‘Customer service’is a concept that most people don’t associate with a nuts and bolts freight transportation company like CN Rail. Yet, customer focus and service differentiation have been key to making the company North America’s number one railway. It wasn’t always this way.
Historically, railways have not been easy to do business with. Their value chain was slow and disconnected. Companies took days to respond to customer inquiries about price and service. The service itself was often questionable. As a result, over the last two decades, parcel and truck delivery companies have stolen many of the industry’s customers with their highly responsive and reliable services. Railways used to carry 25 per cent of the continent’s freight, but this percentage has dropped to 10 percent in recent years.
“A few years ago, our company realized that there were many opportunities to take traffic back from trucks,” said Fred Grigsby, CN’s CIO, “but only if we could provide truck-like service.”
Grigsby joined the company in 1997, after 26 years at Dofasco in a variety of business and IT management positions. He has been instrumental in helping CN Rail deliver on its hugely successful customer service strategy (see sidebar pg 15).
“Behind our results there is a lot of IT,” says Grigsby. “We believe that software is an asset and that it can be used to deliver value. However, the focus must always be on the business. Too many times technology is looking for a place to happen. IT should be a tool that business uses to drive value.”
Grigsby has applied this principle extensively at CN. “The world we live in has lots of IT, but it’s about business,” says Grigsby. While he reports to the President and sits on the Senior Executive Committee, he doesn’t talk about IT, but about the business. His job is to bring technology to bear on a business problem. One of Grigsby’s first actions as CIO was to stop an SAP implementation because it had become an IT project not a business project. “There was no senior business owner. We re-instated it when this person was identified and the project was then implemented quite successfully.”
Grigsby believes that if IT is to help the company position itself for the future, it should not only be justified on the basis of dollars and cents saved but also on the value created. For example, CN’s customer service strategy required a rock solid back office, as well as tools to help employees do their job more effectively. He therefore convinced CN’s Executive Team that the technology needed was simply part of the cost of implementing their business strategy.
Making fundamental IT Dept. changes
The successful use of IT at CN required some fundamental changes within IT, particularly attention to its own internal customer service and technology strategy. Grigsby and his team set out to create a unique IT framework that cannot be easily replicated by CN’s competitors. Their first focus was on improving IT’s delivery capabilities: creating an IT strategic plan, developing delivery management processes, doing selective outsourcing and increasing the focus on performance management.
Today, three qualities distinguish IT at CN: flawless execution, business knowledge and customer relationships. These differentiators are in turn supported by IT’s strategies, processes, partnerships and people. “Flawless execution gives you the right to play in the game,” explains Grigsby. “The business won’t even listen to you if you’re not good at this. All IT people are also expected to understand the business and to manage relationships. If you can’t do these things, your value is sub-optimized.”
With these in place by 1999, Grigsby was able to begin improving IT’s decision-making capabilities, such as developing a three-year IT business plan, establishing a project management office, moving towards selective sourcing and developing a resource management and competency centre, which manages all IT staff and groups people into centres of excellence.
“Taking people away from managers and putting them into a centre of excellence helps spread out the talent and develop young people’s careers,” explains Grigsby. This change was initially difficult for the managers, since they had to learn how to strictly focus on the tasks of getting projects completed rather than managing the annual workload and careers of individuals.
Focus on value creation
In the past two years, Grigsby’s focus has been on developing IT’s value creation capabilities. This has included establishing a value management office, building customer teams, starting an investment board and focusing on business transformation.
In 2002, IT introduced its own customer service strategy to address the different needs of its internal customers. It created multifunctional virtual customer relationship teams to be a single point of contact for its customers. Led by a Business Relationship Manager, these have been “unbelievably successful”, notes Grigsby. Each relationship manager works with all of the different groups in IT (i.e. Operations & Telecom, Project Resources, etc.) and is held accountable for the customer relationship and is measured on overall customer satisfaction.
