A Catalyst for Success

March 3, 2008 by Stephan De Maria

Modern information technology refines company data into usable knowledge – often referred to as “business intelligence” (BI) – which executives and managers then apply to support their strategic and operative decisions. However, the longer such tools are on the market, the clearer it becomes that technology alone cannot guarantee success in business. The need to supplement the analysis of past and current statistics with predictive methods to increase profitability has led to the concept of corporate performance management (CPM).

The Croatian food and drug company Podravka has recognized the value of this approach. Following the initiative of its CIO, Damir Martinovic, the company developed a program to speed up implementation of its business strategy.

Founded in 1936 as a preserves and jelly factory, Podravka is now a dominant force beyond its home market. “From the Baltic Sea to the Black Sea, we’re a major player in our industry,” says Martinovic. Podravka employs 6,800 people at 25 subsidiaries, plants, and sales offices. In addition to eastern and southeastern Europe, the company delivers its products to Germany, Australia, and the United States.

Independence is first priority

Still, the ongoing process of concentration in the food industry is leaving smaller companies like Podravka, with revenues of u500 million in 2007, little room to breathe. “It’s eat or be eaten in our industry, and we’re doing our best not to land on the plate of one of the big companies,” Martinovic says. Developing independently helps in this context. “It’s a conservative business with modest growth rates,” the CIO reveals. “But our performance is above-average.”

Besides maintaining high standards of quality, concentration on certain markets and product categories is key to success. “We want to increase our revenues abroad while raising our brands’ profiles,” says Martinovic. In the long term, Podravka wants to become the market leader in specific product classes in central and eastern Europe. The company’s best-known product is Vegeta, a blend of spices it has sold for over 50 years. Podravka’s other best-selling products include sour preserves, instant soups, and the pepper relish Ajvar.

The company, whose largest shareholder is the state of Croatia, is divided into four divisions: foods and beverages, pharmaceuticals, services, and corporate functions. Podravka’s IT department, which was formed in the 1970s, is represented on the company’s executive board. “We view information technology as one of our core functions,” says Martinovic.

Comprising 84 employees and located at Podravka’s headquarters in Koprivnica, northeast of the Croatian capital of Zagreb, the IT department’s responsibilities include everything from telecommunications to business software. “Central management makes us efficient,” Martinovic says. “Whether its integrating a branch office or installing new applications, we handle it all here. That makes things simple, fast, and secure.”

For this CIO, who worked as SAP consultant and consulting manager before joining Podravka, simplicity is essential. “We employ only as many systems and partners as are absolutely necessary,” he says, referring to SAP, Microsoft, Hewlett-Packard, and Cisco as the company’s main associates. According to Martinovic, Podravka’s SAP ERP installation currently serves 15 subsidiaries, and more are on the way. “Limiting ourselves to one system helps us stay active, agile, and efficient,” he says.

“Our job is to accelerate the implementation of our company strategy and enforce it in our daily business,” notes Martinovic. Since this is more of an ongoing process of improvement than a one-time project, Podravka’s IT department took the time to put together a comprehensive CPM program. What began at the end of 2006 with initial evaluation measures will this year become an integral part of the company’s processes.

Finding the right partner

Podravka went shopping for the necessary technical knowledge: The consulting company Cubeserve (Switzerland) provides Podravka with the relevant conceptual, organizational, and technical expertise. The most important initial task was mapping all of the company’s IT-supported processes in the SAP system, which Cubeserve also handled. First, every Podravka management process was checked for improvement potential. The results formed the basis of the program that has been ongoing since mid-2007, which consists of several subprojects:

  • upgrading to SAP NetWeaver BI 2004, including rollout to all levels of management
  • reworking all controlling processes
  • reworking all key figure systems
  • implementing a balanced scorecard methodology
  • revising of long-term planning

Having worked with a key performance indicator methodology for three years, Podravka already had a solid basis for these tasks.

Setting up a CPM competence center which will handle the operational monitoring and management of the company’s success rounds out the agenda. Marc Friedrichsen of Cube-serve explains the crucial importance of this new center: “Podravka is going to measure its success by its constant, long-term ability to actively run this program.” He adds that this has to be lived, and the competence center has to provide the corresponding impetus.

Podravka laid the foundation for this in advance. “To get a clear picture of what we were dealing with, we first agreed on a binding definition of CPM,” says Martinovic. This familiarized everyone involved with the aims and scope of the program to promote buy-in. Martinovic and his team are now focusing on refining the results
of this preliminary work for the lower levels of the company hierarchy.

The competence center comprises a manager and three CPM specialists. Business associates from every company area perform preparatory work for the CPM CC, and the overall unit reports directly to the executive board.

Podravka’s strategic and operational planning and its implementation – including performance measurement – have been realigned based on its improved system of reporting. The resulting increase in transparency has a reciprocal effect on the company’s planning, increasing its accuracy in subsequent cycles. “This will lead to the ongoing, iterative process of improvement we want in our everyday operations,” says Martinovic. The CIO can count on the support of the executive board. “We don’t want to reinvent the wheel; we’re just looking for an opportunity to better realize the targets set by company management,” he explains.

In the future, Martinovic hopes to see the program as integrated and self-evident as working with software. “SAP is an essential work resource. In the new products and releases, we’re finding everything we need for our program with respect to information technology,” he says. “Now all that we need are a few more employees who provide both IT expertise and industry competence…”

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