Walgreens Boots Alliance’s heavy focus on digitalization to save up to $600M

Dive Brief:

  • As Walgreens Boots Alliance (WBA) continues its “digitalization” efforts, the company stands to reduce annual IT cash spend by between $500 million and $600 million, said James Kehoe, global CFO, during the company’s Q2 2019 earnings call Tuesday.
  • “We are on track on digitalization,” said Alex Gourlay, Walgreens co-chief operating officer and president, during the call, referring to the company’s partnership with Microsoft. WBA has dedicated $300 million to “boost our capabilities on digitalization,” said Kehoe. About 60% of the investments are dedicated to partnerships and the remaining 40% is its own digitalization efforts.
  • Digitalization is highlighted as one of the four strategic priorities for WBA, said CEO Stefano Pessina. The other pillars include restructuring Walgreens’ retail offerings, creating a “neighborhood health destination around more modern pharmacy,” and deploying its transformational cost management program, according to Pessina.

Dive Insight:

In the last several months the company has on-boarded a chief digital officer, global chief marketing officer, global chief supply chain officer, global controller and chief accounting officer. The CDO and CMO will have heavy focus on digitalization.

Gunjan Bhow joined as CDO in mid-January and is expected to lead the development of WBA’s digital and physical customer solutions, according to a WBA spokesperson, in an email to sister publication CIO Dive. He previously worked as GM of digital and mobile products at Amazon and most recently was SVP and GM of digital, mobile and e-commerce for The Walt Disney Company, according to his LinkedIn.

“We have restructured entirely the organization of our brands business,” said Pessina, and the progress is improving the company’s customer-facing platforms and retaining customers in Rite Aid stores.

The company is being strategic with its reinvestment of saved expenses; “each digital investment and each partnership has to stand on its own merits,” said Kehoe.

WBA is working on several partnerships for its retail and infrastructure initiatives. In January, the pharmacy announced a seven-year partnership with Microsoft to help personalize healthcare access, migrate stores to Microsoft 365 and use Azure.

“The Microsoft teams are on-boarded” and already working to consolidate the companies’ separate digital teams under the pharmacy’s new CDO, said Gourlay.

The company is working with grocer Kroger “to determine how best to unlock future growth and synergies,” said Gourlay. Kroger also has a partnership with Microsoft to develop a retail as a service product the companies eventually plan to commercialize to the rest of the industry after initial piloting.