How Delphi’s CIO Drives Innovation, Change and Revenue With IT

Tim McCabe has been through it all. McCabe joined Delphi Automotive in 2006 and became CIO in 2009, and in the years he’s led technology the auto parts maker stumbled financially, plunged into bankruptcy, reorganized and streamlined, got back on a growth track and re-emerged as a public company. McCabe and his team undertook drastic cost- cutting to help stanch losses, then shifted gears to enable global expansion and are now driving the ‘Safe, Green and Connected’ initiative that is fueling Delphi’s success.

In this installment of the IDG Enterprise CIO Interview Series McCabe talked with Chief Content Officer John Gallant about how he navigated that tortuous track and how IT has become — no pun intended — a driver of revenue. McCabe explains that bankruptcy forced IT to take a cold, hard look at how it was really adding value, but he says other IT leaders can — and should — put themselves under a similar microscope even if their companies are financially healthy. McCabe also explored what it means for CIOs to be “contextually” knowledgeable about their businesses and — having overseen major outsourcing initiatives at both GM and Delphi — he talked about the future of offshoring and out-tasking.

McCabe is a member of the CIO Executive Council — IDG Enterprise’s peer-based global community of leading CIOs.

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The company has been through an awful lot in the past decade. Tell me how your team has helped Delphi make that turnaround. How are you driving key initiatives?

A: I think we’ve got to talk about this contextually in time frames, because the team now is different from the team from, say, 2006 and 2007. The makeup is different. The capabilities that we’re required to have are different. So let’s step back in time for a minute and then we’ll kind of get ourselves up to 2013, and looking beyond.

I joined when the company had been in bankruptcy and the entire organization had to make, if you will, an organizational and operating model flip. We went from being U.S.-centric, highly reliant on GM for revenue, to a company that was going to change its footprint geographically and change its business model — and we changed it.

Our portfolio changed over the course of the five years and our focus as a company changed over that time frame too, from being U.S.- centric, GM-reliant, to being, right now, about 30 percent revenue in the U.S., 30 percent in Europe, 30 percent in Asia-Pacific, and 10 percent in South America. In early 2006 we took on what we call the Safe, Green and Connected megatrends. We were probably a little early in the market with that because it wasn’t really resonating right out of the chute with consumers and OEMs. But if you say “Safe, Green and Connected” now there isn’t a person on the planet who doesn’t have an idea of what that means. The company early on recognized, during this transformation, that it needed to become a different company than it was when it went into bankruptcy. And the IT team likewise.

Our objective for the first three years was to get costs down, because that was what the company needed us to do — become very lean, become very flexible and become very much a low-cost, sustainable provider for the broader Delphi. We did that, and we went to a highly outsourced model, while retaining those things that are core to any IT organization: strategy, architecture, supplier management, and client- facing relationships.

As we remodeled the IT team in the 2005-2006 timeframe, we recognized that those things that look like commodities needed to be done by somebody else. We outsourced many of those services at that time. Then as the economic tsunami hit not just the U.S., but found its way to the rest of the world, we found that what we thought was the right amount of cost out wasn’t the right amount, so we continued to push, becoming leaner. We changed how we were spending and what we were spending money on. We found that you could actually run, back then, a $10-12 billion company, at about one percent IT spend-to-revenue.

Now I’m going to walk you into the 2008-2009 timeframe. The market is starting to heal a little bit. We found ourselves emerging from bankruptcy in 2009. We saw some pretty fast growth. And the IT team took a look and said: Our clients are starting to place more demands now on growth. It wasn’t to sustain the model, but was actually to grow the model. So we had to start thinking about what kind of changes did we need to make as an IT team to not just match the Delphi enterprise, but to start getting in front of the Delphi enterprise.

Think about the changes in technology at that time. You started to see the consumerization of IT, digitalization was taking place, mobile was catching on, connectivity was starting to become important, the cloud was on everybody’s lips, and we just took off as a business. Our business grew very rapidly in the 2009-2010 timeframe, and now, all of a sudden, we find that we’re completely global. We’re driving an enterprise that is making everything start to feel like one Delphi.

We have 18,000 engineers now, and they’re spread all over the world. We have about 120,000 employees, and the IT team hadn’t grown that much. But we were changing our focus from managing the cost out to focus on bringing value to the organization. The client-facing team gets stronger. We put more focus on having strong business acumen. Being an IT professional is important, but being able to understand profit and loss, business cases, return on net assets, started to take much more precedence in dealing with our clients. Because, guess what? We were no longer worried about how much money we could save. We were worried about how much more revenue we could take on in our business model.

