I didn't know what to expect when Procter & Gamble CIO Filippo Passerini agreed to be interviewed for my book, The Strategic CIO: Changing the Dynamics of the Business Enterprise. Passerini rose through the ranks at P&G to become not only CIO, but also president of the company's Global Business Services division. Given that P&G is an $84.2 billion consumer products company with almost 5 billion customers in 70 countries, managing one of its four main business units is of course quite a responsibility.
We agreed to conduct the interview via videoconference. Because Passerini is a top executive at P&G and one of the most respected CIOs in the world, I wanted to be well prepared for our interview. To do that, I provided Passerini background material on my book and conducted research on his background. I was nervous as I dialed into the video conference, but as soon as I heard the ringtone, I gained my composure. In a few seconds, Passerini appeared on the screen. We exchanged introductions and began the interview. I soon found out that we have three things in common: We share the same name, we both have accents (a thick New York City accent and a thick Italian accent, respectively), and we both use our hands when we speak. As we talked, I relaxed when Passerini told me that he aligns to the four strategic IT transformation phases that form the basis of my book. Over the next two months, we had multiple conversations in which he shared the philosophies and strategies that he has implemented at P&G.
I interviewed over 150 CIOs, IT and business executives and include many of them in my book. Given that Passerini's story is so compelling, I devoted an entire chapter to how P&G leverages information and IT to gain competitive advantage. I mentioned this to Passerini and asked if he would do me the honor of writing one of the book forewords, which he graciously did. (The second book foreword is written by Rob Carter, CIO of FedEx Corporation, the subject of a future article on a stellar CIO.)
Passerini's successes fill volumes, but I thought I would share some key initiatives that align to each of the four strategic IT transformation phases that changed the dynamics of the business enterprise at P&G. The following edited excerpts are from my book.
1. Deliver Commodity and Business Services Exceptionally Well
A prime requirement for IT organizations is to ensure that there is no disruption to services used by the business, customers, suppliers and distributors. If they do this well, IT organizations develop credibility that enables the CIO and IT teams to work with business units on solving business problems.
Passerini recognized early on in his CIO role that the delivery of business service needed improvement. He knew that unless he was able to accomplish this he would never develop the trust-based relationship with business unit executives to collaborate and solve future business problems. Passerini's solution was to "develop a business model to outsource with the best of the best" for the non-core work. P&G signed $4 billion of outsource agreements with best-in-class partners that were completed in a record 11 months. More importantly, Passerini says, "outsourced positions were made available within our partners' organization so no P&G employee was left without a job." The model was innovative in process, execution, and speed, and at the time, the initiative was recognized as the largest IT alliance in history.
2. Understand the Business, Focus on User Experiences and Improve Business Skills of IT Personnel
Today's highly competitive global environment requires business teams to respond quickly to market needs. This is especially true in today's digital economy, where every business needs to leverage information and technology for competitive advantage. As a result, business teams now include IT personnel who play a key role in collaborating to develop solutions that achieve measurable business outcomes. To do this, however, requires IT personnel to speak and understand the language of the business. Developing competencies and skills around business knowledge, market knowledge and technology prowess are critical if IT personnel are to be productive when working with business teams.
Passerini is a strong believer in driving business value. He often says, "It's about focusing on business first and technology second." To execute against this belief, Passerini needed to change the perception of IT from a technology provider to a business solutions enabler. This is exactly what Passerini did in 2003. His first step was to combine the shared services organization with the IT organization to become P&G's Global Business Services (GBS). Next, Passerini needed to change the culture of IT personnel to focus on business first and technology second. The name IT evokes technology as the primary goal. To resolve this misperception, Passerini renamed the group Information Decision Solutions (IDS). As Passerini says, "the focus should be on delivering information that helps the business make decisions by providing value-added solutions." Role responsibilities in IDS also changed. IDS leaders focused on transforming P&G by connecting business needs with potential IT enablers. Again, it was business first, technology second. Changing the name and role responsibilities sent a clear message to the business that Passerini's organization was focused on enabling business to make well-informed business decisions.
3. Implement Initiatives to Improve Margin (Sales/Cost)
Phases one and two are foundation components to gaining the trust of the business in working together to solve business challenges. The first phase focuses on delivering services exceptionally well. The second phase deals with changing the behaviors of IT personnel to focus on business first by understanding business needs, and communicate in the language of the business. Once the business feels comfortable that IT is working at improving the delivery of services and IT personnel understand the business, IT organizations can focus on working with business teams on initiatives that drive margin.
