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No Innovation Without Quality

  • Anne Teague
Chapter
  • 4.3k Downloads
Part of the Management for Professionals book series (MANAGPROF)

Abstract

Like many food and drink companies, Heineken’s top IT priority is to tackle big data. It will form the foundation for all of our digital innovation and support our strategy of developing a deeper understanding of the customer. Heineken is a consumer brand, but its activities are predominantly selling business-to-business, so we have typically been one step removed from the consumer. As a result, it has been difficult to truly understand how, when and where our beers are drunk. But now that is changing.

Keywords

Service Level Agreement Business Requirement Business User Entrepreneurial Project Customer Organization 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Like many food and drink companies, Heineken’s top IT priority is to tackle big data. It will form the foundation for all of our digital innovation and support our strategy of developing a deeper understanding of the customer. Heineken is a consumer brand, but its activities are predominantly selling business-to-business, so we have typically been one step removed from the consumer. As a result, it has been difficult to truly understand how, when and where our beers are drunk. But now that is changing.

There is a huge – potentially overwhelming – amount of data becoming available. That data flows at great speed, from a huge variety of sources, in many different formats. Our ability to innovate will depend on how quickly we can analyze this data and convert it into actionable business intelligence. Throughout the process, we must ensure that the data is secure and privacy is protected. If we can do all of this successfully, we’ll be able to improve the customer experience and the products, and reduce our environmental footprint too.

7.1 Social Media Drives Data Growth

One reason for the growth in data is social media, a powerful tool for brands to connect directly with their consumers, bypassing the supply chain. Heineken’s brand Don Equis was the first to achieve a million Facebook fans and now has 2.9 million. That’s just one of more than 250 brands we own that are growing their fan bases. Outside of these direct relationships, we also need to be able to listen to what people are saying about our brand online. A reputation is won over years but can be lost in hours. Complaints can quickly go viral, sometimes based on erroneous information, and we have learned it is important to be able to identify and correct any misunderstandings promptly.

7.2 Gathering Data from the Internet of Things

Another driver for the growth in data is the Internet of Things. According to analyst house Gartner (2014), there will be 25 billion devices connected to the Internet by 2020. Deployment is still in the early stages in the food and drink sector, but connected devices have the potential to improve both the customer experience and the quality of information available to the manufacturer. For example, smart kegs could be used to monitor the freshness of beer in bars, ensuring a premium experience for customers and also providing the manufacturer with information on consumption. In retail outlets, fridges could recognize customers and offer relevant manufacturer promotions to them when they’re selecting their drinks.

Devices in the home could also be connected. The Heineken Sub is a home draught beer machine available in France, Italy, Spain and the Netherlands. In the future, phone apps linked to the Sub could be used to show customers when they need to reorder and deliver relevant promotions to them too.

7.3 Realizing the Value of Big Data

As more and more devices become connected, we’ll be able to gather data from production to consumption: Learning more about our manufacturing and transportation processes, and how our products are bought and enjoyed. We’ve already begun to fill the big data pool, but this information will become most valuable when we are able to mix data from multiple sources, analyze it and spot previously unknown correlations and relationships. This capability will be fundamental for enabling digital innovation and realizing value from it.

7.4 The Constraints on Digital Innovation

All too often, digital innovation is not empowered but constrained by the IT systems an organization has. Large companies typically have a patchwork of legacy systems built up over decades and through acquisitions, making the IT inflexible and hard to manage. In many cases, it is ill-suited to the big data world where information needs to be able to flow freely between applications and be analyzed in multiple contexts.

Integrating and launching a new application could take 18–24 months. It’s hard to reconcile that with the need to be an agile organization responding to market opportunities quickly. At Heineken, for example, we have projects that we know about a long time in advance (such as our sponsorship of the Champions League and the James Bond films), but our local marketing teams also need to respond to opportunities that arise in their markets at short notice. The entire lifecycle for a new digital product might be just three months, from inception to retirement. IT organizations must reinvent themselves so they can deliver digital innovation in those timeframes.

7.5 Reinventing the IT Function

To achieve this transformation, there needs to be a shift in the IT team’s mind-set. If the team is spending most of its time managing the plumbing of the IT (as many do), then there is little time left to support the business with these new applications. The goal should be to establish a high-quality system that requires minimal day-to-day intervention from the in-house team, so that they are free to work creatively with the rest of the business. By definition, innovation is about doing something for the first time. It’s risky for the business owners, so it’s essential that they feel they can depend on the IT team to support them. This is especially important in a federated organization such as ours, where the centralized global IT function must win the trust of the operating companies worldwide and be seen as the best partner for delivering innovation. If the IT team is tied up in maintenance, it will be hard for them to give the business users the time and attention they deserve.

