If you want to know why people buy Toyota, just ask someone who drives one. Some people have put as many as 300,000 miles of their vehicles. That emphasis on quality comes through in every commercial about Toyota. However, quality resonates through just about every function, especially IT, at a Toyota company. But this hasn't always been the case. In 2002, executives at Toyota Motors Sales, USA, Inc. complained about how IT was unresponsive, and about where all of the money spent on IT projects went. Barbra Cooper, the CIO, undertook a massive restructuring of IT to better align strategically to better align with the needs of the business units and to better align with the company's culture of quality and continuous improvement.

Recently, enterpriseleadership.org sat down with Zackery Hicks, a corporate manager from the Office of the CIO at Toyota Motor Sales, USA to talk about how IT meets project goals, innovates, maintains quality, and develops talent. Here's what he had to say:

EL: Can you provide an overview of your IT organization?

ZH: Barbra Cooper, our CIO, also oversees the University of Toyota, which is a global responsibility. Our IT organization has a federated model, consisting of about 400 employees. The office of the CIO oversees the transparency, governance, and the business enablement. We have aligned a divisional information officer or DIO with each of our business units. Each DIO has a staff of direct IT reports. Each DIO sits with his/her business line and attends that business unit's staff meetings. At review time and throughout the year, the business executives provide feedback on DIO performance to the CIOs. DIOs have a dotted line to their divisional executives.

Within my domain, I have IT strategy, finance, governance, resource management, and vendor management. I also have security, privacy and compliance.

EL: Is that structure a model for all of IT within Toyota?

ZH: For some divisions of Toyota, IT has the same structure as us. The manufacturing divisions have a flatter IT structure than ours because of their
specialized business needs.

EL: Did Barbara Cooper develop this structure for the IT organization?

ZH: She did. Barbara likes to say she called the police on herself. Before joining Toyota, she has been a change agent CIO, transforming new companies and then moving on. Her longest tenure as a CIO has been at Toyota. Several years ago, she felt that it was time to transform IT here because people perceived IT as more of an order taker. Cooper wanted us to be thought of as a respected strategic partner. She took us on the journey to achieve this goal.

EL: Where does the Toyota Motor Sales IT organization fit into the global Toyota IT?

ZH: We are a separate company from Toyota Motor Corp in Japan. However, all the supply chains interconnect with each other. In fact, all of our systems connect with those of our other affiliated companies. We have
a close relationship with the other IT organizations within Toyota.

EL: Can you describe the governance structure by which the DIOs operate?

ZH: The Office of the CIO facilitates the executive steering committee. We have many project portfolios recommended by each division for committee approval and for provisioning.  Each division and each DIO has his/her own local governance. You can liken it to state and federal government.

We decided to empower DIOs with all of the resources needed to meet their business units' needs.  We did this because we didn't want DIOs turning into relationship managers.  Furthermore, we wanted them to strive to be successful. As a result, we empower them to respond quickly to their evolving business units' needs. We have a threshold for what they can decide
locally.  Beyond that local approval level, they have to rise up to enterprise governance.

EL: Do the DIOs have to reach project objectives before funds are released?

ZH: We have a business case for each project. We look at the ROI and the total cost of ownership. We also want to have a portfolio view so it isn't just only based on ROI. Some projects that might help us with innovation or help us in our continual quest for better quality might have a lower threshold. In the overall picture of the company, these projects have value. We take more of a portfolio view, but we absolutely do look at securing a return. In the Toyota Way of Plan-Do-Check-Act, we ask each project team to come back after completion to verify whether or not the project reached its objectives.

EL: Can you describe the metrics or methodology the business units can judge the success of IT projects?

ZH: The business case at the initial start states these objectives. At the beginning of the year, we do an annual plan. We agree upon what the enterprise goals are going to be. What does each DIO or direct report have in common with the things we agreed upon? What are our targets? What things are going to be done locally? What are the local plans that we are going to achieve that year? The annual plan must address all of these questions.

By the time the business case comes forward, we already have awareness on what projects we can expect. We do have funding gates at appropriate phases of the project. Before we begin construction, we look to have a completed ROI analysis and a full cost of ownership for a five-year plan. We want ideas to get off the ground. We make it very easy for the different
business sponsors who have ideas for something new. We'll fund the idea, give the team a pre-determined amount of time to go off and think about the idea, and to vent the idea out with IT and any other affected groups to see if the idea has some legs. If it does and the team comes back, then we'll give them more seed money to get through high level requirements. We continue down this path before they get to construction. We want to encourage good ideas that help the business. We also want to limit our exposure by investing in the wrong things. Before we give them money to begin construction, we want to make sure all of the risks and the returns are vented out.

EL: Toyota is known for being a leader in sustainable innovation and breakthrough innovation. Can you give me one or two examples of how IT has contributed to innovation?

ZH: We're proud of our dealer extranet. Two disparate systems used to burden most of our dealerships. They used to enter their factory order requests in with their factory system and then run their office via their dealer management system. The interface we created enables our dealerships to work on either the factory system or the dealer management system without
ever rekeying any input. A vehicle entered as sold in the factory system would automatically update their inventory systems as purchased on their own. This innovation tore down the silos between the automation that existed. The extranet provided the dealerships with more flexibility. They now could see the vehicles to them in their pipeline, and can trade with other dealerships before the vehicle arrive to the dealership. This capability gives dealers the ability to get the right car, to the right place, and at the right time for the right customer.

