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Thinking There: Who We Are

With enterprise systems, as with any major business initiative, success begins with a clear conception of the destination and a wholehearted commitment to getting there. This process of definition and commitment can be termed “thinking there.” It is an ongoing and iterative process of addressing some fundamental questions: Who are we as a company today – operationally, organizationally, technologically, culturally? What is our desired or “opportunity” state, driven by our strategy for distinguishing ourselves in the marketplace? Meanwhile, where does our marketplace, and especially the actions of our competitors, demand that we go? What is our capacity for changing? How can we boost that capacity if it’s not yet sufficient to get us to the destination? What specific business outcomes constitute the destination? How can we measure progress toward them?

Implementing Enterprise Systems

Implementing Enterprise Systems

“Thinking there” involves getting crisp answers to all these questions. In most companies, the answers are, with a fair degree of accuracy, already known, although they may not be well articulated or often publicly discussed. But to form the foundation for an ES initiative, they must be articulated and discussed. Why? Because with a business initiative as expansive and expensive as an ES, the last thing you want to do is attempt the impossible. And the next-to-last thing you want to do is leave potential business benefits on the table. To avoid both pitfalls, you’ve got to begin by “thinking there” clearly.

Enterprise systems are a type of business capability, which can be employed in a variety of circumstances and for a variety of purposes. But the heart of the business capability of ES is improving operational performance and increasing business coordination through process consistency and information sharing. An ES can be sensibly and successfully deployed as:

The “one system” for an integrated company.

The means of integrating selected processes, often associated with corporate functions such as finance and human resources.

The “common core” of systems for a company that seeks coordination across many processes while allowing local variations in how they’re performed.

The means of bringing selected processes in selected locations up to speed.

In other words, the approaches that work range from being global to being highly selective. And the number of workable approaches continues to grow – thanks to both experience and technological advance.

Many companies embark on ES initiatives with the intent of establishing common processes and information across all business units. What distinguishes the implementation successes from the failures is the seriousness of that intent. At project launch, the winners and losers say exactly the same things about the benefits of consistency, coordination and communication. But for some it’s just a momentary (though often convincing) commitment to a theoretical idea. For others, it’s the immediate mission of the corporation – clearly reflected in the day-to-day executive agenda and the executive compensation plan. Distinguishing between these two situations is not difficult for someone asking the right questions and looking for the right signs.

Thinking There: Business Outcomes

In the old days, information systems project management was about delivering “working software and trained users” at a cost within shouting distance of the original budget. Today, the business potential of technology-driven change is so great that the difference between “working software” and real business success can be the difference between business-as-usual and rearranging your competitive landscape. Successful companies can redefine market channel relationships, redefine customer relationships, or earn ROIs exceeding 100 percent. ES project management is not an IT challenge, but a business challenge – and the key to winning big is outcomes-based management.

Comprehensive outcomes-based management involves much more than a business case and benefit targets. Outcomes-based management is about identifying the key operational imperatives required to propel the overall business strategy, and driving these imperatives into the fabric of the work. Outcomes-based management forges the linkages from operational work to strategy and shareholder value.

In theory, this approach sounds simple. In practice, it requires diligence and sophistication. Why? Because business strategies are unique, and the key operational imperatives will be drawn from all disciplines: marketing, product and service development, channel management, operations, logistics, customer service, finance, etc. Although there are clear best-practices for outcomes-based management, there can be no cookbook methodology because ES is about competing through business operations. Our outcomes are what differentiate our business. Our outcomes allow our ES implementation to differ from everyone else’s.

Business outcomes are the definition of success: the result obtained, not the process for obtaining it. For example, reducing the average order processing cycle from 3 days to 5 minutes is a significant business success, but the pros and cons of alternate approaches to achieving this performance will always be legitimate subjects of debate. But with a clear initial definition of success and the determination to achieve it, these debates reach closure quickly and people commit to action. Throughout the research, we were struck by how clearly and crisply best-practice companies articulated their required business outcomes.

