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When Preem, Sweden’s largest fuel company, conducted a complete overhaul of its business strategy recently, it included the IT function in the process for the first time, according to CIO Claes-Håkan Johansson.
“We think this is a very good thing,” he says. “It is the first time that we in IT have helped to build the business strategy.”
How to make IT a part of the business is a question IT functions are constantly asking, says Johansson. “How do you get into the business? How do you get involved, so you can contribute instead of just taking a back seat, waiting for commissions?”
Preem owns hundreds of petrol stations in Sweden as well as two oil refineries. Its business is divided into three parts: refining, retail, and supply and trading.
The company’s new business strategy runs until 2030, and Johansson says the length of the plan is a key break from the past. “Earlier, we had five-year strategic plans, and we had too many,” he says.
Complications arose because each business had its own plan, and they would then try to find ways to co-operate with each other. “Now Preem wants to merge the business areas into one entity,” says Johansson.
The company as a whole has three broad strategies, he says: to have efficient, renewable production; to have world-class profitability and market efficiency; and to be the most innovative and responsible fuel company in Sweden.
IT has no role to play in the first part of the strategy, says Johansson. “Efficient, renewable production is about how Preem develops new products, for example to replace diesel and gasoline,” he says. “To do that, you have to be a chemist, which the IT function’s competence does not cover.”
But in the second and third parts of the strategy, IT can support the business and drive it forward, says Johansson. “There is no doubt that we can be a part of making Preem world-class in profitability and market efficiency,” he says. “We are not fully immersed in this area yet, but we are in the middle of a huge ERP [enterprise resource planning] implementation, and that is a step in that direction.
“Our application portfolio will be reduced, and when we get used to the features in our new ERP system, we can figure out how to make our processes more efficient. That will increase our profitability.”
Innovative and responsible
When it comes to trying to become the most innovative and responsible fuel company in Sweden, IT’s role is to support the business, first and foremost through digitisation, he says. “Digitisation means different things to companies, and there are a lot of buzzwords in IT. But for us, digitisation means that we move from physically owned products with limited mobility, to services where we do not need to own the products.”
This involves moving away from the traditional value chains, says Johansson. “Instead, we will be part of value networks, where we develop things together with a supplier, for example IBM,” he adds.
Johansson says it is important to be able to co-operate with different suppliers. “If we, for example, want to have Wi-Fi services and some other service connected to this at our fuel stations, we can co-operate with two different suppliers with different competencies,” he says. “That would fulfil our needs better than if a single supplier were to own everything. We strongly believe in building value networks.”
Johansson also sees it as IT’s role to help Preem improve time to market for its new products. “We will also provide the business with better analysis tools, so they can understand which products are doing well and which are doing less well,” he says.
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Preem is looking at how all its customers’ needs can be catered for at the same time by co-operating with suppliers of, for example, car washing and car mechanics services, says Johansson.
“This would mean you can leave your car when you go shopping, and when you come back, it is fuelled, washed and serviced,” he says. “By covering more services, the business will get larger and will attract more customers. We will offer more of these kinds of service in the future, instead of standalone products. And we in IT will help build the services.”
But the company’s 100-strong IT department also has other things to do. “My biggest challenge is to make our resources stretch to multiple challenges,” says Johansson. “The implementation of the new ERP platform M3 is a high priority, but we also have to handle day-to-day IT operations, and be a part of other ongoing initiatives in the company.”
But the real bottleneck is the business, says Johansson. “It is always possible to hire one more developer, but the business’ resources are not limitless,” he adds. “It is only those who have knowledge of the business that can lead development.”
Preem’s implementation of M3 is a SEK500m project that started in 2013. “We are going live with it in phases,” says Johansson. “The first release is at the end of 2016, and then, to minimise risks, we will have several dates for going live during 2017. We do not want to have one single big bang.”
More than 300 IT systems
The company’s long history of acquisitions has seen it build up a portfolio of more than 300 IT systems, says Johansson. “M3 will replace about 40 of these, but we will still have a huge number of systems left. That increases the complexity of the ERP implementation, because the systems have to be integrated.”
Preem will draw up a roadmap to get rid of most of its old systems, says Johansson. “There is functionality in M3 that will let us phase them out, but first we have to get to know M3 in more detail,” he says. “Then we will adapt our processes to fit M3.”
It was back in 2008, when another big ERP project failed, that Johansson was hired as CIO. “My task was to clean up the mess, and to make sure we used the experience of that failure to do a better job next time,” he says.
“We also discovered that IT was not at all prepared to support the business’ plans for the coming years, and that there were a lot of urgent fires that had to be put out. So, during the last seven years, I have worked to solve all of this, so that we can now take the steps we are taking.”