Green Mountain Makes IT Support RelationshipsBy Duff Mcdonald | Posted 10-15-2005
According to CIO Jim Prevo, Green Mountain CEO Robert Stiller has always looked to his IT people to make changes to the company's business processes with growth in mind. "Of course, it's been a constant challenge over the years to make sure our business peers were 'good customers' of IT," says Prevo. "But we want IT decisions to be driven from the business, as opposed to dangling shiny IT items in front of them."
Lucky for Prevo, at Waterbury, Vt.-based Green Mountain, IT is actually treated as part of the team, as opposed to a necessary evil. "Our goals have always been aligned. We have never approached projects as IT projectsbecause they're not. They're cross-functional business projects, and they require cross-functional business teams."
In some ways, the coffee business isn't all that complicated. All you need is $10,000 for a commercial roaster and an exotic-sounding name. Becoming a major player in the business, however, is another matter entirely.
At that pointlike many commodities businessesit becomes about relationships. And the folks at Green Mountain Coffee Roasters have shown an ability to cultivate those relationships with the best of them. Of course, those relationships cost money to create, maintain and grow.
Green Mountain sold $137 million worth of coffee in 2004, having increased its revenues more than two-fold over the past five years. It sells all that coffeemore than 17 million pounds last yearthrough a network of relationships that includes more than 7,000 wholesale accounts, as well as to customers via mail order and over the Web.
The company sources 50 to 60 unique green coffees and sells it in packages that range from single servings to bags of whole beans. Green Mountain's productssuch as Kenyan AA and Colombian Supremo Popayánend up in corporate offices, gas stations, convenience stores, grocery chains and individual homes. And the company's IT systems were designed to handle even double that business.
The prime driver behind Green Mountain's recent growth has been its relationship with Keurig Inc., a Wakefield, Mass.-based coffeemaker manufacturer. Keurig's big seller: The suddenly popular single-cup machine, in which you insert a small container of the flavor of your choice and it brews just a single cup.
Green Mountain now sells four million individual-_serving size "K-Cups" a week, up from just 35,000 in 1999, according to one analyst. That's four million people looking at the words "Green Mountain" every weekan impression that makes a difference when those same people are shopping for coffee in the supermarket or stopping in at a gas station for a pick-me-up.
How did Green Mountain make sure the systems were in place to handle that kind of growth? Prevo says the most important decision he made came nine years ago. Technologically, the company had grown from just two PCs when it started, in 1981, to 200, and management wanted to know whether to spend a lot of money when choosing an ERP platformor a whole lot of money.
Prevo told them to go top tier, arguing that if they ever found themselves at $250 million in sales, it would be a terrible time to have to start all over againespecially as customer relationships grew bigger and more complex.
They went with PeopleSoft (now Oracle), a decision that required short-term pain for a long-term gain. "It hurt their earnings for two years," says Mitchell Pinheiro, an analyst at Janney Montgomery Scott LLC. "But in retrospect it was absolutely the right move to make. It allowed them to get their arms around a very complex businessthe number of SKUs they have to manage is enormous." Most important, it left the company with the flexibility to take on new business opportunities without jeopardizing its current growth path. "It will scale to whatever size we grow to," says Prevo.
For example, about three years ago, Green Mountain executives realized that instead of gaining efficiencies at the management level as the company grew, it was instead adding more overhead. A sales staff that had been using a hodgepodge of tools to keep track of their relationshipsa handful of PeopleSoft reports, Microsoft Outlook, Excel, Word documents, PDAs and their own headswas becoming increasingly difficult to manage, and would clearly become more so over time. The sales team's reports were exceeding the 65,536 rows available on Excel spreadsheets on a regular basis.
"We were running some scenario planning that assumed we would quadruple our business over some period of time," says James Jennings, director of applied insight at Green Mountain (he manages all CRM-related issues, including sales forecasting, reporting, and customer and product analytics).
"And we realized that if we just scaled everything up four times, it would be awful. So we were aware we needed to make some significant changes to our business processeschanges we couldn't make with Excel and Outlook."
How to make those changes? "It's a proposal process with different stages," says Jennings. "First, you must have your C-level stakeholder. The proposition has to make sense to themthe ROI analysis must be in very clear terms, along with a cause and effect. The cause is the IT project. The effect is an improvement in revenue or a reduction in cost." After a long process of evaluation, the company licensed a CRM suite from PeopleSoft and began switching the sales staff over to the new technology.
The goal was to get to a point where the organization, rather than individual sales reps, could begin to handle more of the customer relationship function, thereby freeing up sales people to focus on salesthe key to further growth.
At the same time, the hope is that the software will make it easier to manage those salespeople more effectively. According to Jennings, the company's direct sales forcethe largest of six sales channels, accounting for about a third of overall businessincludes 40 individual reps whose performance varies considerably. Responsible for selling directly to bagel shops, delis, bakeries, convenience stores and specialty food stores, some sales reps in the channel have brought in substantially more new customers than others.
By improving performance management with the CRM software, the company hopes to boost the bottom 40 percent of the sales staff up to the midpoint for the channel over the next three yearsan enhancement that would result in a considerable increase in revenues.
Simultaneous improvements through simplified work processessuch as pre-call planning and the creation of custom-tailored sales propositionscould produce a double-digit increase in productivity, with even greater performance boosts from sales reps who are focused exclusively on customer acquisition. The company is confident that the new processes will help it grow faster the bigger it gets, as opposed to the decreasing economies of scale it foresaw from sticking with the status quo.
Prevo, Jennings and the rest of the team say they're prepared for some resistance from a staff that's used to the old way of doing things. "They need to understand it's not merely the corporate office being invasivethat we're actually offloading tasks they're not so suited for and freeing them up to grow their business faster," says Prevo.
Just recently, for example, Prevo and his team have pulled responsibility for sending out special offers to certain customer groups into the corporate office, where it can do a mail merge extremely efficiently, thus eliminating the need to have sales people do it out of their home offices.
There will be some hand-holding at first, admits Jenningslike one-on-one training in the new softwarebut, at some point, the sales team needs to realize that it's not an optional change in _the way the company will do business. _"It's like Shackleton's expedition to Antarctica," he says. "At one point, the ice started crushing the boat. They knew then that _they couldn't stay where they were. We have to provide that level of clarity: You cannot stay on the boat."
Not that there are too many people so stubborn as to resist the inevitableespecially when it's ultimately for their own good. Adds Prevo, "The resistance goes away when they realize that it's a team effort and not Big Brotherthat they will actually benefit from the changes."