(FORTUNE Magazine) – THOUGH BARELY out of its infancy, information technology is already one of the most effective ways ever devised to squander corporate assets. Year after year, the typical large business invests as much as 8% of revenues in telecommunications, computer hardware, software, and related high-tech gear. Information technology soaks up a dramatically growing share of corporate spending, accounting for over 14% of existing U.S. capital investment as of last year, vs. 8% in 1980. Worldwide outlays for computer technology alone now total $350 billion a year, yet overall productivity has barely budged. Companies need technology just to keep pace with competitors, so their main return on investment is survival. Convinced that advanced computers and communications systems can and should produce a bigger payoff than that, FORTUNE probed for lessons among some of the uncommon companies that can demonstrate fat returns on their technology investments. We identified five -- Ford Motor, Dell Computer, Caterpillar, Chris-Craft, and American Express -- that have successfully applied information technologies to familiar business problems. We insisted on measurable results, and we weren't disappointed. The diversity of the challenges these companies are surmounting suggests the breadth of business issues that information technology can address. One caveat: Although service companies account for $4 of every $5 spent on information-technology hardware, four of the five outfits in this sample are manufacturers. That's no coincidence. Many service businesses were late to feel the sting of intensified global competition, and as a class they are notorious productivity laggards -- despite such admirable exceptions as Morgan Stanley, AT&T, Wal-Mart, and State Farm Insurance. Manufacturers as a group have become increasingly adept at wringing quantifiable benefits from their investments. The insights that emerge from the experiences of the five winners profiled in this article apply to any company, whether in services or manufacturing, that spends much on information technology: -- These investments are most likely to pay off when they enable companies to create entirely new business processes. The big returns come from the reengineering, not from the computers. -- Complicated new systems should be carefully tested and introduced in stages. ''Bleeding edge'' technology, however exciting, belongs in pilot programs. Expect results only from proven, bug-free systems. -- Successful companies often rely on outside suppliers of information technology, instead of creating custom hardware and software from scratch. But they participate actively in the development of the major systems they buy. Thus they can exploit the best ideas the marketplace produces and benefit from their suppliers' economies of scale, while still ensuring that new products address their particular needs. -- Recognizing that you can't make progress by giving bureaucrats better tools, these companies avoid the most common mistake of technology buyers: shoveling money and processing power into antiquated ways of doing business. Guided by discipline and old-fashioned human intelligence, even relatively modest investments in information technology can generate vast returns.

FORD: Global integration -- The handsome 1994 Ford Mustang, an all-new model scheduled for public unveiling in October, is the first outward sign of a revolution in the way Ford designs cars. A remarkably integrated set of computerized tools enables Ford to transform a collection of design studios scattered all over the world into a single global organization. The result: substantial cost savings and smarter allocation of scarce resources, both human and mechanical. At the heart of the system are souped-up graphics workstations not much different from the ones that created the dinos in Jurassic Park. Made by Silicon Graphics and simulation specialists Evans & Sutherland, they produce stunningly realistic images of complex objects by crunching more numbers per second than a person working nonstop could deal with in 2,400 years. In the underground Studio 2000X at the Ford design center in Dearborn, Michigan, these computers transform a designer's sketched lines into mathematical models of a vehicle's entire surface. Displayed on-screen, that information appears as glossy cars that pick up realistic-looking reflections from imaginary surroundings and light sources as they rotate on nonexistent turntables. Says Tom Scott, Ford's director of international design: ''Designers look at the shine -- how light hits surfaces. These images have enough clarity to convey emotion. You can get excited about them.'' The computers exchange digital data with a wide array of design tools at various Ford locations. They can produce the numerical codes to control the milling machines that carve styrofoam or clay into full-size mockups of cars. The clay models cost roughly $100,000 each. Says Jack Telnack, head designer on the Taurus/Sable team and now chief of Ford's worldwide design operations: ''We still need to see models to judge designs, but we don't need to make as many as we used to.'' If he carves changes directly on the model, as designers have done since the days of da Vinci, a laser scanner like the one at supermarket checkout counters translates the new shape back into digital data ready for computer manipulation. Plugged into the automaker's $35-million-a-year global telecommunications network, the system allows designers in seven studios all over the globe to work in what Telnack calls ''virtual co-location'' with fellow employees in specialties from market testing to crash simulation. Ordinarily, those people couldn't begin work on a new car until the designers had nearly finished their jobs. Now it's so easy to