New technologies have transformed the retail industry. Innovations have changed and disrupted retail in areas like digital sales, marketing, operations, inventory, and supply chain.

Chris T. Hjelm is Executive Vice President and Chief Information Officer at The Kroger Co, an industry giant with over $100 billion in annual revenue. His perspective offers a mix of business savvy and technology experience at a huge size and scale.

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Chris Hjelm, EVP and CIO, Kroger: Digital Transformation in Large-Scale Retail

Michael:

(00:03) The world of retail is changing, it’s morphing, it’s transforming. There is innovation happening and technology is at the center of a lot of it. And so today on episode number 135 of CXOTalk, I am speaking with Chris Hjelm, who is the Executive Vic President and Chief Information Officer of Kroger. Kroger is one of the largest retailers on the face of the planet. Chris, thank you for joining and how are you today?

Chris:

(00:44) Michael thank you. It’s great to be on the broadcast with you and I’m looking forward to the conversation.

Michael:

(00:50) Well thanks so much, so Chris let’s jump in. Let’s begin by give us a sense of your professional background just to set some context.

Chris:

(01:00) Sure, I started off in kind of in the early days of the educational process where computers were starting to get introduced into companies, and I got a computer information systems degree at Colorado State University. From there, I’ve been lots of places; lived in lots of countries.

(01:18) I started off at Hughes Aircraft Company doing manufacturing and ERP systems, and that was short lived and ended up moving to FedEx, where I spent almost 15 years and I ended up spending time in Belgium and Germany. Had a great run there. Finished up as the CIO of the express business, which was a pretty amazing company.

(01:39) After that did a tour of duty out on in Silicon Valley: three companies in four years including a startup, a turnaround that didn’t go so well. I spent some time at eBay and after that my wife said you know what? How about something different and we moved to the Midwest; lived in Chicago and worked at Orbitz. And then we went public, and got bought and and she said okay, how about something a little bit more stable perhaps, maybe let our youngest son finished school in the same city.

(02:14) The Kroger opportunity came along. I love food, that was a great opportunity to leverage and you know some of my skills and experiences and I’ve been at Kroger just over 10 years. So is been quite a career and I’ve learned a lot along the way.

Michael:

(02:28) So when your wife wanted you to get a job with a stable company, I guess given the size of Kroger and the scale, there are a few companies that could be as stable, so tell us about Kroger. Give us a sense of how big the company is, what the company does, some of the brands. I think for many people we don’t realize just the extent and the scale of Kroger.

Chris:

(02:58) Michael, it is quite a company. Kroger’s been around for you know well over 130 years, and that obviously makes it a pretty elite group in terms of duration. The company itself we have over 400 associates, spread across you know a good portion of the US. Our core business is the supermarket business, which has lots of shapes and sizes from stores as small as 20,000 square feet to stores that are you know up over 200,000 square feet

(03:32) Those stores typically are all the way from Alaska, which would be Fred Meyer. Down in Southern California which would be Ralphs. It’s in Colorado in the form of King Soopers, and then pretty much east of the Mississippi if that’s a general rule of thumb where you would find Kroger with the exception of Harris Tetter on kind of the south-east up through DC, which we merged with over a year ago.

(03:59) That’s just the supermarket side of our business. And then we have convenient stores. So think of those as typically 4,000 square feet or less, and those stores are also sprinkled across the country and we had geographies that are unique just to the convenience store side of our business in North California and down in the panhandle of Florida with Tom Thumb.

(04:21) We have over 300 jewelry stores, known under the brands of Fred Meyer Jewelers stores, which obviously ties to the North West and the Fred Meyer business, but also Littman Jewelers which you will see in many malls across predominantly the eastern third of the US. We also have a fairly large banking business called Kroger Personal Finance and we have a credit card business that continues to grow quickly. Then we also have a very large manufacturing presence. We have 37 manufacturing plants, a very large logistics network and there are many more pieces, but I think that gives you a pretty decent feel for the size and the scale. Maybe one other point to highlight: we’re in the fuel business in a big way, and that includes over 1,300 fuel centers tied to our supermarkets, so that’s 2,600 supermarkets so roughly half have a fuel center. Then we also have fuel in about 700 of the almost 800 convenient stores. So we have over 2,000 outlets or around 2,000 outlets, and those 2,000 outlets puts us in one of the top 10 in gallons pumped in the country.

