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Monday, November 29, 2004

The Ralph Revolution @ General Motors

George F.Colony writes,Believe it or not, General Motors is setting a revolutionary IT pace. Historically General Motors is perceived to be slow in its IT initiatives. Not any more. Excerpts from the article ( with slight edits with my added views) :

In the 1980s, Roger Smith @ General Motors had the bright idea of buying EDS and outsourcing GM's information technology to the company. By 1996, the numbers had gone way off the tracks. GM had the highest IT costs in the car business and was behind in engineering and design technology. Enter Ralph Szygenda, former CIO at Texas Instruments and Bell Atlantic. Against much advice, Ralph took the CIO job at GM. Most predicted that Ralph would last a year at the most, suffocated by the bureaucracy of GM and stiff-armed by the all-powerful outsourcer (and corporate sister) EDS.

We wrote about the changes happening in GM’s IT in JULY. Ralph staged a rebuild of GM that is just coming to fruition now. At the risk of oversimplifying what has been a large, complex effort, Ralph moved IT away from a technology focus to a process focus. If you think about it, the way companies make money is through process — simply stated, the way they do work. By focusing on process, Ralph got IT out of the technology-for-technology's-sake trap and into the business of using technology to improve how GM builds, markets, and finances vehicles. There was resistance from the GM culture. The company is organized into car brands — Buick, Chevrolet, et al. — and regions — Europe, Australia, etc. Since the time of Alfred Sloan, the way to the top of the company was to run one of these divisions and build an empire. So when Ralph said, "Hey, let's run a standard design process, manufacturing process, or supply chain across the company," the refrain was, "No, we do it differently at Cadillac or Saturn or in Europe." Ralph's comeback? "From where I sit, it looks like all of you are building cars and trucks — how different can the process be?"

So the Ralph Revolution didn't take hold until Rick Wagoner, the company's present CEO, came on the scene in 2000. Rick embraced the process focus and has been a strong advocate and participant (he's even taken on the role of the exec in charge of standardizing sales and marketing process across the company). Unlike other CIOs who Rick had worked with, Ralph spoke the language of the business (e.g., better supply chain), rather than techie jargonese.

FACTS on the impact: The company has taken $1 billion out of IT costs each year. It has taken significant cost out of its design process while doubling output. GM cars quality is not so bad anymore, with GM quality now exceeding DaimlerChrysler and Ford and rivaling Toyota and Nissan, according to J.D. Power. On the engineering front, the company recently designed a truck chassis completely in software (the company uses Unigraphics for CAD) and took it straight to production, without ever going through the expensive step of prototyping. The result: great ride, high crash-test scoring, low cost.Perhaps the biggest payoff has been enabling GM to be a truly global company, capable of quickly sharing design, process, and information across the world. While Toyota still has most of its design engineers in Japan, GM is able to get high output from its 19 design centers located all over the world. This capability enabled the company to transform its Daewoo product into the GM small car for all world markets. The process focus pervades all that Ralph touches. The EDS deal expires in 2006, so GM will be awarding outsourcing contracts worth $3 billion per year. To prepare for a new world of multiple outsourcers, GM is documenting 24 IT processes (e.g., change management and asset management) and will require all outsourcers to hew to these processes. This will make the outsourcers easier to manage, guarantee standard IT process across all of GM, and make it easier to plug-and-play outsourcers. Most important, it keeps GM in control.

What It Means No. 1: IT in many companies has become mistrusted, expensive overhead that's disconnected from the business. A Ralph Revolution that reorients IT away from technology and toward process can reverse that trend. Trust will follow, as well as promotions and recognition.

What It Means No. 2: Reality has caught up with the hype. As Ralph and team report, all of the promises of the Net revolution have finally been delivered, and they have made the revolution at GM possible. The Internet is not about selling books and CDs online — it's about making cars, pills, and jet engines more efficiently.

What It Means No. 3: The vendors lose one of their favorite weapons. Vendor CEOs love to run into large user shops like GM and start screaming about the newest technology — VoIP!! RFID!! — in the hopes of extracting dollars. When companies have a strong process orientation, they can ask simple questions: Will this new technology improve how we do our work? Will it improve our product quality? Will it improve customer satisfaction? If so, how?The Ralph Revolution is not over, and it is not fully proven.

If Szygenda walked out of GM today, there is some question as to whether the revolution would head forward with the energy and vigor that has propelled it to this point. And it's hard work — just ask one of the process information officers (PIOs) who are down in the trenches every day trying to keep GMers "on process." But get into a new Cadillac. The high quality and cool design have a lot to do with the IT organization and the revolution that Ralph has led at GM.
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