Kroger Chief Information Officer Chris Hjelm has led IT at a number of leading companies such as FedEx, eBay, and Cendant prior to joining the $108 billion business, operating food retail and drug stores, multi-department stores, jewelry stores, and convenience stores nearly ten years ago. Not content to lead a mere support organization, Hjelm has always thought about the strategic use of technology, and has long been a contributor to top and bottom-line gains to the enterprises of which he has been a part.
For example, Hjelm has instituted a research and development-type function within Kroger IT to investigate new innovations. Examples include investments in locationing technology that help the company ensure enough people are at the cash register before a rush of people have arrived to check-out, and digital shelf signage that help associates and customers more readily find what they seek. He also encourages his team to think like customers as they shop for groceries.
It is no wonder that Hjelm has been asked to join a number of boards in his time, as other companies seek to have him bring the same creative thinking to their companies. In the process, he has forged a path that a variety of others should seek to follow.
(To listen to an unabridged audio version of this interview, please visit this link. This article is part of my series on board-level CIO series. To listen to the prior articles featuring the CIOs of companies like FedEx, Cardinal Health, The World Bank Group, and Southwest Airlines, among others, please visit this link. To read future articles in the series, please click the "Follow" link above.)
Peter High: You're the Vice President and Chief Information Officer for the Kroger Company. Please talk about your role at the company.
Chris Hjelm: From the CIO perspective, it has everything to do with technology at Kroger, so that's everything from technology in our stores, to the systems that run the business, as well as the corporate office and other divisions around the company. The simple thing about Kroger is that, versus some other places I've worked, it's a US company. So we have pretty much everything here in the US market, which makes life a lot easier than traveling the globe, as I've done before.
High: I notice also, another area of responsibility is overseeing small format strategy. Can you talk a bit about that?
Hjelm: Sure. As we look at ways of meeting the needs of our customers in the future, we work on the best ways to combine convenience, the right locations, and the right assortment of products. It satisfies that customers "fill-in trip.” This is different from the large weekly shopping trip. Maybe it is picking up some breakfast items, or grabbing dinner for the family, or supplementing an item or two in the pantry. Those small format stores historically were referred to as convenience stores, but I think, particularly in urban areas, they've had a much broader variety and targeted a different customer trip. We're looking to supplement the market in which we serve customers in a format that we think will connect in a different way. Hopefully, we'll get a lot more of that customer's share of wallet.
High: You've been a CIO at a number of leading organizations including FedEx, eBay, and Cendant. As you embarked on this journey a number of years ago and joined Kroger, how did you prepare yourself as a part of a new industry--an industry you knew as a consumer, but not one that you had known professionally?
Hjelm: Years ago, when I was looking at different industries to work in, I don't know that retail ever came up on my top-five list, or even top-ten list. I've had a variety of industries that I've worked in, including high-tech, e-commerce, and transportation. When I left Cendant, and I was trying to figure out what to do next, this Kroger opportunity showed up on the radar, and my wife said "What a perfect place, you absolutely love grocery stores.” And that's actually true. I am a reasonably accomplished cook. I do everything from baking pies to managing the grill, and everything in between. For me, time in the grocery store is always enjoyable. As a consumer, I enjoy the experience but have always looked at it with an eye towards how it could be better. And coming into Kroger, I can't imagine a better place, or better business, where you get constant feedback from family and friends every day. People always have an opinion about their local supermarket. It's been a really good experience for the nine-plus years that I've been with Kroger.
High: Can you talk a bit about innovative use of technology as you think about the portfolio of things that you oversee, as well as the portfolio of initiatives that you're leading? What are some of the creative ways that you're thinking about technology and its use within Kroger?
Hjelm: We started a research and development department shortly after I joined Kroger, and I've always been a big believer in having that capability inside an organization. At FedEx we had it, and at Kroger I thought it was something that we could apply to change the trajectory of the business. If you think about it, we engage with seven million customers every day. If you combine our fuel centers, supermarkets, and jewelry stores, we have right around 4,000 retail outlets, and we have 380,000 associates. Those are large numbers to work with, which to me present unique and challenging problems to solve.