produce detailed mathematical data even from sketches that designers, engineers, and marketers are working interactively for the first time in Ford's history. Here's what happens. A designer in Dearborn transmits details of a car's shape to Dunton, England, where experts create on computer screens the complex three-dimensional car models used in simulated crash testing. They often do the processing work on a Cray supercomputer back in Dearborn. Elsewhere, engineers use other computers to translate the design data into accurate estimates of the car's weight and aerodynamic properties, and calculations of whether Ford's enormous metal-stamping machines can produce the proposed body panels. Sent to Ford's Ghia studio in Turin, Italy, which has two underutilized milling machines, the data are transformed into models. At the same time, marketers can test interest in the proposed car at focus groups, using computer-generated images indistinguishable from high-quality photographs. S.I. Gilman, executive director of information systems at Ford, says that within a year the company will equip all its design studios with such gadgetry for $50 million -- pocket change for a $101-billion-a-year enterprise. Based on the system's performance in the Mustang and other, still-secret programs, Gilman expects a return on investment of at least 50%. Most of that will come from reduced labor costs in engineering. He says Ford's new design processes could save hundreds of millions more by eliminating many of the mistakes and late design changes that make auto production so horrifically costly. Says Gilman: ''If we get only a 50% return on our investment, we'll have failed. With the new technology we can change our product-developmen t $ process. That's the heart of a motor company.''

DELL: Getting closer to customers -- Despite recent stumbles that include a scrapped line of notebook PCs and a $76 million second-quarter loss, Dell has kept widening its share -- recently over 4% -- of the $45-billion-a-year global market for personal computers. One way the company distinguishes itself from other suppliers of perform-alike PCs is by acting quickly on the masses of data it gathers from customers. ''Information is a valuable competitive weapon,'' says Tom Thomas, chief information systems officer. ''Our whole business system is geared to collect it.'' Without Dell's computer and phone systems, and its $50 million annual investment in information technology, the company simply wouldn't exist. A direct-sales outfit from its inception in 1984, Dell gets 35,000 calls or E- mail messages every day. Many are from potential customers who dial 800 numbers to reach the company's sales representatives; the rest are users of Dell machines asking the technical-support staff for help. The employees who take these calls work on PCs linked by network to a massively parallel Tandem computer that contains the company's customer database, with well over one million entries. The telephone reps type in information about each call as it takes place, recording names and addresses along with product preferences and technical problems. The company stores all this information and much more in a single database shared by employees in departments from marketing to product development to customer service. The data yield guidelines of astonishing specificity. Says Tom Martin, Dell's chief marketer: ''We know that if we use a yellow background on a catalogue cover, we'll get a 30% lower response rate than with gray.'' Dell deploys such information in a variety of ways to increase its responsiveness to customers. At the most basic level, the company raises the effectiveness of its mailings by tailoring them ever more precisely to each recipient. Offering network products such as Ethernet boards or groupware programs to home users is a waste. Since Dell's frequent mailings cost 50 cents to $3 per piece and typically go out to hundreds of thousands of people, the benefits of accurate targeting add up fast. For example, the rate of response to its small-business mailings rose 250% once Dell used customer feedback to refine its pitch. Experience from the database guides the sales representatives who receive ^ calls. As they type in information that categorizes each caller, sales hints automatically pop up on their computer screens. Dell produced a tenfold increase in sales of three-year add-on warranties for PC systems -- a product with high profit margins -- simply by alerting representatives to pitch them to all callers buying systems worth more than a certain dollar amount. Sometimes the pop-ups save customers money. Because it's sold in high volume, Dell's standard PC configuration for multimedia applications is priced lower than a set of components ordered a la carte. Product developers rely on the database to help them shape new offerings. In August the company refined its line, introducing several carefully targeted new models in response to a market-segment analysis. Among others, Dell added a high-performance system -- a ''hot box'' in computer lingo -- for the ''techno-wizards'' who crave powerful gadgetry, and a simplified system with easy instructions for ''techno-phobes'' is under development. On a more mundane level, routine analysis of sales information helps Dell spot such consumer trends as the shift to larger hard disk drives. Last winter, when it was shipping typical systems with drives capable of storing 120 megabytes of data -- the equivalent of 60,000 printed pages of text -- Martin says the company noticed soaring orders for drives nearly twice as large. Dell buyers rushed out to negotiate volume discounts from suppliers of the bigger drives, and by early spring the company was offering them at low, low prices. By summer, 230-megabyte drives had become Dell's top seller.

