$48.3bn due to a surprise decline in exports while the first-quarter current account deficit rose to a record US$144.9bn from US$127.0bn the previous quarter. The deficit will continue to leave the dollar dependent on substantial capital inflows.

The latest capital account figures were reasonably encouraging for the US currency with net inflows declining only slightly to US$76.2bn from US$80.7bn the previous month even though there was a decline in official bond inflows. There will, however, be disappointment that there was a second consecutive monthly outflow from the US stock market. It will be difficult for the dollar to avoid downward pressure at some point over the next few months on financing worries.

[AM-H6LGCI3]

  12:08 AM 0 Comments
Thursday, June 17, 2004
  Managing for Improved Corporate Performance

Generating great performance requires a more dynamic approach to building and adapting a company's capabilities than merely squeezing its operations.
The McKinsey Quarterly, McKinsey & Co.
May 17, 2004
What does it mean for a company to perform well? Any definition must revolve around the notion of results that meet or exceed the expectations of shareholders. Yet when top managers speak with us privately, they often suggest that the gap between these expectations and management's baseline earnings projections is widening. Shareholders tend to think that today's earnings challenges are cyclical. Executives, who find themselves frustrated in their efforts to improve the performance of their companies no matter how hard they swim against the economic tide, increasingly see the problems as structural.

This anxiety is understandable. The overcapacity spawned by globalization shows no sign of easing in many industries, including manufacturing sectors such as aerospace, automotive, and high-tech equipment as well as service sectors such as telecommunications, media, retailing, and IT services. Combined with the increased price transparency provided by digital technology, this overcapacity has given customers greatly enhanced power to extract maximum value. The result - the ruthless price competition that rules today's markets - has convinced many top managers that profits won't rise dramatically even if demand picks up from the recession levels of recent years. In short, the performance challenge companies face isn't cyclical; it will persist for years to come.

The stakes are high. The S&P 500, despite a 40 percent decline from its peak, still trades at a P/E multiple of 15, and consensus forecasts of earnings growth average 8 percent a year - about two to three times the growth of GDP. Lower expectations may well be warranted in a competitive, deflationary economic environment, but reducing expectations of earnings growth to 4 percent would imply a reduction in corporate equity values of no less than 15 to 25 percent.

So top managers have a choice. They can try to close the performance gap by scaling back the market's expectations for future earnings - an approach that implies an acceptance of lower stock prices (and might get them fired). Or they can improve baseline earnings to meet or exceed the market's expectations. Shareholders and managers alike prefer the latter course.

Companies can find additional earnings in two ways: they can try to improve operating performance by squeezing more profit out of existing capabilities, or they can improve corporate performance by organizing in new ways to develop initiatives that could generate new earnings. By pursuing both of these approaches simultaneously, companies can take a powerful organizational step toward meeting the challenges of today's hypercompetitive global economy.

The Limits of Operating Performance
Top managers have traditionally chosen to rely on operating-performance tactics when times are hard and only during good times to undertake more fundamental performance-improvement initiatives. This predilection must change if, as we believe, the challenges facing companies are structural and persistent rather than cyclical and temporary. Companies that depend too heavily on improvements in their operating performance will run into real limits in the longer term.

To be sure, top management, pressured by intense global competition, has reacted correctly over the past few years by pushing operating performance ever harder to meet earnings expectations. Discretionary spending has been slashed, the least productive capacity eliminated, corporate overhead cut, marginal operations and businesses shed. Companies have become far more aggressive in purchasing. These steps, necessary to eliminate waste built up during the boom of the late 1990s, have bought time. But merely acting to secure increased returns from existing capabilities will yield diminishing returns and eventually become counterproductive.

Squeezing operating performance when times are tough is a tried-and-true practice, but it is inadequate in today's hypercompetitive global economy. During the entire post-World War II era, most large companies enjoyed extraordinary strength in their home markets. Their core businesses, often defined geographically, usually gave them privileged access to customers and to labor, capital, and technology. The profitability of these businesses often sufficed to support investments for expanding beyond the core.

With such extraordinary "home court" advantages, top management could set financial targets and develop long-range plans and "visions" to reach them. These plans were incorporated into the operating budgets of businesses. The home court advantage gave companies the muscle to drive their operating performance and to generate the expected profits. Given the opaqueness of the information provided to shareholders, the strength and profitability of core businesses often masked failings such as relatively poor returns from noncore businesses and ineffective corporate overhead. In other words, top executives managed to sustain the illusion that they could predict the future and could thus create expectations of future results. If times got tough, more earnings could always be squeezed from improved operating performance.

During the 1990s, executives in many an industry bet that they could exploit this home court strength to become scale-based winners in the global marketplace. Profits made in home markets subsidized the massive international expansion. It is no coincidence that the industries embracing this strategy - aerospace, automotive, high-tech equipment, investment banking, IT services, media, telecommunications - now populate the list of industries facing structural overcapacity. As barriers to global competition have fallen, so has the home court advantage. As a result, the performance problems that now plague so many companies lie not so much in peripheral as in core businesses.

Fat profits from core businesses in home markets have disappeared. European telecom service providers find that their formerly loyal customers are "rate shopping." US airlines can no longer rely on business travel to subsidize discounts for the mass market. Nor are these problems unusual.

The Risk of Reckless Conservatism
The instinct of companies facing pressures is to retreat to their core businesses, but this is not a practical strategy when the core itself is under attack. What is needed is fundamental innovation embracing not only where and how companies compete but also new ways of organizing and managing them. Making such changes is difficult. Implementing them calls for investment - not easy in an era of overreliance on operating-performance pressure.

Companies typically attempt to boost their earnings by cutting discretionary spending so much that potentially productive long-term investments are compromised. Managers often can't use their own judgment to make even "no-brainer" decisions that could yield important performance gains. We frequently encounter and hear of business leaders who won't spend money on new initiatives even if they are certain to produce large returns (sometimes, in our experience, two or three times the amount invested) within 18 months. Some companies we know have deferred their spending on necessary but unbudgeted new sales personnel, though failing to hire such people means losing substantial revenues the following year and weakens their market position in specific product areas. Other companies have declined to consolidate call centers and to move them offshore - a move that would secure significant ongoing savings in operating costs - because doing so might mean overspending this year's expense budget.

Line managers often lack the freedom to spend money unless their companies seem likely to recover the investment within the current budget year. When such minor decisions are deferred, it is obviously unthinkable to undertake truly important projects, such as investing to build promising new businesses or rewriting the legacy software of core computer operating systems to improve their performance and to reduce longer-term systems costs.

When we raised this point to top managers, they typically expressed horror that such "uneconomic" behavior was taking place. Yet these same top managers are often unwilling to allow exceptions to discretionary expense controls for fear of eroding "make-budget" discipline and suffering the consequent risks to quarterly earnings. The truth is that in many companies, cuts to discretionary spending in core businesses have gone far beyond eliminating waste. Essential maintenance has been cut, and the penalty will be paid in lost revenues and higher costs in the future. In the worst cases, many companies have begun milking their core franchises so much that a future collapse in earnings and even a loss of independence are inevitable.

Extreme operating pressures force line managers to make do with existing capabilities despite the need to adapt businesses to a relentlessly changing marketplace. Managers facing such pressures inevitably lack the resources to explore and experiment. In this environment, how will companies innovate?

Organizing for Corporate Performance
One of the most effective ways a company can respond to today's challenges is to put in place corporate-performance processes to complement their current operating-performance practices. By improving both kinds of performance simultaneously, companies can maximize their chances of closing the gap between the short- and long-term expectations of shareholders and management. Most companies will have to develop dynamic company-wide performance-management processes to make themselves more effective by allocating scarce resources to the best opportunities available. Such processes must be as disciplined as the operating processes used to manage current earnings.

By definition, corporate-performance management involves corporate- and not just business-level managers. (By corporate-level management, we mean general managers who can trade off current versus future earnings and manage expectations for results. At many companies, only the CEO has such responsibilities, but in others they can be vested in group-level managers or in managers of large businesses.)

Unlike operating performance, which can be driven by "vertical" line-management processes, corporate performance requires "horizontal" processes involving company-wide collaboration to generate and share ideas, establish accountability, and help allocate resources effectively. (The research budgets of pharmaceutical companies and the exploration-and-production capital budgets of petroleum companies drive much of the long-term performance in these two industries. Well-managed companies in them often administer such budgets with great discipline and intensity, which we think should be applied to all important initiatives that drive long-term performance.)

Scarce resources now include not only capital but also discretionary spending as well as the talent and management focus needed to find, nurture, and manage new projects that could boost future performance. Major corporate-wide initiatives, such as programs to improve the management of client relationships and to create new product-development and corporate-purchasing processes, would all be part of the effort.

Accountability for performance should reside in the corporation's "top of the house," which is best able to determine what trade-offs between current and future performance are acceptable and is responsible for managing expectations of future results. The top of the house should be construed not as the two or three most senior executives but rather as the entire senior-management team, probably including major business leaders and key functional staff - from 15 to 25 people.

Line and top management should be made collectively accountable for the trade-offs between short-term operating-performance objectives and the discretionary spending and talent investments needed to take on major new initiatives. The burden should not be imposed almost exclusively on line managers - as happens today when top managers "jam down" budget cuts. Individual businesses would probably sponsor many of the best ideas for improving corporate performance. The resources needed to pursue them might involve separate discretionary budgets and full-time staffs drawn from throughout the company. Even a high-impact initiative involving only a single business should be a priority for the whole corporation.

Finding the Best New Initiatives
Effective corporate-performance management improves the way a company identifies and selects its best new initiatives, provides the resources they need, and ensures that once launched they are managed intensively. Consider a chief of technology contemplating a multiyear initiative to rewrite the legacy software of a core operating system that several businesses use, such as a demand-deposit system in a bank or a network-management system in a telecom company. Today, because of operating-performance pressures, such a project might never obtain funds, or the manager concerned might decide to undertake it on his or her own initiative, financing it by allocating the costs to several businesses and developing it over a period of two to three years. Senior management in the affected businesses might have little to do with the effort, only becoming involved when it ran over budget, fell behind schedule, or failed to deliver some of the promised results - or all three.

Under the corporate-performance approach, by contrast, the company's top 15 or 20 executives might meet once a month in a corporate-performance council to review and revise all ongoing projects. Ideas for initiatives would bubble up through the company, and the council would approve the most promising ones. The project to rewrite the core operating system would likely be presented to the council by the head of technology or by leaders of the businesses concerned. It would be subject to open debate before it began rather than executed in isolation. Sponsorship and accountability would be assigned early in the process, and the project would be subject from its inception to regular and frequent reviews, including formal scrutiny by the entire council.

This kind of organization can link the generation of new ideas and initiatives more dynamically to oversight and action by senior and top management. The most relevant business or functional managers would typically sponsor new initiatives. Those cutting across the entire company might have top-management sponsors; those involving conflicts between different managers might be assigned to independent sponsors with fresh perspectives.

A Portfolio of Initiatives
Giving a top-and senior-management team the responsibility for deciding which initiatives to improve and which to reject ensures that a company's corporate-performance projects reflect its broader performance agenda rather than pressures to meet quarterly earnings targets by managing day-to-day operations. A set of tools we have developed to categorize and measure initiatives (see "The Basics of Corporate Performance," at the end of this article) can help managers convert the concept of corporate performance into an operational reality. At the heart of our approach is the development and management of individual new ideas into a corporate "portfolio of initiatives" that can drive a company's longer-term performance by aligning projects with the fluid and risky external environment. (See Lowell L. Bryan, "Just-in-Time Strategy for a Turbulent World," The McKinsey Quarterly, 2002 Number 2.) All activities that could have a material impact on a company's market capitalization become part of the process. We have found that, typically, 20 to 40 initiatives fall into this category.

Ideally, the entire senior-management group would play a role in choosing which initiatives to pursue, to accelerate, or to discontinue; decisions would not be made by individuals or during one-on-one conversations with the president or the CEO. Of course, if consensus proved impossible to reach, top management would ultimately rule on the issues, but it is vitally important to have open debate on the critical ones. These decisions will determine the company's long-term performance, so most of the senior leadership team must be involved in making them.

A typical senior-management group would include top management, major line managers, and critically important functional staff managers, including the heads of the finance, human-resources, marketing, and technology departments - in other words, any member of management with important knowledge needed to inform the debate and to help implement decisions when they are made.

Once formed, this senior-management body should convene at least once a month for a full day; a typical meeting might examine four or five initiatives in various stages of implementation. Every six months or so, the group might review the entire active portfolio of initiatives and determine whether baseline projections of their results met the long-term expectations of the company's shareholders as expressed in its stock price.

Certain initiatives, particularly those that could adapt the company's core business model to changing circumstances, are essential to any corporate-wide portfolio. Such initiatives might include major technology projects, the redesign of the company's core operating model, offshoring decisions, and major marketing changes. Strategic initiatives, such as acquisitions, divestitures, and the building of new businesses, are essential as well.

A particularly important part of the portfolio mix should be initiatives to communicate with and influence the expectations of major stakeholders - customers, regulators, the media, employees, and, above all, shareholders and directors. The involvement of all parts of the company in this area is essential, since strong corporate performance means results that meet or exceed the stakeholders' expectations.

Executed effectively, the process will keep line managers under intense pressure to improve the operating performance of their units. But it will also enable them to propose initiatives requiring major discretionary spending and staffing to a group of executives with a broad sense of the company's overall strategy and performance expectations as well as the power to commit the resources needed. Since managers with big ideas for improving corporate performance would be emancipated from the constraints of their own operating budgets to develop these ideas, they would be encouraged to come forward even if they had difficulty making their budgets. Indeed, the process might become so much a part of the corporate culture that managers wouldn't be deemed to be performing well without sponsoring new initiatives and effectively helping to carry them out.

This approach to decision making can also improve the way companies time and sequence their investments, for everyone involved in debating and reviewing critical initiatives will have the information needed to understand the relevant issues. Such an understanding makes it easier to set priorities and to make the right decisions at the right time with the right information.

Besides developing and launching new initiatives in this way, the improvement of corporate performance involves knowing when to accelerate initiatives that are working and ruthlessly eliminating those that are not. The explicit involvement of all senior managers means that decisions are transparent to all, so it is easier to move quickly to capture new opportunities or to cut losses. The management of risk-and-reward trade-offs improves because a corporate-wide process elicits the views and knowledge not only of the initiatives' champions but also of the entire leadership team. Often, skeptics can see the trade-offs more clearly than advocates can.

Obviously, the resources required to undertake corporate-performance initiatives that involve discretionary spending and staffing must come from somewhere. To make this approach work, a company must carve out a discrete corporate-performance budget and form a project-management office to direct the process. The discretionary funds needed can come only from operating budgets, and the people needed to drive the initiatives will be recruited either by tapping internal talent or by spending money to recruit new talent from the outside. When an initiative succeeds and goes operational, its ongoing activities and staff are moved out of the discrete corporate-performance budget and put back into the operating budget. Unsuccessful initiatives are terminated.

The corporate-performance approach, in sum, differs fundamentally from attempts to use a single process both to improve existing capabilities and to develop new ones. It involves major changes in the way top and senior managers collaborate and in their individual and collective accountability.

A corporate-performance management process will not by itself solve the challenges that managers face today, but it can certainly help. Any decision to shift resources from operating-performance to long-term corporate-performance investments is difficult to make. The advantage of a corporate-performance management process is that such decisions are made explicitly and comprehensively by top managers responsible for driving a company's longer-term performance rather than implicitly by line managers under intense pressure to meet short-term operating-performance demands.

Lowell Bryan is a director in McKinsey's New York office, and Ron Hulme is a director in the Houston office.
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The Basics of Corporate Performance
To turn the concept of corporate performance into an operational reality - and to sustain it - managers must build new businesses, adapt existing ones, continually reshape corporate business portfolios for maximum growth, and, at the same time, keep an eye on crucial strategic functions. What is the best way of inspiring employees to develop and carry out new initiatives? How should a company communicate with its core shareholders to guarantee that their expectations are in tune with baseline management forecasts? How fast or how slowly should strategic change be pursued?

The acronym BASICS can serve as a useful mnemonic for the approach we recommend below. Not all aspects of it may be relevant at a given moment, but our experience suggests that ignoring any dimension can greatly slow or even derail otherwise successful companies.

Build new businesses. Our research shows that the most successful corporate performers of the past 20 years have put considerable emphasis on building new businesses instead of focusing on core areas that could not indefinitely sustain growth that was sufficient to meet shareholder expectations. For example, as IBM's hardware operations came under pressure, beginning in the late 1980s, the company relentlessly focused on its Global Services unit, which now provides 40 percent of its revenues and 50 percent of its profits. And in the late 1990s, Wal-Mart developed what is now the largest US grocery-retailing enterprise.

Adapt the core. CEOs put the future performance of their companies at risk if, in addition to building new businesses, they don't adapt core businesses to changing markets. For example, National Westminster - thought of by many as Britain's best retail bank in the mid-1980s - was taken over by the much smaller Royal Bank of Scotland in 2000 because of a failure to tackle the high cost base of the core retail business. Adapting core businesses to change, often by implementing best practices such as lean manufacturing and supply chain management, helps proactive companies avoid this fate. Change is sometimes driven by megatrends - for instance, outsourcing or offshoring. In other cases, companies (GE is a good example) proactively implement broad performance-improvement initiatives that single-handedly raise the bar for entire industries.

Shape the portfolio and ownership structure. M&A, divestitures, and financial restructurings are rightly considered to be among the foremost tasks of corporate strategists. In the wake of the boom of the late '90s, however, tough market conditions have left many companies gun-shy about major moves. Yet reshaping portfolios remains vitally important: research shows that companies that actively manage them through repeated transactions have on average created 30 percent more value than those companies that engage in very few. (See Neil W.C. Harper and S. Patrick Viguerie, "Are You Too Focused?", The McKinsey Quarterly, 2002 Number 2.) Furthermore, best-performing companies balance their acquisitions and divestitures instead of having a preponderance of either.

Inspire performance and control risk. Management must guide individual and collective action so that they harmonize with a company's overall strategy and values. Too often, attention is focused solely on formal systems and processes, such as organizational structures, budgets, approval processes, performance metrics, and incentives. We have found that an exceptional performance ethic can be built with a mix of "hard" and "soft" processes: fostering individual understanding and conviction, developing training and capability-building programs, and providing forceful role models.

Communicate corporate strategy and values. Even if a company gets everything else right in its strategy, it risks dropping the ball if it can't communicate effectively. The ability to anticipate the likely reactions of investors is particularly important: key shareholders have in recent years derailed the restructuring or merger plans of several companies, and large declines in share prices have claimed the jobs of many CEOs who failed to manage or meet the expectations of their shareholders. Tailoring communications analyses to this constituency's perspective can work very well. Of course, investor communications are only part of the story. Building support among external constituencies such as consumers, regulators, and media as well as internal stakeholders, which include the board of directors, senior management, and employees, is critical to executing strategy successfully.

Set the pace of change. Companies with otherwise successful plans often stumble by moving too slowly on strategy or too quickly on organizational change. Sequence and pacing are difficult to judge; the factors that affect them include management's aspirations, external market conditions, and the organization's capacity to execute a number of initiatives simultaneously. Decisions about the pace of change influence how many initiatives a company runs as well as their complexity. In a short-term turnaround, it is hard to run more than four or five key initiatives; in many cases, two or three are preferable. But in a two- to three-year corporate-performance program, 15 to 20 corporate-wide initiatives may be necessary. -Renee Dye, Ron Hulme, and Charles Roxburgh

Renee Dye is an associate principal in McKinsey's Atlanta office, Ron Hulme is a director in the Houston office, and Charles Roxburgh is a director in the London office.

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  10:57 AM 1 Comments
  When Do Companies Outgrow Their Spreadsheets?

There comes a time at every smaller, growing company when managers perceive a need for more sophisticated software tools than spreadsheet-dependent planning, budgeting, and forecasting.
Russ Banham and Sam Knox, CFO Research Services
June 01, 2004
Pressured by senior management and boards of directors to produce more detailed budgets, forecasts, and performance data, while seeking a longer term view of the financial horizon, many finance executives at midsize companies are reevaluating their reliance on spreadsheets for planning, budgeting, and forecasting.

Many of the financial analysis problems endemic at large, complex public companies - such as finance's need to cut costs and drive profitability, to make financial reports more transparent, and to partner with operating units in business planning - are also prevalent at smaller companies.

Midsize companies have relied on spreadsheets and manual budgeting and forecasting processes since the earliest days of personal computers, and spreadsheets remain the de facto standard for day-to-day quantitative analysis. Indeed, well-crafted spreadsheets may be all the technology a new company needs to get up and running quickly. They are easy to understand and use; nearly all staff have some proficiency with Microsoft Excel.

However, large enterprises in recent years have migrated from spreadsheet-dependent processes toward more sophisticated automated planning, budgeting, and forecasting tools. These tools promise a greater level of operational detail for analytical purposes, more robust financial reporting, quick consolidations of financial data, and more input by business managers. The tools also liberate finance departments from the mundane manual processes of "racking and stacking" data to focus on a more robust understanding of the real drivers of business. As software technology improves and a corps of technologically sophisticated finance executives come to lead new and smaller companies, a provocative question emerges: Can midsize companies derive similar benefits by implementing these analytical applications?

The Status Quo - "Spreadsheets from Hell"
Most midsize companies depend on spreadsheets and manual processes for planning, budgeting, and forecasting. A recent survey by CFO Research Services (a sibling of CFO.com) asked finance executives at midsize companies about their efforts to transform their planning, budgeting, and forecasting processes. Of the 287 company responses to the survey, 73 percent rely primarily on spreadsheets and manual processes, with only 16 percent using analytical applications, and 11 percent extracting the necessary numerical information from their accounting modules. The prevalence of spreadsheets is not surprising, given the vast installed base, ease of use, low cost, and simple user interface of this commonplace application.

This study found, across the board, that survey respondents believe they spend too much time on forecasting, budgeting, and planning. When asked about the most acute problems with their current planning process, more than 60 percent said it "takes too long." Nearly 43 percent said "not enough time to analyze data," and more than a third cited "lack of ownership by business units." Among larger companies - those with more than $500 million in annual revenue - the inability to revise forecasts and budgets during the financial period was cited as the major problem.

What are the root causes of these problems? Respondents indicated that human factors such as collaboration among planning participants and uneven technical proficiency were primary causes. "Overdependence on key personnel" was cited by nearly 50 percent of respondents, "version control" by more than 35 percent, and "collaboration, consolidation of users' work" by nearly 35 percent of respondents. These issues add time to the planning, budgeting, and forecasting process, thereby reducing the amount of time left to actually analyze data on operational performance.

Real Problems in the Real World
Interviews with CFOs at midsize companies confirm these survey findings and shed light on the real world problems that companies face when running their enterprises off a mosaic of spreadsheets. Warren Green, CFO of One Call Medical Inc., a New Jersey-based outsourcing company specializing in medical services for workers' compensation claims, bemoans the inflexibility, data inaccuracy, and time-consuming aspects of spreadsheets. "With our spreadsheet model, I was unable to do 'what if' scenarios or work flow management," Green says. "I spent more time building and managing the model, and making sure none of the links were broken, than I did managing the data and analyzing it to ensure it fit the strategic plan. Aligning the spreadsheets was a nightmare. A simple change like someone adding an account threw the whole template [of operating expenses] out of whack. But the real drawback was my inability to do an analysis of data to make better decisions, to re-forecast or otherwise plan accordingly."