Michael:

(05:38) And you’re revenue is over $100 billion per year.

Chris:

(05:42) That is correct, it’s a big number.

Michael:

(05:47) So you tend to hover right around the Walmart size.

Chris:

(05:55) They’re the largest but I think there is a couple of us that are you know vie for the number two spot and one of the things that’s very impressive with Kroger is the growth rate over the past 47 quarters. And we’ve had positive same-store sales growth for 47 consecutive quarters, which by almost any industry measure is pretty amazing performance and we are very proud of that as a company.

Michael:

(06:25) Okay, so we’re dealing with this enormous organization with many brands spread throughout the country, and it’s retail. So technology, you’re the Executive Vice President and the Chief Information Officer and presumably there’s some role of technology in all of this, so tell us about that.

Chris:

(06:50) Sure, you know at Kroger it literally is everything from you know our distribution centers to all the technology in our stores, what we do on Kroger.com. You know accounting, other back office systems pretty much everything and anything to do with technology falls into what my team and I work on.

Michael:

(07:25) So drill into that a little bit for us.

Chris:

(07:25) Sure, I think there are you know an enormous number of touch points and if you think about the retail world and how it works, and those in retail will connect with this. But each of those convenient stores or supermarkets all in many ways are small data centers. And so we have you know, probably around 4,000 if you include our jewelry stores of these small data centers with numerous you know a couple of hundred thousand you know network pieces of technology over a couple of data centers. And you know it’s something where we manage, you know I’m trying to remember the numbers, like 13 or 1,400 applications and you know, so there is a fairly large number of devices as well as a large footprint of applications that it takes to run this business.

(08:24) And from a team perspective, we’re around 1,500 associates that work in Kroger technology, with several hundred that work for us in third party capacity, whether it’s onshore or offshore.

Michael:

(08:39) So you’re covering this range of technology and what are some of the unique challenges you face, you mentioned that each one of your stores is almost a data center in itself. So what are some of the challenges, both from a retail perspective because of the businesses you’re in but also from a size and scale perspective?

Chris:

(09:03) Sure, yeah if you think about our business just from how do you make it work every day, our customers you know many of our stores are open seven days a week, 24 hours a day and this you know always-on mindset is pretty important. So the quality of service for us is a pretty high expectation of everyone in the company, but certainly our customers.

(09:25) How we manage all of those pieces of equipment across all of those locations. So you’ll think of things as a customer like our point of sales system. Point of sales systems kind of important; kind of needs to work. It’s how customers check out. How we ultimately get paid. That’s a pretty important part of the equation. Pharmacy systems, you know, it’s pretty important. You know it’s a big part of our business. Almost two thirds of our stores have pharmacies in them and that obviously is you know an important part with a lot of industry oversight and regulation with HIPAA.

(10:02) You know, we have to manage all of that complexity and then you’ve got distribution centers, which are also 7 by 24 and you know minutes matter in our business and frankly, seconds matter at checkout and many other places. There’s a fairly large network that connects all of these physical servers and you know peripherals in our stores together, which we’ve spend a lot of time on over the past I guess probably really the past seven or eight years, really making that resilient and making sure that we have not only a really stable backbone but also quite a bit more redundancy than when I joined here 10 years ago.

(10:45) So the quality of service that we offer day in and day out on this is really fundamental to I think the backing that 47 consecutive quarters of positive same store sales growth. We wouldn’t have had it unless the team delivered. Really what I believe is best in class service.

**(11:02) You take kind of that base piece, and then it gets into this whole how do we continue to drive you know, better solutions for our customers, necessary process improvements and solutions for our associates to deliver service to our customers. And then how do we really package up innovation and each of those areas requires a lot of expertise, a lot of diligence, and ultimately a group of super talented people that make it happen every day. To me that’s the fun part of the scale and [com]plexity. You’ve got to work across all of those aspects of our business. You know paying attention to today, but also thinking about tomorrow and the future and balancing that so that you can have a successful company today, but also position yourself for success down the road.

