Life in the fast lane

Building IT value into the enterprise is all the rage in the current climate. CXO’s Neil Davey meets one of the pioneers of this philosophy – Sue Unger, Senior Vice President and CIO of DaimlerChrysler AG.

When it comes to CIOs, DaimlerChrysler’s Susan Unger is as high-performance as you get. Consider her track record. She’s in the driving seat of one of the world’s largest IT groups at one of the world’s largest companies, valued at some US$157 billion. She’s the first and only woman to take the CIO’s office at one of the big three (DaimlerChrysler, GM and Ford) in a traditionally male-dominated auto industry. She successfully presided over the global unification of DaimlerChrysler AG's IT organisation and day-in-day-out directs systems and computer hardware strategy and planning, systems applications development, data center operations and telecommunications network operations for the auto giant. Unsurprisingly, she has won more awards for her work than there is wall-space for, both from within the industry itself – recognition from the Automotive Hall of Fame and Automotive News – and outside – plaudits from the Association of Women in Computing and a place on Crain's Detroit Business list of Detroit's Most Influential Women.

Yes, it’s been a seriously successful stretch since she was named Senior Vice President and Chief Information Officer for DaimlerChrysler AG back in November 1998, shortly after the merger of Daimler-Benz and Chrysler Corp. had been completed. Nonetheless, there are no rose-tinted reflections for Unger, who still recollects the challenges that confronted her upon appointment. Cultural differences, connecting the networks, creating the website that would represent the company’s new face to the customers – there was plenty on her plate. But the challenge that most stands out was that of standardising the company on a single mail platform.

She explains the task that awaited her. “At the time of the merger, there were over 16 different mail platforms within DaimlerChrysler. They all worked great for their individual business units but we were one new company and had to talk to each other on an ongoing basis. From an efficiency standpoint, we needed to get on one platform. But mail, like the PC, is personal and we had to convince our business partners to change to something new when the benefit was not apparent to them at the time.” While only one of the many early challenges she faced as the new CIO, it was the one “that touched the most individuals.”

Delivering business value

Nonetheless, Unger was well aware that such demands would be commonplace when she accepted the role of CIO. It is clear that she was under no illusions as to the strain that IT – and its strategists – would have to bear during a merger or acquisition. “If you want to truly merge and integrate, you really cannot do it effectively without the full involvement of IT,” she emphasises. “IT is so integrated in every aspect of the business, there should be no business alive that is considering a merger that shouldn't invite IT to the table from the very beginning. When the powers-that-be are discussing synergies, IT should be there; when they are discussing consolidation of processes, IT should be there; when they are discussing future strategies; IT should be there.”

Of course, “IT should be there” could be the mantra for just about any CIO in the business and it would be easy to pigeonhole Unger with the rest of the tech community – but you would be wrong to do so. While she certainly wouldn’t undervalue the importance of technology, she is an IT pragmatist and you won’t see technology being implemented for technology’s sake at DaimlerChrysler. Indeed, in the current climate when it is fashionable to talk of building IT value into the enterprise, it is worth remembering that Unger was one of the pioneers of this mindset. It is now some six years since she took to the stage at the Automotive News World Congress and spoke of the importance of IT delivering business value – a positively laissez-faire attitude in the context of the dot-com frenzy.

“If you remember correctly, six years ago, the world was internet crazy!” she highlights. “Good money was thrown at new business models and concepts to make money using the internet. But in reality, I think more companies failed than were successful. During this phase, existing companies took a view outside of their walls to see how they could embrace the customer with a slick internet presence. They may have tried new things; a few worked, but there were many that just didn't make the cut of the new economy. I felt we needed to use the technology to improve our own ‘internal’ business, make us more efficient, make information more transparent and deliver it faster to the knowledge workers and transform the company from the inside out. This was my focus six years ago at the Automotive World Congress and this is still my focus.”

Unger believes that if DaimlerChrysler isn’t delivering real value to its own company, its business partners within the company will find someone else who will. Therefore the focus has to be on making the business more profitable, more efficient, more productive and more innovative, rather than just focusing on IT alone. “The bits and bytes don't ring the cash register,” she stresses. “Our business is designing, manufacturing and selling products that our customers want to buy. So from my viewpoint, it's about how IT can add value to that product that DaimlerChrysler delivers to our customers.”

Business background

This keen focus on value is very likely a product of her business school background – a background that, just like her opinions on IT value, set her apart from her peers in her formative years as CIO. CIOs are almost exclusively technical animals who then learn about business, rather than businesspeople who learn about technology. Studies have indicated that as few as 14 percent of CIOs have any relevant experience in finance before becoming an IT leader. But when Unger joined Chrysler in September 1973, it was as a finance analyst in Sales and Marketing, and she held a variety of positions in Finance and Product Development before finally making the move to the Information Services Group in 1993. This scenic route to CIO stood her in good stead and her financial acumen has arguably been instrumental to her success.

“My business background probably did cause waves in the beginning of my IT career – at that time, it just wasn't done; the prevailing attitude was that only an IT professional could lead an IT organisation,” she concedes. “When I first became a CIO, I told my IT staff and my business partners that we would not do technology just for the sake of technology. I think this philosophy still holds true and provided my IT staff with an early vision of what was to become the rule and not the exception.”

