Collaboration As Culture

By Eva Marer

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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

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.
2. Credibility is key. It's critical to do what you say you're going to do. That means don't over-promise and under-deliver.
3. Challenge the approach, but first understand the business. You may need to challenge some of the things requested of you, but do it in a factual, rational manner based on a thorough understanding of the business.
4. Hold up a mirror.A lot of CIOs complain that business refuses to collaborate with IT. But ask yourself if your own IT organization was acting in a collaborative manner - internally and across the business.
5. Be careful what you wish for. Visibility means scrutiny. Be prepared to be treated like any other business area.

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."

Collaboration Is Built on Trust
Once collaboration becomes a reality at the business level, it can begin to radiate out to customers and suppliers.

The key, says Data, is to collaborate early in the manufacturing process. For example, the Next Generation Truck Program allows buyers of commercial trucks to participate directly in the design process. "If you've already got a certain component on the shelf, there's only so much cost you can take out of it," Data explains. The program has shaved two years off the traditional five-year time period it takes to get trucks from the computer screen onto the highway. As result, the company has already saved $40 million, and expects to save another $160 million in the next four years. In addition, International has improved on-time delivery from about 60% to 90%.

That kind of bottom-line result has allowed the Engine Group to increase its IT budget, even as the overall IT budget has contracted, reports Schlusemann. Next year, his division is bringing in new CAD workstations and recently acquired a new plant in South America.

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The company has also created an online portal called Compass that allows suppliers to offer ideas about how to reduce costs (outside of the current contract). That idea flows though all the various functions and, if approved, results in a savings that is shared 50-50 between International and the supplier. "If we reengineer something, then we both win," Data explains. "We change a business process and realize efficiencies but it's not a one-way deal."

The company has also reached out to its customers in the automotive aftermarket. Data's ultimate goal was to save money by managing the company's inventory of parts directly at dealerships. Yet he knew that these independent businessmen did not relish the thought of meddling for its own sake. His solution was to offer them systems to manage their own customers' inventory. "The system allowed them to raise their own revenue and reduce inventory. Once they saw the result, they wanted to work with us."

Collaboration, Data insists, is about building trust along the entire supply chain, piece by piece. "We are not all there by any means, but we have a lot of the pieces."

As both an OEM and a Tier 1 supplier to Ford Motor Co., as well as having a hand in the aftermarket and leasing businesses, International is uniquely positioned to gain efficiencies by collaborating across the supply chain. As Data points out, collaboration is a matter of combining several pieces in order to create a combination that cannot easily be matched by competitors. "If you're just good at one thing, the competition can easily reproduce it. It's how combine a number of elements to create a unified strategy that sets you apart."

Eva Marer is a freelance business and technology reporter based in New York. She covers investments, personal finance and corporate technology issues for a variety of trade and consumer magazines. Contact her at egresspress@aol.com.