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Michael Voegele, chief digital and information officer (CDIO) at Philip Morris International (PMI), relishes undertaking big leadership challenges – and they don’t come much bigger than using technology to help underpin a significant transformation in the business model of a company that is best known for manufacturing and selling tobacco and cigarettes.
“I’m enjoying it,” he says, reflecting on his two and half years leading IT at the company. “I think the decision to join PMI was about changing stuff, transforming an organisation, having a challenge that you can solve, and then leaving something behind.”
Famed for its heritage in cigarette manufacturing, PMI is in the midst of a shift towards selling smoke-free products that, although not risk-free, are designed to create a nicotine-containing tobacco vapour without burning and smoke. Voegele says this represents a huge shift in business model – and technology plays a crucial supporting role.
“This transition is about converting and helping smokers to convert to a different product that is risk-reduced,” he says. “I’ve gone into a role that involves a huge transformation, with a range of challenges, but also with great opportunities to help the business, to change the way we operate and change how we deliver IT solutions.”
Voegele became PMI chief technology officer (CTO) in February 2019. He previously worked for sportswear giant Adidas, which he joined in 2011, fulfilling a range of senior management positions before becoming CIO in November 2015. During his three years leading IT at Adidas, Voegele pushed significant tech-led change across the company.
“We changed a lot of things – the way we did business and the way we worked together across functions,” he says. “We helped the company move into the omni-channel world and we worked on really eliminating multi-channel thinking. But then there was the question of ‘what’s the next big challenge?’"
“You have to be part of solving a problem”
Michael Voegele, Philip Morris International
As he reached the end of 2018, Voegele couldn’t see an immediate opportunity for further transformation at Adidas. The company’s IT was at “a steady state”, he says. So he decided to take a break from IT leadership and spent some time with his family. In February 2019, the opportunity at PMI came up and Voegele was impressed.
“At that point in time, PMI was five or six years into the journey of commercialising its risk-reduced portfolio,” he says. “I was impressed about the progress of the company within those years – innovating, creating, designing, developing and marketing a completely new product, which also fundamentally meant moving from a B2B business to a B2C business.
“That was impressive, but then I had conversations with the CEO and said, ‘where’s the journey going?’ and then, when I heard about the ambition, I said, ‘that’s the right place, if you look for a challenge’. And that’s when I joined.”
Shifting the technology focus
Voegele recognises that the journey that he and his colleagues at PMI are on is all about transforming a company from the old to the new world. So, what does it means to be working for a company whose heritage is all about smoking, but which is looking to develop a new business model and a smoke-free future?
“You have to be part of solving a problem,” he says. “There was this milestone of saying, ‘can we convert and provide solutions to the one billion smokers in the world that would otherwise continue smoking? Can we give them something that is – not risk-free, but risk-reduced – and, once we are there, how can continue that journey?’”
Voegele’s role is to help transform a technology organisation that he believes was still set up in more a traditional way. When he talked with senior bosses before joining the firm, he discovered that the key IT project on the horizon was the implementation of a global instance of an SAP environment.
He says PMI was planning to spend north of a three-digit million euros amount on renovating the back-end infrastructure as part of this initiative. Not only did he believe this approach was misguided, he thought SAP was badly suited to an organisation that was looking to engage much more directly with the people who would buy its risk-reduced products.
“I asked, ‘What is the motivation of an organisation that says it’s consumer-centric to be focusing all its resources on renovating something internally? What is the consumer getting from us if we renovate our ERP [enterprise resource planning] environment?’ And it was funny because at that point I said, ‘If you want to continue this project, I’m not going to join’,” he says.
Voegele didn’t want to sign up as tech chief and then have to run a massive, five-year ERP renovation. The board agreed and the project was stopped. Attention then shifted from back-end to front-end concerns – and one of these priorities was about ensuring the organisation was set up to make the most of digital-led business transformation.
“I think everybody understood that focusing on the front-end side and consumer impact is what we need to do rather than just being busy within our four walls,” he says.
Delivering an integrated approach
Voegele inherited what he refers to as a bi-modal, two-speed approach to IT, whereby PMI ran separate digital and IT units. The digital unit was responsible for consumer engagement and marketing activities, and IT was accountable for driving efficiencies and maintaining the legacy environment. He took a different and combined approach to IT and digital.
“You need to have an integrated view, which is not an isolated strategy but an embedded element of the business strategy to see how technology is able to accelerate our journey,” he says. “It’s not about old and new technology and segregating it, because that just creates other silos and a lot of issues.
“At the end of the day, there needs to be a connection between your legacy and your future. You have to create the conditions for your digital business that are also linked to your legacy. So we had to rethink how we structure ourselves and how we set our focus; how we invest our resources, but also our money and how we create teams that can actually make an impact.”
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When Voegele looks back on the changes he has made at PMI, he says they can be categorised into three distinct elements: cleaning up the firm’s 2,600 legacy systems; focusing on the procurement and development of technology systems the business needs for the future; and end-to-end ownership for platforms, where the IT team delivers integrated capabilities for its business partners.
“I think across all the pillars, we have made significant progress, which I’m really proud about,” says Voegele, who inherited 2,600 business applications when he joined PMI in 2019. His team has already cut this estate by 500 and has plans to remove another 500. More than 200 applications, meanwhile, have been moved from the data centre to the cloud.
When it comes to developing applications internally, Voegele has overseen the creation of an 80-strong team of software engineers that are embedded across the business. These engineers build digital capabilities for various line of business around the globe. Finally, the integrated approach to IT development has placed technology at the heart of the business.
“We don’t start conversations about technology,” he says. “Instead, we start from thinking about what we are trying to solve from a business-challenge or consumer-problem perspective before we actually engage in any technology conversation – and that’s a big shift and a positive change.”
Creating local solutions to global challenges
Voegele says this three-pronged transformation effort has helped to shift perceptions of technology across the business. In March this year, he assumed his current title of CDIO, reflecting the fact that tech leaders must be business leaders first and foremost.
If you want to drive digital transformation as a tech chief, you must be an equal partner, says Voegele – and despite his team’s achievements so far, there is still much to be done. “I wouldn’t say we are done. I think we still have a big journey ahead of us,” he says.
“If you look at our most important component, when we look at our consumer engagement platform, we are still in the roll-out phase to make it a global platform. So, by end of this year, we will have deployed our suite for consumer engagement in 20 markets around the world, potentially covering 60% of our current consumers.”
Voegele says some of his key challenges involve the continued development of an omni-channel shopping experience, where PMI must, from a regulatory perspective, consider how it transacts online an how it interacts with customers around the globe.
“There is a different regulatory environment in each region,” he says. “In some markets, you can do online awareness; in some markets, you can do online e-commerce transactions; in some markets, you can do a certain kind of marketing and others not.
“So I think the fundamental difference that I can compare us with my former employer is you have to be very disciplined when it comes to understanding the regulatory environment and designing the solutions, so that in every market that you go into, you comply with the regulatory guidance that you have.”
Voegele acknowledges that any enterprise platform must evolve in response to the changing consumer requirements that the rest of the business sees. He also suggests that one of the biggest issues for the IT team is being both global in outlook and approach, while also being fast and innovative at the local scale. It is another challenge he will look to overcome.
“The market is where we interact very closely with the consumer,” he says. “But we want to have global platforms that allow us to build global consistent brands and experiences. So finding this balance of actually creating a core platform that has the ability to support innovation at the front-end side of the house – and to create those differentiating capabilities market by market depending on the local consumer preferences – is a big challenge.”