In the model workspace, right-click (Control-click for Mac) the subsystem or custom component in the model workspace and select Open Component.  Alternatively, for a subsystem, you can also double-click the subsystem to open the detailed view.  (For custom components, double-clicking opens the associated template.)

Click Icon View ( ) in the Model Workspace toolbar. The icon for the subsystem or custom component appears.
The model workspace toolbar now shows the toolbar for icon view:

Move the ports.

Show or hide the port labels using Toggle Port Labels ( ).

Toggle Autoresize Subsystem Icon ( ). When selected, the size of the subsystem box is automatically updated to fit the subsystem ports and port labels.  When not selected, the subsystem box can be manually resized.

Notes about port layout: When autoresizing is selected ( ), whenever you add or delete ports from the subsystem, move ports around, rename ports, and so on, the subsystem icon is updated dynamically to fit the ports and port labels.  For example, if you rename a port with a longer name, the subsystem icon layout is updated to fit the name.
If you change the icon view yourself, such as moving a port to a new location, or changing the shape of the subsystem box, the Autoresize Subsystem Icon is toggled off.  You can always toggle it back on if preferred.

Customize the subsystem icon using the drawing and layout tools on the Annotations toolbar to change the illustration or add text.  For details, see Adding Text and Illustrations to a Subsystem or Custom Component.

When you are finished, click Diagram View ( ) to switch to the diagram view and browse to the parent level of the subsystem or custom component. Any changes you made to the subsystem or component icon dare reflected in the model workspace.  The updated icon is also used in the Local Components tab ( ).