Over the past 10 years
Ralph Szygenda, group vice-president and chief information officer
at General Motors, has used IT to drive £6bn in savings at the
motor manufacturer. He attributes his success to a combination of
hiring the right staff, encouraging innovation across IT and
developing a global IT strategy.
A 37-year veteran of the IT industry, Szygenda started out at
Texas Instruments in the early 1970s, where he worked on the
world's largest computer system of the time - Advanced Scientific
Computer. He was involved in computer design and software, working
in Texas Instrument's defence, semiconductor and IT businesses,
before becoming Texas Instruments' CIO. As CIO, he also ran the
company's enterprise systems business unit that sold IT systems to
Fortune 1000 companies.
In 1993, Szygenda was hired by Bell Atlantic, the US telecoms
company now known as Verizon. Here he worked on redesigning the
telecoms business processes to move the company into the age of
communications, entertainment and the internet.
Three years later, in 1996, Szygenda went to GM, as its first
CIO. At this time GM was the world's largest company. It had formed
IT services company EDS in 1984 to run all IT operations, which was
then spun out as a separate business in 1995. "I was hired to work
out the digital strategy of GM, how IT would be structured and how
to manage this outsourced relationship," says Szygenda.
Along with managing the relationship with EDS, the other big
challenge Szygenda faced was how IT could support a company in
transition. GM had grown through acquisitions, where each business
unit was very much independent, but the company has steadily moved
towards a global model of management. Szygenda says, "In a matter
of 10 years, GM has gone from totally decentralised to running
global processes, and my job here is to drive the business
processes which run the company and innovate with IT."
Szygenda believes IT plays an important role in helping GM to
innovate. "We are very similar to the fashion industry. We have to
meet the customer's needs. We have to meet those needs at the
lowest cost." To provide customers with the right products at the
lowest cost, IT needs to innovate.
"Innovation comes from winning," says Szygenda. "You have to be
the best at running a company, be the best at running IT. We call
it precision IT. Our vision is to use IT to change the business to
make GM the best, across all industries." To get the best from his
people Szygenda tries to ensure his IT teams always work towards
this goal.
Szygenda has a 10-step approach to innovation. He has
established a team of 1000 IT staff including 10 CIOs and process
information officers to enable him to support an IT strategy on a
global basis. Szygenda brought in 1,000 people from outside GM -
who he describes as some of the best information technologists in
the world - and 1,000 automotive specialists to help him manage GM
from an IT perspective as one global entity.
"I hired a mix of people from retail, financial services and
other sectors. If you start of with people who have worked in the
automotive industry for 30 years and have never innovated, the
chances of them innovating is minimal," he says. The CIOs needed
experience of managing IT in a large company they had to
demonstrate a track-record of running successful transformational
projects, and they needed to be team players.
The CIOs manage the IT in each of the individual businesses, and
the process information officers try to find business processes
that can be rolled out globally to allow GM to gain from
efficiencies of scale.
Along with the right staff, before IT can innovate Szygenda says
the CIO must understand the state of the business. "If you are a
CIO and you do not understand the business processes, you are
probably in trouble." To gain his own fast-track insight into the
processes within the automotive sector, Szygenda picked three
consulting firms and asked each to produce a report within 90 days
that compared GM's processes and IT to those of its competitors. "I
got four inches of material from each one and, amazingly, they were
all the same. So they were probably right," he says.
He also spoke to all the heads of business at GM on a one-on-one
basis about their business, what was wrong and what was going well.
This gave Szygenda enough of a grounding in the automobile industry
to speak to the business in terms they could understand, rather
than talking IT. "You better know the business because if you talk
IT to the business they will probably think you are a back-office
person who does not understand the business," he says.
Simplification and standardisation make up the third step in
Szygenda's innovation journey. He needed to simplify the IT
environment at GM by removing 4,500 applications and establishing a
global MPLS network using AT&T. "We had to get a stable IT
environment before we could innovate, so we took out $13bn of IT
costs that were not adding value to GM."
For Szygenda, the next step involves understanding the
competitive landscape. "How can you innovate if you only think
about your own company?" he asks. Every year GM conducts a
competitive analysis using a research company to understand how the
competitive environment has changed. Szygenda uses this report to
show his boss, the chairman of GM, how the IT function in GM
performs against its rivals.
Szygenda says CIOs should also drive innovation by learning from
what is happening in other sectors. "Innovation means you will be
better than other people in your industry." It is not good enough
for GM simply to look at what rival car makers are doing, Szygenda
wants to understand the unique business processes in other
industries.
