Technology chief Linda Dillman gives ISD
By Rachel Lianna Davis Staff Writer racheld@nwanew
Posted on Saturday, June 4, 2005
FAYETTEVILLE — With 23,540 miles of cable moving data throughout the
company, Wal-Mart’s cable lines could nearly circle the Earth one time.
Linda Dillman, executive vice president and chief information officer, gave a
statsfilled presentation on Wal-Mart’s growing technology sector — the
Information Systems Department. "As you just saw, we have ISD associates all
around the world," Dillman said, after video presentations of international
employees. "And they work hard every single day to implement the systems that
help you do your jobs."
Dillman presented new technology items to the group gathered at the Wal-Mart
Shareholders Meeting on Friday. RFID is a big topic these days.
RFID, or radio frequency identification, is expected to lower the company’s costs,
bringing those savings to the customer. The company started a pilot program in
the Dallas area in April 2004. "We’re using RFID in our stores in the Dallas area,
providing visibility we never had before. Using this information, we’re able to
alert associates when we need to restock shelves," said Simon Langford, Wal-
Mart’s manager of global RFID strategy, via video during Dillman’s presentation.
RFID works through a small microchip surrounded by radio antennae. A reader
can instantly scan the radio waves from an entire pallet of product — there is no
need to scan the individual boxes. RFID also helps associates know how much
product is in the storeroom, in order to keep the sales floor stocked.
A Telzon-like wand beeps faster as the associate approaches a desired product in
the back storeroom — which helps the associate get that product on the shelf
Wal-Mart plans to expand the program into other markets soon. "We already
have international associates involved so that in 2006 we’ll have pilots in selected
countries," Langford said.
Dillman also discussed a new nationwide prescription program and customizable
With the "Entertainment At Hand" program, customers can customize their own
CDs at a kiosk in their Wal-Mart store, after listening to a 30-second sample of
Wal-Mart Stores Inc. fills the number-one slot on the Fortune 500 list. It operates
Wal-Mart Stores, Supercenters, Neighborhood Markets and SAM'S Club locations in
the United States. Internationally, the company operates in Argentina, Brazil,
Canada, China, Germany, Japan, Mexico, Puerto Rico, South Korea and the UK.
Seated in an airport between flights in her overbooked work schedule, Dillman talked
exclusively with CIO Today about the inner workings in I.T. at Wal-Mart and the
challenges and opportunities CIOs face in the current business environment. Calm,
collected and serene, the affable Dillman exudes a mixture of confidence, acumen
CIO Today: What are your top concerns as CIO?
Dillman: People are always asking me that question. And there's no easy answer.
There are so many things on my mind at any given moment. The answer depends on
when you ask. But overall, I would say the top concern always centers on people
We build most of our own systems and we try to continuously grow our people. I
have an absolutely amazing team and I focus on replicating that. I am constantly
looking for ways to increase the skills of the team and add members who are the
best in the business.
I share many of the same concerns as other CIOs, but I think they are all
manageable. None of it keeps me awake at night.
There is a major irritation in the mix: spam and the like. It's a real shame you have
to spend so much time and effort battling that problem rather than on more
CIO Today: Has the I.T. environment changed from 5 years ago?
Dillman: Two to three years ago, everyone was wondering whether everything was
going to come together or stay piece-meal. There is so much more innovation now
and things are coming together. We have moved through a transition period.
Mobility has made a big difference ... even in some surprising places. For example,
when we really watch costs closely, and cut them everywhere, we can ensure our
customers get the lowest prices always. We even measure the number of pages we
Our goal for this year was to reduce printing costs by 10 percent; so far this year we
have cut them by 19.7 percent and that happened because our associates are using
mobile devices that negate a lot of the need for the printed page.
There have been big changes in network capabilities as well; that changes the things
you can and will do. It changes the business model too. For example, our Web site
links customers to their favorite store.
They can upload their digital photos at home and pick up the prints at the store. That
is a convenience no one would have imagined just a few years ago.
Increasing network capabilities change how you use the different
channels separately and collectively and how you serve the customer overall.
CIO Today: How have new legislative demands affected the I.T. department and the CIO in particular?
