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Magazine. Vol. 01, 14 December, 2007.

David Berry “Chief Enterprise Architect” 6

Erik Cuypers “IT drives cultural change” 4

Yves Vander Auwera “The cost of a dissatisfied customer” 14

Alexander Dewulf “CIO must be a leader” 10

Carl Tilkin-Franssens “We need a change” 3

Editorial: No train of inertia Business and IT alignment: Ready for the challenge 2007 IT alignment survey: Status IT manager on the rise Nuon boss on the CIO: Must be a leader Elia launches VoIP and VoWLAN: Foolproof project Column: Don’t forget the ‘old’ customer

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IOnet is the first international online and offline network for CIOs and IT managers. We are currently active in Belgium and the Netherlands and count more then 350 members. CIOnet’s mission is clear: to be the community where CIOs and IT managers can build relationships, share knowledge, exchange ideas, enhance their know-how and make friends.

Special Interest Groups A recent initiative has been the development of special interest groups (SIGs), which are groups of CIOnet members united around specific topics. There are currently 4 SIGs, covering sourcing, enterprise architecture, IT benchmarking and collaboration between the academic and business worlds.

The CIOnet advisory boards brainstorm on a regular basis about new initiatives and set the direction in which the community will develop. The basis of CIOnet is the state-of-the-art online networking platform (www.cionet.com) where members conduct virtual discussions, connect with one another and exchange information. Offline, CIOnet organizes regular networking events and seminars on IT management topics. The climax is the November ‘Annual Top Event’, with a day programme and an evening networking dinner, which brings together over 100 CIOs and IT managers.

CIOnet Council In 2008 we will launch CIOnet Council aiming to stimulate the interaction and debate between our members. The council consists of 15 CIOs in both Belgium and the Netherlands who commit to answering monthly a specific IT management question from fellow members.

Joining CIOnet Are you a CIO with at least 20 people in your IT department or an IT Manager reporting to a CIO in an IT department with at least 200 people? Are you interested in joining CIOnet? Then send an email to an@cionet.com with your join request and contact information.

We are proud to present you the first issue of CIOnet Magazine. Our aim is to provide deeper insight into themes that are high up on the CIO agenda: strategy, business value creation, information management, contributing to corporate objectives, and technology as enabler for business improvement. Enjoy. HENDRIK DECKERS Managing Director - CIOnet hendrik@cionet.com

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Editorial

No train of INERTIA

O

ver the past five years, enough has been written and said about sound IT governance and good business/IT alignment to keep us happy for a long time. We all know how better governance and IT alignment can be achieved. I wouldn’t go so far as to say that things are running as smoothly as they might in every firm. But IT managers who want to put this knowledge into practice can at least call upon the know-how and expertise developed over the past five years. In my view, the real challenge facing IT today is the way in which we automate. Essentially, this differs very little from the methods used 20 years ago and is still very labour intensive: analysis, design, programming and testing. As wage costs are for ever rising, IT is getting increasingly expensive. As a result, you don’t create any leverage. Outsourcing to low-wage countries may offer a short-term solution, but, here too, labour costs are going to rise. As we have already seen in India. I recently found that we were unable to build a realistic business case for an IT project because the costs outweighed the savings generated by automation. That is why we need to make a fundamental breakthrough in the manual operation of IT. Previous attempts – such as neural networks or reverse engineering – failed and things like 4GL languages don’t go far enough. To be quite honest, I’m not optimistic about the chances of solving the problem in the short term. What’s more, the IT industry itself is also to blame. It looks, right now, like a train of inertia. The umpteenth version of Windows, the umpteenth tale of lifecycle management, ever-smaller, cheaper, faster hardware... No IT manager is going to lose sleep over that... All IT firms opt for the same things that basically offer hardly any added value. For a while now, the sector has been trying to compensate for lost turnover on hardware and software through services. In the best-case scenario, this reduces customer costs by 20 percent. That is not bad, but not enough to achieve significant leverage effects. My prediction is that the sector will begin to deliver more fundamental solutions, in which manual tasks are replaced by automated processes. That is the real challenge facing the industry right now. As we have now reached the point where IT costs are rising 5 percent every year, without you getting any more for your money.

