What Can IT Learn From How Chrysler Makes Cars?

by drjim on August 13, 2008

What lessons does how Chrysler creates cars have to teach IT departments?

Although working in IT can be a tough job at times, I must confess that working in the American car manufacturing industry sure seems like it is probably a much rougher place to work right now. I’m always interested in what’s going on in the car biz because once upon a time I almost ended up going to the General Motors Institute (now known as Kettering University) and probably would have ended up going to work in the car industry.

We’ve talked before about what IT management can learn from the people who brought us the subprime mess. Now it’s the good folks at Chrysler are starting to do some interesting things that have caught my attention and I think that they may now be in a position to teach us something. First, just a bit of background information for anyone who hasn’t been keep up with current events. The private equity firm Cerberus Capital Management bought Chrysler for about $7.4B just about a year ago. What this means is that Chrysler is no longer a publicly traded company – Cerberus can do pretty much whatever they want and don’t have to answer to anyone. Except the people who put up the $7.4B. Who want to see a return on their investment as quickly as possible.

So why did Cerberus buy Chrysler. In short, they think that they can do a better job of running Chrysler than the previous management did. If they are correct, then they can make the company profitable and take it public and make much more than $7.4B. The trick is to do this as quickly as possible. If they can’t pull this off, then they could end up shutting Chrysler down and just walking away from their $7.4B investment. Got that? Ok, so now we move up to current time. Robert Nardelli is the CEO of Chrysler and he was brought in from after being the CEO of The Home Depot. What this means is that he’s not a “car guy” and he’s not limited in his thinking by how things have been done in the past.

Last week new stories started circulating about Chrysler having talks with Nissan about partnering to jointly produce midsize cars. This is a possible fundamental shift in how Chrysler makes and sells cars. Basically, Nissan would design, engineer, and manufacture the cars and then Chrysler would sell them under their own name. This could save Chrysler the billions of dollars that it takes to create a new car. Not content to put all of its eggs in one basket, Chrysler has also entered into a partnership with China’s Cherry Automobile Co. who will be making small cars for them.

News reporters were quick to point out that this model has worked well for others such as Dell and Nike who really don’t do engineering and manufacturing, but rather focus on marketing and selling. This approach has been tried in the auto industry before; however, these efforts have not panned out well for a number of ill defined reasons.

So what does this all mean for IT executives? Perhaps it’s time to slay some of our sacred cows and stop doing software development and stop doing routine support activities. Instead, perhaps these activities should be completely outsourced and our IT shops should retool to focus on what we should be doing best: supporting the business. Specifically, if like Cerberus we would be motivated by the need to have the business turn a profit quickly, we could focus on working with the business units and try to understand what their issues are and how IT tools and technology can be used to solve these problems.

What would happen if Cerberus took over your IT shop? Just imagine if the job of an IT shop was to create very detailed product requirements and to perform testing on products that were created based on those requirements. Can you imagine just how close the IT shop could get to the business? The invisible wall between IT and the business side of the house would come crashing down. When old ways of doing business (“everything is invented here”) are torn down and replaced with new ways (“we focus on only what we do best and outsource everything else”) then that can truly transform the way IT does business.

Tell me what you think. Do you think that an American car company has lessons to teach IT shops? Is the concept of having a private equity firm run your IT shop something that fills your heart with joy or fear? Leave me a comment and let me know what you think.

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{ 3 comments… read them below or add one }

Donald Forrester May 9, 2009 at 6:21 pm

Outsourcing can be the right approach, depending on the circumstances. But not always. It depends on how unusual the solution needs to be compared to existing technology, or on security and intellectual property concerns, or on whether you can find a company to outsource to that provides the right mix of know-how and price. That’s not always a given.

But most important to consider is that we in-house IT guys already do this. I manage databases, CMSs, CRMs, operating systems, shopping carts, inventorying, and all kinds of other solutions that I myself did not create. I still have a job because there is no solution that’s always perfect all the time, and having a team totally devoted to making sure our business can meet its customer’s needs and adapt to their own systems is critical.

Lastly, the sheer variety of software and outsourcing solutions presents its own challenge, in evaluating and choosing the right tools for the task. This requires expertise that can sometimes only come from having a trusted IT staff managing the process.

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Dr. Jim Anderson May 11, 2009 at 8:18 pm

Donald: great comment! The key word in what I read was “trusted IT staff”. I think a lot of the firms that rushed to outsource everything are starting to discover that there are some tasks that they really only want their trusted employees to be doing. Case in point – anything to do with your customer lists, customer service, etc. The DBA jobs are probably gone forever, but there are a number of new business / customer facing IT positions that will provide employment forever because they require, you guessed it, trust.

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Donald Forrester May 11, 2009 at 10:58 pm

I agree, IT jobs that involve interfacing between people and machines are probably the ones with the best life expectancy.

I think DBA’s can translate pretty well into related fields when they try… the business logic they learn is fundamental to all kinds of IT tasks. The rest of it is just bookkeeping.

This is probably going to be a recurring theme, with widget/application designers, game designers, DBAs, network admins, even security guys are starting to see parts (but not all parts) of their jobs outsourced to hundreds of generic one-suite-fits-all solution providers and crowdsourcing. It’ll be those pros that have both a grasp of the fundamentals and the ability to stay on top of the cream of the new toolsets that thrive in a distrubuted intellectual labor market.

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