Now it’s 2013 and we’ve even moved one layer deeper, and we’re now focusing on value. Our clients are starting to say: If I give you a dollar, can you generate $1.50 in value? If I give you 50 cents, can you preserve the value, hold that cost, and then more importantly, show me how I can start to enable my business outcomes by spending more money with IT versus less? So everybody on my team is ITIL-certified and trained.

We’ve adopted very much a service-management methodology, offering some end-to-end services to our clients and we’re growing that capability. We’re now really engaged. The previous CIO, who hired me, had a seat at the table. I’ve kept that seat at the table. We’re not outside looking in on decision-making. We’re not outside looking in around how we’re going to grow the business. IT is right there. We play a very important role in the overall growth of the company because we have a chance to vet suggestions and ideas, weigh in on the cost, provide insight as to what technology can do to grow the business, and we’re starting to really help connect a very global company.

So Tim, let me explore a couple of different things. First, from a business view, tell us what Safe, Green, Connected means.

A: Safe is the product portfolio we offer to make your driving experience as safe as possible. Crash avoidance, crash sensors, lane departure warning, distracted driver technologies, all those things around safe handling of a vehicle on the road. Green relates to how we manage the consumption of air and fuel to limit particulate matter, improve miles per gallon — really about how much weight can be taken out of a vehicle, so we look at the weight-to-thrust, and start looking at how we can help with that. We do that also with our heating and cooling compressors and condensers, as to how much energy from an engine has to be used to run the ancillary devices.

The Connected piece is really around how we use technology inside a vehicle, so think from the headlamps to the tail lamps how we connect all those piece parts to ensure that they are working as a system. Also our next level of Connected is: How do you take what’s happening in a vehicle or outside of a vehicle and bring it into the car, or the light-duty truck or medium-duty truck? At CES this year we made an announcement of a product called Vehicle Diagnostics by Delphi that we partnered up with Verizon on that allows an owner/user/driver to manage how that vehicle is being used. You can geo-fence it. You can see how often it turns, where it turns to, where it goes, brakes, speeds, those kinds of things. We build 60 million parts a day. We have, I think, 20,000 SKUs, and each one of those products fit under Safe, Clean and Connected without having to torture the definition.

How does your organization drive Safe, Green and Connected?

A: Let’s go with Connected, because that’s a big part of it. On the Connected piece, this is where you start thinking about the blending that takes place. IT is normally the one that works with a network provider, Verizon. But we knew that Verizon had some offerings that could lend themselves towards our commercial aspects. My team actually brokered the relationship and the deal with Verizon on doing the Connected Car. IT is supporting the back end in the [Microsoft] Azure space with the call center activity. So we’re involved in that commercial sale and connection.

We’re also using ‘connected’ to collaborate internally within Delphi and externally with our business partners and customers. Inside Delphi you could think of us as having 18,000 engineers as a subpopulation of about 40,000 employees. So we really are an engineering innovation company. And that’s our little secret. All those people work on projects together. So the question is: How can you make that development process as lean and efficient as possible, bring in as many people inside of the company who can weigh in on good ideas and good inventions and good innovation? We’re using some of today’s techniques with Yammer and Lync and the video in Skype and SharePoint to connect people with the process of ideation and innovation. That’s clearly where we play very well with both our customers as well as our clients.

On the Safe piece, IT tries to ensure that how we manage the safety of our server and data rooms, our hosting, as well as protecting and keeping our data secure. That’s our space in Safe. In Green, again, it’s really about how much energy do we consume? Can we manage to do compute at a different time of day? So it’s following more the traditional Green, which is using less and getting more.

You talked about a couple of things that I want to explore in more depth. One is this idea of focusing on value. How do you take that idea and make it a reality?

A: The way to think about it is that we don’t redefine value. Our clients have their objectives, both at the business level and at the leadership level. These are the things that at the end of the day are going to result in Delphi generating more revenue, more goodwill in the communities in which we operate, and more visibility in the eyes of our customers and consumers. We use the same measurements that they use. Value generation is really where the client has an opportunity to grow their business, and we will recommend technologies to help them get there sooner, faster and cheaper. So an example would be in the ability to find work that had been done previously. We’re deploying Delphi internal search capability. That is a value generator. When we say value creation we talk about revenue.

The other one is around value at the foundational level. In other words, what you’re doing to ensure, at the core of the operating system, that you’re generating value. So one way we do that is to really sweat an asset. We don’t always buy the newest equipment or software necessarily. We make an investment in an asset and we will run it to not only its physical end but its logical end. That’s around the foundational value.

