When I started in IT at insurance company MetLife in 1970, my background was as far away from insurance as you could possibly imagine. I was an engineer, and I had studied towards a doctorate in solid-state physics.
I decided that, in order to succeed, I had to understand what made the business go, what contributed to the top line and bottom line. So I took the same courses that somebody who sells the product needs to take, and passed 10 different exams to become a chartered life underwriter. Once I understood how we created and sold insurance products I knew I could use technology to influence business results.
This orientation toward business results – driving new sales and productivity, increasing customer retention, reducing administrative costs and increasing profit – became my success formula for creating value with IT. MetLife was the first large life insurance company to automate its sales offices, and it gave us a competitive advantage. At the time, a lot of people were sceptical of the initiative, but because of my knowledge of how agents made sales, I was able to make the case to the executive vice president of individual insurance operations as to how different the world would be if we took advantage of the then emerging mini-computers to move systems out to the sales offices.
It’s all about the numbers
By far, the largest expense in the insurance business is paying claims. The obvious question becomes: ‘How can IT help the business drive that cost down?’ When we do so, we drive those savings right to the bottom line. The impact can be measured in millions of pounds.
For a health plan like Humana, we accomplish this by providing tools that offer transparency to patients about healthcare utilisation, its costs, and options they can discuss with their doctor such as the potential to switch to a lower-cost generic drug. We implemented an IT-enabled programme called ‘maximise your benefits’ that creates value both for our members and the company. We use outbound automated calling, personalised monthly statements and pop-up customer care screen alerts to advise our members of opportunities to switch from a brand-name medication to a generic. We also let members know that they could save money using our mail-order facility to fill recurring prescriptions instead of going to a pharmacy. We then use analytics to measure the results, for example by tracking whether individual members took our recommendations. We can see which type of message is most effective in changing behaviour, and calculate savings. The results have been significant, and are directly attributable to IT.
Learn how to run a business
How do you learn to key into business drivers and results? When I had gone through a few different IT roles at MetLife, the people there said to me, “If you want to be CIO of the company, we want to see you run a business for two years first”. They gave me a business that was losing money and told me to make it profitable. If I succeeded, I’d get to be CIO – and that’s what happened.
Short of running your own business, you could run your IT organisation as a business within a business. Deliver IT services, pitch your products, make your numbers. You may never sell your company’s product, but you should understand selling and budgeting. You should also report to the CEO and have a seat at the table. If you aren’t at executive committee meetings, you can get yourself on the distribution lists for internal reports about business results, and you can network with your fellow business people to understand their issues.
If you report to the CFO, you can still cultivate a focus on business results. In fact, this is an area of common ground with your boss, since the CFO is the master of business results. At Humana, if we in IT have an idea, we have one of our financial analysts within IT review its potential costs and benefits and determine what the results of a pilot would need to be to justify further investment. If you don’t have your own financial people, borrow one from the CFO’s organisation. Then the CFO will know you are serious about finding out whether your ideas make business sense.
Get results, help your career
I have no doubt that business competency and a focus on results is a boon to any IT executive’s career. First, it makes a huge difference to how the CEO views you. If the CEO sees the IT head as a technologist who is not an active partner in trying to achieve business results, that CIO is probably not going to have a long-term future at that company. He’ll get out of step with business goals and people will complain that they can’t get what they need out of IT.
Second, a strong results focus positions you for further opportunities. In addition to my CIO role, I also run the entire service operation at Humana, a combined organisation of about 10,000 people. The service group is responsible for controlling administrative costs and, through operation of our call centres, also has a big impact on customer retention.
I got this role because I made the case that if IT and service operations reported to the same person, we’d work better together to define priorities and deliver systems that drive results. In companies where IT and services are separate, IT is only responsible to deliver the project, while the operations group is responsible for requirements and deriving the value. That can lead to finger-pointing if the pay-off doesn’t go as expected.
One word of caution: it’s possible that a CIO can become so business focused that he or she doesn’t pay enough attention to executing on a reliable IT service. You have basic blocking and tackling responsibilities that you can’t ignore. You can delegate that, but you still have to ask the right questions of those to whom you delegate, and make them show you their metrics.
Looking back at my career, there are three things that I believe have been essential to my success: understanding business processes, knowing where the leverage points are to improve top and bottom line performance, and developing strategic partnerships with the business. By focusing on these areas, any CIO is positioned to fulfill a strategic role.