The finance team at Brock White Co. relies entirely on spreadsheets for planning. And the company's struggle to build and maintain accurate analytical models distracts finance staff from higher value, analytical activities. "It's a hellish process that gets more complex every year," says Ted McArthur, vice president of finance at the St. Paul, Minnesota-based distributor of construction products, with nearly $100 million in annual sales. "We do 30 lines of revenue per branch at each of our 13 locations, with each line representing a product segment," says McArthur. "If we take an annual salary for someone and spread it over 21 business days in a month, a simple change to 22 business days requires us to change a ton of formulas. We've also had to endure errors, where we've added up sales for all the branches, but we're undermined by the one branch that didn't extend the formula to reach enough rows and missed a whole person's salary." McArthur says that each year the model gets more complex, and "we introduce more potential for error. We need improved clerical accuracy on the budgeting side, where the numbers always add up. And on the forecasting side we need better analysis tools for looking at the business."

Brock White is currently evaluating analytical applications for planning, budgeting, and forecasting with a view toward improving data analysis and engaging more managers in the financial side of the business. Says McArthur, "I want to get away from spreadsheets and publish the data electronically, then push it to more people than just finance or senior management so they can make more informed decisions. I also want to take the resources out of maintaining the spreadsheet-based model and put them into thinking about the business itself."

Re-forecasting in a complicated spreadsheet environment drove Timothy McNair, controller at Pennsylvania-based C.F. Martin & Co. Inc., the well-known manufacturer of guitars and acoustical instrument strings, to rethink the technology behind his planning process. "At the end of 2002, our sales were $77 million, and we forecast 2003 sales of $81 million," recalls McNair. "We hit the month of May and realized there was no way we would make the forecast and cut our sales plan back almost 10 percent." C.F. Martin's executive team needed to immediately determine the overall financial impact of the reduced sales plan.

"I spent a week without sleep trying to forecast the impact," McNair says. "Unfortunately, our spreadsheet-based systems were inadequate to successfully provide this analysis in a timely manner. I couldn't take all 50 budget centers and blow down the sales impact quickly to each individual budget, so I ended up doing this top-down, with a new operating plan focused on executive level budgets. We spent the next six months trying to drive the changes down to the responsibility managers who needed the appropriate metrics for measuring their performance against the revised plan. For the rest of the year, we were not as effective as we could have been." Had he used an analytical application for the re-forecasting, McNair says, "none of this would have happened - I would've hit a couple buttons and budget managers would have instantly realized the impact of the re-forecast on budgets, allowing them to make decisions accordingly."

C.F. Martin is currently rolling out an analytical application for planning to its budget managers. "We bought it as a budgeting and planning tool, and the first thing we learned was that it was a great financial reporting tool, much better than our ERP system," McNair notes. "No one ever kept a database of financial performance here because of the spreadsheet-based process and the inferior reporting provided by our accounting module. Now we've got one, and it takes two seconds to use it."

Wastren Inc. considered its former spreadsheet-based budgeting process ineffective, with too many individuals required to contribute to it. "It would take so long before it was completed that two months later when we were into it, it just didn't mean a whole lot," says Tom Kaupas, CFO of the Colorado-based privately-owned waste maintenance contractor, with $43 million in annual revenues, nearly all from government contracts. "I needed something that would refresh quarterly," Kaupas adds. "I wanted a rolling four-quarter forecast, the consolidations, and the 'what if' scenarios that I could review - the spreadsheets always came up short. We did a technology versus manpower assessment [as it related to planning, budgeting, and forecasting] and it clearly weighed in favor of applying technology - an automated analytical tool." The company built the tool internally in early 2003.

Interview subjects say poor data integrity and accuracy affect their satisfaction with planning, budgeting, and forecasting. Finance staff at Thales Broadcasting & Multimedia, for example, used to manually key in an entire trial balance for two separate divisions as part of its consolidation process. This was "an enormous volume of line items and numbers, making the process prone to error," says Joan Hartung, manager of financial analysis and reporting at the Massachusetts-based manufacturer of television transmitter systems. "Because this was a consolidation, from a financial standpoint it has to equal out to the penny. But spreadsheets are open to human error. Even I've stepped on a mathematical formula and made it go away, consuming time and resources."

Hartung says the company had a "pretty complex spreadsheet process - the 'file from hell,' we called it - that only one person [in finance] could effectively use at a time. It is huge, and it occasionally locked up the entire computer, and we weren't nearly as efficient as we could have been." Thales recently purchased an analytical tool that it is using for corporate reporting and financial consolidations, and expects to roll out the tool's planning and budgeting features in the next year.

Many users of analytical applications for their planning, budgeting, and forecasting do not migrate completely away from spreadsheets. The survey indicates nearly 70 percent of analytical application users continue to use spreadsheets for local, ad hoc analyses of data from other applications. Companies that use analytical applications for planning, budgeting, and forecasting are generally satisfied with the software. The converse seems to be the case among midsize companies reliant on spreadsheets. Of the 189 survey respondents whose primary planning, budgeting, and forecasting technology is spreadsheets, 20 percent of respondents say their finance staff is "very satisfied," compared with 33 percent of those whose primary technology is an automated analytical application.

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This article is excerpted and adapted from Budgeting and Planning at Midsize Companies: When Are Spreadsheets Alone Not Enough?, a report that summarizes the findings of a mail survey of finance executives at 287 companies and further interviews with executives at 6 companies. Prophix, a provider of software for budgeting, planning, financial consolidation, management reporting, and analysis, funded the research and the publication of the findings; CFO Research Services produced the final report. You may download a copy of the full report by filling out a brief form.

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  10:56 AM 1 Comments
  Cinq principes pour faire de la veille sans budget

Faire de la veille stratégique est à la portée de toutes les entreprises. Loin des questions de budgets et de temps, la veille est une attitude, une attention portée à son environnement. (juin 2004)  

Pas toujours facile pour une TPE ou une PME de mobiliser les moyens financiers et le temps nécessaire pour mettre en place un système de veille. Et pourtant la veille représente un atout stratégique pour les entreprises, de toutes tailles, qui plus est si la concurrence est forte. Anticiper les tendances en matière réglementaire, concurentielle, sociale, et être en première position pour développer une innovation ou se lancer sur un nouveau marché, sont autant davantages décisifs pour une entreprise. Les conseils de Yann Guilain, directeur consulting chez Digimind, pour faire une veille efficace et utile en exploitant les ressources "naturelles" de l'environnement.

1  Cibler les besoins

       
"Il ne faut pas faire de la veille pour la veille", souligne Yann Guilain. La veille doit correspondre à un besoin qu'il faut définir préalablement en interne, via notamment l'identification précise du coeur du métier de l'entreprise. Une petite entreprise définira par exemple ses besoins d'information sur les deux ans à venir, selon des ambitions réalistes, en évitant de se lancer dans un vaste plan. "Pour initier cette démarche de veille, il est essentiel de se centrer sur un projet stratégique particulier et d'avoir une vision dynamique de la concurrence". Bref, l'entreprise doit avoir un but précis à court terme qui va lui permettre de canaliser les personnes et les efforts sur un objectif commun. Une stratégie qui lui permettra de mesurer les retombées de son action. 
       
2  Identifier les acteurs
       
La veille s'appuie en grande partie sur des vecteurs d'information humains. Lorsque les besoins ont été correctement ciblés, l'entreprise doit identifier les salariés qui sont en contact avec les différentes sources d'information possibles. "Soit par leur personnalité, soit par leur position, ces personnes représentent des relais d'information organisés en réseau. Ces individus sont généralement très attentifs à leur environnement et communiquent aisément pour faire remonter l'information. Le facteur clé de succès de la veille tient dans la motivation de ces personnes, qu'il faut entretenir de diverses manières, en proposant par exemple des bonus, des primes, des cadeaux, des retours d'information ciblés..."  
       
3  Récolter l'information
       
Pour récolter l'information, nul obligation pour l'entreprise d'utiliser un énorme outil technologique, surtout lorsque l'effectif se trouve entièrement concentré sur un même site. "La machine à café reste un lieu d'échange non négligeable pour la veille et l'e-mail un outil quotidien pour faire remonter l'information." Une surveillance de l'actualité du Web, des publications virtuelles ou "papier", des communiqués de presse des concurrents, une présence sur les salons en s'étant préalablement renseigné sur les entreprises présentes, sont des actes de base pour la veille stratégique. Il faut rester à l'écoute des tendances et traiter l'information de manière structurée : cibler les thèmes, les domaines ou les types d'information à chercher et définir le rôle de chacun pour éviter de récolter le tout-venant. Les informations récoltées seront alors stockées de manière organisée, généralement dans une mini-base de données.  
       
4  Analyser les données
       
Les données récoltées sont ensuite analysées par rapport aux besoins émis au début du projet. "Ce travail doit être synthétisé dans des livrables qui aident à la décision. Par exemple, le document peut se présenter sous la forme d'un tableau de bord synthétique, utile à six mois. On y trouvera des graphiques ou tableaux, les chiffres de vente ou les argumentaires de la concurrence, et un résumé de cinq préconisations directement opérationnelles. Dans l'idéal et pour être véritablement efficace, ce document ne doit pas dépasser une feuille A4, et surtout ne pas ressembler à un rapport de 200 pages."  
       
5  Diffuser pour agir
       
A ce stade du projet, la veille ne sert à rien si le résultat n'est pas diffusé auprès des collaborateurs de l'entreprise qui pourront agir en conséquence. Il faut donc que l'information digérée redescende vers les acteurs de l'entreprise. Les résultats de l'analyse des données représentent un outil de travail pour les différents services : marketing, recherche et développement, commercial... Pour cette raison, les informations doivent être diffusées rapidement afin d'éviter qu'elle ne deviennent obsolètes, et par là même tout le projet de veille.      
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  10:43 AM 0 Comments
  Spreadsheet Hell

CFOs are interested in the many new technologies being pitched to them, but are they really trapped in spreadsheet hell?
Don Durfee, CFO IT
June 15, 2004
Call it the "innovation gap," a yawning space between two parallel universes. In one, companies operate more effectively than ever before, powered by a rash of new technologies that tackle every aspect of financial management, from the mundane (if complex) processing of invoices and payments right up to strategic planning and long-term forecasting. Software companies promote an endless array of appealing new products that promise to save CFOs time and money, put companies in compliance with new financial rules, and turn reams of data into actionable intelligence. A stream of conferences, roundtables, and Webcasts explore the latest innovations and profile the forward-thinking companies that have deployed them, with the obligatory touting of astounding returns on investment.

In the other universe, new technologies don't fare as well. This universe could be labeled "reality." In a recent survey of 168 finance executives, CFO IT asked about the state of IT as used by corporate finance departments. Out of a list of 14 finance-specific technologies, we found that only 2 are widely used: spreadsheets and basic budgeting and planning systems (see "What's Hot, and Not," at the end of this article). The others - from portals and dashboards to treasury and tax software - have thus far largely been ignored. "Spreadsheet hell," a term often invoked by software companies - and, occasionally, by customers - is not, as of yet, driving many CFOs to make substantial investments in newer forms of IT. Nor have the demands of regulations from the Sarbanes-Oxley Act of 2002, even though many of the more-complex rules focus on internal controls, an aspect of corporate operations often inextricably tied to technology.

Slow Motion
Why the gulf between expectations and reality? It's not that finance departments are uneasy about deploying new technologies - the great majority of survey respondents expressed satisfaction with their department's ability to absorb new IT (see "Finance IT: The Big Picture," at the end of this article). Instead, the two main factors appear to be the slump in overall IT spending and the lingering hangover from the Y2K-inspired wave of ERP implementations. According to our survey, cost and integration problems remain the top barriers to implementing new finance technologies. "Although there is renewed interest, we still haven't seen a big pickup in finance IT spending," says John Van Decker, a vice president at Meta Group Inc.

Ironically, Sarbanes-Oxley may be slowing the pace of new technology adoption further. It's not that IT won't be important for companies' compliance efforts; on the contrary, CFOs say that having a well-integrated system that accurately and transparently reports results is a definite advantage when executives have to sign their name to financial statements. Instead, the problem is that compliance requires such a major effort that many CFOs don't want the disruption of a large systems implementation.

"While we're in the middle of Sarbanes-Oxley, we have an embargo on new systems," says J.T. Fisher, CFO of Delta Connection, a unit of Delta Air Lines in Atlanta. "You don't want to have internal-control attestations driven off of audits and process reviews that are linked to systems that are unstable. Once the process is bolted down, we can start adding new IT." Our survey suggests that many finance executives are taking a similarly cautious approach. Of the public companies that responded, only 10 percent are spending much more on technology as a result of Sarbanes-Oxley, 50 percent are spending somewhat more, and the rest see no change.

But the innovation gap our survey uncovered does not stem only from caution in the face of new business requirements. Broadly speaking, finance executives appear to be largely content with the technologies they have today: 72 percent say they have most or everything they need in the way of finance IT. And the much-derided spreadsheet, so often posited as the dinosaur that newer technologies will ultimately make extinct, is not heading for the tar pits anytime soon. Every single company we surveyed uses spreadsheets today, and a mere 9 percent think they will decline in importance in the coming years (see "Spreadsheet Purgatory?" at the end of this article).

Companies have also learned, after much expense and pain, that technology is only part of the solution, and sometimes not a particularly big part. Technology really works, says Fisher, when it "helps you slough off old ways of doing things, when it helps you discover and adapt better processes. That's when you get great efficiencies. But the latest technologies, in and of themselves, don't make you more productive."

Change Is Coming
This lull in technology adoption won't last forever, though. According to the survey, companies do plan to start adding new finance IT. Eighty-two percent say that within five years their finance departments will rely on a mix of current and new technologies, and 13 percent say they will rely primarily on new technologies.

One reason is that spreadsheets - useful and beloved though they are - will soon force a change for many companies. While they can satisfy many needs in small, stable organizations, they can become a major burden for larger companies. Indeed, while only 33 percent of respondents with revenue under $100 million say that "spreadsheet hell" is a fair description of what goes on in their departments, that figure jumps to 59 percent for larger companies.

"When you are an organization with less than $100 million in revenues, you can almost run your whole accounting department using spreadsheets," says Lee Geishecker, a vice president and research area lead at Gartner. "But as soon as you run into business complexity such as industry-specific requirements, complex incentive programs on your sales side, or multinational environments, you have to move away from spreadsheets as the engine for your budgeting." As companies start growing again, there will be pressure to fix the spreadsheet problem.

Such pressure was strong at Mentor Graphics, a $675 million provider of engineering software. A few years ago, the company's annual planning process required rolling up data from 1,200 Excel spreadsheets - one for each cost center. "When you get that many spreadsheets, it never quite ties together," says Jan-Willem Beldman, the company's enterprise data architect. "On average, it was a six-to-eight-week process each year just to get that worked out."

Today the company uses a Hyperion Essbase system with a Web-based tool that pulls all of the data into one place, automates the approval process, and allows planners to run scenarios more easily than they could in Excel. "We're now doing the whole planning process in five months, down from what was an eight-month ordeal," says Beldman.

Another force for change is the ongoing drive to reduce the cost of finance. CEOs continue to demand that such cost centers as finance be leaner, while making a greater strategic contribution. Because of its ability to automate routine tasks, technology will be vital to this effort.

Consider Delta's experience. When the airline industry suffered a sharp decline in demand following September 11, 2001, the company had to make deep cuts in all areas. Finance was able to use Delta's new SAP system to do its part. By redesigning and automating finance processes as part of the implementation, the department was able to reduce staffing by between 15 percent and 20 percent, and dedicate more employees to providing decision support to the business. "We've greatly reduced the amount of finance staff time spent on transaction processing," says Fisher. "Now we spend much more time on business matters." Delta had a curious advantage, Fisher says, in that its hodgepodge of systems were so cumbersome that when the company consolidated on a single ERP system from SAP in 2001, "we didn't have to worry about people being reluctant to learn a new system - they said, 'I don't care what the new system is, I'll embrace it.' "

More important, Fisher says that a single ERP system offered a way out of spreadsheet hell because it provides a uniform source of data that all spreadsheet analyses rely on. "In the past, you would sit in a meeting and several people would offer up business models, and you'd have to spend time sorting out what everyone's assumptions were based on," he says. "You couldn't even get to a discussion of whether the business case was good or bad because you were bogged down trying to understand what one spreadsheet was saying versus another. That's spreadsheet hell."

ERP, of course, is not new, although the major vendors constantly add new modules and capabilities to it. Among the more purely new technologies of most interest to CFOs, five rise to the top: corporate (or business) performance management, a.k.a. CPM/BPM; E-procurement; portals; E-payment/E-billing software or services; and dashboards.

Teach Them to Fish
What these technologies have in common, aside from the inevitable promises that they will provide near-instantaneous payback, is that they help finance departments do less paper-shuffling and more analysis. E-procurement and E-payment/E-billing (technologies sometimes collectively known as financial supply-chain software) help free finance from much of its routine accounting work. CPM/BPM, portals, and dashboards are tools that help finance satisfy the business's demand for better visibility into the drivers of growth or the sources of trouble.

Frank Figueroa, CFO of Sandia National Laboratories, which is owned by the U.S. Department of Energy but operated by Sandia Corp., a subsidiary of Lockheed Martin, is interested in visibility, on several levels. "As much as I'd like to drive down the cost of IT," he says, "if that spending helps us achieve our objectives, then that's fine. I would just like better insight into which IT projects provide the most contribution to our strategic objectives."

Despite those reservations, he is upbeat about the promise of CPM products. The company is using an Oracle ERP system and portals (essentially Web pages customized to provide access to data, software applications, and other sources of information relevant to a given constituency) as a way of pushing data out to business managers and customers. Now Figueroa is looking for tools to help analyze the data. "We're doing a good job of reducing the cost per transaction," he says. "The drive now is to do a better job of predicting revenue streams and taking actions to make sure we're achieving our strategic goals." One of those goals, he says, is to gain a better understanding of the link between IT spending and quantifiable performance improvements.

That need isn't lost on makers of ERP systems (such as Oracle) many of which have come out with new systems to compete with vendors that specialize in CPM and other aspects of finance IT. In particular, Oracle sees more adoption of Web-based applications for such areas as bill presentment, receivables management, and credit management.

For his part, Fisher of Delta Connection says that once Sarbanes-Oxley compliance is well in hand, he hopes to explore technology that will streamline the company's approach to payroll and employee-records management. "This is the biggest, most complex cobweb of systems for us," he says.

That one-thing-at-a-time approach would seem at odds with the transformative visions that many software vendors are peddling. But what can look slow and steady in the near term can in fact be fairly revolutionary: is there a finance department in existence that doesn't rely on the Internet as an all-purpose technological backbone? Could one have said the same five years ago? Even in the near term, the innovation gap seems far more likely to shrink than to grow. The number of companies that will adopt newer forms of finance IT will be so large, why, you'd need a spreadsheet to track them all.

Don Durfee is research editor of CFO.
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After the Cost-Cutting, More Cuts
While many CFOs have an IT wish list and seem interested in new technologies, a recent survey from Booz Allen Hamilton suggests that purse strings will remain securely fastened. Asked about their top overall priorities, fully 85 percent of the 156 CFOs surveyed cited cost-cutting for general and administrative services - a.k.a. overhead - including IT, human resources, and core accounting and finance functions. In fact, despite the prolonged economic slump and the substantial cost-cutting it has already entailed, only 3 percent said they've cut overhead costs as much as possible.

While survey respondents pointed to a number of different strategies for making further cuts, there was little evidence of a slash-and-burn approach. With the easy cuts having been made, companies now believe they'll need to combine cuts to nonessential services with other strategies, including standardization, restructuring, and altered relationships with - and expectations of - the business units that consume many of those services.

The survey turned up plenty of evidence that IT strategy will play a key role in such plans - and maybe a number of roles. For one, Booz Allen found that success in cutting overhead costs can hinge in large part on mastering the complexity of IT. Companies that said "managing a patchwork of different systems" is their top IT challenge were almost unanimous in labeling themselves underperformers in overhead reduction, while fewer than half of the self-described leaders in cost-cutting said managing a hodgepodge of systems is a top IT concern.

In some cases, an investment in IT may help business units become more self-sufficient. One of the appeals of business intelligence and CPM technology is that they can enable business managers to do their own analyses based on a common set of data. If the technology lives up to its promise, business units can satisfy some of their own requests, allowing finance to do more with less. "A lot of what finance does today are things that people would do themselves if they had the tools," says John Van Decker, a vice president at Meta Group Inc.

That's been a perennial complaint, of course, but with tools improving and the pressure on companies to operate more efficiently in no way abating, this could be a classic case of spend a dime to make a dollar. -D.D.

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What's Hot, and Not
Where does your company stand on the following technologies?   
        Use now Plan
to use  No plans, but interested        No interest                    
Spreadsheets    100%    -       -       -                      
Basic budgeting,
planning, forecasting   66%     17%     13%     4%                     
ERP (finance modules)   34%     14%     26%     27%                    
E-payments, E-billing   34%     18%     34%     15%                    
Treasury systems        29%     8%      29%     34%                    
Tax systems     25%     10%     27%     38%                    
E-procurement   19%     19%     37%     25%                    
Portals (finance-oriented)      13%     16%     37%     34%                    
Dashboards      13%     19%     31%     37%                    
Compliance software     11%     15%     35%     40%                    
Risk-management software        10%     5%      45%     40%                    
Advanced BI, CPM, BPM   8%      20%     50%     22%                    
Enterprise spend management     6%      6%      36%     53%                    
Price-optimization software     6%      7%      31%     57%                    
Note: Percentage may not total 100, due to rounding.                   
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Finance IT: The Big Picture
How would you characterize the state of finance IT at your company today?      
We have everything we need      6%                                             
We have most of what we need    66%                                            
We are missing critical components/capabilities 24%                                            
Our systems are wholly inadequate       4%                                             

How satisfied are you with your finance department's ability to absorb new technologies?       
Very satisfied  25%                                            
Somewhat satisfied      48%                                            
Neutral 19%                                            
Somewhat dissatisfied   7%                                             
Very dissatisfied       1%                                             

When it comes to implementing new technologies within finance, which of these pose a barrier?
(Multiple responses permitted.)
Integration with existing systems       74%                                            
Cost    71%                                            
Disruption to existing process  42%                                            
Training        39%                                            
Employee reluctance to use new technology       26%                                            
Other   3%                                             

As an IT customer, how satisfied are you with: 
        Very satisfied  Somewhat satisfied      Neutral Somewhat dissatisfied   Very dissatisfied      
Internal IT department  25%     42%     14%     16%     4%     
Vendors (products)      8%      42%     35%     14%     1%     
Vendors (service)       7%      38%     40%     13%     2%     
Outsource firms (finance)       3%      18%     68%     10%     1%     
Consultants/integrators 4%      26%     51%     15%     4%     
<<...OLE_Obj...>>
Spreadsheet Purgatory?
Software vendors often say that companies are trapped in "spreadsheet hell," reliant on outdated technology that can't meet today's business needs. How well does spreadsheet hell describe your organization's reliance on spreadsheets?      
        Small companies Large companies                                
Completely      7%      12%                                    
Fairly well     26%     47%                                    
Not very well   46%     35%                                    
Not at all      20%     6%                                     

How do you rate electronic spreadsheets in
the following areas?   
        Excellent       Good    Neutral Fair    Poor   
Accuracy        51%     37%     7%      4%      2%     
Ease of use     50%     44%     6%      0%      1%     
Capabilities/power      46%     49%     5%      1%      0%     
Labor saving potential  29%     47%     13%     9%      3%     
Integration with
other systems   10%     46%     23%     15%     7%     

Five years from now, spreadsheets will be:     
More important  20%                                            
The same        71%                                            
Less important  9%                                             

[AM-9GGIDM4]

  10:16 AM 0 Comments
Wednesday, June 16, 2004
 

The building
  7:34 PM 0 Comments
 

Some digital views from our next home
  7:31 PM 0 Comments
  Brand You Survival Kit
Fast Company
Fast Company Magazine
Updated: Wed, 16 Jun 2004 11:01 AM

Brand You Survival Kit

When Tom Peters first wrote about Brand You, it was cool. Now it's life or death.