Dillman: I assume you are referring to Sarbox? That hasn't had a very big impact
on us. Sam (Walton) used a very detailed control system in his day and it is pretty
much the same system we use now; it's just larger and computerized.
We develop and build our own systems and use common systems around the world,
so we have always had a strong control focus. Therefore, Sarbox requirements
meant little more than documenting and testing to us.
Our biggest concern is maintaining that control in the future since, given our size,
there is no such thing as a small error anymore.
CIO Today: Which enterprise component or technology will be growing most in terms of its slice of your company's budget pie in the next
Dillman: Blade servers; we are very excited about blades. Networks continue to be
a large component for us.
We will also be buying more storage, like everyone else. We keep three copies of
every piece of data, so we have a huge need for storage.
CIO Today: Can you walk us through the decision-making process of implementing a large-scale business process management initiative?
Dillman: We are centralized, so we have only one I.T. group for the company. We
also charge I.T. costs to general overhead rather than to business units, but each
business unit has a manager on the team so that benefits and drawbacks can be
evaluated realistically by unit.
Even so, we focus on global strategic initiatives first.
We start in the fall and spend two days off-site to study customer priorities and
concerns in each area. By January, we go back to each unit to discuss and finalize
our decisions. By the start of our fiscal year on February 1st, we are up and running
according to plan.
We take a development approach to implementation. Frankly, we don't believe
anyone is a good enough designer to get any project absolutely perfect from the
very first. So we learn a lot -- and tweak accordingly along the way -- by breaking
large projects into smaller deliverables.
The human tendency is to build something perfect. But I always tell the team "If you
start with something better than you have today -- then the payback will be huge. If
you wait in order to make the thing perfect, you'll never finish the job and you'll lose
a ton of money you could have made with something better, but not perfect."
CIO Today: What are one or two software or hardware products your company uses that you would describe as "outstanding?"
Dillman: RFID, certainly. The impact of electronic product code is significant. We
have been trialing it in three distribution centers and in 150 stores and centers in
There are more than 100 suppliers shipping tagged items and we have taken more
than a million (electronic product code) reads -- all with good results in process
changes. We focus on the shelf stock -- in keeping it filled for the customer.
Before, a department manager could scan anything he needed restocked. With RFID,
we can create an auto pick-list that can automatically order goods as sales deplete
It can even prevent overstocking by informing the manager he has how many of
whatever already in the warehouse or backroom. Identifying goods and their exact
location is very advantageous in numerous ways.
We'll be using RFID in the future for asset tracking on laptops and other mobile
CIO Today: Which emerging technology do you see as most important to the enterprise?
Dillman: There really isn't much emerging. But what already exists is moving to a
new place. That's exciting when you really look at the possibilities.
CIO Today: Where do you go to do your research on new technologies?
Dillman: All our initiatives are business driven, meaning we look for solutions and
opportunities from a business standpoint and then find technology that accomplishes
the specific tasks. We do not become enamored with technology and then figure out
where we might use it.
So when we go out to research, we already know what we are looking for and that
pretty much defines where to search. If it does not already exist, we create it.
We have good relationships with our I.T. suppliers and visit their labs and R&D
departments regularly. We also look outside retail a lot for new ideas.
Sure, the world’s largest private company bolted to the top because of Sam Walton’s
formula: Buy cheap, sell for less than competitors and profit from high volume and fast
turnover. But the real power behind Wal-Mart Stores Inc.’s phenomenal growth has been
the technology that’s fueled the retailer’s ability to beat its rivals. And Linda Dillman,
Wal-Mart’s executive vice president and chief information officer, is the power behind
Wal-Mart’s use of technology.
The head of a 2,400-person information-services department at the world’s largest
retailer, Dillman presides over a data-storage system second only to the Pentagon’s in
size, and one of the most sophisticated information-services networks in the world. As
such, her reach far exceeds the bounds of the Bible and barbecue belt’s Bentonville, Ark.,
which is Wal-Mart’s hometown.
