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Iveco– creating new value in the automotive space

A global operation

Iveco is the European leader in

the market for Light commercial

vehicles with a 27 per cent

share, and has a significant 20

per cent stake of the Medium

and 12 per cent share of the

Heavy truck business. In

addition, it produces successful

ranges of specialist fire-fighting

and defence-related vehicles.

Over the last few years its

strategy of product innovation

and globalisation has seen

turnover and profits rise year on

year, with record sales of $6.5

billion in 2000 – a jump of 10.7

per cent compared to the

previous year’s 4.2 per cent rise.

2000 also saw Iveco working

with its Cisco account team and

the company’s Internet Business

Solutions Group (IBSG) to

harness the web to meet its

strategic goals, trailblazing

changes in the way people work

and how the division does

business that could be the future

model for the whole Fiat group.

Michele Pizzinga, Iveco’s Vice

President, Strategy and

Development, is confident of

the value Cisco brings as

Iveco’s Trusted Internet

Advisor: “Cisco has opened

new windows in our minds

through which we now see

opportunities to reduce costs,

add value, and get closer to

all our stakeholders. My

dream is that within three

years we will be as web-

enabled as Cisco is today.”

A new strategic direction

In 1999 services such as selling

financial leases, insurances, and

allowing customers to rent

rather than buy vehicles,

contributed only around 4 per

cent of Iveco’s $274 million

profits. However, in 2000 they

represented 20 per cent of

$430 million profits,

confirming a trend that some

commentators believe in a few

years time could see services

representing 40 per cent or

more of overall profit.

BackgroundA division of the giant Fiat Group, Iveco was bornin 1975 from the merger of three Italiancompanies, a French and a German company.Today it comprises 21 plants and engineeringcentres spread throughout Europe and Asia, withjoint ventures around the world.

ChallengeWhile globalisation helped counter the problem ofover-capacity in traditional markets by opening upnew ones, today the challenge is to more efficientlyintegrate activities around the world, reducing cost,leveraging centres of excellence, and creating newrevenue streams by offering value added services.

SolutionGuided by Cisco’s Internet Business SolutionsGroup (IBSG), Iveco is starting a strategicprogramme of web-enabling every aspect of itsbusiness. Workforce optimisation initiatives –running over a new, secure intranet – arestreamlining processes, while other projects willintroduce e-procurement and extend new servicesthrough the entire supply chain.

ResultsWeb-enablement is expected to be the majorcontributor to reducing overall costs by about fiveper cent of revenue – some $32.5 million. Thebenefits of workflow optimisation have done muchto help counter people’s initial resistance tochange and a new Internet culture is emerging.Existing methods of tracking customer satisfactionare being adapted to objectively measure thestronger relationships that will be formed with allIveco’s stakeholders.

E X E C U T I V E S U M M A R Y

“CISCO HAS OPENED NEW WINDOWS IN OUR MINDS THROUGH WHICH WE NOW SEE OPPORTUNITIES TO REDUCE COSTS,ADD VALUE, AND GET CLOSER TO ALL OUR STAKEHOLDERS. MY DREAM IS THAT WITHIN THREE YEARS WE WILL BE AS

WEB-ENABLED AS CISCO IS TODAY.”

Michele Pizzinga, Vice President, Strategy and Development, Iveco

The shift is part of Fiat’s strategy to protect itself from

over-capacity creating downward pressures on margins not

just through globalisation, but more recently by offering

customers value added services which can command higher

margins and reinforce customer retention.

“The way we manage our global operations and integrate

our acquisitions is critical. Not only do we need to reduce

costs wherever possible, we also need to leverage our

resources to generate added value at no extra cost,” Mr

Pizzinga explains. “Like automotive groups around the

world, we had grown globally through acquisition

without the need for a common information technology

(IT) infrastructure. Today that has changed. We still think

globally, but recognise that the lack of common integrated

processes and shared information has resulted in our

acting too locally.”

These are the challenges Iveco is now meeting with the

help of Cisco’s IBSG and the Cisco account team.

