By Baselinemag  |  Posted 2005-05-23 Print this article Print

Albertson's CEO Larry Johnston talks about how he works with his technology chief to fuel innovations; CIO Trude Van Horn discusses what she expects from her chief executive.

Larry Johnston

Chief Executive Officer at Boise, Idaho-based Albertson's, a $40 billion supermarket chain with 2,500 stores in 37 states.

Before he was recruited to lead Albertson's in 2001, Johnston had spent his entire professional life—29 years—at General Electric. Inherent in that pedigree is the idea that without executive support for strong, innovative information technology, a business is sunk. "If you're going to make sure technology works, it has to be there from the top," he says.

Johnston insists that all his key managers carry BlackBerry wireless devices. He also wants shoppers at his supermarkets to register for personalized Internet portals at Albertson's Web site, where they will upload dietary preferences to generate shopping lists. At the store, customers will access their lists on wireless handheld computers attached to shopping carts, point bar-code scanners at bread and macaroni to tally purchases, and glide through self-checkout lanes when they're done.

The man likes technology.

Johnston talked with Baseline senior writer Kim S. Nash about how he works with his chief technology officer to ensure that they get the most from the $500 million Albertson's spends every year on I.T.

BASELINE: How often do you talk with your chief technology officer, Bob Dunst?

JOHNSTON: We have a formal weekly meeting, one on one. He has an hour of my time every week. Since lots of projects require alignment across the whole business, Bob's projects are on the agenda of formal meetings with myself and the executive team, as well as quarterly meetings with [company] directors. There's a formal I.T. governance session once a month. Bob provides detailed updates on key initiatives. A lot of these meetings in the board room and with the executive council will be more structured, but Bob and I talk every day.

BASELINE: Who sets the technical direction of the company?

JOHNSTON: The business strategy is set by me. Bob is tasked with setting a strategic technology road map that is laid down on top of that to support the business strategy.

BASELINE: How much weight do you expect your voice to carry?

JOHNSTON:. I don't get into a lot of nitty-gritty, like what software or hardware [to use], though on a big deal we might discuss that. But generally, I tell Bob what I want and lay it out in granular detail—whether it's making our supply chain more efficient or making the shopping experience different for our customers—and he brings in the technology for it.

BASELINE: What do you do when you feel you're not being heard by your CIO?

JOHNSTON: If I felt my point wasn't coming across or the business strategy wasn't being supported, I'd be very open about that. But with our I.T. governance process so strong, that's rarely an issue.

BASELINE: How do you expect your CIO to go about leading change?

JOHNSTON: We use technology to help us energize people in our company. Bob articulates very well the vast possibilities that exist for using technology to make customers' lives easier and make our business more efficient. I expect him to articulate that vision to our associates and our technology partners. His job is to subject that technology to our systems for measuring business efficiency—such as Six Sigma [a stringent quality management program] and the targeted rate of return on invested capital we have assigned to each program. Technology supports strategy, and for the individual elements of technology, Bob has to lay out return on invested capital. That's how we open people's eyes to what needs to change.

BASELINE: How do you know if he is being effective at it?

JOHNSTON: It's pretty easy for us to see. We have a very detailed technology governance process. Every month, we go into extreme, excruciating detail on every element of these programs. Our technology department in 2004 delivered a key technology project almost every working day of the year. [After] the rollout of the store execution manager software, we got feedback from store directors as to how that was working. [This is one way Bob is measured, as well as by the success of] the self-checkout terminals; we have 4,600 lanes in place.

We get feedback from the front-end management team. We look at metrics—how many customers are going through [self-checkout] and its ease of use. We get customer feedback. Every program has a system of measurement, whether it's internal or external, to determine whether the technology works and we get the desired results. [These measurements include] improved customer experience, efficiency, better deployment of information across the company.

BASELINE: What metrics do you use to rate the performance of your CIO?

JOHNSTON: We get excellent feedback from our [employees and managers]. We include questions on our annual associates' survey about technology, so we can see whether or not they believe we have a technology program here that's really working. We also get customer feedback. We have a system where anybody in the company can listen to customer feedback at centralized call-taking centers. And we look at traditional metrics of a project—budget, was it completed on time and is it delivering required metrics.

BASELINE: What kind of B.S. filters do you use to sniff out good project proposals and bad ones?

JOHNSTON: If someone produces a strong business case to support return on invested capital goals and is willing to stand behind it and bet their job or their P&L on delivering those results, I have a pretty good idea it's a solid project. These are not small investments. We invest over half a billion dollars a year on technology, and I require people to stand up and be counted. That's my test.

BASELINE: Is information technology a utility, like electricity, or a source of competitive advantage?

JOHNSTON: It's both.

BASELINE: In what proportions?

JOHNSTON: We obviously have to support the daily operations of the company with technology—to pay bills, ship products, communicate with stores. In that manner, it's a utility. But that's commonplace in today's digital world. We have all kinds of projects that support communication—e-mail, satellite broadcasting, BlackBerrys on the hips of our leaders so they can access data warehouse metrics. But I see technology's role [in making] customers' lives easier and the company more efficient.

The split varies from time to time. It's not fair to create a ratio. It's whatever the implementation strategy is to support the business strategy. Sometimes the strategy is to change the game and use innovation and change how people shop. But also, it does have a 24/7 job of helping us support 1.6 billion shopping trips per year.

BASELINE: In your experience as a chief executive, what's the hardest thing about working with a CIO to get something done?

JOHNSTON: I have worked with great CIOs over the years, [together] matching business strategy to a technology road map that's funded. People fall down when there's not a good process for that. I feel blessed with having Bob and his team because they're very process-oriented. That's the No. 1 lesson I've learned: Have a rigorous process of review to make sure benefits are flowing.

BASELINE: What do you know about leadership now that you didn't know before working with your CIO?

JOHNSTON: I've learned a lot more about the governance process and how critical it is, and how critical it is to have functional owners embed with the technology team. Making sure they jointly own the project benefits. [A chief executive has] to stand behind the I.T. team. They need it.


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