The Role of the CIO

1. The Role of the CIO Carine Bonnet John Maynard Gavin Shelton Rositsa Tsokova Sarah Wilkinson

2. Learning Objectives • Why this topic is important for the General Managers • CIOs can add real value to the business • Business skills vs. IT skills • What you will learn from our presentation • CIO statistics and information from scholarly research • CIO role in US & Europe • Real interview results with CIOs of Anheuser-Busch, Smurfit-Stone and NSI J

3. CIO Role • CIO – Defined Chief Information Officer (CIO) is an “executive responsible for development, implementation, and operation of Information Technology policies. CIO oversees all information systems infrastructure within the organization, and is responsible for establishing information related standards that support enterprise goals.” (source 1) R

4. CIO Role “The role of the modern CIO is less being purveyor of technical solutions and more being a business partner” - CIO Bob Worralls - Sun Microsystems “ Further, CIOs are expected to be business partners who understand the business aspects of the organization. Given that IS permeates all business functions, the CIO ideally needs to also have a holistic understanding that crosses functional boundaries” - Karahanna and Watson “The CIO position is also continuously evolving. One key is that the CIO must develop both a business and IT perspective.” - Patten, K. (source 2,30,31) R

5. 3 Types of CIOs Business Strategist • Developing/refining business strategy • Developing external customer insight • Developing business innovations • Identifying opportunities for competitive differentiation Transformational Leader • Managing IT crises • Developing IT talent • Improving IT operations • Improving system performance • Security management • Budget management Function Head • Redesigning business processes • Aligning IT initiatives and strategy with business goals/strategy • Cultivating the IT/business partnership • Leading change efforts • Implementing new systems and architecture • Mapping IT strategy to overall enterprise strategy (source 3) C

6. Type of CIO related to the company needs G

7. Type of CIO related to the company needs (Source 3) G

8. CIO Role (source 3) Based on 558 companies S

9. CIO Role (source 3) Based on 558 companies R

10. CIO Demographics (source 3) Based on 558 companies California study of their 200 largest companies found only 4 companies have female CIOs. (source 4) S

11. CIO Annual Compensation (source 3) Based on 558 companies S

12. CIO Demographics R

13. CIO IT Budget The slow down of the US economy in 2008 has affected the IT budgets of the companies. According to the findings of Forrester , a US-based research company, 43 % of companies have already cut their overall IT budgets in 2008, and 24 % have put discretionary IT spending on hold. (source 5) * In Millions (source 3) Based on 588 companies R

14. IT Spending in EUROPE IT spending in Europe versus the US: • UK businesses and governmentswillspend €61 billion ($79 billion) • German businesses and governmentswillspend €57 billion ($74 billion) • France and Italyspend about two-thirds the size of the UK ($52 billion) • Spain, Netherlands, and Switzerlandwillspend €15 billion to €20 billion each ($20 to $25 billion) (source 6) C

15. EUROPEAN CIO’s INVOLVEMENT • Most Europeancompaniessee the CIO as a Technicianwho has no role • in the company’sstrategicdecisionsand innovations. • (sources 32,33) C

16. CIO Tenure • “State CIOs are averaging 26 months in their jobs, which is why state and local chief information officers joke that CIO stands for Career Is Over.” (Source 14) • “Rob Tabb is the 13th head of IT in 26 years, according to a longtime employee. This turnover rate is even more stunning considering that the CEO has been with the $3.4 billion chemical company for more than 45 years.” (Source 15) J

17. CIO Tenure • Average CIO Tenure Since 2003 • Average CIO tenure climbed from 2003 to 2007 but dropped in the 2008 State of the CIO poll results. (Data not available for 2005) • Year Average Tenure (Years)* • 2003: 4.3 Years • 2004: 4.5 Years • 2005: N/A • 2006: 4.9 Years • 2007: 5.1 Years • 2008: 4.4 Years (Notice the drop) *Number surveyed = 558 (source ) J

