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.