But an economic slowdown is nipping at Hogan's heels, and critics say the automobile industry--led by Hogan's employer, General Motors--is woefully out of touch with the digital revolution.
Hogan admits his task at eGM, the e-commerce wing of the world's largest automaker, is difficult. But the economic cooling has had some decidedly upbeat consequences: The sharp slowdown in the technology sector has made workers more eager to work at a big, relatively stable company such as GM. The hammered stock valuations in the tech sector have made acquisition targets more attractive, he said.
Hogan discussed his plans for eGM, and how it may weave a course through the choppy economic waters, during an interview with CNET News.com in Detroit this week at the 2001 North American International Auto Show.
Wall Street seems to be saying that it's no longer enough for Old
Economy companies to use information technology purely as a means of
reducing costs; they must now figure out how to derive new revenue streams.
How will GM do that?
We've got technological capabilities in OnStar and DirecTV where they're not episodic revenue-generating tools but rather subscription-based, which means we have a much more interactive, constant dialogue with customers, which has great potential.
Now we're expanding OnStar's suite of services besides just driving. You can make personal calls, and we'll resell you the cellular minutes, and you can do that through hands-free voice activation. We're launching the Virtual Adviser, where you can get e-mail read to you. And the new news is that you can do location-based transactions. We're pretty excited about that. Those two pieces will be generating a lot of revenue and income that we've never even talked about.
How much income will OnStar and other non-automotive technologies bring?
If you aggregate what we call the growth business opportunities in the companies that aren't core automotive, that's $50 billion.
Has the "dot-bomb" effect--depressed stock values, deteriorating worker
morale, layoffs and closures in the technology sector--spread to technology
divisions at GM and other industrial companies? Does it make you want to
run, kicking and screaming, as far as possible from the Silicon Valley?
No. In fact, it's made potential partners more attractive to us financially. They had these wild market valuations, and it was sometimes difficult to come to a meeting of the minds when we wanted to have a technology or marketing partnership. Now it's a lot more reasonable. We don't like to see misfortune for anybody. But...it has become a buyer's market."
Also, it's freed up talent. We've had some employees who have left GM for the greener pastures of dot-coms bounce back to us, which we're grateful for. And there's also been a lot of talent that's been freed up. We're taking advantage of it.
GM has traditionally invested heavily in companies with which it strikes
partnership agreements--either buying out the smaller companies or becoming
major stakeholders. What kind of companies is GM eyeing?
We'll be continuing to look at companies whose technology marries up well with OnStar and can benefit from the sheer volume and growth we can bring. I'd say things that would partner up well with OnStar would be wireless technology companies--it's very high on our list.
Also I'd have to say that (GM is looking at) consumer-facing tech that's already developed and out there--for example, a good ownership channel. Say there's something within one of the automotive buying sites that has a good ownership connection. Rather than us developing the code, we could simply take their technology suite.
Why should a swift-moving dot-com join forces with GM, which is reputed
to be one of the most bureaucratic of the Rustbelt behemoths?
We tell them that we are different--that our decision-making processes and ability to interact with these companies is not like the traditional business that may have this bureaucratic reputation. Frankly, we've been successful. We've partnered with small, medium and large so-called Internet-savvy companies, and by and large our experience has been pretty good.
We're going to be judicious in terms of how we look for IT and other Web partners. But we are certainly in the market and always looking. We have no shortage of overtures, either. I'm constantly amazed at the number and type of companies that come to us.
You said last August, at the one-year anniversary of eGM, that if you do
your job well, eGM may ultimately be dissolved because every division has
deeply integrated e-business strategies. Do you feel the same way a
I think there are so many new opportunities that we're beginning to understand and explore that I don't think eGM will go away as soon as I thought it would. In fact, it may never go away. The opportunities with e-commerce and the Internet continue to blossom before our eyes.
Besides, a lot of people from GM want to work for eGM--I get tons of e-mails internally. We're kind of looked at as a neat place to work. We've got a neat atmosphere, kind of young and working on neat stuff. A lot of people in the company who are Web savvy want to work in that environment.
Since the stock market crash in April, many technology companies have
shifted compensation from stock options to salaries--the same model that
industrial corporations have used for decades. Does that prove to you that
stock options don't work or only work in raging bull markets?
The volatility in the market would suggest that we shouldn't make a prediction...Many times when we get an employee back from a dot-com, clearly the ability to secure a source of income is one of the reasons they come back. But I don't want to damn the notion of Internet options as a thing that's dead and gone forever. I do think Wall Street is being more pragmatic about valuing these start-ups in terms of revenue and income generations.
The automobile industry is perhaps the most cyclical industry in the
world. As an auto industry veteran who has ridden peaks and valleys, what
advice would you give to dot-commers experiencing their first down cycle?
First of all, cash is king. I'd watch cash flow real closely and make sure you can meet your payroll and debt obligations. But beyond that, I'd recommend a lot of patience and perseverance, because if it's the right idea and has a solid business model, it will survive this shakeout. I don't think there was a lot of cash management at these dot-coms. One thing the auto industry teaches us--and I've been in this business for 27 years now--is that you've got to watch your cash.