There are two kinds of executives: The business-savvy manager who uses technology and the technologist. Before long, the latter will become extinct.
“The day of the technology bureaucrat is over,” says Ken Bohlen, executive vice president and chief innovation officer at Textron, a conglomerate that includes Bell Helicopter and Cessna Aircraft. “Any CIO who hasnt taken the steps to understand the business [side] has written his own death warrant.”
Oh sure, technologists will have a role—someone toting a computer science degree will be around to piece together networks, exchanges and infrastructure software. But that person will report to the MBA-carrying manager who knows enough about technology to make a decision, but doesnt care what exactly is under the hood.
Bottom line: If you cant tell the difference between operating leverage and operating systems, you cant realistically expect to be tapped to manage a project thatll make a real difference at your company. You need to be bilingual.
Your first mission? Brush up on some CFO-ese, a language that revolves around expenses, return on investment, total cost of ownership and revenue generation. Get away from your computer screen and get involved with the blocking and tackling that runs your business.
And if this crash course in CFO-ese works, you may end up like Bert Young, now chief financial officer of Landesk, a Salt Lake City-based management software company spun out from Intel in 2002. Young is a rarity, adept at bridging the gap between business and technology. Most former CIOs cant become CFO.
From 1993 to 1997, Young was CIO at Waste Management, where its the norm to hand the information chiefs title to a business unit head, not the leader of the technology department. “Theres a very noticeable difference between technologists and business guys,” says Young. “A technologist has to be able to put on his business head.”
Here are a few key finance terms every technologist should know, compiled with the help of ROI software maker Alinean.
Base case financials: The current financial plan, assuming no benefits or losses. If technology installations cant top the base case or take years to break even, chances are the project will never start.
Beta: To gearheads, its a not-quite-up-to-snuff version of software. To CFOs, its a measure of risk, primarily the sensitivity of a companys stock price to an overall fluctuation in an index like the Standard & Poors 500. Knowing beta may not help you pitch your technology project, but just the fact you know a little beta may win you some kudos. If technology implementations were stocks, enterprise-planning software would be considered high beta (big risk and reward, or the equivalent of heart surgery).
Hurdle rate: A proposed project must exceed a certain internal rate of return to go forward. The hurdle rate means a return on investment of 120% or more, excluding risk.
Material: To some people material is something like lumber or oil. To a CFO, material is a word you dont want to hear in conjunction with a technology rollout. Its jargon reflecting profit, loss, or changed operations significant enough to report to shareholders. Example: “Since this enterprise resource planning implementation was totally botched, well miss our quarter,” says CFO I.M. Grumpy. If your project flops and becomes material, prepare to start job hunting.
P&L (Profit and Loss): Does your project make money for the company? Is the technology department a money pit? Do you even know? CFOs talk in terms of P&L responsibility. After all, if theres too much “L” and not enough “P,” these financial folks are out of luck.
Knowing the P&L implications of a project may win you your next job. When interviewing CIO candidates for a Textron business unit, Bohlen asks whether they were recognized beyond the technology department at their previous employer and had responsibility for profit and losses.
“Most of the conversation isnt about technology,” says Bohlen. “We have to be sure they have the ability to talk in the right terms to business people.”