  4:51 PM 0 Comments
  First Impression
Fast Company
Fast Company Magazine
Updated: Wed, 16 Jun 2004 11:01 AM

First Impression

"Too many people have copied too many other people's best practices."

-Ali Kasikci , General Manager, Peninsula Beverly Hills

  4:50 PM 0 Comments
  No Small Change

A well-thought-out strategy for change management is critical to the success of any new system. Here's how four organizations reaped big dividends by managing change.

BY TODD DATZ
CRITICAL SUCCESS FACTORS CHANGE MANAGEMENT
PROMOTE A CLEAR VISION to keep employees focused on how the new system will help the company achieve its long-term goals.

MANAGE THE ENTIRE PORTFOLIO of change-too much simultaneous change within a company can be disastrous.
CONSIDER A PROJECT'S SCALE-things that work well in the pilot phase don't always scale to an enterprisewide or global level.

PUT CONTINGENCY RESOURCES in place: That means extra funding to shore up the inevitable problems that will occur.
TOUGHEN UP YOUR I.T. TEAMS so that they don't take personally the inevitable potshots from angry business users.
 
KOLETTE FLY, WHO helped develop Pfizer's electronic data capture system, knows firsthand that asking people to change the way they work can be as traumatic for some as asking them to bungee-jump off a bridge. An epidemiologist at Pfizer who heads clinical trials for the treatment of metabolic diseases, Fly remembers the first time she sat down with the nurse coordinator of a university hospital that Pfizer wanted to recruit for a new study. As soon as the coordinator saw the computer being pulled out of the box, she held up her hand and announced that computers were the "foot soldiers of the devil."

Fly and an IT person spent the next three days trying to overcome the coordinator's digital fears. They worked closely with her to explain computer basics and how Pfizer's Investigator Net (I-Net) system-an electronic data capture system that automates data collection and analysis for drug development studies-would make her work easier and more efficient. But the coordinator remained unconvinced, to the point where Pfizer was about to cut its losses and pull the hospital from the multicenter study. Then, in a grand "aha" moment, the coordinator realized that she could log in and navigate the system by herself without any coaching, and that the system "wasn't out to get her," says Fly. At that point, her resistance evaporated and she became a convert. The hospital became the top patient recruiter for the program, and the coordinator even volunteered to do road shows to preach the benefits of the system to other sites. "If this old dog can learn this, there's no reason anybody else can't," she told Fly.

Kolette Fly, who heads clinical trials for Pfizer, worked closely with nurses and doctors to sell them on a new electronic data capture system for Pfizer's drug trials.       
       
Companies can develop or purchase IT systems that promise to cut costs, streamline operations, wash the car and whiten teeth, but CIOs know that if the users don't like a new system, they can kiss the promised value good-bye. That's why change management is so critical to the success of any new system. A well-thought-out strategy-one that's driven by the needs of the business, encourages user input during the development phase, ensures proper training and keeps the lines of communication open at all times-will go a long way toward making those multimillion-dollar technology investments contribute to the bottom line.

The four CIO Enterprise Value Award winners in this story-Pfizer, the Chicago Police Department, Procter & Gamble and Guardian Life Insurance-have devoted plenty of blood, sweat and tears to convincing their users that change is for the better. Here's how having a solid change management strategy has paid off big time for these companies.


Winning Over the Rank and File
Take a grizzled, 50-year-old cop who's been patrolling the streets for decades and has grown quite comfortable filling out five-ply carbon forms to process all his arrests and casework. Then you suddenly order him to start doing his reports on a computer, an alien-looking object he may have never laid a finger on in his life. Indeed, one veteran cop on his first day of system training on a PC picked up the mouse without logging on, pointed it at the screen and started clicking away. When nothing happened, he asked why the damn thing wasn't working.

That's the whopper of a change management task that the Chicago Police Department-the second-largest department in the country with more than 16,000 police officers and civilian employees-faced as it began developing the Grand CIO Enterprise Value Award-winning CLEAR (Citizen Law Enforcement Analysis and Reporting) system, a relational database that sifts through massive amounts of data to give officers the information they need to fight crime (see "Taking IT to the Street").

In fact, when the case report component of the first CLEAR module, a criminal history records information system that also produces arrest reports for detectives, was rolled out in 1999, it was a disaster. The detectives hated it for a number of reasons: It wasn't user-friendly, the process of getting approval from supervisors proved arduous and involved multiple screens, and detectives weren't given proper training. After a year of listening to detectives' grumbling, managers realized they had to do something.

First, they set about building internal competence in the information services group, and that meant replacing more than half of the management team. "It was a good team, but we needed a different set of skills-people who could manage a large-scale enterprise, people with business skills, project managers, development directors who could understand the business needs of our users and manage a team that would build out, and understand the enterprise structure we were building," says Ron Huberman, who became assistant deputy superintendent of information and strategic services for the Chicago Police Department in 2001. After revamping his team, Huberman focused on training his technology staff, from entry-level developers all the way up to senior managers. At that point, the information services group was ready to begin full-fledged development of the new system.

They began by sending a team of their best programmers out to the field for six weeks to document all the issues users had with the system. The group came back with 200 specific requests for changes, ranging from implementing an easier approval process to changing the format of how the reports printed. IS leaders also made it a point to glean user input throughout the development process. They instituted JAD (joint application design) sessions, which involved teams made up of management, users and technical staff. They formed focus groups from all ranks to gather input. Teams of officers went out to the 25 districts to field-test new apps and train officers. Having officers-not civilians-be the trainers has made a huge difference to the cop on the street.

"There's a certain degree of comfort [with other police officers]," says Sgt. Howard Lodding. He is one of a number of cops from the street who have been brought in to the information and strategic services division as part of the department's change management strategy. A few years ago, there were no officers in the IT shop; now there are 18, and their background in the field helps them design modules in the CLEAR system with users in mind. Their experience also ensures them respect in the field when they train users on the system.

Paul Gaffney, CIO at Staples and an Enterprise Value Awards judge, sums up the monumental task the CPD faced: "I can't imagine a more difficult change environment than an organization like a very old police department. You have longtime employees. They're used to doing things a particular way. They succeeded in not only delivering the right technology but also embracing that technology and unlocking all the value."


Selling the System
Though it might not be as dramatic as cops switching from ballpoints to bits, Procter & Gamble still had plenty of user resistance as it rolled out its Corporate Standards System (CSS). CSS is a global, centralized application that manages the company's technical standards around each product. Technical standards are a critical component of the company's product lifecycle management process-they are the communications links that connect everything from R&D to the product supply department for the purchase, manufacture, storage and shipping of materials and products. The beauty care group, for example, has an average of 125 standards for such key information as formulas, regulatory clearances and packaging instructions, and each project identification code or SKU (overall, the company has about 55,000 SKUs in current production). CSS allows the reuse of existing tech standards and lets its more than 8,200 users share data across the globe. (Previously, people had squirreled away that info in any number of places, including three-ring binders, the occasional website and some electronic workflow tools.)

When working on the development of P&G's CSS system, John Planalp, associate director for corporate R&D, wanted input from business units that were grappling with a lot of complexity. In P&G's case, that meant studying the needs of Western Europe, which contains a number of different countries, languages, brands, country-of-sale agreements and artwork. He says that he wanted to make sure the tool could handle such a wide variety of inputs, without designing it in such a way that users in a simple business-say, a brand of kitchen towel in a country with a single language-would struggle with it, or worse, not use it.

Dan Blair, director of worldwide technical standards for Procter & Gamble, says it took about three months for employees to get over their resistance to the new automated system for product standards.       

The main objective of P&G's project leaders was to show employees how CSS would improve their workflow. They did Web-based training and set up a help desk that follows up on every request from employees. In describing the rollout, Planalp and other execs like to talk about a 60-day immune response from users. That's about how much time it took for employees to get over their resistance to the new system. After that, says Dan R. Blair, director of worldwide technical standards and the business sponsor of the project, they often became advocates. When people complained about the system being too slow, for instance, employees discovered it usually wasn't the technology but the work process that was the culprit. For example, someone in R&D may have been used to documenting last-minute change requests from a retailer (such as a request from Wal-Mart to change the products on a pallet) on the back of envelope. At first they found that documenting changes in CSS demanded more rigor and was thus more frustrating. After fixing the work process-by, for instance, standardizing the approvals necessary for late change requests-they found that the system made their life easier. "Eighty percent of the time it's not about the tool, it's about the work process," says Planalp.

Executives at Guardian Life Insurance had a similar change management challenge when they rolled out a new insurance and annuity policy administration system dubbed Transcend. The system, which replaced an aging legacy system, enables real-time automated annuity policy processing and allows Guardian to connect to third-party broker dealers and build relationships with the brokers and their customer base. According to Executive Vice President and CIO Dennis Callahan, Transcend was successfully deployed with little resistance from internal users. IT executives created the usual menu of workshops and training sessions for users when the new system was launched. But the key, Callahan says, was the partnership between business and IS-there's no battle between the CIO and any business head for control of the agenda. "People are getting the same message from the top down. That eliminates the tension and simplifies change," he says.


Learning from Failure
When companies make major changes in the way they do business, they sometimes hit a few bumps before arriving at a smooth patch of road. That's certainly been the case with Big Pharma, where, beginning in the 1980s, pharmaceutical companies tried without much success to implement electronic data capture systems. But now, Pfizer is one of a handful of industry players that are up and running with highly successful EDC systems. Analysts say Pfizer's I-Net is one of the most advanced EDC systems in the industry, with a deployed base of 4,000 users at more than 2,000 investigator sites in 36 countries.

Guardian Life Insurance CIO Dennis Callahan says the key to successfully launching a policy processing system was ensuring that everyone in the business units and IT shared the same agenda.  
       
But the change management hurdles were huge. Similar to the Chicago Police Department, internal and external users at Pfizer had to move to an online environment from the tried-and-true paper-based environment they'd been working in since the dawn of drug discovery. Clinical teams were very comfortable with paper case report forms (CRFs), on which patient data, such as demographics and vital signs, was collected and analyzed.

The collection and processing of trial data represents 40 percent of the cost of new drug development and is a gargantuan chunk of money, given that the average cost of developing a new drug is more than $800 million. One of the obstacles Robert Goodwin, worldwide head of clinical data acquisition and management, and the business champion for Pfizer's I-Net system, faced was overcoming the fears of his R&D folks that the automation and standardization of CRFs would crush their creative abilities. For example, they feared that a standardized report form would hamper their flexibility to collect information while exploring new ways to do medicine. The company got their buy-in by asking for R&D's input on the electronic report forms. Ultimately, 80 percent of these forms became standard, leaving 20 percent to be unique to each study. The new forms also led to speedier trials. "We demonstrated that with standardization, we could start studies faster instead of making each CRF a Picasso," says Goodwin.

Getting internal therapeutic teams to pilot I-Net presented another knotty hurdle. "Everyone else wanted someone else to do it. They were excited about it as long as they weren't the ones piloting it," says Fly. Project leaders worked hard to give teams that volunteered an incentive. For example, the team studying estrogen receptors involved in breast cancer became motivated by the challenge of piloting I-Net and selling its benefits to clinical trial sites as well. Once word spread that the piloting teams were finding I-Net easy to use and reliable, other teams began to climb on board.


Wowing External Users
In addition to its internal research teams, Pfizer needed the cooperation of most of its investigator sites-the more than 2,000 locations in hospitals, private doctors' offices and universities where trials are run-for I-Net to succeed. Doctors and nurses at these sites had the same concerns as Pfizer's internal users about moving from pen and paper to electronic CRFs. Not only did many medical professionals distrust computers, but they didn't have the time to deal with user-unfriendly technology. In fact, one of the biggest sources of user frustration with I-Net in the beginning was the long log-on script. "People didn't have the patience," says Fly.

"We visited sites and listened to them. We tried to understand their business processes and how they worked so we weren't disrupting how they worked," says Goodwin. One of the seemingly simple, yet stunningly effective ways that I-Net leaders helped the computer-phobic gain confidence was by designing the CRFs (in PDF format) so that they looked like the hard-copy CRFs. And though at first they sent technical staff out to sites for training, as users became more comfortable with technology, Pfizer began training for clinical trial sites online.

The enthusiasm of internal users also rubbed off on external users. Goodwin says he and other leaders cultivated business champions-lead clinicians, lead clinical research associates and lead data managers who wanted I-Net for their projects.

Pfizer faced different sets of challenges when implementing I-Net globally. "How do you get laptops into Estonia or India? It's easy to ship paper; when you ship electronics, there are a whole lot of different import restrictions," says Anthony Gazikas, worldwide head of development informatics at Pfizer Global Research & Development. Infrastructures in other countries are not always optimal-users need to be convinced that the payoff from using I-Net is worth, say, the creaky 28.8Kbps connection, which may be slower than paper. To support its global users, Pfizer put in place a 24/7 multilingual help desk that supports all trials.

The cultural differences in the way doctors work around the world also need to be taken into consideration. For example, in the United States, I-Net may be programmed with plenty of edit checks-say, if a trial participant weight is entered as 300 pounds, the app might generate a pop-up that asks, Are you sure this is correct? In Japan, however, a doctor might take offense at being questioned by a computer, Goodwin says, so Pfizer is less likely to program edit checks into a Japanese-based system.

Whether introducing new technology to doctors in Japan or cops in Chicago, the change management strategies employed by these four organizations have helped boost the acceptance rate of their systems. It may have worked for Kevin Costner when he constructed his ballpark in an Iowa cornfield, but companies know that if you build it, they don't always come. In these four cases, users have come, and, as a result, the systems have been a solid hit.

Send feedback to Senior Editor Todd Datz at tdatz@cio.com.

[AM-RFMR6E4]

  11:01 AM 0 Comments
  The End of Average

by Seth Godin
Monster Contributing Writer
Remember average?
It's the brand marketer at a packaged-goods company refusing to sell whole-wheat bread, because the average person doesn't like it. Or the dietician at the airline who says it should serve only peanuts, because the average person won't eat a corn chip.

Average made America great. Average was the mass market, the sweet spot, the high-volume, high-profit, churn-'em-out-and-move-on middle.

Average is dead.
America's best-selling beer isn't Budweiser or Miller. It's "other." Salsa outsold ketchup for the first time in 2001. There are so many alternatives, so many distribution channels and so many different kinds of consumers that average just isn't interesting anymore.

Are You Average?
Is your company average? Are you an average person doing an above-average job for an average company selling an average product to the average consumer?

Uh-oh.
This is the hard part. In crazy times, the animals with the greatest chance to survive are the outliers -- the super-fast cheetah or the mammoth with the extra-thick wooly coat. Of course, being an outlier is risky. If the world gets warm fast, that mammoth will be awfully unhappy.

All your life you've been trained to keep your head down, fit in, stick with it and be quiet. And in stable times, that's a fine -- though boring -- strategy.

But now the rules have changed. Change is the new normal: Anything could happen; instability is a constant. And the best strategy is not to hunker down and fit in. It's to stand up and stand out.

How can you make your company's products more exceptional? How can you take astounding risks with your career? With your cover letter? With your resume?

You Can't Have It Both Ways
You cannot simultaneously be invisible and stand out. If you're invisible, one thing is certain: You're going to become extinct. Maybe not instantly and maybe not violently, but there's less and less room for someone who doesn't make a difference. In my humble opinion, it's a lot safer and a lot more interesting to make a point.

Start slow, that's fine. But start. Take some risks. Be exceptional. Be salsa, not ketchup.
[Seth Godin is the best-selling author of Survival Is Not Enough.]
[AM-RI5P2K3]

  10:48 AM 0 Comments
  Implement change management with these six steps

By Change Tech. Solutions, Tech Update
January 8, 2004
Change management deals with how changes to the system are managed so they don't degrade system performance and availability. Change management is especially critical in today's highly decentralized, network-based environment where users themselves may be applying many changes. A key cause of high cost of ownership is the application of changes by those who don't fully understand their implications across the operating environment.

In effective change management, all changes should be identified and planned for prior to implementation. Back-out procedures should be established in case changes create problems. Then, after changes are applied, they are thoroughly tested and evaluated. This article describes the process steps for change management and factors critical to its success.

Step 1: Define change management process and practices
As you would with other systems management disciplines, you must first craft a plan for handling changes. This plan should cover:

Step 2: Receive change requests
Receive all requests for changes, ideally through a single change coordinator. Change requests can be submitted on a change request form that includes the date and time of the request.

Step 3: Plan for implementation of changes
Examine all change requests to determine:

Step 4: Implement and monitor the changes; back out changes if necessary
At this stage, apply the change and monitor the results. If the desired outcome is not achieved, or if other systems or applications are negatively affected, back out the changes.

Step 5: Evaluate and report on changes implemented
Provide feedback on all changes to the change coordinator, whether they were successful or not. The change coordinator is responsible for examining trends in the application of changes, to see if:

When a change has been successfully made, it is crucial that the corresponding system information store be updated to reflect them.

Step 6: Modify change management plan if necessary
You may need to modify the entire change management process to make it more effective. Consider reexamining your change management discipline if:

Other process issues
Other process-related issues are also critical to the success of change management. Changes are evaluated and tested prior to implementation. It is practically impossible to predict the outcome of all changes, especially in a complex, interrelated system architecture. You must carry out a thorough evaluation of all changes, especially those dealing with critical system resources. We also highly recommend that you test all changes prior to full-scale deployment. For minimum impact on the system, test with a user not on the critical path, with test data, during off hours, and on a test system.

All changes, big and small, should be covered. Minor changes can have major effects on system performance and availability. A simple change in a shared database's file name could cause all applications that use it to fail. An additional software utility installed in the user's workstation could cause the user's system to become unstable. Or a move of a user's workstation from one department to another could prevent it from properly accessing the network. You might occasionally need to bypass certain change management processes, like emergency changes required to recover from a fault condition. But, even in these cases, document the change thoroughly, and have it approved after implementation, to ensure that system records are updated.

Document all changes. Perhaps the hardest part of change management is documenting all actions performed before, during, and after the change has been applied. Technical people often fail to document changes, and we have seen many problems caused because not everyone knew about earlier changes. Many IT organizations are familiar with the Monday Morning Crisis-that most problems occur on Monday mornings because someone implemented a change over the weekend without following correct change management procedures.

Communicate the benefit
Many people mistakenly view change management as more IT red tape. They fail to realize that good change management acts like a traffic light that regulates the smooth flow of changes and does not stop all change from happening. With a well-planned and well-deployed process, you can ensure that changes do not negatively affect system performance as a whole.

TechRepublic originally published this article on 3 December 2003.
[AM-14BUXU4]

  10:46 AM 0 Comments
  The five laws of an ever-changing world

For centuries, philosophers, teachers, thinkers, artists, and leaders have tried to motivate and guide others with insightful statements about change. And millions of bestselling self-help, change-management, and organizational-leadership books sold annually have at their heart several universal lessons about change.

#1. Change is inevitable.
There is nothing permanent except change. -- Heraclitus
It is change, continuing change, inevitable change that is the dominant factor in society today. -- Isaac Asimov
You can't hold back the tide, the wind, time, innovation, or the macroeconomic forces that constantly reshape the marketplace, the workplace, and society. Awareness that you cannot stop change is your first lesson, Grasshopper. That isn't to say, however, that you can't effect particular changes.

#2. Change isn't necessarily easy, painless, or positive.
Change is not made without inconvenience, even from worse to better. -- Richard Hooker, Theologian

Change means movement. Movement means friction. Only in the frictionless vacuum of a nonexistent abstract world can movement or change occur without that abrasive friction of conflict. -- Saul Alinsky, Anti-poverty Crusader

Bloodless revolutions are rare. And the economics Law of Unintended Consequences tells us that almost all actions of people, governments, or organizations generate at least one change that wasn't thought of. Henry Ford, for example, probably never considered the effects his efforts might have on the buggy-whip industry.

#3. Resistance to change is common.
Progress is a nice word. But change is its motivator. And change has its enemies. -- Robert F. Kennedy

The most damaging phrase in the language is: "It's always been done that way." -- Grace Hopper, Computing Pioneer
It is understandable and natural that people will fight change. It's frightening to replace the status quo with an unknown. Nineteenth-century Luddites smashed the weaving machines that were taking their jobs. Don Quixote skewered windmills in his addled protest of the end of chivalry. And in industry after industry, employees try to hold off the day that a new technology or a shift in business processes will make their current jobs or skills obsolete.

#4. Adapting to change is required for survival.
It is not the strongest of the species that survive, nor the most intelligent, but the ones most responsive to change. -- Charles Darwin

It is not necessary to change. Survival is not mandatory. -- W. Edwards Deming, business and management educator
From the dinosaurs to Montgomery Ward, both nature and industry are littered with examples where resistance to change or the inability to adapt to shifting environments led to their demise. And there's a corresponding set of examples (i.e., humans, eBay) where adaptation and the embracing of change have enabled them -temporarily at least - to thrive.

#5. Creation arises from change.
We shrink from change; yet is there anything that can come into being without it? -- Marcus Aurelius Antoninus, Roman emperor

Change comes bearing gifts. -- Price Pritchett, change management guru
Change has its casualties, but it also presents opportunities. For example, travel agents saw a large portion of their business dry up when self-service airline booking over the Web came on the scene, and many of them went out of business. Yet several of the more adaptive agents and agencies thrived. How? They harnessed the tools of the Internet to establish relationships and partnerships, to offer their customers a broader range of information and services, to tailor complete vacation packages, and to evolve beyond the role of simply providing flight reservations.

The adaptive enterprises and evolutionary individuals
The sobering reality is that to avoid being left behind by the pace of change, both businesses and individuals need a keen awareness of developments in their environments, as well as the ability to adapt to them.

For professionals, this means keeping abreast of industry trends and continually investing in acquiring the skills and knowledge needed for tomorrow's workplace. HP Education and Training offers IT professionals a variety of resources and learning methods for acquiring next-generation skills and knowledge.

For a business, this means transforming into an organization that is poised to quickly and seamlessly respond to changes. This is the essence of what HP calls the "adaptive enterprise," an organization where IT and business are perfectly synchronized to capitalize on change. Visit the HP Adaptive Enterprise website to learn more.


       

[AM-T88Q8X]

  10:44 AM 0 Comments
Tuesday, June 15, 2004
  Le marché chinois vous intéresse-t-il?

Cherchez-vous à présenter vos produits en Chine? Voulez-vous rencontrer vos homologues chinois?

En septembre 2004, une visite des PME suisses en Chine sera organisée. Ce projet a pour but d'établir les liens avec les PME chinoises, de connaître le marché chinois, les conditions et l'environnement de travail en Chine, et d'obtenir un appui de l'administration chinoise.

Contact: Mme. Xiaoru WANG Tél. + 41 (79) 484 1568
[AM-6XIW5G2]

  10:34 AM 0 Comments
  IT Risk / Week 23 2004

No very high vulnerability alert that imply upgrade of systems or software this week.
Nevertheless a rather troubling vulnerability in Internet Explorer is already being exploited while we are waiting for Microsoft to find a way to fix it.

