THE BIG FIX AT TOYOTA MOTOR SALES (TMS)
"I would describe it as almost 1970s-like," said Barbra Cooper of the basic and somewhat insular IS organization she inherited when she joined Toyota Motor Sales as CIO in late 1996. She found PC and network management, and such basic IS disciplines as business relationship and financial management, lacking, with the result that "No one understood the cost of delivering IS." Far from being business partners, IS personnel, when they were consulted at all, were little more than "order takers."
More often, business units that perceived in-house IS as unable to deliver were buying their own IS with no thought to architecture standards, systems integration, or business benefits. When a downturn in the global economy prompted Toyota executives to look more closely at the American division's spending, Cooper, already coping with local complaints about IS's bureaucratic unresponsiveness, found herself under pressure to explain costs as well. She subsequently formulated, over the course of many weeks, a strategy that would focus the energy of a decentralized, highly transparent IS organization on the company's major business segments.
A team of eight staffers assembled by Cooper to make her vision reality generated a list of 18 initiatives, each of which was provided with a project owner, a team, and a mechanism for evaluating the team's success. Improved alignment with the business side was at the top of the list of initiatives.
Cooper identified and embedded in all the business units top-performing senior personnel, whom she called divisional information officers (DIOs). Accountable for IS strategy, development, and services, the DIOs were charged with forging relationships with, and gaining the respect of, the high-level business executives who headed the management committees on which the DIOs sat. "I still believe in managing IS centrally," insisted Cooper, "but it was incumbent on us to physically distribute IT into the businesses.
They could provide more local attention while keeping the enterprise vision alive." DIOs' accountability and responsibility was for the vertical area they served. Corporate Manager of Business Systems Ken Goltara, for example, headed up a small group of internal customers all of the associated vehicle-ordering systems, logistics, and dealer portals. For Ken's customers, it's a one-stop shop as he handles all the systems for the Toyota, Lexus and Scion organizations. Situating approval for all major IT projects in an executive steering committee (ESC) chartered by Cooper served to further strengthen the IS-business bond, and fundamentally altered accountability for projects. The committee included, Cooper, her boss, Senior Vice President and Planning and Administrative Officer Dave Illingworth; Senior Vice President and Treasurer Mikihiro Mori; and Senior Vice President and Coordinating Officer Masanao Tomozoe.
The goal for the ESC was to shift responsibility for IS project vetting and monitoring away from IS towards the business by exposing IS's inner workings to Toyota Motor Sales' business side. Project funds were to be maintained by the ESC as a single pool of cash, distributed on a project-by-project basis as each phase of a project's goals was achieved. This window into what was spent (and not) would enable other projects to identify and go after unexpended funds, and the administrators to reallocate those funds accordingly. The more regular pacing of projects throughout the year, moreover, eliminated spending swings.
Many business executives initially balked at the new approval process. Instead of following the prescribed channel for seeking funding through the ESC, they allied themselves with lower-level business sponsors engaged with IS in business case development and implementation. After about half a year of dealing with senior-level business execs' unwillingness to take responsibility for IS projects, Cooper dictated that the ESC would not approve any project not backed by a higher-level business executive, a corporate manager at the VP-level or above. With business executives, not the IS executive, held accountable for achieving the business benefits of IS projects, both departments had the same stake in the outcome.
Discussion Questions
1. Describe the advantages of TMS's new decentralized IS structure. What are its disadvantages?
2. How did the new structure change decision rights? How did it change accountability for IS project success?
3. Why, in your opinion, would business executives shy away from the new approval process? In your opinion, will Cooper's demand that each project be backed by an executive solve the problem? Explain.