Innovate. (But Delegate.)By Ed Tobin | Posted 2003-08-08 Print
Once you discover what your company's really good at, writes Colgate-Palmolive CIO Ed Toben, let someone elsea single someonedo the rest.
Colgate-Palmolive is nearly a $10 billion company, and we operate literally everywhere in the world. The company's strength has been building new business, country by country. Historically, it was appropriate that that also included building our technology country by country as well.
But that's just not appropriate anymore.
We started a significant technology standardization program in the mid '90s. Our objective was to have the major applications we use for everything, everywhere, to be supplied by one vendorin this case, SAP.
Years ago we'd spend a significant portion of our time just making all the systems work together. On our first SAP project, in 1996, all of our legacy systems had to be adapted to communicate back and forth with the new software. Half of the work and all of the problems revolved around that. Now, most of those problems are gone. We don't have much left that's homegrown. Homegrown systems are harder to maintain and more expensive. A huge part of being able to manage our technology cost is that, by staying with SAP all over, most of the interface work went away, or is on its way out. The 53 countries that we've put SAP into had 53 data centers. Those are all gone. We're down to one data center and a backup.
But there's a trade-off in standardizingjust as there is in anything else. I'd never argue that SAP is the very best of breed in each componentat least, not in the short term. However, we've learned that, in the longer term, as SAP focuses its R&D investment, it will get up to best-of-breed level eventually. We hope for that kind of innovation, but what matters is execution. There are hundredssometimes thousandsof steps involved, and you need to execute on all of them, sometimes perfectly. As a result, we do the vast majority of implementations ourselves. We decided that even if the technology itself wasn't going to be core to our company, we still had to figure out how to run it ourselves.
Innovation is necessary, but we want that innovation to come from our vendors. In concept, we've outsourced to SAP. That's where we want the technological innovation to come from. We want SAP to create innovations through R&D, so that we can benefit from them. SAP is a technology companywe're not. We're an information-technology unit within a consumer-products company. We want to be innovative in consumer products.
While we may not be able to quantify it, it's clear that we've reduced our cost, from both the business and the technology standpoints. Take SAP's Advanced Planner & Optimizer module (APO)I'd argue that it's best of breed. But if I had to pick a particular piece of our deployment that's been more challenging than the others, I'd point to APO. But that innovation reduced the order-to-reorder time for the top half of our customers from 12 days to five, and collapsed 17 inventory databases into one. And APO is just one example. If we hadn't standardized on SAP, we'd be a couple of years behind where we are. We'd have spent a lot of our time putting pieces togethera lot of integration and a lot of interfaces. And that's hard work. But we only know now that we made the right call. If it had been a bad decision, it would have been a very bad decision.
Not to oversimplify it, but anybody can buy software. If the innovation comes from your vendor, there's only one way to keep it from becoming a commoditized innovation that anyone can capitalize on. It's the whole process of implementation that provides you with unique benefits. Broadly speaking, it's about internal discipline. It's not about the product. It's how you use it.
It's a delicate balance: having a technology staff that we view as a core competency and yet also outsourcing the technology needs of the company. If we were doing little more than making sure everything runs, that would be hard to get overly excited about. But we're constantly trying to implement new things, and that's a lot more fun. Sometimes, though, that means delegating the actual innovation to someone else.
Ed Toben has led technology initiatives at Colgate-Palmolive since 1990, and was named the company's chief information officer in 1999.
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