Michael:

(11:59) And then there’s the security dimension and I know that Kroger has to be a constant target, so that needs to be buttoned down especially with your vast footprint.

Chris:

(12:12) It’s a really good point Michael, and for us you know the day I got here it was certainly on the top, you know couple of thoughts about what is most important for Kroger and for our brand. And you know the folks out there that are after our data, whether that’s credit card information or you know, personal information, you know they’re very persistent, they’re very talented, and you know, every day it’s a priority for us and we are constantly thinking about and prioritizing investments. And you know, to be honest with you it often causes a bit of a challenge internally; because people will be you know pushing for certain capabilities. They want certain capabilities on you know in the cloud or what they want to do on mobile.

(13:05) And you know, we’ll basically you know apply some constraints and tell people you know, hey you have got to work in a certain manner in order to safeguard you know, probably most importantly our customer data but also the other assets of the company. In fact getting getting ready for this you know show this afternoon, we spent a fair bit of time you know working through a way to open things up a little so that you and I could have this conversation with you know a high-quality interaction.

Michael:

(13:34) Yes, and I spoke with some of your tech team and they were so deeply concerned saying, okay, which ports do we need to have open, what are the time frames that we need to have these open, where’s the data going. I mean it was obvious that they have a very very very intensely rigorous set of governance and policies related to security that they need to comply with.

Chris:

(14:02)  Yeah, and like I said, we take it very seriously and we set a fairly high bar internally and we knock on wood had a good track record, but it’s that everyday diligence and the commitment of every one of our associates, and including our associates in our stores, at our fuel centers, at our jewelry stores. I mean it really is 400,000 plus people making it a priority, and have to make it a priority every day.

Michael:

(14:30)  Okay, so you’re overseeing this really vast technology network and set and many different systems and somewhere and somehow these need to intersect and support the business priorities and the business strategies and the business goals. How do you ensure that there is alignment between technology and the business goals of the organization?

Chris:

*(15:03) I would say that’s constant pursuit of perfection. It’s not easy. I think first of all it’s having a seat at the table and it’s being part of you know developing the strategy for the company. And the CIO role you know has had a seat at the table before me, but certainly while I’ve been at Kroger.

(15:24) I think that the next piece of the puzzle that you have to kind of get in place is to make sure that that strategy manifests itself you know down into departments of the organisation. Now, we ultimately are the broker or the person [that] has to manage dependencies and resource constraints across the entire organisation. But we really need to get that clarity of you know “Yeh, we get the macro strategy of the company, but how does that translate into merchandising or logistics, or marketing. “

(16:00) And once we have that clarity, we put in a process a few years ago to manage that portfolio, and to really look at you know getting a group of senior business leaders together to help us prioritize you know that set of projects across business domains. So where does jewelry stack up against point of sale or Kroger Personal Finance business. In fact, I was talking to the CEO of Kroger Personal Finance today, and he was advocating or lobbying for more bandwidth out of our digital and point-of-sale teams, because they want to introduce some new features.

(16:39) Now, if you look at the relative scale of their business, its small compared to you know what we think about with loyalty in our merchandising organisation. But at the same time you do have to think about, how do you manage a growing part of our business and allow them the bandwidth, so that they can continue to grow and someday be a much larger share of this company.

(17:00) So we built that process to try and you know create that level of governance for a lot of the projects that take place, and then there is always that strategic conversation that has to happen for the big bets. If somebody says they want to go and spend you know X millions of dollars on a new loyalty system, or somebody says “Hey, I need to put in you know, a new order management system for our digital world.”

(17:32) Those are bigger bets that require you know, often getting an executive level group together. They can look at the dependencies and trade-offs, so whether that’s capital or expense, talent, or even just operational capacity, what is the capacity within our supermarket world to take on change.

