In conversation with Jean-François van Boxmeer, former CEO Heineken about using digital transform...

Thank you, Alexandra. Nice to be with you. Yes, well, I'll beat at the distance. Yes, it is a bit of a distance. Well, let's see when we can just sit together again.

Yeah, it was as you said fairly logical because you quickly realize that digital is only one channel more to communicate, to sell, communicate internally, externally, and also sell to your clients. That is what we realized. And so it's a natural evolution of society. It's not for us a revolution, but it's certainly a very strong evolution. And if we look back at how digital entered, of course it was first and foremost into our office life and administrative life. It's the way you build clients. The whole ERP systems were invented a long time ago. So digital is a very kind of loose concept, but I think it went in three steps. The first one was the automation of all the administrative tasks. The second step was communication. I think it revolutionized the way we communicated with our end customer, which is the consumer. Instead of hanging out with billboards and pre-formatted movies, we were kind of during a direct dialogue with people, and that was quite a revolutionary thing to do. But that happened already, I would guess, with Facebook popping up what was it, 15 years ago, so it's not so long ago. And then the last mile would be the online trading of things, which is a new channel for us. So all three things happened over a period, but it's just a continuation of using new technologies to our advantage.

Yeah, we can go back to the 19th century. Making brewing lager beers was something which was innovative. It was invented by the Czechs a long time ago, but it could only be produced in wintertime because the fermentation process to make a lager beer or a Pilsner beer is only possible when the temperature stays well below 20 degrees. So they could only make it in the winter. And it's really with the invention of the cooling compressor in the second half of the 19th century that you could industrialize the process the whole year long. And if you look back at our founder here, Adriaan van Heineken, he was keen to adopt that new process and that new technology back then. It was very revolutionary. So he imported the machines from Germany, the cooling compressors from Germany, and he imported also the brewers from Germany who could make that type of beer, and he also imported the kind of yeast that was used to ferment that beer. And he was the first to do it in the Netherlands, and it was quite innovative. And in those years, the ones who were the first took the market, and that's exactly what he was doing. And afterwards, his father perfected the techniques to make a very good quality beer and make it stable through time so that we could export it. And Heineken after all developed because it made a superior product that could travel overseas and hold its freshness for quite a long time, and so being exported overseas all over the world and get a premium out of it. So that was innovative. So I would say innovation is in the DNA of the company. Beer is all about the taste, the refreshment, and bringing people together ultimately. And so digital is a way, a means to still bring our trade, if you will, our traditional trade one step forward.

Well, it's the realization. We were very much at the outlook. We were at a stage where we were very well exploiting the digital world to build the brand, but we realized that we were not exploiting it to sell the brand, if you will. How can we exploit these new technologies to improve our sales capacities? And that's where we realized that we would have to take a step forward. And the way we went about it, it was a little bit kind of we started to have the discussion in the executive team as a team, a conversation: what can we do? We booked ourselves into Silicon Valley. I know it's very classic, it's perhaps a little bit cliché, but during our visits we continued to speak about what we could do. And then we returned and we said, what can we do? And we chose not for an approach of a big bang, but for developing initiatives that could immediately make sense, bring business, and be examples for the whole organization of what the new possibilities are with these new technologies. And so it requires for that that your executive team is very well aligned and understands, is equally passionate and fired up to do it. And then you have to, of course, positively infect the rest of your organization as step two. And for doing that, you have to develop initiatives not at the center, but you have to develop initiatives in the business. That is what is important, where people realize in a country that by developing XYZ system and deploying XYZ technology, it really improves their life but also their performance.

