Changing ... from the grounds up
For a New England-based coffee supplier, adapting for change meant looking back at its most basic business processes ... and not liking what it found
This is a story of the stuff that keeps business leaders up at night ... and I don't mean caffeine.
Here's the picture: You're a fast-growing competitor in a hot market. You have great plans for outpacing your competition, and for growing your company by leveraging the innovation, skills and competencies of your organization's staff--a great bunch of folks, dedicated, smart, driven to succeed. If all goes according to plan, you will emerge from your regional position to one of national, maybe international, prominence within your industry.
Except ... it's all going to fail.
Not for the lack of strategic planning ... you have a brilliant plan. Not because of funding, or people or market position or any of the hundreds of inescapable obstacles that might face another company in your position.
It's because your back-office systems--the simple stuff like payroll, AR/AP, purchasing, general ledger--are underpowered and inadequate to support the several information systems initiatives that will allow your next-generation business plan to work. It's as if you have the car, the driver, the team and the race track ahead ... but someone forgot to build the engine.
That was where Vermont's Green Mountain Coffee Roasters (www.gmcr.com) were in early 1996. The coffee boom was well underway. Consumers were lining up at Starbucks-ian espresso bars everywhere in phenomenal numbers. The New England market clearly had legs, with its growing youthful demographic settling in the so-called second-tier cities of the Northeast like Portland, ME, and Portsmouth, NH. Java and barn jackets. The quality of the offerings at coffee bars in the region's mini-marts and gas stations had taken a significant turn for the better, thanks largely to Green Mountain Coffee Roasters.
But this was no time to be complacent. It is the time to act. The word went out that GMCR's infrastructure had to be overhauled--fast, and CIO Jim Prevo was appointed to make it happen.
"There were three stimuli happening at that time,"Prevo recalled. "We were outgrowing our legacy system. It did not support multiple physical locations well and did not have a real database engine under it.
"Two, we had a number of systems projects we wanted to embark on to increase our competitiveness, but really needed to change the underlying foundation prior to making these investments, and three; we needed to do work for Y2K, anyway."
Planning for the process
Bob Butler, now with the Vermont Department of Environment, worked at GMCR briefly during this time, and it was he who brought them to the attention of KMWorld, resulting in GMCR's selection as the Best Practice Award winner in change management.
"The IT team's integration with all divisions of the company was remarkable and inspirational," he said. "In part, it is due to the core values of the company and in part to the vision of the management. The result was to rollout PeopleSoft (www.peoplesoft.com) modules at an incredible rate that even caught the attention of the software maker."
Both men credit the interdisciplinary nature of the rollout team as instrumental to the success of the rapid deployment and acceptance across all departments in the company.
"Our implementation team was multilevel," explained Prevo. "At the nucleus we had me (the CIO), the project manager, systems architect and VP of operations.
"The next level out was the nucleus team plus all of the key departmental managers and key contributors, as well as an average of three consultants. The groups represented were finance, purchasing, inventory control, manufacturing, customer service, wholesale customer service, retail (which for us is catalog sales), field service, distribution and delivery and additional developers.
"Finally, the third level was comprised of people from all departments for testing, training and the development of procedures."
Butler added that the development of the teams was greatly enhanced by top-down management's faith.
"I believe that the CEO is technology inclined and has well-founded faith in the CIO," said Butler. "(Prevo) established and fostered a top-down planning and implementation team structure that spanned across the company. The result was a well orchestrated and structured approach that significantly benefited the design and implementation."
They also fostered a greater employee understanding of the total business process," Butler said. "Virtually all divisions and departments were included in the teams."
Surely, a great deal of the confidence in the process came from Prevo's calculated and careful implementation procedure. He described it:
"We started with the development of a system selection document and the solicitation of five vendors to participate in the process. The entire second-level team participated in the development of the document and the ultimate selection of PeopleSoft as our supplier.
"The selection process took from September 1996 through November of that year. It included eight days of back-to-back demonstrations by the four vendors that opted to participate in the process--SAP, BAAN, PeopleSoft and SCT/Adage.
"We spent the month of December on additional due diligence.
"January 1997 was the project start. We embarked on a rapid education and design phase. The entire second-level and some of the third-level team were essentially locked in a room for 40 business days.
"We did have lots of great coffee as well as cookies, candy and a full lunch break for running, biking, etc.
