Wal-Mart: IT Inside the World’s Biggest Company

Wal-Mart is big. To understand just how big, consider that on Nov. 23, 2001, the 40-year-old retailer sold more than $1.25 billion worth of goods in a single day. The company has 4,457 stores, 30,000 suppliers, annual sales of more than $217 billion?and one information system. According to CIO Kevin Turner, running centralized IS with homegrown, common-source code gives Wal-Mart a competitive advantage and helps the company maintain one of the lowest expense structures in retail.

Turner stepped into the top CIO spot two and a half years ago at age 34, when former CIO Randy Mott departed for Dell. Turner had served as Mott’s second in command, and prior to that he ran application development as Wal-Mart’s youngest corporate officer

(29 years old). In 1997, Turner became the first recipient of the Sam M. Walton Entrepreneur of the Year award, a very high honor at the company. But when asked about his accomplishments, this CIO talks primarily about the capabilities and accomplishments of the Wal-Mart IS team, the vision of its CEOs past and present, and how blessed (his word) he is to work with such a remarkable group of people and for a company like Wal-Mart.

CIO Editor in Chief Abbie Lundberg talked with Turner this spring about Wal-Mart’s competitive position, IS strategy, development methodology and the importance of security for a just-in-time company in a post-9/11 world.

CIO: Wal-Mart’s the largest company in the world now. Has that changed your priorities?

Kevin Turner: You know, we don’t talk a lot at Wal-Mart about being the largest company in the world. [Founder] Sam Walton never had a goal of being the largest company in the world, nor did [previous CEO] David Glass or [current CEO] Lee Scott. What we do talk about is being the best company in the world. And having something called the divine discontent, which says that you’ll never be satisfied with where you’re at or where you’re going, and that you can always improve. Striving for excellence is one of our three core beliefs. Sam died in 1992, and everything in the company in the last 10 years has changed except for three things: Have respect for the individual, practice excellent customer service and strive for excellence in all that we do. In that third core belief, which is very strategic for us, is that divine discontent.

You also have three basic philosophies behind your IS strategy. Tell us about that.

The first philosophy is to run a centralized information system for our operations all over the world, and we run that from Arkansas. The second is to have common systems and common platforms. The third is to be merchants first and technologists second. Now, along the way, a lot of folks were not optimistic that we’d be able to grow as much as we have and still keep our IS centralized and running on common platforms. But that’s been one of the things that’s allowed us to drive our costs down and helps us be really efficient. Whether you run a store in Bentonville, Ark., or in Miami, Fla., or in Leeds, England, the processes and the systems are generally the same. We’re able to transfer people from one store to the other, and they’re able to pick up right where they left off. We don’t have significant downtime or startup time in the transition.

How have you made that work, given your rate of global growth and your numerous acquisitions?

When we started down the path to become a global company, we were driving the systems that had worked in the United States out to the other countries. We made a lot of mistakes doing that, and there were times when we questioned whether we were going to be able to run the world centrally from an IS perspective. What we’ve come up with is a model of decentralized decisions but centralized systems and controls. We will have a common system and a common platform, but we have to allow a great deal of flexibility in our systems so that the people in those local markets can do their job in the best, most effective way.

Say you’ve made an overseas acquisition, and there is a system there that may or may not be better than what you’ve got already. What are the steps you go through in evaluating that?

When we acquire a business, we start by defining success with the customer. What does success with the customer look like? We haven’t always been good at determining that, but we’ve put a lot of emphasis on it in the last 18 to 24 months. This is critical so that everyone has the same definition of success.

The next step is to eliminate before we automate. Eliminate steps, processes, reports, keystrokes; eliminate any activity that you possibly can for two reasons: One, you’ll end up building a whole lot better system that’s easier to support, and two, invariably you will have a better solution that’s more [user] friendly.

Next is to do a business process overview, where we physically lay out what the system looks like from a business process standpoint. We validate that with the best business process experts in our company before we start the design. Once we get the system built, then we pilot it with our best and toughest customers, stores, distribution centers and clubs. If you pick the lowest volume store or easiest customers to test with, you don’t find all of the things that you need to find.

That approach can work only if your people truly understand the business. How do you make that happen?

