E&J Gallo Winery CIO Drives Digital Innovation In Wine

E&J Gallo Winery is a remarkable vertically integrated organization. They own the vineyards that make the wine, but they also own the sand mines, manufacturing production facilities, glass manufacturing, and the like. With $4.6 billion in revenue, the California-based winery is one of the largest private companies in the United States. 

When Sanjay Shringarpure took the Chief Information Officer of E&J Gallo, like CIOs of many private companies, he found that IT was more of an afterthought than a strategic driver for the company. In the four years since he took over IT, Shringarpure has shifted the order-taking organization to one that is a strategic partner to the business, aligning IT with the business functions in new ways. The precursor to this shift was a modernization initiative.

In this interview, we discuss the modernization activities and the organizational changes made to enhance the value that IT contributes. We also discuss the cultural changes necessary to realize this vision, Shringarpure’s take on blockchain and the cloud, the Wine OS platform the company has created, and a variety of other topics.

(To listen to an unabridged audio version of this interview, please click this link. To read future articles like this one, please follow me on Twitter @PeterAHigh.)

Peter High: You have been the Chief Information Officer of E.& J. Gallo Winery for nearly four years. Could you talk about the IT department you found when you joined and some of the details of the transformation you have led since?

E&J Gallo Winery CIO Sanjay Shringarpure

Sanjay Shringarpure: E. & J. Gallo Winery is not just a winery, but we are a vertically integrated collection of entities that includes our sand mines, vineyards, manufacturing production facilities, corporate applications, glass manufacturing, and our sister company that manages logistics for us. That ecosystem is supported by one IT technological function, which reports to me. Roughly four years ago, Gallo’s leadership started to recognize that technology was playing an increasingly important role in the future of the company. Because of this, leadership wanted to modernize some of our capabilities and give IT a bigger seat at the table regarding how we progress through our journey.

In 2014, we were a traditional IT organization. From an org perspective, we had two functions, which were applications and operations. The operations side typically dealt with the infrastructure side, such as laptops, phones, and Wi-Fi. On the other hand, the application side primarily focused on best-of-breed applications, many of which were homegrown and many of which were packaged software that we had bought and rolled out across multiple disciplines and functions across the winery. At the time, the overall investment portfolio sat at roughly 1.5 to 2.5 percent of the revenue services, which was appropriate from a CPG perspective.

To evolve to where we are today, we started looking at how we make IT a strategic partner with the rest of the business functions we support. Rather than simply being an order taker or a group that keeps the lights on, we wanted to help provide more capability, direction, and influence across commercial-facing functions, the back-end, manufacturing, the supply chain, and the agriculture portfolios that we owned. With that in mind, we evolved into a horizontal and vertical approach, which changed the entire structure of the department.

We had three focus areas, which were plan, deliver, and run. The idea behind this was that we wanted four verticals supporting each of the business functions that we support. Rather than being an isolated infrastructure department, the shared services department was integrated across the multiple areas that we support. The four functions are;

We decided to have those four verticals run by leaders who would control a small set of developers supporting those applications themselves. All other functions were horizontalized in a shared services manner. We then created a horizontal Run function associated with that. The idea was that the four business relationship functions would be focused on growing capabilities and top-line revenue. While this was about growing the business, the Run function was about keeping the lights on and continually reducing the cost inefficiency of operations. This does not only include labor efficiency or pure dollars given back to the business, but it could involve capacity or other functions.

We started this journey in 2015, and between 2014 and 2017, we saw significant improvements across the board. A simple metric is the number of projects that we were delivering on. In 2014, that number was 80 to 90 projects, by 2016, it was over 200, and by 2017, we had crossed the 300 projects threshold without a substantial increase in the footprint of labor.

High: What do you ascribe that degree of improvement to?

Shringarpure: Focus. This new org structure and new culture have increased focus so that the run department is centered purely on keeping the lights on. The run department only spends about 20 percent of its time on project work. On the other hand, the project teams are clearly scoped out into units of work that can be directly attributed to certain capabilities that we are chasing. In those early years, the philosophy was if we could focus on hitting singles and doubles, the home runs would come. These projects were smaller in scope and size, and we slowly built up. The reason for this approach was primarily because, on the horizon, we saw a large ERP initiative that we had to do. We had a 22-year-old system that we needed to replace. We were on JD Edwards, we moved to SAP, and we are now live on that. This has been a relatively successful journey that has allowed us to create a culture and a department that have the capability to make small impacts and add value with the large transformational projects. It took a year or two to get the department to be able to take on an ERP of that magnitude, and it was not just ERP as we have done other large initiatives too. These initiatives include our Account 360, Wine OS platform, and replacing our HR systems with ADP. We believe that the best approach is to lay our transformation out over a five-year period and then grow into the capabilities that we want to start getting to.

