Hops to IT

Carlsberg CIO Kenneth Egelund Schmidt talks to Ian Clover about his company’s use of video conferencing technology, his strategies for diversifying the IT department and the ever-pressing need for transparency in business.

“There is still some aversion to video conferencing technology. I suppose there remains a level of education and exposure to the technology that has to happen before it becomes widely accepted”

For a company that sells upwards of 12 billion litres of beer a year, you could be forgiven for believing that the importance of Carlsberg's IT infrastructure lay some way down its list of pressing priorities. The company is, after all, one of the most instantly recognisable brands in the world, the largest brewer in Northern and Eastern Europe and the fourth largest on earth. Its logo adorns football shirts; its beer taps parade proudly and invitingly atop bars across the globe; its innovative self-pour mini kegs are the discerning party thrower's choice for sophisticated take-home drinking; and the satisfyingly unmistakeable 'hiss' that emanates from its canned beers (and plastic bottle varieties) when chilled and then opened on a hot day has come to shape the soundtrack and atmosphere of summer music festivals more than any band has managed to, ever.

Its advertising has been ingenious, inventive, evocative and playful. Carlsberg is a beer of fun, friendship and frivolity. Taken at face value, Carlsberg is the company we all run to on a Friday afternoon, when tools have been downed and time is one's own. It is always there, reassuringly extensive and probably the best friend in the world. It will never let you down. But it is also an organisation that is as smoothly run as its produce is to enjoy; its ubiquity built upon a management team possessing whip-sharp business sense; its brands and growth a result of intensive market research and inspired acquisitions.

None of the benefits the average Carlsberg consumer enjoys would be possible without the dedication and hard work of its back room team, of which the IT department is something of an unheralded heavyweight. As with any large organisation, the role played by the IT department is instrumental in shaping Carlsberg's ability to diversify, grow and maintain its position as a global leader, which is why Kenneth Egelund Schmidt, Carlsberg's CIO, is a figurehead who is acutely aware of the responsibility his department shoulders on a daily basis. This responsibility is manifest in the various pressures he feels to deliver leaner, more efficient IT in order to assist Carlsberg in its increasingly expansive logistical efforts.

"In recent months, there has been a drive to streamline and digitise Carlsberg's IT process in order to create transparency in our cost of processing," says Schmidt, who is keen to emphasise just how important transparency is for his department. "This might sound like a simple task, but actually being able to cost what it takes to conduct a task or run a process is an important part of Carlsberg's IT strategy, not to mention the overall strength of the business."

Streamlining IT

Schmidt has been at the helm of Carlsberg's specially created Carlsberg IT subsidiary for the past two years. During his time there, he has been instrumental in overhauling the company's IT infrastructure in order to bring it in line with the key deliverables that other departments under the Carlsberg umbrella - such as its ever-innovative marketing department and its enterprising business development sector - must adhere to. "One part of my job is based around what I call 'making a fast business case', because in my role I see a lot of projects that are quite complex; projects that take a lot of time to implement and develop before we see any of the payback," says Schmidt. "So for me, to be able to streamline a process, to say 'let's go for 50 percent of the potential savings, but then have a much faster project', and then evaluate and maybe take 20 percent later on, is a better way of working."

In a company as large as Carlsberg, if a certain department can advertise its credentials and promote its own worth, it can create for itself a settled and conducive working environment in which it is afforded time and funds to streamline and test its own business objectives. "In some of our projects, we have removed some of the complexity by being less ambitious," reveals Schmidt. "Within the Carlsberg system, as we drive more and more for compliance in processing and reporting, this ability we have to utilise a process gives us more control, which is an argument we use to supplement our business case. So, our internal audit is a really great exercise to follow in this case. Internally, we have decided that we have an ambition to make the IT department a leading example of good business processes within the company of Carlsberg."

In order to achieve this, Schmidt has proactively nurtured an atmosphere of pride and acclaim within his department, concluding that, if his own team will not champion the work they do, who else will? "We develop our processes and then we tell the company about it, to serve as an example that can be carried within another domain." Schmidt has also worked hard to redefine not only how Carlsberg's IT department is viewed from within the company, but also its key deliverables, too. "I have totally changed the organisation in IT at Carlsberg, and one of the key points has been the appointment of a senior manager who is actually responsible for processes.

