Parting interview with one of my all time heroes. Ralph Szygenda was GM’s first CIO. He inherited a disaster and really embedded IT with the business process. Other factors have driven the company to bankruptcy ( BTW, not the first time GM has gone bankrupt–look it up) but IT at this company seems to be, for a change, an enabling force for the new GM’s success.
I like the way they do IT governance and align on business process.
Interesting info on the capabilities of ON-STAR that I did not know.
Sorry to see him go.
When Ralph Szygenda joined General Motors as CIO in 1996, the automaker was one of the largest, most diversified corporations in the country. However, the IT organization was at an all time low. GM had just unleashed EDS, the IT outsourcing organization. Szygenda says, “There were about 20 of us left in the company who knew anything about IT. EDS did everything. We had to start from scratch to rebuild IT.” Thus began Szygenda’s legendary career to become the global CIOs most CIOs want to emulate. He and his team began to build what would become the world’s largest outsourced IT organization. He says, “We consolidated endless numbers of systems, applications, networks, and processes.” Under Sygenda’s leadership IT’s focus shifted from systems to cars, customers, and innovations, such as OnStar. GM emerged as a global business, especially becoming the number one automaker in emerging markets such as China. Now things are different. Szygenda retired on October 1, 2009, as GM emerges from bankruptcy to become a more focused, leaner automaker. He says, “Now the entire company can focus on getting closer to its cars and customers. ” A month before he retired, Enterpriseleadership.org had the pleasure of sitting down with Szygenda to talk about how the role of IT changed the company, how GM plans to deal with some of its operational issues outside of IT, and what changes we might see for the IT organization. Here is what he had to say:
EL. Because of the bankruptcy, how did the company’s business strategy changed?
RS. Clearly, it is still in development. A couple of things happened. The bankruptcy took away many of GM ‘s decades old legacy problems. More management time went into legacy, healthcare cost, and Delphi, a bankrupt automotive supplier spinoff from GM. We had to give Delphi more money than anticipated to keep it alive because of its criticality to our supply chain. GMAC, the financial services business, has also gone away. Our strategy is to concentrate and make time for our customers. That is what a car company really should be doing. It gives us an opportunity to do this without many of the legacy issues we had in the past.
EL. What changes have you made or plan to make to the IT organization and how will these changes affect the outsourcing partners?
RS. Not a significant amount! I believe in the IT organization shadowing or mirroring the structure of the business. It goes for any company. As GM restructures and changes how it runs its international operations, the IT organization also changes to adapt to that particular area. Our base strategy remains the same — to use process information officers (PIOs) as well as CIOs. These people drive the common elements of product development, manufacturing, or supply chain across the company. That strategy or that direction for an organization issue will probably stay in place.
EL. Do you still have the same number of outsourcing partners?
RS. During my past 13 years here, we have reduced the number of suppliers to less than 20 key IT suppliers. That number includes all of the product companies, such as Microsoft, Oracle, and Cisco, as well as services company, such as IBM, HP, Capgemini, and Wipro. We have mostly service providers along with both hardware and software product suppliers. From an IT viewpoint, we run our sophisticated model of buying and brokering IT. We have 1,000 people inside the company that have the responsibility to design the business direction and the acquisition of IT.
EL. How will the IT budget change and what new IT investments do you plan to make because of the restructuring?
RS. IT cost will bottom out this year. It has been difficult because of the bankruptcy and the conservation of cash. We have reduced cost every year for the past 13 years through efficiency. In other words, we have taken cost out of the operating side of the IT business and put it back into development of new capabilities and application. This year that figure has been lower than what it has been because of the bankruptcy. It will start to go up again because we cut it very severely this year. So going into next year, we will put more money into innovation as the business changes the particular processes where it wants to go.
EL. Can you describe the investments you made over the years that have really paid off?
