Procter & Gamble CIO Filippo Passerini: 2010 Chief Of The Year

P&G CIO Filippo Passerini

The wall in Procter & Gamble's executive conference room, called the Business Sphere, is a 21st century monument--built to honor the gods of data. Two white concave screens, about 8 feet tall and 32 feet wide, face each other around an oval conference table, letting as many as 16 executives, led by CEO Bob McDonald, see at once the reality of how P&G is doing around the world.

But is the data as perfect as its gleaming altar suggests? Is it as real time and comprehensive as this global consumer goods giant would like? No, P&G CIO Filippo Passerini freely admits. But the fact that it's not pristine perfect reveals something about Passerini's leadership style.

"We intentionally put the cart before the horse, because it is a way to force change," he says. For years, companies have tried to gather all the right data, build the high-powered data marts to support it, and only then build decision-support tools to exploit the data. And that approach hasn't worked.

Instead, Passerini's team gives executives a clear view of what's possible, to "use it as a catalyst to drive the right data convergence," he explains. If a data point is getting discussed on these screens, but it's based on models or projections rather than hard data, the pressure grows to acquire that data. Within two years, Passerini wants P&G employees to have access to seven times the amount of real-time information they have access to today.

It's fashionable for CIOs to say they're focused on the needs of "the business," not on the technology. But truly doing that means stepping into the unknown, committing to goals where it's not certain what technology or data is needed to deliver. It means taking risks.

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Passerini has taken these risks, repeatedly, as he has dramatically changed the role of information technology at P&G, the $79 billion-a-year maker of consumer megabrands from Tide to Pampers to Pringles.

He took a risk when he went to bat for virtual reality tools for product development, letting designers get new products to market faster by using digital mock-ups in consumer focus groups. The first iterations were derided as "cartoonish," but they're now used in the development of more than 80% of the company's new products.

Passerini took a risk when he pushed to arm every P&G knowledge worker--tens of thousands of employees--with a digital "cockpit" of easy-to-read charts containing the data most relevant to their jobs. The idea was that there would be one shared version of the facts, so people would stop debating what's happening and focus on solving problems. The first attempt fell miles short of that vision, requiring an 18-month detour to rearchitect the business intelligence environment. Today, however, cockpits are used by 38,000 P&G employees.

Perhaps boldest of all, he led a sweeping reorganization in 2003 that not only outsourced swaths of IT but also made technology part of a broader group Passerini leads called global business services that includes human resources, facilities management, and other services used across the company. The uncertainty in that move initially sent IT morale plummeting but now has turned IT's focus much more sharply on business innovation. Morale, Passerini says, has bounced back.

For taking risks like these, and ultimately delivering business value, Passerini has earned recognition as InformationWeek's 2010 Chief of the Year.

Passerini's most difficult stretch goal, however, still lies ahead. P&G CEO McDonald describes the strategy as "digitizing the company end to end." This isn't just a technology strategy; every business unit leader is expected to show progress on digitizing his or her business. And it isn't a pet project that'll live on only in PowerPoint. McDonald put this digital ambition in his 2010 annual report letter to shareholders, pledging to make P&G "the most digitally enabled company in the world."

That digital mission is part of meeting some audacious global business ambitions. McDonald aims to add 1 billion new customers by 2015, taking P&G up to 5 billion customers worldwide. He has committed to growing market share profitably, and to do that, McDonald reckons, P&G will have to become a $100 billion revenue company that can operate like a nimbler, $10 billion one.

Delivering on all these goals will provide the ultimate test of all that Passerini has put in place.

Virtual Reality: Real Enough?

P&G's use of virtual reality in product development shows the headaches as well as the results that can come from putting business goals first.

In the early 2000s, it was clear the pressure to get new consumer products to market faster was accelerating. P&G needed to compress the time it took to create and test a product, so it needed to create package prototypes more quickly, show them to focus groups sooner, and iterate faster when test consumers panned the first try.

That meant modeling product packages digitally. P&G's IT organization turned to virtual reality, which at the time (2002) was barely in its infancy. For perspective, Second Life, the online virtual reality environment that enjoyed a fleeting burst of fame, didn't launch until 2003.

Bernard Eloy helped lead the virtual reality effort, as head of a team of technologists in P&G's Brussels office. They already were working with their peers in packaging design and consumer research, so they knew the problems well. Building a prototype bottle for a new fabric softener, for example, and creating a real-world mock shelf to test it with consumers took too long--many weeks. And if consumers hated a design, it would take several more weeks to get new versions out.

So the team in Brussels created a way to virtually create both a product and the shelf it would sit on, to appear on a life-size screen. Eloy remembers vividly the response he got when showing it to his business unit counterparts: "Their thinking was that it looked too much like a toy."

The team has continued refining its virtual reality environment, taking advantage of more powerful computers and graphics capabilities, and piggybacking on the explosion of video game innovation. Yet they also field-tested the "cartoonish" version and learned something important: The game-like digital environment didn't hurt the simulation. Comparison tests found that focus groups reacted much the same whether using the simulations or real-life mock-ups. Doing those tests also provided success stories, critical to getting a tool adopted. "People said this saved their product launch," Eloy says.