And as a CEO, maybe also for other CEOs who are on this transformation journey, you say okay, we all got inspired, executive team needs to be aligned, you really need to do initiatives in the countries. What else could you say in terms of inspiration for other CEOs? You can be quite lonely on this journey, I guess, or you know it needs a vision, it needs stamina. I don't know. Well, I think when you say to an organization we go more digital, naturally people will cheer you up because it's just, you know, we're surrounded with it in our daily life. So that is not the difficult call to make. Everybody sees we have to go there where the whole world is going. Now comes the real issue is when you got a problem, because it's a process where you have to accept that you make errors. And big organizations like Heineken are used to flawless planning and execution and don't know how to deal with problems along the way. So it's developing the adaptive capacities when things don't work out, to take a step back, saying it's not a problem if it doesn't work that way, we try another way. So in that kind of mental agility of how to deal with something that you cannot plan in advance totally towards an outcome, you have to have direction but you cannot plan the exact outcome, and you have to deal with that. And to be able to live with that, I think as an organization what you have to learn, and as leadership you have to show tolerance for failure more than ever, I would say. And then you have to have a lot of resilience and tolerance for failure, and knowing that perhaps in the beginning is the period where you will pay a hefty price for little success. If you pull the plug too early, you would forgo gigantic opportunities maybe. But it's also to know where it really doesn't work and to just exit totally a project. Learning that is quite difficult, and you have to show a certain degree of calmness in your organization and also looking at facts rather than getting emotionally infected when things go wrong, if you see what I mean. So that's a little bit the crucial thing in deploying that. And it's also important to capitalize on the learnings. It is important that you get the learnings also from your mistakes and that you know what to do and what not to do, and not repeat the same mistake. So you have to create, people call it an ecosystem, but the way you work about it, it has to be a very open book how you progress. Transparency is really required doing that. And so people should have an environment to work where they feel safe in a large organization to tell the truth. We have chosen also at Heineken at an approach to some initiatives were really made and developed at arm's length from the group rather than within the group, because we thought that if we would integrate it too soon, the natural inertia that you have in a big group would have killed or at least made the deployment of these initiatives a bit difficult. So yeah, that's more or less what we did.

Yeah, sure. Yeah, and the vision again, the vision is how you deploy as a brewing company and a leading brewing company, but it's how you deploy your product portfolio, but how you deploy also your approaches to clients and customers and consumers, and that's in constant evolution. And I think the product evolves obviously in a very slow pace and society evolves a bit more quickly, and you have always to find the right equation between these two speeds. And with digital you had a noticeable acceleration of habits of people and the technologies they were using in daily life, and you have to weather that through. When I started in 1984, I did my duty as a sales rep in the organization, and you were calling on individual clients and it was important to develop a personal relationship with them, knowing who they were, name of their wives, their children, the dog, where they went on holidays. That personal contact was very important to set a good atmosphere to conduct business and develop a business relation with that person. Now fast forward to the grandson of that owner of a pub, and he would still be in pubs, he would be a lot less interested by my visit talking about his dogs and the last holidays, but he would be a lot more interested in if we would offer him a digital environment where he can quickly make his own choices, where he can also have a look into other things than just only my kind of category of products. If I can help him with things like showing him the way around where he finds the best architects, the best kitchen fitters in the country, that kind of stuff, it's very important to create a larger universe than only the one of your product. And if you can give a tool, a digital tool, because today people consult themselves, they're all on the screens, so they do a lot of the work themselves, but you have also to create the environment where they quickly and easily can find the solution for their problem. So in a way, what you do is still the same fundamental steps of looking what is adding value to your customers. At the end, it's only the means that change over time.