RS. Twelve years ago, this company operated very decentralized with autonomous business units. Today the company runs the common processes for product development, supply chain, and manufacturing the exact same way throughout the world using this exact same technology, saving a significant amount of money and permitting great speed for product development. For example, 12 years ago, we had 23 computer aided design systems. Today we have one. We cut the product development cycle time by more than 50 percent. We have approximately 30,000 design engineers around the world using this same technology. People on different continents can work in parallel to design together. We move eight million vehicles throughout the world using the same supply chain systems. We purchased $90 billion dollars of services and materials using the same purchasing systems throughout the world. We deliver just in time to plants and manufacturing facilities across the company. OnStar is another example. We have five million customers using that technology in vehicles. It saves many people’s lives. We can diagnose vehicles and tell our customers all through technology that they have an issue. If they have an accident, we can notify emergency resources through satellite systems linked to our call centers. We can stop stolen vehicles automatically if the police officer wants to bring the vehicle to a halt. The person driving is in trouble. All that includes technology changes that have occurred in the company over time. At the same time, we have saved significant IT dollars through efficiency. In fact, we have reduced billions of dollars. At one time, we had 7,000 IT systems. Today, we have about 1,500 systems taking out billions of dollars of costs, and moving from autonomous businesses to very common business There have been significant changes in the business.
EL. Can you describe the current governance process for making technology investments?
RS. We have CIOs for the major business units in the company. Given the company’s global size, 14 years ago we created the role of process PIOs or experts in business direction. For example, we have a business PIO in change of the entire product development process, from concept to actual vehicle development. We have another PIO who handles all manufacturing processes throughout the company. Another one has the supply chain. They drive initiatives across the entire company by doing two things: trying to put together and analyze the business needs, and driving the strategic direction with the business leaders on defining the most important requirements to transform the business. Every year we do a portfolio process where we analyze those needs coming from the business PIOs, such as the PIO for product development. In this case, we would work with an IT project management officer to see what the company needs. We also do a comparative analysis or a competitive assessment of all of our competitors each year. Next, we take all of the particular IT requirements we need to do and we rank from one to 60. We go back and socialize with the business leaders, come back in, and ask senior management in the company to evaluate how we should proceed. This occurs every year through a pretty detailed portfolio process for the company. It’s unclear whether we will modify this process. I don’t think it will happen totally. It is business driven, kind of a ROI investment area. We look at ROI in two areas — one is analytical based on cost savings, and the other one is intuitive based on what we think we need to do. We look at business ROI, which includes IT. We do not do independent IT, except for running the computer center, or telecommunications, I don’t expect a significant difference because the process has worked successfully over time. GM’s major issues revolve abound legacy cost issues of not having the right products for the marketplace. It is a global process around the company. I’m not sure anyone will say there is an issue with that. We had a 40 percent reduction in the marketplace of sales, which cash could not overcome.
EL. How do you categorize the technology investments?Do you look at what is innovation or what is explorative?
RS. I have a strategy manager who works across the entire portfolio process. Under those areas, we have clearly new process transformations, which include strategic area changes in the portfolio. Then we have, what I call, more tactical new product launches in the company that need IT investment, such as regulatory or initiatives to keep the business running. Next, we have strategic business process transformations. For example, we have different regulatory requirements in Russia and in China. We have to meet all of those. We have new product launches every year because the vehicle designs change. Here we might need more leading-edge technology. We might experiment with new IT in areas where we see how they would adapt to GM from that perspective.
EL. Are you going to make any changes to the way you measure your technology investments?
RS. It is solid ROI with a total business appropriation request. Any major changes must link with the business for measuring a business change. You can’t get much better than that. On the other hand, the intuitive side is very difficult to measure. For example, how do you evaluate every new change to a new HR system? Some of that is intuitive. I am not sure we will change that. We will change the business’s end goal to focus more of customers and the cars. We will drive a different perspective from more customer-oriented systems, more product information gathering, and new ways to communicate with the customer. We will drive more investment in those areas. The IT process will not change. The business needs will tend to tilt and change more toward the customer, the vehicle design, and the need to meet the market needs.
EL. Have your expectations of your internal staff changed?
RS. This organization has always been very aggressive. Most of the people on the senior IT leadership team have come from outside GM. As a result, they have had different mindsets, and difference experiences over time. The overall IT speed of the company will accelerate. We will have to deliver our requirements faster. Our IT people view this as a positive move. However, they will be under greater pressure, along with the IT suppliers, to deliver quickly on these requirements.
EL. Can you describe your growth in foreign markets?
RS. Ten years ago, we were not in China. Today, we rank as the number one automaker there. If you look at the new emerging markets, GM has done quite well there because it did not have the legacy area. People say, ‘How can GM be a leader in China and still have all of legacy problems and then go bankrupt in the U.S.?’ We did not have the legacy cost issues outside of the U.S. I appointed an emerging market head who makes sure we address those markets from an IT perspective very quickly.
