Paving the way for digital transformation

In my previous blog post, I began telling the story of a CIO’s role in the business transformation of H. D. Smith to expand its core business of pharmaceutical products distribution to include innovative, integrated technology-enabled services. The leadership team had a vision of where they wanted the business to go. But they also recognized that the pharmaceutical distribution world was beginning to head into a digital future and, if they wanted to participate in that growth, they would have to invest in the fundamentals to get there. Given the firm’s underinvested legacy IT environment at the time its digital journey began, a successful transformation was a daunting task.

I spoke with CIO David Guzmán about strategies deployed and steps taken in this business transformation. As I explained in my previous blog, the first step was a necessary mindset change. Next came three major foundational building blocks to create the potential for innovation.

Block 1: Changing the technology 

H. D. Smith strongly adopted the cloud / as-a-service model. First up was shifting the proprietary data center to CSC’s cloud for Infrastructure as a Service and a partnership with AT&T to manage the network.

The firm migrated up the scale of the as-a-service model incrementally:

• Software as a Service – It outsourced EDI work to Seeburger, a company in Germany; used Legisym’s SaaS solution to meet the requirements of controlled substances; used, TraceLink for track and trace, and used Microsoft Office 365.

• Platform as a Service – The firm implemented Microsoft’s Azure platform for its development environment. Now it can fire up servers for testing and shut them down without having that infrastructure in house.

• Data as a Service – Nearly three years ago, the firm shifted to FusionOps for data as a service. This solution takes all of H.D. Smith’s data from the ordering system, SAP, and other sources and loads it into the data warehouse in the cloud at FusionOps, performing all analytics, reporting, etc. there.

Summing up the migrations to as-a-service models, Guzmán says, “We migrated away from managing things that go bump in the night.” 

IT service levels are now high. The firm also focused on process excellence and implemented change management, ITIL, the agile methodology for software development, and outsourced SAP-specific solutions managers and application life cycle management. And all IT resources company-wide are now managed by the Project Management Office (PMO), which reports directly to the CEO because of the strategic level of change necessary for the transformation.

Block 2: Changing the people

Even with shifting to an as-a-service model, the size of the IT department hasn’t changed. But Guzmán says “the team’s nature and talent had to be transformed dramatically.” The firm brought in key new people to help reach the skills objectives; but about one-third of the original team remains, and they have been trained with necessary new skills. The company invested in training those who were loyal to the company, had a deep understanding of the business and were willing to transform themselves. Their knowledge, trust in the firm and commitment were essential for successfully completing the journey. 

Todd Stille has been with the company 30 years and remains as the chief architect, reporting to Guzmán. Mike Dulceak has been with the company eight years and has overseen the transformation of the infrastructure. Chief in the new people front, Mark Mehmet, who has been with Guzmán for over 20 years, is the strong #2 in IT and has been instrumental in the execution of the IT strategy for the company.

Block 3: Changing the ecosystem

An important aspect that caught my attention as Guzmán told me about the building blocks they had to put in place to move to digital is that they made more than technology and infrastructure changes. They also made some philosophical changes.

The digital world and as-a-service model moved the firm’s IT environment from a mode of do-it-yourself and managing some vendors to, instead, an ecosystem of committed partners. The way a company needs to view that ecosystem and align and drive the partners is different from the purchasing orientation of keeping an eye on vendors. 

An example of the philosophical change Guzmán implemented to nurture the ecosystem was to view not only the companies in the ecosystem as an integral part of the grand vision H. D. Smith was driving, but also to view the individuals in those companies in that manner. 

“It’s silly to think that if my job is to motivate, inspire, develop and mentor to get the most out of everyone, that I shouldn’t treat everybody in the ecosystem as an individual. As a leader, I’m a leader of everyone who is under my charge, whether they work for H. D. Smith or not,” Guzmán says.

Early in the journey, instead of big, black letters spelling “Vendor,” he had HR change the ID badges of partners’ employees to look the same as H. D. Smith employee badges with name, picture, title and date they joined the company. They also assigned H. D. Smith email addresses and phone numbers to each partners’ employees.

Not treating ecosystem partners’ employees any differently than the firm’s employees was a big part of the transformation’s success, according to Guzmán. “Having our partners be part of the fabric throughout the whole process was integral to the baseline for migrating to digital.”

Bimodal strategy

Amazingly, in the midst of massive change involved in putting the building blocks in place to pave the way to the future, the firm also began innovating. It recognized the need to move fast to capture opportunities in the digital world. In fact, the firm’s overarching strategy for transformation was bimodal – having two components occurring at the same time.

The first component was to maximize the existing core business; the second was to transition to becoming a provider of innovative integrated solutions and services around products. Given the deep, extensive change involved in just putting the foundational building blocks in place, one might wonder how the firm managed to take on innovation at the same time. In my next blog post, I’ll share how it achieved that.