Business outcomes must be tangible and operationally specific, must have business significance and map to business value, and must be unambiguous and measurable. “Reducing order processing time from 3 days to 5 minutes” is a business outcome; “Implement a standard order processing system” is a rather vague goal. “Close the books in 2 days” is an outcome; “Improve the timeliness of financial reporting” is a vague goal.

Outcomes-based approaches simplify and accelerate ES projects and increase their chances of business success. ES projects are large and complex by nature. Project-plan tasks frequently number in the thousands. Project rosters of 30-50 full-time professionals are considered small, and 100+ are not atypical. Most significantly, business people are being asked to accomplish their work activities in new, different ways. Alignment is absolutely essential, and business outcomes are the agency for aligning activities and decisions of everyone involved in or affected by ES implementation. If linked appropriately across levels (from the shop-floor to the boardroom), the business outcomes can be a means to demolish cross-functional barriers. Projects accelerate because teams don’t dally in endless debate or pursue private agendas. The outcomes provide the platform for results and project accountability.

Business outcomes are developed through a facilitated conversation among senior managers. The conversation takes the understanding of “who we are” and the outline of a realistically ambitious “desired state,” and then makes the desired state tangible. What specifically distinguishes it from the present state of the business? What would it be like – in terms of operational performance and business capability – to have reached the desired state? What combination of performance levels and business changes constitute the desired state? These are the outcomes. The process of developing them is the beginning of the business alignment, change management, and communications campaign.

Getting There: Structuring ES Projects

Large ES projects can take on lives of their own. Preventing this, and enforcing focus on business objectives, requires explicit project structure, which in turn promotes the appropriate decisions and behaviors. Clear and well-communicated project structure is essential to ensure that both the project teams and their customer constituencies maintain clarity for the duration of the endeavor. An ES project’s structure – its overall design, activities and resource plans, timetable, and governance structure – is the most direct and detailed communication of serious intent that an organization can deliver. Structuring a large ES project involves the following activities.

Determine project phasing and timing. The basic options for implementation approach are horizontal and vertical. In a horizontal approach, a company implements one process (e.g., financials) across the entire enterprise (multiple organizations), before implementing subsequent processes (e.g., fulfillment). In a vertical approach, a company implements multiple processes (e.g., manufacturing, fulfillment, procurement, financials, etc.) at one operating unit, and progresses across the enterprise unit-by-unit. Within each approach there are variations in phasing: What can be done in parallel, what must be done sequentially, and what can be done in overlapping fashion? In a horizontal implementation, can many business units implement at once? In a vertical implementation, how many processes can “go live” together? What phasing allows us to gain experience fastest and transfer it across units most effectively?

Establish project team organization. An outcomes-oriented project explicitly recognizes that process-oriented corporate structures are inherently matrices. Process owners are responsible for the design and performance of processes wherever they are executed. Business owners, like divisional and location heads, are responsible for the work of organizational units. They have P&L responsibility, hence the most direct vested interest in realizing business outcomes. They and their people use the ES, ongoing education and training is in their budgets, and they have the ability to motivate people to change.

Establish technology and operating architecture. In the early 1990s, establishing an effective technology environment for the project itself required a depth and quantity of expertise in new platforms, networks and tools (e.g., UNIX, TCP/IP, Windows, SCCS, etc.) that was beyond most companies’ capabilities. Though setting up a project environment is still a major issue, the good news is that tools and practices have improved dramatically, and promise to continue improving. The best-practices approach to ES technology architecture is to analyze not only installation requirements, but also the anticipated services and service levels in the new technological environment. Since accelerated project management methods allow companies to configure pilot environments in less than a year, the time horizons to develop the enterprise’s long-term technological operating plan have shrunk dramatically.

Establish project governance. Executive management must have passion and create ownership for the business success of the project. Process and business ownership of the business outcomes must be real, not just a tacit steering committee blessing. For this reason, there must be a solid line relationship between the project team and the process and business owners. Ensuring that the relationships between the business and the project stay vibrant and powerful is the primary role and responsibility of the executive management board as well as the project leader. Leadership behavior is the norm, regardless of the box one sits in.