(17:53) So were very thoughtful to try and make sure that when we do prioritize and make a commitment to getting something done that we’ve aligned the resources across the organisation to the best of our ability to ensure its success, not just with what we have to do on the technology side. But it’s the whole change and successful adoption and deployment whether it’s internally for our associates, or at times including our customers.

Michael:

(18:20) So you mentioned change, so clearly the notion of change is a key part of your thinking when you’re considering innovation activities for example.

Chris:

(18:36) Yeah, change is something we think about a lot, obviously in our world and I’m sure every industry feels the same way. But change is doing nothing but accelerate from a pace perspective. For us in retail, and predominantly food retail and we’ve got other forms of retailing as well, the competitors are getting better every day. And there are also new competitors entering the market, and those new competitors that enter the market you know, often don’t have the same constraints that we have. But also they don’t have the size and the scale and you know the number of customers, you know the loyal customers that Kroger has.

(19:18) And so we often look at that as “yeh, absolutely we need to think about new forms of the competition,” but at the same time how do we leverage the great you know assets that we have as a company and make sure that we think about and leverage those to maintain a sustainable competitive advantage when we think about areas of investment.

(19:38) Innovations is a great case and point. If you go back a couple of years ago, one of the early investments that we made on the innovation front was a system that we refer to as Queue Vision, but in the day it was built it was very novel, today a lot of people have copied it. But at the time it basically used a combination of infrared technology to kind of count the people, both coming in our stores as well as at our check [out] lanes and predictive analytics, so the time of day, day of week, you know and some other factors to estimate when someone was going to get to the front end of our store.

(20:21) So to make sure that we had enough folks to check out our customers, and enough baggers to bag groceries, and that technology allowed us to really take an average wait time of around four minutes, down to an average wait time of roughly 30 seconds.

(20:39) And while that was a fairly significant capital investment from a labor perspective in our stores, and there were some extra effort during the implementation. But you know on a kind of apples to apples basis, it’s with that dramatic improvement of service was done with very little to no incremental labor. To me, that is the kind of transformational change that you know moves the needle that customers care about, that you know we really drove and built a lot of that internally, that you know to me that’s how we stay ahead. So that’s kind of where our heads are at, it’s where are the big things that matter most to our customers that we can kind of change the retail world.

Michael:

(21:20) So you spend a lot of time thinking about the relationship of the customer to the Kroger stores, and obviously there’s a business component to that and there’s a technology component as well, so maybe elaborate on that for us please.

Chris:

(21:40) Sure, our customers have quite a few touchpoints with us. They obviously start today with many of them start with a very successful mobile application or on Kroger.com. The key things on there, you know are often you know what’s for dinner-- so recipe ideas. But a lot of content that helps customers think about “Hey, what should I be planning for from a meal perspective.” But that translates then into my shopping list and you know what offers are out there on the market. You know, digital coupons have been something that we’ve played heavily in and you know are the largest retailer working with digital coupons and our customers love it.

(22:25) And so they’re engaging on our website, they’re engaging on our mobile app, and we obviously had to make that easy in store. So we automatically you know applied digital coupons at point of sale that makes the customer’s lives easier.

(22:39) We’re working today really hard on lists, to help customers think about you know what’s for dinner, what they want to have on their shopping list to make sure they don’t forget something when they come to the store. In fact, we just launched and I think we have it in maybe 12 stores now, but it’s an order online and pick up in store. But it’s just not a basic order online pick up in store. We’ve really been trying to be thoughtful about you know, what are the regular things customers order. And you know how can we help the customer build a very fast and right shopping list and allow them to you know, get the benefits of you know, not having to get the little kids out of the car, or whatever their needs are to have really an incredibly fast experience with Kroger.

(23:27) Now you take a kind of that piece of the world, which is kind of may be the digital side in, and then when they’re in the store we’ve done a lot to try and simplify their shopping experience in the store. And I mentioned automatically applying digital coupons, one of the other technologies which we’ve recently deployed as a prototype store would be a digital shelf edge, so the entire shelf edge, think of it as a digital display.