That's obvious. We are Heineken, a fairly decentralized company. And why is that? Because we operate everywhere across the world and we have one brand that unites us all, and that is Heineken, because that's sold all over the world. But mind you, Heineken is only 15% of the volume that we sell. It's a lot more of the profits, but it's 15% of the volume that we sell. It grows faster than the rest, which makes us a special company with the Heineken brand. But next to the Heineken brand, we have another 350 local brands: beer, but also cider and sometimes non-alcoholic products. And when you visit all the 80 plus countries in which we operate with own production sites and the whole supply chain, those are very local operations. And so the best way is to devolve the power to run this to the local management. And so that's why I'm saying we are a fairly decentralized company. Now, there are a number of things we are stronger as a group because we must be clear about what you do locally and what you do centrally, because there is also a lot to be gained to do things centrally. Think about purchasing and all that jazz. When it comes to digital deployment, it is new, so it has to work. And for an operation company, you have to create the environment where other people can look in the kitchen of the company where you develop an initiative so that they can get excited and not reinvent the wheel on their part. So that is the whole ecosystem that you have to create. So you have to have a vision that you have in the executive team which is going in one direction, you have to be all crystal clear, everybody behind. I think that top management has to realize it costs money, you will come across flaws, but you have to believe that ultimately you will find a few nuggets that when you will scale them up across all these operations, you will make indeed a difference. But you have to start deploying it in the operations, not in a head office, because you don't sell beer in a head office. That's a little bit how we have chosen to work.

You had in effect, if I recall well, two initiatives. Because mind you, I retired from Heineken, so you were speaking to a pensioner anymore. So there were two things. There was the first development was around, if I recall well, a digital app that we were giving to our customers. Customers typically in Mexico have mom and pop shops, small shops, and they are visited once or twice a week by a sales rep, and he would take up the order and then it gets delivered by our trucks. You can complement the sales rep with an app where they can also order directly themselves. That is what was developed in the first place. It exists now in a lot of countries, but Mexico is very big for us, so it was a kind of a big deployment. It's an addition to the sales rep, it's not a total replacement of it, but it's offering that extra kind of feature because again, as the world moves on, there are also digital savvy in Mexico, everybody has a smartphone. People will find it easier to handle the thing online than having to wait for the sales rep to come. So we adapted to that. That's one of the applications. And the second one was more a people thing rather than a technology development. It was called, if I recall well, City Labs. And in fact, that is the correct approach to do it: to go at grassroots instead of plotting with a management team what we need as further digital deployments. It's rather sitting down with district sales reps and saying, what is it really that we could do differently to sell more and have a better service to our customer, to have a more satisfied customer? And so you sit around and you make, therefore it's called City Labs, people gather around and then they come with examples of their daily life. And I think Spark Optimus helped in that in recognizing the patterns, because a sales rep always comes with his particular kind of example, right? And you have to recognize in all these examples what a pattern is, and then out of that pattern you can see if you can develop a solution which is digitally enabled and which will help the sales reps very effectively and the customer very effectively. And if I look back, it's only an example, but one of the examples was the fridges. Now Mexico is a hot country, so you have to sell the beer cooled. People buy it on the go and they buy it cooled. So we deploy a lot of fridges. The brewery deploys thousands and thousands of fridges. It's a business in itself, equipment of fridges in the point of sales. Now what is important is that a sales rep comes in at 2:00 in the afternoon and sees that the fridge is either not working or is not well replenished or the price tags are in the wrong order. So you better do it before you open the shop. Now the only way to do it is online, and then you have to deploy a photographic recognition technology. People make their own little photo, they send it, people are being sent feedback from the sales rep on WhatsApp how to do it. Eventually the client would be delivered extra more if needed. Very concrete things. Then the next step will be to automate that thing a little bit further. Of course it's a dream to start immediately with the perfect system wholly automated, but I think the beauty of collaboration with Spark Optimus is always to reach milestones that are delivering already additional business and that have that open opportunity to still build improvements further on. I think that has been the great thing about City Labs in Mexico. At least the Mexican operation was very enthusiastic about it and it was wholly embraced by that operation.

No, you don't start with it. And I think if you really look at it, digital is majority people change and minority real technology. What technology brings, I don't know, in some cases 80-20, 80 people, 20 technology, in some cases a little bit more technology. But practically in all cases, you are only successful if you address the people component, that people understand how the thing works, that you make them part of it working. And that requires a lot of time, because most of the people in management positions they understand conceptually how all this works, but it has to work very practically for the people who handle it, for the thousands of people who handle it every day. And if it is not proved by practice, then it's useless. And I think that is when you refer to a no-nonsense approach, it's essentially that it has to be practice proofed. And we live in a time where you hear a lot of things about digitalization, and people start with speaking about we're going to create a data link, and then my question will be, what for? So I think it's always putting the things in the right order.