CATERPILLAR: Inventory control -- Caterpillar, which returned to profitability this year after seven quarters of losses, is typical of the old-line manufacturers that reengineered key processes in response to reverses in the marketplace. Gored in the mid-1980s by Japanese competition, rising manufacturing costs, and declining market share, Caterpillar launched a $1.85 billion program to modernize its 17 factories. The goal was to increase product quality and plant flexibility while slashing inventories and production-cycle time. The company recouped its costs last year, and since then the return on its investment has been running at a 20% annual rate. Caterpillar's plant in Aurora, Illinois, makes earthmoving vehicles. With the help of experts from GM's Electronic Data Systems, Caterpillar redesigned the production process there, spending $250 million on new systems and equipment. Says Jim Bishop, an EDS regional manager who works with Caterpillar: ''Computer technology is a minor part of it -- an enabler, not a creator. The real secret was the reengineering of the assembly process.'' Originally, the Aurora plant built several different vehicle models on just two assembly lines, requiring frequent, time-consuming setup changes. The redesigned factory runs eight shorter, more specialized lines. Most of the labor is still manual, but employees now work together in teams called cells. The biggest saving, however, comes from integrated materials-handling systems that have cut inventories of tens of thousands of components by nearly 40%. As vehicles move down the assembly line, automatically guided cranes and a monorail system designed and built by Harnischfeger of Milwaukee deliver parts as needed. Networked computer terminals on the factory floor require workers to alert the system at key stages of the assembly process. Their input -- often a single keystroke in response to the computer's query -- triggers automatic replenishment of components. Similarly, the computer monitors parts consumption and automatically transmits reorders to suppliers. It also sends information on inventory levels and finished products, along with other crucial data, to the financial tracking system at Caterpillar headquarters in Peoria, Illinois. ''We didn't want to create islands of technology,'' says David Berger of Caterpillar's corporate information systems staff. ''We wanted to create a flow of information all the way from suppliers to the delivery of products to customers.'' The systems integration required to achieve that consumed some 15% of the corporation's total modernization budget. Already, the payoff is impressive. Caterpillar's corporate inventories dropped 11% in just the past year, to $1.7 billion. But Bruce Schuver, operations manager of the Aurora plant, says that increased customer satisfaction, not cost savings, is the ultimate reason for the modernization program. The company can now produce wheel-loaders -- which weigh up to 173 tons and scoop, carry, and dump materials such as sand or gravel -- in five days, vs. 16 before. Customers benefit from faster delivery, lower prices, and a defect rate that's half what it used to be. For a company that has lost an estimated five points of market share to Japan's Komatsu during the mid- Eighties, regaining customer loyalty by these means is critical. Caterpillar still has a long way to go, but the upturn apparently has begun.

CHRIS-CRAFT: Faster to market -- Since pleasure boat sales peaked in 1988, waning consumer confidence has cut demand almost in half for the sort of cruisers and runabouts Chris-Craft makes. That vortex sucked into bankruptcy one of the world's best-known boatmakers, once renowned for the sleek mahogany speedboats it sold to movie stars. Chris-Craft emerged chastened, with a new corporate parent, Outboard Marine of Waukegan, Illinois, and a new plan for survival. Explains G.W. ''Chip'' Speegle, Chris-Craft's senior vice president for marketing and sales: ''We are not the low-cost producer, so we cannot gain advantage through price. Our strategy is to introduce new products to gain share in a market that is now essentially flat.'' To do that, Chris-Craft laid out $300,000 for a computer-aided design system from EDS's Unigraphics subsidiary. The primary payoff from CAD is a dramatic cut in product-development cycles; lower manufacturing costs are a bonus. Robert MacNeill, vice president for product development and engineering, says the tool is especially helpful in boatbuilding, where ''everything's curved, nothing's level, nothing's plumb, nothing's straight, nothing's square.'' In the four years since Chris-Craft installed the system, it has tripled its annual output of new designs while cutting development costs in half. Already it has redesigned its entire 18-model fleet -- alas, all made of fiberglass these days. In the past six months it has created half a dozen new products, notably the model 268, a jaunty 26-foot sport boat fitted out with head, galley, and sleeping quarters for two. Priced at $35,000, the 268 steered straight into an unfilled market niche and became the company's best-seller. After its introduction last fall, though, the 268 provoked an unanticipated response. By April dealers were asking Chris-Craft for a slightly smaller version that would sell for $5,000 less. That idea challenged the