With Business Transformation on the Line, IT Topped This CEO's Agenda

In 2008, Birds Eye Iglo Group CEO Martin Glenn had one key priority on his agenda: Finish Project Pioneer, a massive and time-sensitive transformation that would move the company off its previous parent company's systems and onto its own standardized and optimized SAP platform.

By Jennifer Zaino

Since being sold by Unilever to private equity firm Permira, U.K.-based frozen foods manufacturer Birds Eye Iglo Group has been involved in a major business transformation project. Dubbed Project Pioneer, this initiative has involved significantly altering its business processes and underpinning them with a new and standardized SAP system across its operations in the U.K., Ireland, France, Netherlands, Belgium, Germany, Austria and Portugal.

TransformationEnablers recently had an opportunity to speak to Birds Eye Iglo Group CEO Martin Glenn about the massive scope of this initiative — including its critical change management requirements — and how the large-scale effort is paying off in a difficult economic environment. The rollout of the 11 SAP modules for more than 700 users across the U.K., France, Ireland, Netherlands and Belgium, was critical to the business transformation process. SAP is the backbone of the company and vital to almost every part of its operations, from manufacturing to packaging and order processing. Birds Eye now has full ownership and control of its business systems, and no longer has to rely on the IT infrastructure of its previous parent company, Unilever, or on its former owner's costly Technical Services Agreement (TSA).

Glenn also provided his perspective on other issues, such as why it makes sense to have the CIO head up both IT and HR functions.

TransformationEnablers: To what extent do you believe that IT is critical to driving business advantages over your competitors?

Glenn: There are two answers to this. When Unilever sold us to a private equity investor in November of 2006, that had to involve total separation of just about every business process you can imagine — payroll, HR, treasury, all those kinds of things that the remote parent had once done for the division. The biggest part of separating from Unilever was getting to a standalone IT position. We negotiated a two-year transition service agreement — two years to get out of their control and achieve self-sufficiency. The project, called Project Pioneer, to do that was truly massive and time-sensitive. The successful implementation of a standalone platform was the difference between being able to create a stable platform for business growth or muddling through with an unsuccessful platform costing more than we would like to pay into 2009.

So for me, as CEO of this business, IT has been very much top of my agenda. In 2008, when I outlined our key priorities, number one was to get Project Pioneer done. No ifs or buts, no maybes about achieving three other targets as well, but get that one done. That was life or death to us this year.

Going forward, the honest answer is that I don't see our IT platform as a critical differentiator in terms of driving business advantage except in one important area — cost. I think the things that made us a successful business in the European food arena have been the quality of our people, and our ability to take advantage of the private ownership structure we now have, with the private equity factor that has allowed us to restructure and rebuild the business, which was not possible when we were under public ownership gaze as a part of Unilever. We also have a range of proprietary consumer insights that involve understanding the taste profiles of products that people really value, and we have the manufacturing footprint and excellence to deliver on that.

IT fits into that because the big advantage of designing a standalone system for the business from scratch is that we have been able to operate, or will be able to operate, with much lower IT running costs than we did previously. So IT is now leading edge, and having IT well-designed and smoothly running lets us spend more money in areas of the business like marketing, trade investment and fixed investment, which allows us to drive growth. Subsidiary to that, IT is important to continue to drive productivity improvements: We see more opportunities to get smarter use of our systems, to make sure we can run those at as low a cost as possible. That's particularly important in the food business. One thing that has changed incredibly in the last year has been hyperinflation in food commodities — that is a strategic shift for anyone selling food. The cost of everything has gone up — you see it as consumers, and we see it as manufacturers. To organize ourselves to offset that inflation is absolutely critical, and IT is a big part of that.

TransformationEnablers: What are some of the ways that your new IT environment is driving and will continue to drive productivity improvements in today's troubled economy?

Glenn: We've got a financial crisis working in parallel with an economic slowdown that's almost certainly a recession. The financial crisis aspect has to do with the cost of money and therefore investment, and how to deal with it. The economic slowdown is how consumers adjust their spending when they have less disposable income. If you take the first issue about how companies should behave in a very unusual credit crisis, the key thing we have to do well is to manage working capital for our cash extremely well, so the ability to forecast accurately to manage raw materials and finished goods stock, to forecast cash is absolutely critical. In this environment, you want to hold as much cash as you can, and be reliant on third-party provision of working capital as little as you can.

Cultural change is at the heart of how Birds Eye is going to transform its business, says CEO Glenn.

We're in a good place with our IT systems because we have much better visibility into running our complicated multicountry environment, which goes across seven European markets and six categories. There's complexity to the business even if it's not that big. So you can't afford to be sloppy as far as working capital is concerned. IT is critical, because if we can forecast and predict needs, there's less chance of a crisis.

The second thing that's relevant to a business like ours that is private, equity-owned and highly leveraged, is banking covenants. About 120 banks have lent us money, and we have certain ratios we need to keep to. So, for investors, just-in-time, accurate reporting, which is often taken for granted, needs really good IT and people.

IT has always had a big role to play in the processing platform, and as food costs or raw materials increase in cost, your focus on the yield and efficiency at which you transform raw materials into finished goods becomes more important. So you typically see companies doing more cap-ex [capital expenditure] investment surrounding production rather than new capacity investments, and IT is at the forefront of that. Process line management in particular is important; also inventory management. So inevitably there's a drive to get more efficient at the things you do, and typically efficiency and IT capability go hand in hand.