(23:58) On that digital display, not only are we able to put additional content out there about a product that somebody wants to you know, scan the QR code and show me some additional information about that product. But also you know imagine that customer shopping and us highlighting on the shelf because of some locationing technology, what’s next on the shopping list. So I mean they are almost really doing a “pick to light” shopping experience inside of the supermarket.

(24:29) So we think about associate productivity, we think about customer engagement, and this whole digitization of the store to me is something that we’ve been on this journey for several years. And we’ve been building out this infrastructure that allows us, you know if you kind of use the Internet of everything of this IOT world, we’re building, we’ve built out and are deploying an infrastructure that will allow us to kind of really add features and functions to this digitization of the store, that our associates are really enjoying and getting a lot of value out of. And we think we are just scratching the surface on what happens for the customer.

**(25:12) But that thoughtfulness, and kind of thinking ahead about you know making those strategic investments that will stand for many years, I think of what a lot of companies and you know, IT departments frankly struggle to get approved and struggle to get out there. People think about it, but it’s like how do we go and make it happen.

Michael:

(25:35) Well this is a very interesting point, so at Kroger what is the process that you go through to ensure that there is both an IT voice and a business voice coming together on these strategic projects.

Chris:

(25:55) I would say it kind of depends on the project, but is in a general sense we have you know team vertical alignment, where we think of it as development of IT teams that are aligned with different groups. So we have a group aligned with retail, so that’s point of sale or merchandising, they work together on strategic projects. Or whether its supply chain and back-office systems they work together, or whether it’s on the digital side.

**(26:27) So we have these relationships in many organizations. We have people; we call them customer relationship managers, whose specific role is to work with the senior business leaders. They sit at their strategy sessions, they sit in their staff meetings and they actually help build these business cases around change, around innovation.

(26:47) Now, the hard part is when you want to or you need to go put out a major infrastructure, that may be has to start with one piece of functionality. And to me that’s where it gets hard. That’s where it becomes a bigger bet, because you have to get a cross functional group of senior leaders together to say, “Hey are we willing to invest X? You know, this one project in and of itself might not have a high return that would pass our normal approval rate, but once this is in we can add multiple other systems on top of it with little to no incremental infrastructure, and those will have great returns.”

(27:32) And I think that’s where the you know, senior IT leaders and frankly my time is spent making sure the company understands you know what’s possible. And this is what’s possible from a business perspective, and you know it obviously has a technology bent to it. But this is really more about the customer and about how we drive you know value to our associates and helping them improve productivity.

(27:59) But we have to kind of be the voice of you know what’s possible, and then when it comes down to it, helping build that business case that is tangible. It’s real, and it allows the company with confidence and say we’re going to make these strategic bets.

Michael:

(28:18)  So this is a very far cry from organizations that view IT as a cost center right, your mandate – I’m not meaning to put words in your mouth, but it seems your mandate is not, hay Chris, reduce IT costs that’s your mandate. Your mandate is hey Chris, you know help improve customer loyalty, help improve better customer experience, help improve efficiency for our associates. It’s not about cost reduction for most part of it is is?

Chris:

(28:53) You know Michael I think that’s a really good point. We think about you know what’s you know, the future of the company and we think about the strategy of the business and we have a customer first strategy that we’ve been on for quite a few years, well over 10 now. But you know it starts off with you know, our prices are good our people are great. You get the products in store you want plus a little, and the shopping experience makes you want to return.

(29:27) So you know we kind of start with those four general principles and we’ve really been focusing even more on hospitality and how do we create a friendly environment, which means we have to allow associates to more efficiently complete their other tasks that have to get done so that they can spend more time with customers.

**(29:46) And we need to continue to improve the freshness of what we offer in our stores. So we have these macro-priorities and that it the most important set of initiatives for the company. Now, one of our strategic objectives is absolutely to continue to optimize how we run the business every day to help fund those initiatives. And within Kroger Technology we have clear objectives about how do we continue to make what we do every day. Think about you know, those buckets of work that I talked about earlier, but you know, how do we run those core services every day so the we can serve you know the 8 million customers a day effectively. We can support our 400,000 associates with highly reliable systems and response times.

