Building the Equity of IT

A Conversation with Erwin Logt, FrieslandCampina’s CIO

FrieslandCampina has relied on speed, innovation, and execution to become one of the world’s largest dairy companies. When Erwin Logt was hired as chief information officer in 2013, his goal was to embed those same qualities into the IT function.

Logt, who joined after an 18-year career at Procter & Gamble, wants his organization to become a strategic partner to his business colleagues, providing rock-solid technology services and generating distinctive value through IT-driven business transformation. After only two years, the IT organization of the €11.5 billion Dutch company is well on its way to achieving both goals.

Marc Schuuring, a BCG partner and managing director, recently interviewed Logt about his first two years at FrieslandCampina and his goals. Excerpts follow.

What was the position of IT within FrieslandCampina when you joined as CIO?

IT was a technology-centric organization primarily focused on base capabilities, IT operations, and the transformation of our value chain through the deployment of a new global SAP-based template. We had just completed the integration of Friesland Foods and Campina, which had merged in 2008, including the consolidation of IT. Our IT capabilities in topics like digital and analytics were still relatively low.

What is the strategy of FrieslandCampina?

FrieslandCampina aims to become the most successful, professional, and attractive dairy company in the world by increasing our market share of value-added and branded products and by improving our operating profit and the performance of our member dairy farmers. Our strategy, called route2020, calls for us to accomplish these goals by 2020. For IT, this means we must modernize and further professionalize ourselves, and change our culture. In parallel, we must build new capabilities and knowledge to enable our business partners to reach their route2020 goals.

When you joined the company, how was IT viewed within FrieslandCampina?

IT had an image problem. It was being measured on cost and was perceived to be making suboptimal contributions to FrieslandCampina’s corporate goals. But IT was also misunderstood, and successful projects were not always visible. There were good people in IT, but they were not always in the right roles. And morale was not as strong as it should be. The focus was more on technology and not so much on the value we could generate. I believe the IT organization was underutilized.

After your first 100 days, what was your assessment of what needed to be done?

We needed to take four immediate actions to lay a new foundation for IT. First, reposition IT as an organization within the company. Define a new strategy and business plan, and communicate, communicate, communicate. We had to be more visible so that our business partners understood our plans—but also our problems and our challenges. We had to run IT more as a business, and we had to build a new image.

Second, we needed to get our operational costs and quality in line with industry standards. Nobody likes to hear about the extras if the engine is not reliable.

Third, we needed to transform the IT organization in terms of people, processes, culture, and organization model.

Fourth, while we needed to support ongoing priority work like the global SAP program, we also had to invest in new capabilities such as business intelligence and digital, as the business was moving fast.

We do not want only to serve and enable the business, we also want to trigger and drive change and transformation. In today’s world, IT is no longer there to just provide services and solutions and be an internal supplier. It has to step up and shape the future and become fully embedded in the business. It is uniquely positioned to do so, and not doing so is a loss for every company, in my opinion.

What are the key elements of your strategic program?

It has three key components. First, fix the base to drive IT operational excellence. Centralize all operational IT activities under one umbrella, upgrade our infrastructure, consolidate and right-source commodity scope, drive technical innovation, and better leverage our strategic partners.

Second, run IT as a business. Organize for success, build a value-centric culture, professionalize internal IT processes, and introduce commercial thinking into IT.

Third, drive value. Focus on automation, standardization, and simplification of existing value-chain business processes, as well as on areas in which information and technology can create even more distinctive capabilities—areas like digital marketing, e-commerce, business intelligence, and our employees’ workplace.

What did the transformation mean for the people in your organization?

In order to create a new business- and value-centric organization model and to create a new culture, we needed to put our existing people in the right roles and hire new people. We first assessed the top 100 roles in the IT organization. While technical expertise is still critical, we needed more business-savvy and international people. Today, over 40 percent of the top 100 IT roles have either changed in scope or in personnel.

