Using IT to Transform Business

WellPoint wanted to strengthen and transform its technology infrastructure so that the company's business units could offer the best customer-facing systems in the industry.

An ADVANCE interview

Editor's note: Ron Ponder, PhD, is executive vice president of information services and CIO of WellPoint Inc., the largest U.S. health plan. Over the last 25 years, he has spearheaded the adoption of IT in the transportation and telecommunications industries, as well as at WellPoint. Most recently, he has been a member of the senior team directing WellPoint's unprecedented, network-wide technology initiative worth $42 million that provides free hardware and software to 22,000 of its member physicians in California, Georgia, Missouri and Wisconsin.

ADVANCE: During your career, you've introduced several companies in different service industries to information technology (IT). What types of changes have resulted?

Ponder: Introducing appropriate, strategic IT changes the way in which a company does business. But it can also change that company's place in the market, and its future. This is especially true of service companies whose core operating model is founded on processing millions of transactions specific to a particular industry. Successfully automating transaction processing is an enormous, but critical, effort that goes beyond merely purchasing technology infrastructure and systems. Instead, success depends on the company's ability to bring IT into its core operations and business processes, and to fuse technology with its business plan. When done correctly, this effort results in increased customer satisfaction, higher sales and profits, and increased productivity, as can be seen in telecommunications, banking and transportation.

ADVANCE: Are there any similarities in the challenges and solutions you've experienced across these different industries?

Ponder: Definitely. At various points during the past 30 years, IT has been new to each of the major service industries. I've led some very talented teams of information professionals in designing and developing the technology infrastructure and systems for transaction processing at Federal Express, Sprint, AT&T, and now WellPoint. At each of those companies, we instituted new IT systems, business processes, technologies and approaches. The basic issues, challenges and solutions were very similar.

Challenges common to all of them included replacing information and technology silos with a standardized network and a foundation architecture, integrating customer databases across business units, and merging the technology side of the business with its financial and business goals. Common solutions included studying the company's business and customers in depth; assembling the highest quality IT team by recruiting the best and brightest business technology talent from inside or outside of the company; unifying and standardizing IT architecture and technology; and merging technology resources with customer-facing functions.

ADVANCE: Can you give us more detail? For instance, what changes did you help institute at Federal Express?

Ponder: At FedEx, we had the opportunity to spearhead some of the most critical innovations in the overnight package delivery industry. Those innovations were focused on increasing customer satisfaction and differentiating our service. They included the company's worldwide electronic package tracking and tracing system, which became the industry standard; technology for building the first transportation Web site to offer online package status tracking; and expansion of the SuperHub, the company's primary package-sorting facility in Memphis. The SuperHub expansion was the largest and most complex technical and mechanical integration project in FedEx history.

ADVANCE: What types of challenges and issues did you face in that effort?

Ponder: Much of the technology we needed — both hardware and software — did not exist at that point in time. So we had no precedent to go on, and had to build it ourselves. Second, interoperability was a key ingredient for success, because of the number of different system components involved. Another challenge was the acute need for company-wide communication and training, since the use of this new system involved everyone throughout the entire company. Fortunately, from the very beginning, our IT and business strategies were closely aligned, and the entire team had support from senior management.

ADVANCE: What about your experience at Sprint?

Ponder: At Sprint I was responsible for local, long distance and wireless technology and network operations. I was the lead member of the senior team that initiated and oversaw the transformation of the company's long-distance network to optical technology. Sprint was one of the first in the industry to achieve this goal. The adoption of optical technology also helped the company surpass its competition's reliability standards and service restoration capabilities.

ADVANCE: What happened at AT&T?

Ponder: My team led the transformation of the company's communications and computing infrastructure from product-centric, stand-alone business units to a customer-focused organization. The result was a large improvement in time to market, and cost reductions of over $1 billion. This conversion consolidated more than 20 separate internal data networks and separate, non-interoperable sets of customer records into a unified, standardized IT infrastructure based on TCP/IP and a client-server architecture. At the time, this was one of the world's biggest transitions to a TCP/IP network. It allowed the company's business units to share selected customer data and presented a single view of the customer.

ADVANCE: Before you and your colleagues led WellPoint's recent Physicians' Quality Technology Initiative, what other types of changes did the team initiate within the company?

Ponder: We transformed and strengthened the company's IT services and technology infrastructure toward a more enterprise-wide approach. This now includes standardized operations and practices, as well as new technology solutions that are key to the company's business strategy.

Our goals were to improve customer service, strengthen communications with providers, reduce administrative costs and increase access to information. We created a universal data model for the company while focusing on customer-facing systems such as e-commerce and customer service. It was vital that all of our constituents — our physicians, our members and the hospitals — would be able to access the information needed to conduct business as efficiently and accurately as possible. We wanted to strengthen and transform our technology infrastructure so that the company's business units could offer the best customer-facing systems in the industry.

ADVANCE: Did your background in IT make you approach these challenges differently?

Ponder: Yes, I think it did. The key difference is my view that WellPoint, like other service companies, not only sells specific products or services, but also offers products or services based on large-scale transaction processing systems. Our vision of merging IT strategy with business strategy comes directly from the experience I've had with transaction-based companies. So we looked to that experience, as well as to the financial services industry, for guidance and ideas about best practices and standards.

To accomplish this, we worked closely with WellPoint's financial staff, and other business unit presidents, to tightly integrate the company's three-year IT strategy with its three-year business strategy. During WellPoint's internal IT transformation, we also put together a world-class IT organization staffed with many respected leaders and managers recruited from inside and outside of the company. An executive committee continues to ensure the ongoing development and implementation of a comprehensive technology vision that supports the company's business strategies.

ADVANCE: What results have you seen?

Ponder: To date, we have established a robust technology foundation designed to support WellPoint's IT and business strategy going into the future. This middleware layer has allowed us to successfully roll out two major enterprise-wide projects in the past year. The first was a medical management system. The second was a system designed to give all of our members absolute security by changing their identification numbers from their Social Security number to a pseudo-random number. This middleware layer has given us a foundation robust enough to tackle major projects that we expect will place us ahead of our competitors, as well as position us as industry leaders. One example is the Physicians' Quality Technology Initiative we launched last year. It offers parallel IT benefits to the entire health care field by jumpstarting physician entry into the electronic medical community.

ADVANCE: What advice would you offer to other health care CIOs?

Ponder: CIOs must be key players in all of their company's strategic planning and financial decisions. This is vital to ensure that IT — and the IT viewpoint — remains an essential part of every important business move the company makes, and to help CIOs remain aware of their company's total performance and operations. Similarly, senior management must clearly understand the importance of IT and how it contributes to the company's business and customer goals.

CIOs and IT managers should communicate regularly with the company's primary internal business customers to ensure that IT goals are closely aligned with the business units' goals. The IT department must establish a unified, consistent technology architecture so that customer and financial data can be shared throughout the corporation. The company's technology platforms should be derived from what customers need, and not from the use of technology for technology's sake. The CIO must remain focused on customers and understand what they need.

ADVANCE: What can health care CIOs do to ensure that IT remains a key part of their companies' strategies?

Ponder: My advice is to get involved in the larger business discussions. In addition, make it a priority to know as much as possible about the company's customers, products and services. Understanding how multiple processes interrelate, developing systems that serve those processes and people, and managing complex projects in detail are skills that are becoming increasingly necessary for the successful health care CIO.