Business alignment. After all these years, it's still the bugaboo for many an IT shop. Now consider the challenge of keeping IS in step with the business at a truly global company with annual revenues of $144 billion-while it's undergoing major change.
That's the challenge at Ford Motor, and Ford seems to be on the right track. Ford was four times as profitable in 1998 as any of its big competitors based in the United States, Japan and Germany. Furthermore, the company has dramatically accelerated the pace of its business, cutting everything from vehicle-development time to the speed at which it deploys new software applications.
At the same time, though, business is a race no one ever really wins. The only options are to stay ahead of the pack or get run over. Ford's competitors are putting similar emphasis on reducing cycle times and focusing on customer demands, while the availability of information over the Internet is reshaping the process of buying and selling cars in general-which is changing Ford's relationships with consumers and auto dealers alike.
President and CEO Jacques Nasser's plan to transform the company from a maker of cars to "a consumer company that offers automotive products and services" is well-known. What hasn't been documented is how, exactly, Ford intends to make sure its IT function is contributing to the change-over. Nasser says he recognises the pivotal role IT must play in Ford's transformation: "You must integrate IT into the texture of the business," he says. Fine-nowadays everybody says that. But a closer look into Ford's IT operations shows that Nasser and company offer more than lip service to business-technology integration. What follows are key elements in Ford's approach to keeping its IT heading in the right direction.
REEXAMINE THE MISSION...FORD CHANGES DIRECTION"We had been in the business of 'making trucks' for many years," says Neal Ressler, vice president of research and vehicle technology and chief technical officer, who has been at Ford for 32 years. "But when you're a consumer company, you start [comparing yourself with] Ritz-Carlton, General Electric, Harley-Davidson"-companies known for great customer service, customer loyalty and correspondingly high stock multiples, Ressler notes. That fundamental shift in thinking dates back to roughly 1993, when Alex Trotman was Ford's CEO, and carries on today under Nasser, as evidenced by the "consumer company" terminology in the company's corporate mission.
Mere wordplay? Apparently not. Concrete evidence abounds of the process of transforming Ford to fit the new mission-a transition dubbed the Ford 2000 plan. Ressler explains: A car maker typically aims to make most everything in the car. "Maybe someone else can make the seats if you're a transportation provider instead of a car maker. It allows you to take better advantage of other people's capabilities," he says.
For example, for three decades or more, Ford designed cars and trucks on a home-grown engineering system, which the company regarded as a fundamental source of competitive advantage. But with the shift to the consumer company mind-set, Ressler and Richard Riff, director of Ford's C3P product development system, began to realise that that particular software development effort represented an unnecessary high fixed cost that was not truly among Ford's core competencies. To design cars was essential, but to design software was not. Now, while Ford still strongly influences the development of the design tools it uses, the bulk of the software is off-the-shelf; the company focuses its own work on standardising and integrating its product development technology under a single product-information-management program. The company is moving toward a single CAD/CAM system from Structural Dynamics Research (SDRC) and its Metaphase product information management tool, with the aim of feeding all design data into a single repository. One result: Using common tools and data definitions with universal access has helped Ford cut average time to develop a vehicle from 37 months in 1996 to 24 months or less today. The company still lags notably behind some foreign competitors in that area, but the entire development process is one of five that Ford has targeted for further reengineering.
This isn't something Ford couldn't have done before. But it simply wasn't a clear goal until the company changed how it describes its mission. "You pay more attention to these things as a consumer business, not just a manufacturer," says Ressler. The key question is, How does Ford drive its new focus and the concomitant new ways of thinking through the corporate ranks?
...AND REPEAT AS NECESSARY FORD IT DEPARTMENT MIRRORS FOUR-TIER BUSINESS STRATEGYTry to imagine focusing a company of 345,000 employees worldwide on a common goal, and it's hard to keep from comparing the challenge to the old saw about herding cats. For Ford, a four-stage business strategy model has been the answer. The model's stages describe the company's mission, strategy, processes and infrastructure; that basic model is then reiterated and mirrored, with the appropriate level of detail, at each level of the company. Proceeding downward, each level provides a bit more detail and how-to for achieving the goal or stage above it.