Internet Explorer Multiple Vulnerabilities
Affected: IE 6.0 and 6.0 SP1
Description: Fully patched versions of Internet Explorer reportedly contain the following vulnerabilities that are being exploited in the wild to compromise client systems. (a) Internet Explorer successfully processes a webserver response that redirects the location of a resource to a file on the client system. Note that this file can be accessed in the security context of the "Local Computer Zone". (b) Internet Explorer contains a cross-domain vulnerability that can be triggered when handling a frame, and a "modal dialog box" that is invoked from the frame. These vulnerabilities can be exploited by a malicious website to execute arbitrary code on a client system. The technical details and the exploits have been publicly posted.

Status: Microsoft not confirmed, no patches available.

Council Site Actions: Most of the reporting council sites are awaiting the vendor patches. Some sites plan to roll out the patch during the normal system update cycle and others plan to expedite the rollout.

Several sites have already notified their desktop support teams to be aware of the problem.
 References:
Posting by Rafel Ivgi
http://archives.neohapsis.com/archives/fulldisclosure/2004-06/0031.html
Analysis by Jelmer
http://62.131.86.111/analysis.htm
CERT Advisory
http://www.kb.cert.org/vuls/id/713878
Modal Dialog Box Reference
http://msdn.microsoft.com/library/default.aspurl=/workshop/author/dhtml/
reference/methods/showmodaldialog.asp
SecurityFocus BIDs
http://www.securityfocus.com/bid/10473
http://www.securityfocus.com/bid/10472

______________________________________________________________________

Weekly Comprehensive List of Newly Discovered Vulnerabilities

                       Week 23 2004
_____________________________________________________________________

04.23.2 CVE: Not Available
Platform: Other Microsoft Products
Title: Microsoft Internet Explorer Dialog Zone Bypass Vulnerability
Description: Microsoft Internet Explorer may permit cross-zone access, allowing an attacker to execute malicious script code in the context of the Local Zone. This vulnerability could be exploited in combination with a number of other types of attacks such as execution of arbitrary code. Internet Explorer versions 6.0 and 6.0 SP1 are reported to be vulnerable.

Ref: http://www.securityfocus.com/bid/10473
______________________________________________________________________

04.23.4 CVE: Not Available
Platform: Other Microsoft Products
Title: Microsoft Internet Explorer File Installation Vulnerability
Description: Microsoft Internet Explorer is reportedly vulnerable to an arbitrary local file creation and overwrite issue. If a user opens a local HTML file in Internet Explorer, a malicious script embedded in the HTML file can use the ActiveX "ADODB.Stream" object to create or overwrite arbitrary files on the local filesystem. For this to occur, the script must retrieve an external malicious file from an attacker specified web site using the "XMLHTTP" ActiveX object.

Ref: http://seclists.org/lists/fulldisclosure/2003/Aug/1703.html
______________________________________________________________________

04.23.5 CVE: Not Available
Platform: Other Microsoft Products
Title: Microsoft Internet Explorer URL Obfuscation Weakness
Description: Microsoft Internet Explorer may allow an attacker to obfuscate the URL of a link. Under certain conditions the true URL of the site displayed in the browser window may be obfuscated by a combination of special characters. This exploit works only if the redirect URL is hosted by IIS 4.0.

Ref: http://secunia.com/advisories/11830/
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  10:07 AM 0 Comments
Monday, June 14, 2004
  Ethical factors (by Covalence)

A. Working conditions

1 - Labour standards
Does the company endorse the norms of the International Labour Organisation, notably those concerning freedom of association and the effective recognition of the right to collective bargaining ; the elimination of all forms of forced or compulsory labour ; the effective abolition of child labour ; and the elimination of discrimination in respect of employment and occupation (ILO Declaration on Fundamental Principles and Rights at Work)?

2 - Wages
Compared to the local situation, how does the company assess the level of wages paid to employees and executives ?

3 - Social benefits
Has the company taken measures internally or externally regarding social benefits and advantages for employees and families ?

4 - Training and insertion
Has the company taken measures regarding youth professional training, continued formation for adults, stabilisation of jobs, social plans in case of lay-offs ? What about the cost, time and coverage of these measures ?

5 - Women
Has the company taken measures regarding the promotion of women at work and the coordination of professional and private life ?

6 - External working conditions
Has the company taken measures to improve working conditions among its suppliers, subcontractors and other professional partners referring to the norms of the International Labour Organization : individual initiative, code of conduct, fair trade label, social certification c.f. SA 8000?

B. Impact of production

7 - Sales
In which countries / regions does the company sell products and services, and for what share ? (detailed information by country and type of product or brand preferred, but regional estimations also registered) What is the proportion of exports?

8 - Link with official development aid
Have commercial operations of the company been related to official development assistance (bilateral or multilateral) ?

9 - Export risk guarantee
Has the company benefited from export risk guarantee (ERG) ? Which where the importing countries ? Has the company answered any questionnaire relative to social and environmental aspects of export operations for authorities responsible of the ERG attribution ? Has the company published these answers ?

10 - International presence
Is the impact of the company's Foreign Direct Investments positive or negative ? (FDI : Investment abroad seeking at exercizing long term influence on the management of a company and representing participations from 10 % of the capital to its control and acquisition)

11 - Joint ventures
Are local investors participating in the investments realized by the company, at what share ? Are these partnerships due to deliberate choices or to a legal constraint ?

12 - Economic impact
How does the company's investments influence local industries in terms of job creation, access to markets, competition, economic growth ?

13 - Social impact
How does the company's investments influence the implementation of local laws relating to social areas c.f. social protection, public health, employee relations, fiscal relations ?

14 - Job stability
In the different countries / regions where it is active, what is the turn-over of the company's employees ?

15 - Local employees
In the different countries / regions where it is active, what is the number and the proportion of local employees in the company ?

16 - Local executives
In the different countries / regions where it is active, what is the number and the proportion of local executives in the company ?

17 - Women employed
In the different countries / regions where it is active, what is the proportion of women among the company's employees and among the company's executives?

18 - Downsizing
Has the company sensibly reduced or interrupted activities for economic reasons ? If yes, what can be said about the measures taken to minimize negative social effects of such decisions ?

19 - Infrastructures
Have FDI realized by the company provoqued governmental investments in infrastructures for transport, energy, health, education, training and other fields of public interest ? Has the company supported or directly participated to investments in public infrastructures ?

20 - Local sourcing
Does the company purchase directly to local farmers, industries and services providers ? If yes, how does the company assess the impact of these buying on economic and social development ? How many local suppliers in each country ?

21 - Stability of prices
How does the company 's buying of raw material influence price fluctuations in international markets ?

22 - Technical assistance
Do the company's suppliers, subcontractors et other professional partners benefit from its technical assistance, advice and training ? If yes, how does the company assess the impact of such transfers of knowledge and technology on local economic and social development ?

23 - Intellectual propriety rights
While managing its intellectual propriety rights, has the company taken measures that favorize human and economic development, the protection of biodiversity, respect of traditional knowledge and local natural resources, for example through voluntary licenses, agreements, cooperation with research institutes and local communities ?

24 - Local innovation
In which measure does the company's presence influence on local industrial and cultural innovation ? Has the company's presence contributed to local innovations useful to economic and social development ?

25 - Fiscal contributions
For each country / region where it is active, what are the following data : fiscal contributions, purchasing of raw material and products, sales, profit ? What can the company say about its fiscal relations policy ? How can the company assess the impact of its fiscal contributions to local economic and social development ?

26 - Environmental impact of production
Has the company adopted programs of management of the environmental impact of its activities ? What can be said about the effect of these programs on local economic and social development?

C. Impact of product
 
27 - Product human risk
Has the company had to face requests regarding risks that its products would present for the health, safety and security of consumers and populations ? If yes, how did it react to these requests ?

28 - Product social utility
Does the company currently market products or services that respond particularly to the needs related to human, social and economic development ?

29 - Product relation to culture
Has the company put on the market a product, or developed an activity, that valuate local culture and traditions ?

30 - Socially innovative product
Does the company research & develop products or services that present a particular interest for local economic and social development (R&D) ?

31 - Product environmental risk
Has the company taken particular measures relatively to environmental risks of certain products, c.f. reference to international agreements, cooperation with international agencies, NGOs, universities, local communities ?

32 - Waste management
Has the company taken particular measures relatively to the management of waste due to its products ?

33 - Eco-innovative product
Has the company launched a new product or service environmentally friendly while contributing to human development ?

34 - Information to consumer
Has the company taken particular measures aiming at informing consumers on the use of its products, c,f, price, quality, quantity needed and other human, economic, cultural or social implications ?

35 - Pricing / needs
Has the company taken particular measures to define moderate selling prices for products responding to essential human needs as defined by major development organizations ?

36 - Cause related marketing
Has the company been involved in operations of cause related marketing (a % of the sale of a product is attributed to social projects) ?

37 - Social sponsorship
Does the company proceed to donations or social sponsorship in cash or in kind ? In that case, does the company communicate identity of beneficiaries and the amount involved ? What is its policy in this field ? What does the company expect of NGOs to engage in more cooperation ?

D. Institutional impact
 
38 - Anti-corruption policy
Is the company taking measures to contribute to reduce corruption in private and public markets ?

39 - Humanitarian policy
Has the company defined a policy and taken particular measures regarding its activities in conflict or reconstruction post-conflict zones, a humanitarian policy ? Has the company been requested to leave certain countries because of political situations, or through pressure on governmental or rebel forces, and in that case what was the reaction to these requests ?

40 - Human Rights policy
Has the company defined a human rights policy and taken particular measures regarding its activities in the developing world ?

41 - United Nations policy
Does the company support the UN Global compact or other UN initiatives, programs and agencies ? In this case, is this support direct or via a professional organisation ? Has the company taken initiatives related to the Global compact ?

42 - Boycott policy
Has the company been the object of demands of exit of certain countries because of the human rights situation ("repressive regimes"), and in this case how did it respond to these demands ?

43 - Social stability
Has the company taken particular measures that contribute directly to local social stability in rural and urban areas, notably in matters of education, health, security ?

44 - Support to political actors
Does the company support political actors financially, is this information available to the public (parties, countries) ?

45 - Lobbying practices
Which national and international political issues has the company discussed about with developing countries governments ? What are the main subjects of debate currently ?

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  4:20 PM 0 Comments
Friday, June 11, 2004
  Managing the Risks of Sarbox 409

Although the perils involved in real-time financial reporting stack up as formidable, few companies are up to tackling them, compliance experts say.
David M. Katz, CFO.com
June 10, 2004
Even as it spawns new risks for their corporations, the pressures imposed by real-time reporting under the dictates of Section 409 of the Sarbanes-Oxley Act can add to the legal liabilities of finance chiefs and their bosses.

Under that section, companies must disclose the facts about financially significant events "on a rapid and current basis." At the same time, as part of the Section 302 certification of financials by CFOs and CEOs, the executives must attest that they've installed adequate disclosure controls. But if the company files an 8-K late, "is that a sign that their disclosure controls are ineffective?" asks Spirgel. Tardiness might make investors question a company's competence in getting material information up to the C-suite swiftly enough he explains - and lawsuits against officers and directors as well as the company itself might follow. (See "The Reality of Real-Time Reporting" for full coverage of the effects of the new Sarbox 409 rules. The rules go into effect August 23.)

Yet while the risks of Section 409 could be formidable, few companies are up to snuff in managing them, say compliance experts. The main reason for the lag is that their compliance focus has been on Section 404, which compels CFOs and CEOs to sign off on the adequacy of internal finance controls. Further, companies are in the midst of phasing in speeded-up periodic reporting strictures: By the end of 2005, companies will have only 60 days beyond the end of their fiscal year to file their 10-K, compared with 90 days in 2002. "Most organizations right now are concentrating on 404," says Anne Swaller, practice director of Parson Consulting, "so there's been a little neglect, quite frankly, of 409 and accelerated reporting dates."

What can executives do to manage the risk of being caught by surprise by the risks of real-time reporting? The most obvious step might simply be to file late and take the time to make the needed adjustments. While late filing might spur doubts about a company's disclosure controls, the downside of filing an inaccurate 8-K could be much worse, according to Larry Spirgel, an attorney with Morrison and Foerster LLP.

Under a safe-harbor provision in the new rules, in fact, the SEC gives late filers a bye until the end of their current reporting period. In an earlier commission proposal, seasoned issuers of stocks and bonds would have had to file an S-1 form - a long form normally used by first-time issuers - if they came in with a late 8-K. "If you used an S-1 every time you had material information, you would have to stop selling and amend the registration," adds Spirgel. "It would have made trading in public markets very difficult." Under the new rules, a late filing won't cost a company its eligibility to file an S-2 or S-3 short form when it raises capital. In contrast, there's no protection for incorrect reporting.

To avoid problems with real-time reporting, some executives are taking a longer-range approach. Scanning data generated by their operating units, they hope to uncover brewing material problems early in the game. Each morning at software provider Cognos, for example, CFO Tom Manley pores over "a rich array of report cards," including current information about software deals that have been closed or changed in the last 24 hours or ones that have been pushed to a later quarter. The finance chief feels that the data provides him with an excellent resource for tackling 409-related risks. "If I had several large deals fall out of a quarter, that could create a potential material event," he says.

Some executives feel that investments in technology, too, can go a long way toward helping their companies comply with the dictates of current financial reporting. Even as it attempts to emerge from bankruptcy, Owens Corning will be installing a business-performance-management system over the next few years, according to corporate finance director Kent Wegener. A data-warehouse system (with software provided by Kalido) has already been installed, although providers for the data-forecasting and data-presentation functions have yet to be chosen.

Until the system is in place, the company plans to comply with Section 409 through a "manual, brute-force kind of effort," says Wegener. But once it's up and running, he expects Owens Corning's finance executives to have a much clearer and more current view of the company's risks. "Today, if we have an operating issue in a business, it would go through several layers of management and analytical cycles before it reached the top layer of the company. But because of technology, it would be available at the same time at the top level as lower management," he says. "It would compress that cycle dramatically."

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  11:18 AM 0 Comments
Thursday, June 10, 2004
  2004 Finance Executive Career & Compensation Survey

by Eric Krell

Compensation for CFOs and other senior finance executives is climbing as demands sharpen across a broad spectrum of responsibilities.

When describing his role as CFO of Big Lots Inc., Joe R. Cooper begins by explaining the $4.2 billion retailer's branding efforts. He quickly summarizes a national television marketing campaign and runs through Big Lots' Web site. He then moves on to outline the company's merchandising and supply-chain initiatives. "The finance organization here is involved in all aspects of the business," explains Cooper, who was promoted in February from the post of vice president and treasurer. "We're highly involved in planning strategic initiatives, targeting the desired returns of those efforts, communicating their objectives and helping to hold the business accountable for the results of the initiatives." *

That said, over the past year, Cooper -- a former Big Four auditor -- has greatly increased the amount of time he spends flexing his CPA skills because he's been overseeing Big Lots' compliance with the Sarbanes-Oxley Act. "It's not as if you get to relax your attention on the strategic side of the business or on your operations" as a result of regulatory demands, he explains. "You just need to commit more energy to the control side." * Cooper was drawn to Columbus, Ohio-based Big Lots four years ago by the variety of challenges his job encompasses; the importance the company places on its finance function; and the leadership qualities of then-CFO Mike Potter, who has since ascended to CEO. This kind of mutual attraction between well-rounded CFOs and organizations that highly value finance is common, according to the results of Business Finance's 2004 Finance Executive Career & Compensation Survey, which was sponsored by Ajilon. The responsibilities of top finance executives continue to expand -- and their compensation is keeping pace. * Sixty-one percent of CFOs who participated in the Business Finance survey earned more in 2003 than they did in 2002, and 44 percent of CFOs expect their earnings to rise again in 2004. Half expect to earn about the same amount that they made in 2003, and only 6 percent predict that their pay will fall this year. Among all survey respondents, most of whom have senior-level titles (see Methodology on page 27), 62 percent saw a compensation increase in 2003, and 59 percent anticipate another jump this year (see graph 2, below).

These findings do not surprise Neil Lebovits, who is president and COO of managed services, consulting and staffing firm Ajilon Finance, Office & Legal in Saddle Brook, N.J., even though few (if any) other corporate functions have seen steady compensation increases over the past few years. "Every finance department was asked to do more with less during the recession," Lebovits notes. "When Sarbanes-Oxley appeared, finance was asked to do even more with even less. And the risk associated with upper-level finance positions increased. Now CFOs and, frankly, even strong divisional controllers want to get paid for the risk of signing their lives away."

Sarbanes-Oxley's quarterly certifications and the subsidiary certifications many divisional controllers are signing -- added to soaring workloads and a reduction in resources -- warrant higher pay, Lebovits argues.

"The big story," he emphasizes, "is that there is a demand for increased compensation among finance executives and that demand is being met. You definitely see more and more creativity in how companies are compensating senior finance executives. They're not being cheap about it."

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Cost Cutting Takes a Back Seat


The survey's other good news is that cost management is no longer finance executives' top priority; this shift may signify a strengthening of the economic recovery. Instead of belt tightening, most survey respondents are focusing on revenue growth, strategic planning, merger-and-acquisition (M&A) activity, and financial reporting processes. Governance and regulatory concerns, which were hardly mentioned in previous years' surveys, are also garnering attention.

In Business Finance's 2003 survey, almost 40 percent of CFOs identified cost reduction as their top priority for the coming year. This year CFOs identified revenue growth as their number-one priority and ranked mergers and acquisitions second. Only 11 percent expect cost cutting to be their primary focus during the next 12 months (see graph 3 on page 24). In addition, when asked which aspect of their job will be the most important driver of their future compensation, CFOs overwhelmingly chose creating shareholder value and strategic planning (see graph 4 below).

Seymour Burchman, senior vice president of Sibson Consulting in Princeton, N.J., points out that survey respondents' growing emphasis on strategic activities may reflect companies' renewed focus on top-line growth as the economy improves. "It also may signal even greater involvement by the finance people in running the business," he adds.

Executive recruiters such as Gary Kaplan, president of Gary Kaplan & Associates in Pasadena, Calif., report an increase in requests for finance executives with valuation skills as the recovery leads to a rebound in M&A activity. "This was a very quiet area for the past couple of years," he says. "Now we see that requirement in virtually every set of CFO specifications that we receive from clients."

However, CFOs in some industries must maintain the recession mind-set a while longer. "My number-one priority continues to be cost efficiency and trying to find cost savings," says Howard Garfield, CFO of Hillwood Development Corp., a Dallas-based real estate developer. The real estate industry, with its heavy reliance on job creation as a growth driver, tends to be one of the last sectors to suffer -- and one of the last to emerge -- from economic slowdowns. The challenges of the past 18 months, Garfield says, have required him to fall back on the fundamentals of his finance skill set.

The need for balance recurs as a theme throughout the survey results. Although CFOs are spending time once again on growth activities such as revenue management and M&A, they continue to cut costs, work on Sarbanes-Oxley compliance, improve financial reporting and raise capital. Today's CFO must exhibit a blend of strategic and transactional skills.

At Progress Rail Services Corp., a $1 billion subsidiary of Progress Energy based in Albertville, Ala., CFO David Klementz has spent roughly 30 percent of his time over the past year focused on financial software systems. A major data warehousing effort, for example, will improve the accuracy and availability of the financial and operational information Progress Rail Services executives use to guide the business. Evaluating IT investments may appear a more tactical than strategic task, but Klementz expresses the importance of paying adequate attention to both types of activities.

"You cannot meet the strategic goals you're paid to meet as a CFO unless you have the right management team, analytic tools and plans in place," he explains. "A strong IT focus or succession planning may have less of a direct link to the CFO's compensation, but the CFO can't achieve strategic goals without those other pieces in place."

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You Must Comply


The survey results suggest that finance executives consider corporate governance and regulatory compliance to be just the sort of tactical chores Klementz is referring to. They are crucial for the company but are not, on their own, financially rewarding for the people who have to carry them out. A negligible portion of all respondents (7 percent), and even fewer CFOs (4 percent), pointed to governance and compliance responsibilities as the most important driver of their current compensation. And only 2 percent of CFOs and 5 percent of all respondents believe these duties will be a key determinant of their future earnings. Yet they are among survey participants' top four priorities for the coming year.

This bears out what many finance executives have already discovered: Regulatory compliance is a time-consuming necessity. Even though it may not boost an individual's bottom line, the documentation-heavy governance marathon must be run carefully. In fact, 65 percent of CFOs chose governance and compliance issues as the factor they would give the most importance if they weighed a job offer from another company (see graph 5 below). Regulatory concerns rated above compensation, the potential employer's financial performance and the position's location.

Progress Rail Services' Sarbanes-Oxley needs have dovetailed nicely with corporate efforts to integrate acquisitions into the organizational structure. Still, when Klementz tallies up all of the work that documentation, process flowcharts and testing of inter-nal controls have required of his finance team, he is surprised by the result. He estimates that compliance activities consume about 20 percent of his time, as much as 50 percent of his divisional controllers' time, and all of his internal audit director's time.

Despite anecdotal reports of extensive compliance efforts and the duties' high ranking on survey respondents' priority list, some observers worry about the fact that so few finance executives consider these activities to drive their compensation. Robert Rabidoux, a business professor with Argosy University in Sarasota, Fla., says governance's poor showing as a determinant of pay suggests that "the impact of federal legislation has not disturbed the status quo." If that's the case, Rabidoux says, Sarbanes-Oxley may "possibly be seen as a blip on the radar screen and not a [reason to] shift the behavior of finance managers."

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Defusing the People Problem


Discussions with more than a dozen finance executives, recruiters and compensation experts reveal that human capital management is another nonstrategic activity that retains critical importance for finance executives. Only 4 percent of CFOs in the Business Finance survey said developing talent is the most important determinant of their earnings. However, 9 percent of all respondents chose this option as the top driver of their current compensation, and 13 percent selected it as the key factor affecting their future pay.

These results could suggest that lower-level finance managers overestimate the future impact of their coaching skills, but compensation experts don't think that's the case. Sibson Consulting's Burchman says that failing to pay attention to managing and developing employees is a key factor in turnover risk. He says organizations need to give this area more emphasis to ensure that employees with high potential remain in their ranks.

Mark Anderson, president of ExecuNet in Norwalk, Conn., predicts that the talent war which exploded in 1999 and then flamed out in 2001 will soon rekindle. "We're not quite going to return to the frenzy of 2000 -- which was probably one of the best times for executive employment -- but the need to manage, develop and retain top people clearly is going to increase," he says. "We definitely see that as one of the major challenges any corporation will face over the next five years."

This trend holds positive implications for senior finance executives' pocketbook, but it requires them to pay extra atten-tion to their management activities. The survey asked participants whether they consider themselves to be compensated equitably in light of the way corporate finance has changed over the past two years; 52 percent answered yes. CFOs and senior vice presidents of finance expressed the highest degree of contentment with their pay. Sixty-six percent of respondents with each of these titles answered affirmatively. Likewise, a majority of controllers (56 percent) and finance managers (58 percent) consider their compensation to be fair relative to their role's responsibilities and risks.

The looming problem is that satisfaction levels are much lower in the middle and bottom tiers of finance. When CFOs, treasurers, vice presidents, controllers and finance managers are removed from the calculation, a majority of survey respondents -- 55 percent -- are unhappy with their earnings. And although staff-level titles represent only 15 percent of all respondents, those people consistently expressed displeasure with their pay. Eighty percent of tax managers, 70 percent of financial analysts and 65 percent of accounting managers believe their compensation is insufficient.