Another way to think about value for us is also going to be in the area of preservation. If you are in the process of growing the business, can you grow it at a cost that’s less than how you had previously grown it? So, in other words, can we do more engineering with fewer engineers? Can we help to preserve our deployed asset base? So we spent a lot of time showing how, without having to hire more people, we can get more work done with the connected Delphi worker.

You had mentioned that another key aspect of the transition over these years was shifting more resources toward client facing or client focus. Can you talk a little bit about how you’ve done that? Is that through things like embedding?

A: Maybe in your experience with your current employer or some other job, you’ve maybe been on the sales arm of a company. And one of the things a very good commercial consulting or sales organization recognizes is that you have to know — and this is shorthand — who’s who in the zoo? Who is the decision maker? Who is the influencer, either formal or informal? Where does the money come from? What things inside of the business generate the revenue? What things inside of the business deteriorate revenue? So what we’ve done is create and maintain a client account plan. We have five divisions, and every one of those divisions has a direct report of mine who has a client- facing staff.

Again, we have about 200 employees, so these are thin teams: think of this as maybe a 10-12 person team. And these clients are around the globe. So we don’t have all of the divisional leadership sitting in one room. They’re interspersed throughout the globe, so I try to place the people where the decision makers are. But they create an account plan, and that account plan talks about the revenue that they’re going to generate during the course of the year, their business growth plans, their customer, their sales conquests, their engineering requirements, the technology that they’re using to win the new business, their supply base.

The client team is either in the same building or virtually in the same building. They understand and interact with the president and the president’s executive staff on probably a daily basis. Their goal, if you will, is to sell IT. They’re here to help sell IT and solve problems. There are relationships that are defined. We are part of how they do their day-to-day business. Because there are a lot more clients than there are IT folks, we have to aim at the people we know are going to be the decision-makers, influencers, or the problem solvers.

Having gone through this transition, all these different phases, what would you say are the key lessons you’ve learned that are applicable to other technology leaders?

A: I would say the No. 1 lesson is to be contextually aware of the business. It’s not just enough to know what the company does, but you have to know why it does it and who does it and what the needs are. I try never to lose sight of several things: how does Delphi as an enterprise deal with information technology, how do they view the role of technology in helping with the business outcomes, and how much are they willing to invest in information technology? So that’s No. 1.

No. 2 is to always be out in front of your client, but not too far in front. If you’re out talking about cloud and they’re still thinking about dirt, you’re going to be irrelevant. Not too far out and not too far behind. Every leader has a different view on that, so you have to think about that contextually. While I hold a conversation at the strategy board in the leadership teams, my staff has to have an even deeper understanding of the business they’re supporting. Again, it’s about being contextually aware and being in front but not too far in front. The third thing, and it’s going to always come down to this, is you have to have the right people on the team, and they need to understand the world they’re walking into, because you have to have alignment on people’s professional growth, personal expectations, and make sure that you hire the right person who will both be challenged by the role, who will challenge the client but not disrupt the business process.

How would you say you, personally, as an IT leader, changed throughout all of that?

A: That’s a very good question. I would tell you that when I look at my personal profile as a leader I have extremely strong feelings and an extremely aggressive, ambitious agenda, and I don’t like to take a lot of input necessarily. I tend to have an idea and go get it done. I’ve learned very much how to temper my view, tone down my enthusiasm and manage my personal expectations around what’s possible working for a company the size and complexity of Delphi.

My understanding is that in January IT moved under the CTO. Can you talk to me about that change and what that’s doing in terms of driving innovation or the perception of IT? What’s the impact of that and what’s the rationale for that?

A: It’s all good. Before that, we reported into our global business services organization, so we were working on kind of a shared services model. The feeling at that point in time was that IT certainly fits, on paper, like that. But as it turns out we had centralized a long time ago, and IT only has one CIO and none of the staff report, dotted line or otherwise, into any other part of the organization. So we already became global and we already became a shared service and we delivered our offerings the same regardless of where you were regionally or divisionally or functionally. So we, in effect, were operating in that model.

There was early recognition that it really didn’t fit into the creation of a global shared services startup. That was No. 1. No. 2, there were also some overall changes in January for the organization, and we took the operating presidents, the teams who were leading $4 billion, $5 billion, $6 billion divisions and had them report up under a newly created role of a Chief Operating Officer. At the same time they took information technology out from under the shared services role which still fits, we still have that person, and moved us underneath a CTO, a Chief Technology Officer, and that was also a fairly new role at Delphi as well.