When we started off, we focused on things that we thought could fundamentally change revenue or materially lower cost or dramatically change the shopping experience. One of the early projects that's become a pretty well-known success from an industry perspective is a system that we call Q-Vision. Q-Vision's mission was to improve the checkout experience for customers and associates. We reduced the average wait time in a check-out line from about four minutes and we now average around 30 seconds. That was done with a fair bit of technology, a lot of operational execution, and a lot of training. But fundamentally, we dramatically improved service with very little to no incremental labor; just sheer productivity improvement. It uses a combination of infrared scanning, some very good predictive analytics, and we basically count customers coming into our stores, figuring out who is a family, who is shopping by themselves, and we do a very good job of predicting how long people are going to shop. We use that to appropriately staff, and in real-time manage the staffing in the front of our stores to make sure that we maintain that great checkout experience.
The example I use is if you and I are working together and it's not busy in the front of the store, the manager might say “Why don't you guys go take your break?” The system tells you how many lanes are open now, how many lanes should be open now, and how many lanes should be open in 30 minutes. If we know we're going to get slammed in the next 20 minutes, we wouldn't go on a break. But, looking at the front of the store, you may not know that. So basically, we provide a lot of visibility to what is going on in the store that might not otherwise be understood, and there's a management system that's wrapped around the performance so that we can consistently manage that very high standard of service. It's a combination of different technologies, but more importantly, it's the package that we assembled and the way that we engage our Kroger associates to manage that system that's allowed us to achieve the results that we have.
High: So many of your peers have an issue of the business being a bit esoteric, and therefore, the average person in IT may not have a personal relationship with the business. I'm thinking of B2B and B2G type companies where it's impossible to go into a store and interact with the products in creative ways. Obviously, you're blessed with a business that every single person on your team presumably can experience, and can use that as a learning opportunity. I'm wondering if and how you think about your team's interactions with employees, customers, walking the aisles of the store, and how that is used as inspiration for the kinds of ideas that you've already described.
Hjelm: Whenever I meet with new hires and welcome them to the company, we talk about that. We talk about the beauty of the company being that you can go experience our services every day, and you can look for opportunities. And trust me, there are plenty of opportunities in the food retailing business.
I'll give you a second example. We recently built some custom temperature monitoring technology that goes into our frozen and refrigerated cases, and we're using a new network protocol called ZigBee. You can think of it as technology that sits on the wireless spectrum like Bluetooth or Wi-Fi, but it is wireless technology that excels at locationing because it creates a mesh network. Going into our stores, one of the things that you often heard complaints about was the refrigerated or frozen case that had a compressor go out. If that happens in the middle of the night, in the morning the food is not at a safe temperature and has to be thrown away.
We would manually have associates check temperature logs. There were thermometers in these cases, and people would check temperatures multiple times a day. That's not the most rewarding task on the planet, and the accuracy with which it was done wasn't always the highest. I was shopping in our store one day, and they had completely cleaned out the cheese case. A failed compressor had been caught in time, and they were able to take some product back into the freezer in the back, but we weren't able to sell product. We designed the system, and are rolling it out. Now, the second there's a deviation to the normal cycle of a refrigeration unit, it sends an alert to the store manager, and it sends an alert to the repair technician. So if there's a problem, we're catching it within minutes, and they're able to repair these issues before there's an impact to the product.
Once again, think of it across 2,650 stores, with all the frozen cases. That's a big task to have our associates do that manually, and we're automating that task. It is a win for associates and a win for customers. At the time we invented that, there wasn't any technology that could do that, but, by having our research and development team, we were able to lower the cost, do it ourselves, leverage the network that we were putting in our stores, and that's a pretty unique set of capabilities that most retailers don't have.
High: I know that some of the other innovations Kroger was on the leading edge of were self-service and self-check-out. I realize others have come up to speed on that as well, but I'm curious, as you think about customers' adoption of technology (as obviously that is a new way of experiencing the grocery store), how do you think about helping customer adoption of new innovations like that?