"So he's driving the end-to-end processes across IT. And that means he is actually quite powerful, especially when compared with the old system we had where domains and silos where commonplace. Now, he can make sure that we have continuous improvements, measurements and communication throughout."

Video conferencing

One tangible performance delivered by Carlsberg's IT department was seen during the drama that unfolded when the Icelandic ash cloud grounded pretty much all of Europe's planes during a fraught couple of weeks towards the end of April 2010. Businessmen throughout the continent were grounded, with Carlsberg's no exception. Companies from Ireland to Italy had little option but to seek other transport or business arrangements, with a number of the more innovative enterprises adopting or utilising technology to help them overcome the logistical issues they were now faced with.

"Like anybody else, we couldn't travel, but we still had a lot of important business to conduct," admits Schmidt. "It was a huge inconvenience for us, but we were able to deploy and utilise software to overcome this. First of all, we made a site where all equipment was available for everybody, and in parallel with that we implemented an office communications server from Microsoft. This was one stream of our response to the ash cloud; the other was video conferencing technology that enabled us to conduct meetings which otherwise would have been cancelled."

Carlsberg's video conferencing capabilities are not, however, wholly reliant on ash clouds, tube strikes or other forms of transport upheaval to prove their worth. "While the ash cloud was something of a catalyst for our video conferencing technology, we have begun employing it in more general usage. We have OCS conferencing capabilities that initially had only a medium penetration within the company - despite the technological ability we had in both video conferencing and office communications servers, and the widespread understanding that it could save us a lot of time, there was still this strange hurdle to acceptance."

But since a fair proportion of Carlsberg employees were forced to utilise video conferencing technology during the volcanic ash cloud, there has been, admits Schmidt, something of an upsurge in interest. "Once you've used it once, it becomes so easy and normal, and utilisation of this technology saves the business a lot of time and money. So what we are really looking into now is how we can remove these initial barriers for utilisation, looking into finding out what it takes to make people confident with using the technology."

A reluctance to embrace new-fangled technologies is nothing groundbreaking. Even the most confident, self-assured jet setting business delegate can be reduced to a mute, fumbling, obsequious wreck when faced with something as seemingly arcane and fiddly as video conferencing units. Culturally, too, Schmidt has identified an aversion to adapting to this technology. "It is sometimes strange, because even when we have a technician on call who can deal extremely quickly with any problems that arise, there is still some aversion to video conferencing technology. I suppose there remains a level of education and exposure to the technology that has to happen before it becomes widely accepted."

Schmidt is keen to encourage greater adoption and utilisation of video conferencing technology within Carlsberg because he sees the vast wealth of benefits and savings it brings. "Lack of time is a constant issue in business, and video conferencing technology tackles this directly. So instead of planning to meet up two weeks in advance to look into discussing an issue, video conferencing allows us to say 'well we can hook up, share the presentation, discuss it and make a decision, and we can do this tonight.' So it is this speed of decision that is actually driving adoption of video conferencing." Cost reduction is a major offshoot of this, too, believes Schmidt. "For some of my team across Europe, we are using video conferencing technology intensively, and that now means the amount of time we spend in a plane is drastically reduced, bringing with it immense savings in both cost and time."

Restructured and agile

It is a perpetual challenge a CIO or IT director faces - how to cut costs, improve the business and ensure the IT department is seen as something more than just a cost centre. Today, there is at least a greater understanding of the role IT plays in ensuring a company's objectives are met, but for some CIOs, the struggle to prove their department's worth is a continuous one. "I don't actually see a problem with being seen as a cost centre," says Schmidt. "Because in the end, we are part of the same strategy within Carlsberg. However, we do have a duty to be perceived as an efficient part of the business, and that is something completely different. We are faced with a demand to be efficient, to be fast, and to be agile."

In response to such demands, Schmidt admits that he has often asked his IT department to think and work beyond its comfort zone. "Maybe I've been quite ambitious in what we do, but we actually spend a lot of time discussing the necessity of shared processes and end-to-end processes, supporting a pan-European and sometimes global objectives, so we have required global end-to-end processes. And this is a huge task, and something that brings me back around to that simple word of 'transparency'.

"Transparency," continues Schmidt, "is actually two-fold. It is transparency in our business, in our data, in our performance. Because basically, we come from a very local set up, and within a small snapshot, we have moved into this shared business model where our top management want transparency in everything. It is a major, major challenge for us to achieve this, because what I am asked to deliver is transparency within IT costs as a consequence of how the business is behaving."

