Christophe Deslandes was recruited in 2007 to head the IT operations at KapStone Paper and Packaging Co., a Northbrook, Ill.-based paper manufacturer. Problem was, the newly formed KapStone didn't have any IT operations -- or at least, any it could call its own.
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KapStone had grown from nothing to $300 million in annual revenue after acquiring its first paper mill from International Paper Co., and the new business was being run on its former parent company's large legacy IT systems -- on borrowed time: The transitional service agreement between the companies set a deadline of 18 months to migrate off of those legacy systems.
Of course, that also meant that Deslandes had 18 months to select and implement an IT environment stable enough to ensure the company could keep on keeping on -- and robust enough to support future growth. Indeed, before the year was out, KapStone already would be contemplating its second acquisition, and in 2008 would grow to $700 million in annual revenue. "We could not afford to fail," Deslandes said, speaking to SearchCIO.com at the recent Gartner CIO Leadership Forum in Scottsdale, Ariz.
Deslandes decided to go modular, building a system of best-of-breed applications that could be swapped out when the business outgrew them or if it found itself going in a different direction. Then he had to make sure he had a team that could put it altogether. Scary? He calls it the "opportunity of a lifetime."
Hi, I'm Linda Tucci, senior news writer for SearchCIO.com talking with Christophe Deslandes about IT innovation.
Christophe, thank you very much for being with us.
Deslandes: Thank you.
Christophe, tell us what you found in terms of IT systems when you joined KapStone in 2007.
Deslandes: We didn't have anything. We were living off International Paper's legacy systems and had a transitional service agreement to use the systems for about 18 months. We didn't have a website. We didn't have a domain name. We didn't have an email system. No network, no nothing, no [enterprise resource planning] ERP. We had to buy and build everything from scratch, which is kind of a once-in-a-lifetime opportunity.
And innovative by definition. How would you describe the CIO's role in a project such as migrating off legacy IT systems?
Deslandes: Because of the complexity, I don't think any one person could really have a grasp of every aspect of a project like that. A CIO's role in that case is two-fold: One is to put together a team of people who can make things happen. The second is really to understand what the company is going to become, what the board wants to do with it.
We were expecting quite dramatic growth over the next few years, so I had to build a platform for that growth. At the same time, you can only build so much or you're going to price yourself out of business. So, you have to tread that fine line between being innovative and building a lot of capacity for your growth, and at the same time, keeping costs under control.
Give me a few examples of the systems that you ended up going with that struck that balance between building for today and building for a company that's fast-growing. Deslandes: Because we had very little time, we didn't have time to build something very complicated. At the same time, you don't know where the pain point is going to be as we grew. Is it going to be more storage? Is it going to be a different line-of-business application, more email? So, we had to build our systems in a way that was very modular.
One of the first things we did was lavish money on training. … Some people said, 'Christophe, you're crazy. You train your people and then they'll quit for a better job.' I beg to differ.
Christophe Deslandes, CIO, KapStone Paper and Packaging Corp.
What we ended up doing is buying best-of-breed applications for basically each problem we were trying to solve. We bought one of [the] top two best applications for papermaking, for example. We bought the leading procurement application for buying wood, which is our main raw material. We bought a pretty robust financial ERP [platform].
The advantage of doing it that way, rather than making one system do everything, is [that] your application is still very generic. Then, if you outgrow one of the applications, you can replace the piece of the puzzle that is no longer adequate without having to rethink the whole structure. Or you can bring other pieces to the puzzle if you go into a slightly different business. The caveat is that you have to be very good at making all of these applications play together, so we had to develop a very robust systems integration practice.
We upgraded our financial ERP in the middle of our second acquisition, and got the whole project done in about eight months. You don't get to do that if you try to do everything in one big system.
Did you consider big sorts of complex systems, like an SAP?
Deslandes: We did look into it. The decision to go with a mid-tier ERP -- Microsoft Dynamics AX -- was pretty much done when I came on board. As luck would have it, this is exactly the kind of system I would have gone after, rather than trying to do everything in SAP.
In striking that balance between innovation and keeping costs under control, how did you measure the risks and benefits of what you were buying?
Deslandes: I think the main driver for us was that we had to get off these legacy applications. And so, I think the main metric in this early phase was, can we become self-sufficient? Can we have something that is good enough to run the business and be off those expensive mainframes that we were paying dearly for and that belonged to another company, which, of course, was becoming a competitor.
The bar was relatively low at that point. Going forward, you start looking at all of the quality metrics, like traditional return on investment and how many of your processes are leveraged by your application. But at the beginning, it was really about delivering something stable and minimizing the risk, because we couldn't afford to fail.
So, you had 18 months to get off the International Paper's legacy IT systems. Did you make the deadline?
Deslandes: We made our deadline. We were off in basically 15 months.
Wow. So people were working all out to get this done. How did you motivate them? How do you create a culture of innovation where people are thinking on their feet all of the time?