No, it's embracing the thing. They have to see it works better than my old way of working, and if I can be rewarded for it, whether it's monetary reward but also just the reward of seeing your work progressing, I think don't underestimate how potent that is when a sales rep receives a compliment from his customer. We work not only to feed our families, we work also for our personal pride at all levels.

Yeah, in South Africa it has been a little bit of serendipity, I have to say. And it's a bit the opportunity that created the strategy, if I'm perfectly honest. We came across a startup which was called TouchSites, and which has been developing a what in effect is a cash register machine for a sales outlet, but allowing more than that. It also allows an ordering function towards the supplier, it offers also analysis function of the different categories of the products and the competitive field you're in, and it offers also a possibility to organize promotions with it, loyalty cards with specific promotions, all from one. It looks like a cash register, a bit modern, a bit sturdy also, and connected wireless. And that was invented by these people. So you could imagine, South Africa is a market where small trade is still very dominant, and logistics is what it is in South Africa. It's good, it's far better than in many other African countries, but still it's very dispersed, it's a vast country. And here you have something for a challenger that Heineken is in South Africa with a market share back then of only 10%, growing, but we came really from a very small market share. To grow that, we would need in a very vast country a number of sales reps to do the intelligence work, which just doesn't make economic sense. And here comes TouchSites technology, where you have an active sales electronic sales rep, if you will. And that is the opportunity we saw in TouchSites, because you could install the machine in many more outlets than you could regularly visit, and that device could make the market intelligence that normally you would do with human beings. And that was the very big discovery. Second thing is you could read the markets, you could read patterns of consumption on a weekly basis: when is it that people go out, when is it that people go and shop and bring home? You could see that all in real time and organize your business for that and tailor-made promotions, offerings of products, but also your delivery hours to the patterns of real consumption. That was the big deal about TouchSites. Now the founders of TouchSites wanted, like often a startup, they wanted to cash out, but also stay in because they were very interested to see how we could develop this technology further in practice, scale it up, and use it in other countries. This is where also Spark Optimus came in, because scaling that up and taking over, because we effectively bought out TouchSites, and yeah, I always made that mistake, they made a big deal out of me at Heineken because I was continuing to say TouchStones and it is TouchSites. But anyhow, we bought out a technology company, it's not our turf, and so it's where the help of Spark Optimus to keep everybody honest in the process was very important, and creating that practical link to our business because you had seen it's not your first experience with us. So you helped us in deploying that and also to have a look in other African countries. It's still, what I believe because I left six months ago, it is still in its early days to declare this technology an absolute winner, but there are enough elements that you can build on for the future which are extremely valuable. And you have also crossover spillings, because all markets where sales are predominantly done through small size stores, you can use that kind of solutions and technology to do a better job. So yeah, that was a bit our South Africa adventure.

Yeah, and it's the thing about training the people how to use the technology. It is that because deploying the technology is a matter of money, it's how many machines and placing the machines. And on the other hand, it is to learn to retrain sales reps themselves how to work with that, because they have to work from data and not directly from information they gather in an oral way from the customer, but rather through a totally automated thing. They got all what they need in advance, and they have to again train them to recognize patterns and to do something with it. And it's a lot of training, I have to say. But I would say we have in the sales field organization in Heineken the same kind of evolution that we had in the supply chain 20 years earlier. The whole automation and digitalization that we see now coming in and coming up in the sales process is what a company like Heineken had rather the beginning of the century, from I would say 1990 on until 2010. Those were the 20 years where the whole production process, the supply chain of Heineken went from a traditional way to the 4.0 kind of technologies. And if you look at the people who work in the brewery, what we call operators, there are an entirely different breed of people than the ones they were. And again, when I started in 1984, we were 15 at the production line that was making 15,000 bottles an hour. Now you have five people for a double line of 80,000 bottles an hour. But if you look at the equipment of today, it's entirely automatic. So the people who are the operators, they have to be trained for that kind of devices. And a bottling line of 2 times 80,000 costs the price of a jet airplane. It's not a free thing, right? It's a very expensive piece of equipment, and the way you're going to drive it requires a level of technical skills which most of the people didn't have 30 years before. I think for sales rep, it's a bit the same kind of evolution. It's a big human retraining that is required to make sales as an activity in our company digitally empowered by digital technologies effective and a winning tool for us. That's the revolution we're in.

