Using IT Wisely toBy Kim S. Nash | Posted 2006-04-04 Email Print
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Which companies are the smartest? Using public financial data Baseline contributor Paul A. Strassmann has developed a formula that ranks companies not according to how much money they make, but how well they use information technology to make it.Remove Barriers">
For example, Clive Meanwell, CEO at The Medicines Co., a pharmaceutical maker, decided that unimpeded communication would promote learning at his firm, which would in turn get drugs to market faster. He had his technology and building departments construct open "huddle" spaces wired for the corporate network and the Internet so employees could collaborate outside their cubicles.
BlackBerrys and other wireless e-mail devices also proliferate. And a company intranet goes beyond the typical human-resources material to offer information pertinent to daily work, such as updates on clinical trials and how to reach colleagues with a particular kind of expertise.
The idea is to "put what people care about in front of their faces," says David Mitchell, vice president of I.T. at The Medicines Co. "Don't force them" to go search for it, he says. The $150 million company is No. 20 on our list.
Who Ruled and Why?
For our ranking, we calculated the Knowledge Value per Employee at more than 3,000 public companies, using financial information averaged over three years.
Using figures from the last full fiscal year alone might have been useful, but it wouldn't show the fuller picture of smarts over time. In this story, you will find the 100 best scorers, as well as profiles of some of the smartest of the smart.
Pharmaceutical, oil and gas, and technology companies did well in our ranking, but it wasn't just a factor of big sales and relatively small staffs. Giants such as Bristol Myers Squibb, Johnson & Johnson, Exxon Mobil and Chevron didn't make it because, simply, their competitorssuch as Genentech in pharmaceuticals and Burlington Resources in oiloutperformed them.
Real estate companies also did well in our ranking. Real estate is hot, of course, and real estate investment trusts can bring in lots of cash with relatively few people, but only if they make good decisions.
CenterPoint Properties Trust, No. 1 in our ranking of 100, is a 22-year-old real estate company that invests in industrial property. It owns, for example, a 50-acre business park at O'Hare International Airport in Chicago and a 2,000-acre train yard in Joliet, Ill., anchored by Burlington Northern Santa Fe.
CenterPoint says one of its most important differentiators, among hundreds of real estate investment companies, is tenant service. It pays bonuses to property managers and staff that depend, in part, on an annual tenant satisfaction survey, administered by an independent polling company.
Property managers must visit each tenant at least once every 90 days, to build relationships and check for problems such as tardy trash pickup or complaints about neighbors. The company runs a homegrown application that integrates property management, accounting and administrative data.
Last year, CenterPoint says it achieved a 94% retention rate on its 201 properties by its attention to tenant needs.
Tactically, a CIO can offer our ranking to senior executives when defending the technology budget. The typical peer comparison of information-technology spending as a portion of revenue reflects only short-term financial results.
But at the board level, trends in stock-market valuation will always merit more attention because they reflect long-term economics. The CIO is suddenly speaking business language.
In the end, Knowledge Value per Employee is just one more way to evaluate the job the information-technology department doesand for a technology leader to unearth some insight into how he or she can make the company better, faster, smarter.
Google, by the way, isn't included in our Smartest Companies ranking; it hasn't been public for three years. Using the most recent single year's worth of data, Google would come out with a Knowledge Value per Employee of $16 millionpretty darn good. Of course, Google is enjoying the limelight right now, hailed by some as a Microsoft replacement.
It's also feeling the heat from Department of Justice lawyers pressing to look at its search data. It will be interesting to see where Google places when we can run a true three-year calculation for our ranking in 2008. Will that $340-per-share price have paid off?
Let us know what your guess is, and what you think of the Smartest Companies ranking, at Baseline's blog (www.projectmanagement.ithub.com) or directly at firstname.lastname@example.org.
QUESTION: Which metrics do you think are indicators of a company's brains? Write to: BASELINE@ZIFFDAVIS.COM.