When Ralph Szygenda walked into General Motors Corp. (GM) on June 28, 1996, it must have been a little like entering a movie set for "The Company That IT Forgot!" The automaker had just completed the spin-off of Electronic Data Systems, its information technology provider, leaving a company that seemed stuck in 1970s thinking.
As the first-ever CIO of the world's largest automaker and corporation, Szygenda (pronounced zhe-gen-da) had accepted a mandate that many thought was undoable -- enabling GM to become the first major manufacturing company to transform into a digital enterprise.
"That's exactly the reason why I accepted the challenge," recalls IndustryWeek's 2001 Technology Leader of the Year. "I've always been attracted to jobs that seemed impossible."
As this task continues, Szygenda sees it as an opportunity to both transform and broaden strategic options for GM. He also emphasizes IT's role as a differentiator with the potential to develop and retain new profit streams by creating new value for customers.
"We have entered a time of electronic transactions and knowledge sharing, a time when our relationships with customers, suppliers, dealers and employees are drastically changing and improving," Szygenda says.
Boston-based Adrian J. Slywotzky vice president, Mercer Management Consulting, and co-author of "How Digital Is Your Business?" (2000, Crown Business), applauds Szygenda's success in rejecting the notion that e-business techniques are applicable only to dot-coms and new businesses.
"Szygenda kept to the key issue -- 'How can I use digital options to build a better business model for my company?'"
Starting At The Top
The dimensions of the challenge Szygenda faced were formidable. By 1996 information systems had proliferated at GM, but most of them were antiquated, isolated "silos" of information implemented with little thought given to integrating data flow across the enterprise. Marketing data researched by one GM marque was difficult to share with executives in other parts of the organization. Design engineering had fallen into the same trap, threatening collaboration among the global product development staffs. As a result, new-car development cycles stretched to almost four years. Order-to-delivery times, whether placed by customers or dealers, were as long as 76 days.
Szygenda, more of an e-business strategist than a technology-oriented CIO, found that a lot of GM's IT thinking was mired in self-limiting, service-oriented strategies. To create a digital manufacturing company he knew he would have to meld information technology with business design in ways totally new to GM, and -- most significantly -- totally new to GM top management.
"The encouraging factor was the humbleness of senior management in realizing that the IT function had to be made more strategically relevant," says Szygenda.
Even so, it was not easy.
"It took a lot of education. Senior management at first did not understand the full implications and significance of information technology." That is not surprising and is still a continuing challenge for most manufacturing companies, says Slywotzky.
"Unfortunately many senior executives in manufacturing companies still position IT as being restricted to the back office and the bottom of the [business process] pyramid. Today's IT potential also involves customers, suppliers and business partners. IT affects not just the bottom of the pyramid but every other level as well. That's a big change from four to five years ago."
Szygenda spent a phenomenal amount of time one-on-one with executives throughout the company to really educate them.
"While Rick (G. Richard) Wagoner Jr. [GM's president and CEO] educated me about the automobile industry, I educated him about the potential of information technology. Now, we've both had to give and take, because we're both pretty bull-headed, but we've learned how to come together and make necessary changes."
Slywotzky says building such a dialog is an essential step in digital transformations.
"Every company that has made a successful transition to a digital way of doing business started by creating the right kind of dialog between the business side of the house and IT -- between the CEO and the CIO. Without a mutual exchange of objectives and ideas, it is virtually impossible to use IT to gain competitive advantage."
GM management has come to support the strategic view of IT, as evidenced by the fact that Szygenda reports to the CEO not the CFO, a classic IT debate that has raged ever since computers entered the corporate scene as number crunchers 30-some years ago. Szygenda says one of the reasons he continues to enjoy top-management support is that he has not been a big spender.
"Today, we've changed everything at GM, and the remarkable thing is that I've mined [the necessary money] within the existing budget. I never asked for money."
