Catching Up With Donagh Herlihy, VP & CIO, Wm. Wrigley Jr. Co.

Kara Romanow sits down with Donagh Herlihy, vice president and chief information officer, Wm. Wrigley Jr. Co., to find out how he manages challenges around bringing new products to market, collaborating with retailers and being part of a global business. Also, read about who inspires him and how he survived swimming with Great White sharks.

What keeps you up at night?

In my mind, getting consumer relevant innovation into marketplace and ensuring the consumer knows about and understands the brand/product proposition is the industry's biggest challenge. There is a lot of product tweaking going on with consumer products through line extensions and feature enhancements, but not real innovation that the consumer values.

At Wrigley, we have a great track record in innovating, but in general in our industry about 75 percent of new products launched don't succeed. The magic would be if you could predict the one in four that will succeed and then align your resources and the organization behind that success so that you can really capitalize on it.

But the reality is that, even if you have a great product with a proposition that distinguishes it in the category, you don't know with certainty what the outcome of a new product will be in the marketplace until the consumer (who has the final vote) weighs in. So, you're still taking measured risk and the great challenge is having a business model that allows you to flex when a product is a great success in the marketplace, or scale back if it's not a success.

In trying to address this challenge through IT we looked at a software company recently that is based on the principles used in the simulation software adopted in the aerospace industry. Boeing or Airbus will simulate the entire build of an aircraft before actually cutting materials, making sure that in a virtual world all the pieces work together. Now some of these concepts are coming into our world to look at supply chain scenarios and examine sensitivities with new products. As you go into new markets you can develop a range of scenarios and outcomes to allow the creation of a best fit supply chain/investment model. In consumer goods we traditionally simulated potential outcomes by function, but not across the entire process, and it's at those boundaries that the misses occur. Ideally you will simulate how a new product or marketplace will impact the overall value chain and technology can play a critical role here.

How can manufactures and retailers better collaborate?

You've seen the pushes with RFID and with data synchronization and before that we had CPFR and ECR. They are wonderful old concepts for collaboration and the technology has been there for a long time, but it seems to me that collaboration is more about synching everyone's objectives and resources. The best collaboration projects are when people from two partnered companies believe in the scope and outcome of the project and are willing to target resources so they succeed. One project at a time and one relationship at a time. I struggle with these big industry initiatives where everybody is working towards the same mandate regardless of the business value to the individual participants; you see passive resistance or compliance at best, but not real collaboration.

Any collaboration needs to motivate both trading partners and they both need to get something out of it.

We have a great consumer-driven supply network pilot in one of our geographies where we are collaborating with a big customer. They are motivated by the solutions we bring, and we are motivated by the access to demand information and insights. The wins include high service levels for the retailer and reduced inventory levels for both companies, and are substantial enough that we should invest resources. We also bring other solutions in terms of category management and consumer insights to this retailer. And it's broad collaboration that's necessary to build a business; we do collaboration well and we build partnerships where we bring solutions to the retailer and expect the retailer to share consumer demand and other insights.

Our job at the end of the day is to educate the retailer and provide insight on the confectionery consumer and the category because that's all we do; it's a question of focus and depth of insights and knowledge. In fact, retailers are very interested in those activities. Some collaboration is just good old category management or shelf-space management. We have done some collaborative studies with companies whose products are carried in the front of a store, like magazines, sodas, razors or candy, and you can get wonderful insight on how consumers shop and make decisions and where they make their decisions. Our understanding of confectionery, the consumer and how the consumer shops brings value to the relationship because it helps retailers drive their business. What are the industry's biggest challenges in bringing new successful products to market?

Reaching the consumer and driving awareness and education about the product is the biggest challenge. Creating consumer pull for new products is a challenge. In the good old days there was a traditional consumer goods model where we all threw dollars at TV and mass marketing and everyone did it the same way. Then it was just a matter of how much you would spend to get people to try new products and to get repeat purchase. But now reaching consumers is tough, maybe because of technology: cell phones, internet, Playstations, etc. Some consumers are digesting two to three different mediums simultaneously -- they may be reading a magazine, watching TV and instant messaging their friends, so the model for creating consumer pull is more challenging.

Consumer goods companies create brands and awareness and affinity and loyalty, but it is getting much more difficult and complex for marketers to reach consumers.

You need to recognize where your target consumer is spending their time and add value for them in a way that's not obtrusive. For example, we have a great Web site, www.candystand.com. It's a free gaming site that has more than 10 million visits per month. And on that site, we offer fun and interactive ways to connect with our brands. We've even woven our brands into those games. This is the wave of the future.

What challenges do you face as a global company where 65 percent of your business is outside the United States, which is much higher than many of your peers?

Any unexpected benefits?

When you have operations in more than 50 countries and products sold more than 180 countries, it can be hard, from an IT perspective to get all the scale benefits, you remain somewhat fragmented and still need people in a lot of locations. Getting scale benefits is also challenging because of tactical issues in building shared services. We run our company on a single global instance of SAP and as an IT group we need to deal with clients who operate in lots of different languages and lots of time zones, which leads to lots of early morning and late evening calls. But all these challenges are surmountable.

The most important benefit of being global is the wonderfully diverse workforce. We are naturally diverse because we have as many people in China as in the United States, and have insights into different consumer trends and needs. If you are tapped into all of those markets and have local people running those businesses, then you have a real big portfolio of ideas. The ability to understand those ideas and bring something that has been proven in one culture to another culture is important to our business.

For example, one of biggest drivers of growth in China has been a new packaging idea where 45 pellets of chewing gum are put into a plastic bottle. It changes the dynamic with the consumer around sharing the product and using the product, and we are transplanting that packaging idea around the globe.

Another benefit of being global is the ability to create big, global brands that are loved by consumers the world over. We have a huge marketplace opportunity. We can leverage all the things we know about products, merchandising and consumers across geographies and increasingly global retail customers.

Of course, you also have to be aware of the similarities and the differences between consumers around the world. This can apply to brands, packaging and flavors.There are some shared likes in flavors (mint and fruit flavors) and then there are unique flavor profiles which are generated locally, but have the potential to be shared around the world. For instance: we have a product that was first introduced in Europe that has a menthol eucalyptus element and offers really exhilarating taste experience. That product also resonates with consumers in Asia.

Certain specific flavors are common to some countries because of the local cuisines. Sometimes, those flavors really are only locally specific, but it is also a possibility that they may transplant well into new geographies.

Overall, the benefits of being global are huge for our business. Big ideas are coming from the diversity of the workforce and the experience of our local people.