Thought piece #2:

Succeeding with IT transformation – Lessons learned by the CIO of Axfood

Retail giant Axfood has under the leadership of CIO Jan Lindmark replaced virtually all IT systems. A journey that has had profound effect on the company, including a clear impact on the bottom line result. What does it take to succeed with such an undertaking? We met with Jan Lindmark to find out.

Axfood has transformed the food retail industry in Sweden by combining retail and wholesale in one company. Axfood was founded in 2000 when the Ax:son Johnson owned Dagab bought large and small food retail chains and independent stores all over Sweden.

From an IT perspective, the result of merging these diverse operations was a heavy load of legacy systems that did not support the new business model. Badly working systems, technical platforms that had already reached their best-before date and the impossibility of efficient integration plagued the company and drained resources.

Fighting IT legacy and supporting new operating models

From a business perspective the strategy was set. Centralized purchasing, distinct retail chain concepts, a qualitative and affordable assortment of goods and the development of private label brands were to be implemented across Axfood. The legacy IT systems, however, could not support the direction of the company.

– When I joined Axfood in 2001, I had to start by mapping the kind of IT support our business model required. The IT systems of the wholesale business were in a comparatively good shape then but it would have to be replaced like all of the other systems in due course, says Jan Lindmark, CIO at Axfood.

For a few years the existing systems were continuously patched up but that was not enough. We couldn’t fully align IT with the business critical processes that were being further developed and fine tuned. The finance and accounting system was the first to be replaced and that laid the foundation to really kick off our strategic IT journey.

– During 2003-2004 we decided to standardize the IT landscape in all of our stores. This was the first strategic project that we undertook, says Jan Lindmark and points out the importance of having the same assortment of goods, prices, promotions, and sales information and so on in every store. Something that is impossible to realize without the right IT support.

Since then Axfood has new systems and platforms for areas such as assortment planning & merchandising, pricing, promotion management, customer loyalty, e-commerce B2B, Financial Management, Business Intelligence, HR & payroll, automatic store replenishment, waste management, warehousing and logistics.

– We can now look back on a very successful program that has impacted our business greatly.

A joint business and IT effort

The right organization is essential in order to successfully make this type of strategic journey without any major disruptions in business operation. The challenge is always that there are many projects that compete for priority within the company.

– It was important for me as a CIO to work more on getting everybody to cooperate and strive for the same goals than to be sunk into technically detailed questions that my team could solve without me.

Doing this, Jan Lindmark made sure that the business side took an active role in the program.

– Exactly which platform you chose is less important than having both IT and business onboard the project and working closely together, says Jan Lindmark.

When IT and business comes together, decision-making processes improves.

– For us, an efficient decision making process has been a key factor. IT is located right next to the business at the office, says Jan Lindmark.

The right competence and culture is required in change journeys

In the beginning of the change program, Axfood did not have a project culture per se but that changed during the course of the journey. The internal teams that worked with the implementation were organized based on key business processes and consisted of people who brought various kinds of expertise to the group. Axfood also had people in their IT organization with previous experience from Axfood’s business functions, such as the stores and warehouses.

–They really understand how bad it gets for the cashier when, for example, the wrong price labels end up on the wrong goods and most importantly how badly this affects the customer experience. Having people with this experience in the IT department was an important asset, says Jan Lindmark.

When the change program was initiated and the overall requirements were set, it was, however, clear that Axfood also needed to strengthen their teams with new competences. At the same time it was essential to keep employees with knowledge of the legacy systems – a delicate balance.

– We hired, for example, SAP experts in order to create an internal power base around the new platforms and made sure to build teams around these experts. Having internal expertise made it easier to work with our chosen implementation partner Accenture and for us as a customer to set solid expectations and make the right demands.

A challenge that arose, considering the scope of new platforms, was building the maintenance operations for the new platforms since Axfood did not want to outsource IT operations.

– We believe that insourcing of IT generates new development and efficiency not just in IT itself but in business also, says Jan Lindmark. One should not underestimate the effort in building effective maintenance operations after the actual implementation.

Solid governance is key

Governance has been the most important factor for success.

– With governance structure that works all the way from the Board of Directors to the executive committee and to the IT group, the end result will be great. Having had the same top management during the course of the project has been a real success factor as well.

At this point Axfood is busy streamlining and optimizing the IT systems further in order to keep improving.

– Now we can reap the rewards and see how much this has impacted both customer experience but also sales, logistics and so on, says Jan Lindmark and leaves us with one important thought piece that goes for running business as well as IT change project: retail is detail.

Key learning points from a successful IT change and implementation program

  • Get buy in from the business side of the company and set common goals.
  • Get the IT program prioritized and communicate the total estimated cost clearly form the start.
  • Recruit the right competence and involve them heavily in working with the supplier.
  • Prepare thoroughly and build a change program that every individual project can rest on.
  • Get the right governance structure in place.
  • Prepare and build the new maintenance organization as an integral part of the change program
  • It might be good not to have only top management in the steering group. Makes sure to include the right competences from across the organization.

Navigio CIO Contact

Do you want to know what Navigio can do for you and your company within the CIO area, please contact Fredrik Wall, fredrik.wall@navigio.se, +46 8 662 11 21