This has set us up to take the next step, which entails evolving our org and our department from a functional focus to more of a customer-facing organization focus. In doing so, we look to drive capabilities with a development, platform, and run function. As we are seeing the evolution in the industry of more packaged software, which are more platforms that tend to be cloud-based, we support those. I find an affinity between those platform functions and the Run function growing. On the other hand, the core development function is focused on our core competitive advantages for the homegrown applications of technology that we can build out. Lastly, the customer-facing is primarily focused on mega process management, business analysts, business relationship management, and the program management office.

High: Could you talk about how technology helps enable the business to earn more revenue?

Shringarpure: Fundamentally, traditional IT tends to be a cost play. While it is about bringing in new technology, it has to be at the cheapest cost possible, and you have to be able to drive that cost down. That is a valid strategy, but it cannot be the only strategy that drives an IT department. IT departments additionally need to be able to add capabilities to the business and try to determine if there are new business models to chase. If there are, [the IT team] needs to see if they can provide the technological foundation upon which they can create those models. IT teams have to try to make that an option for the business. It does not necessarily have to happen, but it can be something for the business to take a look at.

For example, we have created an interaction platform for our growers through our grower gateway, which is one of those business models. Rather than being a revenue-driven business model, it is more of a capabilities-driven business model. Moreover, Account 360 helps our distributor sales forces sell our wine better through a mixture of data analytics, business intelligence, and machine learning [ML] to create a converged platform through which they can interact to sell our product.

Today, everything in the landscape tends to be broken out into individual apps. We have taken more of a best-of-breed strategy with a converged look at the day in a life of our partner functions. We have to make a platform that can address the day in a life needs of a sales person or a supply chain person. Supply chain might be done through our SAP implementation, Account 360 might be for our salespeople, the Grower Gateway may be for our grower representatives, and HR Cockpit, which sits on top of ADP, may be something that can help the HR function’s day in a life. Taking a look at it from that perspective, rather than a best-of-breed one, allows us to take a more holistic view. Doing so has changed the way in which we deliver to the business, and it has been tremendously successful so far.

High: Could you further elaborate on the Wine OS platform?

Shringarpure: We are part of a three-tier network. We sell to a distributor, the distributor sells to a retailer, and the retailer sells to the consumer. Further, we have tasting rooms who sell to the consumers directly when they come to Napa or the Central Coast. We have additional platforms, such as E-retail, which is not truly E-retail. This includes marketplace sites such as Amazon, enablers such as Drizly, and click and collect sites from our retailers. In order to provide a platform for this omnichannel approach,  we created a Wine OS platform that leverages Salesforce, Elastic Path, Drupal, a centralized digital content hub, a small portion of CMS, and some of the point of sale platforms that we have. In doing so, we created a converged look and feel infrastructure for providing the capabilities across omnichannel. While this is not perfect, it is an evolution, and it has provided significant value for us.

High: You previously mentioned that you have taken many steps to decrease the percentage of people who are in the Run category, which increases the amount of flexibility that you have. Could you further elaborate on that journey?

Shringarpure: With our traditional model, we were roughly 20 percent project-focused and 80 percent Run-focused. We put in a management tool using ServiceNow and a time reporting tool that identified that this was happening. We had folks who were pulled in many different directions, and when they were on a project, they had to keep the old applications alive. It made it harder to spend time on both with the production issues that were coming in.

We went from that 20-80 ratio to a 50-50 ratio in just three years, which represented a huge ramp-up in terms of productivity for our project work. Today we are at about 70 percent project and 30 percent Run, and our goal is to get to 90-10. To be honest, that is likely a pipe dream because every time we put in a new platform, that Run bubble pops up. We have to slowly take that bubble down, which can take anywhere from 12 to 18 months. That said, I do believe we can achieve 80-20 in the next few years, which would still represent a 10 percent improvement from today.

Making this change has allowed our business to be more receptive because we are dealing with their problems, rather than just keeping the systems alive. There are two ways we have approached this.

High: As that transition has been enacted, has the makeup of the team changed?

