McLaren CIO on Digital Transformation, Hybrid Environments, Shadow IT And More

McLaren has been a pioneer in the competitive world of Formula 1 since 1963, and has recently grown and diversified into related industries.

In a previous post, I summarized McLaren’s five-point IT strategy, working closely with SAP, as summarized by CIO Craig Charlton in a recent web seminar when he was interview by Eric Kavanagh, CEO of The Bloor Group.

I encourage you to watch the interview yourself, but this post summarizes some of Craig’s views on addressing the key challenges of leading IT in a fast-growing technology and engineering company [some quotes edited lightly for legibility].

How do you help support your applied technology group?

“The applied technology group builds on our F1 heritage. It takes the performance orientation to other industry verticals such as health, transportation, financial services, and more broadly into motor sport. [For example] Every Formula 1 racing car has a McLaren ECU in it, so we tongue-in-cheek say that we win every Formula 1 race!”

“We take performance management, design thinking, and simulation — three topics where we believe that we are bleeding edge. And take that to other industries to get some discontinuous results — some real game-changers.”

How do you help support the automotive group?

Since 2011, McLaren has been building their own cars, including a new higher-volume sports car series launched this year which is competing against other well-known brands in the $150-200,000 range. This means some big changes for IT.

“The systems we’ve got are still the systems that we wrote in the 1990s, written on technologies like Delphi, which have huge limitations. This is a big part of the partnership with SAP.

Putting in SAP wall-to-wall in Automotive is something that we’re doing this year. We’ve been working on it for quite some time [and] we went live in April with the product lifecycle management tools. That’s really helping us from a design and engineering point of view… Around mid-January next year, we’ll be taking all of the manufacturing and logistics, sales, after-sales, finance, and associated businesses like McLaren Special Operations onto SAP, all running on SAP HANA Enterprise Cloud.”

How does McLaren foster a culture of innovation?
Although McLaren company is global, with offices around the world, the company has 3,500 people on the same site just outside of Heathrow in the UK, which Craig believes helps foster a common culture of innovation across the organization.

“Change is embedded in the DNA of McLaren. If you take a look at the Formula 1 car: we’re changing that every week. It’s a prototype car. Change is just part of McLaren’s culture.

“For McLaren, it comes right from the top and our chairman Ron Dennis. The McLaren technology center is a truly inspirational place to work. It’s like no place I’ve worked at in my life. It’s an impeccably tidy, clean, organized place that is there to empty the mind of the clutter that you might have in a normal organization. It starts with with the philosophy of how McLaren operates… and that runs through to IT as well. It’s not just about deploying it and running away, it’s about understanding your products, and understanding much more deeply how they’re going to benefit your colleagues in the organization”

“I’ve always been a believer that if you throw smart people at a problem they will come up with a good answer. And if you look around McLaren, we’ve got a lot of very very smart people.”

“But that’s just part of it… In addition to that you need to give them the freedom to try things out, to experiment and fail fast. If there’s a culture of risk aversion and punishment if you fail, you’re never going to foster innovation. So you have got to give people that space, reward it, and make sure people are comfortable to be able to try things out.”

With all the change happening, how do you train and support your users so they feel competent and confident with these new systems?

“There’s been a big move over the last few years to push things out to end user support, because if you can use your phone and download an app, then you should be able to do that at work as well.”

“I think [this can] can work in certain areas. But if you’re making significant changes to how somebody’s doing their daily work, what you want to do is make IT simple and accessible for them.”

“A great example: we’re rolling out some cloud-based solutions right now, and we’re still using floor-walkers — we’re still going to have people walking around, helping someone: ‘Do you know what you’re doing, how it’s going to work, do you know how it’s going to change?’ — and not leaving their desk until that person’s happy that they can actually do that.”

How do you use SAP across the organization?

“We’re live with SAP in Finance, Procurement and HR. SAP Success Factors has made a massive, massive change in terms of how we go about recruitment. We’re in a geographically-interesting place and the war for talent in the UK is quite high right now, whether that be high technology or engineering.”