Net ready survey

Cisco Systems is Iveco’s primary networking

communications provider and in the summer of 2000 the

Cisco account manager for Iveco and members of IBSG

took Mr Pizzinga through both the highs and lows of

how Cisco had web-enabled itself. They explained how

Internet Business Solutions such as workforce

optimisation, networked supply chain, customer care and

internet commerce achieved annual savings of nearly $1.4

billion in 2000, while the value of business conducted

over the Internet had been driven to $18.9 billion, with

90 per cent of orders placed online.

“I was very impressed by Cisco’s capacity to implement

new Internet technologies and ways of working. I have

seen many companies talk about it, but Cisco has actually

done it, creating e-enabled processes and reducing

operational costs,” says Mr Pizzinga.

The next step saw Mr Pizzinga and other senior managers

take part in a Net Ready Survey, a questionnaire

developed by Cisco that helps companies understand their

competitive position and ability to succeed in the Internet

economy by exploring four key dimensions – leadership,

governance, competencies, and technology.

The survey showed that senior management saw the

Internet as key to the future, and the go-ahead was

subsequently given for a $0.44 million project to set

up an employee portal that would introduce web-

enabled processes and information flows to improve

workforce optimisation.

Linking technology to business needs

Around the same time, Mr Pizzinga appointed Nilo Calvi

as Iveco’s E-Business Manager to provide a greater focus

on e-enabling the company.

One of the key features of Cisco’s IT governance model is

that it empowers business units, giving them the

responsibility for identifying the IT initiatives that will

meet their objectives. Operational units allocate money

from their own budgets for IT and manage projects

through to ensure appropriate returns from them. Rather

than implementing every IT project as in a conventional

model, the central function’s role is refocused on

managing the core infrastructure and co-ordinating the

various business-led initiatives.

“This is a new and a very important concept,” observes

Mr Calvi, “because it empowers the business units and

encourages every business manager to develop the

expertise to evaluate IT proposals that they are

considering. Maintaining a strong focus on common

resources – the core infrastructure – also ensures that

costs are shared across business units. I’d never before

seen such an effective management model that provides

such a strong and direct link between technology and

business objectives.”

Focus for workforce optimisation

The first Iveco project to benefit from the approach

proposed by IBSG is the employee portal that is

introducing Cisco-like workforce optimisation into Iveco.

A series of IBSG-led workshops in Italy and London saw

Iveco’s Human Resources (HR) managers meeting their

opposite numbers in Cisco. The workshops helped to

identify key information and spark ideas for the portal

that were then developed with the support of the Cisco

account team in Italy.

All of the company’s 35,000 employees will have access to a

wide range of HR-related information – from rules

regarding travel and holidays, details of Iveco’s

competencies model and internal values, through to

providing the framework used for evaluating career paths.

Employees will be guaranteed a reply from HR to any

question within 36 hours. Web-supported processes will

guide people through the maze of various staff discounts

that are available on a range of things from vehicles to

insurance. Staff expenses will be put online as will the

company’s directory. For the first time it will be possible

to access people’s electronic diaries and enable the system

to find the free time available for possible meetings.

The portal is also enabling new ways of working over and

above providing unprecedented levels of information at

people’s fingertips, which will include online access to

white papers and multimedia presentations using video-

on-demand. Communities with common interests that are

dispersed around the globe, such as research and

development staff, are being brought together with web

space dedicated to them. Vacancies will be posted to

encourage people to take a more active and effective role

in their own career paths. Using these web-enabled tools

and techniques Iveco hopes to see a significant

improvement in employee productivity, in keeping with

the 20 to 30 per cent increase that Cisco enjoys.

E-procurement of office supplies, machinery, mobile

phones and the like will also be introduced, reducing

paperwork, leveraging economies of scale and generally

taking cost out of the process.

The company is also investigating e-learning with IBSG

and already delivers one training course – on how to use

the new processes and tools – over its intranet.

“E-learning has tremendous potential,” explains Mr

Pizzinga, “especially for our dealers, salespeople and

technical people in the field. E-learning should enable us to

dramatically reduce the time it takes to get these messages

out – from perhaps 12 to three months. And just by

having more information available, people’s natural

curiosity will contribute to ‘training’ in a very real sense.”