Heineken outsources the management of most of its infrastructure to T-Systems Dynamic Services, which takes care of hosting, operations, technical application management, maintenance, administration and security. Because T-Systems manages the operational infrastructure layer, the global IT team at Heineken is able to focus on more strategic initiatives in partnership with the business.

It won’t be easy for the IT team to pivot from plumbing to innovation. The technological change and outsourcing process take some time, and it is important not to underestimate the cultural change required too. Some IT team members might initially feel that their job is threatened when external partners are brought in, or feel that their authority is being eroded within the business. Clear communication and training will be essential to ensure that the team first of all understands and then benefits from the opportunities for job enrichment that this adjustment brings.

7.6 Defining the High-Quality IT System

The first step in enabling a more agile IT function is to establish a high-quality IT system that it, and the entire business, can depend upon.

Quality is a slippery concept to define, and in the past metrics such as uptime have often been used as proxies. End users have become increasingly demanding of the IT that they use at work. At home they use web services (such as Gmail or Facebook) and desktop email software. Downtime for these is practically zero. When people get to the office, they expect that same smooth experience and want to trust that the IT will always be available so they can focus on doing great work. Downtime is a blunt instrument for measuring user satisfaction, though, which is the real end goal.

At Heineken, we have abandoned key performance indicators in favor of a focus on the end user experience. In our view, a high-quality IT system is one that makes users happy, which means enabling them to do their job effectively, both day-to-day and when launching entrepreneurial projects. That requires reliability, of course, but scalability and agility are equally important, and flexibility is also key. These are the characteristics that define a high-quality IT system in the eyes of the users.

There are three facets to a high-quality IT system: the platform, the people, and the processes. All of these must be optimized to satisfy the end user’s needs.

7.7 The Platform

When I assumed the CIO position in 2012, one of my top concerns was to consolidate our IT environment and make it more manageable, so we could more easily respond to the business requirements. While we still have a significant estate of legacy IT, we are aiming to move as much of our IT as possible into the cloud, and this is where our new investments are focused. As well as reliability and built-in redundancy, the cloud offers us scalability. This will become increasingly important as we embark on big data projects.

We are committed to the concept of software-as-a-service. When we chose Office365, for example, we did so knowing that the vendor would update it and add new functionality over time without us needing to worry about it. This is a pain-free way for us to keep our systems current, without distracting the IT team from more strategic ventures.

The cloud also satisfies our requirements for a more agile IT function, making it easy to spin up new services and applications. We can ramp up resources at short notice too, so it’s easier to support digital campaigns with uneven or unpredictable demand, or to respond to any other business change quickly.

There is a built-in benefit to the cloud’s pricing model too in that it encourages the right behavior from business functions. Under an “all you can eat” pricing model, there is no incentive to innovate in the IT, rationalize it or even retire applications effectively at the end of their life. With a focus on launching new applications, it’s easy for this to be overlooked and for redundant applications to accumulate. This is especially true as the lifecycle of digital products increases, and we see more and more short-term and local campaigns launching across our territories.

With a pay-as-you-go model, or in the Heineken world “pay per drink,” the business pays less if it uses less resources. This approach rewards the right behavior and helps to ensure that resources are not being wasted. We have ambitious targets to reduce our carbon emissions, and effective use of IT can make a contribution towards that. Without this incentive, users are likely to be more risk-averse and less innovative. The risk of downtime is a given in any IT project, so business leaders are unlikely to take it on if there’s no possible reward.

The cloud is enabling us to move towards the dynamic workplace too. People are passionate about the devices they use at home, including phones and tablets that provide instant information through an intuitive and enjoyable user interface. At work, they increasingly expect to use similar technology. The idea that you would have to go to a specific desk or device to find some information seems antiquated. People want to be able to access corporate systems in the same way they access their personal email and social networking applications: anywhere, any time and using whichever device they have available. From a business perspective, this capability is essential for agility and competitiveness.

One way to achieve user satisfaction is to allow them to use the devices they are most comfortable with, so we are now exploring bring-your-own-device (BYOD) and bring-your-own-mobile (BYOM) strategies. There are many challenges associated with these strategies, including how you reconcile staff freedom with company expectations. Heineken is a premium brand, so it might create the wrong impression for a sales rep to make a customer visit with a beaten-up old laptop, for example. From an IT delivery point of view, though, it shouldn’t matter whether the user prefers Android, Apple or Windows: Our goal is to accommodate whatever makes the user happy.