What we found as we were emerging from bankruptcy and preparing our IPO and doing our road show, we were really highlighting for the industry and for the investor community the role of innovation and the role of technology at Delphi. It quickly became clear that that was really resonating in the market. So we formalized that role with Jeff Owens as the CTO. As you start to think about it, there is an absolute blending that’s taking place between technology as it fits in a product and technology as it enables business outcomes and consumerization. It started making more and more sense that to really leverage technology and innovation inside of the company, having information technology report under the CTO was going to make good sense. Jeff and I are continuing to plot the course for how we use this combination to think about market opportunities and even how we compete for talent. We ship a billion lines of software code every day.

I just came back from a trip to India. We have a tech center in Bangalore where there are over 800 software engineers who do nothing but develop and put code into hardware. I have to start competing with all of the app developers and the Google’s and the Apple’s and the Microsoft’s of the world. I have to start thinking about what does that look like for the workplace, in a work environment? What kind of technology can Delphi start to offer up to engineers so they’re going to work at Delphi as opposed to someplace else? So we’re starting to see opportunities around PLM [project lifecycle management] and some of the other work we’re doing in the engineering space to have Delphi be perceived as a leading-edge provider of new technologies. IT wants to make sure we provide them with the appropriate tools, both in the way of hardware and software, to live up to being an innovation company. Jeff and I are working on those types of strategies, as an example.

Makes perfect sense. So Delphi has been down a unique road with really dramatic changes over the past decade. I think some people would look at that and say: Well, those challenges were unique to Delphi. But what would you say for other CIOs? What are the key takeaways from having been on this mission, in terms of driving innovation and driving change within their own organizations? What are the key takeaways from the Delphi experience?

A: I’ll maybe try to put that in context. So the Delphi experience is one where a $30 billion dollar company ended up being a $10 billion company at one point in time. That forced me and my team to get very intimate with what is really required to run technology at Delphi. By lowering the water you begin to understand what’s really core and what’s really important and what technology really makes a difference. So I’d say one of the lessons is that you don’t have to go into bankruptcy, but you’ve got to stop and take hold of what it is that you’re really doing. In other words, what are you really doing and what [parts] of it do your clients really value? CIOs do all kinds of neat stuff, but what kind of value do the clients put on it, and what kind of business outcomes does it really enable? I think first and foremost you have to understand that, because that’s your inflection point. That’s when you can say: Okay, these are things that really make a difference at my company, and I’m now going to put more emphasis and I’m going to spend more time and I’m going to spend more money on those few things that really make a difference.

No. 2 would be not trying to delight your client as much as ensuring that your enterprise and your client’s business outcomes are assured by making the right investments in a pragmatic and, if you will, holistic way inside your company. Don’t do something because it’s neat, do something because it makes a difference.

I’m fascinated with this because it’s sort of like having your house on fire. That will help you determine really quickly which are your most important possessions.

A: What things do you grab on the way out the door?

Right. But do you think that a CIO who’s not going through that kind of wrenching change that you went through can actually do that, and if so, how do they do that?

A: They’ve got to stop and look at their business. It depends how complex the business is. Clearly we’re not the most complex by any stretch of the imagination.

It’s a pretty complex business, with 20,000 SKUs and 120,000 employees.

A: Okay, yes, we are complex. We all run 1,000 miles an hour. I don’t care who you are. But take the time to go a layer below the obvious, and see what it is that really generates value for your company. Go spend time with your client. I spend more time with my clients than I do with my team. I spend more time at our factories, our tech centers, our sales offices, to understand what employees value.

When I’m in these locations — and I’m a fairly low-key person — I will just walk up to some employee at their desk, introduce myself and start talking to them about what they do and what is it that they could use additionally from information technology — not as a sell, but to understand if we’re even meeting their basic needs. I think that’s what everybody needs to do. My team does it when they’re out. We try to get to the heart of what makes Delphi Delphi, and then make sure that we can take the few dollars we get and really make them count. I believe that the leadership team here has seen that change, values it and actually gives us the opportunity to do more. Because we sweat that asset and we manage that resource as tightly as a P&L guy or gal.

What’s the next phase of this transition and transformation?

A: We continue along this journey of creating offerings. [For example,] we are nascent when it comes to business intelligence and big data and data analytics. But our clients are starting to understand the value that can be generated by working up models and problems that they’d like to see solved by being able to extract information that sits in the company — banging up benchmark information, market information, competitive information, and develop investment strategies.