"During this phase, we had consultants bring us through each panel and process, organized by business process, for example, from 'order' to 'cash.' We would train for two days on each of these modules in the business process and then immediately go into design for that business process. Then we'd move on to the next one, and so on."
Documentation was generated for each step of the application setup.
"This was used later by Bob Butler to set up a 'golden' database that had all of the setup, but no transactions in it," Prevo said.
Prevo and the implementation teams were then tempted by the lure of technology.
"During this phase we were exposed to many nifty features of the software," he remembered, "but we were determined to manage the scope of the implementation. All we wanted to do in these first-phase process steps was to replace the functionality we had in place in our legacy system ... no bells and whistles."
Those, he knew, would come later. "The goal was to get on PeopleSoft and off the old system. Then we could start using the additional functionality once we had some experience with the new system," Prevo said.
This disciplined approach continued throughout the experience. "When we were finished with the training/design phase, we decided to carve up the implementation into chunks rather than go big-bang." he explained. "We ended up dynamically changing the scope and deliverables slightly to ensure that we were able to get pieces of the system up and running fast.."
The first phase included purchasing, inventory, accounts payable, manufacturing and general ledger.
"That first group took us four and a half months," said Prevo. "Later we implemented A/R, order management and billing, human resources, field service, mail order (which was a new channel on all modules) and soon asset management."
Somewhere in there the company took stock of its progress and the impact it was having on systems, and decided to do one major upgrade and two minor upgrades in the PeopleSoft application, as well as three upgrades to the hardware environment.
The impact on corporate culture
@body:So how did the employees react to all this change, and how did they adjust over time? What has the cultural impact on the organization as a whole been since inception?
Prevo is especially confident about this subject. "The key here was early involvement by a broad group of people," he said. "At the time we had a group of 15 people nearly 100% focused on the project out of a total of 300 people in the company. That's 5% of the company dedicated to the task and another 5% or 10% involved 20% or more.
"By having the core group involved from the beginning," he continued, "there could be no finger pointing--after all we all chose this package! And there was greater acceptance of the fact that we had to make a change and it was going to be very difficult."
There were small incentives and victories along the way, too.
"We made sure we celebrated milestones and handed out T-shirts and stress balls to everyone as we moved along. Everyone went the extra mile," said Prevo. "Even after two and a half years, people are still engaging in the latter phases with the same enthusiasm and dedication."
The project has been a great rallying point for the employees of the company and has pulled together the departments more than any prior event. Everyone is much better educated as to the interrelationship between the departments in the various business processes.
Bob Butler agrees that the "change" management is the most remarkable achievement of all: "It was artfully done, effective, and lacked the corporate B.S. to which I had become accustomed in the past," he enthused. "While there were significant pains associated with the implementation, it was handled with extraordinary care and efficiency."
There has to come some point in any implementation when you ask yourself: Is it done yet? Have we succeeded? Prevo thinks it's still too early to call: "The various go-live dates and the subsequent move from the legacy system to the new system are obvious 'success' points," he said. "We have also seen some areas where we can say it was bumpy for a while after cut-over, but we really are in better shape than we ever were on our old system ... this is true in A/R, for example.
"But significant ROI is still to come. I think this is because we have focused mainly on replacing the old system and only taking new functionality that was easy or free in terms of implementation speed."
Does the result justify the means? While setting up an infrastructure that can support the future is hard to quantify, there are still success metrics that must be examined.
"The investment at the time was nearly 8% of sales ... nearly $3 million on $38 million in what we consider lagging sales," said Prevo. "And the investment in people was, as you've learned, very great."
But the changing--always improving--economics of technology has positively affected GMCR's ability to move forward along this path.
"The decreasing cost and increasing performance of hardware and software was clearly a critical factor," said Prevo. "Our production environment consists of seven or more NT servers dedicated to specific application functions, such as database, process scheduler, firewall, Web site, application server, file server, etc. We could not have run a company of our size and complexity on this platform three years ago."
The long-term effect on GMCR of the PeopleSoft implementation is mostly unknown, and that's where the company has to place it faith.
"We have to continue to understand there is clearly an ongoing aspect to this. All teams will be in place and implementing new features, functions and versions for as far as we can predict into the future," said Prevo.
The benefits that can be gained by those enhanced implementations are unpredictable, and where GMCR's future lies. But the prospects, said Prevo, look positive: "We are in good shape for this fiscal year. With the major replacement portion of the implementation behind us, we can now turn this incredible team loose on process improvement."