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9/24/2004
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Wal-Mart's Way

Heavyweight retailer looks inward to stay innovative in business technology.

Wal-Mart's Way Table Of Contents:

  • Page1: Insourcing IT And Software Development
  • Page 2: The Potential Of RFID
  • Page 3: Massive, Centralized Infrastructure
  • Sidebars:
  • Wal-Mart CIO Linda Dillman On RFID
  • People First: Talent Development Is A Wal-Mart Hallmark
  • Wal-Mart's RFID Mandates: Separating Fact From Fiction
  • A Leader-To-Be With A Diverse Background
  • Once RFID Milestone Passes, Focus Shifts To More Suppliers
  • IT's Role In Realizing the Possible
  • Case Study in Fast-Track Career Growth
  • Battle-Hardened Director Of Information Security
  • Quick Poll: Outsource vs. Insource

  • Growing up in blue-collar Fort Wayne, Ind., Linda Dillman once contemplated a career as a beautician. But she chose a different path. Now she's perhaps the most powerful CIO in the world, leading the business-technology efforts of the most successful and widely recognized retailer on the planet.

    Dillman, 48, became executive VP and CIO of Wal-Mart Stores Inc. last year, though she'd been at the helm of the Information Systems Division as senior VP since August 2002. This year, Dillman will oversee 2,500 business-technology projects that come with high expectations. Topping the buzz list is Wal-Mart's much-talked-about radio-frequency identification initiative, but Dillman will tell you that isn't even the most expensive IT project going on at the company, not "by a long shot." Other high-priority projects include revamping supply-chain processes, synchronizing product data with suppliers using the UCCnet standard, improving E-commerce platforms, and developing talent and fostering regulatory compliance in stores across the globe (see story, "People First: Talent Development Is A Priority").

    Members of Wal-Mart's Information Systems Division, at one of the retailer's Neighborhood Market stores. From left: Tony Puckett, Dan Phillips, Randy Salley, Rob Hey, Linda Dillman, Carol Mosely, Matt Carey, and Carolyn Walton.

    Members of Wal-Mart's Information Systems Division, at one of the retailer's Neighborhood Market stores. From left: Tony Puckett, Dan Phillips, Randy Salley, Rob Hey, Linda Dillman, Carol Mosely, Matt Carey, and Carolyn Walton.

    Photo by Bob Stefko
    As with 95% of Wal-Mart's IT projects, the Information Systems Division will manage the work from programming to process reengineering, relying very little on commercial software and not at all on outsourcing. Indeed, programmers are right now putting the finishing touches on intelligent RFID middleware to handle the influx of data to be generated as the first wave of 100-plus suppliers begins sending RFID-tagged cases and pallets of products through the doors of Wal-Mart's Sanger, Texas, distribution center. Yet Wal-Mart spends below the average on IT for retailers--less than 1% of worldwide revenue, which reached $256.3 billion in 2003. "The strength of this division is, we are doers and do things faster than lightning," says Dillman, the owner of a Mercedes SLK 320 convertible that gives her the opportunity to drive in the fast lane in her private life, too. "We can implement things faster than anyone could with a third party. We run the entire world out of the facilities in this area at a cost that no one can touch," she says. "We'd be nuts to outsource."

    The company's IT budget has, in fact, grown at less than the rate of sales growth, says Dillman, who reports to executive VP and CFO Tom Schoewe. Of course, it doesn't hurt that Wal-Mart's sales far exceed those of other retailers. Plus, its "No. 1 status gives it the capability to pass on some IT investments to suppliers, as demonstrated by the RFID and UCCnet mandates for 2005," says Gene Alvarez, VP of technology research services at research firm Meta Group.

    Wal-Mart's reputation for designing applications and working with new technology acts as a powerful recruiting tool, drawing 95% of new IT employees to its Bentonville, Ark., headquarters from outside the state. And many of those who come to work for Wal-Mart's Information Systems Division stay for a long time. The executives in charge of key operations, including the company's data warehouse, its human-resources systems, and its international systems, each count a decade or more of experience with Wal-Mart.

    Just last March, Carolyn Walton gave up her cabinet-level post as Arkansas' CIO to become a VP in Wal-Mart's Information Systems Division. Ask her why, and she'll tell you about the 7:30 a.m. Valentine's Day meeting she attended this year. Saturday morning meetings are just part of the normal business routine for the hundreds of Wal-Mart business and IT executives who must regularly attend them, but for Walton, this particular event was a revelation.

    She listened to executives analyzing sales of Valentine's favorites such as chocolates, red roses, plush teddy bears, and fine jewelry, comparing results to previous years at any given time of the day at specific store locations, right up until midnight on Friday, Feb. 13. And she watched as an IT employee was recognized for developing an application to get fresh flowers to stores more quickly than in the past.

    "That was the telltale sign Wal-Mart relies on information to run its business and depends on technology as the enabler to meet the customers' needs," says Walton (no relation to the retailer's founding family), who's responsible for the worldwide rollout of RFID technology. "There's confidence and credibility in the IT organization to deliver results."

    That's important in a company where business technologists, like everyone else, are considered merchants first, responsible for moving the business forward. Expectations are spelled out in one of the many sayings--including those of the deceased co-founder, Sam Walton, whom everyone there still calls "Mr. Sam"--that garnish doorways and walls throughout the David Glass Technology Center, a converted manufacturing building two miles from headquarters, where Dillman's staff is housed. "The greatest pleasure in life is doing what other people say can't be done," reads the quote from Mr. Sam.

    Straight From The Source

    Wal-Mart's RFID information page for suppliers

    Wal-Mart press release on the rollout of electronic product codes

    The Wal-Mart Culture, including 3 basic beliefs

    Sam Walton and the Sundown Rule

    The History of Wal-Mart

    Biography of CIO Linda Dillman


    For business technologists to prevail where others fear failure, they must experience the real-life environment of the business. "The best systems are built by people who understand how they're used," Dillman says. She learned that at her first job at a small retailer, where she worked closely with business execs on strategy but also carried a soldering iron on road trips so she could run cabling to hook up terminals in the stores she visited.

    That philosophy is playing out now as Wal-Mart prepares for the January go-live date of its RFID initiative, aimed at solving the decades-old problem of making sure the products customers want are not only in the store but on the shelves. Dillman recounts how Carolyn Walton, working at a Wal-Mart store as part of the company's mandatory training, saw firsthand the difficulty of finding a specific case of hair spray to refill shelf stock. It took three days to locate the case in the back room--something that would take minutes using a handheld RFID reader. Dillman, though she never did make it to beautician school, knows enough about the beauty business to point out that most customers won't swap hair-spray brands, so Wal-Mart lost sales during those three days.

    Wal-Mart expects its RFID project to help not only its sales but also those of its suppliers, and it may even aid competitors and other industries. How much it will benefit suppliers, however, is one of the biggest debates in the IT industry.

    Photo of Wal-Mart courtesy of Knight Ridder

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