Most Innovative CEO of 2014, CGI Group’s Michael Roach (Portrait by Markian Lozowchuk)
Earlier this year, Montreal-based CGI Group created an app for ThyssenKrupp Elevator that enables the elevator manufacturer’s maintenance crews to not only remotely monitor every car’s operation but also predict when it may break. The software, an example of “machine learning,” uses a cloud-computing platform from Microsoft, whose CEO Satya Nadella called the app “breakthrough stuff.”
This kind of whiz-bang tech isn’t why CGI chief executive Michael Roach deserves the title of Most Innovative CEO. Building smart technology is a basic job requirement for an IT consulting company. Roach’s innovation is of a broader variety, in business model, strategy and ways of fostering efficiency. His definition of the term: “I think innovation means to work smarter rather than harder.”
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Roach, a northern Ontarian who, at 61, retains a distinctly Canuck accent, has a penchant for such aphorisms. He took over CGI in 2006 from founder Serge Godin and proceeded to grow the heck out of it. A series of acquisitions culminated in the 2012 purchase of U.K.’s Logica, a global systems integrator. The merger turned CGI into the world’s fifth-largest IT consultancy. “It’s not the number of countries you’re in but the number of countries you’re making money in,” he says.
Logica’s client relationships helped shift CGI’s portfolio from lowly technology maintenance to more lucrative outsourcing contracts managing entire IT systems, such as a bank’s trading operations—a key aspect of Roach’s strategy. “Most of our work typically dealt with the CIO,” he explains. “Now, on certain platforms, our customers are the business people who have bigger budgets and whose focus is growth, while the CIO is looking at costs.”
That, in turn, has boosted CGI’s opportunity to sell software, a higher-margin business than services. Today, 16% of CGI’s revenue comes from software, which is a high percentage for the sector. It’s a major reason the company’s margins are “best in class,” says Stephanie Price, a CIBC World Markets analyst. Roach, who spent 25 years at Bell Canada (and was one of the few officers who could climb a telephone pole), knows bureaucracy dampens innovation. So he fosters intrapreneurship by doling out seed money to his staff for promising ideas. A generous stock purchase plan adds additional incentive and prompts another Roach adage: “No one ever washes a rental car.”
With roughly $1 billion in free cash flow, CGI is well positioned to chase new acquisitions. “They’ve signalled that they will continue to be consolidators,” says Thanos Moschopoulos, an analyst at BMO Capital Markets. But Roach won’t chase growth for growth’s sake, he says with a bit of folksy wisdom: “Without generating earnings and cash, you won’t be looking at the menu, you’ll be on the menu.”