CARL TILKIN-FRANSSENS

CIO – KBC President Advisory Board CIOnet Belgium

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Special feature

Business and IT alignment

Ready for the CHALLENGE Studies into the IT needs of CIOs are quite clear. Improving the relationship between IT and business continues to feature high on the agenda, alongside themes such as IT governance and monitoring the added value that IT creates for the company. So there is still work to be done.

R

ichard Wyatt-Haines is the author of ‘Align IT’. In his book, he looks in detail at the causes of the rift that still often exists between business and IT. Naturally, he also indicates how to align business and IT. “Compare it to the situation where a boy asks a girl to dance for the first time”, explains the British author. “Sometimes he gets turned down, sometimes not. That first dance is always a bit strange, somewhat uncomfortable. But with time, a strong bond, or even an intimate relationship, can develop. It is exactly the same with business and IT. Initially the relationship is a somewhat awkward one, but after a while business and IT can really work in close collaboration to achieve an optimum business impact.”

PICTURE

Erik Cuypers, Head of Communications, Operations & IT Banking with ING: “IT communication influences strategic decisions, facilitates alignment with business and shows IT to be a crucial driver behind changes in corporate culture.”

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Tracing out the strategy together Whether or not a close bond can be achieved between business and IT depends on various factors, not least on how the IT department itself is geared to it. IT can opt to play a submissive, purely facilitating role or a leading one. “It is really not nice to see the IT department constantly overtaken by events”, says Richard Wyatt-Haines. “A great deal of energy goes into putting out fires. As soon as one crisis is over, the next one arises. IT really needs to be fully involved in tracing out company strategy.” Of course, at the same time it is important for both business and IT to understand one another’s procedures and needs. It is

only when everyone has the same focus that the time is ripe for aligning business and IT. In order to be a good enabler, the business must have a good picture of the technical potential IT has to offer. But there must also be transparency and insight on the IT side. “In many cases, IT is often the first to get important information. IT knows the channels through which customers place orders, IT sees how processes are running in the company, and so on. We can therefore presume that IT is best placed to signal any changes or opportunities. These days, the information often comes from the marketing department. Which is a mistake, in my opinion.” A basis for change Both business and IT also need to show the necessary flexibility. When an opportunity arises, they must be able to respond to it together immediately. They need to be able to handle the constant evolution appropriately, and anticipate as much as possible. “In order to allow IT to play a driving role, the CIO himself must have a strong vision”, believes Richard Wyatt-Haines. “He must understand how IT can stimulate new success. But it is important to remember that technology in itself is never an end. IT is a means.” In order for business and IT to work together successfully, it is important for them to speak the >


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Special feature

> same language. Communication is the key to

success. Moreover, communication is a prerequisite in any change processes – and thus in IT. “Often it is IT projects that form the basis for farreaching changes in an organization”, argues Erik Cuypers, ING’s Head of Communications, Operations & IT Banking. “At the same time IT doesn’t always have a very positive image, as is shown by the way IT is perceived within the organization. IT can use communication as a lever here: com-

munication can be used to support a change in corporate culture, to arrive at the desired business/IT alignment.”

PICTURE

David Berry, Coty’s CIO : “Thanks to the success of our SOA approach, the company knows that it can rely on IT to accomplish subsequent projects rapidly and successfully.”

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More creativity Nowadays, IT is still far too much a matter of methods, procedures, structure and governance. A different approach can do wonders for a better IT/business alignment. IT should make more room for creativity and empathy, be more aware of the world around IT. “Communication is an important factor in achieving this new IT approach”, says Erik Cuypers. “IT does not just address customers and users as in the past, but also other stakeholders. IT does not communicate solely through detailed reports, but inspires and stimulates the business through other forms of communication.” It all boils down to IT communication concentrating on supporting the changes brought about by