18. CIO Tenure • Been in the Job Long? • CIOs who have held their job for less than 2 years has increased by 7 % since the “State of the CIO” survey in 2006 • How Long Have You Been In Your Current Position? (source 3) Based on 558 companies S

19. CIO Tenure • “You only stick around by delivering results. CIO’s have demonstrated they are good business managers.” Mark McDonald, VP of Gartner Inc. referring to the increase in tenure of Chief Information Officers.(Source 27) • CIOs must possess leadership qualities to last in the business • “The ability to lead and motivate people is a must.” • -Richard Hoppe, Director of IT, Anheuser-Busch (Source 28) • “Leadership is the traditional role of the CIO…the CIO is personally instrumental in the organizational exploitation of IT.” • Feeny / Willcocks(Source 29) S

20. How CIOs Spend Their Time • 2 main viewing points • Group • Amount of time • Both mean andmedianshow most time is spent with … • IT staff or team (40%) • Company’s executives (avg. 21%) G (source 3) Based on 555 companies

21. How CIOs Spend Their Time *(source 3) (Based on 542 respondents’ choices of which activities comprise their primary focus “It’s not surprising that most CIOs are consumed with transformational duties and alignment, and that an additional large percentage are homed in on the IT function and its operations. Few CIOs have the luxury of spending most of their time on strategy; those that do have earned it by building a smooth-running, efficient IT operation and a strong partnership with the business that keeps the portfolio in synch with business needs.” –CIO Magazine (source 3) G

22. How CIOs Spend Their Time Looking towards the future…the importance of a business outlook. “When chief information officers (CIOs) first entered the executive suite…they were not exactly a popular addition. ‘More comfortable with computers than people’ was a common verdict on CIOs who had risen through the information system ranks. Employers seemed to face a simple trade off: CIOs with depth and breadth of technology experience or those with general business and interpersonal skills, such as the ability to exercise influence within the organization.” - Mary Kwak “We believe that this is the future-state of the CIO role, which in time will become the mandate for most CIOs at most businesses. None of this is to say that we, or any other CIO, should turn our backs on the operational or IT transformational aspects of our role. But as the position evolves, we are spending proportionally much more of our time as strategists versus the other aspects of the role.” - Louis Ehlrich, CIO of Chevron Global Downstream and Vice President of Strategy and Services. (Source 18, 3) J

23. Evolving CIO Leadership RoleBusiness skills vs. Technical skills (source3) Based on 558 companies Established CIOs spend about 2/3 of their time on non-technical issues The emphasis on non-technical issues shows the leadership role of CIOs is changing, with a greater focus on business issues and improving organizational growth “He realizes that his role is not just about technology, but is concerned with business transformation, business success, and business leadership.” Jerry Luftman and RajkumarKempaiah on Cendant Corporation CIO Lawrence Kinder (source 35) J

24. CIO Interviews Joseph Castellano Mark O’Bryan Mary Ann Jacoby

25. Main Facts of Companies Interviewed (source 19,20,21) C

26. CompaniesBackground Information

27. Companies • Anheuser-Busch, Inc • Anheuser-Busch International, Inc. • Anheuser-Busch Packaging Group • Metal Container Corp. • Eagle Packaging Inc. • Longhorn Glass Corp. • Busch Entertainment Group • Manufacturers Railway Co. • Anheuser-Busch Agricultural Operations • St. Louis Refrigerator Car Co. • Anheuser-Busch traces its origins back to the Bavarian brewery, which was established in 1852. 1860 - Eberhard Anheuser acquired the Bavarian brewery and renamed it E. Anheuser & Co. In 1864 Adolphus Busch, joined the company that would later become Anheuser-Busch. • 48.8% of U.S. beer sales • 2007 Net sales $16.69 billion Net Income $2.12 billion • 30,849 full-time employees (source 22) S