In 2005, P&G acquired Gillette, and the integration into the P&G business model was a no. 1 priority. This project really put Passerini and his entire organization in the spotlight. If you have been involved in an integration project, you realize how complex it really is. Integrating products, processes, employees and systems into the acquiring company can be an arduous task. For Passerini, an avid chess player, the challenge is in developing the right integration strategy along an achievable but aggressive timeline. The complexity was enormous. It involved 69 countries, 170 legal entities, 115 distribution centers, 148,000 new customers, 71,000 new products, 23,000 new employees, 5,000 relocations and 113 office consolidations, as well as all the business systems integrations, which included manufacturing and supply planning, demand management, order-shipping-billing, employee services, core financials and business reporting processes. The total number of integration projects exceeded 1,100 over a 36-month period. A major portion of the integration phase, commercial and employee, was completed in 15 months, which was half the time normally expected. The business outcome was significant. Over $1.4 billion in savings were realized — a real testament to an organization that is focused on business first.
4. Leverage Technology Strategically to Innovate Value
Strategic CIOs and their teams can have a dramatic impact on changing the business model of their companies by focusing on leveraging information and technology in innovative ways. To do so requires that CIOs have a strategic vision, business focus, and a communication style that is collaborative.
Passerini always focuses on ensuring that his organization is relevant. As he often says, "it's about helping the business make well-informed business decisions to achieve business outcomes." As you can imagine, Passerini spends a lot of time in meetings. A number of years ago, he came to the realization that business meetings took too long. At a marketing meeting he attended, executives were debating the accuracy of each other's data. Passerini had seen this scenario play out numerous times. He realized that meetings took too long and decisions were based upon incorrect data. Passerini needed to do something about it. He had a vision of an Information Democracy, where P&G decision-makers should all have the same information in real time. As Passerini says, "debating data accuracy creates wasted energy. By having access to the right data at the right time, we can make informed decisions and address the needs of our customers and consumers." Passerini and his team took the initiative to develop a digitize, visualize, and simulate strategy to change the way business decisions were made at P&G. It's a remarkable story.
Passerini's digitize strategy was centered on developing a single source of truth and helping P&G personnel make well-informed business decisions. He did this by standardizing on an SAP platform and beginning a transformation of how business decisions are made at P&G.
His visualize strategy included developing "Decision Cockpits" and "Business Spheres" to help managers make well-informed business decisions. The Decision Cockpit involved placing visual displays of key information on desktops to help over 50,000 P&G employees make better decisions quicker. To help groups of managers review and make decisions better, Passerini and his team developed Business Sphere conference rooms at P&G facilities around the world. P&G managers meet in these conference rooms where analyzed information is displayed visually on wall-sized monitors. Using data visualization, managers can better understand what is happening in the business and address issues with a valid solution. For example, a group of product managers meets in a Business Sphere conference room and reviews a heat map of product market penetration in Western Europe. The data displayed on the heat map explains what is happening and enables team members, supported by data analysts, to understand why changes in market penetration are occurring so they can work together to decide how to improve market penetration.
Passerini's simulate strategy involved improving time to market, a challenge for many companies. For many years, P&G invited groups of customers to participate in focus groups at P&G facilities, which included evaluating mock displays of physical shelves containing P&G and competitors’ products. The focus group would make recommendations that P&G personnel would implement for the next focus group meeting, which occurred six to eight weeks later. Examples of recommendations might be a bottle color should be red vs. green; bottles should be placed on a lower shelf; the packaging should be changed because it doesn't convey the right messages; P&G products shouldn't be placed near competitors' products, and so on. The problem was, the time lapse between each focus group meeting lengthened the product development cycle. Of course the sooner products ship to customers, the sooner P&G can benefit financially from the sale of those products. Passerini saw this as an opportunity to use simulation technology to replace the physical shelf with a virtual shelf displayed on multiple monitors. Focus groups now view the digital display and make recommendations, and with just a few keystrokes by the data analysts who participate in the meetings, the recommended changes are made in real time. The use of simulation shaved weeks off the product development cycle and improved cash flow for the corporation.
Passerini is helping change the way P&G executives think about and conduct business. Changing the game is about staying relevant, being distinctive and connecting to customers to understand their needs and, more important, anticipate their needs, even before they are able to articulate them. He does this by leveraging technology in innovative ways. Passerini believes that CIOs are not just about technology; they are about creating new business models and new markets that help their companies grow and prosper. He learned early in his career that success is about business results and value creation first, and second, how technology can play a role in the winning formula. To Passerini, technology is just an enabler, a tool to draw upon when needed. He thinks strategically about the business and relies on developing business models that can reshape and drive competitive advantage. Also important to Passerini is the realization that it takes a group of talented people to get things done. He is a respected leader, mentor and coach to his leadership team. In 2012, Passerini was awarded the first Fisher-Hopper Prize for Lifetime Achievement in CIO Leadership. He is a well-recognized and admired business executive and leader. He is consistent, results-oriented and strategically focused. When Passerini speaks, people listen and magic happens.
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