For example, the IS and process-leadership group has its own version to mirror the corporate model. And subgroups within the IS organisation have their own mirror models as well. The technical services group, which is the part of the IS organisation that provides computing infrastructure such as networks, data centre services, global server support, application support, help desk and technology R&D for the entire company, carries the mission statement, "To deliver the best-in-class, highest-quality, lowest-cost technology infrastructure utility, providing the foundation for the company to achieve its business goals and encouraging the creation of new and innovative ways of doing business." George Surdu, director for technical services, says the mission statement reflects again Ford's newly embedded customer focus-the references to quality and cost mean his group must offer levels of service and price them so as to be competitive with outside providers.
CENTRALISE DECISION MAKING... FORD STANDARDISES TO A DEGREE UNDER CIO'S AUSPICES Until recently, Ford had no centralised IT group. Instead, each functional arm or geographical unit of the company developed its own systems as it saw fit. One element of the Ford 2000 vision was to act like a truly global company rather than a company with disjointed units in many countries. The result of Ford's old structure was incompatible systems, which slowed the task of sharing information; that, in turn, slowed the velocity of decision making. So, beginning in 1994, Ford took the first steps toward consolidating its systems groups into a central organisation-a plan that culminated in Bernard Mathaisel's arrival in 1996 as Ford's first CIO and executive director of process leadership.
Centralising IT caused major change at Ford. For example, the company now has an enterprise technology architecture and a process for identifying which technologies fit in, which need to be replaced and so on. "These standards are adhered to by our business globally. If it isn't in the standards, that technology doesn't get rolled out," although there is a process for identifying exceptional needs, says Surdu. Essentially, all the company's desktop systems are provided by one supplier-Dell Computer -and Ford uses two standard configurations for those desktops. Benefits: lower hardware costs, lower support costs and easier software rollouts because of simplified testing requirements.
Indeed, says James Yost, Ford's newly anointed CIO and head of process leadership, "A lot of our commonisation of systems couldn't have been done before the current centralised organisation was put in place."
At the same time, though, Ford is careful not to let the desire for standardisation squelch the need for different applications around the globe. "They are very careful to leave alone those things they should," says former CIO Mathaisel. While the US units operate on standardised financial and manufacturing software, for example, Ford groups working in emerging markets such as China tend to run their operations on smaller ERP packages to give them a simpler, consolidated look at their regional business.
Part of Ford's efforts to transform itself into a more unified, global company-and to get IT better aligned with its changing business strategy-was to hire CIO Mathaisel, who departed the company in July 1999 after only three years (Mathaisel is now CIO at electronics company Solectron in Milpitas, Calif.). While Ford executives decline to comment about the reason for the split, Nasser stresses that the CIO "must be literate in terms of how the business works," which is certainly a strong point for 25-year Ford veteran Yost, Mathaisel's replacement.
Yost, who also holds the title of vice president, reports directly to Nasser and attends Nasser's Monday morning staff meetings (as did Mathaisel).
...BUT KEEP A FOOT IN THE BUSINESS UNITS FORD CREATES MATRIX REPORTING STRUCTURE In centralising IT, there is always the risk that pulling IT workers out of their functional silos could cause them to lose touch with the rapidly changing business. Ford's solution was to develop an organisational matrix with key personnel reporting both to the CIO and to business-function heads.
An example is Nick Smither. As director of product development systems within Ford's Process Leadership organisation, he has two bosses. On the one hand, he reports directly to Yost and attends Yost's weekly staff meetings. On the other hand, Smither also reports to Ressler, the company's head of product development, and sits in on all of Ressler's key decision-making meetings. In fact, while Smither says he faces the usual challenges of keeping up with the latest technology and its possibilities, he is expected to spend most of his time talking to Ressler's people and providing process and IT support for their work designing new vehicles. "If [my direct reports] talk more to me than they talk to my business partners, that will be a problem," Yost confirms.
Smither holds a master's degree in engineering and spent about four years in the engineering function before switching to the IT organisation. His background facilitates communication between the two groups. "Ultimately, it all comes down to people," says Ressler. "The people who act as intermediaries are crucial; we don't have armies of people who can stand with one foot in each camp." Likewise, each business function has an IT liaison who reports dually to Yost and the function head.
Process leaders like Smither are along the horizontal axis of the process leadership organisational chart, grouped under the three headings listed in the second step of the IT strategy model: process and technology, solutions delivery and technical services. Smither's product development IT group, along with financial IT and other functions with specialised application needs, falls under the process and technology group.