Develop the resource plan. Resourcing an ES project presents a basic choice. The least organizationally painful (but probably most expensive) approach is to hire a systems integrator to turnkey the effort. This approach leads to a focus on installing the software rather than transforming business operations, but most such projects do get done and generate positive ROI. The outcomes-based approach takes the opposite course. Systems integrators and consultants may be extensively employed, but the project cannot be turned over to someone else. Outcomes-based management is about trying to transform the enterprise. Because the business outcomes are so significant, the company makes the choice to put many of its best business and IT people on the project, to have the whole company pull together to take up the slack, and to undertake the change management initiatives for organizational transformation.

Learn and revisit. One of the inherent advantages of outcomes-based management is that, with a focus on the future, the grip of the present is less strong. It’s easier to assess the current situation dispassionately and determine if change is required to shorten the journey or improve the aim at the target. Though this license to re-think and change is an essential asset to project managers, it may be even more important to the business as a whole. Successfully “living there” occurs through ongoing examination and learning. Revisiting what’s being done and why should become second nature to people.

Two additional ongoing activities must explicitly overlay the above steps: develop and maintain executive passion, and develop and reinforce teamwork across the business and the impacted business communities. Executive and team behaviors must be consciously fostered throughout ES implementation. Otherwise, the barriers and restraints of business as usual will weaken alignment, project structure and the chances of successful outcomes.

Getting There: Managing ES Projects

Day-to-day project management is where everything comes together. ES project management involves orchestrating the work streams of many delivery teams, keeping those teams staffed and otherwise resourced, managing vendors and consultants, and communicating constantly and effectively with all constituencies, especially executive management. The project manager needs to focus not only on the technical software implementation, but also on managing teamwork and intra-project relationships, and fostering needed executive behaviors. If not managed well, any one of these dimensions can significantly undermine the project’s timeline, scope, economic value proposition, and prospects for completion and success. ES project management also involves:

Continuing the activities of project structuring, and sometimes restructuring the project on the fly. Team organization and governance are adjusted to accommodate changes in the players, business circumstances, outcomes priorities, and the growing experience level of the project staff. The technical architecture is adjusted as pilots reveal the detailed requirements of installation. And, of course, the details of the resource plan are adjusted continuously.

Occasionally revisiting with executive management the issues of “thinking there.” Even if business outcomes and project ambition are strongly aligned with business identity and strategy from the start, priorities and timing of outcomes may have to change due to changes in the business or the realities of how the ES project is unfolding.

Regularly anticipating “living there” issues. Day-to-day project management decisions should be driven by, in order of precedence: 1) business outcomes, 2) enabling the company to work well when the ES is in place, and 3) immediate project expediency. This precedence is clear, but can never be perfectly followed. The art of project management is making the tradeoffs that keep momentum up and keep the long-term direction in focus.

Paying constant attention to organizational change management. Change management activities – including general communications, changes in HR systems, and individual employee training – prepare people for the future by involving them in it, both intellectually and behaviorally. ES project management is as much about the work streams for change management as about those for process and technology change. Moreover, the project manager and other project leaders, by their personal example, create organizational energy and the will to change.

Many of the critical success factors for managing ES implementation are common to large business change initiatives: a clearly defined business model, strong sponsorship, an accomplished and well-positioned project manager, skilled and dedicated and empowered project teams, regular project tracking and reporting, and rapid resolution of issues as they inevitably arise. Several additional success factors are more specific to ES initiatives: avoiding the technology problems of inadequate infrastructure, managing the work of vendors and consultants, coping with team turnover during a lengthy project, managing the legacy environment in parallel, and communicating effectively with all stakeholders to maintain momentum.

Living There

The highest order of success is reached not just when a company attains the outcomes, and not just when it operates well with the ES in place, but when it becomes adept at “living there.” This means capitalizing on the information available in an ES and the experience gained in ES implementation, and making the ES a platform for new business initiatives, improved management processes, and ongoing creation of new business value.

Many firms that implement an ES tacitly assume that when the system is installed they are finished. The project team is disbanded save for a few maintenance personnel. The effort to mold the organization to the system, and vice-versa, is considered complete. Management’s attention moves to other issues. The ES project is a “success.”