In any development effort, our [IS] people are expected to get out and do the function before they do the system specification, design or change analysis. The key there is to do the function, not just observe it. So we actually insert them into the business roles. As a result, they come back with a lot more empathy and a whole lot better understanding and vision of where we need to go and how we need to proceed.

We’ve learned some hard lessons in our stores, clubs and distribution centers when we developed something and people didn’t use it, and they chose to find other ways to get the job done. We are working hard to develop systems that are easy to use. That puts an awesome responsibility on that developer to get out and understand the business. That’s one of our key things: We’re merchants first, technologists second.

On Execution

Getting beyond the up-front process, how do your people actually execute? Do you have principles of execution?

That’s something we talk a lot about because, as a company, we’re big on execution. You can’t name a great team that wasn’t good at discipline. Execution and discipline are not the enemies of enthusiasm. We have a very clear set of critical success factors that every associate in our division has to live by, and they are generally conditions of employment. Some of them are complicated and some of them are very simple: excellent customer service, testing and validation before you roll it out, balance and controls, payback and ROI. All new [IS] associates are indoctrinated into that set of disciplines, and all associates review it at least on an annual basis. The disciplines are the same for everybody regardless of what team you’re on?infrastructure or development or help desk.

How do you recognize failure of execution?

Well, there are a lot of ways to recognize failure, such as if a project is missing end dates. We don’t call them completion or target dates; we call them end dates because everybody should have the same definition of end date. We track projects against the end date and surface those things that are behind or in trouble. The second indicator comes from on-the-job reviewing and listening. I and others who are not on the project team go out where these new systems are deployed and talk to the people doing the work. We ask them how it’s going, how things are working, what they’d like to see different. That’s where you really surface feedback that can help project teams get even better.

Sometimes we have to make management changes to bring a project across the finish line. It’s hard because no one wants to give up on a person or a team that’s struggling. But there are times when the right thing to do for everyone involved is to change the quarterback and put somebody else on the team.

On Coming Technologies

What do you see coming in retail technology in the next five years?

I’m excited about the future. There will be some great opportunities in storage. We will have ubiquitous storage within the next three years that will help us truly drive anywhere-anytime-anything computing, which is very important for our business. I think that wireless will continue to be exploited, and at some point our customers will walk into one of our stores or a Sam’s Club and use their own device on our network to accomplish whatever they want. We’re in the process of building an infrastructure that will enable that.

Radio frequency identification is also exciting, and we’re working with MIT on the development of “cheap chips.” I think that you will see cheap chips replace bar codes over time, and we’ll be able to intelligently drive the supply chain through what’s on the shelf and what’s in the back without our associates having to verify it.

Voice over IP will certainly take off and will lower costs and help us all from an infrastructure standpoint. We all know what it’s like today when an associate moves or transfers and you have to change the phones. They’ll simply be able to take the phone with them, plug it back in, and everything will be working without any systemic changes.

I think voice recognition’s time will come in the next three years. We have not scratched the surface with this technology in retail and certainly not yet at Wal-Mart. We are using some voice recognition technology in our distribution centers, but I think you will continue to see more and more areas where it’s exploited, and it will eliminate the need for some of the mobile computing we do in our stores, clubs and distribution centers today.

What about the future of your custom applications?

From a development standpoint, I think the biggest opportunity we have is leveraging information. In the future, we should actually be simulating our business with an inductive model versus a deductive model to determine our opportunities to maximize sales before the actual event occurs. An example would be, say, that we start running Easter [simulations] in December so that we can better prepare and know what the Easter business will look like. We’re really excited about the potential for predictive information and simulation. We’ve also got a strategic initiative going on with self-service. We are working to provide self-service technology for our associates, prospective associates, customers and members, and to eliminate paper and paper forms. Having an associate portal and devices on our sales floors will let customers and members get product information, and let us do computer-assisted selling.

What is your process for evaluating new technologies?

We leverage a lot of different fronts. We’re plugged into the research and development labs of all of our key suppliers, whether it be Cisco, IBM, NCR, AT&T or HP. We spend a lot of time in Bell Labs, research centers and other places helping influence where we might go in the future.

We also have a team of folks that helps us do proof of concept and pilot key technologies that could be coming in the future. We need to look at the technology in a pilot environment so we can really understand its ramifications or benefits.

And everybody is expected to be an expert in the industry or business that they’re in, and we rely on them to make sure that we hear about all the ideas that come together, especially those that come from the people who actually do the work.

