The Future Company The role of the CIO and the IT department Copenhagen, December 2002

Is this the status of your present IT department? Constantly having your hands in the dirt trying to maintain adequate velocity

Leverage systems toward new business! Trying to gather information in order to obtain an overview but it seems impossible

Looking at best pratice! Fierce competition in the marketplace combined with more rapid product cycles Lanell is a part of the WM-data Stratevo network

Agenda 1. Lanell Innovation is a part of a pan European Network 2. Innovation and the IT organization 3. How to apply innovation in a working organization

Virtual Organization Structure ? R R R R R ? R R R R R ? R R R R R ? RR What is a Virtual Organization? Facilitates the workflow of a group of users across multiple domains who share [some of] their resources to solve particular classes of problems Collates and presents information about these resources in a uniform view Members configure project teams in order to meet customer needs quickly Lanell Innovation is a networking company with a virtual organization

Networks are a reality Technology now allows networks both to become easier and to expand Networking is basic Virtual organization stripped of its technological aspect - has always existed what is new - is technology now allowing such activities both to become easier and to expand; barriers of distance and time are no longer constraints for business in communicating with employees, suppliers, customers, partners What is new in networking Barriers of distance and time are no longer constraints for business in communicating with employees, suppliers, customers, partners. Enabling temporary operational units based on market opportunity Facilitating that partners contribute only with their strengths (core competencies)

Forces feeding the power of networking Ability to respond requires a new flexibility that affects our traditional ideas of organization and management Effects driving networks Growth in importance of the individual who values loyalty to a profession above loyalty to one organization - and who values their private and working lives equally Disappearance of the job for live and of progress up the career ladder Shift from manufacturing-based to information-based economy Organizational structures and management concepts of the past are no longer viable in market place of rapid change Technologies are now converging to support the flexibility demanded by organizations

Lanell is a part of a pan European network Lanell Innovation is the network facilitator that initiates Virtual Organization, maintains relationship between the member companies, facilitates the formation of market and customer driven temporary Virtual Corporation, Lanell Innovation is based on: Partner Equality Boundary Crossing Geographical Dispersion Complementary Core Competencies Pooling of Resources Changing Participants Electronic Communication

Infinite innovation Sustain constant product development and accelerate product cycles in the organisation What Lanell Innovation does differently Share knowledge and add value to corporate knowledge Based on equality of Partners Innovative and Flexible with a small core organization Stripped to core competencies Use of Information and Communication Technology Focus on the essentials Outsourcing all non-essential Lanell Infinity model

Agenda 1. Lanell Innovation is a part of a pna European Network 2. Innovation and the IT organization 3. How to apply innovation in a working organization

Proposed closing the US patent office in the late 1700s because everything necessary had already been invented John Adams Proposed closing the US patent office in the late 1700s because everything necessary had already been invented John Adams Does innovation matter ?

Innovation matters! Average annual shareholder return 1986–99 Innovativeness 20 % 10 % 0 % –10 % –20 % (Sample: 600 U.S. corporations) Arthur D. Little research has shown the explicit link between innovativeness and shareholder return

Innovation for sustained value creation Leading companies have been able to capture the Innovation Premium by making innovation their main strategic thrust

Revenue (MM DKK) ? Today2007 Target Market Expansion Base Revenue Traditional Mergers and Acquisitions New Products Currently in Pipeline Growth Gap Target The CIO play a major role in closing the growth gap. To do this the CIO needs: In-depth knowledge of IT and the capacity to apply IT strategically. Streamline IT department Along with general business experience outside of IT and the ability to get messages to top management. Illustrative Where do future revenue growth come from? Companies need to recognize that innovation is the key element in closing the growth gap - this involves the CIO.

Profile of typical CIO The CIO needs to stay focused on the big picture while constantly improvising. Profile 90 percent are male. 64 percent have IT backgrounds. Of those with non-IT backgrounds, most have experience in finance or operations. Nine percent are expatriates. The CIO face challenges: Make the shift from playing a more tactical role, to becoming an integral part of strategic planning and knowledge management. Make high-stakes decisions and big-ticket expenditures in areas that the companys top decision-makers may not understand. Be an effective team player while shaking up the status quo. Contact with CEO 15 percent of U.S. CIOs have no interaction with the CEO. 17 percent interact with the CEO less than once a year. 11 percent interact less than once a month. Needed skills 65 percent of U.S. CIOs believe that their successors will have a different skill set than they have. 80 percent think a grounding in business skills or an MBA is important to their success. Most of those who say that their current job is NOT a route to the top cite insufficient business or functional experience.