Szygenda estimates that in 1996 when he arrived, GM was spending, as a percentage of revenue, 25% more on IT than the company's Detroit-based competition. "And we weren't doing as well."
He began by "clearing out the clutter" and then investing strategically to improve efficiency and reduce costs. Among those accomplishments:
- The worldwide telecommunications structure was overhauled to gain tremendous bandwidth for the Internet and information generation. ("We've taken out thousands of servers.")
- Systems have been standardized. For example, GM now has only one computer-aided design system worldwide, where at one time there were more than 20. (Szygenda confronted nearly 7,000 legacy systems when he arrived at GM.)
- Product development cycles, once spanning four years, are now approaching 18 months. Szygenda says rationalizing the product development process also produced $1 billion in savings. A vehicle order now takes 40 days to fulfill, down from 76 days, and the company has a goal of 14-day delivery.
"We had to clear out the clutter before we could change the company," Szygenda says. "We did that and invested a significant amount of money -- $1.7 billion -- just on Internet-based applications, but all of that money was mined out of existing funds. Even after doing that -- impacting all of General Motors -- today we spend $600 million less [on IT] than we were spending in 1995. So given that, you get a lot of management support when you don't ask for more money."
Szygenda describes his e-revolution vision as big -- not big like a new vehicle launch, but more fundamental -- like the invention of electricity, or the birth of the industrial revolution.
"This will radically, profoundly, change GM's world," he says.
Building An 'A' Team
Szygenda's destiny to be GM's change-master was shaped by his career path-first by 21 years at Texas Instruments Inc. (TI), where he accumulated responsibilities as vice president, information systems and services, and CIO. At TI he established a reputation for reengineering business processes. By 1991 his TI portfolio also included being vice president and general manager of Texas Instruments Enterprise Systems Business Unit. It functioned as an external software systems integration business.
When GM's executive search team, led by former vice chairman Harry Pearce, became interested, Szygenda was reengineering business processes as vice president and CIO at Bell Atlantic Corp., a position he had held since 1993. Szygenda began at GM realizing that the automaker had a vacuum both in terms of IT technology and people. He tackled the people challenge first.
Szygenda knew that to succeed in differentiating GM by the competitive strength of its business processes, the strategy had to start with a team equipped to be equally convincing as business executives and information technology specialists. He wanted to surround himself with a team of CIOs who were also process information officers.
The search also focused on finding people who could help overcome the hidebound resistance to process change. He needed a staff that could effectively initiate a digital business process revolution in a company where senior executives still thought that keyboards were for administrative assistants and clerical help. "Wagoner wasn't even using a laptop when I arrived in 1996," says Szygenda.
Wagoner even publicly admitted last December that he "had been a technological troglodyte -- I never used a computer at work." (Today Wagoner and other GM executives routinely depend on digital tools such as PCs, PDAs and the Internet.)
To win over reluctant business management, Szygenda's team had to be a special breed. Those that made the cut came from positions such as vice president at Navistar International Corp. (Kirk Gutmann, now global develop product information officer) or director of information for Allied Signal's engine division (Clif Triplett, now global produce product information officer).
"When I brought people in, they had to have two competencies," Szygenda says. "They had to know how to run businesses, and they had to know information technology." Szygenda hired more than 200 information officers and business-process experts that were installed in every GM operation. Every business unit now has a chief information officer who reports to the business president.
Szygenda also put in place process information officers for product development, product production, sales, service and marketing, business services, and the supply chain to drive common solutions across those units. Szygenda's team implements new thought processes and procedures vertically and horizontally across the company's global organization. The result: a business matrix that will quickly absorb e-business initiatives and new technologies into GM's core business operations.
"The key is having an IT team that not only can understand business objectives, but help develop initiatives to accomplish them," says Tony E. Scott, chief technology officer for Szygenda's Information Systems and Services organization. Scott describes his role as helping GM correlate bets on information technology with the business impact. He was previously vice president of information management at Bristol-Myers Squibb Co.