But getting business value from an ES requires that it be viewed not as a project, but rather as a way of life. Some activities that are central to achieving ES value can only be undertaken once the system is in place. Others, though begun before installation, are not complete until the company learns to make the most of operating with an ES in place. There are the “living there” issues: How can the ES continue to make the firm more efficient and effective? How can the close fit between system and organization be maintained over time?

Some “living there” concerns involve operating the business and the ES after installation:

How do we maximize the value the organization derives from its ES in day-to-day operations?

How do we measure that value, above and beyond reaching the business outcomes, that drove the ES project?

How do we maintain and upgrade the ES?

Other “living there” concerns involve learning and adaptation:

How will the business and its ES accommodate changes to management processes and the information they use?

How will we adjust to changes in marketplace strategy, organizational structure, and operational processes?

How can we extend the ES model to customers and suppliers?

Few companies have had ESs implemented long enough to master all these “living there” issues, so there are no simple benchmarks or established best practice cases. Nonetheless, based on experience to date – especially the problems encountered by companies that failed to anticipate these issues – we can delineate the major issues of “living there” and adjust ES implementation activities to take advantage of that awareness.

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  • Know where you are. The enterprise needs to understand where it is in the development of its administrative structure across the range from domestic to exporter to multi-domestic to transnational to global.
  • Develop IT support functions in local markets. This helps to create competitive advantage by enabling key systems to be rapidly deployed into overseas markets.
  • Identify the IT-based advantages that are specific to your company. Find points of strength in your operating IT environment that can be used in a foreign market to gain rapid market share.
  • Search for synergy. When working with joint ventures or acquisitions, focus on collaborative and knowledge-sharing systems as a “slow build” strategy for further integration.
  • Search for transparency. Work to enable transparency in your systems so that your partners can “look into” your processes – or even through your processes into your industrial value network.
  • Harvest the fruits of information integration. Pick applications portfolios nationally, but move control, design, support and hosting of major databases to a central “global” location.
  • Become both global and local. Reflecting the overarching need to be both globally coherent and locally adaptive, a multinational company’s information technology setup has to be both global and local. Adopt a “Lego-type” flexibility for systems and applications, and for IT support. Data must be standardized to be useable and useful. Interfaces need to be clear and unambiguous if different internal units and external parties are to be made a part of the overall architecture.
  • Build a collaborative backbone. Typically, the flexibility required by global systems is complemented by a robust and seamless system for messaging, reporting, logistics, and the like. There is a definite need for a “backbone” set of technologies and applications that keep the company integrated and to support any attempt at a global strategy.

For more information contact Shaun

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Global IT Management Teams

The CIO plays a key role in the organizational success of IT globalization by ensuring that the proper level of IT leadership is in place across the corporation. Regional or line of business IT executives must contribute to the global initiatives as a team. Ideally, the regional IT executives will report to the regional presidents. At a minimum, the regional IT executive must have access to and be in a position to influence the regional president and his or her direct reports. The global IT council, composed of the senior IT leadership from corporate headquarters and the regions, will then be in a position to play a key role in establishing programs, priorities, standards and support capabilities across the enterprise. Objectives of this global IT council will typically include:

  • Build and promote the global IT vision.
  • Determine the major components of the global applications portfolio.
  • Set technical and process standards for systems implementation.
  • Define responsibilities for implementation and support at the global, regional and local levels.
  • Drive maximum application commonality, balancing unique local requirements with the global business process models.
  • Demonstrate leadership in the transfer of business process models, templates and best practices in system implementation, and other organizational learning.
  • Seek economies of scale in IT, leveraging partnerships with key suppliers globally and pursuing shared services where it makes sense.

Typically, the corporate IT organization will own primary responsibility for IT vendor management, “product management” of the global solutions, applications integration and portfolio management, and IT infrastructure. Technical and user support will typically be marshaled to meet local coverage and service-level needs. Mobile implementation teams are often utilized at both the corporate and regional levels. The global IT council will seek the proper balance in local and regional user support services.