Hjelm: I think customers have different needs. Some customers are not crazy about being in the grocery store. They're not like me, they don't enjoy it. They want to get in and out as quickly as possible. For those customers, how do we facilitate their getting in and out of the store as fast as possible, making sure their route is efficient, making sure they can optimize finding of products, making sure using coupons is easy?
Somebody else may have a different need. The example I use is with customers who are gluten-free. We're working on some really interesting next-generation shelf edge technology. Think of it as a digital shelf edge. That digital shelf edge would replace traditional paper tags. Think of it as a pricing replacement, a tool that helps associates stock shelves. But using locationing with the consumers, we also have the ability to highlight something like gluten free products. If you're looking at nutrition bars, we could highlight on the shelf, in your color of choice, the products that are gluten-free.
Also, think about the historical manufacturing systems (traditional warehouse picking solution). If you think about a customer shopping, or an associate picking an order for a customer to pick up at our store or deliver to their home, we can incorporate that same pick-to-light technology to facilitate the picking of a grocery order. Say you had a particular bottle of wine on your list that you wanted to get. Finding it in the wine department isn't always easy, but wouldn't it be nice if it would just highlight for you the bottle of wine that you needed to grab. We think we can shave a fair bit of time off the average customer's shopping trip, but also make it more enjoyable.
High: Another topic I wanted to raise with you is that you are a CIO who has joined the boards of multiple companies. How did you get involved in board work and how has it benefited you as a CIO of Kroger? How have you brought some of the insights from the conversations you're having in two very different industries back to your day job as well?
Hjelm: I was actually on the board of a startup company. I chaired that board, which was a great learning experience. We had some venture capitalists, angel investors, and then Gary Loveman, CEO of Harrah's was on our board. Earlier in my career, it was a great way to get a feel of what it meant to be a part of a board. Probably seven or eight years ago, I got a call from a recruiter who was looking to fill a board position at a company called RehabCare. It was a public company. They had some pretty significant technology issues with project delivery, and they didn't have that experience on their board. They were specifically looking for somebody who could come in at the board level and provide some strategic guidance on how to attack some of the problems, and also somebody who could serve as a mentor and a resource for the CIO. That was how I got started.
I was fortunate enough to be selected to that board, and be there for several years and a fair bit of success. I had new terminology to learn in healthcare, but how you attack business problems, and how you apply technology to those solutions was quite similar. Some of the thought process that I borrowed from FedEx helped me think about productivity improvements for our therapists, and we were able to deploy technology that helped improve productivity. It was progressive using mobile devices. We were able to leverage Apple technology because we thought it was a good fit for ease of use. Their ability to track and manage their activities and time with patients ended up being a real win.
From there, RehabCare was acquired by Kindred Healthcare. That was about three years ago. They ended up selecting two of the RehabCare board members to join the Kindred board, and I was fortunate enough to be one of the two. I've been working with the Kindred board over the past three years.
High: As I think about the many people profiled as part of the board-level CIO series, it seems like there are some companies who are looking for assistance on things like security which are becoming so much more prominent, but others are looking for new innovative ways to leverage technology. Do you find that your role on the board is to address either or one or the other to any great extent?
Hjelm: I think that the answer varies. At one company, we had some specific execution issues to work through. That included a change of CIOs, and I helped with the recruiting process for that position. I would say at Kindred it's really strong execution, and we've focused more of our energy there on technology innovation, and they recently brought on a new CIO, and I was part of that process. I got to talk within the final interview to their preferred candidate and help provide some thought on innovation, knowing the board, knowing the management team. It's kind of a mentor, or certainly a support resource to accelerate the new CIO getting up to speed and effectively working with the board. I think in that case, it was earlier on, that was kind of the focus over the past six months. Information security, while it's always been a board topic, has had a little bit more passion and energy around it in probably every boardroom in the country. I think the experience that I bring or a sitting CIO would bring is useful, partly because it's a different industry, and in this case, retail has been a little ahead of the curve in terms of being a target for the bad actors, because we had data assets, credit card information, personal information that people would want. But the healthcare industry has valuable data as well. I do think it helps the rest of the board when they have a member of the board that can go deeper on a topic and provide some guidance and feedback to help make sure the board is appropriately spending its energy to support the company.