29. North America’s premier packaging company • Smurfit-Stone Container Corporation was formed November 18, 1998, when St. Louis- based Jefferson Smurfit Corporation (JSC) merged with Chicago-based Stone Container Corporation. • Home offices in Chicago and St. Louis • World’s largest paper recycler • Industry’s largest paper based packaging company • Size • 22,700 employees • 2007 net sales were $7.42 billion with a net income of about $ -115 million • Capabilities • Corrugating packaging (world’s largest) • Mill products • Recycling solutions • Point-of-purchase displays • Packaging Equipment Some factories located in Canada, Mexico, and China • (sources 23,24,25) R

30. Was started as a commercial art company in 1919 • Family owned until 2005 (still private company) • Offices in St. Louis (Home), Los Angeles, New York, and Detroit • Largest advertising agency in St. Louis • 200 employees • Core Components • Asset Management • Co-op and Compliance • Sales Promotion • Print on Demand • Research and Intelligent • New Media Solutions Major Clients (source 26) R

31. IT Departments structure

32. Anheuser-Busch IT “Run” “Plan” “Build” • Faces business units – primary contact for all I.T. • Develops deep understanding of how business works • In partnership, develops I.T. Strategies with “customer” • For new applications, lead in designing requirements, effective implementation, benefits • realization • Provides user training, maintenance, minor work on systems • Innovates how information is obtained, used to drive business unit performance • Runs the systems that deliver business applications • Delivers and maintains I.T. infrastructure and customer support services for the business, with ongoing focus on availability, performance, • security, customer service, and cost effectiveness • Anticipates and plans future infrastructure and enterprise systems needs for the business, • including capacity growth and R&D of new technologies • Partners with Business • Technology and PMT • Manages all new major projects, • developments • Manages consistent, quality approach for system developers • Leads, coordinates development, updating of enterprise-wide systems (SAP, • Siebel, etc.) and tools (e.g. “business intelligence) • Develops, applies expertise in • I.T. “state of the art” Accounting HR (source 17) G

33. Anheuser-Busch IT Breakdown • About 1200 people within IT worldwide • Budget is about 1.6% net sales (about $267 million) • Didn’t disclose in detail • Largest percentage went to salary • “Money buys brainpower” – Joe Castellano (source 17) G

34. Smurfit-Stone IT IT Operational/ Functional Owners Demand Management Supply Management Container Keith Fehd John Knudsen Steve Strickland Matt Denton Applications Doug Bolen Mill/Board Sales/ Supply Chain/ Reclamation Greg Schissler Sonny Jackson Math Blanchard Mike Oswald Infrastructure & Architecture Jim Adams Finance & HR Chuck Miller Paul Kaufmann Ron Hackney (source 26) J

35. Smurfit-Stone IT Breakdown • About 320 people within IT worldwide • Budget is about $89 million (1.2 % of the Net Sales) • $30 million salary • $25 million depreciation • The rest is used for consultants/outsourcing/hosting fees (source 26) J

36. NSI IT (source 18) S

37. NSI IT Breakdown • About 30 people within IT • Budget is still being worked on • Since 2005, all budgets were individual per project thru CFO • 2009 will be the first budget year brought to senior management • Salaries are most expensive within IT budget • IT is most expensive department at NSI (source 18) S

38. CIOs Background

39. Joseph Castellano • Received a degree in journalism from Northwestern University • Got hired into AB in the marketing department where he spent several years • He served as Vice President of Retail Marketing from 2001-2004 • He then served as Vice President of Corporate Human Resources from 2004 to March 2007 • In march of 2007 he was named Vice President and Chief Information Officer “It appears that only highly interpersonally skilled individuals—regardless of technical background—advance to the CIO position.” – Enns et al. (source 17,34) C

40. Mark O’Bryan • Bachelors and Masters in mechanical engineering from the University of Dayton • Worked at GE in aircraft engineering, then audit staff, and supply chain and procurement—worked for GE for a total of 13 years • Brought to Smurfit-Stone right after merger and was appointed Vice President of Procurement in order to help two companies find synergy after merger—4 years • Was appointed Vice President of Operational Management • Moved up to Vice President of Strategic Initiatives in July 2005 • In April 2007, Mr. O’Bryan was named Senior Vice President of Strategic Initiatives and Chief Information Officer (source 26) R