Deslandes: There was a lot of enthusiasm in the business -- it was one mill, basically, about 500 employees. Instead of being a very small cog in a very big machine, they knew there was a unique opportunity to create a different kind of paper company. It's a pretty old-fashioned industry, but we were doing something new and exciting. And, I think, just everybody at every level of the organization, even the hourly workers, saw the vision and liked it.
That is not to say everything went smoothly. Sometimes enthusiasm can lead to mistakes, because people have the naïve view of what it takes to put systems like that in place, for instance. But in a way, it was easy for us because everybody was pulling together. The challenge going forward is to get that kind of enthusiasm when you have another acquisition.
We're at the Gartner CIO Leadership Forum in Scottsdale, Ariz. This morning we heard a session on what CIOs should be doing to motivate employees. It was interesting that the main takeaway was that money does not necessarily produce the best results.
Deslandes: Within the IT staff I certainly saw that, especially with our second acquisition. They were actually pretty high up on the pay scale already. But they were really being ignored, borderline abused, by their corporate masters; and really had no support from their legacy organization. We brought them into a much more entrepreneurial group. We took fragmented teams and put them all together as one team. That really made a huge difference. We got a kind of commitment out of IT workers I've never seen before, because people were so enthusiastic about making a difference.
You inherited a bunch of people who had been ignored. …
Deslandes: These are people who haven't had any money spent on training in years. One of the first things we did was lavish money on training. We told them, it's going to be different than what you used, but we'll train you on these new technologies. Some people said, "Christophe, you're crazy. You train your people and then they'll quit for a better job." I beg to differ: I think they'll quit the day I stop training them. Once IT workers see that their skills are becoming stale, that's when they look for a different career.
Give me a few examples of the training you provided.
Deslandes: Something as simple as the fact that they migrated out of Lotus Notes to Microsoft Exchange, and had to be trained on that. We took them out of older versions of Windows, and now we're on Windows 7, so they had to be trained on that. Certainly the new ERP platforms that we put in place. Development environments. I mean, you name it, pretty much everything was different than what they had before.
What business needs are driving your technology purchases this year?
Deslandes: First of all, we're coming into the first renewal cycle of our infrastructure -- the oldest parts of our infrastructure are now 4 years old. It's starting to fall out of warranty and that kind of stuff. So, we're taking the opportunity to invest more into virtualization. It's interesting:
When we started, we made some innovative choices around the architecture; but when it came to the infrastructure itself, we have been very conservative. We had to eliminate that risk -- the you cannot afford to fail part. Now we're at the point where we can look into virtualization to improve our asset utilization. We also will invest more in security.
Most of the work this year is around IT governance, for a couple of reasons. No. 1, we are a publicly traded company, so we're subject to Sarbanes-Oxley; and the auditors don't really care that you're only 4 years old.
How mean of them.
Deslandes: Yeah. They expect a maturity of processes that we don't have in some cases. So, the second thing we're spending some money on and a lot of time on, is governance principles -- building the application portfolio, the service catalog, doing formal risk assessment, business continuity plans. That is not to say we haven't done anything on this front, but we are putting this into a more solid framework.
I noticed that in an award you won in 2010 for your leadership on migrating KapStone off these legacy systems, you were praised for your change management skills. Can you talk a little bit about that?
Deslandes: That's an interesting point. I mean change management to me is -- you can try to formalize it. The auditors love to see that you have a very rigid and a robust change management practice. But really, to me the idea of change management has to be a collaborative effort between IT and the business.
And so, I think, the main thing is that IT needs to resist owning the change. We're here to facilitate it. And you really have to push back to the business on it. I will be the first to say, can we meet, can we talk about we are trying to do? I try to facilitate a discussion to help them understand exactly the problem they're really trying to solve. Then, maybe we can help them beyond what they think.
So, one of your chief challenges with a modular system is integration. How did that go? You're sort of fixing the car as it's running down the highway.
Deslandes: Yeah, because we had to stay in business in the meantime. This is one of the areas where I think we had some difficulties at first. The main difficulty was actually trying to explain that vision. And what was interesting is that some of our vendors and consultants were not quite up to speed on it. And the other was that we were investing in technologies that are relatively new, and it was difficult, in some cases, to find talent to help us implement it.
We had a couple of rocky starts, where we just realized we had the wrong partner. So that cost us a little bit of time, but it paid off in the end [to make a change]. And when we went through an upgrade, as we did our second acquisition, we got it right the second time. We'll get it even better the next time around. So, we're taking each acquisition as an opportunity to improve things.
And where would you like to end up, in this evolution?
Deslandes: I think the vision is that the CEO taps on my shoulder and says, "We've got another acquisition. Can it be up and running in three months?" And I'm going to say, yes, we can, and essentially not have to deal with it. I can have the methodologies and the tools in shape so that I can take a younger project manager and say, "Here's your tool kit, go and do it."
We're at the Gartner CIO Leadership Forum in Scottsdale, Ariz., speaking with Christophe Deslandes, CIO at KapStone Paper and Packaging Corp. Thank you so much for being with us.
Deslandes: Thank you.