High: As you think about your background, what is it about your experience that you think made you qualified to be board-ready, and for others who might wish to follow in your footsteps, what advice would you offer?
Hjelm: That's a good question. I think the first thing is to be a well-balanced business leader. You have to be able to grasp the opportunities, the challenges, and work as a part of a team to go solve those. You happen to bring a specific expertise, or in my case, I happen to bring an expertise to the board, but you're part of a team. Your ability to understand whether it's the healthcare industry, retail industry, transportation, and how you identify opportunities, how you address strategic planning, how you address business planning, talent management, and succession planning. All of those things that business leaders deal with is how you as a board can support the company.
I think first and foremost, if you are narrowly identified and viewed just as an IT professional, I think you're going to miss the mark for what most boards are looking for.
The second thing is you have to engage. I think most business leaders are pretty balanced at doing that, but you have to be part of the conversation. Whether you're sitting in an audit meeting or whether you're part of a compensation committee, you need to do your homework, you need to be prepared, and you need to engage. You don't only engage when an IT subject comes up. They expect you to be fully engaged and participating in all board subjects, in the same way they would expect a former CFO or CEO. They want that diversity of experience applied to all topics.
Finally, at Kroger, one of our board members retired recently, and he was giving advice to the rest of the board, and he said, "Noses in, fingers out". It's easy to remember, and I think it helps. As a board member, my job is not to manage the business, my job is not to manage IT. My job is to understand, provide guidance, provide input where asked, and basically be a resource to represent the shareholders interest. I would encourage people out there to get engaged in their own companies, even at the board level. Get involved with the board, ask them those questions, ask them about their role, ask them how they see their role, because I think those different perspectives are useful. I would also encourage my team, and I look for opportunities for them to be on advisory boards, to start with non-profit boards, to get familiar with governance, what the responsibilities are of the board. I think the more experience that young leaders can get, the better position they'll be in when they get that first opportunity to join a private or public board.
High: To close out, I wanted to ask about your own perspective on trends that particularly excite you. There have been a number we have already talked about, but are there others as you look out a year or three that particularly excite you, and the business implications of technology that excites you?
Hjelm: It's a fascinating time. There is so much going on. One that comes to mind is productivity. I think there will be a continued explosion of what we're going to do to leverage technology to drive productivity. Whether it's locationing technology, I think open-source is going to have a huge role in both speed and productivity, the globalization that's taking place, the amount of data.
Take my example earlier with infrared where we're doing a video system that we're rolling out that has on-board video analytics that we're using for all kinds of interesting queue management solutions that we're using in our delis and meat departments to identifying traffic patterns and helping with store design. There is an enormous amount of IT that is going to be applied to improving productivity.
The other one for me that is top of mind, that I think we're just scratching the surface of, is personalization. Whether it is in our world, helping to facilitate the shopping trip of customers to improve how they can engage with us. They give us a lot of data. They share a lot of data online and via social media. How can we use that data that they're willing to share in a way that we can create better services?
I used the gluten-free example, but if a customer is willing to tell me that they're gluten-free, why wouldn't I want to share with them gluten-free products, whether it's in a promotional advertisement or coupons to offer to them? We're currently relevantly ranking digital coupons for customers. We hit the billionth customer download for digital coupons early last year, and it's a cumulative number that we track. The pace is accelerating, and I think part of the reason is because we are making it relevant for the consumer. It's truly a personalized interaction with the services that we offer, and I see that mobility has had a role in that. I think locationing has had a role in that, as well. All of that together creates some really compelling experiences.
Peter High is President of Metis Strategy, a business and IT advisory firm. His latest book, Implementing World Class IT Strategy, has just been released by Wiley Press/Jossey-Bass. He is also the author of World Class IT: Why Businesses Succeed When IT Triumphs. Peter moderates the Forum on World Class IT podcast series. Follow him on Twitter @WorldClassIT.