IT. IT may play a proactive, driving role here. “Communication is aimed at improving the dialogue between business and IT, but also at facilitating changes in the in the IT department itself. In the long term, communication goes from being something purely functional to being a component of the company’s mindset. In this way IT communication helps to develop the entire corporate culture.” Layered communication It is important for IT to acknowledge that communication should be allowed to intervene at different levels. For instance, it is essential for company senior managers and executives to be aware of the role and importance of IT within the organization. IT should portray itself as a reliable partner for the company, which aims to provide all staff with the appropriate support and resources. At the same time the IT department has to ensure that its own employees are aware of the position that IT occupies within the company, the direction in which IT is going and the consequences of this for the rest of the organization. “There are various ways of providing the right support for each of these levels of communication”, adds Erik Cuypers. “IT communication can therefore take quite different forms.” IT communication influences strategic decisions, contributes to alignment with business and shows IT to be a crucial driver behind changes in corporate culture. “It is important for IT to opt for a holistic approach to communication: an integrated approach with long-term objectives.” IT supports business objectives The need for conclusive business/IT alignment is also far more apparent if the organization opts for growth through acquisitions. The story of American cosmetics company Coty is a good example here. Coty owns a range of well-known perfumes and beauty product brands, such as Calvin Klein, Davidoff and Adidas. Furthermore, the company markets the perfumes of such celebrities as Jennifer Lopez, Kate Moss and Gwen Stefani. Coty’s ambition was to expand into a business with a five billion dollar turnover in three years, and thereby become one of the top five beauty companies worldwide.


Special feature

“Coty decided to achieve that growth largely through acquisitions”, says David Berry, Coty’s CIO. “The company therefore acquired Unilever’s cosmetics department. That takeover alone ensured that in one year our turnover grew by thirty percent.” IT also played an important role in the ambitious acquisition plans, by integrating the IT departments of the companies acquired and by implementing SAP worldwide. “What was crucial here is that we decided to build a

Chief Enterprise Architect. He was not only concerned about architecture, but also opted for a model that made it possible to support important opportunities, such as acquisitions and integration of other organizations. Nevertheless, the projects came up against some significant obstacles. “It was not easy to explain to the business units SOA’s ultimate impact on the whole company. Even within our own IT de-

PICTURE

SOA (Service-Oriented Architecture) as the basis for our entire ongoing IT approach.” This shows how IT chose to use technology to help achieve business objectives. A leap in the dark Taking over Unilever’s cosmetics department forced Coty to redefine its existing IT strategy, with a SOA as the main strategic platform for Coty’s further expansion. “We started off small, with small budgets for specific projects,” explains David Berry, “but we made progress very quickly. We preferred not to wait until we were able to unleash a total SOA.” For the IT department SOA was a new concept, but for the people in the business, introducing SOA was a complete leap in the dark. The rapid implementation of the integration projects created the necessary confidence among Coty’s management. It clearly showed that the CIO was moving towards being

partment we needed to pay extra attention to communication, especially about the introduction of the SOA concept and associated tools. After all, implementing SOA represents a radical departure from the traditional way of programming and developing. Our IT people were also entering some quite new territory.” However, Coty’s efforts immediately led to a positive result. “We are ready for the next major acquisition. The business knows that it can rely on IT to accomplish any subsequent integration projects rapidly and successfully. In this way, IT quite specifically helps to achieve corporate objectives.”

Richard Wyatt-Haines, business speaker and author of ‘Align IT’: “The IT department is the first to get important information. IT is therefore best placed to signal any changes or opportunities.”

Richard Wyatt-Haines (2007), Align IT, Business Impact Through IT. John Wiley & Sons Ltd.

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Survey

2007 IT alignment survey

STATUS on the rise 43% of Belgian CIOs report directly to the CEO, which is more than a few years ago. But no less than 57% of CIOs (still) do not sit on the management committee.

S

uch are the findings of the ‘2007 IT alignment survey’ which CIOnet conducted among its members this autumn (see box). Johan Conix (an ex-Gartner analyst, now working for ERP specialist West Trax) has analysed the results and compared them with a similar survey conducted by American CIO magazine among its readers. “More CIOs are reporting directly to the CEO than in the past”, states Conix. “This shows that the status of the IT manager within the organization is on the rise.” But at the same time Conix points out that a relatively small percentage of CIOs (43%) sit on the management committee. In the United States, 68% of heads of IT sit around the table where strategic decisions are made. Another interesting observation is that 57% of Belgian CIOs have never had a job outside the IT department. A sharp contrast with their American colleagues, of whom only 25% have spent their whole career in IT. A third of American CIOs previously held a business operations role and another third were in consulting. “This shows that in the US more emphasis is placed on management skills and less on functional background”, concludes Conix. When asked about their ambitions, it seems that most CIOs would like a similar role in a larger company (41%). 14% aspire to become CEO one day and another 14% are more than satisfied with their present job. Almost half the respondents say that IT spending is controlled by the IT organization itself and 36% say that IT and business units have blended control. The majority of CIOs (68%) describe the overall governance structure of IT as centralized, while 30% describe it as partly centralized and partly local.