41. Mary Ann Jacoby • Received a degree in Business Administration (Management Information Systems) from UMSL • Got hired by Ralston Purina as a Tech Specialist in the Emerging Technologies Group • Then served as the IT liaison to the sales/business side • “Claim to fame” was automating the district sales team • Built technical training programs for sales teams • Left Ralston Purina and started her own consulting company (12 years) • “Boutique place for small to mid-sized companies that needed IT solutions to various business components” • Eventually sold off pieces of the company and just did web-based marketing services on her own • Got hired by NSI in 2005 in Technical Business Development (made up position) • Bridge gap between IT and sales • Taught company IT vision instead of on a client by client basis • Was appointed CIO when old CIO left • Pushed IT development and vision alignment with business (source 18) R

42. Typical Day/Major Responsibilities

43. Typical Day/Major Responsibilities • Lots of non-technical duties • Communicate with managers (often times learning on technical issues) • Keep senior managers up to date • Sits on Strategic Planning Committee • Most time spent on being “face guy” to business side to align IT with business and instill IT value in company (source 17) J

44. Typical Day/Major Responsibilities • Manage 3 models from IT layout (see chart) • Operational • Demand • Supply • Most time spent working with business working on change • Not very technical – trust managers under him • “Face guy” to business side to instill value in IT • Money for projects (new $130 million IT project to centralize processes/system for factories) • Communicate with senior manager to help align strategies (source 26) G

45. Smurfit-Stone IT IT Operational/ Functional Owners Demand Management Supply Management Container Keith Fehd John Knudsen Steve Strickland Matt Denton Applications Doug Bolen Mill/Board Sales/ Supply Chain/ Reclamation Greg Schissler Sonny Jackson Math Blanchard Mike Oswald Infrastructure & Architecture Jim Adams Finance & HR Chuck Miller Paul Kaufmann Ron Hackney (source 26) G

46. Typical Day/Major Responsibilities • Never a typical day (smaller, new company) • Try to put structure in company • Never has been formal structure • Managing priorities within IT and various department • Install overall vision for future • Teach management team to have process in IT • “Sell it then build it” vs. “Have model already in place” • Have departments understand how IT works • Align IT with company view • Support sales team • How IT will keep company competitive in the future “I’m a very hands on CIO which is probably different from other corporate CIOs you have talked to.” –Mary Ann Jacoby (source 18) J

47. Who Does a CIO Report to?

48. Who Does a CIO Report to? • Mr. Castellano felt this debate is highly overrated • The debate between CFO/CEO receives too much press • Reports to Mike Owens (Vice President of Business Operations) • Has a great relationship • Because of previous positions held, relationships with all senior executives are excellent • Trust from his dept. and from other senior managers • Because of seniority, Mr. Castellano has a strong voice in lots of decisions (Strategic Planning Committee) (source 17) C

49. Who Does a CIO Report to? • Mr. O’Bryan Reports to CEO (Patrick Moore) • Used to reports to CFO (Charles Hinrichs) –focus on driving cost down • Now focused on IT change so reporting to CEO helps this process • Has worked for CEO in other positions at Smurfit-Stone (lots of trust) • Give updates once every 3 weeks • Weekly update through email • Uses CEO to fire department up when needed • Thinks its better to work for CEO (keeps alignment with business close) (source 26) R

50. Who Does a CIO Report to? • Ms. Jacoby used to report to CEO (Mark Mantovani) • Now reports to COO (Dennis Griebel) • Very close relationship • Mr. Griebel helps lead support for IT • Is really important for Ms. Jacoby • Views on reporting to the COO • Mr. Griebels play “traffic cop” for all the departments, so reporting to him makes sure IT and the other departments are in synch (source 18) S