Mattel Upgrades IT toBy Kim S. Nash | Posted 2005-08-04 Email Print
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Mattel's world-class competitive intelligence system crunches sales reports, children's play-pattern studies, and even findings on where kids go online. The system picked up signals that young girls, heavily influenced by the gyrations of pop star BritneyCrunch Better Barbie Numbers">
Gathering and crunching all this data takes processing power. Mattel has acknowledged in conference calls with financial analysts that the hardware and software to support its overall technology strategy needed help in the late 1990s and early 2000s.
Mattel's former chief information officer Joseph Eckroth, who left in June to become CIO at real-estate investment company New Century Financial Corp., has said that when he arrived in 2000, he found that Mattel's information systems were a decade old. There were 200 "fragmented" enterprise systems in manufacturing, inventory management and transportation that didn't easily share data.
About 80% of them were custom built, which was "a limiting factor on our employees' productivity and operating efficiency," Eckroth told financial analysts during an April 2002 conference call. Dianne Douglas, formerly head of investor relations, has been named Mattel's new CIO.
A company that runs dozens of older applications built by in-house programmers can find its technology staff spending most of its time maintaining the software and creating interfaces between any new software and the older applications.
Corporate intelligence amounts to understanding your customers, sensing the competition's next moves and knowing yourself. A lack of reliable, timely data from a company's own accounting, supply chain and other core applications impedes the flow of information to decision-makers.
Eckroth explained during the analyst call how the inefficient technology had hurt Mattel's ability to compete: "[By] the time an event has occurredlet's say a change in demand for a specific productand the information is made available to the people who need to react to it, it is often too late to take action to effectively minimize a risk or maximize an opportunity."
Early in 2002, Eckroth and Eckert launched an overhaul of Mattel's information systems. They wanted to make the technology department more efficient with off-the-shelf applications that needed less "manual intervention" by developers and support staff.
They also wanted to use technology to make the company as a whole more efficient. Focal points included replacing 2,000 old personal computers; upgrading the disjointed, customized enterprise software; and installing a data warehouse for better decision-making.
"Every year we are incurring millions of dollars in lost opportunities," Eckroth said in 2002, "whether it's ... to manage inventories better, reduce our cycle times, improve our customer service or eliminate non-value-added work, all because our systems infrastructure is not up to date."
Eckroth steered Mattel toward packaged software. That included buying Hyperion products, including Essbase, for financial and research analysis in early 2002; Mattell also standardized on Oracle financial applications and databases in late 2002, and deployed Computer Associates' ERWin data-modeling tool. In 2003 and 2004, Mattel focused on rolling out Oracle Financials so its offices worldwide could see and report unified budget and other financial data.
Consistent data makes forecasting more accurate, which in turn feeds better data into internal intelligence reports.
But Mattel's mistake related to Bratz wasn't so much that it wasn't getting data; the information was processed and delivered. What mattered was the company's ineffective response, says Ben Gilad, a competitive intelligence expert and author of Early Warning, which outlines corporate intelligence problems, including Mattel's. Mattel, he says in an interview, "completely missed on the early signals and it caused them to lose the edge."
In the period from 2000 to 2002 when MGA bore down, financial data from Mattel's accounting systems indicated sales dips for Barbie. Mattel does not give dollar figures for U.S. Barbie sales, but disclosed that domestic sales of the doll line dropped 12% in 2001 and another 2% in 2002. Ultimately, U.S. Barbie sales would fall 15% in 2003 and 15% last year.
In those four years, according to industry estimates, U.S. Barbie sales dropped $500 million.
At the same time, the company had to deal with the fallout from the $3.5 billion acquisition of The Learning Co. Even former CEO Barad's impressive achievement of taking Barbie from a $200 million brand when she started managing the doll line in 1982, to $1.8 billion in 1997the year she became chief executivewasn't enough to salvage her job. She resigned in February 2000 under pressure from the board, ending her 18-year career at Mattel.
After three months with no permanent leader, the company tapped the more conservative Eckert, a newcomer to the toy business, to fix the mess at Mattel. On top of it all, Toys R Uswhich, with Wal-Mart, accounted for 40% of Mattel's sales in 2000was pulling product orders as it struggled to stay alive.
"Mattel was in a desperate time when I came on," CIO Eckroth told an audience at an Oracle customer meeting in 2003. "Bob needed to get the company back on track."
How Barbie Lost Her Groove Great product; historical franchise; huge market share; unbelievable customer affinity. And rapidly dropping popularity
Operational Details on the Barbie Situation:
Barbie's Heroes: Mattel's intelligence agents, their bosses, and who played what role in the problematic reinvention of Barbie.
Roadblock: CEOs can be the Greatest Obstacle to Success. Mattel's intelligence told it kids wanted hipper Barbies; CEO Robert Eckert and Mattel reacted slowly, and paid the price.
World Class Tool Box: Mattel uses a sophisticated set of data and intelligence tools to steer the Barbie franchise.
Near-Sighted Corporate Intelligence Can Be as Deadly as the Competition. Rival companies with successful toys put Barbie in a tough spot. Politics, social pressures and fashion changes can sink you oras Japanese car-makers demonstratedmake you a winner.
ACNielsen: Retail Riches. Every day, ACNielsen gathers data associated with millions of retail purchases, from apples in Arizona and Barbies in Boston. It charges a bundle for the results. Is it worth it?