(30:36) Those are the kind of, if you will, the ante just to get into the game. But we put pressure on ourselves to continue to do those more cost effectively, so that we can help invest more of our IT spend on the things that we believe create long-term sustainable competitive advantage.

(30:57) But that’s on us, because look, most of our business partners don’t understand what we do every day. You know, if I can talk to them about virtualization and they’re going to think about you know, Google glass or something versus you know some virtualization technology in the data center. They don’t understand the nuances of our world and nor should they. But I do think they put you know, a heavy expectation on us to run a very lean, cost effective set of core services, and we aspire to do that better every year so we can do more.

(31:30) With that said, our company’s invested a lot, pretty much every year since I’ve been here. We’ve had incremental spend on Kroger technology and a lot of that and our goal is to increasingly invest those dollars in areas that we think that are transformational for us for our company.

Michael:

(31:49) So how do your folks in IT gain enough nuance knowledge about what different parts of the business are doing, so that you can add business and strategic value to these other parts of the business as opposed to merely being a supplier of either services or infrastructure.

Chris:

**(32:17) That is one of the harder parts of I think our job. We often have a pretty full plate. I know all the folks in my organization are pretty busy every day. You have to get out in the business. Now one of the beauties of Kroger, and I tell every new hire group the same message, and in fact interns that work here. My point to them is, show me a business where you get to as a customer and interact with it every day.

(32:48) You may not be in a manufacturing plant every day, or you might not be you know, in our logistic center you know, building pallets of product, but you can certainly go and see those if that’s your domain of expertise or systems that you work on.

(33:03) But you can get in our stores as a customer, and engage with our business every single day. And I think that’s part of what we really encourage our associates to do. It’s get out there, experience the business, go on trips with our business partners out to stores. Walk our stores with people that think about them differently. Walk with the store where the person is thinking about the next generation fresh food experience in our prepared food areas, in our deli’s. What are they thinking about and what’s that going to look like? And we try and paint a pretty concise picture at a strategy level. Or you know what are those areas of our business that we want matter most which we want associates to care about.

**(33:47) But ultimately, the responsibility sits with me and the rest of our IT team to get out and experience the business and to really embrace and understand what it is that we can do. And I always tell; you know, when you get into this business it’s amazing how many of your friends and family have an opinion about your stores. And I love it and I always tell people, bring it on.

(34:12) We want any and all feedback, because that feedback is directly coming from the people that we care about, which are the customers that shop our stores. And I do think that’s a unique perspective that associates at Kroger have the opportunity to grasp. But to be honest with you, we do have folks on our team that maybe do not get out into our stores very often.

**(34:35) To me there’s no excuse for that. It’s like you’ve got to get out there and be part of our business. To me, when we do that well, the other piece that we try and do is we try and have quite few forums where we’ll share. So we’ll have a technology expo every couple of years. We have a big Kroger leadership summit next week here in Cincinnati, where we bring a lot of our store leaders from across the country and from our corporate offices across the country. You know, over 5,000 people will be here in Cincinnati.

(35:12) We will have a tech expo at that leadership summit and when I get any and every chance to spread the word, I tell everyone you have to go see it. You have to go understand it. So it goes both ways. It’s our associates, making sure that they understand what’s going on with technology and what’s possible.

**(35:11) They have to communicate that back out with an informed view because of their using and experiencing the Kroger services, but at the same time, we really, I try and take some of the senior leaders out to Silicon Valley with me and we spend time with startup companies. I’ll make sure and take them out to our labs so that they can see this technology and experience it first hand, so that they can be evangelist for change as well.

**(35:58) So I really try and make sure that it’s a kind of a two-way street, that I play a little bit of their role as business leader and evangelist for change operationally. But at the same time they are being the evangelist for what’s possible and what technology can do the change at Kroger.

Michael:

(36:13) So a while ago I met one of your folks who works in IT Shashank Saxena, and to say that he just works in IT is underplaying his role a lot. Shashank is pretty amazing and he was on a panel that I moderated called Cintrifuse, and he and I spent some time, and he has actually been a guest. Shashank was a guest on CXOTalk. And I came away speaking with him with a clear sense that you have a very rigorous process for deciding which projects to actually embrace and which not to, and along the same lines we just have a question from Arsalan Khan who is asking in how do you decide in what is strategic and what is operational for IT. So I guess this all gets to the filtering process that you use for deciding where are you going to invest your time and your money.