boatmaker's design team. Even with its Hewlett-Packard workstations and EDS software, Chris-Craft had spent nine months designing and building the 268. By the time the company decided to produce the smaller boat, only three months remained before the fall boat-show season, when dealers traditionally shop for new products. But in mid-August the company met its deadline, introducing the 24- foot model 248, priced to move at $30,000. Measured by dealer orders, the smaller boat is already outselling its larger sibling, helping power a 34% increase in revenues. That achievement would have been impossible without the new technology, says Verne Zoll, manager of CAD systems. ''We wanted a model about 8% smaller than 268,'' he recalls. ''So we just pulled up the 268 information and scaled its hull and deck on the computer, making them 8% smaller. Of course, since we can't scale people, we then had to go in and redesign the interior to make it ergonomically correct. In the end, though, we had to change the deck only slightly to accommodate the new cockpit.'' Once the design was done, production moved rapidly. For example, electronic output from the new design drives a computer-controlled router, which cuts plywood into bulkheads that fit every time. John Mazzola, president of EDS Unigraphics, envisions a future in which people work with virtual products more often than with real ones: ''Computer- aided design eliminates the time-consuming 'information float' that occurs when one person puts information on paper and another has to translate it. People can work collaboratively instead of consecutively, and time to market is compressed.''

AMERICAN EXPRESS: Telecommuting -- Two years ago a supervisor at an American Express Travel Services reservations center in Houston went to management with a problem. Several travel counselors -- the people who book plane seats and hotel rooms for corporate clients by phone -- had asked whether they could do their jobs at home. Some were mothers, fed up with three-hour daily commutes that robbed them of time with their kids. American Express spends over $1 billion annually on information technology, and its credit-card business has become a showcase for document-processing and database applications. After deep rumination the company cautiously decided, on a trial basis, to endow a few of its most reliable agents with the telecommunications links they needed to work at home. The resulting program, dubbed Project Hearth, has proved so unexpectedly successful that American Express plans to expand it. By year-end, says Roger Ballou, president of Travel Services, over 100 travel counselors in 15 locations will have shifted to home work, up from 25 in late summer. Eventually, 10% or more of the 10,000 American Express employees who do telephone order-entry work may sign on. ''We went in search of a solution to help people with family situations and stumbled on the electronic highway,'' says Ballou. $ His enthusiasm for Project Hearth is grounded in economics, not altruism. American Express can connect homebodies to its phone and data lines for a modest one-time expense of $1,300 each, including hardware. Once the electronic links are established, calls bounce seamlessly from reservation center to home, where agents can look up fares and book reservations on PCs. Supervisors retain the ability to monitor agents' calls, ensuring tight control. The productivity gains so far have been astounding. The typical agent -- they're all women so far -- handles 26% more calls at home than at the office, resulting in a 46% average increase in revenue from travel bookings, or roughly $30,000 annually each. In addition, Ballou envisions substantial savings in rent. At a conventional office, American Express allocates about 125 square feet for each agent's work area. Project Hearth's next destination is New York City, where American Express leases office space for roughly $35 per square foot, nearly $4,400 annually per travel counselor. By sending workers home, the company can reap those savings as soon as leases come up for renewal. Stay-at-home agent Faye Compton believes the big lifts in productivity result mainly from the lack of distraction. ''I don't feel like I'm working any harder,'' she says. ''It's just that I don't have Suzy next to me telling me her husband is being a jerk. I'm not worried about who's going into the boss's office, or noticing who's heading to the bathroom for the tenth time today. Now, on the days when I do have to go in to the office and sit in a row of eight travel counselors, I can't hardly concentrate.'' Compton, the mother of two preschoolers, says she cherishes the opportunity to spend more time with them: ''I used to have to get up at 5:30 A.M. and tiptoe out of the house while everyone was still asleep. Now I get to wake up my kids, have breakfast with them, make sure they brush their teeth. I get to stand at the door and wave goodbye as my husband drives them away to child care. That hour and a half in the morning is like a blessing to me.'' Millions of other telephone order-entry workers -- at banks, airlines, direct marketers, and customer-service centers -- might welcome the chance to make a similar tradeoff. As more companies catch on to the hidden payoffs from information technology, such life-changing opportunities are certain to multiply.