Quality is another aspect of innovation for us. It's part of our focus on and part of our culture. Quality shouldn't be limited to our vehicles. Our systems should also have that quality. We've been innovating by providing our engineers, regardless of where they are in the world, the ability to view any part of a vehicle that is not performing as designed. Our Toyota dealerships have this capability for servicing vehicles.

EL: What quality practices are you using in IT?

ZH: Toyota is Lean. We have our own culture on Lean thinking and continuous improvement. Cooper made them a big priority when she reorganized IT. We wanted to better align IT with the Toyota culture. Our mantra says that we're not a public corporate IT shop; we're a corporate in-house IT department which knows what our business wants and mirror that. We needed to move upstream and to understand our business better. We achieved this posture through Lean thinking and the continuous improvement or Kaizen. We absolutely incorporate these quality practices in everything we do in IT.

EL: How does IT meet the objectives of the Toyota Production System?

ZH: We're the sales and manufacturing arm of that. IT uses the same principles used in manufacturing. The methodology is the same. You can't see everything that IT does. On the other hand, if you walk by a vehicle assembly line, you can observe how much wasted time is expended. We mirror our production system by using dashboard and process documentation to visualize and to enable people to see what's doing on in it and to improve upon it. This visualization is all part of our continuous improvement.

EL: What types of IT career development programs do?

ZH: At my previous companies, you were labeled either an IT person or a business person. At Toyota, you have opportunity rotate through different areas of the business.  I started at Toyota in corporate services. Because I had IT experience, I had the opportunity to move into IT. However, people have to demonstrate the talent to move to another functional area, as well as to have the desire to do so.

EL: Is there a formal leadership program at Toyota?

ZH: It's based on different levels. Our University of Toyota functions as a center for dealers and for our employees to learn business skills, communication skills, to uplift the organization's abilities, and to prepare for the future. This center is also open to IT people. In addition, while working with the University of Toyota, we developed our own career path within IT based on the changes occurring in this industry. In the 1980s, a good programmer could count on becoming a manager. Today, a lot of programming happens offshore. An IT manager today needs to oversee relationships with disparate vendors, and a disparate workforce across the globe. 

EL: Can you describe the performance goals set for senior IT people?

ZH: We focus a lot on achieving our goals by building employee performance incentives into our plans. We establish goals at the beginning of each year.
Throughout the year, we make sure we honor these goals, unless business conditions change. It's easy to get distracted because of all the complexity which comes with IT. Having objectives, having goals, and tracking our performance of those goals becomes important for keeping everyone on track.

The Office of the CIO has been successful in managing not only the day-to-day operations of IT, but enabling the CIO to have optimal business engagements and worry less about tactical part of IT.

EL: How have you handled the execution of IT strategy?

ZH: We put the portfolio of our current applications on one axis. On another axis, we looked at what business conditions are likely to occur. We wanted to see what would happen at the intersection of these two things. What would happen to our systems if we need to support more or less dealerships? Would our systems support the increasing variation of our vehicles? What affect does business complexity have on our systems? This process helped us to have a better dialogue with our business customers. We were able to go upstream by our increased ability to have a dialogue about changing business conditions and the potential impact of our application portfolio. Instead of being an order taker, we could anticipate if we needed to invest in new systems. This awareness helped us more in strategic planning.

Through the Office of the CIO we ensure that these potential projects or projects that support the business strategy rise to the top and get the needed funding, and get all of the executive support they need. We make sure they are tracked monthly through that visualization. We want everyone to have the same understanding of what is going on with the projects, to be able to help the projects as they are coming off the tracks, and to get projects back on track based on early warning signs.

EL: Can you describe some of your IT innovation programs?

ZH: We have several formal programs around innovation.  In fact, one of our top goals for 2006 and 2007 included innovation. I mentioned our annual planning process helps keep our associates focused on those areas where we want to make progress. Innovation was an area that's taking center state in our annual plans. We don't care if the submitted idea was actually carried out. We're more interested in how many ideas each executive brings forward from their team. We want to provide a clear path for any idea to rise to the top. We also have some local groups compete similar to a science fair. Their ideas don't have to be about Toyota per se.  Perhaps a submitted idea might be the muse for another associate in how it could benefit Toyota. We don't want to limit innovation. We hope to bring in some ideas that could drive some foothold here at Toyota. Each quarter we give out awards for innovation and continuous improvement. In fact, in 2007, IT allocated 100 percent of its continuous improvement fund to innovative ideas.

Note: Since this interview took place, Zack Hicks is now corporate manager of administrative services.

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Additional Reading - Sponsor Links:
Managing the Business of IT: Maximizing the Power of Service Resource Planning, the Next Step in Business Service Management
Understanding ITIL® Service Portfolio Management and the Service Catalog

Author: Elizabeth M. Ferrarini - She is a technology writer from Boston, Massachusetts. Reach her at elizabethferrarini@yahoo.com.