Chris:

(37:18) It’s a really good question and once again not an easy answer, and Shashank has done a great job, he’s been with us for going on three years and he is a very innovative thinker, and he’s been knee deep in our digital transformation, and brought an enormous amount of talent and delivered a lot of really good stuff for Kroger.

(37:38) He is very connected into the startup world, so we do spend time and energy both locally with organizations like Cintrifuse, but also out on the West Coast with some venture capital companies, so we stay pretty well connected.

** (37:56) Now back to how do we take and figure out what we’re going to work on, I’ll tell you it happens probably three ways. One way is that the Shashank’s of the world work with their business partners to figure out what matters most. And we do hackathons and you know other things to come up with ideas. So we have a vote, you know we in in the IT organisation, Kroger Technology, we have a vote, and I expect our associates to voice their opinions and once again they have an informed opinion as customers and to me that’s very powerful.

(38:32) Those priorities and debates and discussion happen within how you can think of those as functional areas. Then you’ve got on the innovation side, about a year and a half ago we created a directed innovation group, and I will tell you in the past we kind of had an R&D steering committee and some exec’s that would participate in that. But it wasn’t always the right folks to represent the key areas of the business, and we kind of took a different approach. And when my boss, Roddy McMullan got to be the CEO he said let’s take a slightly different view of how we do innovation and we created what we call directed innovation group.

(39:12) And we looked at the big levers in the company, in places where we think there’s opportunity to create you know sustainable, competitive advantage. And we specifically direct our innovation activities to those areas, and we also have put in – and I don’t think by the way we quite figured it all out, but we put in a set of objectives so we could measure the success of these initiatives. And we had a lot of portfolio work that was kind of historical that we had to clean up.

(39:43) But we basically said, you know we want to have two innovations a year, not you know small innovation but have two material innovations per year. And to be honest with you, that’s a pretty lofty objective because of the number of touch points particularly when you’re putting in new infrastructure.

(40:05) That, I would say that you have got kind of the innovation bucket around like true research and development, things that have never been done before. You’ve got innovation on the software side, which we could obviously do on Kroger.com and our mobile app and so we had lots of degrees of freedom there.

(40:22) And then I think the other source of strategy, you know kind of trade-offs and that happens with a couple of the senior executives, and occasionally the CEO you know casts a vote and says hey you know what, I want to go and get this one done. And in fact if you go back to Queue Vision, that was the CEO saying you know I want this rolled out in two years. We weren’t even quite done yet. You know, we haven’t properly baked that full solution, but we were rolling it out and finishing it as we went because we had decided that was you know a big priority.

(40:58) I would say another one that happened a little differently was our work and temperature monitoring, which was think of it as our foray in building the infrastructure in our stores to facilitate the Internet of Things. So we have you know, digital monitoring now of frozen and refrigerated cases. That system is I think probably by now well over close to 2/3 of the way rolled out, and this is a multi-year roll out because you are putting in a new infrastructure in the store, hundreds of digital tags in the store. That was one that we have been pushing more internally with our research and development team. Now with the direct innovation group, I think that kind of change would happen even faster than it did. We worked on that from a couple of years before we really finally got momentum.

** (41:51) And so, our goal was to continue to work in smarter ways that allow innovation, do hackathons, allow R&D to experiment, but take the best ideas, get them in front of the right audience and make more conscious strategic bets that align all the right resources in the organisation.

(42:12) And I would say we’ll be working on that for a long time, because that’s not easy. I would say we’ve already seen the benefits, and I think the big reason is the commitment of the CEO and you know his direct participation in those discussions and bets.

Michael:

(42:31) So Chris we have just a few minutes left and I must say this conversation has gone by very very quickly. So what advice do you have for IT and for CIOs who come out of the more traditional technology oriented mindset ways of thinking, but who want to contribute more strategically to their company. What advice do you have for these folks to begin that conversation, sustain that conversation and have a strategic engagement with their organizations?

