Daryouche Behboudi, Kurt Salmon's North America CIO Advisory Practice Lead and Carole McCluskey,Coinstar, Inc. CTO discuss ways CIOs can be more effective partners to their peers and promote a culture of innovation throughout their organizations.

DARYOUCHE BEHBOUDI: Why don’t we start with your background and your current role at Coinstar?

CAROLE MCCLUSKEY: My role at Coinstar is chief technology officer, and in that function I perform both the CIO function as well as all of the product engineering, hardware, software, and compliance and security that goes into distributing our kiosks into the market.

Prior to joining Coinstar, I had my own consulting firm, EttenAj Consulting, where I provided interim executive services. Before EttenAj, I held a number of executive positions, the last being vice president of global professional services for TIBCO Software. I came up the traditional path of a technologist—software developer, consultant, architect, etc.—before I became a leader in the technology space.

Your company prides itself on retail innovation, and that seems to play an important role in advancing the business. What challenges have you, as the CTO, needed to respond to in order to introduce innovation in the company?

It’s an ongoing challenge. It’s easy to be innovative when you don’t have the burden of an existing line of products and a set of consumer expectations. But as a company with over $2 billion in revenue and two well-loved brands in Redbox and Coinstar, we strive to come up with new products within our existing lines of business as well as introduce new automated retail businesses that appeal to consumers and our retail partners.

We have two core methods we use to innovate. One is our new ventures organization where we incubate new automated retail ideas, such as the Rubi coffee kiosk we’ve talked about in the last year. This is a self-service coffee kiosk that uses whole beans ground fresh to order and serves a high-quality cup of coffee with a great taste. We’re doing this in partnership with Starbucks and their Seattle’s Best coffee brand. We take a lot of pride in being able to organically launch a new business within our company, and we’ll be launching a number of other exciting new lines of business such as food service and used and refurbished electronics.

We also innovate within our present lines of business. Just a couple of months ago, we launched an event tickets business that makes it possible for customers to go to a Redbox kiosk to search and buy tickets for local events. Instead of charging an exorbitant amount of money for handling and processing fees, we only add a $1 ticket fee on top of the cost of admission. We’ve rolled that out in Philadelphia, and it’s been exciting to see how well it’s been received. Another Redbox innovation that has been getting a lot of press is our joint venture with Verizon to launch a video streaming service that is competitive with any of the other players out there.

So how do we do all of these things? We’ve created a culture of innovation. We hold contests for our employees to generate ideas, and we make room for innovation. When we want to develop a new product, we put a lot of emphasis on budgeting and planning to make it a reality.

Clearly, the company trusts your vision. How do you go about convincing the senior management to provide the investment money to implement these new ideas?

I talked a lot about product innovation just now, and that kind of innovation is sometimes much more straight forward because, with products, you can more easily see the benefits down the road. When you put out a new product, you create a P&L and have an expectation of the revenue you’ll drive with it.

We’ve also done some unique things by bringing in technology like SAP, VMware and other infrastructure-based technology and architecture. We knew it was time to modernize our infrastructure, so we implemented those tools pretty quickly, without a lot of analysis, and referred to business case studies to do that, among other things. Early on in my work with Coinstar—first as a consultant and then in my tenure as an employee—I spent a lot of time building trust in my relationships with the business leaders of the company. Having that trust enabled me to talk with them about the advantages of making investments in SAP as an infrastructure so that we could do things that weren’t previously possible for us.

Part of that involved assimilating our two strong lines of business, Redbox and Coinstar, which had previously had very dissimilar corporate systems and needed to unify on a single ERP platform. I worked with the business to see the value of that through simple common sense rather than ROI. As a result, they were able to see that there really would be value at the end of it, and we were able to work together to make that happen.

Can you elaborate on this idea that ROI should not be the sole focus in making an IT investment? What other benefits can be derived through virtualization technologies such as cloud services?

It can be a difficult concept to communicate. Many technology leaders have relied in the past on using ROI or hard-dollar analysis to justify technology purchases. I’m not saying that we didn’t look at it from that perspective, but getting a return in value on the money we spent in a certain amount of time wasn’t our sole objective.

We are very much a value-driven company. If you walk into our Oakbrook Terrace office where most of our Redbox people are housed, or our Belleview office where most of our corporate and Coinstar line of business people are located, you’ll see our values on the walls. In order for us as a company to measure our success through our interactions with the community and our employees as well as our development, growth and attraction of great people into the company, we must create alignment in our business processes and practices. We can’t have confusion in our organization. When we acquired Redbox, we had two very different cultures coming together, and we decided that, rather than spending 10 years to get people aligned around a common business process, we would use technology to drive alignment. With our implementation of SAP, we aligned around the platform’s world-class business processes. This got everybody to think about how we could work better together, regardless of how things had been done in the past.

From an IT infrastructure standpoint, we continue to become more and more virtualized. We have standardized on VMWare, and I’d say that we are close to 100 percent virtualized. We have adopted a cloud strategy that includes both public and private cloud solutions. We continue to look for ways to maximize our core assets and outsource or leverage services that are better delivered by other providers.

We also looked at the technology and materials we’d invested in, such as the hardware we used in our kiosks, and realized that our energy consumption was too high. We wanted to have a lower carbon footprint, so we started thinking about how we could become more efficient with our technology over time.

So would you say that you have a platform-centric organization?

As a company, we are focused on our automated retail business model, and we want to leverage our 30 collective years of experience—combining Redbox’s 10 years and Coinstar’s 20 years—in building, operating, managing and servicing automated retail solutions. We want our employees to take that legacy and accelerate it by bringing new products, like our coffee business and others, to market. In order to do that, we have to align all aspects of our business, from our cash management systems and touch screen variations to the chart of accounts we use to run the business.

