IT Transformation at Motorola: Staying Above the Waves in a Perfect Storm

The economic challenges of the first decade of the 21st century have required organizations to cut costs, and fundamentally rethink and transform how they do business. This has affected companies of all sizes, and those which are publicly traded are under even more scrutiny to deliver cost management, which directly drives margin and earnings.

Article co-author Sam Desai was the Global CIO for Motorola, chartered with the transformation of IT. During his 33 years with Motorola, Sam held many senior leadership positions across the company, including sales, marketing, product development/launch and engineering. He serves on the boards of several Fortune 500 organizations.

The IT organization within Motorola recognized this challenge and embarked on a three-year program, which dramatically changed how IT services and processes were delivered, while dramatically changing the cost model. Underlying the transformation were the principles and approach inherent in Business Architecture. Using this holistic approach, IT moved from being a cost burden, to a strategic capability for Motorola. The journey was not without its challenges, but in the end dramatic business results were realized.

Call to Action

In early 2000, the global economy saw the boom and bust of the dot-com era. Within Motorola, the economic turmoil resulted in a dramatic slip in sales. As sales dropped, internal cost-cutting did not keep pace, creating a domino effect resulting in the shrinking of already narrow profit margins.

This perfect storm negatively impacted Wall Street’s confidence in Motorola, and its stock price slipped from $48 a share in the spring of 2000 to $9 a share in the fall of 2002, with a drop in market capitalization of over 80%. Driven by a critical imperative to improve profitability, Motorola’s Chief Executive Officer (CEO), Ed Breen, challenged the Information Technology (IT) community to: “…reduce the cost and improve the effectiveness of IT globally or external consultants will be brought in to do it for you.”

In late 2002, the newly appointed Chief Information Officer (CIO), Sam Desai, a 33-year veteran of Motorola with experience in growing global businesses and managing costs, and a reputation for turning lemons into lemonade, took up the challenge. He embarked on an aggressive plan to dramatically reduce the global cost of Information Technology by 35 percent, while at the same time ensuring that Motorola retained the technology capability to deliver products and services to its customers. The efforts of Sam and his leadership team built upon several cost management initiatives launched a year earlier, and put things into overdrive. In the end, lemons were as sweet as Florida oranges.

The Plan

A plan was created to compel change across five key dimensions of the global IT organization. The changes spanned IT Strategy, the IT Business Model (what and how services and solutions would be delivered and at what price point), the global Operational Model (how the organization is structured and staffed), and finally the Governance Model (how decisions are made and enforced). This plan follows the same approach developed by the Business Architects Association.

Understanding and communicating this alignment with leadership and the staff of IT became a core pillar of the transformation.

The first change was the articulation of a new strategy by the CIO and his leadership team; “Simple, Common, Global and FAST." From this came a new business model that differentiated IT service delivery based on need and linked it to associated cost. Next, every function of IT was evaluated in the context of a global operating model to determine if the capability was a) strategic to Motorola and as a result must be retained internally, or b) a commodity service (e.g., management of server farms) and could be delivered more efficiently by a third party.

A new organizational model was then put into place, which called for fundamentally different core competencies than in the past and demanded a different kind of IT leadership, one which emphasized business acumen and the ability to lead and drive change first ... then IT savvy. Finally, the way in which IT was governed was modified to streamline decisioning, enable management of resources on a global basis, and the establishment of standards to create a common baseline of infrastructure technology and business applications.

For this aggressive plan to work, Mr. Desai recognized that it needed the full support of the presidents of each of Motorola’s six business units (BUs). After all, they are the customer of the IT organization. Without their commitment to accept and embrace a different IT delivery model -- despite his best efforts -- it would not be possible to achieve the results for which Mr. Desai strived. Fortunately, Mr. Desai had strong personal and collaborative relationships with each of the BU presidents, and they assured him of their confidence in him and his ability to deliver services while transforming IT into a world-class capability.

Thus began the transformation of Motorola’s Information Technology organization and a two-and-a-half year journey of change. In the end, costs were reduced by over 35 percent and the organization is now lead by IT professionals who are respected business professionals who not only deliver IT solutions but participate in strategic decisions are are even directly involved with the sales process to customers. The entire IT infrastructure has been refreshed with new technology, IT has established and enforces standards across the enterprise and, most importantly, Information Technology is now a Motorola Strategic Capability.

A Global Strategy

All businesses and business functions need a clear and executable strategy. Within the IT function at Motorola, the strategic objectives were clear: "Deliver world-class IT solutions and service at a cost that compares to benchmarks, and make IT a core competency of the corporation.” On the surface this appears to be simple, but the challenge was in the execution. Each of the six business units managed IT independently; with budgets, IT goals and objectives defined and funded by the individual business. There was no holistic IT strategy, nothing binding the IT professionals together, no idea of the total investment in IT, and certainly no incentive to function as a global capability.

First things first. Sam Desai needed a straightforward strategy which could be easily communicated and acted upon. From this need was born a Global IT Strategy; "Simple, Common, Global and FAST.” This provided the rallying cry for every professional in IT. Keep things simple, establish and use common standards and solutions, make solutions global, and do it fast. At the core of the strategy was a shift in how IT thought about itself, moving from the traditional modular thinking which focused on delivering point solutions, to an integrated view of IT as an enterprise asset which needed to leverage capabilities. A shift from: “… build locally and risk duplication vs. build it once and deploy globally …”

A three-step execution plan was created to implement the strategy. The plan began with a global evaluation of the Efficiency or cost of IT delivery with efforts focused on consolidating, shrinking and streamlining every function, process and capability of IT globally. Next came Effectiveness, a focus on vital initiatives which included: standardization on a common Oracle platform, partnering with external partners to deliver non-core capabilities, and finally the Transformation of IT from a cost burden to Motorola, to an enabler of the business through the delivery of products and services, and an active partner in the sales process to drive revenue.

Clear goals and timelines were established to ensure accountability for the transformation and achievement of a new cost model. Within 30 months, the aim was to optimize global costs and become a world-class IT organization.

Note: Don't miss parts two and three of this series on IT transformation at Motorola.