In one case, designers were making a laundry product with green packaging for European markets--and they didn't realize until the digital demo that a rival bottle looked nearly identical. Seeing their product designs on the shelf, next to competitors', has proved to be a key value of digital simulations. Consider that P&G brand managers could be taking a new product global, facing different sets of rivals in different countries.

Retailers also offered early support for the digital modeling. One of the first was a French convenience chain that wanted to redesign its stores. P&G could show the retailer what products would look like on its new shelves, as well as what promotions would look like in places around the new stores.

That's the next major step for this visual technology: showing an entire store, replicating the consumer experience of P&G products from the time a person walks up to the front door, grabs a cart, and heads down the aisle.

When it comes time to do a focus group using virtual reality, the IT team doesn't just switch on the technology. It provides whatever's needed to deliver that service, including keeping the library of product images up to date so there's a digital image of every competitor on file.

That's the big idea behind Passerini's global business services team, that a centralized team provides the services that business units need. Getting to that place, though, was anything but painless.

Outsourcing And Unrest

Between 1985 and 1999, Procter & Gamble entered 55 new markets, leading to considerable duplication of back-office services, including IT ones. By 1999, the company had more than 100 data centers. "We needed to run in a different way," Passerini says.

Outsourcing was a key piece of the strategy. In just 11 months, Passerini outsourced $4.2 billion in P&G spending. Hewlett-Packard got $3 billion for IT operations. IBM took over many HR operations, and Jones Lang Lasalle the facilities management.

At that time, about 2,000 P&G employees moved over to become HP employees. The company went from more than 100 data centers down to three data centers, in the U.S., Belgium, and Singapore, and three service centers, in the U.S., U.K., and Philippines. The idea was that the remaining P&G global business services team--7,000 in all, of which 3,200 are in technology--would focus not on keeping the lights on, but on business innovation.

But the speed and the scope of that transition were brutal on employees. Uncertainty reigned. Morale in Passerini's organization, as measured by employee satisfaction surveys, sunk to the bottom quartile in the company.

IT was renamed information and decision solutions. But a name change without real change will boost only mockery, not morale.

At P&G, one of the most respected roles is to be a brand manager, the individual who leads product and marketing strategy for one of the world's iconic consumer brands. Many a future CEO has passed through P&G's brand and product ranks--think eBay's Meg Whitman, Microsoft's Steve Ballmer, GE's Jeffrey Immelt. "It's very clear that within P&G being a brand manager is very cool," Passerini says.

So he tapped into that culture for global services, naming individuals as "service managers." The title came with clear responsibilities: Set internal prices, monitor quality, and develop innovations. They must also market their services, as seen in posters in Passerini's office touting new videoconferencing and collaboration offerings. "We manage it like we would the launch of a new brand, a new product," he says.

Passerini also embedded IT people in various business units and made them accountable for delivering business results, from saving money to speeding products to market.

FROM THE TOP

P&G CEO Bob McDonald's shareholder letter talks technology

On Digitizing P&G: "With digitization, our goal is to standardize, automate and integrate systems and data so we can create a real-time operating and decision-making environment. We want P&G to be the most technology- enabled company in the world." On Real-Time Data: "We are targeting a 20% to 25% reduction in some spending areas and we are looking for a sevenfold increase in realtime data. By getting the right data to the right decision makers at the right time, we can become increasingly efficient and productive"

Employee morale in Passerini's group edged back up; now it's in the top quartile of the company. But Passerini still awaits the employee survey each spring with high anticipation. "If people do work that is relevant, that they feel is making an impact on the business, people will respond very well, so morale will go up," he says. Morale, he adds, "is what glues the whole thing together."

Passerini finds it a bit amusing how CIOs constantly ponder "existential" questions about their role--what is my purpose, what will my future be, what is my mission in life?--that no other CXOs would ever ask. "Don't talk about it, just do the work," he says with a laugh. To him, IT professionals are "uniquely qualified" to have business leadership roles, he says, because they have front-line knowledge of business processes and the technology that enables so much of a business. But they need the right perspective. "We believe technology will always be a commodity fundamentally, and information and decisions is what we stand for and what we need to drive," he says.

To get there, Passerini thinks the IT team must do two key things: Provide tools and training to help employees collaborate more effectively, both inside and outside the company; and drive business transformation.

Business transformation doesn't always come naturally to IT. It should, given the IT organization's process knowledge and its place in every part of the company. But IT tends to get comfortable in "enabling" roles--tell us what you need and we'll provide the options. Even more so, Passerini says, IT likes to think in binary options: We can deliver that quality level or we can lower costs; we can provide additional services or we can deliver more quickly.

To that point, Passerini recalls the time he spent in a P&G line management role. He doesn't remember any "or" options. The pressure was for higher profit and higher market share, better quality and lower costs. "We brought this mind-set to IT," Passerini says. "It's and, and, and, and."