As a step towards enabling the dynamic workplace and BYOD, we have implemented two programs called HeiHosting, which consolidated our SAP instances and non-SAP software, and rationalized our server landscape. This was an important first step because if your software and server landscape is localized, it is difficult to be agile and provide consistent remote access to applications. Simplifying the IT environment was the most important project in our strategic plan.

We consider standardization to be essential for a high-quality IT platform. We want to empower business users to use off-the-shelf solutions from marquee partners, without customization, so we can deploy more quickly and at lower cost. Customization carries risks and implies a need to retain specialist knowledge on how a system has been modified. It also takes time that would be better invested in more strategic initiatives, both on the IT and business side of the project. We rely on T-Systems’ roadmap and offering so we don’t have to reinvent the wheel, and so we can free up time and budget for innovation.

One of our guiding principles for the platform is that we don’t want to be the first to deploy a new technology. That might seem to stifle innovation, but in fact the opposite is true. For us to be innovative, we need to be agile, need to have systems that users willingly adopt, and need to have a strong relationship between the business users and the IT team. All of these could be threatened by deploying an unproven technology that resulted in downtime or other failures.

7.8 The People

Having the right platform is only part of the puzzle: Its success depends on the people who are responsible for it. We can take it as a given that the people have the necessary expertise and experience required, so what defines the quality of the people is how well they are able to work together and communicate, especially between the customer and provider organization in an outsourcing arrangement.

Internally, the IT team has an important role in coordinating the ecosystem of partners and ensuring they satisfy the business requirements. Outsourcing doesn’t mean that the IT team can sit back and not do anything. Externally, outsourced partners should take responsibility for delivering the day-to-day IT quality, and for helping to evolve the platform.

To get the best out of an outsourced partner, it is important to focus on the long-term relationship. At Heineken, we are not interested in enforcing penalties when service level agreements aren’t met. This might sound unusual, given that the outsourcing industry has historically relied on penalties to govern providers. We strongly believe, though, that it is short-term thinking to see a mistake and then seek punishment and compensation for it, rather than working cooperatively on a solution. Penalties don’t fix the underlying technical problem and don’t reassure the business that the issue is under control either. At a time when the customer and provider should be working more closely together because a problem has come to light, penalties drive a wedge between them, demotivating those who are most influential on the success of our IT. When entering into an outsourcing relationship, it’s healthier to think of it like a marriage, where mistakes are forgiven, and each party supports the other in the long term.

That’s not to say that the outsourcing company has an easy time. Its people need to develop their role beyond keeping the systems running and hoping the customer doesn’t bug them. At Heineken, we are a beer company and not an IT company. We turn to our ecosystem of providers for advice, and expect companies such as T-Systems to proactively identify opportunities to increase standardization and introduce new technologies that will better support our requirements. In the way that the internal IT team must focus on innovation and become a trusted advisor to the business, outsourcing providers must be willing to support our entrepreneurial projects and become trusted advisors to the IT team.

This is only possible if there is honest and open communication on both sides, based on a deep understanding of each other’s businesses. That means discussing not just the opportunities but also the difficulties. In an environment reliant on penalties, this kind of communication can be suffocated by the fear that it would call attention to weaknesses. In a long-term relationship, discussions like these can only strengthen the partnership and the IT systems by providing a foundation for robust long-term planning.

This kind of relationship requires a complete change in skill set. The internal IT team needs to work with outsourcing providers as partners and colleagues, and not as suppliers. This is much more challenging than just checking whether the IT is working, and working out which penalties apply if not. The external team needs to go beyond the technical skills required to manage today’s IT systems and become more strategic, aligning with the customer’s long-term goals and proactively helping to evolve the system towards them.

On both sides, there needs to be an unprecedented level of trust. For those who have previously worked under a penalties-led framework, it will take considerable effort to become less defensive and more open. Many roles will be transformed from operational and responsive, to strategic and proactive. It is still rare to find people who have the complete skill set required, so it is essential that customer and provider businesses both help their staff to broaden their talents.

There might be resistance to this change internally from those who would rather focus on IT plumbing than more strategic work. At Heineken and T-Systems, our communications teams have joined forces to help explain to the Heineken operating companies what the changes are and how they will be affected. Clear communications within the companies can make a big difference in helping everybody to see the opportunities that a closer partnership will bring.