The end goal of Szygenda's team is formulating a competitive business model that integrates processes on common platforms -- one that unites people, processes and technology.
"Some of GM's challengers, including our Asian competitors, built their initial success on people and processes, and now they're discovering that they can't get any better without applying information technology," Szygenda says.
Fulfilling his role as CIO/business strategist, he clearly sees his team's integration efforts as a key competitive advantage.
To be successful with that integration, Szygenda's team has to contend with value chains that are being stretched by globalization. For example, 60% of the industry's growth is predicted to take place in eight developing markets: China, Brazil, South Korea, India, Thailand, Mexico, Poland and Russia.
GM is capitalizing on that global potential by leveraging alliances with companies such as Fiat, Isuzu, Subaru and Suzuki.
Szygenda believes success depends on IT's contribution to some fundamental industry problems. "The first, and perhaps the most fundamental issue, is that our traditional automotive processes [still] do not fully meet customer-driven requirements. Products are too complex, and design cycle times too long to properly respond to the marketplace. Customers should be able to design their own vehicles, add options, select colors and understand how these decisions improve price and financing."
Also, manufacturers and dealers don't have integrated, win-win e-models that provide valid, up-to-date information on customer demand, he says. "Imperfect information means manufacturers often build too many of the wrong models. Because it's difficult to change production in midstream, the result is supply chain, manufacturing and distribution processes that don't respond properly to market changes, leading to lots of inventory. Manufacturers and suppliers lack sufficient visibility back through the supply chain, fulfillment processes and demand side."
Szygenda's strategy to confront these issues is built around the GM business web. "The focus is on the constituencies: suppliers, dealers, employees and customers whether at home, at the office, or in the vehicle. It encompasses the internal processes of our company from planning the first concept of a car, through product development and manufacturing and through sales and lifetime service. It includes our alliance partners such as Fiat, Isuzu, Suzuki, Subaru and others in technology innovation."
To facilitate customer data access, "we've integrated over 40 call centers into three and 19 information warehouses into three worldwide." Szygenda admits that the auto industry was unique for almost a century in knowing the names and addresses of customers. "But until now, we didn't do much to leverage that information toward individualized customer intimacy," he adds.
One sign of change is GMBuyPower.com. With coverage growing from 15 to 40 countries, the shopping and buying site will have the opportunity to service half the world's population. In the U.S. consumers can configure a vehicle, find it in a dealer's inventory, access financing and incentives and send electronic messages to the dealer of their choice for the best price.
"Outside the U.S., GMBuyPower.com. is enabling complete sales transactions." Szygenda is referring to General Motors do Brazil, where the company, working closely with its dealers, developed a special Chevrolet model, the Celta, to give its customers a complete online purchasing experience. From the program's September 2000 launch, the sales of more than 87,000 Celtas have been influenced by the Web site with almost 70% sold entirely over the Internet. That's more than any other automotive site in the world, says Szygenda.
The Brazilian "cyberconsumers," typically tech-savvy 20-39-year-olds, are able to configure a Celta online and buy it at a set price lower than that of a traditional purchase. IT integrated the customer, the distribution systems, a production facility at Gravatai and 470 Chevrolet dealers.
At the Gravatai automotive complex, GM and 16 suppliers joined forces to create an automotive complex that essentially functions as one plant. A co-development cycle replaces the traditional component development cycle. The system shortens vehicle production time, keeps inventory down and drives costs out of the value chain, says Szygenda.
Clearly GM and Szygenda have come a long way. Asked what accomplishments he's proudest of, Szygenda provides a three-fold response: "One, we've transformed the mindset of GM senior management to understand how to put technology and business together. The second thing is that the IT model and the team we brought in from the outside have been very successful. The model worked despite those outsiders who said it wouldn't. The other thing is...we have changed the speed of General Motors. 'Slow and bureaucratic' no longer applies." Big and fast could describe the emerging GM, adds Slywotzky.