In a recent Morgan Stanley survey, 74% of CIOs reported that they would continue to make significant investments in technologies to improve supply-chain collaboration despite the current economic crisis. In an environment where about half of the U.S.’s 1000 largest companies face budget cuts of up to 20%, collaboration between suppliers and customers makes sense: it can improve margins, increase capital efficiency and boost the bottom-line.
Yet the hard truth is that many of those companies will be wasting their hard-earned cash, suggests Art Data, vice president of IT at International Truck and Engine Corp., a manufacturer of commercial trucks and a Tier 1 supplier to Ford Motor Co., based in Warrenville, Ill.
“Our opinion is that collaboration is not an IT investment,” Data says. “If you don’t have the relationships and trust, IT won’t do it for you. CIOs have to realize that or else they miss the human capital portion of the relationship that allows you to take advantage of technology.”
Data knows what he’s talking about. The company, a wholly owned subsidiary of Navistar International, has received kudos far and wide for its technological innovations along the supply chain. Just last month International ranked seventh overall -and first in automotive- in Information Week‘s 500 survey of leading-edge companies. In addition, the company routinely scores high in polls of best places to work, making it an excellent case study in how to get results – and remain popular.
Collaboration Starts From Within
The first thing CIOs have to realize, says Data, is that collaboration starts from within and slowly expands to encompass customers and suppliers. “You have to have openness and cooperation within your own organization, otherwise how do you think you look to your customers?” he asks.
| Data’s Five Do’s |
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Art Data, VP of IT for International Truck and Engine, offers five tips for gaining collaboration in IT and across the business: 1. Put people first. Success in business depends on corporate culture and processes. At the end of the day, it’s the people who make the difference. That means don’t over-promise and under-deliver. challenge some of the things requested of you, but do it in a factual, rational manner based on a thorough understanding of the business. collaborate with IT. But ask yourself if your own IT organization was acting in a collaborative manner – internally and across the business. treated like any other business area.
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International learned that lesson the hard way. In the early 1980’s, the firm, then called International Harvester, almost went bankrupt. Data credits strong leadership from CEO John Horne in changing the corporate culture. “We invested a lot of time in establishing the values and culture of this company to make sure people work together,” he says. That meant educating every single worker, whether on the shop floor or in the management suite, about the values of accountability, cooperation and customer service the company wished to instill. The key, says Data, is that education be responsive and ongoing: employees are surveyed yearly on how top management is delivering on its promises to customers and employees.
The company was divided into three business units: Truck, Engine and Finance, each with a president and a head of IT. As VP of IT for the company as whole and IT director for the Truck Group, Data is the top man on the technology totem pole, reporting directly to the CEO and to the chairman of the board. Data used his leadership to change the very structure of the IT organization to facilitate collaboration. “I got tired of the pendulum swing between a centralized and decentralized structure,” he says, because neither was flexible enough to accommodate change. Several years ago he instituted Harvard Business School’s hybrid structure, in which each IT manager has both a solid and a dotted-line reporting relationship, one to a business unit manager and the other to IT.
Jim Schlusemann, IT director for the Engine Group, can’t praise the arrangement enough. In practice, that means that he reports directly to the president of the Engine Group while also having Data’s ear. That gives him two channels of influence, along with two pipelines into the board of directors. The set-up continues down the line: a mid-level IT manager responsible for marketing technology reports to his IT boss but also sits on the marketing team.
Collaboration Means Increased Visibility
The advantage of the hybrid structure is increased visibility -and deeper integration- of IT. That means business and IT are equally accountable for tech decisions and everyone understands the impact of those decisions down the road.
Before doing his yearly budget for the Trucking Group, Data sits down with the president of the unit, the top general managers and the finance guru to decide on priorities. And Schlusemann does the same for the Engine Group. Visibility is constant, with IT taken seriously and discussed throughout the year at high-level meetings, including monthly meetings to adjust budgets based on projected sales.
That may sound like paradise to alienated CIOs, but be careful what you wish for. Increased visibility also means that “you get scrutinized the same as any other area,” Data says. “Once IT is fully integrated, it’s not hard for management to figure out if you’re strategically aligned, if you’re adding value or not.”
Ultimately, of course, Data would not have it any other way. For one thing, it means he’s sitting pretty today, despite the fact that his budget, measured as pure expense, has dropped by about 20%. Make no mistake: the trucking business is off 40% compared to last year and the industry has not been this ugly in 20 years, Data admits. But so far he has not made staff cuts and he’s confident that the investments he’s making now will position the company to emerge strong from the crisis. “IT investment is measured by how you align spending with business objectives in uptimes and downtimes. After the threshold of keeping the lights on, there is no correlation between how much money you spend and the effectiveness of IT. At the end of the day, it’s how you spend it that counts.”