7.9 The Processes

The customer and outsourced provider need to work together to plan which processes should be implemented. As a first step, there needs to be a business-IT alignment process to ensure that the technology is meeting the needs of the business owners. This ensures that the outsourcing provider offers the right solutions, and can also identify any gaps in requirements. T-Systems explains its roadmap to us, and if there is something we need that they cannot offer, we are able to work together to find other providers that can plug the gap.

It is important that the customer organization has a clear vision of the desired architecture to ensure that any changes to the systems are consistent with what the customer wants its IT to ultimately look like. Without a vision, the risk is that the architecture could gradually evolve in a direction that the customer would not ideally have chosen.

Service level agreements remain useful for managing expectations on both sides, but it’s important to think of what you want the relationship to achieve, and find effective ways to track progress towards that. In our relationship with T-Systems, we measure the level of standardization and server consolidation and have an index for cost reduction. These reflect the strategic imperatives in the relationship, and show how quickly we are moving towards a platform that will better support agile innovation.

We also aim for Zero Outage in our partnership with T-Systems, which is a requirement to satisfy end users and ensure that our business can operate uninterrupted. Heineken is increasingly dependent on automation supported by IT for our production processes, so downtime can have a significant effect on our business – and it’s impossible to recapture the time lost if a production line is stopped. If a brewery can’t brew any beer for a day, it would be a disaster.

T-Systems has processes to achieve zero outage that span operations for day-to-day availability, and projects, which is when the greatest risk of downtime occurs. Major incidents are prevented using effective project planning, employee certification, regular system monitoring and end-to-end business service monitoring. The processes increase the availability of Heineken’s network and monitor any risks in the operating environment. The effectiveness of these processes is measured using the TRI*M index, which stands for the three Ms: measuring, monitoring and managing. To track its progress, T-Systems commissions market research firm TNS Infratest to ask customers how T-Systems scores in these areas. Over the last three years, T-Systems has been able to raise Heineken’s rating from 40 to 110 as a result of focusing on high-quality platforms, processes and, especially, people.

It is also important to introduce processes that enable partners in the outsourced ecosystem to speak to each other. Instead of being the middleman in the process, the customer organization should empower its partners to cooperate with each other in the best interests of the customer and the outsourced providers.

In our case, T-Systems works closely with other ecosystem partners, speaking weekly and meeting monthly, to discuss how they can jointly prepare to meet Heineken’s requirements. Top of the agenda are innovation and rationalizing the app landscape. If there are operational problems, these companies can work together to resolve them without necessarily needing to involve Heineken in that process. While our IT team will sometimes need to contribute our company perspective, if they can be excluded from more routine inquiries that further liberates them to work on digital innovation with end users. High-quality processes should, as far as possible, enable the IT systems to be managed independently of the in-house IT team.

This is only possible when everyone enters into the relationship in the spirit of partnership, and when the processes help to reinforce that. The customer needs to trust that its providers will work in its best interests. The ecosystem partners will sometimes be in competition with each other and need to communicate openly about that and turn to the customer for a judgement on how best to handle that. Everybody needs to be confident that they will be supported by their colleagues in other organizations, and that if something does go wrong, they will work together to resolve it.

To ensure the organizations remain aligned, there is also a continuous dialogue between the top managers at Heineken and T-Systems. A strong relationship can only be built on trust, with both parties sharing their goals, upcoming innovations, and aspirations for the partnership.

7.10 Conclusion

New technologies, including big data and the Internet of Things, bring huge opportunities to companies that want to better understand their customers and find new ways to delight them. In order to take advantage of these opportunities, there needs to be a high-quality IT system that offers not only reliability, but also agility, scalability and flexibility. The right platform is the basis for a high-quality IT system, but it must be supported by the right people and the right processes. In particular, the IT teams need to develop a more strategic outlook that enables them to support the business requirements for innovation, and there needs to be a trusting relationship between companies and their outsourced partners. This provides a stable basis for day-to-day and strategic management of the IT systems, and a springboard for agile innovation. There can be no digital innovation without a high-quality IT system to enable it.

Reference

  1. Gartner (2014). Gartner says 4.9 billion connected “things” will be in use in 2015 (Press release). Accessed August 29, 2015, from http://www.gartner.com/newsroom/id/2905717

Copyright information

© Springer International Publishing Switzerland 2017

Authors and Affiliations

  • Anne Teague
    • 1
  1. 1.Den HagueNetherlands

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