Yeah, very exciting. It's one of the few B2C that we developed because in our business, the B2B as you call it is the bulk of what we have to do. I mean, that is 90% of the business. The B2C, it worked for Beerwolf because the idea was people have a big interest for craft beers, and the world of craft beers is a bit similar to the wine world: a lot of varieties, a lot of little stories to be told, a lot of people using different ingredients, an infinite variety of products. And since I would say 10 to 15 years, 30 years already in America, 10 to 15 years here in Europe, you see a generation of people having an increased interest for these special products. Now you can either build a store where you put a lot of craft beers together, or you can do a digital store. And that is what we did in effect. The approach was not revolutionary, we were not the first one to do it, but we were certainly the first big brewer to do it. And we have chosen, and again this has nothing to do with technology, we have chosen to offer all products to be an open system, so not particularly favoring our own special beers. We have them, but they are a strict minority in the portfolio that we offered through Beerwolf. It's a lot more products from everybody else. And I think it's also important that you keep that openness and that you don't try to be cute and start to too much advertise. If you choose one competitor's product to come in with an algorithm who says, oh, I have more or less the same, won't you buy this one? Because then your competitors will say they're cheating us and they will go away. So it only works if you are able to operate it as a platform. And the business is that platform. It's not us as Heineken brewer, it's us as a big European online shop of all the specialties that you can find in Europe. And that's how conceptually it was engineered.