How do you do that? Say somebody in the IS group somewhere has an idea for something. How does it get to you?

Just walk up and tell me. It’s a very open environment. As an example, we will have training sessions or grassroots sessions with key [internal] customers where we break down their area to see what we can do better and how we can do it. We’re proactively looking for those things that can help us change our company. And when you get proactive, you can play offense as opposed to defense where you’re reacting to a set of issues. Proactively driving a set of strategies or driving a set of new initiatives helps get those customers on your side. They believe that they are part of the process and that you are there to help.

On Security and Data Management

Wal-Mart has built the company in large part on its efficient supply chain and inventory management. All of that is driven by, and dependent on, the flow of information. Because of the potential impact of an event like Sept. 11 on this flow, are you doing anything differently in business continuity planning or disaster recovery?

Unfortunately, we are doing things differently as a result of Sept. 11, and I say unfortunately because we’re investing a lot of money, resources and time in security, privacy and similar activities. Things that were once objectives and goals are now a way of life. That’s really the transition that’s happened for us since 9/11. We’re going to be burdened with it for quite some time. I’d really like to see our technology vendors step up and help us with these vulnerabilities because the money that we’re pouring into security right now is being pulled away from development and strategic things that we could be investing in. A lot of the vulnerabilities that we deal with are preventable and could be avoided if the technology vendors would get proactive and do the due diligence to tighten up their products.

In security, companies typically spend maybe 20 percent on prevention and 80 percent on recovery or dealing with problems after the fact. Have you shifted the amount you spend into prevention?

I’d say we’re spending 80 percent on prevention right now. Necessity is the mother of invention, and we’ve invested a lot of knowledge and capital in intrusion detection and playing as much offense as we can to make sure that we’re protecting our company. Personally, every day I spend time on security.

With the Enron and Wall Street scandals, we’ve seen how important it is to know how the data that’s driving the company is being handled, managed and monitored. How do you treat this responsibility?

My job as the chief information officer for Wal-Mart is to bring visibility to all of our information, to eliminate the blind spots, to not wait to be asked to develop controls and balances but to be the champion for the information. In the last 10 years, the driver of change has transitioned from technology to information. Technology at this point is simply a means to an end. What is really strategic is the use of the information and how we exploit and maximize it. We’re in a business that competes at the speed of information, and my job is to ensure we present it in such a way that we use it to drive execution and improvements in our business.

On the Changing CIO Role

You see the CIO as champion of information now. In what ways has the role of the CIO shifted?

I think the role is changing quite significantly. Someone once said if we do everything perfectly in our profession, we would still get a B- grade. You can do one of two things with that. You can let it eat you up, and deem yourself unappreciated, or you can decide to better that and become a strategic element in your company. This idea of being more transformational is about making sure you identify those things that are truly transformational and put your effort and resources behind them. That’s the shift happening with CIOs, and my role is to be more strategic, more plugged in to the big ideas that can change our company. And by the way, those ideas don’t find you; you need to go out and find them. That’s something Lee Scott has really pushed home to me?that I’ve got to be more proactive in seeking out those transformational ideas so that we can widen our gap over our competition.

You’re fortunate to have a CEO who is pushing that transformation agenda from the top. What about CIOs who can’t get transformation on the agenda?

The key is credibility. Our formula for credibility is track record plus empathy equals credibility. That begins and ends with learning and understanding the business you’re in, where it’s going and how it’s going to get there. And then you bring forth those things in IT that can change the world. Of course, the infrastructure today has to work like a light switch. People really don’t want to know how it works, they just want to know that it works every time, and that it’s fast, reliable and scaleable. This is required in order to establish the credibility that is key to getting the opportunity to change your company.

For the CIO’s responsibilities going forward, what percent is technology versus business strategy?

Ideally support and infrastructure are zero to 1 percent, but that’s not the case. There are times when that’s a lot of what we’re doing. Obviously strategy and business learning have to dominate over half of your time. The other half should be dominated by the people that make us successful. One of the things that I’ve learned at Wal-Mart is it’s not the people that I work for that determine whether I am successful or not, it is largely the people that I get to work with. It’s really important that you involve them, that you help them, that you give them the time to get out and learn the business and hold them accountable for that. Typically they’ll exceed your expectations every time.