“We compete with other engineering firms, we’re competing with the firms in London… We need to have full visibility of candidates, right the way from thinking about applying through joining McLaren — and SAP Success Factors really helped us there.”

“The solutions are all based on SAP HANA Enterprise Cloud, which has made a really big difference in terms of how we can harness these technologies. No longer do I need to have high investment from a capital point of view.”

“With SAP HANA Enterprise Cloud I get industry-grade technology that I can rely on to run my SAP systems. And that is critical for me.”

What is the importance of cloud to McLaren? 
Eric emphasized that Bloor emphasizes the importance of cloud to its customers. The company emphasizes that cloud is not necessarily going to replace on-premise systems — they should view the cloud as an extension zone for your company.”

Craig explained the company’s hybrid strategy in more detail:

“In our case, apart from the SAP environment, we are quite heavily on-premise. Some of that is driven by high-performance computing requirements for computational fluid dynamics, in racing and in automotive, but some of it is just because we’ve been on-premise for a while”

“For McLaren, cloud benefits include greater flexibility, reducing capital expenditure and having a pay-as-you-go model.”

“But it’s also attractive for disaster recovery options. With a single main location, that can be an issue. But if the company can failover from on-premise into the cloud, and then over time use that failover as the primary solution, it can be a more seamless way to fully move to the cloud over time.”

What does “discontinuous improvements” mean?

“It’s different compared to incremental thinking, where you’re just moving things ahead very slowly. We want to be making big changes, in terms of performance in F1, in terms of the supercar experience we have in automotive, and we want to be dealing with some of the world’s biggest problems in the business verticals we look at in applied technologies”.

“It’s something that I learned a long time ago: with incrementalist thinking, if you just keep changing a little bit here and there, you’re not going to get a massive amount of change.”

It’s as simple as stopping people and saying ‘OK, have you thought about this in a completely different way? If you were unconstrained, how would you do it? Let’s take those constraints away for a second and just talk about what is possible – and then we’ll worry about the money and the resources.’”

“For me, that’s how you’ve got to try to bring this to life. It’s about how are you going to create the game-changers.”

What is McLaren’s Internet of Things strategy?

“We’ve actually been collecting data from the cars for about 27 years. The internet of things and connected cars is something we’ve been doing for a long time! And with that, we’ve collected now over one trillion data points, which is an unbelievable amount of data. The challenge with that is finding the insights in it. If you can’t extract the information you want from it, it’s irrelevant.”

“This is an area we are working very closely with SAP and looking at some of their clever in-memory technology and hopefully we’ll have some more news about that later in the year.”

“I actually like the way SAP think about IoT, which is ‘outcome-driven applications.’ It’s about thinking how are you going to change the game using IoT.”

“IoT is a term that’s used a lot these days, but if you decompose it, it’s essentially some form of sensing, some sort of data communication, some sort of data collection, and then some form of analytics and application on top.”

“The stack is pretty similar depending on whichever business vertical you’re in. So the differentiation point is then trying to understand what you’re trying to achieve.”

“Is it trying to make a car go faster around the track? Is it trying to understand what components are failing in a McLaren automotive car so you can start to do predictive maintenance and the car can book itself in for a service? And with autonomous driving in the future, drive itself there while you’re at work and bring itself back. It’s those kind of things that I think is where the focus should be.”

“Everybody you talk to these days says they are doing IoT, but for me you’ve got to dig in and understand what’s the unique value add that each of these organizations can bring. Like I said, I think SAP have a very interesting way of doing it.”

How do you deal with “Shadow IT”?

“If you go back to 2010 or 2011, IT was easier then, I think. As a CIO it was more of a control game: ‘were going to do it this way, let’s get on with it’.

“If you have that attitude today you’re dead as a CIO. If you look around an organization, you’ll probably find people that know more about technology than you or people in your organization.”