Analyzing the IT organization Added value Impact Cost efficiency Computer operations Systems Development And maintenance Systems and Information Architecture Business Requirements Identification The traditional IT department has undergone huge evolution – Information technology is on the track to become basic business The traditional set of tasks for IT department has included: Managing operations of data centers, remote systems, and networks Managing corporate data Performing systems analysis and design, and constructing new systems Systems planning Identifying opportunities for new systems IT knowledge Business knowledge Balance of expertise required

Changes in traditional functions Added value Impact Cost efficiency Computer operations Systems Development And maintenance Systems and Information Architecture Business Requirements Identification Different forces are pushing the traditional functions IT knowledge Business knowledge Balance of expertise required Growing external services Growing capability of users The following trends are moving their performance out of the IT department: Distributed systems More knowledgeable users Better application packages Outsourcing

Organizational Effectiveness 5.Restructuring the industry 4.Restructuring the organization 3.Growth and Increase in market Share Operational control 2.Asset management 1.Process management Management focus Remain in Business 5.People Systems Knowledge control Make Money 4.Megadecisions 3.Marketing, distribution, customer service Save Money 2.Financial, manufacturing, services 1.Administrative Functional use Tuning management focus towards real application benefit Reducing costs 1 2 Leveraging Investments 3 Enhancing products and services 4 Enhancing executive decision making 5 Reaching the consumer Above the line Below the line Where do traditional IT functions stop and key business processes start?

Changes in the roles of the IT department Added value Impact Cost efficiency IT knowledge Business knowledge Computer operations Systems Development And maintenance Systems and Information Architecture Business Requirements Identification Balance of expertise required CIOs must start reshaping the way the enterprise and IT department works and competes IT departments have two missions: maintain todays systems and work on tomorrows systems. The Today operation should concentrate on providing services, while the Tomorrow operations need to focus on helping the businesses operate better. The IT department must keep performing while transforming New Roles in IT Broker Business and Information Architecture

Keeping up speed The CIO play a major role laying out the playing field. To do this the CIO needs to: Have IT performance analysis, indicating problems and need in current operations Encourage project teams to study the marketplace They are becoming more proactive by helping to create a vision of the firms future and its use of IT and selling those ideas to others Develop a competent business driven IT staff and IT-savvy users Implement systems that helps leverage information and cross department strategies Establish close relations between IT executives and general management CIOs are required to bridge the innovative gap between IT optimizing initiatives and business development

Agenda 1. Lanell Innovation is a part of a pna European Network 2. Innovation and the IT organization 3. How to apply innovation in a working organization

Normal people can and will innovate of their own initiatives if enabling conditions are present. A. Van de Ven Normal people can and will innovate of their own initiatives if enabling conditions are present. A. Van de Ven Can your organization become highly innovative?

Initiate a plan for innovation Creating an organization culture that enables innovation Vision – Declare the importance of innovation; make it part of the companys self-image Foresight – Find out where technologies and markets are going. Identify articulated and unarticulated needs of the customers Stretch goals – to make quantum improvement Empowerment – Hire good people, trust them, delegate, provide slack, and get the #$%& out of the way Communications – Open, extensive exchanges according to ground rules in forums for sharing ideas, and where networking is each persons responsibility Rewards and recognition – Innovation is an intensely human activity. Keep good people happy. It is imperative that CIOs and general management articulate the companiess innovation policy

Knowledge that one has is critical to personal success Knowledge that one has and shares is critical to personal success Reuse destroys creativity Reuse can fuel innovation Value is derived only from personal creativity Better ideas can be generated from interaction and collaboration The right mindset is essential Routinely seeks knowledge to increase effectiveness Occasionally seeks knowledge to fill gaps Leverages institutional networks Leverages personal network Routinely captures and shares knowledge with global network Occasionally captures and shares knowledge with personal network Behavior Beliefs PractitionerKnowledge worker It is vital to nourish the beliefs and behaviors of the knowledge worker

The Lanell workflow for applying innovation Before embarking on the innovation mission ensure that you have the right setup in place Setup the company for innovation Mentorboard – Establish a mentor board with senior employees from all parts of the organization Develop Business Case tools – Set a standard for BCs that enables Value driving decision making Define hierarchies – Dont realize too late that ideas are the main business asset Define rewards – Fuel the idea process

Never time to do it right, always time to do it over! Never time to do it right, always time to do it over! Be cautious of harmfull agility

Lanell Innovator helps accentuate innovation Supporting the process of knowledge and innovation driven organizations

Niels Stenfeldt Poulsen Managing Director Lanell Innovation Mosede Højvej 24 DK 2670 Greve Denmark Website: Niels Stenfeldt Poulsen Managing Director Lanell Innovation Mosede Højvej 24 DK 2670 Greve Denmark Website: