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This article was originally published in the January 2008 issue of The McKinsey Quarterly. Copyright (c) 2008 McKinsey & Company. All rights reserved. Reprinted by permission.
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To keep pace with a rapidly growing company, CIO Marina Levinson must choose her priorities carefully.
By Roger Roberts and Tom Stephenson
June 2008
When Marina Levinson joined NetApp as chief information officer, in 2005, the data storage business "had a very good IT operation for a $500 million company," according to her. In reality, however, the company was already four times that large-and growing by 25 percent a year. Her primary task has been to build an IT organization that can help, rather than hinder, NetApp's continuing fast-paced growth. As Levinson says, "You never want IT to show up in a quarterly report as the reason the company didn't meet its revenue numbers."
Soon after joining NetApp, Levinson assessed the IT organization's capabilities and identified dozens of processes and activities in need of improvement. Launching a broad organizational transformation of the function was out of the question, given the need to scale it up quickly to remain in step with the growth of the business. Instead, she identified and then tackled concrete sets of high-value improvements. To ensure that they aligned with the company's strategic direction, she adopted a governance model placing positions for key IT decision makers within the business units and appointed people who could help her ascertain whether IT resources were invested in the right projects.
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The implementation of these change initiatives hasn't always been smooth: business leaders (and IT managers) who had grown used to an IT department that merely took and fulfilled orders had to get comfortable with IT leaders who challenged them and kept an eye on the IT strategy of the broader enterprise. But the changes were necessary-and, despite the bumps, ultimately successful.
Working to change the profile of IT requires close collaboration with the business and-even in tech-friendly Silicon Valley-the ability to show colleagues inside and outside the IT department why change is necessary and possible. To understand how high-tech CIOs manage this type of transformation, McKinsey's Roger Roberts and Tom Stephenson talked with Levinson at NetApp's office in Sunnyvale, California.
The Quarterly: When you came in, how did you identify what had to be fixed?
Marina Levinson: To figure that out, we conducted high-level interviews with executives and a series of work sessions to identify the biggest problems we faced, as well as the top five or six things that we needed to focus on in the next 18 months to be successful.
NetApp has always been strong in product innovation, which has helped us gain new customers. But in recent years, closeness to customers has become a much more important component of our company's strategy, as we've deepened our ongoing service relationships with them. When you sell to CIOs and other senior IT execs who understand IT operations, the expectations around IT customer support and professional services are very high. I think that we've done a marvelous job in the last four or five years and truly developed excellent capabilities in this area-for example, with systems that can remotely diagnose trouble in our products and signal it to us, sometimes even before the customer becomes aware that there may be a problem.
The Quarterly: How did you decide on your transformational priorities?
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Marina Levinson: Because of the company's rapid growth, we had never really focused on improving business processes, but we knew we would have to as part of our long-term growth strategy. In a normal business process transformation, you would focus primarily on making improvements on the process side. But 90 percent of our critical processes have IT implications, so we have to deal with business processes together with the IT that supports them. Our systems and processes are very tightly linked.
Our assessment revealed that we had something like 200 capability gaps between where we were and where we needed to be. We believed that embracing something like Six Sigma would mean death to the company and to the change program because Six Sigma is a change methodology that does not enable you to move quickly enough to get from here to there. Instead, we found that a more effective approach was to identify the five top critical process capability gaps that could prevent us from scaling up our business and then to attack those gaps with gusto. This allowed us to continue to build quickly while also looking at least two or three years ahead to make sure that we had a road map of where we wanted our business and our technology to go. We revisit the road map every year because our business is pretty dynamic. Our problem areas will change, and we need to be nimble enough to address changes in the strategy.
For example, we identified our order-to-cash process as something we needed to improve in order to be able to scale up our business. When I started, a large percentage of our sales orders had to be manually touched by someone on the order-management team. Since so much of our business comes at the end of a quarter, that really threatened our ability to scale. So about a year ago, we started attacking that from the business process and systems perspectives and we've managed to reduce orders requiring a manual touch by 75 percent.
It's somewhat challenging in this environment because NetApp is so driven by results, and there's a need to deliver tangible business value in 90-day increments. When the company doesn't see the results fast enough, questions start to pop up. So communication and change management are paramount because you want to show clearly not only the road map but also the results that we're generating by working on this transformation.
Next: Levinson's Transformational Priorities
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