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Circuit City's Fix-It Time

Through the late 1990s, No. 2 consumer-electronics retailer Circuit City (CC) moved into a variety of products and services, such as appliances and CarMax (KMX), an online used-car shop. The menagerie of businesses took Circuit City's focus off its core consumer-electronics franchise. Among other things, it let its information-technology strategy falter.

That's where Michael Jones comes in. In January, 2004, when Circuit City unveiled plans to sell its credit-card division, the chief information officer of the credit-card business assumed he would be out of a job. Instead, the Richmond (Va.)-based retailer promoted Jones to senior vice-president and CIO for the whole company, making him a key player in its turnaround strategy.

Wall Street is pleased the retailer has returned to basics in the last two years. However, it has a lot of ground to cover if it wants to close in on the lead of No. 1 rival Best Buy (BBY). Sales at Circuit City stores open at least one year declined by nearly 6% in December -- its most important month of the year. But analysts polled by Thomson First Call predict that in the fiscal year ending Feb. 28 the retailer will increase sales by 5%, to $10.2 billion, and post per-share earnings of 42 cents, up from 29 cents in the prior year.

Jones spoke with BusinessWeek Online reporter Amy Tsao at the National Retail Federation's annual convention, at the Jacob K. Javits Convention Center in New York City, about his plans to overhaul the retailer's IT strategy. Edited excerpts of their conversation follow:

Q: What was Circuit City's approach to IT when you became CIO a year ago?

A: Our organization was, at best, fragile and fractured. We had in place since the 1980s a custom-built technology architecture. Our executive committee was requesting a myriad of changes to the point-of-sale software every month. Just the discipline required to manage that is significant. I questioned whether that is where our eye should be.

Q: What changes have you made since you took the CIO position a year ago?

A: I asked a group of our executives what they would do if they could start over. Then, about four to six weeks after starting, I pulled the plug on a point-of-sale project we called Magellan. It had started in 1999 and in early 2004, the company had implemented it in only 100 of 600 locations, and it was only 30% functional. You have to question the seriousness of the project if it takes five years to get that far. To me, it was important to pull back and have a holistic strategy.

Q: What other changes did you make?

A: I'm pushing toward a complete commercial solution [rather than one that is] customized. We are building our model around the technology, as opposed to the technology having to fit the model we have. We're starting with our point-of-sale technology. We've teamed with software companies Yantra, 360Commerce, StreamServe, and with IBM (IBM). We want to be done with this rollout by the close of the fiscal year at the end of February, 2006. The company has to be willing to hold its nose [until then], but a year from now is as long as I can hold them off.

Q: What other technologies are you interested in implementing?

A: We're evaluating the vendors in several critical areas: Reflexis and Store Perform for task management, and Retek and JDA on the merchandising side. In customer-relationship management software, we're looking into Siebel Systems (SEBL). We have a company called Connect3 Systems as a partner to help us with marketing technology.

Q: You've said in the past that you favor gradually adapting to a change like radio frequency ID (RFID) tags, vs. adopting it immediately. Is that still how you think of the technology?

A: Do you remember [which companies were] the first movers in automatic teller machines? In five years, RFID will be prevalent, but we won't remember who was first [in adopting it]. I am excited by it [but] Wal-Mart (WMT) will be a first-mover. Circuit City of late has been in survival mode.

Q: So far, RFID is used mainly in the supply chain and logistics side of the business, but what applications might it have down the road?

A: The price of RFID has to come down, and acceptance has to rise, but it's not so far off. My fantasy is that our best customers will have loyalty cards, and when they walk into a store, the manager will be alerted. We want to know, for example, if a customer was on our Web site looking at plasma and LCD [liquid-crystal display] TV sets. Maybe that customer didn't buy anything but has an interest. We could create a tipping point for the customer. Maybe we put a personalized coupon while [he or she is] in the store.

Someday, if a customer makes a big transaction, we could have our CEO W. Alan McCollough's BlackBerry go off. The customer would get a phone call from McCollough or another top-level executive, who would thank the customer for his purchase and ask how the experience was.

Q: How do you describe your overarching goal as CIO?

A: I want to be the visionary for our stores and make the right changes relative to customer experience. I'm thinking, "Three years out, what will make the difference?" Right now, we're dealing a lot with the infrastructure and plumbing changes. But we need to ignite a fire and get ourselves to where we need to be. We have ambitious goals.

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