Who are you reporting to? CIOnet

CEO (Chief Executive Officer) Corporate (Group) CIO CFO (Chief Finance Officer) Other (boards, shareholder, other manager) COO (Chief Operating Officer)

CIO.com

43% 17%

41% 5%

15% 15%

24% 15%

9%

14%

Did you have a job in another functional area outside IT? CIOnet

CIO.com

No Other

57% 20%

26% 14%

Logistics Business Operations (non IT)

11% 7%

8% 33%

7% 5%

18% 23%

Finance/accounting Manufacturing/production

5% 5% 5%

35% 14% 11%

Marketing Sales

5% 2%

12% 15%

Engeneering Administration Consulting

As expected, it is mainly infrastructure and architecture that are centrally managed (91% and 89% respectively), while project management is centrally managed in only 61% of companies. CIOnet asked who was accountable for IT return on investment. 25% of respondents said that accountability lay with IT leadership while 59% said that it was shared between IT and business leadership. Is IT’s primary role in the organization to create new business opportunities or rather to provide support? According to 59% of respondents, the former, and according to 41%, the latter. For 61% of respondents it is clear that IT drives innovation initiatives – together with business units. There were no surprises about which processes were running more efficiently thanks to IT. The top three were finance/accounting, human resources and customer support.

INFO

Over 50 CIOs (22% of CIOnet members) took part in the 2007 IT Alignment Survey. Respondents work in all sectors of the economy and half are from companies with 10005000 employees. The 15 questions sounded out the role and position of the CIO and IT’s strategic contribution to the organisation.

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CEO view

Nuon boss on the CIO:

Must be a LEADER “Many CIOs do not make good people managers”, says CEO Alexander Dewulf of Nuon Belgium. “Often they have come up through the ranks of IT, but lack the communication and human skills required to be a leader.”

D

ewulf certainly does not deem it necessary for a CIO to have built his career in IT. “My present IT manager has never worked in IT. But he has strong operational skills, and is a good coach and communicator.” Dewulf believes it is an advantage if the CIO has a business background. “A good CIO is a leader”, says Dewulf. “He has to motivate, assess and coach his employees, while at the same time give them the necessary freedom to take initiatives.”

PICTURE

Alexander Dewulf has an interesting opinion about the cost of IT. “I don’t like people who connect the cost of IT to company turnover. By automating you save on people across all levels of the business. And the more you automate, the more you can achieve, but the bigger your IT budget becomes. I use Capex to reduce Opex.”

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In addition to people skills the CIO also needs good communication skills. “A CIO must explain why IT is of strategic importance, and explain to business managers how IT brings added value.” Language Dewulf, a civil engineer, is quite clear about the CIO’s role within the organization. “IT is of critical importance to us. That is why the CIO reports to me.” According to Dewulf, a CIO’s role depends very much on the nature of the company. In Belgium, Nuon is a sales and marketing organization. “IT is a driving force at the front-end, where all cus-

tomer knowledge is held in CRM systems, and also at the back-end, at the invoicing stage.” An energy supplier’s invoicing systems are so complex that they operate along the lines of a bank. In Nuon Nederland, where the power is produced, the CIO does not report to the CEO. “There the CIO is active in several business departments and there is less IT/business alignment.” Alexander Dewulf worked in the IT sector for many years and is familiar with CIO language. “I don’t just look at the cost picture, but also at how this translates as regards business and IT alignment. In companies that have a good IT policy, the CEO shows the necessary knowledge and interest in IT.” Tensions Tensions sometimes arise in an IT department because IT has to carry out governance projects (as a result of corporate decisions, for example) or has to respond to application-driven complaints from the business (following new market developments, for example). “We resolve them by splitting up governance projects and by incorporating the separate parts within business projects.” Dewulf believes that a neutral body is needed to help keep these processes on track. This role is reserved for the PMO who reports directly to the CEO, while the business is the project owner. In this feature the CEO reflects on IT alignment and the strategic role of IT on the business. Alexander Dewulf (50) is now CEO of Nuon Belgium. Prior to this, he was CEO of Siemens Business Services, Director at EDS, and held various positions with Siemens Nixdorf.


