How Ford reimagined IT from the inside-out to power its turnaround
By Jason Hiner
July 9, 2012
Takeaway: With its Ford SYNC product and a technophile CEO, Ford now has a reputation as a tech innovator. But, here’s the inside story of the big IT moves it orchestrated behind the scenes.
Photo credit: Jason Hiner | CBS Interactive
Ford has successfully transformed its image from a lumbering, outdated behemoth of a bygone era into a forward-looking, highly-technical twenty first century enterprise. The company that Henry Ford built earned this revitalized reputation mostly from the launch of Ford SYNC technology across its product line, the constant nods to technology from CEO Alan Mulally, and, above all else, the fact that people are buying enough of its vehicles that it’s profitable again.
However, Ford’s technology strategy behind the scenes in the back office was just was pivotal to its remarkable turnaround as the flashy Ford SYNC and MyFord Touch innovations that have gotten so much attention among consumers and the press. I recently visited the Ford campus in Dearborn, Michigan to see a little bit of the behind-the-scenes magic in action. I also sat down with Ford CIO Nick Smither at Ford’s historic World Headquarters building to talk about the role that the company’s IT group has played in the eventful turnaround since Ford’s near-death experience in the mid-2000s.
Smither explained how IT changed the way it was organized to meet one of Mulally’s primary objectives, how IT slashed hundreds of millions of dollars in costs but then used those resources to create new opportunities for growth, and how it got on the good side of its users by being a collaborator and not just the department that hands out tools.
Good timing
Ford CIO Nick Smither (Photo credit: Ford Motor Co.)
Smither (right) landed in the CIO job in April 2006 after two and half decades in engineering and IT positions throughout various Ford divisions in Europe and the Americas. The England native slid into the top IT job when the previous CIO, Marv Adams, jumped to Citigroup (Adams later bounced around to Fidelity and then Ameritrade). In early 2006, Ford was at its nadir and the top IT job didn’t look particularly attractive or stable.
But then, in September 2006, Ford threw for the end zone and scored big by luring Mulally away from Boeing to lead a revival at Ford.
“I was in the job about five months before Alan showed up, so the timing was fantastic” Smither said.
As soon as he took the wheel at Ford, Mulally immediately put several strategies in motion:
•Simplify the company’s product line, focus primarily on the Ford brand itself
•Build vehicles people actually want to buy; create the best vehicle in its class in every class where Ford is going to build a vehicle
•Focus rigorously on data and facts in a weekly “Business Plan Review” with all of the department heads
•Integrate the company into one global enterprise, stop the infighting among divisions, and harness the power and scale of Ford’s global resources
It was the last item that developed into what Mulally dubbed the “One Ford” initiative. And, it was that push that gave IT its primary mission.
One Ford … One IT
“The entire focus of the business changed with One Ford,” said Smither. “Alan set out the One Ford strategy in 2006 and the One Ford strategy really got put in place in the early part of 2007. We’ve got a parallel strategy we call ‘One IT.’”
While elements of One IT had bounced around before Mulally arrived, its synergy with the One Ford strategy crystalized all of the best thinking around it, made it a priority, and gave it the executive support it needed to push through obstacles. Still, getting started was pretty brutal.
Smither explained, “A lot of the focus early on through that period of survival in 2007, 2008, and the early part of 2009 was on restructuring the business and getting ourselves to a position where we were viable. The old business model of Ford was a lot of autonomy in each of the regions from a business perspective and a lot of complexity and fragmentation in the IT environment. Even though we had some One IT initiatives in place before One Ford they were fundamentally addressing the infrastructure and not the application portfolio or how we interface with the business. All of our focus through the survival phase and now into the growth phase — which is way more exciting — has been on really enabling One Ford, in terms of driving much more commonality and integration internally so we can offer more diversification of products to consumers.”
For IT, that initially translated into a lot of budget slashing. But, it wasn’t the kind of budget slashing that was only aimed at improving the company’s bottom line. A lot of it was about unlocking resources tied up in maintenance and freeing them up to invest in innovative new projects.
“If you take the period of 2006 to 2011, we basically took out 30% of our IT operating costs, which was hundreds of millions of dollars,” Smither said. “It was a combination of actions. We did take some staff reductions through the tough times. We consolidated our enterprise data centers. We used to have six facilities globally, now we’ve got two. We retired some legacy applications. We common-ized business processes. Oftentimes we would have had at least three applications fundamentally doing the same thing between North America, Europe, and Asia Pacific. We’re driving much more commonality. We’re not all the way there yet. There’s still opportunity ahead of us, but we have a lot more commonality in our application portfolio.”
The results have quickly yielded benefits as IT has had to support Ford’s faster-than-expected growth in sales.
“It’s driven a lot of efficiency,” Smither explained. “And we’re actually doing more in terms of adding capability to the business. We’ve been able to divert resources away from day-to-day operations into new capability. It’s supporting the growth because we’re building lots of new plants as we speak. We have eight plants under construction around the world. The IT teams are delivering the automation that’s required in the plant, but also integrating those plants with things like our global posting systems and our global logistics systems for parts flow in and out of the supply base. So there’s a lot of effort right now going into supporting our ambitious growth plans around the world, whether it’s facilities in Asia Pacific or in Russia with Ford Sollers — which is the joint venture we kicked off there. And also we’re expanding capacity here in the U.S. We’re adding shifts. We’re upping [assembly] line speeds in many cases to support the increased demand for Ford products. There’s a huge amount of [IT] activity going on just to support business growth.”
A centralized federated IT department
These changes have naturally a major impact on how the IT department organizes itself.