The vertical axis of the IT-process organisational chart lists process managers (including supply chain and special projects and business integration), program mangers (including Y2K) and regional business coordinators (for example, Europe and South America). For example, Director of Business Integration Teri Takai heads the Special Projects and Business Integration group that oversees the integration of corporate acquisitions like Volvo. Takai has a very small dedicated staff, but borrows staff from George Surdu's and Nick Smither's groups (and others) as necessary. This practice keeps dedicated head count low during lulls in the acquisition process-not that there have been many such lulls for Ford lately.
Matrix management is not without its critics, but it seems to be working well for Ford. Indeed, this organisational structure should remain largely intact despite the change in CIO, Nasser says. "The basic strategy developed over the last few years will continue. I think we've got an outstanding IT team, and I don't anticipate any major changes" in that regard, he says.
INTEGRATE IT WITH PROCESS LEADERSHIP... FORD'S IT DEPARTMENT HELPS LEAD THE CHANGEOne of the biggest challenges for ongoing business-IT alignment at Ford is that the business is a moving target. The "consumer company" is in many ways still a better description of where Ford is headed than where it stands now; Ford has some very deeply embedded ways of doing business, and the consumer rock dropped in the pond in 1993 is still producing plenty of reengineering ripples today. Ford's answer to keeping IT on top of the changes is that Yost's group is responsible for both IT and process leadership, and so is leading the changes. The group documents corporate processes and acts in a consulting role to help facilitate reengineering. "My view is that IT is only a support-an enabler for changing business practices," says Yost.
The group has identified five key areas of its business for focused reengineering efforts: design to delivery, order to delivery, services, manufacturing and product design. That certainly isn't an exhaustive list of everything the company does, and the more areas the company can target, the faster it can change. However, as Surdu says, initiatives of such large scope-like designing a new car, or all the steps that turn an order into a delivered vehicle-take several years to design and implement, "so you don't want thousands of these reengineering initiatives."
A dedicated team is examining and documenting each area. IT-process staff work together with operational personnel to first document the existing processes in a given area. "Then they ask a lot of why and what-if questions," functioning in a sort of advisory-consulting role, says Mathaisel. "The other people are commonly too close to [their work] to think about it at that level." Lower-level improvements-those of smaller scope than the big five reengineering areas-that can be addressed more quickly are handled as "focused improvement opportunities" that might take a year, or as even smaller increments called "rapids" or "just do its" that might be implemented in a day. Again, the cascading approach allows for thoughtful management at all levels of the enterprise. The little changes don't have to wait for the huge initiatives to be completed, and yet the big-picture processes, where payback for the company is greatest, receive the attention they merit.
As the reengineering teams identify process changes or best practices, they use the company's intranet to catalogue and inform similar business units in other places. Ford has identified and replicated over 2,700 practices or processes and claims a value of nearly $600 million delivered from best practice replication since August 1996. Another measure of the company's streamlined processes: Ford is the most efficient auto manufacturer in North America, requiring 35 hours to build a vehicle, compared with 44-plus hours for its US competitors, according to a 1999 productivity scorecard from Troy, Mich.-based Harbour & Associates.
...AND THEN DRIVE AS FAST AS YOU CAN FORD MAY MAKE THIS ONE STICK"They're making progress; I think the changes Ford is making are real changes," says Richard Hilgert, vice president of auto research at the First of Michigan division of Fahnestock in Detroit.
It's clear that under Nasser and Mathaisel's leadership, Ford has designed a solid working method for integrating IT into a changing business. But make no mistake: Ford is in a race, and the key to winning a race, ultimately, is speed. Can a company that defines the Rust Belt redefine itself and its ways of working at the speed of the Internet economy?
"I watch these companies struggle internally to make changes," says James McQuivey, a senior analyst at Forrester Research in Cambridge, Mass.-and the son of a Ford dealer. "When they started saying, 'Quality is job one,' I didn't believe it. But they did it," McQuivey says.
Arguably, one way to accelerate the rate of change would be to identify and attack more major process-reengineering initiatives. But there is a limit to how much change an organisation can assimilate at one time, and Ford seems to be as close to that limit as prudence would allow. Looking at the state of the company at this point in time provides a snapshot of racers in motion. There is no finish line, however-only the question of who is in front at the moment, and whether they are still running. By every indication, Ford is running strong.
Time will tell.