Nothing in Dillman’s middle-class background suggested she would become a corporate
titan. Raised in the blue-collar, automotive factory town of Fort Wayne, Indiana, the third
daughter of a letter carrier and occasional temp worker (a brother is younger), Dillman
wanted to be a beautician in high school, “because when I looked around at the time, my
cousin, who cut hair, was the most successful woman I saw.” But Dillman was railroaded
into college by teachers who saw what she could be. “Happily for me, a lot of people in
my life have believed in me and encouraged me,” she says.
At Indiana Central College she studied business administration because it seemed like the
broadest program from which to launch a business career. Afterwards, she held a series of
jobs with small companies: an analyst for a high-risk auto insurer, the office manager for
a company that made parade floats, the contracts and payroll administrator for the
Environmental Affairs Department of Indiana U. Then Dillman moved to Hewlett
Packard. Computer operations were just then booming and HP was moving into
commercial computer systems. Dillman stayed for five years and, while working in
administration, studied computer programming at night at the University of Indianapolis
before joining the Wholesale Club in 1987. Its founder was a good friend of Sam Walton.
One Monday morning in 1991, she arrived at work to discover that Walton had bought
her company. Dillman took six months to decide to move from Indianapolis to this small
Ultimately she relocated and started as Applications Development Manager for both
SAM’S CLUB and Wal-Mart Store Systems. Then, in 1997, she was promoted to
Director of Applications Development. The following year, she became VP-of
Applications Development and led the system conversion for Wal-Mart’s acquisition of
ASDA in the U.K. “It was very hard putting together two different organizations on two
different continents,” she says. “Systems was the initial liaison for the two organizations.
But at the same time, she loved the immersion in England’s culture and the travel: 18
times to England in nine months. In short order she was promoted to Vice President of
International Systems and soon after, Senior Vice President and CIO.
Although she gamely took each assignment, not all turned out spectacularly. In 1998, her
group spent 18 months redesigning specialty systems such as the vision center, pharmacy,
photo shop and tire-lube outlet. “But we went in with too holistic a view, as if we were
designing nirvana,” she says. When the parts didn’t fit together, they had to start over.
From that “I learned you have to know when to cut something and change direction.”
She has taken that lesson to the personal front, “I no longer wait until I can have the
ultimate when buying a car or a house or going on vacation. Rather, I go with what I can
do now,” says Dillman who was engaged twice but never married. Still, she lives with a
list and takes great pleasure in crossing things off the list. “Putting it on a list keeps me
from recycling it in my brain,” she says. “Once it’s on my list I stop worrying about it.”
Two years ago, when promoted to her present post, Wal-Mart’s CEO Lee Scott asked her
to find a way to shave $2 billion from inventory in the next two years—or start looking
for another job. Although it’s not easy to cut inventory while you’re increasing sales
more than 10 percent a year, Dillman is well on the way.
In June 2003, she fired a shot heard round the retail world, when she decreed that the
company’s 100 biggest suppliers had to convert to radio-frequency identification tags, a
souped-up bar-code system, on all case and pallet shipments by January 2005.
Eventually, the tags should lower labor costs and lead to increased product sales, as
merchandise will be more easily and accurately tracked.
“Wal-Mart has never been a company that adopts the latest and greatest technology
unless it makes sense,” says czar Dillman. “Top management may not understand the
technology, but they understand its capabilities. They can see where the technology will
take the company.” Indeed, Wal-Mart is recognized as one of the first retailers to
understand the power of information hidden in the barcode.
In a typical 60- to 65- hour work week, Dillman might confer with her seven direct
reports in her modest, windowless office in Wal-Mart’s David Glass Technology Center.
The goal is to make sure everything is running smoothly, including the 3000 (you read
that right) new projects completed last year and the hundreds more now in the works.
They include pricing software to help buyers take markdown and converting distribution
centers of newly acquired stores in Brazil and Japan. Wal-Mart intentionally eschews the
99-cent philosophy, pricing items at $4.64, say. Her department keeps track of the close
to 120,000 items in each store and knows what to stock and restock. With its own
supercomputer, Wal-Mart streamlined its supply chain, speeding delivery from plant to
store shelf. “A little gadget called a Telxon tells me the sales price of the item and how
many I currently have. And it knows what the history looks like for tracking each sale as