Even if they’re not technology experts, directors should be able to question management about how technology decisions support a company’s business strategy, says Louis J. D’Ambrosio, chief executive officer of Avaya, the $5 billion communications systems provider that was spun off from Lucent. D’Ambrosio talked about best board practices in an interview with Directorship at Avaya headquarters in Basking Ridge, N.J.:
We know that the era of godlike chief information officers has long passed. In your view, how should the C-suite work with the board to seize technology opportunities?
First and foremost, you have to get it on the agenda. At Avaya, we have IT on the full-board agenda at 70 percent-plus of our meetings. It’s IT in all respects, not just in its control perspective but also its support role and enabling perspective. The board cannot abdicate the technology discussion to the CIO or management. If management can’t describe the role of technology in plain English, then the board has to address management’s communications skills. Even though technology has a complexity to it, its purpose and function and utility have to be described in clear business terms.
Are directors expert enough to be involved in technology decisions?
Board members do not have to be programmers. They do not have to write code. They do not have to write complex software. But they have to understand, “If we’re going to be reporting our segment profitability externally, will our technology systems be able to address that?” If management makes a presentation about the ways they are changing pricing methodologies, it would be reasonable for a board member to ask, “Are we comfortable that the technology systems will be able to ascertain the kind of information we need?” If they want to improve customer satisfaction, it would be appropriate to ask, “What is the role of technology in changing customer experience? When customers speak to one of our people directly or interact with us through the Internet or contact one of our call centers, do they get three different experiences?”
All those questions have nothing to do with the intricacy of technology. They have to do with the imperatives of the business and appreciating the role that technology plays. Directors should not become experts on technology, but they need to be inquisitive about its role in helping the organization achieve its business objectives.
Should boards improve their technology smarts by adding different types of directors?
I think there is a learning curve. Our most recent board member was specifically put in place because of his technology expertise—Frank Fanzilli, the former CIO of Credit Suisse. The more important thing is not abdicating decisions to the specialists in management. For example, all financial decisions on a board are not abdicated to the chair of the finance committee or the audit committee. Or when an organization is going through an acquisition, is everyone on the board an expert in the nuances of an M&A deal? Is everyone a world-class financial expert? No. But will everyone on the board weigh in on whether an acquisition makes sense? Absolutely. On our board, one member has a background in leading very large commercial banks, Tony Terracciano. He’s one of the more engaged individuals in questioning whether the technology roadmap is consistent with our strategic vision. We also just brought on a new CIO, Lorie Buckingham. One reason I selected her was that she’s a business person first and a technologist second.
I’m not sure why a culture has developed in which board members can weigh in on topics where they’re not experts, but they don’t do that in technology. That must change over time. There is increasing responsibility and liability for board members. When it comes to what information is available and what information is identified, I’m not sure there’s anything more important than IT in presenting and illuminating that information.
Should boards have technology committees, or would a decision about, say, reporting and disclosure systems be made by the audit committee?
It depends on the board. I don’t think it’s a requirement to have a technology committee. In our organization, it’s done in three places. It’s done at the broader board meeting. It’s done almost always in the audit committee meetings. It’s also done through individuals like Frank Fanzilli, who are subject area experts.
What are you seeing among your customers, in terms of technology decisions?
I see technology committees emerging, but I haven’t seen a consistent trend in terms of industry or size of the company. It seems company-specific. But I am seeing more CEOs engaging with their board members on important technology decisions. It’s particularly true at Avaya, because so much of our technology has to do with how employees interact with customers. Anything that has to do with a company interacting with its customers usually rises to the level of a board discussion.
One of our sweet spots is in the whole contact center space. It means understanding who’s calling, why they’re calling, what their propensity to buy is, what are the cross-selling and up-selling opportunities and how to increase customer loyalty. When you are making a technology decision that has a direct impact on customers, it would be a fair bet to say that those decisions will reach the board level. If it were purely an infrastructure decision, I would say less so.
Besides customer contact, in what other areas does technology directly enable business strategy?
Examples are Honda Formula One changing the cycle time to develop a new engine and Whirlpool changing automatic replenishment and automatically alerting the CEO if there’s a change in the stock price. These examples are not about someone saying, “Here is the strategic vision. You in IT, come and support it.” These are people who have embraced technology to help differentiate their organizations.
Avaya is a leader in Voice over Internet Protocol. Is that a technology whose time has truly arrived, or is there still a whiff of experimentation about it?
In 2006, over 65 percent of the 50 million lines were Voice over IP. That’s a staggering adoption rate. We’ve never seen anything like it. People will look back and say there were three fundamental paradigm shifts in the past 50 years. There was the explosive adoption of personal computers. There was the revolutionary introduction of the Internet. And there was the convergence of voice and data.
What does it mean for communications?
In the original value proposition, Voice over IP was basically only about cost savings. It was saving money on long distance toll charges. You integrated networks by putting voice and data over one network. Over the past four years, adoption has been spurred by business process transformation and business model innovation. You’re embedding voice and data directly into the core of a company’s business processes. Imagine if you call me, and when the phone on my desktop rings, no matter what cell phone or BlackBerry or Treo device I’m carrying, it rings simultaneously. When I pick up the phone, I have the full functionality that I have in my office.
Are businesses using this technology already?
Steve Wynn at Wynn Resorts redefined customer service in the hospitality industry by deploying Internet Protocol Telephony in all the guest rooms in his hotel. When guests come in, their phone provides them access to everything from how to play blackjack to what’s on sale at all the retail outlets that are on the perimeter of the gaming floor. They also feed information back to the customer service representatives. For Wynn Resorts, that decision was made by Steve Wynn. It was not developed solely by the technology organization but by a CEO, who was also chairman of the board, having a vision about how he could differentiate customer service.
Are you hitting your sales targets?
We have several billion dollars in revenue and operate in 60 countries around the world, yet we’re focused squarely on specific areas. We think that gives us critical mass that’s appropriate. We have the specialization that is needed, and we have the strategy of moving up the value stack that plays to our strengths.