"In logistics, we may we look at how FedEx or Wal-Mart does
shipping. In manufacturing, we could look at Dell and try to relate
how it makes computers to what we do."
People are invited to General Motors to talk. "We meet with CIOs
from other companies all the time. We also run our own research,
and our process officers look at what processes are innovative
around the world."
Innovation also requires a CIO to understand how their own
business is changing. For Szygenda, it is just as important for
CIOs to appreciate the drivers within their industry sector and the
IT sector. "Today, the environment in the automotive industry may
be driven by fuel prices. If you started a project three years ago
and the business has changed, you have to change the IT
direction."
He also urges CIOs to look closely at what is occurring in the
IT industry. "If Oracle is buying up companies you used to work
with individually, you have to figure out whether this is positive
or negative and you have to influence the IT industry," he
says.
The next step on the road to IT innovation involves looking at
what business processes can be improved by the smart use of IT.
"Everyone is trying to figure out real business value from IT," he
says, but it is important for a CIO not to be drawn in by what IT
suppliers are trying to sell. Instead, they should drive
negotiations by presenting business problems to the IT supplier and
ask them to find an innovation solution.
Finally, Szygenda believes it is important to take risk in order
to innovate, and the company must engender a culture of
risk-taking. "Don't wait three years to make a decision. Risk
taking should be done upfront. If an idea does not work, I have
time to evolve it," he says.
Szygenda recommends that IT people should aim to deliver value
to a business every six months. "Business people must see process
or business improvements quickly and not have to wait three years."
This forces IT people to take risk in order to innovate.
Unlike some CIOs, where the head of IT only receives a single
perspective on an IT strategy, Szygenda encourages debate within
his team. He runs five-hour meetings every Thursday with his global
IT management team in which two opposing views on an IT strategy
are debated. A decision is made after each meeting.
"I have CIOs who ensure customer needs and the drivers for a
particular part of the business are understood. I also have process
information officers who are experts in a particular process, who
drive commonality, and they are paid to innovative GM processes,"
he says.
This creates different priorities: the CIO will look at their
own business unit, while the process information officer looks
across the company. One view is tactical the other strategic.
Szygenda says the benefit of this approach is that no one can keep
a problem a secret. "People are able to express their different
points of view which means we are able to make a better decision
and innovate," he says.
The end result of this approach is IT innovation, which Szygenda
says must deliver a tangible result to the business.
To continue with IT innovations, Szygenda also works closely
with key suppliers. AT&T, SAP and Microsoft research and
development staff are invited in to General Motors to work on IT
R&D. However, their work is always directed by GM's business
needs.
Ralph Szygenda on managing
suppliers
"Historically, IT suppliers have tried to tell companies how to
run their business. For some reason, IT companies, who basically
build operating systems, server hardware or routers, try to tell
you how to run your company.
"IT companies, even services companies, do not run corporations.
They sell transactions to run computer systems or write software to
support logistics. They have never been CIOs of companies. They
have never had to architect companies. IT companies that have never
run an automotive company will be hard pressed to tell me how to
run my company.
"Buying more network routers will not make my company run
better. When an IT supplier tries to tell a company how to run its
business, in most cases this occurs because the user company does
not have strong enough IT executives.
"It does not make sense for an IT supplier to sell you an
off-the -shelf product to try to transform your business when it
does not understand your company.
"The people who report to me are measured on how they transform
the business. The latest product is useless to me unless it
transforms the business. Businesses need to push back on IT
companies and tell then what they need. I buy a lot of information
technology, and I can tell IT suppliers what I need. This is where
innovation comes from."
Ralph Szygenda's 10 steps for effective
CIOs
1. Employ innovative people. If you don't have people who can
innovate you won't succeed.
2. Understand where the business processes are today
3. Use IT to standardise, simplify and collaborate
4. Know your competitors
5. Understand business processes that exist outside your
industry
6. Make sure you can take into account what is happening in the
business environment
7. Know what business improvement you need to avoid the risk of
IT companies telling you how to run your business
8. Take risks and make quick decisions
9. Allow debate
10. Measure the business results.
The key point of Szygenda's 10 steps is that each one builds on
its predecessor. Innovation can only begin if the business hires
the right people who understand what needs to be done. But before
they can achieve anything, IT must first get its own house into
shape, and that means simplification, consolidation and cost
reduction.