“We’re moving much more to a centralized federated model than a decentralized model, which is where we were historically,” said Smither. “It’s actually a combination of both [centralization and decentralization]. The shared services are highly centralized. It really mirrors the One Ford model. You look at the One Ford model and we’ve got shared skill teams for product engineering and manufacturing so that we drive consistent process across the globe but then we’ve got business units that support North America, South America, Europe, and Asia Pacific that are ensuring the unique requirements of each market are met with those product offerings. And we’ve done the same with IT. We’re trying to leverage the scale of efficiency while ensuring the uniqueness of each skill team or business unit is supported.”
The general idea is to get the best of both worlds by creating shared services that are best-of-breed and standardize Ford’s technology blueprint, while putting IT professionals in each of the business units so that they understand the business details and the customers.
Smither said, “We’re trying to simplify the IT environment. We went through a period of internal restructuring where we fundamentally treated application development and infrastructure-as-a-service globally, whereas historically there were pockets in each of the regions. So now there’s one shared service for infrastructure and operations and there’s one shared service for application development. But then, we embed IT professionals in each of the business activities, whether it’s research or product engineering or manufacturing in Europe or North America. [As a result] we can leverage the scale of IT globally while supporting the unique requirements of consumers and product [development] or manufacturing facilities, as we grow around the world.”
Powering Ford innovation
The purpose of all this IT transformation, of course, is to make Ford a faster, more agile, more innovative company. For example, the “new capability” that Smither mentioned has manifested itself in IT being able to give a big assist in the development and deployment of Ford SYNC and in helping the company automate its manufacturing plants.
Photo credit: Jason Hiner
“The IT team was proactive in the development of SYNC, which obviously got a lot of positive consumer reaction when we launched it five years ago,” said Smither. “As we’ve evolved SYNC and added capability, we now actually provision all of that software in real time in the plant. Basically, as the vehicle is going down the assembly line we have Wi-Fi capability that is loading functionality based on the specification of the vehicle and the language pack based on whatever language needs to be configured for that vehicle. That’s now happening with other [software] modules in the vehicle, too. So increasingly, the IT applications in the plant are actually enabling us to provide more product functionality than we would historically when we relied on physical loading of software early in the manufacturing process.”
Much of backend IT work that’s happening in the manufacturing plants is also about making those plants infinitely more nimble and flexible.
Smither said, “A lot of the retooling that’s taking place is not only increasing the levels of automation with the line-side equipment, but it’s also increasing the flexibility of the plants… The tooling is more flexible so that we’re able to flex capacity in real time to meet consumer demand. For example, the ability to flex between volumes of one power train or one body style versus another body style. Historically, plants were configured to meet a certain capacity of a certain configuration of vehicle. Using the flexibility of automation and robots we’re now able to have plants that are much more flexible in terms of the ability to change the mix of vehicles that are being scheduled week to week.”
This kind of flexibility is badly needed, especially after Ford’s embarrassing misstep this spring where it couldn’t make enough vehicles to meet the uptick in consumer demand in North America, while its rivals Chrysler and General Motors didn’t have any problems increasing their capacity.
Don’t forget the users
Many IT departments have had to cut back on their help desk and user support in recent years and have ended up leaving users to their own devices — figuratively, and even literally in some cases. Ford recognized that part of its IT transformation had to involve getting smarter about empowering employees.
“About five years ago we started a program we call ‘Digital Worker’ that fundamentally looks at all the collaboration tools we need to drive increased capability globally,” said Smither. “It’s partitioned into four areas. There are the traditional office productivity tools like instant messaging and email and [Microsoft] Office. Data and video and audio [collaboration] is the second area of focus. There’s mobility solutions, so remote access, employee bring-your-own-devices [BYOD], tablets, and so on. The fourth major area is information and data provisioning, which is using [Microsoft] SharePoint as the structured data repository, Yammer for social media, enterprise federated search for being able to search [document] repositories globally. And we’re aggressively integrating those services to fundamentally improve the ability for teams to collaborate around the world.”
Fortunately, Ford isn’t just thinking about the tools but also how real workers will be using them and how IT can make good recommendations for when and how to use specific tools.
“The first phase of Digital Workers was bringing the tools together. The current phase we’re in is how do we maximize business capability in terms of thinking about not just the tools but the process and the integration and how people are actually enabled by the technology to be more productive in terms of what they’re trying to accomplish as opposed to just providing the tool,” said Smither. “We’re [also] doing a lot of work around something called, ‘How I Work,’ which is a scenario-based approach so that people understand which tools to use in what context to be the most efficient. So there’s a scenario around how to run an effective meeting or which tools to use in which circumstances. We’re getting a lot of take-up and driving a lot of ability for collaboration using [our] digital worker framework across the enterprise.”
For an example of these programs in action, take Scott Monty, Ford’s social media chief and a digital native who’s been with the company since 2008. Monty said, “I was one of the end users on Digital Worker and How I Work and it’s been interesting to see how IT has evolved from being seen internally as simply a tool provider to a true collaborator and innovator that actually helps solve business problems.”
Four priorities
For an IT department that’s trying to help drive such ambitious goals while also streamlining its own operations and offering smarter, more efficient support to the company’s employees, it has to remain super-focused and disciplined.
As a result, Smither has organized the IT group around four top priorities:
1.Drive integration of applications
2.Support growth
3.Enable collaboration
4.Drive internal efficiency
The good news is that if a company as large and as entrenched as Ford — with as much legacy technology, process, and culture holding it back — can make as much progress in IT as it has in the past five to six years, then other IT groups who are facing these common challenges should take heart.
Source: www.techrepublic.com
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