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'Two steps forward, two steps sideways, one step back'

'Two steps forward, two steps sideways, one step back'

Owen McCall, CIO of The Warehouse Group, understands the importance of learning to walk before you run. Cost-effectiveness hinges on system dependability, and he says IT will not be valued by the business until it provides firm foundations.

A good CIO needs staying power and nerves of steel. Owen McCall, chief information officer of The Warehouse Group, set his sights on system stability from day one and never let up until he achieved it. Four years on he is confident that first base is covered and can address some of the other challenges: “Business enablement” and revising perceptions some areas of the business still have about IT unreliability. For The Warehouse there is increasing competition, with new entrants in general merchandising and national retail space growing three-times faster than retail sales. As well, so-called ‘large-box category-killers’ such as Harvey Norman, Supercheap Auto, Bunnings Warehouse, Mitre 10 and even Number 1 Shoes have been expanding their retail footprints. Convergence has led to grocery businesses increasingly selling general merchandise — not to mention, of course, The Warehouse diversifying into groceries with its own Extra stores. Three Extra stores were opened, with plans to expand to 15, but further expansion was put on hold last September; as the company wanted to assess the performance of the new venture.

Competitors moving into the market to emulate what The Warehouse has done successfully for more than a decade can be put down to the side-effect of success; imitation being the sincerest form of flattery. McCall expects this competition to hot up; from experience he knows that only the strongest will survive. “If you look back when The Warehouse was really growing fast, through the 1990s, the weaker competitors got killed off. Those that survived have increasingly become better.”

During a presentation at the MIS100 event in Auckland in May, McCall coolly confessed to having no IT background. “The closest I’ve got to programming is I wrote a macro in Excel once that didn’t work,” he said, to knowing laughter from his peers. But McCall knows about business. He spent a year working as a financial auditor and a trained accountant. “I did a year as an auditor with Deloitte, then moved into its consulting practice, which is where I started getting involved in IT systems,” he says. In his last year at Deloitte, McCall was responsible for its outsourcing organisation in Australia and New Zealand.

Supermarket diplomacy

In his MIS100 presentation McCall diplomatically avoided mention of the possibility the Foodstuffs or Woolworths chains might bid for his employer. The supermarket giants each already own a 10 percent stake in The Warehouse Group, and there are differing opinions about whether the two majors would pursue the Extra stores if one of them bought The Warehouse; or whether The Warehouse’s diversification into groceries could exert enough competitive pressure to break the supermarkets’ duopoly. It had been hoped the Extra stores would challenge their dominance, (Woolworths and Foodstuffs already own 99 per cent of the grocery market), because finding suitable sites and gaining resource consents for large retail grocery stores makes it practically impossibly for new competitors to enter the market.

The plan to roll out 15 new Extra stores would impact on McCall’s IS strategy for business enablement, as would a change of ownership.

So how does McCall stay on top of these developments, while planning for the prospect of dramatic changes to the business he is supporting and keeping the lights on and ensuring systems are stable?

“It’s pretty hard, particularly in retail,” McCall acknowledges, “because it moves incredibly quickly. We have daily and weekly cycles, so getting the time and space to step back can be difficult.”

On the road

McCall describes himself as “an introvert by nature”. He finds it easier to sit in his office nutting out IT management problems, than he does getting out and talking to fellow executives. “It’s much more comfortable sitting in your office doing that stuff, than it is to get out and talk to people,” he confesses. Yet, he says when he visits the stores to help him understand the challenges staff face when using IT systems, it’s one of the most rewarding parts of the job. “That’s where the value is. Particularly now that there’s very limited value in driving IT better. It’s like doing exercise: the hardest part is the thought of it.”

McCall aims to get to a store almost every month and spend half a day there looking at operational processes. Learning about the day-to-day processes helps to reveal some of the shortcomings of IT. Often the frontline reality highlights what works in theory doesn’t necessarily work in practice. He is sometimes frustrated that systems are not working the way he anticipated they would — and embarrassed by what IT has imposed on store staff: “Sometimes it’s not that we’ve designed something silly, it’s that the store just isn’t carrying out our procedures. It’s pretty common in most businesses to get some of those execution issues.”

McCall describes this learning process as; “Two steps forward, two steps sideways and one step back”. The Warehouse’s entry into the grocery business has required it to put into practice processes quite different from those in its general merchandising business. “We’ve simply never run a grocery business before and so we’ve made some mistakes,” he admits. “We’ve had to go back, fix and change, and evolve as we go.”

Baseline reliability

McCall traces the turning point to the ICT restructuring implemented shortly after he joined The Warehouse four years ago. “The fundamental premise behind that restructure was a single point of accountability for systems, from working with the business to define the strategy through to ongoing

operations and maintenance of that.”

So far the benefits have mainly been in performance improvements. “It’s not just about the structure, but the structure has helped us get the focus on the people — cradle to grave, managing their systems and understanding that if they do a shonky job of the delivery, they’re going to have to live with it in

operations.”

Generally, he says, he has achieved what he set out to do at the start of restructuring, but for him to claim to have had a grand plan would be a lie. “Over the past few years we’ve set out to show that we’re competent at running an IT organisation. Now that we’ve done that, we can ask to be listened to. Why should they take any notice of us if we can’t even take care of our own backyard?”

Dovetailing with his reliability drive, McCall has been seeking cost-effectiveness — and with some success. “Over the four years, we’ve improved our operational costs by more than 20 percent and this will improve to 30 percent next year,” he says. It has been achieved while improving service levels, along with a 60 percent reduction in faults. These operational savings have largely been reinvested into IT projects and capital spending, allowing McCall’s team to drive further improvements and fund future initiatives.

Uncertain future

With stable, cost-effective systems at the foundation, future Warehouse technology initiatives will be about business enablement. These will include working with the general merchandising group to help improve decision-making and the information flows around their product ranges for the correct allocation of stock.

Last year, The Warehouse completed its Options Ranging project, which helps apparel buyers allocate stock more appropriately to stores for improved sell-through and coverage. It was a homegrown system, built in Delphi by the group’s own developers and designers while working to the joint specifications of IT and the business. “We now need to be able to replicate that success within our general merchandising business,” says McCall. The merchandising business model contrasts with that of the apparel business, though while the application will be different the objective will be the same.

At the time of writing, the moratorium preventing Woolworths and Foodstuffs bidding to buy The Warehouse had been extended, with the retail giants claiming if either was successful in a hypothetical bid to buy The Warehouse, competition in the grocery industry would remain strong.

It remains to be seen whether McCall’s list of business-enablement projects would be curtailed or extended if that hypothetical bid were to materialise. Change being what it is in the retail industry, McCall’s IT systems might outlive all of the contenders.

Sidebar: How do you spend your time?

We asked Owen McCall what occupies him on a usual day, assuming there is such a thing as an average day for a CIO, as well as his time spent over the lifetime of an average IT project.

Average day:

Business strategy and executive commitments: 30%.

IT strategy: 15%.

Vendor management: 0 to 1%.

Team management,

development: 40%.

Reporting to senior management: 5%.

Keeping IT running: 5%.

Other: 4%.

IT projects:

Upfront prioritisation, gaining buy-in, signing off business cases: 30%.

Project execution (reporting to steering committees, etc.): 70%.

Post-go-live: 0%.

“The only time I get involved in the post-go-live world is if something has gone horribly wrong. And I’m pleased to say that’s only happened twice in the four years I’ve been here,” says McCall.

© Fairfax Business Media

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