In such a demanding environment, Schmidt has to make doubly sure that every cost the IT department brings to the Carlsberg business model is quantifiable and accountable. "Just a few years back, cost was just allocated," he says. "Now, like a lot of other people who have to put in a service catalogue with prices on the different services - and then depending on how IT services are actually consumed, pay for it - The IT department has to not only go from local to global, but it also has to build an entire business system within IT to support that. And that is a huge, huge task."

As a response to these pressures, Schmidt has developed a pan-European SAP system that can support both the local and the glocal markets, covering everything from finances to sales execution and marketing. "We have been extremely ambitious with our pan-European implementation of this SAP system," says Schmidt. "This drive we have for transparency means putting everything in the shared platform, and we have been asked to accelerate that roll out [originally planned for 2014] simply because we need the platform sooner."

Diversifying the IT dept

Expansion, delivery, and diversity - all challenges that Schmidt has had to face and overcome in the past 18 months as Carlsberg has continued to grow and expand at an unprecedented rate. In 2008 the group acquired British drinks company Scottish and Newcastle in a joint venture with Heineken: a move that brought a greater range of products to the Carlsberg portfolio but also a wider IT network across separate departments spread throughout Europe. Such growth brought with it the potential for a number of logistical headaches, and Schmidt has had to develop and refine the company's IT department in order to cope with such a range of demands.

"We looked at cloud computing; all of the pros and cons and, to be quite honest, have not yet found a compelling case for adopting a cloud-based model just yet," says Schmidt. "What I'm actually doing is watching it mature, particularly in terms of the contracts and cost models involved. It does interest me, particularly the ability it offers you to scale up and down, but we actually haven't identified any major applications where we need that capability."

Despite his reservations on cloud computing, Schmidt has given plenty of thought into how he hopes to diversify Carlsberg's IT department in the future, in order to better deliver and drive the company's business needs. "In my world, the IT department would consist of two parts," says Schmidt. "The first is a run part, and then another part I call 'growth and optimise.' The run part is what I call the 'boilerman' - just making sure the lights are on. The other part is simply supporting the business and taking the cost out of doing business and, quite ambitiously I guess, perhaps sometimes providing business opportunities."

Some aspects of Schmidt's vision have even already been formulated. "What I am doing within Carlsberg IT is splitting the IT department into two focus areas which are closely interlinked but their focus is split. There are also two different budgets: the run part should be reduced to become more efficient. The other part will make sure that we can support any upcoming project. This is where we should optimise based upon the business case, not absolute spending. This drives a logical sweet spot for IT within project and portfolio management. We are also building competencies within change management and training, simply to make sure that we actually harvest the value of the systems, not just by enabling the business, but actually making sure we achieve the desired impact."

Carefully considered, cost-focused and impact-driven IT implementation procedures are driving Carlsberg's business objectives, with Schmidt at the controls and a dedicated, ambitious team forming a capable and efficient engine room. Despite the recent recession, Carlsberg has continued to grow, and the company's IT department has had to adapt to this expanding environment.

"Looking back three years," concludes Schmidt, "there were a lot of projects being conducted. Right now, although we still have a huge activity level, we are so much more focused on the two prongs of cost and benefit. We found, for example, that when rolling out the shared platform the demand for infrastructure was even more apparent that ever before. Additionally, we still have a high level of expenditure, but it is again much more focused than before. Transparency in decision-making will be the main focus for us moving into 2011, and in order to do this we will focus on platforms. In terms of cost-reduction, I am still working on our commitment to retire our legacy systems, and then it is my firm belief that the IT department can make a huge effort in becoming more active in developing and implementing new business processes and models, which is actually the whole point behind a lot of the things we're doing with IT."

Transforming the IT department from a reactive, cumbersome department into a flexible, agile and proactive arm of the business is Schmidt's ultimate aim. "What I really like about Carlsberg is the fact that there is an extremely open dialogue between departments. So if you stand up and take the initiative, something happens. But again, it is important because once we have the platforms in place, we need to actually extract the value from them. And I think IT is obliged to really be proactive and show that the possibilities it brings are actually beyond and can surpass the capabilities the business as a whole thinks it can deliver."

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