Shringarpure: The team is evolving. I have noticed many more full-stack developers and a growing focus on growing undergrads, which involves working them through the chain, going into run, jumping to development, and then moving to BRM functions. Moreover, we have inserted different levels of management and different levels of capability. These individuals are primarily focused on being more customer-centric and walking a day in the customers’ shoes before applying their technological processes to making the customers’ journey better. I believe that is crucial. Many IT teams tend to create bubbles inside of their departments, which is something that I even see in the vendors who supply technology to us. The teams will say, “This is the best practice that we have seen anywhere.” However, the reality is that best practice only had inputs of XYZ numbers, whereas every company and situation is unique. Vendors need to be able to create a technological platform that can address 80-90 percent of the customers’ needs. Your core competence is always going to be different when you go from industry-to-industry or from company-to-company. You have to identify what your core competence is as a company, which for us is agriculture, sales, and potentially some of our Wine OS platforms.

High: We are sitting in your offices in Modesto, California, and while California is the hub of technology, you are a bit removed from Silicon Valley. How have you been able to grow a team here?

Shringarpure: There have been a number of challenges.

High: Could you elaborate on some of the trends you just mentioned?

Shringarpure: We are not doing true AI, so while we have leveraged parts of it and dabbled here and there, we have not fully leveraged it yet. This is because I do not believe we are mature enough, and we have not yet identified the business problems. Despite that, we are doing a significant amount of work in ML. For example, with our ticketing system, ServiceNow, instead of having to lay out every single decision tree, we have looked to route the ticket to the right team to be addressed. We have piloted using TensorFlow and some other tools, and we are finding that we are getting better. From an AI visual recognition perspective, we have used our AI capability in our Account 360 platform so that when salespeople take photos of the back bar, they can identify what is a Gallo product and where we can sell more. We can use that as an input in creating the opportunity for the salesperson to have that discussion inside a bar or retail store.

I do not focus on AI or ML as an end-all-be-all in itself. Instead, I look at it from a use case and as potential inputs to solving a use case perspective. I believe the industry gets too caught up on identifying the next hottest technology when many tools already exist that we can merge together into a converged solution. Instead of saying, “Let’s do blockchain,” it is important to identify the core question you are trying to solve first. I believe that is where the focus needs to be. The tools are going to evolve.

We have been using VR a bit. Specifically, we have been using it with point of sale display so the salesperson can use an app and show the retailer how the point of sale display will look in-store. As a similar example, I was reading about a clothing store where you stand in front of a mirror, you select the clothing, and it shows how it would look on you.

High: As you look to the future, are there any other trends that are making their way onto your personal roadmap?

Shringarpure: I am interested in taking a deeper look into blockchain because the maturity curve is still out there. I believe there is some level of track and traceability through our supply chain that might be increasingly important. Gallo tends to be a closed ecosystem loop, and if I own my own vineyards or if I control the grapes, the bottles, and the corks, creating a blockchain inside of my own ecosystem defeats the purpose. I find that if we had a more diverse ecosystem, that might be better, but then again, these are just initial thoughts. I have not thoroughly delved into it.

The other piece that I am interested in is seeing is how the evolution of the cloud occurs. As we begin going onto cloud platforms, we are starting to see major benefits. However, there is a risk around security, competitive advantage, and controlling the data. Specifically, there are questions around who controls the data and how much I have access to in the cloud. We do not want to become a commoditized technology provider because our footprint would shrink in terms of the value we provide to the company. We do not want to move everything to the cloud and just be done with it. We have to balance that and see how we can leverage the cloud to add value and stay relevant in the ecosystem of departments. We have moved a great deal of infrastructure to the cloud, but those core competency-driving apps have yet to be moved.

High: What are some of your favorite E. & J. Gallo products?

Shringarpure: I am a big fan of our Louis Martini and Orin Swift products. Moreover, sparkling is a favorite, and J Vineyards has some of the best sparklings around. We have 190 brands, so to be honest, it is difficult to keep up. That said, we have had some great products that have been coming out. The most recent one that came out was Mount Peak, which was one of the better wines I have drunk in a long time.

Peter High is President of Metis Strategy, a business and IT advisory firm. His latest book is Implementing World Class IT Strategy. He is also the author of World Class IT: Why Businesses Succeed When IT Triumphs. Peter moderates the Technovation podcast series. He speaks at conferences around the world. Follow him on Twitter @PeterAHigh.