The reasons for this discontent appear to vary in accordance with the size of the respondent's pay package. Higher earners who are unhappy claimed their compensation is inequitable because of the increase in risks attached to their position. Middle earners reported that their salaries have not kept pace with the expansion of skills their job demands. Lower earners indicated that their paychecks have not kept up with surging workloads (see chart 6b, below).

While finance executives may write off some of this displeasure as standard bellyaching, those who ignore it altogether may be courting sizable turnover. Many companies that have boosted CFO compensation have failed to extend increases deeper into the organization.

"Those [lower-level finance] people are extremely frustrated," Lebovits reports. "When we talk to people to see how open they'd be to being recruited, we'll get an 80-plus percent acceptance rate. People have been asked to do way too much, and in the mid to lower level of finance departments it has been a double whammy. They've faced everything the rest of the company has faced, and now they have a large amount of extra compliance work to do. And, thanks to the recession, they're sending their own faxes because they have less administrative support and spending more time wrestling with their systems because they have less IT support."

 http://www.bfmag.com/magazine/archives/issues/2004/june/27.gif

Proactive organizations have recognized that unemployment -- despite recent portrayals in the general media -- is right at a 50-year average. "As soon as job creation really comes into its own, there is going to be a massive talent war," Lebovits warns. "Many companies cannot afford any defection or any drops in productivity. And productivity will decrease."

Progress Rail Services and Hillwood Development are among the companies firing preemptive strikes to prevent future talent battles. So is transportation services provider Yellow Roadway Corp., based in Overland Park, Kan. Don Barger, that company's senior vice president and CFO, assigns rising finance managers the task of planning quarterly meetings attended by his function's top 40 executives. Barger uses the meetings as a dual opportunity to communicate priorities and develop his staff.

"When we continue to ask staff to do more with less, people skills and personal management are critical," says Hillwood's Garfield. "The pressure that finance departments are facing to cut costs, be better with their numbers and increase their reporting under the new SEC rules is taking a huge toll. Consequently, I spend more time coaching than I did in the past."

Progress Rail's Klementz does, as well. He points to the stricter regulatory environment as a motivation for strengthening his management, development and recruitment efforts. "In a billion-dollar organization, I can only have knowledge of so much, yet my exposure is huge," he says. "The only way for me to address that is to be comfortable with the level of competency, sophistication and commitment in my organization. I find that I'm taking a harder look at the people I have." He is also augmenting his department's internal audit, treasury and analysis teams, because they have not received staffing increases in the recent past.

Big Lots' Cooper addresses personnel concerns by taking an active approach to succession planning. Before his recent promotion, he set out a definitive plan to help his vice president of strategic planning, Tim Johnson, "be prepared for the next step, not knowing exactly when that would be." Johnson assisted him with the company's investor relations. Then, when Cooper moved up to CFO, he promoted Johnson to the IR role. "You can't give your team specific timetables, but you can give them the tools and the mentoring they need to grow," Cooper notes. "When it's time, they're ready. In the finance team, we're very focused on ensuring that we're prepared."

At San Jose, Calif.-based Cisco Systems Inc., Mike Bender, director of finance IT investment management, has been coaching his team on the IT financial management equivalent of long-distance running. "I've really focused on keeping the team motivated and on having patience," explains Bender, who is the controller for Cisco's $1 billion-plus annual investment in IT. "We have fewer resources, but we have more, and bigger, fish to fry." The key for Bender is identifying how his employees can support the corporation's move from a functional orientation to a process orientation.

"Everyone on my team can come up with complex financial analyses, but what they love is the interaction with business managers," Bender notes. "The business managers will ask them anything, and the team often fields questions on topics outside the normal scope of financial responsibility. They become an independent, third-party validation for the business managers. We're their trusted advisers."


Adaptability Is Essential


The term "trusted adviser" seems to be a fitting -- and popular -- description of the CFO position's expanding mix of strategic and transactional responsibilities. Executive search consultants report that their clients are looking for a broad range of skills. And finance executives seem to be delivering. Despite the accounting blocking and tackling that Sarbanes-Oxley requires, 74 percent of CFOs who responded to the compensation survey consider themselves to be more focused on management activities than on transactional tasks.

Barger, a seasoned CFO and former controller with a Wharton MBA, describes the CFO's role in four parts: business partner to the line organization, trusted adviser to the CEO and to the line organization, tone setter at the top of the finance function, and developer of talent. However, he adds, "you may emphasize one of those aspects more than the others, depending on the business cycle, the economy or the political environment." When, for example, Yellow acquired rival Roadway last year, Barger's "trusted adviser" duties assumed a new prominence. "That's when, as CFO, you have to stand up and give your own opinion and be counted upon," he says.

Privately owned software firm Business Engine, based in San Francisco, counted on its former finance chief, Doug Dickey, to wear many hats. He was recently promoted to president and CEO; however, until last month, he was not only interim CEO, but also CFO and executive vice president of operations. Dickey is a former Oracle executive and a CPA, and he served at one time as a senior manager with PricewaterhouseCoopers. He believes the CFO's role returned to its roots over the past few years.

In the mid-1990s, many finance executives "were very focused on their stock price and on things which, on the surface, added to shareholder value but did not create long-lasting shareholder value," Dickey notes. "Now I think those people have come back around to a more traditional understanding of the CFO role. When companies start looking at survival, they fall back to the basics: How are we structured? How do we make money? How do we lose money? How are we doing against our peer group?"

As recently as 2001, Business Engine needed its CFO to be a deal-maker "charged with positioning the message of the company for additional funding or for going public," Dickey explains. But the organization's need for valuation and negotiation skills subsided quickly with the onset of the recession, and Dickey's role shifted toward more traditional CFO duties; he became more of a transactional disciplinarian. Late last year, as the economy started to rebound, his focus began shifting again. He is now expected to split his attention between traditional CFO activities such as cost man-agement and the strategic responsibilities prominent on his agenda several years ago. This new mix of duties is evidenced by the flow of Business Engine board meetings. Through the first two hours of those meetings, Dickey fields questions about operations and performance. Then, once the board members are confident that the company is on solid footing, they spend the second half of the meeting discussing strategic planning and growth.

Barger and Dickey agree that top finance managers must be prepared for companies' ever-changing demands. Dickey says he would not have been hired by Business Engine if he had not possessed impressive deal-making credentials. But he would not have remained with the company through the recession if his skill set was not packed with operations experience and finance and accounting fundamentals.

"There is something to be said for being adaptable and being able to adjust your priorities to the environment," Barger says. "It's a case of emphasizing one part of your CFO skill set at a particular time over another. A recent example is the need for setting the tone at the top in light of Sarbanes-Oxley. That part of my role has taken on more importance."


Holistic Finance


The Business Finance survey results suggest that the highest-paid CFOs are strategic business partners who continue to utilize the transactional tools in their skill sets. CFOs who described their job as management-oriented or mostly management-oriented posted an average compensation of about $230,000, while those who described their role as transaction-oriented or mostly transaction-oriented posted an average compensation below $175,000.

Professor Rabidoux, a former CFO, believes that finance executives' compensation will continue to reflect the expanding skill set that those positions require, as well as the additional risk they entail. He says the current expectations of industry, creditors and the investing public require companies to find a "holistic" CFO.

Lebovits seconds this notion. He says Ajilon's clients want "everything" when they seek candidates for high-level finance slots. Prospects must be able to help grow the business, play a key role in M&A activity, talk to Wall Street, keep costs down, and skillfully handle compliance and financial reporting.

These specifications increasingly describe the expansive responsibilities of CFOs like Cooper, Dickey, Barger and Klementz. To meet their organizations' growing demands, Cooper says, finance executives must collect as much varied experience as possible and must embrace the challenge.

"Over the next 12 months, I will focus on continuing to develop my team and ensuring that we're complying with Sarbanes-Oxley," the Big Lots CFO explains. "But I'll spend just as much -- if not more -- time helping the company execute our strategic plan. There is a big role for finance here."

Originally printed in the June 2004 issue of Business Finance


[AM-V8JXSE4]

  10:43 AM 0 Comments
Wednesday, June 09, 2004
  Three Questions for Would-Be CIOs-for-Hire

YOU'VE LEFT YOUR JOB, and you're freelance consulting while looking for another CIO post. The problem is, no attractive positions are available, and there aren't enough hours in the day to focus on your job search, work on client engagements and build your consultancy. So what do you do?

If you're a committed, connected and self-directed IT professional with a decade of management experience, you could look at joining one of the CIO-for-hire organizations-such as Tatum CIO Partners, Topologe and If & Then-cropping up. These firms place IT executives in short-term positions with small to midsize companies temporarily in need of a CIO's savoir faire. Sound good? Well, as with every kind of job, there are questions to answer. Here are three.

Question 1:
How much business control do you want?
The CIO-for-hire consultancies I talked to are run as partnerships. When Mike Anzis, 59, an independent consultant for three years, was considering a job offer with Tatum in fall 2003, he was initially leery of the company's partnership business model. Tatum partners share the revenue they generate with other partners, and he was concerned this would be a big change for him.

But now that Anzis has been with Tatum for eight months, he sees the upside of partnership: "Because you've got a number of partners looking out for you and your next assignment, you don't have to spend your time doing marketing while you're focused on the assignment. [The firm's] mission is to get you your next assignment."

Question 2:
Can you wield influence without authority?
After two years during which he held three vice president-level jobs with e-business platform provider Genuity (now owned by Level 3 Communications), Pat Gillogly, 60, was delighted to join Tatum as a hired gun where he'd be able to get in, get out and get things done for companies in need.

"As an interim manager who doesn't have a long-term stake in the [client] company and is therefore much more immune to the politics of the organization, you can take a hard look at the people, the processes, what works, what doesn't and then make some objective recommendations for the CEO," says Gillogly.

But effecting change as an outsider isn't easy. No one knows that better than Jack Maguire, a 55-year-old CIO-for-hire with Topologe in Burlington, Mass. He says he was tested on the first day of his first engagement with Topologe by the client's IT staff. "Any staff is concerned about any new body. They don't want to have someone [off the street] telling them what to do when they're not sure if you actually know what they're supposed to do," he says. To earn their trust, Maguire says you might have to show them that you can do their jobs. "Once they realize that you understand their functions, they'll be behind you," he says.

Question 3:
Can you deal with an uneven work rhythm?
Joining a firm like Tatum or Topologe is a good move for someone who likes the excitement of working with a variety of companies on short-term assignments. But it's no semiretirement: Many organizations that hire temporary CIOs have growing pains or are in crisis mode. You can expect to work 50 to 60 hours a week when you begin an engagement, Maguire notes.

Other times, the pace isn't so fast and you can find yourself "sitting on the bench," says Maguire, who was between clients when I interviewed him in March. Gillogly didn't take on an interim CIO position until several months after joining Tatum because he was waiting for the right client match. Because you're making money only when you're working for a client, you need to have some financial stability to do this kind of work. And when you're not working for a client, you have to go get new business.

Says Maguire, "If you want a 9-to-5 job, this isn't it."

[AM-BCHD173]

  10:38 AM 0 Comments
  Becoming the Business-Centric CIO

By Darwin John,
Strategic Advisor,
and Arthur Hopkins,
Vice President Technology Consulting
The Business-Centric CIO: Recent studies performed by Gartner and a host of other leading IT research firms have noted that CIOs must get into the business of "The Business." In other words, A-List CIOs are those who have not only been able to translate IT into real business results but those whose primary focus is on the business and not on IT.

In some ways this represents a paradox. Just in the title, Chief Information Officer, there is a strong connotation that information implies technology. So how does a CIO transform from the business of technology into the business of "The Business?" The answer - not without a lot of deliberate effort, time and fortitude.

We should note that an organization's size is not a determinant of whether or not this transformation must take place. In our consulting business, we interact with corporations from small and mid-sized businesses to Fortune 500 corporations, and the theme is the same no matter the size: the key to success is less about IT and more about taking on the business priority.

So, what is the #1 priority of any business? Optimizing Stakeholder Value - it's as simple as that! Of course, optimizing value can be incredibly complicated in itself - it comprises many components, some of which follow:

In this article, we'll take a closer look at some considerations involved in the transformation of the technology CIO into the business-centric CIO.

Business Alignment
To start, let's address the obvious question - what about the "business of technology" and the "technology of the business?" The business of technology is the domain of the hardware and software resellers - that's what they do and that's the role they fill. The technology of the business begins to address the specifics of the CIO's company, but does not completely define the level of responsibility the CIO carries. As a business-centric CIO you are aligned with more than the operational needs of the corporation - you are aligned with the overall business strategy. This is an important distinction - the emphasis is on the business strategy.

Once you agree with this basic principle of aligning with the business strategy, the second key is to determine your role in impacting the business. Within the current climate that says, "technology doesn't drive business," it is easy to conclude that the role of the business-centric CIO is to merely attend to the basic needs of the business as dictated, focusing on reducing costs while striving to maintain service levels. The business-centric CIO recognizes that "CIO" and "technology" are not equivalent terms, and that the mandate against technology driving the business doesn't ban the CIO from being a business driver. This CIO has the opportunity to be at the forefront by anticipating the forthcoming business needs, the technological options for meeting those needs, and the business impact of doing so.

Business Impact - Understanding the Currency
It is also important to recognize that the success of the business-centric CIO is measured by delivery of business impact. But how is business impact measured? To determine this, CIOs must know what the currency of business impact is. In some cases it might be measured in product sales or services, while in others it could be market share or efficiency. Additionally these deliverables can be either tangible or intangible. The job of the CIO is to know how to deliver results in each and every one of these areas to positively impact the business.

The Balancing Act - Operations and Strategy
In every enterprise there is a suite of core applications and infrastructure for which there are expectations of enterprise-caliber delivery. This suite comprises the fundamental, "bare minimum" where delivery can be measured in absolute terms across the dimensions of performance, availability, maintainability, extensibility, scalability, interoperability and security. The addition of "cost of delivery" provides a key, quantitative differentiator as it relates to these areas. Your effectiveness as a business-centric CIO, however, will be measured in your ability to go beyond delivery of these products and into the realm of service delivery. While it is critical to run the current operations and ensure you maximize efficiencies and effectiveness, this is only one element of the job. Thus, the key within this aspect is how to balance both the day-to-day operations with the future of the business.

Tangibles and Intangibles
Within the day-to-day operations, the business-centric CIO must ensure quality in the delivery of services. While products are tangible and have metrics that are easily traced all the way from the purchase order to the data center, quantifying the intangible notion of service is a moving target that the business-centric CIO is constantly aiming to hit. One key to ensuring quality service is to establish a holistic vision of the continuum of service - considering where the service begins and where it ends. Does it begin with a project kickoff meeting, in a brainstorming session to determine project scope, in the timely reply to the invitation to the brainstorming session, or in some seemingly unrelated interaction with a stakeholder from the business who mentioned a recurring problem for which they have been seeking a solution? Defining the point at which customer service begins is difficult at best, which effectively places the business-centric CIO in a constant state of service delivery mode. After all, there is no such thing as a mere conversation about service - everyone always has an opinion and as CIO you must have your finger on the pulse.

A second consideration is to relentlessly reinforce the mindset that the customer is the "customer" and not merely a user, a stakeholder, or even a sponsor. In many environments these parties are, in fact, empowered to take their business outside to a third party, which means they are no less of a customer to the business-centric CIO who competes in earnest for their business. Note that these customers tend not to seek out product providers, but service providers for their added value.

Cost vs. Value
If your customers perceive that what you provide as CIO is merely a product, then your "product" is differentiated only by cost, and improvement is measured only by reduction of that cost (ideally while maintaining or raising existing service levels). As a result, if you are a CIO who is disconnected from the bottom and top line, you are destined to be viewed as a fungible cost. For this reason, you must map your direction to be in line with the business direction by:

This means that if you are introducing technology that promises increased efficiency in order processing, you must ensure the delivery of the technology, the increased efficiency and the top and bottom-line impact. Once again, the greatest challenge for the CIO is to have a firm grasp of the "currency" of the business and its measurement of value. As important as service level improvements may be, their traceability to the top and bottom line tends to become more difficult to find the harder one looks.

Results and Accountability
As a business-centric CIO, it is critical to have the fortitude to make yourself accountable and the capabilities to deliver results. Often CIOs turn to consultants based on the increased likelihood of either getting the outside firm to deliver results or to have someone who can be held accountable for a failure to do so. Although third-party service providers bring tangible values, especially in those areas where the current environment does not have the skill or knowledge to deliver, the CIO must still align them and their deliverables back to the business objectives. Regardless, at the end of the day, the CIO must see him/herself accountable for everyone's results, including the outside consultancy. The business-centric CIO must take risks that help propel the business forward. If you as a CIO are not taking calculated risks and making yourself directly accountable, one could argue that you are not being strategic. Risk is inherent in this position.

The People
Some time ago I worked in an environment with some professionals whose response to, "thank you," was always, "no need to thank me, this is my job - it's my pleasure." As patterned as this response may have been, this mindset reinforced the idea of who the customer was and the professionals' zeal to engage them as such. Ultimately your effectiveness as a business-centric CIO will be a function of your ability to create a business-centric culture that reaches throughout the ranks of your IT organization - and as a result permeates the organization. Business-centric CIOs must make it a daily priority to engage their teams and promote a culture of not only quality and delivery, but taking on the mind of the business. As the leader within the IT organization, you must drive the culture of business first to your team. There cannot be barriers between the business and IT. In fact, if IT is seen as just the technology appendage of the business and your people share this view success will never truly be achieved. None of this is easy and you will experience resistance. Like any transformation, however, time, communication and a good road map will ease the process.

Getting Into The Inner Circle
As a strategic business leader, the business-centric CIO needs to cultivate healthy relationships with the business' major players, including the stakeholders, officers and other key executives, demonstrating to these key business players a complete understanding of the business' strategies, proving that your focus is on the business goals first, and technology second.

Action speaks louder than words and to get into the inner circle, you have to deliver, measure and present tangible, quantifiable results to enable the business to achieve its goals. While it's a slow process, over time, and with proven results, the inner circle will be able to link business successes back to IT initiatives.

Putting It All Together
Ultimately, the question before the CIO is "How do I move from where I am today and make the transition to be a business-centric CIO?" Answering this simple question takes into account the organization's business strategies and goals, and each individual's function within that organization. It leads us to the basic principles upon which today's business-centric CIO must be based. The CIO:

In today's dynamic economic climate, CIOs must be business leaders. It is no longer enough to merely recommend a certain platform, infrastructure or product. Today, a critical ingredient for a successful organization is its CIO. Your success in this role will be determined by your ability to take on the mantle of leadership which will, in turn, be a determinant of how well your company succeeds.

[AM-PIMJNF3]

  10:19 AM 0 Comments
  Vendors tout WiMax potential: Customers will get their hands on i t by 2006, some say

By Grant Gross, IDG News Service        June 02, 2004

Wireless broadband, including the yet-to-be-deployed WiMax, has tremendous growth potential, but is still years from rollout, according to wireless broadband equipment vendors speaking at a conference Wednesday.

WiMax, the 802.16 standard that promises a range of tens of kilometers instead of Wi-Fi's range of a couple of hundred meters, should become available to customers in 2006, predicted equipment vendors during a forum at the Wireless Communications Association International's 2004 symposium in Washington, D.C.

The five panelists discussing how big wireless broadband can get made few concrete predictions about the growth of wireless broadband, but Zvi Slonimsky, chief executive officer of wireless equipment vendor Alvarion Inc., predicted that wireless broadband equipment revenues would grow from $305 million in 2003 to $2.9 billion in 2008. But he also told the audience to take his predictions with a grain of salt.

"Obviously, broadband wireless is the next major event in communications," added Reza Ahy, chief executive officer of Aperto Networks Inc., a vendor of broadband wireless access devices.

Some analysts have expressed doubt about WiMax, however, saying the technology has been over-hyped. Critics of WiMax say it's likely to be an alternative to cable modem or DSL (digital subscriber line) broadband service, but by the time WiMax is rolled out, most people who want broadband service will already have it.

But WiMax isn't likely to compete with DSL or cable broadband; instead, it will be another option for the owner of a computer or handheld to connect to the Internet, said Francois Cadorel, marketing director for the Mobile Communications Group at Alcatel SA. "Our vision is a seamless broadband experience -- while at home, at the office, or on the road," Cadorel said.

Cadorel and other panel members described scenarios where a computer user used Wi-Fi in a home network, then switched to WiMax while taking a laptop to other parts of a city. As such, WiMax won't compete with DSL or even cellular phones, but as a complementary service, said Klaus-Dieter Kohrt, senior vice president for government and industry relations at Siemens Mobile, part of Siemens AG. "It's not about trying to grab someone else's piece of the pie, it's about making the pie bigger," Kohrt said.

Adoption of broadband has outpaced the adoption of cell phones and color television sets in the U.S., noted Scott Richardson, general manager of the Broadband Wireless Division at Intel Corp. That demand for broadband fares well for WiMax, he said, even though others on the panel noted that WiMax service will likely cost more than US$200 a month when it first is available. "On the demand side, it's very clear users want broadband," Richardson said.

[AM-UAG1JI3]

  9:25 AM 0 Comments
Tuesday, June 08, 2004
  Records Management Implications of Sarbanes-Oxley

Jean Bua, Vice President and Chief Accounting Officer,
Iron Mountain

Sarbanes-Oxley Records Management Implications
* Internal Controls
- Corporate Requirements
- Public Accounting Firms Requirements
* Whistleblower
* Audit Workpapers
* Destruction of Records

Corporate Requirements: Internal
Controls
* States "the responsibility of management for establishing and maintaining an adequate internal control structure and procedures for financial reporting" (§404 (a)(1), SOA)

* Requires an internal control report in addition to financial report which must:
- contain "an assessment...of the effectiveness" of company's internal control structure and procedures (§404 (a)(2), SOA)

- evaluate whether controls "include maintenance of records that inreasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer" (§103 (a)(2)(A)(iii)(II)(aa), SOA)

Public Accounting Requirements:
Internal Control
* Sarbanes requires the Auditor's report to contain that the company's internal controls:
- "include maintenance of records that in reasonable detail accurately and fairly reflect the transactionsand disposition of assets of the issuer...

- provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements and receipts and expenditures are made only in accordance with authorizations for management. . ."

- (§103(a)(2)(A)(iii), SOA)

Implications - Internal Controls
Narrow Implications
* Requires formal testing, review, and documentation of the internal control process
* Requires maintenance of financial records
Broad Implications
* Requires a records maintenance program for financial recordkeeping that meets the test of timely and accurately reflecting the transactions and dispositions of the company's assets.

* Requires information technology, accounting & finance, and legal to collaborate on the development and implementation of a records management program

* Senior management will drive the implementation of records management programs
Narrow Implications
* Public accounting firms (and internal auditors) will be auditing the maintenance/management of financial records
Broad Implications
* Public accounting firms (and internal auditors) will be auditing records management programs
* Public companies must develop (if not already in existence) records that reflect all transactions and must have records management programs that (i) retain all those records for adequate periods and (ii) enable the company to locate the records when needed.

