Nestlé’s IT transformation proves recipe for success during COVID-19
Nestlé’s IT transformation proves recipe for success during COVID-19
Derek du Preez
Wed, 11/11/2020 – 07:08
- The CPG giant is almost three years into a technology change programme, which has been put to the test during the COVID-19 pandemic.
Nestlé is one of the largest consumer packaged goods brands in the world. Its products include everything from coffee, to chocolates, to cereals, and everything in between. With over 291,000 employees worldwide, 2,000 global and local brands, and 400 factories – it truly is a mammoth operation in consumer goods.
Sitting at the centre of Nestlé’s strategy, although you may not necessarily know it, is an ongoing technology transformation that is aiming to enable the business to innovate at speed, with increased resiliency and better insight into its operations.
Chris Wright, Head of the CIO Office at Nestlé, was speaking this week at the Gartner’s 2020 IT Symposium, where he provided some insight into the ongoing technology work being carried out at the CPG company.
To give you an idea of the scale of the operation at hand, Nestlé has thousands of applications, deals with over 1 million transactions a day, has 2,000 websites, more than 6 million IT support interactions a year, 5,000 IT professionals and hundreds of partners. This means huge scale and complexity.
To this end, Nestlé has been undertaking an extensive technology transformation programme, which was recently put to the test as the COVID-19 pandemic unfolded (but more on that later).
Firstly, Wright explained that the food industry is changing rapidly and that start-up companies are working to take a bite out of Nestlé’s market share – which means that it needs to respond with agility, superior products and understand customer demand.
This is changing the dynamics of our industry, quite dramatically. And as an IT organisation, we need to understand how to help our business respond to that. Our old ways of operating weren’t going to be enough to allow us to do so. So we had to work out how to move fast without breaking things.
Resilience isn’t enough if we can’t evolve fast, change fast and support our rapidly changing business. And this is very much what I think all of you see across the industry, is that every company is increasingly tech enabled. It is no longer just a back office function. IT is a key strategic enabler and tech is embedded in our business models, in our routes to market. And indeed, even in the services that we offer to our consumers and to our customers.
Nestlé’s ambition, as Wright set out, is to be the most admired IT function within the CPG industry.
Nestlé’s and Wright’s vision over the past two and a half years has been to make IT a strategic enabler for the company, to help it win in the marketplace by providing “fuel for growth and being and the technology differentiator”.
This vision is targeted at achieving the following outcomes:
Reliability with speed and agility
Greater user experience
Increased, visible business value
And underpinned by key behaviours IT is encouraging within the organisation:
Being curious and innovative;
Can do and results driven;
Wright elaborated and said:
We established certain key priorities that we felt were critical to us. One was what we call receiver obsession. So this is really an obsession with our end users, and our internal and external receivers. We wanted to be obsessed with bringing value to all the different types of receiver that we have to serve.
The second point is we have a large IT organisation spread across the company and the countries that Nestle operates in . We needed to act with speed – with local agility, but with global scale. So we increasingly want to act as one IT team, where we can interlock those local capabilities, but still bring the global scale. Bring the two together to operate as one IT team.
Third, we established what we call ways of winning. This is around how we internally operate. So it’s around topics like product management. But we felt product management in isolation wasn’t enough and we also need to focus strongly on, how do we establish the right relationship management with our businesses and with our functions? So we had to interlock product management and business relationship management.
And last but not least, we wanted to be a technology differentiator, not just a technology provider. We believe that tech can help our business within the marketplace. And to do that we needed to be able to leverage technology for business in innovation.
To fulfil the above objectives, Nestlé has adopted an approach that is supported by four foundational enablers and four pillars. See the image below for the full picture:
In terms of the foundational enablers, Nestlé has been rethinking its organisation structure, where it’s located (ramping up new sites globally), as well as team structures and the roles and skills of staff. Wright said:
In addition to that we’ve been trying to drive globally across all of our regions the culture and behaviours that we call out in our vision to life. This is very important because without the right culture and behaviours, we won’t be faster, we won’t be more agile and we won’t be more receiver obsessed. So this was a critical element for us as well.
Elsewhere, Nestlé has been focusing on vendor management with its procurement partners, in terms of how it operates with partners. It has 14 strategic vendors, 50 global partners and more than 10,000 suppliers globally. Wright added:
We’ve been changing, not just in some cases who those vendors are, but how we operate with them. Can we move to a model where we’re not so horizontally layered where we have one vendor working on testing, one on development, one on sustainability? We’re moving to more of a DevOps model aligned with our new product structure, so that we can drive greater efficiencies and greater speed.
Nestlé has also been thinking about its architecture and its data model, in terms of wanting greater control of product management and its relationship to the business. Wright said:
So we always ask ourselves the question, in everything we do, what’s the right approach? What should we outsource? What should we in-source? Or what’s the best model?
In the last two years Nestlé has turned over more than 75% of its external IT spend, realigning it with its transformation. In many cases it has renegotiated spend and in some cases shifted focus away from certain partners.
ServiceNow has become a strategic supplier for Nestlé, for example, where it has deployed the vendor’s product catalogue, application performance management, financial management, project management, as well as ITSM. Wright said:
This has now become the fundamental operating system, or what you might think of as ERP for IT in Nestle. That’s allowed us to also rethink the way that we measure ourselves. So we looked at the outcomes that I talked to earlier and rethought, how do we measure ourselves? Yes, we need to measure business disruption. Yes, we need to measure incidence and reliability, but also we need to get much better at measuring not just service level objectives, but are we getting faster at serving our business? Are we improving the speed of applications? Are we improving the end user satisfaction with our applications? The adoption and leveraging of them? So we’re getting much more now into types of metrics that should allow us to improve and reach the outcomes,
The impact of COVID-19
All of the work Nestlé has done in recent years was put to the test during the recent COVID-19 pandemic, where the company not only had to quickly shift to distributed working, but also support factories and its supply chains with new technologies to ensure operations could continue. Wright said:
It was a huge stress test, not just of our organisation, not just our technology, but also our ways of working and where we are in our transformation journey.
This helped us to affirm that we do believe we’re on the right path.
At one point we had more than 100,000 employees working remotely. But we still had many in factories and in supply chain that had to be on site. And that happened within a matter of weeks and we got everybody connected very quickly.
We had very good transactional stability, and this was key, because as a food company we had significantly fluctuating demand. In many cases, consumers were stockpiling goods at home, and therefore we had to meet increased demand in many countries and in many categories.
Nestlé also experienced a rapid shift towards e-commerce during this period, up from 50% to 80% because of changes in consumer behaviour. It also had to support its expert engineers, using new tools, such as augmented reality solutions, in order to help factory workers to be able to service equipment remotely. The company was also helped by the fact that it was using Office365 and could quickly migrate 180,000 employees onto Microsoft Teams for collaboration. Wright said:
Our flexible cloud ecosystem wasn’t just important in terms of enabling our workforce, it was also key in us assembling new capabilities, new solutions, to meet specific needs. Also, our existing data assets and our existing reports, we often used them in different ways to answer new questions with different speed and different capability.
And last but not least, our company…was given a greater freedom to act with more speed, and that also allowed us greater speed and agility. So we do believe the IT transformation and the IT roadmap provides much of the needed resilience and flexibility. And we’ve seen that demonstrated during COVID.
Disclosure – ServiceNow is a diginomica partner at time of writing.