Chris:

**(43:10) Michael, that’s probably a multipart answer. I think the first thing you have to do is you have to earn the credibility as you know a service provider that you know delivers every day. Because if you don’t have that credibility you’re not going to be able to take the next step in the relationship. So you have got to earn your stripes.

(43:33) The second thing is, go deep and really, really understand how your business work. And if that means more time in plants, if that means more time out in the stores. Whatever it takes to really become an expert in the business, so you speak the language and you truly can understand from the other point of view. So you are listening and having a dialogue that’s two-way with the leaders of a company.

(44:03) The third thing I think that’s super important, is you have I think you have to keep up with what’s possible in technology. Look, none of us can know it all, but you have to you know kind of divide and conquer with your team, and as the senior leader pick up the nuggets of you know insight that come from your Chief Technology Officer that is knee deep in you know kind of infrastructure and servers, and networks.

(44:32) Do the same thing with you know like your head of R&D or get somebody to be more on the R&D front that’s looking at other industries, and what great things they’re doing. You have to then become the pragmatic person that’s helping the rest of the organisation understand what’s possible. And that often is the hard part because you have to take a little risk, and look you know, this stuff is not easy. A lot of us you know we kind of often joke about the tenure of CIOs is often not more than a couple of years, and you know I think you have to understand that in order to be successful, you’re going to have to take some risk. And, but that risk reward I think for the benefit of the company is something that if they don’t ask you for it, I think you have to, again understanding why that’s important and why they need it.

Michael:

(45:24) So basically it’s the responsibility for the CIO to initiate that strategic conversation, is that what you’re saying?

Chris:

(45:34) Exactly, you cannot wait to be told what to do. That was something we went through you know 10 years ago when I got here. We had very much of a service mindset, and that’s important. We definitely need to provide a great service, but at the same time we need to be thought leaders. Look, we’re owners of the business, and we have an opinion, and we have unique experiences and insights that can help the company, not only figure out you know the right strategy. But also help prioritize and drive initiatives that are going to make a difference.

**(46:11) And to me, you kind of have to earn your stripes to be part of those conversations, and when you get a chance to sit at that table, and you get a chance to be part of those conversations, when you sign up for things you have got to get them done. And we all know that’s the hard part, especially for things that have never been done before. You know, true innovation has the highest level of risk. To me, it’s the most fun, has the most reward and it does make a difference and you just have to be willing I think to personally take a little bit of risk to be part of those conversations. And if you’re not been proactively asking to be part of the strategic conversations, or to be making part of those decisions, you should basically insert yourself and explain why your opinion counts.

Michael:

(46:57) Well that’s fantastic advice. Unfortunately we’re out of time, but I know that your  comments address concerns that many CIOs do have who want to play a strategic role and sometimes they’re not really given the opportunity and they’re not sure what to do. So on behalf of many CIOs out there I say thank you for your great advice. And thank you for taking the time to be part of episode number 135 of CXOTalk.

Chris:

(47:34) Thanks Michael and I’m proud to be number 135 and I’ve really enjoyed the conversation.

Michael:

(47:39) Well I hope you will come back another time. We have been talking with Chris Hjelm, who is the CIO and Executive Vice President at Kroger, the Kroger Company, one of the largest retailers on the face of the planet. Chris, thank you again for taking the time and really I hope that you will come back again.

Chris:

(48:10) Thanks Michael.

Michael:

(48:02) Everybody, next week we are speaking with the Chief Marketing Officer for Mozilla, so come back and hope you have a great week and talk with you soon. Bye bye. 

 

Companies mentioned in today’s show:           

EBay:                            www.ebay.com

FedEx:                          www.fedex.com

Fred Myers:                 www.fredmeyer.com

King Soopers:              www.kingsoopers.com

Kroger:                         www.kroger.com

Ralphs:                         www.ralphs.com

TomThumb:                 www.tomthumb.com

Walmart:                      www.walmart.com