Implications: Internal Controls
Corporate Requirements:
Complaints
The Audit Committee of the BOD is required to establish procedures for complaints:
* Includes "receipt, retention, and treatment of complaints received . . . regarding accounting, internal accounting controls, or auditing matters" (§301, SOA; § 10A(m)(4)(A) of 1934 Act)

* A process for employees to submit, in confidence and with anonymity, concerns regarding questionable accounting matters (§301, SOA; §10A(m)(4)(B) of 1934 Act)

Implications - Complaints
Narrow Implications
* Requires recordkeeping programs for complaints
Broad Implications
* Heightened sensitivity to the integrity of financial reporting
* Increased internal scrutiny

Public Accounting Requirements:
Audit Work Papers
The Act requires for public accounting firms:
* Audit work papers and other information related to any audit report to support the conclusions of that report retained for 7 years after the audit (§103(a)(2)(A)(i), SOA)

* Includes "records (including electronic records) which are created . . . in connection with an audit. . . and contain conclusions, opinions, analyses, or financial data relating to such an audit." (§802 (a), SOA; 18 USC §1520 (a)(2))

Implications - Audit Work Papers
Narrow Implications
* Requires recordkeeping programs for audit work papers and related documents for public accounting firms
Broad Implications
* Requires recordkeeping programs for audit work papers for corporations
* Requires e-mail retention/archiving re: audit materials - correspondence and related financial data - for both public accounting firms and corporations

* Because Sarbanes-Oxley empowers the PCAOB to subpoena from issuers documents on which an audit is based, issuers may have the same de facto seven year requirement

Destruction of Records
* "Whoever knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the investigation or proper administration of any matter within the jurisdiction of any department or agency of the US... shall be fined...imprisoned not more than 20 years, or both." (§802(a), SOA; 18 USC §1519)

Implications - Destruction of Records
Narrow Implications
* Ad hoc suspension of records destruction, either in anticipation of litigation or across the board as a protective measure Broad Implications

* Design and implement formal "litigation hold" programs
* Design and implement formal records retention programs to identify retention and disposal requirements of records
...Mission
Secure your corporate information to preserve your company's reputation.

Records Management Challenges
Challenges
* Paper records:
- Existing records management body of knowledge
- Applied by small, focused staff, but...
- Without much visibility or resources
So why is Records Program Compliance challenging?
* Electronic records
- Not a document type
* They are simply records in another format or media
- In the case of e-mail, a delivery mechanism
- E-mail is mostly user-controlled, making consistent management extremely difficult
- High legal visibility and risk exposure
- Massive volumes

Challenges
Goal: Compliance vs. Perfection?
Design in good faith and implement consistently:
- Across all record types
- Across all business units
- Around the globe
Design to Meet the Future
* E-mail archiving solutions are becoming viable
* Software applications will implement retention/archiving - to varying degrees * Retention policy compliance will become part of the employee "code of conduct"

* Internal auditors - and external auditors - will be reviewing the records program
Design in a Program Context
* The good news - it's a corporate program
- Not esoteric or arcane
- Like any other corporate program
* The bad news - it's a corporate program
- Requires same resource investment as any corporate program that seeks to change employee behavior
* Identify hallmarks of successful programs in your organization and mirror them
* Requires senior executive support to succeed

How to Get Started
Step 1: Define Policy Scope
* All information assets, regardless of location or media of use or storage
* Control access and use
- Intellectual property protection
- Information privacy compliance
* Retention and destruction
- New FACTA legislation
- Records Retention Schedule as program cornerstone
- Consistent policies and procedures
Step 2: Program Management
* Form Records Compliance Steering Committee for governance
* Launch project team to design and implement
* Structure and staff administrative organization to run program
* Identify ownership and involvement of key functions:
IT, Legal, Compliance, Audit
* Forge partnership with records management vendor Program governance, implementation, and administration
Step 3: Take Stock of Your Starting Position
* Your e-mail system, network servers, document management systems, software applications, etc.
- Inventory your "Data Repositories"
* Your existing policies, Retention Schedules
- Update or leverage
* Your records storage vendors, systems, facilities
- Vehicles through which you'll implement
* Your risks and exposure
- Risk/cost trade-off
* Your senior management sponsorship
Step 4: Establish Priorities and Sequence
* There's no canned solution
* You can't solve this in one-shot
* Enterprises tend to go through these phases:
1. Identify and control
2. Index for access
3. Integrate and comply
Step 5: Develop Retention Policy
* Retention rules are implemented through systems and people
- Apply as much through systems and automation as possible
- When applying through people, make it simple and limit choices
* Provide broad, easy to understand rules that can be consistently applied (vs. "legalese" or precise, granular, overly detailed rules)

Protect Yourself with Retention Holds
* Explicitly direct suspension of record destruction for actual or potential litigation or investigation
* Develop policies and procedures to:
- Identify holds based on litigation, investigation, and audits
* For:
- Hardcopy records in offsite storage - through your vendor's system
- On-site hardcopy records - through internal publicity and management follow-through
- E-mail and e-records on servers - e-mail archiving services or systems
- E-mail and e-records on backup tapes - by suspending tape rotation and purging for affected tapes
Complicated? That's why you inventoried the "data repositories"!
Step 6: Apply Retention Rules to Paper Records
* Technology, processes, vendors, systems, best practices
- It's all there - mature industry
* Low-level software feature/functions all have converged
* Make high-level selection decisions based on:
- Partnerships
- Solution providers that match up to your organization's geography, service requirements, and technology vision
Step 7: Apply Retention Rules to E-Mail
* E-mail is not a single-headed monster
* No easy, comprehensive solutions to the issues that e-mail presents
* You'll need to address:
- Policy component
- Technology component
- User training component
- "Rules of good conduct" component
- Retention component
Step 8: Assess Risks For Other e-Records
* Use your inventory of data repositories
* Weigh costs of retention enablement versus risk reduction
- Evaluate cost to access versus cost to store considering probability of future, frequent access
- Cost to store longer versus cost to classify
* Apply retention policy by "data repository" for homogeneous record types
Step 9: Program Maintenance
* Training and communication - on going
* Employee certification "Code of Conduct"
* Audit your adherence to policy and procedures
* Update and refresh retention rules, 12-18 months
* Engage Internal Audit
Step 10: Measure Results
* Direct cost savings from better access
- Lower discovery costs
- Reduced compliance costs and fines
- Lower tax audit and recovery costs
- Higher productivity from timely use of information
* Direct cost savings from managed retention
- Lower IT storage costs
- Lower paper records storage fees
* Indirect savings from "brand" protection by being compliant

Summary
* Records Program Compliance is necessary
* It is achievable if treated like other important corporate programs
* A compliant records program will reduce costs, direct and indirect
* Help is available to achieve success!!

[AM-UTNLVU2]

  6:46 PM 0 Comments
  Happy trading

<<...OLE_Obj...>>
[AM-98Q8HG4]

  6:42 PM 0 Comments
Friday, June 04, 2004
  Industry paying 'high cost' for greener energy

Financial Times, 2 June 2004 - Incentives to promote renewable energy are adding significantly to industry's costs, according to businesses accounting for up to 80 per cent of European industrial energy consumption.

The International Federation of Industrial Energy Consumers (IFIEC), representing sectors such as steel, chemicals, non-ferrous metals, cement, paper, food packaging, and automotive industries, said: "Renewable energies can only successfully contribute to the energy situation when permanent subsidy is not required."

It was responding to an international conference held in Bonn to promote the development of green energy as part of global efforts to alleviate poverty and reduce the impact of climate change.

Jurgen Trittin, the German environment minister, speaking at the conference, said developing nations spent two-thirds of their foreign currency income on oil and investing in renewable energy schemes would reduce that dependency. Germany has installed more than 14,000MW of wind power capacity, making it the world's biggest wind farm developer and providing about 5 per cent of the country's electricity.

However, financial surcharges have added about Euros 4.50 a megawatt hour to German electricity prices, according to the IFIEC. "Most European Union schemes follow this approach by simply guaranteeing premium tariffs for electricity generated from renewable energies," it said, "(but) counting capacity without any reference to efficiency criteria is misleading consumers.

"The reality is that, all too often, they are required to pay high rates for inefficiently generated power. In addition, consumers are also paying to maintain fossil-based generation capacity necessary to guarantee supply during periods when renewables cannot deliver."

Another report, by the International Energy Agency, finds that government spending in Western countries on renewable energy research fell by nearly two-thirds to Dollars 696m between 1980 and 2001.

This decline "appears to be inconsistent with presumed political intentions in many IEA countries to increase the share of renewables in the total primary energy supply", it said.

The US, Japan and Germany carried out most of the research into renewables - mainly solar, wind and biomass - between 1987 and 2002. Overall, renewable research accounted for just 7.7 per cent of IEA governments' energy research spending.

Solar and wind energy expanded by almost 18 per cent per year from 1970 to 2001, with growth rates accelerating in the last few years. But these new renewables are concentrated in just a few countries, namely Denmark, Germany, Spain, Japan and the US.

[AM-IDU3TK]

  2:46 PM 0 Comments
  Wireless Systems Duke It Out

Reuters
12:07 PM Jun. 03, 2004 PT

AMSTERDAM -- Third-generation mobile phone services are finally here after a mammoth effort that cost the industry at least $123 billion, but new systems that operate much faster already threaten to consign 3G to history.

The new technologies would offer cheaper and faster Web connections and the high-quality video that 3G promised but has not delivered, and regulators are preparing to let operators decide for themselves which system they want to use.

Major wireless service providers such as Nextel in the United States and Britain's Vodafone are trying out Flash-OFDM, a new wireless technology able to carry data 10 times faster and cheaper than 3G networks.

"What we say is that for a $10 investment per person an operator can cover his subscribers. Per megabit, we come out at one-tenth of the price compared with a third-generation network," Andrew Gilbert, European manager of U.S.-based Flarion which invented Flash-OFDM, told Reuters in an interview.

One Flarion investor is T-Ventures, which is linked to T-Mobile, Europe's second-biggest mobile phone service provider after Vodafone.

Flash-OFDM will start out on laptop computers offering uninterrupted, high-speed connections even when a user's signal switches from one base station to another, allowing employees to access company networks as if they were in the office.

A rival system is WiMAX, supported by U.S. chip giant Intel, which would offer fast wireless Internet over distances of up to 28 miles. WiMAX aspires to be the long-distance version of existing local wireless Internet systems.

Flash-OFDM is the latest buzzword in an industry that feels let down by 3G.

The first 3G networks that have been opened to consumers this year were initially advertised as being capable of two megabits per second, enough for high-quality video.

But not only is 3G about two years behind schedule after European operators bet their future on radio spectrum licenses four years ago, the top speed of the so-called UMTS networks has been pared down to less than 400 kilobits a second.

What is worse, mobile service providers have to prepare customers for just one third of that data speed once the new networks are being used intensively, just enough for a high-quality audio stream.

Adding insult to injury, operators bought the radio frequency licenses under the condition they would only use it for 3G cell networks.

The condition was introduced to make sure networks across Europe would work together and repeat the success of the preceding GSM mobile standard.

This helps explain why Vodafone is trying out Flash-OFDM -- not a 3G cell technology -- in Japan. Other, unnamed European operators are testing in secret, an industry source said.

Analysts say the restrictions have become an unnecessary burden, destroying the value of the licenses and wasting radio spectrum when more efficient networks can pump greater amounts of information through the limited airwaves.

It could also mean Europe risks losing its edge in the wireless industry.

"Potential spectrum users will tend to place a lower value on the licenses because of the technology constraints they face in the exploitation," British market research group Analysys said.

Regulators, however, are moving to relax the restrictions.

In a speech last month, European Information Commissioner Erkki Liikanen said, "We will probably need to depart from technology constraints attached to spectrum allocation."

This puts the door ajar for Flash-OFDM, which can operate in the same radio spectrum and use the same antennas as UMTS. It can thus be an add-on to UMTS base stations, sharing the fixed network in the ground that connects base stations, Flarion says.

Flarion's Gilbert is quick to point out that he does not want to dethrone UMTS. UMTS is designed for voice calls and modest data usage, and Flash-OFDM was originally designed for demanding computer users.

And not everyone in the industry is convinced Flarion will succeed in the mobile handset market. Vendors point out that UMTS will be improved next year with so-called HSDPA add-on technology that will increase data transport speeds.

"We track all key technologies, but it doesn't look probable at this point in time any of them will exceed Wideband-CDMA capabilities," Kai Konola, strategy and business development director at Nokia Networks, told Reuters.

Wideband-CDMA is the generic term for the 3G UMTS networks that are built by the operators which now run 2G GSM networks.

Nokia and rivals such as U.S.-based Qualcomm, Sweden's Ericsson and Germany's Siemens hold key patents on Wideband-CDMA and have an interest in seeing it succeed, while Flarion owns the patents for Flash-OFDM.

As for WiMAX, Nokia was one of the initial supporters of that system, but it did not renew its license early this year, saying WiMAX was not fit for the flexible mobile use Nokia is seeking. "Currently we see no business case for operators with any of these now proposed proprietary technologies," Konola said.

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  They are masters of innovation, technology, and strategic vision - 40 companies driving the global economy.

By Kevin KelleherPage

Old-school business types found some solace in the bust - at least the upstarts got their comeuppance. Hardly! With the economy finally perking up, newcomers are running the show: Three of the top five companies in this year's Wired 40, our annual list of enterprises leading the charge toward a connected global economy, were founded in the past decade. One-third are less than 20 years old.

This year's list reflects the churn we've come to expect in the tech economy. Only nine selections appeared on the original list back in 1998. Still, the criteria for inclusion remain unchanged. These 40 leaders have demonstrated an uncommon mastery of technology, innovation, globalism, networked communication, and strategic vision - skills essential to thriving in the information age. Here's how they stack up.

1. Google
ALL THE ANSWERS
Last year: 1
The bigger the Internet becomes, the more it needs search. Dogged by imitators from formidable (Yahoo!) to flaky (Booble), Google has become the central clearinghouse in a world exploding with information. The company's vast hive of servers, purportedly the most powerful private network in existence, not only caches seemingly every page on the Web, but also personal data like email - and someday perhaps music files and more. It's hard to say what the company will call upon this monster rig to do, but you can be sure the Net will be better for it.

Done: Gmail, Froogle, Google Local, Orkut - what hasn't Google done?
To do: Cofounders Larry Page and Sergey Brin need to complete their IPO without betraying their promise to do no evil.

2. Amazon.com
EVERYTHING MUST GO ... ONLINE
Last year: 7
The question facing Amazon has gone from "Will it work?" to "What won't work?" The online retailer-cum-global mall now runs more than 35 virtual storefronts selling everything from underwear to live lobsters; there's even a page that accepts campaign contributions. What started with books is fast becoming the Net's premier one-stop shop.

Done: The company has opened its database so other retailers can integrate their stores into the Amazon flow.
To do: CDs and DVDs - yawn. Amazon should capitalize on its peerless customer reviews to sell downloadable music and video.

3. Apple Computer (new)
THE NEW FACE OF CONSUMER ELECTRONICS
They laughed in 2001 when Steve Jobs introduced the iPod, Apple's $400 MP3 player. They laughed in 2003 when he opened the iTunes Music Store, selling songs for 99 cents when millions of consumers were downloading tracks for free. But Jobs is having the last laugh, while creating the kind of platform-and-content synergy that gadget makers dream of. Having sold 5 million iPods, Apple owns 55 percent of the music player market. Meanwhile, iTunes has coaxed the Big Five record labels into a single online store and persuaded fans to download - legally - more than 60 million songs, about 70 percent of commercial downloads. And beyond consumers of digital media, Apple is empowering a new generation of content creators with superior music production (GarageBand) and video editing (iMovie). Put them on the blazing Power Mac G5 and you have the platform of the creative class.

Done: The iPod Mini, released in February, is already taking market share from makers of smaller, cheaper music players.

To do: With iTunes for Windows and the HP-branded iPod, Apple is finally playing well with others. If only it would find more playmates.

4. Genentech (new)
BIOTECH GROWS UP
In the feast-or-famine world of biotech, Genentech has reaped a bounteous harvest, season after season. It was the first to splice genes into fast-growing E. coli bacteria, thereby mass-producing therapeutic proteins, like insulin. Later, Genentech scientist Arthur Levinson advanced the technique by using mammalian cells to manufacture drugs - a standard practice today. Levinson became CEO in 1995, and revenue has since more than tripled to $3.3 billion without a single major acquisition. In February, the Food and Drug Administration approved Avastin to treat colon cancer, a decision that could bring in $2 billion a year - or much more if the drug is approved for other cancers. Levinson has vowed to make his company a leading developer of drugs for cancer and immune disorders by 2010, when he hopes to have won approval for 10 new treatments. With lung, prostate, and ovarian cancers in its sights, as well as arthritis, Genentech is well on its way.

Done: The company enjoyed an unprecedented string of FDA approvals between June 2003 and February 2004: Avastin, Xolair (the first asthma therapy based on genetic engineering), and Raptiva (for psoriasis).

To do: Genentech is ideally positioned to transform bioinformatics, genomics, and high-throughput screening from 20th-century dream into 21st-century reality.

5. eBay
FLEA-MARKET CAPITALISM
Last year: 6
More than just an online auction site turned cultural phenomenon, eBay is an economy unto itself. This year, roughly $30 billion worth of goods will change hands through the company's servers. That will make the auctioneer the 81st-largest economy in the world, just ahead of Kuwait and El Salvador. Not bad for ecommerce.

Done: eBay Motors has become the operation's biggest division in dollar terms, moving $7.5 billion in cars last year, up from $1 billion in 2001.

To do: Fraud has grown so rife that vigilante users are tracking down grifters. The auctioneer needs to police miscreant sellers much more aggressively.

6. Samsung Electronics (new)
A CHIP OF CONSUMER PARADISE
In 1997, in the midst of the Asian financial crisis, Samsung Electronics' new president Jong Yong Yun committed what seemed like an act of corporate suicide. He began sinking billions into research and equipment, vowing to outclass competitors in memory chips and consumer electronics. It was an inspired strategy. Samsung lifted DRAM chips from commodity to value-added item by tailoring them to meet the needs of prized customers like Dell and Microsoft. Then, when the growing popularity of digital cameras and MP3 players spurred demand for flash memory, it quickly converted its memory chip plants. At the same time, the company pioneered voice-activated dialing and was the first to equip cell phones to play MP3s and shoot video. Samsung has not only grown into the one of the most respected non-Japanese brands in Asia, it has become a leading innovator in consumer electronics worldwide.

Done: Samsung introduced a mobile phone with a camcorder and video-on-demand. Then it sold 100,000 of them.
To do: Connect PCs, TVs, hi-fis, microwaves, and air conditioners: Korea, where 70 percent of homes are wired for broadband, is a perfect laboratory for the emerging digital household.

7. Yahoo!
MAKING THE WEB PAY
Last year: 3
CEO Terry Semel is on a mission to figure out what makes money on the Web. His ability to aggregate huge audiences - 263 million and counting - has attracted 70 of the 100 top US advertisers as well as dozens of content suppliers. Yahoo! is where ads meet eyeballs on the Net.

Done: Yahoo! built a new top-notch search engine from scratch, thanks to expertise from acquisitions Inktomi and Overture.

To do: Google has outpaced Yahoo! in search and free email. The Web's oldest brand needs to hone its edge.

8. Electronic Arts
PLAYING TO WIN
Last year: 28
Eat your heart out, Hollywood. EA took in $2.5 billion last year, more than the 10 top-grossing films combined. The company's new LA studio plans to employ 1,000 writers, animators, and assistants, many from the film industry. Games aren't just growing more realistic and interactive; thanks to EA, they've become mainstream.

Done: EA revamped its Internet division, adding 1.8 million subscribers to new online tournaments.
To do: So far, interactive entertainment has taken hold only in games. Movies, music, painting - the field is wide open to EA.

9. Pixar (new)
THE ANIMASTER
In 1995, Steve Jobs predicted in these pages that Pixar would usher in a new era of filmmaking, possibly even supplanting traditional 2-D cel animation. It took less than a decade for his company to deliver, serving up digital crowd-pleasers like Finding Nemo, the highest-grossing animated movie of all time. Between five feature films and a handful of shorts, Pixar has collected a staggering $2.5 billion and 17 Academy Awards - an average of $500 million and three Oscars for each feature. And it consistently keeps 44 percent of what it takes in, an unheard-of percentage in the media industry. Pixar also licenses its technology to others, but its ability to advance digital imagery with each new release keeps it in the vanguard. Pixar's success in movies, along with Apple's in music, has made Jobs the first digital media mogul.

Done: Jobs declined to renew his 13-year-old distribution deal with Disney, prompting would-be suitors to begin a frenzied mating dance.

To do: Pixar needs a distribution partner willing to accept a smaller cut than Disney, yet with enough clout to reach the masses.

10. Cisco Systems
THE "WORK" IN NETWORK
Last year: 11
Tech moguls wondering how to win friends and dominate markets need look no further than Cisco. The hub-and-router king has ruled the network market for a decade with hardly a glance from trust busters. Instead of strong-arming competitors, the company has absorbed clever startups while keeping its workforce streamlined and focused. It's an 800-pound gorilla that fosters innovation rather than squashing it.

Done: Cisco shored up sluggish IT revenue by fine-tuning its wares for voice over IP.
To do: The company has fended off low-cost competitors by offering features that anticipate market demands. How about blocking viruses at the router?

11. Infosys Technologies
GOING WITH THE WORKFLOW
Last year: 34
It's a classic new economy pattern: A nascent company performs a familiar task at lower cost, disrupting an industry but freeing up resources for further innovation. In the case of Infosys, 24,000 programmers worldwide - educated, English-speaking, and paid a fraction of US wages - develop and maintain software for US giants like Cisco and American Express. You wanted lower costs and higher productivity? You got 'em.

Done: Moving beyond India, Infosys has built coding shops in Mauritius and China.
To do: If Infosys can expand throughout the developing world, it will unleash the power of pent-up engineering talent worldwide.

12. Dell Computer
THE GREAT COMMODITIZER
Last year: 15
Dell's formula of assembling on demand and selling directly to the customer turned PCs into commodities. It also made Dell the desktop market leader. The company has since squeezed prices for printers, storage, even plasma TVs. If computers are ever traded in the commodities pit, a statue of Michael Dell should be erected there in his honor.

Done: Following Gateway into the consumer electronics market, Dell now peddles TVs and MP3 players.
To do: A few overpriced markets could use the Dell touch: Cable TV? Wireless access?

13. IBM
IT'S A BLUE WORLD AFTER ALL
Last year: 4
Quick: What's the biggest software company after Microsoft? Maybe Oracle? Perhaps SAP? Wrong. It's IBM, which is using its muscle to propel open standards like Linux into the corporate arena. But IBM is about more than just software - as a force in other markets, such as chips, servers, and storage, it's the all-in-one IT outsourcer.

Done: After acquiring PricewaterhouseCoopers, IBM trained consultants to think like engineers, and vice versa.
To do: IBM routinely wins more patents than anyone. It's time to focus on turning nanotech and bioinformatics into real industries.

14. SAP (new)
SEAMLESS SOFTWARE
Today's economy is hell on the IT department. Companies buy and get bought, swap partners like swingers, and operate in a shifting landscape of new customers and suppliers. All this makes it imperative that incompatible software systems talk to each other about, say, which suppliers offer the best prices for a given part, or what a prized customer bought today. SAP's software stitches these systems into an efficient whole at 22,000 companies in 28 industries. The company's initial focus was enterprise resource planning - in plain English, that's automating basic business activities. But as the firm has grown it has moved into managing databases and customer information, realms dominated by giants like Oracle and Siebel. Competition is heating up, but SAP has an advantage: Shrewd cost-cutting during the IT downturn has left it lean and agile. With 59 percent of the business-software market, SAP is the major player in enterprise management.