Our culture has changed as well, especially in our headquarters. We doubled the number of non-Dutch employees in our top 100 roles, and we hired the first group of 15 MBA graduates. In addition to their ability to drive business opportunities and engage with business partners, they bring an entrepreneurial spirit and healthy outside-in view. They are challenging the status quo.

We had to change fast for the health of both the company and the IT organization. We needed a small revolution in the first one to two years.

To drive innovation and quickly build mastery in new areas, we created three lean teams around digital themes, specifically, commerce, analytics, and workplace. These teams are able to throw ideas against the wall and see what sticks. The idea is to learn fast and fail cheap. We have seen a few examples where a relatively small innovative idea from these teams has created a snowball effect and has speeded up the creation of much larger capabilities.

The IT organization and culture is moving in the right direction, and we are getting the right mix of people to propel us to the next level, but we still have quite a journey ahead of us.

How do you make the tough choices that such a transformation requires?

That’s a difficult question, and I am certain my decision making is not flawless. We do not have the luxury of waiting for perfect information, so we need to rely on good data and get started. We can make course corrections as we go. We often know that we want to go to Italy but we don’t know yet if we want to go to Milan or Rome. While we can discuss that for a long time, why not buy a car and start driving?

Can you explain your “equity of IT” philosophy?

During my P&G career I became a strong believer in the PIE model—performance, image, exposure—of personal career development. This model also works for a discipline or organization. It’s not enough for IT to have a strong performance. We also need a good image. The better our image, the more trust we generate, the more support we will receive, the more strategic we can become, and the more value we can generate for FrieslandCampina. But to change our image we need exposure. We need to be out there and communicate. IT needs to be visible. Our programs and solutions need to be visible, and we need that consistent message. This is not a natural step for an organization that has been serving in the background. We had to make it part of the reward-and-recognition processes for our people.

Think of IT as a brand. Then the question is (as with any commercial brand) how to build strong equity? A strong image is key, starting with defining what you want to be known for, and then building and maintaining that image consciously.

What were some moments of truth that IT has experienced during the transformation?

Our key moments of truth are related to rebuilding trust and nurturing our image as a partner. In early 2014, our Asian SAP system in Kuala Lumpur crashed and was up and down for two weeks. The team had to be decisive and act fast. They moved the SAP environment of seven countries to our outsourced data center in the Netherlands in one week. It was an incredible effort.

This was the first moment of truth for me. It gave me insight into my team and what worked and did not work in the organization. It was also a first step in changing the image of IT. People still talk about the way the team dealt with the issue.

A second moment was when the team developed what we call our corporate daily shipment report. We did not ask our business colleagues what they wanted up front. The IT team talked to two other FMCG [fast-moving consumer goods] companies and then quickly and inexpensively built the first version. We then went to the business and asked if they wanted it. This report is now live and widely used by management to steer the business in real time. While this particular report is a relatively small capability, it was proof for my team especially that our new culture and behavior can work.

A third key moment that helped us build trust was around our 2014 cost-reduction program. We were achieving our stretch target and committing to absorbing business-driven increases, thus showing the fix-the-base strategy was on track and delivering on our promise to co-own business challenges.

What’s next?

We need to continue to benchmark ourselves regularly, and we are proud to see that FrieslandCampina IT is doing better in the Grocery Manufacturers Association benchmark versus peers than a few years back. Our fix-the-base strategy is working on cost and quality. But we need to stay humble and very alert as we recently experienced with some performance issues in the employee workplace environment.

Furthermore, to be known as change agents and transformation leaders, we need to continue to optimize our organization and strengthen our culture and mastery even more. We need to initiate more innovation and show our business partners both what is possible and what is needed for FrieslandCampina. At the same time, we cannot lose sight of the key corporate priority to transform our value chain. This is an ambitious goal, but we have a fantastic team in a great company where we are been given the opportunity, and we are very energized to make it happen.

About Erwin Logt