A Global Career

Passerini has seen a lot of P&G in a nearly 30-year career with the company. Born and raised in Rome, he joined the company as a systems analyst, working in Italy for eight years. He took a stint in IT management in Istanbul, thinking he'd get some international exposure. He was right, moving to jobs in the U.K., Latin America, and P&G's Cincinnati headquarters. He still gets back to Rome every six or eight weeks, dropping in as he travels the world to see his mother and other family members.

Passerini, by his admission, is not a patient man ("I'm working on that," he says, in his rich Italian accent), even after three decades navigating the bureaucracies of a sprawling multinational company. He dreads that a good idea might wallow in the concept stage.

"We take a lot of risk," Passerini says. "When there's a new idea, rather than talk about it philosophically, we do a pilot for free with one of the business operating units."

That's how one of Passerini's major successes, P&G's information cockpit, got started. There were plenty of days when it looked like this idea was doomed to crash and burn.

Democratizing Information

In early 2004, P&G's IT organization set out to develop BI portals for every P&G information worker. Killer idea, but "six years ago, no one had a clue how we would achieve that," says Andrea Simone, chief enterprise architect, whose job at the time was to deliver that project. By mid-2005, after an 800-user pilot, the harsh reality set in. "The promise was bigger than the actual delivery," Simone says.

The software they were using would never scale to tens of thousands of users. And even if it could, it would never deliver the action-oriented visualizations the company wanted. Simone's team made a lot of tabular, spreadsheet-type data available in one place, but that configuration didn't meet the grand vision of a highly visual "cockpit."

Getting it right would take a complete architectural shift--away from BI as a platform and more toward a portal. And to build that portal would take more than a year. "I told Filippo, 'I'm going to go underwater for 18 months. You have to have my back,'" Simone recalls.

This approach--setting a huge stretch goal, with no clear idea how you'll get there--happens all the time in other parts of the business, such as marketing, Simone notes. In IT, people tend to get hemmed in by the reality of what's possible today. Not so Passerini. "He always asks you to push beyond your comfort zone," Simone says.

Today, 38,000 employees use the cockpit. The idea is to put an end to people fine-tuning which metrics and results get the most emphasis in the spreadsheets they would otherwise e-mail around. It also lets people focus on the biggest problems--regions that are losing market share, so that execs can drill down and find out why, or areas that are booming and might merit more resources. "Cockpits let us manage the business by exception," Passerini says.

The cockpit concept powers the business sphere, the 16-seat executive briefing room that McDonald and the most senior executives use weekly. Often, their discussions center on one of McDonald's business goals of "growing share profitably." The discussion might start with a look at what has happened to market share and profit in various regions, then look to forecasts. That leads to scenarios--say, four views of Western Europe based on whether the overall market rises or falls and whether P&G hits or misses its goals for share of that market.

The data, as Passerini mentioned, isn't perfect. The team takes a hybrid approach to data, says Guy Peri, a director who oversees the business analysis systems. Where it has live data, such as sales data direct from a retailer, it uses that. Where it doesn't, the team creates models to project results. And where it has to model, it's looking for ways to get that real data.

BI is one of the key elements of McDonald's push to digitize "end to end." And there's plenty of work left to do. The cockpit's only on the PC today; it must be mobilized for use on smartphones. The business sphere exists only at headquarters today, but the IT team's working to create 20 smaller-scale spheres around the world over the next three months, so that business leaders can get the same immersive data experience and share it over videoconferences. (P&G has more than 80 Cisco telepresence studios worldwide.)

So what became of Simone, the team leader who told Passerini he needed to disappear for 18 months to get the cockpit done? He got promoted. And his new task is nothing short of digitizing the company--the point man for CEO McDonald's mandate.

The Future: End-To-End Digital

Passerini knows the danger with this kind of grand ambition: "The risk when we talk about real time and digitization is that it becomes a fluff thing," he says. So the global business services team is working to quantify it.

P&G has identified 98 processes that the company runs on. It's looking at how long each of those processes takes--is, say, 90 days the right timeframe for completing a profit forecast? Or should it be 30 days? A week? Then it looks at process and technology changes to make it happen.

All executives have this mission--to find these opportunities and report on what they're doing to digitize their piece of P&G. With that kind of executive backing, Simone isn't worried about doing a lot of evangelizing. "We look like help rather than someone trying to enforce a process to digitize the company on them," he says.

Yet the hard work lies mostly ahead. Looking at those 98 processes, P&G thinks it can cut cycle times for some of them by two thirds, by digitizing those processes and making much more data available at the time it's needed to make a decision. "We're probably 10% there," Passerini says.

In two to three years, he thinks his team can deliver more like 70% of those real-time data needs. How exactly will the team do that?

Passerini will have to get back to us on that. But trust that they're working on it, even if they don't have the perfect solution right now.

Continue to the sidebars:
A Glimpse At Procter & Gamble's Innovation Facilities
and
3 Things That Frustrate P&G's CIO