Done: SAP won new customers around the world, like Airbus in Europe, Ashland Oil in the US, and New China Life Insurance. Sales to Brazil, China, and India grew at double-digit rates.

To do: Make enterprise software cheaper. Make it easier to install and upgrade. Most of all, make it adapt to the company, not the other way around.

15. Nokia
THE NET IN YOUR POCKET
Last year: 2
Nokia became the leading maker of mobile handsets - nearly two in five now carry its name - just as cell phones were shifting from analog to digital. The challenge is to stay on top as phones evolve into game/email/music/camera devices. The company's effort to gain a controlling interest in the Symbian handset OS is a bold bid to cement its advantage.

Done: The Flying Finn grabbed top market share for GSM phones in China and racked up brisk sales in Brazil, India, and Russia.

To do: Nokia is in a position to dovetail Wi-Fi with GSM and CDMA networks, creating a seamless wireless Web - and tiered price structure - from high bandwidth to low.

16. DIGITAL VIDEO SERVER
Last year: 18
When you're explaining to your grandkids what a VCR is, take a moment to tell them about the local video-rental outlet driven to extinction by Netflix. Using the postal service's hoary network, Netflix has turned the rental business on its head and drawn a throng of customers who have remained loyal despite the onslaught of competitors like Wal-Mart. CEO Reed Hastings says video downloads are next.

Done: Netflix posted its first annual profit in 2003 and vowed to double membership to 2.7 million this year.
To do: Who needs parcel post? We want our VOD!

17. Monsanto
REENGINEERING AGRICULTURE
Last year: 32
If Monsanto's genetically modified seeds haven't destroyed the earth, neither have they fulfilled their promise to ease world hunger. New CEO Hugh Grant has abandoned the strong-arm tactics that made his company a pariah. Now his challenge is to transform Monsanto from the only business that dared apply genomics to agriculture to the one that makes hay with it.

Done: Under Grant, Monsanto has won allies in the food industry and begun mending fences with regulators in Brazil and Europe.

To do: Under fire, the company backed away from the notion of growing drugs in GM crops. It's planting season again.

18. Toyota Motor (new)
LEAN, GREEN DRIVING MACHINE
Any doubt that Toyota owns the hybrid-car market vanished in February when, as 1 billion TV viewers worldwide watched, stars like Sting, Jack Black, and Charlize Theron pulled up to the Oscars in (the envelope, please) a Prius. Honda also makes hybrids, and GM and Ford will roll theirs out this year (the latter using Toyota's tech). But with the Prius, Toyota has already captured the hearts of the eco crowd - and made other automakers green with envy. The company, which mass-produced the first part-electric, part-gas powered vehicles in 1997, will boost Prius production by a third this year and transplant its hybrid technology to its Highlander line and the Lexus brand starting this fall. Toyota's innovation extends to assembly lines: Although its plants have been regarded as the industry's most efficient for decades, it recently upgraded them to standardize factory equipment and processes. Now it's studying every component to squeeze out remaining inefficiencies.There's no stopping a company that won't stop improving.

Done: Toyota overtook Ford to become the world's second-biggest automaker in 2003, selling nearly 7 million vehicles.
To do: Why does green have to be a dirty word? Toyota's challenge is to sell Middle America on fuel economy.

19. Vodafone Group
WIRELESS AT HEART
Last year: 9
With 128 million subscribers from Portugal to Japan plus a 45 percent stake in Verizon Wireless, Vodafone is poised to determine what kind of data gets pumped through mobile devices. The opportunity is huge: to create a portable, interactive global network for text messages, music, video diaries, and live news. Oh yeah, and phone calls.

Done: Vodafone narrowly avoided overextending itself by losing to Cingular in a bid for AT&T Wireless.
To do: Enough talk. Make the mobile Internet a reality.

20. Flextronics
HARDWARE ON DEMAND
Last year: 39
Dell, Ericsson, Nokia, and Xerox are among those who have turned the dirty work of manufacturing over to Flextronics. The Singapore-based outsourcer does it cheaper, thanks to high volume and an integrated network of plants from Brazil to Hungary to China. Flextronics brought in $13 billion last year making gadgets like Microsoft's Xbox and HP's DesignJet printer. With that kind of money, who needs glamour?

Done: Flextronics met the downturn by expanding in low-wage countries and emphasizing customer service. The reward: a flock of satisfied tech-giant customers.

To do: Hardware prices would drop even further if the company took on other tasks, like supply-chain logistics and warehousing.

21. InterActiveCorp
LITTLE SHOP OF DILLER'S
Last year: 29
By adding dotcom survivors like Expedia and Match.com to core holdings like Ticketmaster and Home Shopping Network, Barry Diller turned InterActiveCorp (formerly USA Interactive) into a mosaic of consumer indulgences. Diller is strong where Amazon isn't: travel, events, dating, and real estate. That makes a solid foundation for a growing ecommerce empire.

Done: Hotels.com, Hotwire.com, and Lending Tree are the newest gems in Diller's collection.
To do: The quickest way to profits is the shortest path to sales. InterActiveCorp needs to put one-click shopping on TV.

22. Nvidia
PUSHING THE PIXEL ENVELOPE
Last year: 22
The breakneck pace of development in graphics chips makes Moore's law look like a turtle race. Yet Nvidia has pulled ahead of the pack, putting PCs on a par with consoles and preparing the way for high-res 3-D imagery to migrate from games to the desktop, handhelds, and beyond. Chip by chip, Nvidia is bringing fantasy closer to reality.

Done: Sony's upcoming Spider-Man 2 and Warner Bros.' The Polar Express take advantage of Nvidia technology, giving the company an entrée into Hollywood.

To do: Archrival ATI Technologies snagged the market-share crown briefly last year. Nvidia needs to win it back.

23. WPP Group
ADDING IT UP
Last year: 33
CEO Martin Sorrell wants you to take things personally. He's pushing for personalized marketing - mobile, interactive, and direct - instead of traditional ads, which are about as personal as a hug from Dick Cheney. But Sorrell knows that each of the 102 countries where advertising behemoth WPP operates needs to be spoken to in its own special way. The world may soon be hanging on WPP's every word.

Done: The purchase of British agency Cordiant Communications gave WPP a firm foothold in Asia.
To do: Tomorrow's corporate giants in China, India, and Mexico need a global voice today.

24. Intel
MACRO PROCESSOR
Last year: 14
Intel makes 85 percent of PC microprocessors, but that won't keep it on top in a post-PC world. So the firm is developing silicon for servers, handhelds, flat-panel TVs, and medical gear, and its $4.8 billion R&D budget is funding research in fiber optics, nanotech, and smart dust - especially after its 64-bit Itanium chip was met with a yawn from the market.

Done: Five million PCs were shipped with Intel's Centrino technology in 2003, bringing Wi-Fi to the masses.
To do: The costly fiasco of the Itanium chip serves as a reminder that Intel must satisfy market needs as it diversifies.

25. EMC
MINDING THE STORAGE
Last year: 36
EMC became a tech giant on the strength of immense networked hard-disk arrays. After copycats like Hitachi and IBM piled on, the company branched into software that automatically tags and prioritizes everything from email to video files. The result: Data storage that's fast, cheap, and open to all operating systems - and EMC's return to the vanguard.

Done: EMC cemented its lead in storage software with purchases of Legato, Documentum, and VMware.
To do: Add AI to storage networks. EMC should put a virtual archivist at every employee's beck and call.

26. FedEx
LORD OF THE BRING
Last year: 12
First FedEx eliminated the friction from express mail. Then it applied its world-class logistics to ground shipments, taking on UPS in a market long ruled by the brown trucks. The upshot: in 2003, some 5.3 million packages delivered to 215 countries every day.

Done: The $2.4 billion purchase of 1,200 Kinko's stores extended FedEx's reach into back-office tasks like printing and binding.

To do: Lots of things need transporting. How about FedEx Grocery or FedEx Travel?

27. Microsoft
MONSTER, INC.
Last year: 8
The Goliath of Redmond has a simple mantra: Control the operating system and you control destiny. Indeed, Microsoft's hegemony allows it to set the agenda - on desktops and servers, at least. But the company's taste for monopoly over innovation has attracted a host of persistent Davids, including regulators, virus creators, and Linux developers. Longhorn, the next-generation OS, will test the giant's plan to make its software the operating system for your life.

Done: Bill Gates finally made peace with Sun's Scott McNealy, who had goaded the Justice Department and then the European Commission to prosecute Gates' Evil Empire for antitrust violations.

To do: Given Microsoft's long string of scrapes with antitrust cops, it's time for the company to start competing on the merits of its products.

28. Pfizer (new)
KING OF THE PILL
FDA approvals have slowed - the agency green-lighted only 21 drugs in 2003, down from 56 in 1996 - so Pfizer is packing its pipeline to make sure something gets through. Despite the surging cost of bringing drugs to market, the Viagra maker has 130 new compounds in development, as well as 95 new uses for old ones. It will spend $8 billion on R&D this year, more than double its 2003 profit. But the trick to keep Pfizer growing at last year's amazing 40 percent clip is to combine the company's stellar marketing ability with the innovative spirit found at startups and universities. For instance, it's working with two of the hottest biotech boutiques, Eyetech and Neurocrine, to develop medicines for macular degeneration and insomnia, respectively. With 300 such partners laboring in the background, Pfizer's pipeline will be productive for a long time to come.

Done: Pfizer's successful integration of Warner-Lambert and Pharmacia has given it the best-selling drugs for a dozen ailments from arthritis to depression.

To do: Generally, it costs $900 million to make just one drug. Sounds like the pipeline itself is ripe for innovation.

29. Costco Wholesale (new)
DISCOUNT DELUXE
Who ever thought a warehouse store could be a popular weekend hangout? Credit Costco, the Washington-based big-box retailer whose skill at bringing deep discounts to high-quality goods has turned its cavernous stores into dizzying arcades of consumer fetish. Building on the hyper-efficient supply chain pioneered by Wal-Mart, Costco is putting luxury goods - Barolo wines, Jacuzzi spas, plasma-screen TVs - within reach of a new class of consumers. The combination of bulk sales and membership fees fosters customer loyalty; constant influxes of stylish clothing or fresh food items stimulate impulse purchases. The company also defies the low-wage Gospel According to Sam Walton: Despite paying higher wages, Costco's profit per employee is 22 percent higher than Wal-Mart's. If Wal-Mart has become a blight on small-town America, Costco is the amusement park on the outskirts - the place where all the fun is.

Done: The company piloted a new store specializing in high-end home furnishings and drew up a plan to open these Costco Home outlets throughout the US.

To do: Costco owns the wholesale-club niche while treating its employees far better than the average retailer. Now the company must build on its lead without sacrificing its exemplary standards.

30. Comcast
STRIKE UP THE BROADBAND
Last year: 38
More than 21 million US homes - one in five - get Comcast's cable service, and 5 million log on using its broadband Internet lines. With that kind of reach, CEO Brian Roberts thinks he has a shot at making video-on-demand work, putting pressure on TiVo-like recorders. First, though, he's taking on the Baby Bells by offering dirt-cheap voice calls over IP lines.

Done: Having extended its reach by acquiring AT&T Broadband in 2002, Comcast showed its appetite for content with a bold bid for Disney this past spring.

To do: VOD and VoIP are a good start, but Comcast could really shake things up by launching legal P2P file-sharing into the living rooms of America.

31. Taiwan Semiconductor
THE CIRCUIT MAKER
Last year: 24
Manufacturing microprocessors is an expensive undertaking that can distract innovators from designing better chips. The solution? Let Taiwan Semiconductor do it. Orders from niche players like Broadcom that don't have their own factories, as well as giants like Motorola and Philips that do, are keeping the company's revenues growing 40 percent a year. By making it cheaper to produce ever more advanced chips, TSMC is clearing the way for next year's killer app.

Done: The company broke ground on a new factory in China, helping maintain its majority share of the global foundry market.

To do: To extend its role, Taiwan Semi could move up the value chain, becoming not just the silicon industry's factory but its lead designer.

32. Ameritrade (new)
TRADING PLACES
The bear market did away with many etrading outfits, but it made Ameritrade stronger than ever. In 2003, after years of losses, the company made a $137 million profit, a fitting reward for CEO Joe Moglia's foresight four years ago: After the bubble burst, he moved fast to slash more than one job in three. Then he bought five smaller rivals - including a $1.3 billion deal for Datek in the darkest days of the downturn - and integrated them without increasing head count. As a result, the company executes more online stock trades than anyone in the world, and does it more profitably than E*Trade and Charles Schwab, which found it necessary to expand into mortgages and investment advice. The lesson? Even post-crash, it pays to believe in online trading. As the truest believer, Ameritrade is the biggest winner.

Done: Last year, the company unveiled its coolest tool yet: graphic circles representing stocks that pulse as buy and sell orders are placed. Click on the circle to trade the stock.

To do: Someday anyone will be able to trade any stock from any location at any time. What's the holdup?

33. Gen-Probe (new)
DISEASE DETECTIVE
Technology has done more for treatment than it has for diagnosis. Gen-Probe is evening the score by automating the labor-intensive task of testing blood for diseases like hepatitis and HIV. The benefits: lower cost, higher productivity, and fewer human errors. Unlike blood screeners that look for antibodies, Gen-Probe's machines detect viral genetic material, which is present well before antibodies appear. Its Tigris system allows one person to run 1,000 tests a day, 10 times the rate of other diagnostic devices in use. Tigris won FDA approval last December. Now Gen-Probe is aiming higher: It's developing a screen for prostate cancer that promises to be three times more effective than the competition.

Done: In October 2002, the National Institutes of Health asked Gen-Probe to develop a test for the West Nile virus. Nine months later, it was ready to roll.

To do: Prostate cancer screening is a good start. Now where is Gen-Probe's breast cancer screen?

34. Ryanair
WING COMMANDER
Last year: 30
In eight years, Dublin-based Ryanair has built a no-frills airline that shuttles 22 million skinflints a year to more than 75 European cities, buffeting the Continent's complacent airline industry. The company keeps costs low by focusing on second-string airports and selling tickets on the Web, completing 95 percent of sales online. Ryanair is now the Internet's favorite way to fly.

Done: No reclining seats. No head rests. No window blinds. Ryanair's cost-cutting has been ruthless.
To do: The carrier has a golden opportunity to extend the budget-airline business to developing countries with a growing middle class.

35. L-3
NETWORKED DEFENSE
Last year: 21
Defense contractors don't get edgier than L-3. The company integrates automated equipment with aging machinery, giving new meaning to the term military-industrial complex. CEO Frank Lanza's vision: Unmanned planes delivering precision munitions based on real-time recon while wired warriors stalk the enemy on the ground. War may be hell, but at least it's a connected hell.

Done: Bomb-sniffers and flight recorders are now part of L-3's homeland security toolkit.
To do: Opening L-3's technology to allies would allow for more efficient multilateral forces in global hot spots.

36. Citigroup
WORLD BANK
Last year: 31
Citigroup is the world's banker. It manages accounts for 200 million individuals and corporations in 100 countries. A third of its revenue comes from outside North America, and that's where Citigroup sees its future: serving the rising consumer and entrepreneur classes in the world's fastest-growing economies.

Done: Last year, Citigroup introduced credit cards in Brazil, China, and Russia, and underwrote the $3 billion IPO for China Life Insurance.

To do: Whatever happened to emoney? Citigroup just might have the clout to finally replace cash and cards with a virtual alternative.

37. Level 3
THE LAST FIBER BARON
Last year: 23
What if they built a 22,500-mile digital network and no one came? Slack demand from telcos and ISPs leaves much of Level 3's fiber dark, so CEO James Crowe is selling broadband service in a potentially lucrative new market: voice over IP. If the VoIP business catches fire, it will brighten Level 3's future.

Done: Crowe scored a major deal providing broadband to the federal government.
To do: While Level 3 waits for the market to heat up, its $1.1 billion rainy-day fund will come in handy for buying up rivals at cut-rate prices.

38. Inditex
UP-TO-THE-MINUTE FASHION
Last year: 19
Retailing giant Inditex and its Zara chain of nearly 2,000 clothing stores are household names from São Paolo to Singapore but nearly unknown in the US. The Spanish company relies on a globally integrated supply chain to cut costs and time to market. But Inditex faces formidable challenges: Weak sales, currency fluctuations, and savvy imitators like Sweden's H&M threaten the company's future. Time to innovate!

Done: Zara expanded into furniture last year, with 30 stores in Europe.
To do: Inditex's far-flung network is poised to challenge American cultural dominance - first in fashion, then in design at large.

39. JDS Uniphase
LIGHT AT THE END OF THE CABLE
Last year: 40
Of all the tech stars of the '90s, JDS Uniphase was among the hardest hit by the bust. The premier maker of optical networking electronics has weathered hardship well, selling industrial lasers and flat screens while it waits for an upturn. If broadband and voice over IP start to crest, JDSU will be ready to ride the wave.

Done: The company found a strong CEO in Cisco veteran Kevin Kennedy, who is nudging it back to profitability by shaving costs and branching into high-margin businesses.

To do: Why not sell off excess inventory to countries that can't afford fiber? That would establish JDSU's hardware as the global standard.

40. BP
PRIMING THE PUMP
Last year: 26
CEO John Browne believes the world will run out of oil in 40 years. That may seem like a long time, but Browne thinks ahead. He's pushing the oil giant toward solar, wind, and hydrogen. Meanwhile, he touts natural gas as a clean alternative.

Done: BP reduced greenhouse gases by scrubbing emissions from its factories in industrialized nations and promoting unleaded gasoline in the developing world.

To do: Without a push, hydrogen energy won't be available anytime soon. The world's largest oil company could make it happen.

Ten companies were ejected from the Wired 40 this year. Their sin? Failure to meet the global economy's incessant demand for innovation.

Affymetrix
Personalized medicine was the most exciting promise of Affymetrix's microarrays, but the technology didn't deliver.

Cemex
The Mexican mixinghouse reinvented the cement industry in the '90s, but it failed to come up with a compelling follow-up act.

Charles Schwab
The company that democratized investing risks becoming just another knockoff of a Wall Street brokerage.

Check Point Software
The Israeli outfit is no longer the only giant keeping the Internet safe for ecommerce. Cisco, Microsoft, and others have joined in, eroding Check Point's market share.

GlaxoSmithKline
Its dramatic R&D restructuring is finally taking root, but rival Pfizer has excelled in a strategy with more immediate results: licensing deals with the hottest biotech startups.

Honda Motor
Despite its commitment to innovation, Honda can't match Toyota's hybrid-car sales and manufacturing muscle.

Millennium Pharmaceuticals
Using genomics to discover new drugs was a wonderful idea. Years later, it's little more than that, and Millennium is falling back on traditional methods to stay alive.

Oracle
Larry Ellison's power grab for PeopleSoft demonstrated how desperate he is to remain a force in business software. His fumbled attempt shows that he may be losing his golden touch.

Sony
The Japanese electronics giant hasn't overcome its structural flaws and returned to the forefront of new product development.

Wal-Mart
A brilliantly automated back end propelled Wal-Mart to the very center of the global economy. Now the retail behemoth is more bully than trailblazer.

Contributing writer Kevin Kelleher (kpk99@yahoo.com) wrote about the Wired 40 in Wired 11.07.
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  1:32 PM 0 Comments
  Spyware: A Hidden Menace

As spam is to e-mail, spyware is to the web. Can it be stopped?
Economist Staff, The Economist
June 04, 2004

Viruses and spam get all the attention, but there is another, less visible, threat to internet users that may already be lurking on your computer without your knowledge. "Spyware", as it is known, is software that sneaks on to your PC, tracks your online activities, and occasionally splashes pop-up advertisements across the screen. It is more than a nuisance: such software is, in effect, hijacking your PC, monitoring your internet use and unilaterally opening browser windows. Some spyware also harvests personal information, such as your e-mail address and location - or even your credit-card details.

The rapid growth of spyware over the past year, and the legal ambiguity surrounding it, has brought it to the attention of regulators and lawyers in America and Europe. This month, a court in Utah will hear a case challenging the first state law that would ban it. Unless the software is stamped out, it could do to the web what spam has done to e-mail: create an annoyance of such magnitude that the internet may become less useful.

The practice is widespread. Spyware that monitors a user's online activities and triggers advertisements in response is present on over 4% of computers, according to one study. The top three spyware firms claim their software is installed on around 100m PCs. Yet most users are unaware it is there. That is because the software is usually installed in a "bundle" with other programs, such as the peer-to-peer file-trading software with which many internet users swap music. Another kind of spyware automatically installs itself when a user merely visits a particular site, a trick known as "drive-by downloading". Having sneaked on to a PC, spyware applications can severely degrade its performance. Mostly, it is very difficult to remove; some programs are even designed to make removal as hard as possible.

The most nefarious forms of spyware steal information such as credit-card numbers or passwords by monitoring every keystroke a user types. This kind of software is already illegal, and is relatively rare. Much more common, however, is advert-triggering software, produced and distributed by software companies operating in a legal grey area, who prefer to call their products "adware". There is real money to be made in hijacking screen real-estate and selling it to advertisers: the largest adware firm, Claria, had revenues of $90.5m in 2003 and recently announced plans for an initial public offering.

Though less devious than outright surveillance, this form of spyware can nevertheless harm consumers and online businesses, by diverting users away from the sites they have chosen to visit and by displaying a competitor's site or advertisement instead. Until recently, for example, German internet users visiting the national site for Hertz, a car-rental firm, were, if Claria software was installed, shown advertisements for rival car-rental firms instead. Hertz sued, and in March a German court ordered Claria to stop the practice.

In America, several firms have sued competitors and spyware firms over trademark and copyright infringement, as well as unfair competition. Many of these cases have been settled out of court, which lowers costs and speedily resolves the matter. But this means that no legal precedent is established. Where courts have ruled, their decisions have been inconsistent: hence the growing interest from policymakers in drawing up legislation.

Earlier this year the state of Utah passed a law banning spyware unless it tells users that it is being installed, asks for their consent, and can be removed. Context-triggered pop-up advertisements were made illegal without the permission of the targeted website. One spyware firm, WhenU, immediately sued to block the law, partly on the grounds that it violated free speech; this will be the subject of a hearing next week. Other states that are considering legislation, including California, New York, Iowa and Virginia, are watching closely. So are federal lawmakers: Congress has drafted two bills restricting spyware and the Senate is debating a third.

These bills are similar in calling for notice, consent and ease of removal. (A European Commission privacy directive in 2002 takes a similar line.) Yet they differ in strength, depending on whose interests they aim to uphold. States such as Utah lean towards consumers, and take a stringent position on what is permissible. The legislation proposed by federal policymakers and by California, by contrast, favours the technology industry with a softer stance. The industry, for its part, is divided. E-commerce sites, which are often the victims of spyware, typically call for new laws, while technology firms fear that legislation could outlaw some of their existing practices. For example, Google's search toolbar has a feature that can collect data if users allow it.

Moreover, some companies that oppose spyware also happen to profit from it. For example, Dell, a computer-maker, has complained that spyware is the main reason for customer calls to its technical support lines. This hurts its brand. In Britain, however, the company has become a customer of Claria, and its ads pop up when users visit the websites of rival firms such as IBM. And in May, Yahoo!, a web portal, released a browser add-on that can block pop-up ads, even though Overture, its ad-placement unit, is responsible for 31% of Claria's revenue.

The analogy with spam is informative. If legislators had acted sooner, it might have been possible to prevent spam from spiralling out of control. Does that suggest that legislation against spyware will also prove ineffective? Not necessarily, because the people behind spyware are a centralised and traceable group of companies, unlike spammers. Lawmakers have an opportunity to nip spyware in the bud, and help to ensure the integrity of the internet. They should take it.