EL. Is GM looking to move OnStar into new markets such as healthcare?
RS. Coming out of bankruptcy, we must concentrate on the core automotive businesses and nothing else. GM has a long history of being in all types of businesses, everything from heating and cooling to owning Hughes Corporation. In fact, we owned EDS when I joined the company. Diversification is not one of goals right now. OnStar plays a key role in the insurance industry. We understand, as well as provide, all of the internal analysis of the vehicle electronically. For example, an insurance company might say, ‘We will sell you insurance on the miles driven.’ This information automatically feeds the insurance company. It is paid per usage. We are doing some of these things. For the government, we can monitor vehicles with OnStar. We know which vehicles have evacuated from a hurricane. We can tell how many people are on the highways. We immediately work with government agencies to give them that input. We leverage the fact that the vehicle acts as another node on the IT network. This leveraging helps us to use OnStar for online navigation and information you want. Many businesses have wrapped themselves around that. One example includes directing people to restaurants. There will be more of that. The killer application will always be safety and security followed by navigation. It is hard to find applications that may be extremely successful after that. It is a new territory for innovation. Today OnStar has no direct similar competitors. We have about five million customers. Other companies install tracking devices into cars after they are built. No other competitor builds a system like OnStar directly into the vehicle. If there is something wrong with my vehicle, I get a diagnosis via email.
EL. What is IT doing to drive innovation within the company?
RS. For a long time, IT has have been transforming all of these business processes, and transforming the technology in the vehicle, though innovations such as OnStar. We are taking that process to other parts of the world. The processes in the company for product development and manufacturing are very good. They will not affect GM’s ability to compete in the automotive business. This is a fashion business. You need the right car or truck to meet customers’ needs. These needs could include energy efficiency, comfort, or reliability. Ten years ago, IT was fragmented or spread across the world. For example, within 10 years, we have gone to no presence in China to being number one using IT. This is a nice success story. GM also uses more social media than any other company. We have been into blogging for years. We have experience with Second Life. We will see more of that. The next generation of technology will offer more transparency to customers, letting then know everything about our products and our company. Our next move includes making sure GM has the speed it needs to transform after the bankruptcy. Our legacy issues are gone. GM had two issues — legacy cost which was a major driver and the 40 percent drop off the marketplace. You can see right now with the Cash for Clunkers how many people are buying cars because of the stimulus. IT has never been an issue for IT. If you talk to any members of the executive team today, they will tell you the same thing. I am not sure that executive leaders in other companies would say that IT does what I need it to do.
EL. What was the genesis for GM’s major outsourcing of IT?
RS. When I joined the company, IT was decentralized. It offered mediocre processes.We inherited outsourcing when GM spun off from EDS. We had to make it work. In 1996, we were the largest corporation in the world. About 20 people who knew something about IT remained with the company. EDS handled everything else. We had to make it to work. Industry analyst reports say that 70 percent of all enterprise IT includes acquired services through some form of outsourcing. It is a way of life. We did it way before our time. We have done it pretty well. It has allowed us to move quickly. We did not have to worry about having all of those internal people and assets in the company and trying to make it leaner. We could never have moved that fast with technology. The Internet also enabled us to redesign all of the interfaces, whether it is to the supplier, or dealer using the Internet. If we had to do that from a hard-coded environment, it would have taken us a decade or more. It took us three years.
EL. Can you give me some examples of IT firsts at GM?
RS. We were the first one in California to display customer info versus going through a dealership 10 years ago. We were the first one to interface with a supplier base. We had 1,000 of suppliers at that time we were buying $100 billion of materials and services. We did all of that online. Meanwhile, the rest of GM was encumbered by speed in areas such as production. Within three years, IT helped transform GM. IT will not keep GM from being successful. Instead, it will be whether or not this company can meet customers’ needs with the right products fast enough. The perception quality problems have taken decades to fade away. Most people believe we have good products and want the U.S. auto industry to succeed. The entire American car industry still has a perception issue that will linger for a few more years. That will occur in the next couple of year.
Elizabeth M. Ferrarini – She is a technology writer from Boston, MA. Reach her firstname.lastname@example.org.