Challenges

At the turn of the century in 2000, at the time of the formation of PepsiAmericas, it was rooted more in business unit autonomy. The organization logic was based on synergies from related, but not integrated, business units. While PepsiAmericas pursued economies of scale through shared services, they typically grew through the success of the individual business units and acquisitions of other related businesses, example being merger between Whitman Corporation and Pepsi Bottlers. Also the increasing power of the retailers necessitated transformation. It required process redesign and systems rationalization. The business managers looked to the IT unit to meet these challenges. The company however lacked IT capabilities needed to cater the demands of these retailers in a cost efficient way and to elicit the value expected from its acquisitions. PepsiAmericas at this time made a principled decision to use technology to maximize its potential.

One of the reasons behind this shortcoming was that they were operating in the Diversification quadrant. This model however was not suitable for them and posed the following drawbacks: -

• Produced a fragmented and disjointed collection of architectures.
• Economies of scale were not realized.
• High cross-silo integration effort.
• LoB-specific approach to problems.
• Siloed, redundant technology, no cross-silo reuse of technology assets.

In order to decide which quadrant a company (or business unit) belongs in, two questions need to be answered:

• To what extent is the successful completion of one business unit’s transactions dependent on the availability, accuracy, and timeliness of other business units’ data?
• To what extent does the company benefit by having business units run their operations in the same way?

While the answer to the first question was affirmative, Ken Johnson (CIO) noted that the reasons for establishing standardized processes were different for CEE than for USA. One example being the SOX controls were not applicable to CEE. Based on this information it could be safely assumed that PepsiAmericas belonged in the Coordination quadrant.

At the time of formation of PepsiAmericas in 2000, it served customers through conventional routes. With growth conventional route approach became impractical. In 2001 they initiated a series of IT enabled business changes to address changing market demands and help automating a company’s core capabilities. This Next Gen initiative had mixed results. An effective foundation for execution depends on tight alignment between business objectives and IT capabilities, and this effort failed to provide this alignment. However it did enable a rapid integration of companies acquired.

Customer Alignment being the next triggered very little IT work. For the most part, the people continued to use, the technology platform developed for Next Gen. It was primarily geared at reorganization from a self-contained and autonomous regional setups to a more functional organizational model. This reorganization was accompanied by a certain level of process centralization. The international subsidiaries remained relatively autonomous.

CDR and DW

Competitive Edge provided a technology foundation for a more informed and responsive business. The creation of CDR and DW enabled a common understanding of data across the business units. This integration of data allowed PepsiAmericas to adopt the coordination model. This however does not apply to every company. As mentioned previously only if the successful completion of one business unit’s transactions is dependent on the availability, accuracy, and timeliness of other business units’ data would the company benefit from this effort. In companies that offer different products and services to different customers, so central management exercises limited control over those business units. These companies would normally grow primarily through the growth of individual business units. In these companies it would be better to follow the diversification model and diversification would enable them to:

• More responsive to LoB needs.
• May increase innovation due to the closer position to business.

Coordination allowed it to integrate untold number of products or processes without forcing standardization. It is however worth noting that, unlike the Unification model, while most insurance processes were not be standardized across all business units or products. Within individual business units and product lines, PepsiAmericas was moving toward a Unification model (individual LOB) to capture potential efficiencies and enable predictability, on an enterprise level they decided to stay in the Coordination model.

Non IT Executives

The primary challenges faced during creation of CDR and DW were as follows: -

• Consistency. Standardization is not primarily an issue for information systems; people must come to agreement on the whys and hows of defining which measures to derive.
• Uniformity. All branches and LOBs should have a uniformity in processes. In case of PepsiAmericas they had very different process requirements as aforementioned.

The non IT executives were thus required to play a very important role in creation of this consistence and uniformity across the enterprise. It has to be understood over here that standardization and integration is not an IT issue. It is a business issue, therefore the focus needs to be higher than just IT, it should be on the company’s operating model and without the help and active involvement of the Non IT executives such an initiative can never be materialized. Appropriate executive attention was especially beneficial in the following areas:

• Environment analysis. External information, such as strengthening retailers and competitive analysis. Identifying the new capabilities to keep the competitive edge.
• Management process. The management process sets the targets, defines the key figures, monitors performance, and implements the measures. They also look into possible reorganization efforts to enable IT with these initiatives. Without such efforts, especially in the Customer Alignment the integration efforts in Competitive edge would not have been fruitful.
• Standardization. Uniform metrics, management processes, and incentive policies make it easier to anchor the strategy within the organization and communicate its objectives.
• Governance. Most important among all these being the governance.

Based on the aforementioned information a complete standardization was therefore not a possibility for PepsiAmericas. This initiative however exposed opportunities that improved data could create for the business. Specifically the steps taken in this regard were as follows:

• Executives started to change their approach towards change management and strategic priorities.
• A PMO was formed.
• Execution teams were formed by pairing IT leads with business leads.
• A more disciplined life cycle increased the role of Sr. Executives in corporate governance resulting in a stronger IT-Business partnership.

RESULTS

Once in the coordination model, they now had the opportunity to provide services across the enterprise all the while enforcing management mandates. Leveraging on this capability they built Demand Planning, Power Presell, and Perfect Pallet. This was a giant leap in simultaneously enhancing performance, cost effectiveness and business capabilities. This capability allowed the different business units to focus on optimizing their operations and utilizing integrated core reaping huge costs and supply chain operational benefits.

PROS and CONS

Thus at the end the whole exercise allowed them to:

• Maximize economies of scale.
• Support strategic direction towards data storage consolidation, rationalization of redundant applications, and technology standardization among LoBs and facilitated information sharing across LoBs.

This came with a cost though:

• Can be less responsive to individual LoB needs, because the centralized EA capability must analyze needs of multiple LoBs and various trade-off options to avoid specialized, one-off solutions.
• May impede innovation.