We’re putting together an offering around business intelligence using some fairly simple tools like QlikView, and now we’re going to start taking that out to our business colleagues, our clients, and show them the art of the possible and say: This is something that, if you like, we can provide you end-to-end, from the data extraction to building the data models, to putting in the tool and showing you how to use the tool, and provide you a concierge-type service where we can help you navigate on your next generation of what-if modeling. We’re clearly moving in that direction.

Also, engineers always want the opportunity to test something in a sandbox. We’re heavily outsourced, so we’re starting to look at what work should an internal team own? We’re exploring the idea of Delphi IT having its own test and development environment where we can give our engineers a safe and secure way to download and use development software in their business. We’re starting to put special emphasis on areas that are not really, if you will, the foundational running, but the innovation aspects.

I think I highlighted earlier this whole concept around a connected Delphi, and that’s only going to continue on. My boss has a saying: No matter where you are you’re 70 percent out of position. Decisions get made by other people. Things are happening away from where you are. But how do you get better connected so that you can be less than 70 percent out of position, maybe just 10 percent? We’re starting to think about how you virtualize and digitize systems and information that you can look at and pull regardless of what device you have in your hand or where you’re located? How can you connect with people in a way that forgets time zones, forgets location? That is an area where we’re continuing to emphasize. It’s back to diving deeper into how decisions get made, diving deeper into virtualizing and digitizing the world in which we operate, and getting people closer to the information that they need to make the appropriate business decisions.

I’ll continue to advance the IT team and push them into less internal views and more external views.

What technology are you most excited about right now?

A: What I’m most excited about that I think continues to have promise is everything around sensors and connection. As we start looking at how to digitize the work, because of our global footprint and our manufacturing volumes and our engineering volumes, the more we can connect what happens on the plant floor to our engineering environment and our engineering environment to our manufacturing environment, and our design department to our tooling department, and start to see how things perform is very, very important to me. That also plays neatly into what we’re doing with the connected vehicle. Here we have both an internal strategy and external go-to-market strategy that really interlace and lay over the top of each other. I think that’s really the opportunity for what we’re aiming at.

You have tremendous perspective and experience with outsourcing and offshoring. I’d be interested in your take on how the use of offshoring and outsourcing is changing and how you think IT executives need to be looking at those opportunities today.

A: The model has changed dramatically over the last 10 years. In the early days people viewed outsourcing as an opportunity to kind of outsource ‘your mess for less’, so the CSCs and the IBMs and the EDSs were able to take big broad swaths of information technology services and go run them. Then we saw the rise of the Indian capabilities and you saw the EDSs and the HPs and the CAPs [Gemini] and the CSCs and the IBMs start to leverage and create capabilities in low-cost countries, Indonesia and India, and to some extent China. That held up for a while.

Then the market continued to shift and these large monolithic deals weren’t getting done anymore and the Indian providers were starting to say: Well, I’m not just a low-cost provider, I’m actually a full-service provider, and I’ll put capabilities wherever you are. They started to challenge the traditional kind of ITO firms.

Then the traditional ITO firms started to change too, and realized that they couldn’t be as profitable being all things to all people. They started to narrow down their offering while the Indian companies got more and more capable. They were attracting customers who wouldn’t have thought about giving them the business, again, doing both low cost and high cost, providing blends. Then business process outsourcers took off and said: Look, just give me a swath of your transaction stuff and I’ll take over total ownership of it, including the underlying technology. That started taking business away from the traditional ITOs. Then you get into the cloud.

All of a sudden you’re not even talking about a BPO, you’re talking about procuring an answer, not even taking the business process, I’m just buying now a cloud capability. The Workdays and the Salesforces are great examples, but so many people have gotten into that space. The premises and the companies have changed dramatically over time, and now, all of a sudden, you can take pieces of your business and go right into a cloud environment or go to a BPO environment. The model has changed. How you use that model has had to change too. If you wanted to try to take ‘your mess for less’ and put it in the marketplace you probably wouldn’t get anybody to take it anymore. The consumer’s gotten a lot smarter. The supply base has gotten a lot smarter. I don’t want to say pickier, but they now recognize how you can create good margin versus margin, good business versus bad business. So everything has changed from when I started this in the ’90s. There’s no doubt.

So if you were to boil it into one sentence in terms of how people should be approaching this from an IT leadership perspective, what would it be?

A: It’s not either/or, it’s both. Understand what service someone can do better, cheaper than you can and better is the first word, cheaper is the second, and let somebody else do it. But don’t walk away from it. You still have to manage the outcomes. You still have to create a partnership. Relations matter most.

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