“The IT director can really change the dynamic of how a business operates”

Since its first record shop opened on Oxford Street, London in 1971, Virgin has grown into one of the world’s most respected brands, involved in everything from planes, trains, finance, soft drinks, music and cell phones to holidays, cars, wines, publishing and bridal wear. It now boasts over 200 companies worldwide, employs over 25,000 people, and has annual revenues exceeding US$7.2 billion.

Tying all of this together is a goal to improve customer experience through innovation – and often through the innovative use of technology. A classic example is Virgin’s philosophy on retailing cell phones. Group CIO Gareth Lewis points out that every piece of technology Virgin brings to market has to be intuitive and so easy and obvious to operate that people can use it first time, 100 percent of the time, without having to thumb through a wordy manual.

“For a lot of our businesses, what we do is we make it fun, challenging, innovative, value for money and, ideally, a great customer experience,” he says. “However, that doesn’t necessarily mean that we’re always using the latest technology – you can’t always afford to do that. The way a product or a service is presented to the consumer is all-important and you can overcome a lot of technology deficiencies by packaging things in a creative way and making the experience good, even though the underlying technology may not be state-of-the-art.”

Virgin also has no qualms about being a market follower as well as a leader, preferring to look at the viability of new technologies introduced in the market to spot the gadgets from the gimmicks. Virgin Mobile brought digital audio broadcast technology to the market as a first in conjunction with Microsoft, the BBC and BT Movio. Before coming onboard, Microsoft knew it could push the technology’s boundaries but didn’t have a vehicle to take it to market; the BBC had the content; and BT Movio had the service but not the customers. Virgin had the capacity to design and build the phone offshore, and through collaboration, Lewis knew the companies could bring the pieces of the jigsaw together into an attractive package for consumers.

The bigger picture

Lewis’ role encompasses overseeing IT across the Virgin Group. “Probably the biggest challenge is trying to drive some commonality across the whole,” he says. Whilst he does not have executive authority over any IT director – they report to their individual businesses, which he says have been deliberately established as “autonomous entities” – he concedes that there has been a recognition over the last few years that some areas could benefit from some degree of commonality. “For instance, we don’t necessarily want them making decisions about the manufacturer of the PCs they buy,” he explains. “If you go back two or three years, we had one of every PC that was ever manufactured, which is ridiculous. A PC is largely a commodity product and you’ll spend more on supporting that PC than you will on the hardware, so we made the decision to get down to a single supplier on a worldwide basis that provides us with half a dozen different models in desktop and laptop form. I now don’t want anyone spending time and energy going out and negotiating with another PC supplier for a support agreement and a warranty. If you need PCs, these are the specs, it’ll get reviewed on a regular basis, the price point will be a worldwide price point and the same around the planet, and it will be guaranteed cheaper than you could buy them yourself. So don’t spend anything.

On the commodity end, Lewis believes it is important to buy simpler products and services on much more efficient basis. “We will continue to raise the bar on that to the point of providing transaction-based services, such as HR functions and, hopefully, some finance and accounting functions across the group,” he says.

Outsourcing

Another area the group has made great strides in is outsourcing. Virgin has cut its IT budget by 15 percent by outsourcing specific business functions to India and South Africa, and Lewis believes they could have cut it even more. “Any business function involving more than a hundred people could potentially see savings of about 50 percent,” he says. “However, we don’t always choose to take on those savings – instead we may choose to restructure the ways in which we deliver IT. Quite often, if you take the more mundane things offshore – the development process or the testing or the quality assurance, even some of the maintenance activities – you can spend more money and energy doing what I regard as the key functions of the IT director: getting the business requirements understood and working with the business to change the way in which it functions.”

His advice to any CIOs approaching offshoring for the first time is simple: “Have a go! It’s better and easier than you would imagine, and a pretty well trodden path nowadays. Most destinations look the same from a distance, and the only way you’ll differentiate between them is going out there and spending a week or so (as I’ve done on many an occasion) to see what they’re like.

“We’ve seen everything – from the absolutely phenomenal, big, glossy campus with 42 buildings that had been built in only three years, to the chap who sounded very credible until we turned up at the development centre and found it to be the back of someone’s house!

Of course, tackling IT issues in such a huge environment is going to be a challenge, and his advice to anyone who may be facing a similar task in an expanding organisation is to focus on the big stuff that’s going to affect the business. “Focus on things that are going to make a dramatic impact to the way that some part of the business works, whether that’s improving efficiency through some offshore savings, or a way of developing and generating more revenue,” he advises. “If you can find ways of doing that, and get a lot of the more mundane things to third parties that you can rely on, that’s the way forward.”

Without a doubt, the role of the CIO is becoming ever more strategic, and it’s people lkike Lewis that are doing as much as anyone else to drive their organisation’s forward. “We have some IT directors within the group who are still at ‘shop-level’ and like it that way – and there is a real place for people like that – but in most businesses today I think people are looking to their IT directors to add significant new dimensions to the business,” he concludes. “We can really change the dynamic of how a business operates.”

Touched for the very first time
Virgin began in the 1970s with a student magazine and a small mail order record company. Its growth since then has been based on developing good ideas through excellent management principles, rather than acquisition.
The company prides itself on seizing opportunities where it can offer something better, fresher and more valuable, often moving into areas where the customer has traditionally received a poor deal and where the competition is complacent. With its growing e-commerce activities, the company also looks to deliver 'old' products and services in new ways.
New ventures are based on hard research and analysis. Typically, Virgin reviews the industry and puts itself in the customer’s shoes to see what could make it better. Fundamental questions are also asks such as is this an opportunity for restructuring a market and creating competitive advantage? What are the competitors doing? Is the customer confused or badly served? Is this an opportunity for building the Virgin brand? Can value be added? Will it interact with our other businesses? Is there an appropriate trade-off between risk and reward?
New ventures are often steered by people seconded from other parts of Virgin, who bring with them the trademark management style, skills and experience. But the company frequently creates partnerships with others to combine skills, knowledge, market presence and so on. Once a Virgin company is up and running, several factors contribute to making it a success. The power of the Virgin name; Richard Branson's personal reputation; its network of friends, contacts and partners; the Virgin management style; and the way talent is empowered to flourish within the group. The company points out that to some traditionalists, these may not seem hard headed enough but argues: “To them, the fact that Virgin has minimal management layers, no bureaucracy, a tiny board and no massive global HQ is an anathema.”
According to the company website: “Our companies are part of a family rather than a hierarchy. They are empowered to run their own affairs, yet other companies help one another, and solutions to problems come from all kinds of sources. In a sense we are a community, with shared ideas, values, interests and goals. The proof of our success is real and tangible.”
Source: www.virgin.com

Gareth Lewis is responsible for overseeing IT across the Virgin Group, as well as promoting best practice in program management in the diverse operating companies. He is also directly responsible for the Offshore Outsourcing Program. Previously, Gareth was Global Program Director, Mobile Business at Virgin Management. Before Virgin, he was a partner in the Telecommunications Practice of KPMG Consulting.