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Based on a 3-year plan, HP devotes considerable resources to transforming its entire IT organization. The initial results have proved encouraging.

According to Mark Hurd, CEO of Hewlett Packard, it is all about spending money to save money: increasing IT capital expenditure with the strategic objective of reducing operating expenses in the long term.

PICTURE

Ewald Comhaire, Global Portfolio Manager, Infrastructure Services, HP Services: “HP’s formula for IT transformation success can be adapted to any organization’s specific needs in order to develop a flexible and costeffective IT environment that synchronizes IT with business.”

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Don’t wait to ‘push the envelope’ In 2005, Mark Hurd got his message across - that HP needed to radically and urgently transform its IT. The company was operating more than 85 data centres in 29 countries, using close to 5,000 applications, 21,700 servers and 762 data marts. Small-scale tinkering was no longer sufficient – HP needed to completely overhaul its own use of technology, without disrupting its business. HP conducts business in 179 countries, receives 800 million calls per year – for support, assistance and other services – and employs 16,000 people facing customers. The scale of the business may look impressive, so is the potential impact of IT transformation. “Our first aim is to provide better information for improved decision-making”, says Ewald Comhaire from HP Services. “Second, we wish to reduce IT costs while delivering more to the business. Third, we can reduce the risks facing the company by controlling the infrastructure more effectively. And finally, we are a showcase for corporate customers. Unique results – and not only for HP Halfway down the road the results of HP’s bold IT transformation project are astonishing. Ewald Comhaire: “Which organization can boast that it has created three next generation global data centres, closed 17 major data centres and many smaller ones, and reduced the number of servers

by 30%, while increasing processing power by 80%?” Striking the right balance between ‘less’ and ‘more’ is what has made this transformation so popular with the business. HP has cut networking costs by 50%, but tripled its bandwidth. It has abandoned 60% of legacy applications, replacing them with global ones and accelerated application roll-out. Ewald Comhaire continues: “Back in 2005, we devoted 4.1% of our total rev-

enue to IT. We aim to reduce this to about 2% in October 2008, freeing up cash for investment elsewhere. The maintenance/innovation expenditure ratio (70/30 in 2005) will be completely reversed, thus creating greater potential for innovation and transformation.” The need for IT transformation is universal: “Operational complexity and cost pressures are common threats. HP has now established itself as a leader in IT transformation and is capable of replicating this success within any other organization.” Interested in this topic? HP organises the ‘IT Transformation Series’ throughout 2008. More info at http://www.hp.be/ittransformationseries


Case study

Elia launches VoIP and VoWLAN

Foolproof PROJECT Increased communication security, better redundancy and higher efficiency were Elia’s major concerns when it launched its VoIP and VoWLAN project. Greater cost-efficiency was a very welcome side effect. Power transmission operator Elia has to ensure that lights are kept switched on in Belgium. It owns the country’s entire 150-380 kV grid infrastructure and almost 94% of its 30-70 kV grid. Daily operation and maintenance of the high-voltage grid (with more than 800 substations) is managed from a national dispatching centre and three regional centres.

with from their mobile phones. Additional functionalities, such as voice recording or the ability to transfer the PAB from Outlook to the IP phone, can be complemented by ‘home made’.NET developments. More recently, Elia added VoWLAN technology to its VoIP project. According to Frédéric Leroy, the key motivation was increased security of the data network (802.1x protocol), improved response to

Simpler, safer and more efficient “To keep our highly complex inter-meshing structure up and running, efficient and foolproof communication between our 1,200 employees is fundamental”, declared Frédéric Leroy, IT & DataCom Exploitation Manager at Elia. “VoIP allows our dispatching centres to manage incoming calls more intelligently. It supports the creation of hunt groups for the helpdesks. Furthermore, it makes dispatchings and employees more mobile by providing them with a single telephone number and giving them access to the corporate directory – whether they are at a dispatching centre, on the road or at home.” Greater cost-efficiency was a very welcome side effect. Frédéric Leroy: “We avoided major investments in telephone switches, reduced their number from 165 to 5 and cut down maintenance costs and communication charges.” The company also welcomed the benefits associated with using a single network for both voice and data communications, such as reduced infrastructure complexity and higher redundancy. High user acceptance of the transition to a VoIP environment is fuelled by the extended functionalities and user-friendly display. Users immediately recognize a look and feel that they are familiar