This philosophy has provided a valuable perspective on IT initiatives for DaimlerChrysler. And despite the “no technology for technology’s sake” mantra, the company has still been at the cutting-edge with its deployment of IT. Its PartFinder initiative (see boxout) is a case in point, using a 3D product search engine to do 3D structured searches to integrate and share over 215,000 parts across Mercedes Trucks, Freightliner and Fuso. A further example has been its rollout of RFID technology, which has seen DaimlerChrysler emerge as a pioneer in the deployment of the technology in legacy assembly processes and paint shops. Unger suggests that in the longer-term, the company sees the main impact of RFID being not only in its core processes but also in the whole automotive supply chain.

“Although the automotive industry has been using RFID for many years in production control, the view about the capabilities of the technology has changed in recent years. The focus is still on process efficiency, but it is being extended to supply chain processes. Closed-loop applications with a focus on local processes and high value assets, like work-in-progress tracking or container management, are the starting point for RFID adoption. We have evaluated RFID in several proof-of-concepts, such as asset management in a server room, access management, car pool management, material flow and plant logistics. Currently, we are testing EPC Gen 2 for the management of reusable containers in our plants in Conner Avenue, Michigan, and Sindelfingen, Germany. The latter one has a special focus on the implementation of a VDA [German Association of the Automotive Industry] recommendation about RFID-based container management in the supply chain.”

Eye on the bottom line

Nevertheless, for all this innovation Unger remains steeped in finance and there is always an eye on the bottom line – hence DaimlerChrysler’s Material Cost Management (MCM) system. Based on Lotus Notes, the system measures commodity variable costs in support of platform and vehicle profit improvement; manages and facilitates collaborative team activity across engineering, finance, procurement and supply, product planning, manufacturing and the company’s suppliers; and provides a fast way to track and react to all cost reduction suggestions received internally and externally from suppliers.

Developed and rolled-out in 2001 for less than US$1 million (“a great example of a fast, furious and effective IT solution delivery”), MCM has saved the company millions of dollars already. “In the first year we had over 9000 ideas that were booked,” says Unger. “We currently have approximately 4500 internal users and 1300 external users. In 2005, this system helped the Chrysler Group book significant cost savings. Today we still receive approximately 500 submissions per week! Our emphasis is on components that are transparent to the customer, but deliver high savings and quality gains. MCM is a great example of how IT solutions deliver on the promise – solving real world problems and delivering tools to address the challenges of today and tomorrow.

“It's an excellent example of how we use technology to deliver solutions that add value quickly and meet business unit requirements,” she adds. And so it comes back to the philosophy of leveraging IT for business value – a simple concept really, but one that escaped many great CIOs for a long time. And even though CIOs have come round to Unger’s way of thinking on technology as a value provider, there are still few that actually share the same mindspace. Would all CIOs benefit from a grounding in business and finance? Definitely. But for the time being, Susan Unger is one of a rare breed to rollout of the CIO production plant.

“I do think that my business background has served me well,” she concedes. “And if you asked me 20 years ago if I could imagine myself in charge of IT for a multinational company – I'm not certain that my answer would have been ‘yes’. But so much has changed in the world with the global economy, global customers and the global workforce. To be successful in any industry, you really do have to focus on the business and figure out how your area of expertise can contribute, drive and innovate to enhance your company's success.”

Unger on outsourcing

Outsourcing is, of course, a major topic these days and DaimlerChrysler – along with competitors such as Ford and GM – is pursuing ambitious outsourcing strategies. So what are the primary business drivers for a firm like DaimlerChrysler to outsource operations?

“The business drivers are, and have always been, to focus on what it is that we do better than anyone else,” says Unger. “Are we faster, is our quality higher or our cost equal to or less than our competitors? Or is it simply something that we do that provides us with a competitive advantage? In my mind, these are the real business drivers. For example, years ago we took a look at all aspects of the company's cost structure. We found that we had automotive employees providing all of the services required to operate our cafeterias and cantinas. Now what in the world does running a restaurant in our plants have to do with designing, engineering, manufacturing and selling automobiles and trucks? I guess the bottom line is: focus all of your expertise on your end product and the processes that will make that product stand out from the competition.”

Going global in terms of its R&D is another important part of the company’s strategy, and DaimlerChrysler actually has nine R&D locations throughout the world. The R&D facility in Palo Alto, California, is an internationally renowned research lab that specialises in the implementation of advanced information technology in the motor vehicle. However, the Research and Technology Center in Bangalore, India, which was established in 1996, has also become an important hub for the development and application of information technologies and services. “It's through the interaction of the competencies at these various worldwide locations – and with our local partners at each of the development units – that we generate innovative research and collaboration, ensuring that we remain the trendsetters in working for the future of the automobile,” stresses Unger.

So what advice would she give to CIOs that are considering offshore outsourcing for the first time? “Don't think that you can hand over a broken system or bloated process and they will fix it and make it all better; it just doesn't happen that way. Make sure the documentation is clear, concise and expectations are measurable. This just helps everyone get on the right page. When you take on outsourcing, look for a partner who will be in it with you for the long haul; someone who understands your strategy and believes in your vision. Almost anyone can take your purchase order and fill it the first time; however, you really want someone who can fill that order each and every time.

“And don't forget: as with any partnership, make sure that you have an exit strategy. Run the what-ifs and the risk analysis. If the relationship fails, make sure you have a way to come back whole!”

“Bits and bytes don't ring the cash register!”

“My business background probably did cause waves in the beginning of my IT career – at that time, it just wasn't done. The prevailing attitude was that only an IT professional could lead an IT organisation”

“If you asked me 20 years ago if I could imagine myself in charge of IT for a multinational company – I'm not certain that my answer would have been yes”