“At the moment our e-business efforts are focused on

two areas. One is on process re-engineering and the

other is in taking each initiative forward,” says Mr

Calvi, “but we already see the day when we no longer

talk about ‘e-business’ because because it will be simply

business as usual.”

Success through quick wins

Iveco’s experience in developing the employee portal has

enabled it to better appreciate the value that Cisco places

on managing change through a series of small projects that

yield rapid results rather than a few all-encompassing, but

high-risk and long-duration strategic programmes.

“Typically in the past, process improvement or efficiency

projects have focused on the supply chain because there

are always improvements that can be made in this area,”

says Mr Pizzinga. “And frequently these projects have

looked for large implementation budgets of, for example,

$100 million. IBSG’s approach is to take much smaller

steps, which are easier to authorise, manage the risk

better, and deliver results faster. This approach not only

makes it easier to justify the next step but also earns the

support of people whose working lives are being

improved.”

Iveco’s managers are currently finalising their plans for

workforce optimisation and the employee portal and will

be presenting them to their IBSG team for comment and

feedback. The team will also help Iveco prioritise each

initiative including working with them to determine

Return on Investment (ROI) forecasts.

Business to business initiatives

“We are already developing plans to extend the portal

concept to our 250 dealers in Western Europe and those

beyond to introduce new techniques of customer

relationship management,” says Mr Calvi. “We want to

create a new channel to support our dealers and their

customers, giving them the technical information they

need, for example, or creating areas of the portal

dedicated to certain dealers or key accounts. Our aim

won’t be to go round the dealers and sell directly to

customers, rather we will work better together to increase

the service we deliver to customers. We are already

working on adapting our existing service measures to

capture improvements delivered by the web.” Iveco also

intends to provide dealers with the facility to buy and

exchange used vehicles through the portal.

Iveco’s commitment to the Internet saw the company in

2000 join the B2B e-business solutions programme being

co-ordinated by Odette International, the non-profit

making organisation established 16 years ago by the

European motor industry to set standards for electronic

communications and logistics processes throughout the

supply chain.

European automotive manufacturers and suppliers,

together with associated organisations, are working

together to use Internet technology as an enabler to

optimise common business processes in the whole value

chain. These include product development, procurement,

supply-chain management and so on.

Trusted Internet Advisors – a new type of partnership

Asked what he values most about working with IBSG, Mr

Pizzinga talks of the openness and impartiality of their

help. “In my experience it is not easy to find someone

who will provide advice that is outside their own self

interest. With IBSG it is different because they are sharing

how Cisco implemented Internet technology – we are

learning from their own experiences. Their core business

is not process re-engineering or how to organise your

business to scale e-business, so when they share their

expertise it does not have a ‘commercial edge’ to it.”

Critically, the calibre of Cisco’s people is first rate. “Our

day-to-day Cisco account team and the IBSG people are

all very effective and extremely well motivated. I regard

Cisco as a friend – not just because we have built good

working relationships with their people, but because of

the way they work with us, not as salespeople or

consultants, but by sharing information and their

experiences. This is exactly what we need because the real

challenge for us is to understand what the Internet can do

for us and then to make it happen,” says Mr Calvi.

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“The learning and insight that Cisco has shared with us

regarding workforce optimisation, e-procurement and the

like will enable us to make a more valuable contribution

to this important initiative,” observes Mr Pizzinga.

Technical assistance

As well as sharing its own experience to help Iveco

develop its own web-enabled workforce optimisation and

other initiatives, the Cisco account team has provided

valued technical support, including helping Iveco secure

its intranet both within the Fiat Group’s overall

infrastructure and the outside world.

“One of the impressive things about working with our

Cisco team is the way they are able to draw on the

international resources of the whole of Cisco, not only in

terms of introducing us to people who use and manage

web-enabled processes for example, but also in providing us

with expert technical assistance. At one stage we felt that we

perhaps needed to create a Virtual Private Network (VPN)

to secure our intranet, but Cisco brought in an expert from

its Technical Assistance Centre in Amsterdam who showed

us how firewalls would do a better job,” recalls Mr Calvi.

Cisco engineers will also be undertaking an E-Compliant

Network study to identify any changes required to Iveco’s

networking infrastructure to ensure that it will be able to

support its transformation to an e-enabled organisation.