FedEx three years ago launched a sweeping IT transformation project based on a key insight by CIO Rob Carter. He amassed data and created a bewildering "spaghetti chart" that showed how a spate of acquisitions was creating an ever more complex and costly IT infrastructure.
"We're broken," Carter told his top managers, including Dorothy Berry, who was vice president of the IT strategy management office that oversaw the project.
Berry was among a host of IT professionals who shared the lessons learnt at the IT Forum & Expo, an event in Boston hosted by IDC. The conference focused on how IT can enable organizations to reinvent themselves, grow and succeed, but only if IT and network professionals think in strategic business terms.
Berry told of how FedEx's divisions were meeting one FedEx precept, "operate independently", but failing in another, "compete collectively". Among other things, she said Carter cited customer complaints about widely differing business rules from one FedEx division to another.
Carter's critical insight, Berry said, was realizing that these trends meant FedEx's vaunted IT group would soon be an anchor holding back the company's growth.
Berry admitted she and others resisted that conclusion until Carter's data made it undeniable. The main goal of the transformation effort, carried throughout the IT organization, was to be "fast and flexible in meeting business goals". To prevent this from being an empty slogan, an essential part of the IT transformation was to identify the measures and data that could be used to assess the IT group's strengths and weaknesses and measure its progress, she said.
Other speakers described similar conflicts -- business metrics trending in unsustainable directions, calling for a kind of careful radicalism in reordering business processes that would be powered by corresponding changes in IT.
HP was facing rising warranty costs, coupled with new federal laws that required companies to set aside reserve monies to cover them, said Neal Elgersma, executive director for HP's discrete manufacturing solutions. Further, the company realized it lacked the needed processes and tools to manage and minimize these costs.
HP mapped out the variables in its warranty process, matched these with available third-party software tools, and then filled in the gaps with its own software development, including for the first time a common database for all warranty information. The far-ranging changes let managers see, for example, that when repair sites replaced a failing modem in one laptop model, the process unknowingly often also cracked part of the keyboard, which would have to be separately repaired. With the newly transparent warranty process, HP made simple changes in the modem repair process, avoiding the extra damage and cost.
Elgersma said that with results like this, HP will save $US600 million in reduced warranty costs, money that falls directly to the company's bottom line. By the late 1990s, Boston Scientific, after years of high but not necessarily profitable growth, found its supply chain breaking down, said Robert Cantow, the company's group vice president for supply chain. Some of the symptoms resulted in frequent 'stock-outs', resulting in a growing number of expedited shipments at premium freight costs, he said.