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  1:22 PM 0 Comments
Wednesday, June 02, 2004
  Avril 2004 : "C'est décidé, je me lance"

Il a 45 ans, il a décidé de quitter un poste confortable pour créer son entreprise. Chaque mois, dans Le Journal du Management, il raconte l'aventure de sa petite entreprise. (avril 2004)  

Parce que la création d'entreprise est une aventure, toutes les étapes de ce parcours mérite le détour. Succès, doutes, échecs, joies, craintes... Un créateur d'entreprise a accepté de raconter, au fils des mois, l'aventure qui est la sienne. Un journal de bord anonyme, pour parler sans pudeur.

Agé de 45 ans, je suis diplômé d'une Maîtrise de sciences et techniques en automatique, obtenue parallèlement à une activité salariée à mi-temps. De 1982 à 2003, mon parcours professionnel est particulièrement varié à la fois en terme de postes, de sociétés, d'activités mais aussi de lieux géographiques. De postes d'expertise technique, je passe progressivement à des postes de management en technique, en organisation, en qualité, en production. Enfin, après une période en "corporate", j'occupe le poste de directeur d'un établissement industriel de 300 personnes.

Après un démarrage dans un grand groupe sidérurgique, je découvre le secteur papetier, puis, suite à un intermède de quelques mois dans l'ingénierie, je reviens en 1989 à l'industrie dans le secteur emballage que je ne quitterai qu'en 2003. Sur ces nombreux postes, douze au total, cinq ont été occupés à l'étranger (un an en Arménie, un an en Chine, deux périodes de quatre et deux ans en Espagne). Ma famille m'a suivi à chaque déplacement.

<<...OLE_Obj...>> Rebondir et donner vie à un projet"
Marié, et père de quatre enfants de six à quinze ans, cette situation de permanents changements devenait chaque fois plus difficile à supporter à toute la famille, en particulier à mes deux adolescents. Début 2003, il m'est demandé de changer de poste prématurément, au bout de deux ans, et donc de déménager à nouveau.

Ce fût le moment de faire un "bilan personnel" résumé rapidement :
- d'un coté, un poste de cadre supérieur avec une rémunération correcte;
- de l'autre, un déménagement supplémentaire (et au moins trois autres à suivre avant la retraite), une région et une ville agréable où la famille avait trouvé ses marques, le risque important de déstabiliser les enfants à l'âge de l'adolescence.

Ce bilan, qui a impliqué la famille, a permis d'établir le "projet personnel" avec les objectifs suivants : profiter de cette situation pour rebondir (et donner vie à un projet d'entreprise que j'avais depuis de nombreuses années), ne pas déménager et prendre en charge mon avenir.

Le choix est donc fait de ne pas donner suite à cette injonction et je quitte le groupe pour lequel je travaillais depuis treize ans. Il ne reste "plus" qu'à mettre en œuvre ce projet personnel. Or, bien qu'ayant occupé des fonctions importantes et variées dans des groupes industriels, il faut reconnaître qu'entre l'idée "je veux créer mon entreprise" et la création, le chemin à parcourir reste encore bien long.

Bien ! La décision de créer mon entreprise a été prise. L'idée d'une reprise d'entreprise industrielle m'apparaît alors assez évidente, me permettant de bénéficier de mes acquis dans ce domaine. Ceci étant, je ne ferme aucune porte et j'étudie toutes les opportunités qui se présentent (deux candidatures à des postes de direction, une proposition de consultant).

Avant de mettre en œuvre ce plan de création, il m'est nécessaire de réaliser un bilan objectif et complet de mes compétences et de mes motivations. Le changement de vie de salarié à une vie d'entrepreneur risque de bouleverser quelques réflexes acquis, et de nécessiter d'en développer d'autres. Je dois avouer que mon départ du groupe, après treize années durant lesquelles je m'étais investi profondément professionnellement et personnellement, se passe mal. Je ne doute d'avoir pris la bonne décision. Mais la rupture, par sa brutalité, est assez difficile à vivre :
- perte du statut avec la famille et les proches
- perte significative de revenus
- perte du contact quotidien avec mon équipe de quinze collaborateurs proches et des 300 employés
- perte de repères spatiaux temporels (horaires, réunions, trajet, bureau...).
Malgré tout, un soutien me conforte dans mon choix. Quelques semaines avant mon départ officiel, j'ai contacté la CRCI de Bourgogne (Ndlr : Chambre régionale de commerce et d'industrie) afin de savoir si des entreprises seraient à céder. La CRCI lançait alors une formation de 300 heures sur la création et la reprise d'entreprises. Je m'y suis inscris sans hésitation.

<<...OLE_Obj...>> Enrichir mon expérience"
Cette formation est l'occasion de découvrir les quelques domaines méconnus dans mon parcours professionnel (finance, juridique, vente), d'enrichir mon expérience de ceux connus (management, gestion, technique), mais surtout d'approfondir mon projet personnel.

Dans cette période difficile, cette formation se révèle être une aide psychologique indispensable, grâce au partage avec les coachs et la trentaine de collègues de la volonté d'entreprendre, des expériences, des idées et des projets aussi riches que variés.

Grâce aux conseils et informations recueillies, mon projet personnel se complète rapidement d'éléments économiques révélant une incompatibilité majeure. Ne souhaitant pas utiliser mon capital immobilier, mon apport initial est faible (100 K€). Or ce montant n'est pas suffisant pour reprendre une entreprise qui puisse m'assurer, même à terme, au moins 70 % de mes anciens revenus salariés.

L'idée initiale de donner une continuité "industrielle" à mon parcours professionnel par une reprise d'entreprise s'avère donc impossible à mener à bien. Je revois alors avec ce nouvel éclairage, une proposition d'association sur un projet de création moins gourmand en capital initial.

A bien y réfléchir, cette nouvelle période est riche d'enseignements : 
- la difficulté à couper les ponts avec le passé (vingt ans cela marque quelqu'un)
- l'obligation de cohérence entre le projet personnel et le projet de création
- l'indispensable complément de formation dans les domaines expérimentés ou non
- l'importance de l'accompagnement dispensé par deux "consulaires" de la CRCI de grande qualité, forts d'une centaine de créations depuis dix ans
- l'indispensable disponibilité et la forte implication nécessaires pour donner vie au projet.
Cette phase de préparation m'a permis de passer d'une vague idée de reprise d'entreprise à un projet de création cohérent avec mon projet personnel. Nous verrons en quoi consiste ce nouveau projet dans le prochain épisode.

La suite de "Ma petite entreprise" le mois prochain, dans Le Journal du Management.
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  4:44 PM 0 Comments
  Réseauter, oui, mais encore faut-il savoir pourquoi

Par Agathe Plamondon
Le terme « réseautage », une pratique courante dans les milieux d'affaires, peut se définir de différentes façons, selon les intentions de chacun. Comment choisir ses réseaux ? Comment s'y retrouver ?

Le terme « réseautage » peut se définir de différentes façons
Le réseautage est l'art de donner et de recevoir. Réseauter, c'est faire de chaque rencontre une occasion d'échange. C'est aussi l'établissement de liens, de façon intentionnelle et stratégique, qui permettent d'ouvrir de nouvelles avenues, de nouvelles perspectives. Bref, réseauter, c'est un peu comme jouer à la bourse : il faut savoir bien miser, faire preuve de jugement et surtout de patience.

Le réseautage est devenu une pratique courante dans les milieux d'affaires
En fait, le réseautage a toujours existé. Déjà dans l'antiquité, les marchands utilisaient leurs « contacts » et leur influence pour avoir accès à la monarchie - et aux hommes d'église qui possédaient le pouvoir et l'argent. Avec le temps, le tout s'est raffiné et aujourd'hui, réseauter fait implicitement partie des stratégies de développement de chaque entreprise et de chaque individu. Le réseautage, parlez-en à plusieurs, est devenu une spécialité en soi.

Le processus de réseautage s'avère essentiel en ce qui a trait à la quête d'informations sur les divers aspects du démarrage, du financement et du fonctionnement d'une entreprise, mais aussi de son développement à court, moyen et long terme.

Il semble y avoir un lien évident entre le fait de « réseauter » et d'entretenir ses contacts privilégiés
Tout à fait ! L'un ne va pas sans l'autre. J'ai appris avec le temps qu'il faut, pour réussir en affaires comme dans la vie en général, savoir maintenir des liens étroits avec parents, amis et partenaires d'affaires.

Dans les PME comme dans les grandes entreprises, soigner ses contacts professionnels et personnels est primordial. En affaires comme dans la vie de tous les jours, il est essentiel de prendre soin d'eux. Nos contacts, ce sont d'abord et avant tout des connaissances, des êtres humains. Il faut en prendre soin. Pour ma part, je vous dirais que je préfère consolider mes relations pour le plaisir, uniquement pour le plaisir! Le temps fait le reste. Et bien souvent, je fais d'heureuses découvertes !

Y-a-t-il une distinction entre faire du réseautage et faire partie d'un ou de réseaux organisés ?
Effectivement, je crois qu'il y a une importante nuance à faire. Je préfère faire appel à mon réseau personnel de contacts. Car, avec l'accroissement des réseaux organisés, et leur spécialisation, l'essence même de ce qu'ils devraient être risque de se perdre : un lieu d'échange d'information.

Les réseaux ont souvent mauvaise presse. Certains les fuient comme la peste, considérant qu'on y retrouve trop de gens uniquement en quête de mandats. D'autres les jugent trop peu performants.

Je connais personnellement des amis qui, deux ou trois matins par semaine, se font un devoir de participer aux petits-déjeuners de leurs réseaux. La plupart me disent y avoir rencontré des gens très intéressants, mais peu de personnes susceptibles de faire affaires avec eux.

Mais il ne faut pas généraliser non plus ! Certains réseaux sont assurément plus performants que d'autres. Encore faut-il savoir faire le bon choix en regard de ses propres besoins.

Comment choisir ses réseaux ? Comment s'y retrouver ?
Posez-vous d'abord des questions sur ce que vous recherchez. En matière de développement des affaires, certains réseaux n'offrent que très peu d'opportunités. En revanche, ils sont une source précieuse d'information et d'échange pour parfaire vos connaissances. Évaluez les aspects positifs mais aussi négatifs de faire partie d'un ou de réseaux. Ce que vous pouvez y apporter comme ce que vous pouvez en retirer.

Quelques conseils
Utilisez vos contacts personnels. Fiez-vous à votre instinct d'entrepreneur. Sachez également dire non. Faire partie de réseaux demande d'investir temps et souvent... argent. Rien n'est gratuit, soyez donc sélectif dans vos choix. Et posez-vous souvent la question à savoir si le groupe auquel vous appartenez fait encore votre affaire.

En conclusion
Tous les gens que vous connaissez font partie de votre réseau personnel, qui est probablement beaucoup plus large que vous ne l'imaginez. Sachez reconnaître leurs compétences, leurs expériences et leurs besoins. Les personnes que vous connaissez constituent peut-être aussi de bons clients éventuels. Il est plus facile de miser sur cette intimité que de solliciter des personnes à froid.

N'oubliez pas que le bénévolat ou l'implication sociale constitue également une bonne façon de vous intégrer à un groupe. On y fait souvent de surprenantes rencontres qui un jour pourraient rapporter gros à votre entreprise et à vous-même.

Agathe Plamondon présidente Communicateurs du Fauve

On peut la joindre à l'adresse suivante : aplamondon@fauve.qc.ca
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  3:40 PM 0 Comments
  A quoi ressemble un champion réseauteur responsable?

ó Il est généreux.
Il recherche des façons appropriées et originales de donner ou d'aider, sans attendre de
retour.
ó Il possède et partage ses ressources.
Il recherche, accumule et utilise intelligemment différents types de ressources. Il accepte
volontiers d'être aussi une ressource de valeur pour les autres.
ó Il possède et partage ses connaissances.
L'information et le savoir étant au coeur de la société actuelle, ils sont indéniablement
sources de pouvoir et clefs de succès. Il importe donc de vivre en mode « apprentissage »
tous azimuts et de partager généreusement ses connaissances et son savoir-faire.
ó Il fait confiance.
Confiance en lui-même, confiance aux autres. Il réalise et reconnaît ce qui est bon en lui,
comme dans les autres. Un climat de confiance rend les gens vulnérables. Accepter d'être
vulnérable est une autre forme d'intégrité. Contrairement à ce que plusieurs croient, être
assez honnête pour accepter d'être vulnérable implique que nous sommes simplement
humains, non pas faibles.
ó Il est curieux, toujours à l'écoute et informé.
Il observe, écoute, voit les gens et les événements d'une façon différente, nouvelle et
fraîche. Il peut ainsi identifier des occasions ratées par d'autres. Il maîtrise aussi l'art de
poser les « bonnes » questions, celles qui génèrent l'information utile et précieuse.
ó Il est intègre.
Il pratique la règle d'or, « on récolte ce qu'on sème ». Il s'efforce d'être juste et honnête
professionnellement et personnellement. Ainsi, il réussit et prospère en affaires, développe
des relations intéressantes et dort mieux la nuit.
ó Il est honnête.
Il sait que l'absence d'intégrité démolit, pervertit et détruit la relation. Les contacts et les
relations basés sur de la confiance composent la colonne vertébrale d'un réseau. Ainsi, la
survie et la croissance de son réseau dépendent d'un environnement d'intégrité.
ó Il a le sens aigu du « moment opportun ».
Sentir et saisir le moment opportun peut être la clef du succès! Cela implique bien sûr une
grande sensibilité aux besoins, aux frustrations et aux humeurs des gens.
ó Il sait que le secret d'une bonne action-réseau est...l'action.
Les contacts gravitent tout autour de nous... À nous de les repérer, de les attitrer dans notre
réseau et de les y retenir.
ó Il est très organisé.
Disposer d'une foule d'information, de noms, de contacts, d'idées et autres s'avèrent le nerf
de la guerre. Mais, à quoi cela sert-il s'il nous est impossible de dénicher ce dont on a
besoin, quand on en a besoin?
ó Il est enthousiaste.
L'enthousiasme, qualité contagieuse, génère de l'énergie positive. L'énergie et l'attitude
positive des « enthousiastes » leur permet de réaliser ce qu'ils désirent là où d'autres
échouent.
ó Il a le sens des responsabilités.
La bonne fée n'existe que dans les contes. Il le sait et s'assure d'en être une pour lui-même!
Conscient que la responsabilité de sa vie lui incombe, il est prêt à apprendre, à demander et,
évidemment, à partager.
ó Il est proactif.
Le champion réseauteur ne gaspille pas son temps à réagir aux critiques négatives et aux
plaintes futiles des autres. Il se concentre intensément sur la poursuite de sa vision.
ó Il utilise son réseau à bon escient.
Il prend le temps d'établir des liens avec les gens avant de solliciter leur apport. Il n'abuse
pas des membres actuels de son réseau. Ni possessif, ni jaloux de ses amis et contacts, il les
présente les uns aux autres.
ó Il sait remercier et rendre à César ce qui est à César.
Il sait partager les feux de la rampe. Il ne prend rien pour acquis et est généreux de ses
remerciements. Il critique avec parcimonie et félicite sans compter.

Bref
Réseauter, est un art qui s'apprend et requiert un équilibre délicat
·  de personnalité ;
·  d'attitude ;
·  d'acquisition de savoir.
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  3:40 PM 0 Comments
  The Six Most Common Outsourcing Mistakes

Lisa DiCarlo, 05.26.04, 6:00 AM ET
NEW YORK
Lost in much of the public debate about offshore outsourcing is the actual process of transferring business operations to a third-party company outside the U.S. It's time consuming, complex and fraught with peril. Fortunately, most companies make the same mistakes.

Big American companies have been outsourcing ever-more critical aspects of their business to offshore companies in an effort to cut costs and improve efficiency. Offshore companies can also provide better quality than the U.S.

But make no mistake. Planning, execution and continued oversight of an outsourcing strategy requires a lot of work. The benefits will not be realized immediately and cost savings will probably not be as significant as predicted.

Experts in the growing field of outsourcing advisory services say companies tend to fall into the same traps when planning, executing and maintaining an outsourcing strategy. We spoke with two such experts: Mark Hodges, CEO of Equaterra, and neoIT CEO Atul Vashistha.

  3:06 PM 0 Comments
  Survey Reveals IT Obstacles to SOX Compliance

By: SmartPros Editorial Staff
NEW YORK, May 28, 2004 (SmartPros) -- According to a joint survey by CIO Insight magazine and Gartner Executive Programs, there are several technology obstacles to overcome before companies can meet the Section 404 compliance deadline of the Sarbanes-Oxley Act.

<<...OLE_Obj...>>

The top three obstacles cited are problems with data structures, difficulties ensuring adequate security and business continuity, and variations in infrastructure between business units.

These issues are closely related, according to Marcus Blosch, Vice President, Gartner EXP. "They are the result of years of building information systems one-by-one in complex organizations, where data definitions, business rules and operating procedures are set department by department."

Based on the survey of almost 200 large, medium and small business CIOs and senior-level IT decision-makers (all of whose organizations must comply with the act), 36 percent said their companies have a long way to go to comply with Section 404. However, despite the fact that more remains to be done, 86 percent of respondents believe their company will be fully compliant in time to meet their deadline.

But there will be a price to pay in meeting these regulations. Close to a third of CIOs (30 percent) said the cost of compliance will have a significant negative impact on their companies' profitability during the next two years.

"There's no doubt that compliance with Sarbanes-Oxley will place a burden on corporations, especially smaller ones, in the short-term," said Ellen Pearlman, Vice President and Editor-in-Chief, CIO Insight. "However, some companies recognize this is an opportunity to clean up their processes and systems and use it to their business advantage."

Large companies are the most confident that they have the IT and financial resources to make their compliance efforts go more smoothly. Medium-size businesses are spending the smallest percentage of their overall IT budget on compliance, yet they're the most likely to invest in financial reporting software to meet the deadline and the most likely to say they expect to reap significant business benefits from their compliance efforts. Meanwhile, small companies are most likely to say they won't be able to meet the compliance deadline, citing an inadequate budget as the major obstacle to compliance. 

Two-thirds of IT executives surveyed said they're investing in financial technologies to help comply with Sarbanes-Oxley. Companies are most likely to spend money on document management and financial reporting and transaction software. Large and small companies are focusing on document management, while midsize businesses are most likely to use financial management software.


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  3:03 PM 0 Comments
Tuesday, June 01, 2004
  Premiers retours d'expériences sur Microsoft CRM

01/06/2004.
Les implantations de la solution CRM de Microsoft se comptent "sur les doigts d'une main". Un aveu qui n'émane pas d'un détracteur de Microsoft mais de Bertrand Launay, Directeur Division Entreprises à Microsoft France, qui s'exprimait mercredi 26 mai lors des "Rencontres de la relation client" organisées par le géant. Et un aveu qui trahit la très grande progressivité de l'adoption des solutions de ce type, même lorsqu'elles émanent d'un acteur comme Microsoft...


Rappelons (lire aussi l'article du 25/02/2004) que Microsoft CRM - écrite sous l'architecture .Net - bénéficie d'une bonne intégration à l'ERP Navision (et pour cause : Navision a été racheté par Microsoft) ainsi qu'au pack Office. La solution qui se concentre sur la gestion des forces de vente (gestion du cycle de vente, de l'action commerciale et marketing, mesure et prévision des ventes) et du service client (dossier client, traitement incidents et réclamations, gestion des processus) s'adresse potentiellement aux projets impliquant entre 5 à 1000 utilisateurs.

Bernard Julhiet (conseil en management et ressources humaines), ClimConfort (vente et installation d'appareils de climatisation) et Giraud International (opérateur de transports) font partie des premières sociétés à témoigner sur leur choix de la solution CRM de Microsoft.

A l'origine du projet de Giraud International, groupe européen disposant de 53 sites répartis sur 14 pays d'Europe, un besoin d'uniformiser les applications. "Les commerciaux sont éloignés les uns des autres et l'information est non partagée et souvent redondante" explique David Kirst, le directeur commercial. D'autant que des postes de chargés de clientèle ont été créés qui doivent, eux aussi, avoir accès à l'information des commerciaux. "De plus en plus d'exigences en relation client et de plus en plus d'intervenants", resume le responsable. Or il n'existait pas d'outil de gestion des forces de vente au sein de la société.

La réflexion sur un projet de CRM a donc débuté il y a 2 ans chez Giraud, et l'appel d'offres a été lancé voici 18 mois. C'est donc Microsoft CRM qui a été choisi. Pour M. Krist, "la solution s'avérait légère d'utilisation, peu compliquée à déployer et surtout ne dépaysait pas les utilisateurs habitués aux environnements Microsoft et travaillant sous Outlook". Ce dernier point avait d'ailleurs été l'un des éléments différenciateur par rapport aux autres solutions du marché. C'est Alsy, partenaire de Microsoft, qui s'est occupé du déploiement.

Plusieurs directions ont été impliquées dans le projet : commerciale (les forces de vente ont constitué dès le départ une équipe de validation), informatique et opérationnelle (pour la personnalisation du contenu). En phase pilote, l'équipe de validation a été rejointe par une population plus ancienne qui était moins favorable aux solutions technologiques. Cette organisation a permis de vérifier que la solution était accessible à cette deuxième population.

Le déploiement, qui doit concerner au total 220 utilisateurs, est actuellement en cours en Europe et devrait être terminé à la fin de l'été. Pour le moment la phase pilote se termine avec l'équipement des grands comptes et une formation des salariés est prévue au mois de juillet. Pour un vrai recul sur la solution, il faudra donc encore patienter. De fait, selon le consultant Philippe Niewbourg, "la solution, dont la principale innovation est l'intégration à la messagerie, est encore jeune et nécessite des points d'améliorations".

En France, Microsoft affiche déjà une quinzaine de partenaires qui commercialisent sa solution CRM, mais l'objectif est de recruter une cinquantaine de partenaires sur les 5 prochaines années.

Trois projets Microsoft CRM    
Giraud International (organisateur - opérateur de transport)   
Effectif        3150 personnes 
Chiffre d'affaires      484 millions d'euros   
Implémentation  Siège à Vitry sur Seine, présence dans 14 pays européens avec 53 sites 
Bénéfices apportés par MBS CRM  Les commerciaux bénéficient d'une gestion complète des contacts client et prospect, ils accèdent à l'historique de la relation avec leur client, ils peuvent organiser leur travail (agenda, fiches pour saisir les rapports de visite...). En bénéficiant d'une information centraliséen les commerciaux sont au courant de tous les appels d'offres au niveau pan européen.  
Bernard Julhiet (conseil en management et ressources humaines) 
Effectif        55 personnes   
Chiffre d'affaires      6 millions d'euros en 2003     
Bénéfices apportés par MBS CRM  Amélioration de la productivité et de la réactivité des équipes par un pilotage plus efficace des projets, amélioration de la satisfaction clients, rentabilité accrue, valorisation du capital humain.
ClimConfort (vente et installation d'appareils de climatisation)       
Effectif        22 personnes   
Chiffre d'affaires      4 millions d'euros en 2003     
Implémentation  régionale, objectif de couverture nationale d'ici 5 ans
Bénéfices apportés par MBS CRM  Optimisation du suivi de la relation client, accompagnement de la croissance, aide à la décision.      

Laëtitia BARDOUL, JDN Solutions
[AM-CHXKWV4]

  2:11 PM 0 Comments

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