There are different levels of scale in how we platform our business. Part of it involves the back office managing our systems of record, and part of it involves defining areas of differentiation for our lines of business so that we can present our brands and products in a way that makes sense. We’ve started that process internally and have put a lot of effort into thinking about how we’re going to do those things differently from both an IT perspective and a product development perspective.

Is this the beginning of that journey?

Yes, we’re about six months into it at this point. Much of our effort so far has been spent examining our technical assets—cataloging our applications and the business processes related to technology and product architectures. We have two or three different product architectures, and we’re trying to figure out which to leverage and when. But first, we have to understand what we have.

We’ve also been doing a parallel exercise on the business side, talking to our internal stakeholders about our vision as a company, how we want to engage with our customers, whether we want to offer different services to our retail partners, how that would look and how we would build a product roadmap that connects to our underlying technical roadmap. So we have both business and technical requirements to consider. We’re about a month away from having our roadmap in place, and we’re starting to think about forming the team that builds the platform. It’s a very exciting time for us as a company.

How have you demonstrated the value of technology to Coinstar and earned a voice for technology in the boardroom?

The biggest aspect for me has been delivery. Early on at Coinstar, there was no IT representation at the corporate executive counsel level; IT was previously led by other leadership. I now report to the CEO, which makes a big difference, and that came from consistently producing results that prove the value that technology adds to the company. That’s what senior leaders believe in. You have to show them that IT folks function very much like consultants. Without IT, business leaders won’t always know about the technology that can help them achieve their business goals. It is my job to make sure that technology is leveraged effectively. IT has evolved from being a necessary evil to becoming a real partner to the business, and that relationship doesn’t just involve talking about technology. It involves understanding the business and its needs and figuring out how to bridge the gap between business and technology.

The messages that CIOs bring to the table may not always be what the business wants to hear, but they are what we believe to be best for the company. That sometimes means that we get into battles with business leaders over decisions they’re making or priorities they’re setting that won’t deliver the results they want because the technology either can’t keep up with it or isn’t aligned with it. So, as a CIO, it’s important to have the courage to be honest and direct.

Finally, as a CIO, if you’re going to advocate for something, you have to deliver on it. And that means delivering early and often. Don’t wait two years to offer a good product or service. Give them something good in two weeks. As a technology leader, being who you say are and doing what you say you’ll do is what gives you credibility, and that’s what ultimately gives you and your team a voice in the boardroom. That’s been the game changer for us here.

How do you get other business leaders to look outside of the box and accept the radical changes in technology development that the business needs?

Honestly, you have to let some of it sneak up on them. If I were to go to a doctor and he or she told me all of the things they were going to do in a medical procedure, my eyes would glaze over. I wouldn’t fully understand it, and I might get scared because it’s so complicated. You have to do the same thing as a technologist. You can’t go to your peers and tell them how things get done in technology with a great level of detail. They wouldn’t understand it any more than you would understand the fine details of what they do. This is something that I see happen over and over with people I’ve mentored over the last decade or so. They’re so apt to panic and tell their peers every time something breaks or doesn’t work out the way they planned. The truth is that every project has problems; every piece of technology has bugs in it. What matters is how you manage and communicate that information. You have to give people transparency, but you only need to give them the transparency that’s important to them, and you need to have the situational fluency to deliver a message that’s appropriate for the person you’re working with. You need to understand them and what’s important to them, and then you have to be able to adapt your style and your message appropriately. They don’t necessarily need to worry about all of the things that keep you up at night. Instead, bring the solutions. And when you know you have a problem that is going to affect them, make sure they know about it early enough that they can be a partner with you in solving it.

BIOS:

Carole McCluskey
As chief technology officer, Carole McCluskey oversees product and corporate technology by driving technical strategy and execution for Coinstar, Inc. Carole has been at Coinstar since 2009 and joined the company officially in January 2011. An enterprise software veteran, Carole has more than 25 years of experience in software development, professional services, technical support and operations.

Before joining Coinstar, Carole was managing director of EttenAj Consulting LLC. EttenAj provided strategy and advisory services focused on business and enterprise optimization. Typical engagements for the firm included operational and organizational turnarounds, interim/acting executive management in operations, PS, sales, alliances and marketing, enterprise software selections, and IT/IS operational assessments. While managing director at EttenAj, Carole held the following interim leadership positions: VP of North America PSO at VMware, chief of staff at Redbox, head of corporate systems development at Coinstar, interim VP of corporate IT at Coinstar, VP of client services & support at Intacct, COO at Edifecs, and SVP of sales & alliances at Ultimo Software.

Prior to starting EttenAj, Carole was VP of global services operations and professional services at TIBCO Software. Before joining TIBCO, she was vice president of professional services & alliances for SchemaLogic and vice president of sales & services for CapitalStream. She graduated from California State University at Fresno with a B.S. in industrial technology and digital systems.

Daryouche Behboudi
Dr. Daryouche Behboudi is a partner leading Kurt Salmon’s CIO advisory practice in North America. He has 13 years of experience in managing and delivering consulting engagements with Fortune 100 firms, focusing on IT operations and organizational design, IT integrated planning, IT procurement and outsourcing, enterprise data center strategy, enterprise network architecture, IT cost takeout, IT strategy articulation, and enterprise program management office design and implementation.

Prior to joining Kurt Salmon in 2009, Dr. Behboudi was a managing director in the Cross Industry Services Group at BearingPoint, focusing on financial services clients.

Dr. Behboudi was assigned to the Oak Ridge National Laboratory as a research fellow during his post-doctoral study, where he worked on modeling advanced materials for use in aircraft design. He earned his doctorate in electrical engineering from Lehigh University.

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