And there again we did the little step approach. We started in the Netherlands, kind of deploying the concept and seeing whether that was getting traction, and then we went on to other countries: the neighbors, France and Belgium, and then the UK, and we are now in 10 countries, keeping that architecture. Of course the portfolio of the products we offer varies from one country to another, because otherwise it would be a bit difficult to handle. Beyond that, the logistical machine that you have to organize has to be flawless and it's economically viable because special beers, small series but high prices, it's like wine, and so you can pay for the last mile for the individual transportation of a box. Whereas for big brands like Amstel or Heineken, the economics don't work out. You better go to your Albert Heijn and shop your crate of beer. But for special beers that you don't find otherwise, Beerwolf is the place to go. We developed it as an arm's length from Heineken, totally independent. We chose management, a manager from Heineken, a very experienced, at that time he was a young man, Hans Burg, he still a young man, and he had a wide commercial experience. He had worked in foreign countries and also sometimes difficult countries like Egypt, one of his stints. But we took really a top-notch guy, a guy who has a lot of entrepreneurial experience. If you want to survive in an environment like Egypt, you are by nature an entrepreneur, otherwise you don't survive there. So this kind of profile of people with their background and experience are open-minded, are entrepreneurial, and you give them a kind of freedom to set up a team and also recruit the people they need, because the people you need for doing such a business you won't find them in Heineken. So that's how it did. Now Spark Optimus also supported this business, and I have to say I visited a few times, and what I discovered there again, it's a bit about technology but it's a lot about human organization. And you see, you go on a site and that site is always perfection, but the way you do it in the beginning, it's not artificial intelligence, it's just posted on a big wall every morning of people who say, well this works and this doesn't work, this product is in high demand, this promotion works, these regions love this kind of products. And so you start to tailor it just because of observations. When you data analytics is a big word, but it starts with observations of patterns and exploiting these patterns. Now the first flow of it is often just done manually, and then you start to automate them. That's what are called these algorithms, that's only that. And I've seen that at work and growing in Beerwolf. But in the beginning it was like a kitchen shop, you know, it was incredibly people at the mother Heineken would have called it very unprofessional, because it looked like a very disorganized messy, you know, people shouting everywhere, and you know, are they really working or are they having fun? I tell you they work really hard. And I have to say that there were little stops and goes, and we altered the business model, some things didn't work, and we had to redraw the whole logistics and had to be reconsidered. We considered also putting our beer tender systems and the subp, these cartridges sales into Beerwolf. And so you have always, entrepreneurship is always accepting also that you're never reaching an end point, it's going to be a perpetual evolution. And Beerwolf has been doing that quite well. And I have to say that our site founder was Hans Burg, and he did a marvelous job. He's now running the Netherlands in our empire, which is a big position, still a big market for us. So he's now relieved at that function. But this is an example of a B2C that worked quite well. We have developed a lot of other things B2C that we had to stop, they didn't work. In the Netherlands we developed a cool beer delivering at home like Uber Eats, you know, it's very funny, people like it, but if you want to lose money, just do continue that. There is no end to it. Because digital commerce is very exciting, there are a lot of stories going around, but there are also a lot of graveyards. And so we have to be cognizant of the law of statistics. When you are in our business, at the end of the day you transport something which is relatively inexpensive and weighs a lot, so the logistics in it are the leading driver how you have to organize. And you can't deny the laws of gravity in our business, if you will. And as long as you keep doing that, I think that the digital solutions can really add channels to it. But again, I stress that, and I'm a user of Beerwolf, as a consumer I'm very happy with it. But the big benefit for Heineken going forward in digitalization is certainly in B2B and in market intelligence and in the way you approach your consumer, and in all kind of management services that you can offer to your clients in order to improve their return on sales too. It's not only improving our return, but it's also improving the return of our customers, because that makes us a credible B2B partner at the end of the day, if you will. And that is where we should put our money foremost in this.

Yeah, that was also very important. It's not specific to digital, it's specific if we branch out of beer to go into cider, as long as you don't have people who have been good at selling cider making career further in Heineken, cider will never develop. It's the same thing. It's common sense in a way.

No, I think it was, you were not my pick as CEO in this case. I would like to defer the honor to Yand from Heineken who knew you and who took you under the tent. And I think he was very intelligent politically to introduce your company into the full-fledged management team so that everybody from Asia to America, from Africa to Europe, from public relations in our company to the people who are busy with sustainability and the finance, everybody around the table can see what is that we want to do and what is the role of the consultant, the external person or company that's going to help us. And I think you did a very great job too, you know, so walk us through what was in front, what the pitfalls were. All that educational work was done at the executive team level several times, so it's not that you appeared once and then you work with the operating companies. No, you came back and did reporting. So I think it worked well, our collaboration, because there was that constant feedback loop which was organized not only at the operational side but also at the strategic side at the table of the entire executive team. This is what made our collaboration, I think, special and a bit more than you would usually think it is. And then on the ground, I think you have the same practical approach that we like to see. So you're not selling grand plans, you are forcing us to take a stance of where we want to go and not telling us this is where you should go, because then you're just blindly following something. You I think excel in the art to make sure that your client is putting its own goal and then you take them, your clients, by the hand to go there. And I think patience is one of your great qualities. And I think you are very much focused on the practicalities of it, and so you go beyond the conceptual selling points and go into the practical organization of things. You have a network of also suppliers who can arrange the technological side. But I think you are a great company to assemble the journey for a company like us. And that is the adventure that at least on my side I've been enjoying.

Thank you, Alexandra. And really thank you for this conversation. It's really very nice that during these interesting times we could zoom together and talk about this adventure. So thank you. Thank you. All the best to all the Sparkies.