PICTURE

disaster scenarios, better possibilities for connection to the Elia data network – including for short-term third-party contractors – and the resulting increase in productivity. Nor are the cost benefits to be underestimated, thanks to fixed-to-mobile convergence – a single device replacing the PDA, mobile phone, cordless DECT phone and fixed set – and reduced fixed and mobile operator charges.

Frédéric Leroy, IT & DataCom Exploitation Manager at Elia: “We added the VoWLAN technology to our VoIP project to increase the security of our data network, respond better to disaster scenarios, improve productivity and drive down costs thanks to fixed-to-mobile convergence.”

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Column

Don’t forget the ‘OLD’ customer

F

rom time immemorial, man has aspired towards growth. Fortunately, growth is now no longer associated with military conquest. It rather takes the form of economic growth, or acquisition of new market shares, and is proudly described by companies as “growth in turnover”. Many firms have become ‘sales-driven’ and (too) often give priority to seeking out and concluding new deals, sometimes to the detriment of the company’s ultimate interest. Worse still, sometimes to the detriment of customers in general, and existing customers in particular. At a time when words such as ‘profitability’ and ‘cost reduction’ are common currency, we have some doubts about whether companies are able to access the resources (i.e. ‘people’) required to both ‘conquer’ new markets and continue to offer high-quality service to existing customers. As CIOs, our duty is to support our company’s business and to provide our company with high-performance, reliable, stable and secure information systems. We too are familiar with the terms ‘profitability’ and ‘cost reduction’. To achieve our mission, we work with our own teams and also with ‘partners’ that we have chosen because they have convinced us that they would give us the best chance of achieving our objectives, via a stable win-win relationship. So why are we so often disappointed and why do we need to put so much effort into obtaining the services we expect? Personally, I believe that many problems could be avoided or minimised if companies invested as much in delivering ‘sold’ services to existing customers as they did when they were trying to convince us that they were the best and offered the best products. Have they ever calculated the cost of a dissatisfied customer and the investment and effort required to win him back? Have they ever calculated the effort and investment required to achieve growth with a satisfied customer, in comparison with the effort and investment required to win a new one?

YVES VANDER AUWERA

ICT Shared Services Director, Federal Administration The columnist for this issue passes the torch for the next issue to a colleague. Yves Vander Auwera has chosen Marc Van der Schueren, previously CIO at Acerta and, since 1 October, CEO/Managing Director at the Belgian Post Office Bank. Topic: the move of a CIO to a general management position.

14


beating the mummy. easy.

beating hackers. easier.

1. Know your hieroglyphs.

The ancient hieroglyphs speak of the Pharaoh’s return, and his vicious attack on a midsize enterprise IT department. How it all turns out is less clear, as the hieroglyphs got chipped and are hard to read. Sorry.

1. Implement Microsoft

2. Make a torch.

The Mummy, being wrapped in dry linen, is extremely flammable. Make a torch from a rolled-up newspaper and swing it in his direction. You’ll get his attention immediately and he’ll quickly lurch away.

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3. Unwind him.

The Mummy is easy to unwind. Sit him in a swivel chair, grab his loose end, and spin. Keep him spinning, make him dizzy, and once you’re done, he’ll be completely exposed.

4. Summon the sun god Ra. Borrow an ancient staff or a magic ankh. Speak the magic words to summon the mighty power of the sun god Ra, and stand back, because Ra does not mess around once summoned.

5. Be the Mummy’s daddy.

Ancient Egyptian royalty was dynastic, meaning the pharaoh’s firstborn child became the pharaoh. Disguise yourself as an older Mummy, tell the Mummy you’re his grandfather, and he’ll be obligated to do your bidding.


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CIONET Magazine 1  

CIONET Magazine Issue 1 - December 2007