“The business has really bought into it,” says Grigsby. “We put our best people into this and it’s paying off.”
Business process simplification and change management have become centrepieces of all IT projects at CN. For reengineering, Grigsby believes his own IT people are as good as or better than external consultants. He has therefore made a small group of highly skilled people available to CN’s business units to help with business transformation. These consultants are talented, driven individuals equipped with the latest tools and techniques and very few restrictions. They have a mandate to help the company leverage its superior information and technology base to create breakthrough value in the business. They bring a variety of competencies to bear on a problem, such as data analysis and change acceleration, and help the business units formulate business strategy, identify opportunities, optimize business, leverage for value and develop a change management strategy. These internal consultants have come to be very much in demand as news of their abilities has travelled in the organization.
Managing the merger
IT has also learned the importance of careful change management in effectively implementing new technology. “We worry a lot when a new system goes in. I’ve learned over time that only the paranoid survive,” says Grigsby.
During a recent merger in the US, the company was under huge political pressure because mergers in other railroads had not gone well. Careful planning, excellent execution and good change management enabled CN to integrate the US company into its systems, with only four hours stoppage of systems outage to cut over and barely a hiccup.
Companies must be prepared for some pain at the front end of a new system, explains Grigsby. He cites the predictable evolution to how the business will react – even to a good system.
Stage 1: “What idiot designed this system?”
Stage 2: “I guess it’s okay.”
Stage 3: “Don’t take this system away from me!”
Careful project and change management can help users get to Stage 3 faster and easier. Only then can the company begin to generate value and leverage its investments.
Better people management
Grigsby believes strongly in investing in his own people. “We are a results-driven company,” he says. “But in the end, results are not possible without the right people in the right places with the right leadership.”
Early on he “shook the trees” to identify people with talent and potential and gave them a chance to take on more senior positions in the organization. They have thrived and become IT leaders.
His confidence in his people is reflected in IT’s sourcing strategy. “I believe insourcing can be more effective than outsourcing,” he says. “We have been better able to control costs and services by keeping work inside.” With outsourcing, a company has less control and may not get the service it expects.
Similarly, Grigsby is on a mission to reduce or eliminate the number of consultants the company uses. “We want to do more and more ourselves. We will bring in people who have skill sets we don’t have for a short time so they can transfer their knowledge to our people. Then, they’re out.”
Grigsby explains that he would rather cut operating expenses than salaries. “If we can save in this area, we can grow our own people and build our own future.”
Overall, successful IT requires a lot of hard work – both from IT and the business, says Grigsby. While all IT departments are under significant cost pressure, it is critical that CIOs do the right things for their organizations.
Says Grigsby: “They must be stewards of their organization’s IT resources. Sometimes this means standing up for what is right. Doing this will pay off in the long run. It may not be the easiest or most comfortable thing to do but at the end of the day, a CIO will have his integrity. And he or she will have created an environment that is good for staff, customers and stakeholders.”
CN tops its class
CN is a $6-billion rail freight transportation company with 23,000 employees and 18,000 miles of track. It is the only rail company in North America to connect three coasts – the Pacific, the Atlantic and the Gulf of Mexico. CN transports a wide variety of products, such as coal, automobiles and auto parts, grains and fertilizers, metals and minerals, forest products, and petroleum and chemicals.
For the past six years, CN has focused its efforts on customer satisfaction and asset utilization – and it’s paying off. For the third time in the past four years, CN came out on top of all Class 1 railways according to five customer service metrics – on-time delivery, speed of delivery, ease of doing business, value for the dollar and Internet capabilities. A transportation analyst at Morgan Stanley wrote: “These results confirm our belief that CN remains the best managed railroad in North America and is likely to realize greater top-line growth than most other railroads.”
Heather A. Smith is a Senior Research Associate at Queen’s University School of Business and a Director of the CIO Brief, a group of CIOs that meet quarterly to share experiences and best practices. She can be reached at [email protected].