“It’s now about embracing that creativity and work. You can’t let it go wild — you still have to have a certain level of governance in place, but one of the approaches we talk about in McLaren is ‘you can’t stop somebody doing something unless you’ve got a credible alternative’. And if we don’t have a credible alternative in IT, what we should be doing is working with the individual who has brought that idea to life, and figure out how we can take that to corporate standards.”

“It’s about embracing this concept of shadow IT or consumerism. If you haven’t got that credible alternative, you can’t stop somebody doing it. And that for me is critical.”

“So it’s about how do you get that credible alternative quickly, or how you take that solution that somebody’s been putting in place and make it the credible alternative.”

“It’s a different way of thinking.. and if you do play the control game, what you find is that people will do it anyway — so you’re never going to win”

Eric’s summarized it well in the interview: if the relationship between IT and business is collegial and open, then shadow IT doesn’t need to stay in the shadows. That helps bring the best ideas to the top and you can all work through them and find the right solutions.

How are you dealing with legacy systems?
Eric pointed out that “rip and replace” are words that scare people, and asked how McLaren planned to efficiently and safely move away from old systems.

Craig explained that in addition to the overall IT strategy (covered in the previous post), there were 30 technical roadmaps with a lot of details. These are not “prescriptive” — in some areas, flexibility and change has to be built into the plan, for example with ERP:

“There are different ways you can go with ERP these days. The organization is desiring different things, companies out there like SAP are providing different types of solutions, and things are changing as we go ahead. So in that space having a bit of flexibility and allowing your team to work through what’s possible is important to me. If you’re too rigid it’s tricky…”

How should CIOs communicate around strategic changes?

“If we’re trying to change some difficult things that involve investment, that involve major organizational change, you’ve got to be upfront about it.”

“I’ve seen so many times that people say ‘Oh, it’s going to be OK, don’t worry, it’ll be fine’ — you’re far better off saying ‘actually, it’s going to be three months of hell, it’s going to be difficult, and then when we come out we’ll be back to where we were. It’s much better to be upfront and honest if you’re doing major change activity”

Where should the CIO report to?

“You hear a lot of debates around who should the CIO report to. I tend not to worry about that. As far as I’m concerned, all of the CXOs in the organization are people that I need to work with, we’re peers, and we need to work together to make sure we have the right solutions to enable McLaren to be successful”

How is in-memory a change agent for you?

“I think we’re still learning about in-memory. Some schools of thought say it’s [just] about moving it from physical disk to in-memory, and it’s faster.

And I think that’s one way to look at it. But if we use the example of how SAP HANA works, it’s fundamentally changing the data structures that you work with. Because you can tear through massive amounts of data quickly, you’re moving to a situation now where you don’t necessarily need data warehouses and you don’t need to be batching data up for data processing. So on the fly, you can do business-level reporting straight from your transactional solutions.

So that’s not only just speed, it’s also simplifying the technology landscape and taking cost out of the technology landscape as well. For me, the penny kind of dropped on that six or seven weeks ago and I thought ‘this is something that is truly revolutionary’ in how things can change from an IT point of view”

Which technology partners to work with? How do you pick the right partners?

“I can’t be successful as a CIO by relying only on my internal organization. I need to have strong partnerships: technology partners, service partners, that can help me deliver what we’re doing”

“In a traditional CIO sense, you go through a process of going out to market through the strategic sourcing process, etc. and then you look at the standard things like cost, service match, culture etc.

There are two or three things you’ve got to get right. One is that you’re technology partners have to be making money out of any process. If you’re going to screw them into the ground, you’re going to lose.

Secondly, you need to set the stall out in terms of what you’re trying to achieve with that technology partner and how they can actually match you — geographically, organizationally, and in terms of what your strategic objectives are. I think that is very, very critical.

Thirdly, it’s about relationships. It’s about making those strong relationships with the people in the organization that you’re going to work with, so that you can have the real discussions when things are good and when things are bad.

With SAP, we’ve got a long-standing relationship, over 19 years, we’ve got a great relationship with SAP, and we nurture that, we make sure that they’re making money, and we make sure that the partnership works well.