April 14, 2005

Winn-Dixie CIO: Bankruptcy Has Its Advantages

By Evan Schuman, Ziff Davis Internet

When the $10 billion 1,000-store Winn-Dixie grocery chain went Chapter 11 (bankruptcy reorganization) on Feb. 21, the initial employee reaction was shock.

But the chain's CIO said the secondary reaction was a remarkable focus on core business issues, including the strategic use of technology.

"There is nothing like that kind of threat. It's had a really remarkable impact on IT," CIO Charlie Weston said. "What body of work should IT be doing to really drive getting the business out of Chapter 11?"

Weston is a veteran of The Home Depot's IT operation, where he spearheaded EAI (enterprise application integration) deployments. He left The Home Depot in October 2004 to assume his current CIO post.

For the five months that he served as CIO of the 80,000-employee Winn-Dixie before it moved into Chapter 11, Weston said he found the 80-year-old company's people to be wonderful to work with, but that the culture was much slower and more genteel than what he was used to.

It struck Weston as "not political enough, not driven enough, not enough of a sense of urgency."

"Much of it was that old world sense of Southern culture. The South has much more of a veneer. 'I don't raise my voice. I'm respectful of the other person.' That can impede organizational change."

For example, in other corporations, frustrated managers might find themselves pounding on a desk to make a point, Weston said. Although ungracious, "it can get action and results."

But once the stock price plummeted and bankruptcy court action was taken, employee attitudes shifted quickly and dramatically, he said. "It has really brought a sense of urgency to the table, a sense of focus."

Weston has discovered—as have other CIOs and chief financial officers after they enter bankruptcy proceedings—that a lot of the political turf battles that Fortune 500 companies tend to have quickly stop once the company's survival is threatened. Psychologically, this is similar to how communities—or even countries—quickly and temporarily put aside partisan issues during disasters.

This can be especially helpful for executives such as CIOs, whose power comes from serving other departments and business units, who may have very different agendas. But the ultimate responsibility for the technology working rests on the CIO, even if those departments disregard the CIO's implementation instructions.

"One of the difficulties the CIO has is that you're sort of [given] accountability for anything IT, but many of the actual results are in the hands of the business unit owner," Weston said. "To that degree, Chapter 11 has helped tie more of the accountability to everyone."

Right after the Chapter 11 filing, Weston was called into his CEO's office and CEO Peter Lynch gave him new marching orders. He was to take the then-current caseload of IT projects—numbering about 70—and slash them down to about 16.

Lynch told the CIO to kill anything that didn't directly support a very small handful of new corporate objectives. "I got our senior team together, and we locked ourselves in a room," Weston said, and they reviewed all IT projects and proposals with an eye on "what would really drive sales, improve store operations or reduce expenses or improve compliance. Armed with that litmus test, we went through our giant list of projects."

"Those 16 go to the core of pricing, merchandising and inventory," he said.

Weston is slated to present that list to the CEO this week. "Chapter 11 has really turned everything around. I am getting absolute endorsements from other senior executives," he said.

In many instances, Weston said, the killed projects were ones that IT had been opposing anyway, usually because the technology was too immature.

"Of those 70 projects, a couple had some major dollars set aside for some very sophisticated analytic tools. The business unit was all set to go ahead, but IT was saying, 'No, you're not ready for that yet,'" Weston said. The killing of those projects was a huge help to the company. "That was huge because they would have been a major distraction for us and possibly prevented us from fixing the core" IT problems involving pricing and inventory.

The biggest overall change that the Chapter 11 proceedings have brought, Weston said, is the adoption of a much more practical manager attitude. "What I've seen is that we've stopped worrying about future-oriented things that are nice in theory but that we're not ready for. We now go back and focus on the immediate and real and potentially more mundane things," he said.

"I could have a very expensive demand forecasting system, for example, but if my basic systems aren't good, what's the point? If I buy an expensive tool before my core processes around ordering and replenishment and inventory work well, it's not really going to help. It's putting a pig on lipstick," he said, flipping the clichŽ to indicate the process had not only been trying to beautify an ugly thing, but trying to add the beauty before building the thing.

He cited RFID as an example of an interesting technology that fails the immediate ROI test. "I haven't yet seen the immediate payback for us. We're going to go very slowly on RFID, and we're going to pass right now," he said. "Wireless was another that was on the radar screen but that has now been taken off."

Wireless is a good example of the kinds of projects that Weston would have killed as CIO even before Chapter 11 but that the bankruptcy proceedings made the decision a lot easier and faster. "I believe that it would have gone away anyway, but only after lots of meetings and many more dollars were spent."

Winn-Dixie is also taking advantage of the court-encouraged economic efficiencies to squeeze more life out of its legacy apps and hardware. The company had already planned on combining new systems with older legacy hardware, but "Chapter 11 has greatly accelerated this."

"We're re-engineering a lot of our apps. We're going to leverage a lot of the legacy stuff, much of it on mainframes. A lot of XML under the covers," Weston said. "This is the most cost-effective way we can think of. Chapter 11 has driven us to think of what is not necessarily the most technologically advanced approach, but what is the most cost-effective. The combination has caused us to get more creative in terms of leveraging what we already have."

This approach has the added benefit of lowering costs and, therefore, giving Winn-Dixie a potential competitive advantage.

Asked whether the TCO (total cost of ownership) might be higher given higher support and possibly higher training and integration costs, Weston said that it might indeed have some higher-cost maintenance elements, but it was irrelevant. "It's a bit of a moot point if you don't have the cash to do anything differently," he said.

"When we looked at the cost model, we couldn't see thatÑin the long runÑit would really be not that much more expensive. We figured it's better to go with the devil you know." Besides, the resulting system would theoretically be precisely customized for Winn-Dixie's operations. So even if the TCO proved to be somewhat higher, "even if that were true, you are still going to get the immediate impact. Ultimately, we'll come out of the IT cost a little bit leaner, our cost model will be leaner."

But it's not merely a long-term advantage, he said. "We'll get all of the sales gains in the short term, and we'll then have time to deal with the hypothetical cost of added costs in the long term. It has forced financial discipline."

Winn-Dixie's OS mix consists of MVS, AIX and Windows, and they've brought in some applications from CommerceQuest to act as a process and message handler for moving information between platforms, parsing XML and "managing the entire process," Weston said. "They can form a wonderful adapter. They can queue-enable things that have no knowledge of XML or a queue. Imagine that you have a legacy chunk of code that you want to tie into something else. You can wrapper that beautifully and make it understand XML."

Weston said that kind of translation is going to prove critical as Winn-Dixie tries to use its technology to improve while cutting costs.

He gave as an example an effort they are involved in to shorten the supply chain for flowers. With floral displays, the sellers are very local and regionalized "and they have to get [the flowers] to a warehouse, and the freshness and vibrancy of the flowers is critical."

Winn-Dixie is working with a company that aggregates the demand for various retail partners, auctions the demand and then handles the transport. In theory, this allows for the growers to have a better handle on demand and allows for the flowers to be delivered in better shape. "It eliminates the latency and gets better prices for the flowers and moves them through our supply chain faster than before," Weston said.

But trying to make that all integrate cleanly into the Winn-Dixie network proved difficult, and Weston points to this as an example of where CommerceQuest helped. "We had been trying [unsuccessfully] to make this all work for seven or eight weeks, with the worst combination of FTP, shell scripts and hand-coding wherever we couldn't get those two things to work," Weston said. "In two weeks, [CommerceQuest] got it to work adequately. We're now going to expand it."