The global IT council also contributes to the “internationalization” of solutions and services by:

  • Recruiting the best business and IT professionals for the global process teams.
  • Ensuring regional representation on global technology teams charged with development of detailed standards (e.g., communications networks, email and collaboration tools, e-commerce technologies).
  • Assessing candidates for advancement in corporate or other regional IT leadership positions.

The members of the global IT council can also play a pivotal role in bringing regional business insight to the IT leadership team, and in influencing regional general management.

Early in any globalization effort, the IT council should resolve the primary responsibilities among corporate, major business units, regions, and local sites. The responsibility “boundaries” will evolve over time, but early classification can prove very productive in speeding discussions. The results of one such classification exercise at a global corporation are shown in Figure 1.

Figure 1: Global IT Architecture Responsibility

 

Global IT Architecture Responsibility

The use of multiple specialized management teams on IT globalization initiatives can be a very effective way to strengthen effectiveness of global standards, and, more importantly, to create a sense of worldwide ownership of the results. To the extent possible, the teams should utilize company talent from around the world, including technical business leaders who own respect within the various international regions. Together these individuals become a powerful conduit for ideas and content from the region, and the promotion of standards to the local organizations. Examples of possible strategic global teams include:

  • Enterprise Applications Council – Provides leadership in business process model implementation, global/regional data models, applications integration standards, version management, and prioritization of requests for vendor enhancements.
  • Technical Infrastructure Council – Focuses on standards for networks, servers, operating systems, and solutions and tools for systems operation management, data management, information access, email, and collaboration tools.
  • Electronic Commerce Council – Typically chaired by corporate marketing, this council provides leadership in corporate “image” standards, Web-site linkage and content coordination, browsers and other tools, Web-page design, and technology services providers.
  • Shared Services Councils – Typically chaired by corporate finance, these teams pursue opportunities to improve operations economies through the establishment of shared services for processes that may be consistent across multiple locations. The shared services centers are typically by geographic region, and include functions such as finance, HR, legal, IT operations, and sometimes engineering.

For more information contact Shaun http://www.sacherpartners.eu

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Given the many potential advantages of increased coordination across the global enterprise, it is essential that the IT function be organized to enable and support global information management, technology infrastructure, and business applications. Deciding how to organize and manage IT in a way that overcomes any natural resistance toward coordination (e.g., local entrepreneurial spirit, the “not invented here” syndrome) can be challenging. For many multinational corporations, attempts to globalize IT have been disappointing. The key to success seems to be in finding the right “hooks” of intrinsic value for the local business entities, as well as the corporation at large – in other words, answering the question, “What’s in it for me?”

The first step in developing the right “hooks” is not in reshuffling the boxes on IT organization charts, but rather organizing IT globalization projects so that the results are clearly understood and committed to. Organizing for results includes two major elements of communication. First, the globalization initiative must progress from a set of clearly defined business outcomes, owned by senior executives, that serve as the strategic rationale for the investment. Second, the project must be owned and staffed jointly among regional IT organizations, the appropriate business process owners, and line executives. A detailed project plan – with all major events, milestones, responsibilities, dependencies, and timelines indicated – is also crucial to success. Characteristics of an effective project plan include:

  • Clearly articulated business outcomes, with metrics and accountabilities.
  • Joint responsibility for business change with business process owners and line executives.
  • Detailed project implementation tasks – with major decision “tollgates” identified.
  • Pilots for operational testing and evaluation of measured business results.
  • Delegation of decision making, with clarity of scope and the process for escalation of issues (e.g., to global process executive sponsors).
  • Continuous communication and collaboration with international counterparts.
  • Executive management actively engaged in defining the outcomes and measuring results.

As a team effort, and a business priority, the IT globalization initiative then has the visibility, the access to expert business resources, and most importantly the legitimacy to proceed to success.

Business Ownership of Global Projects

Whether it is the deployment of a common infrastructure, the implementation of a set of technical standards, or the installation of common business applications, global projects should begin with a rigorous assessment of the desired business outcomes. What new capabilities and measures of performance are needed? How will this project enable those objectives? What is the value of these outcomes to the local business units? How do the outcomes advance key strategic objectives of the corporation?

The business outcomes must be owned and articulated by members of senior management of the corporation. In the most successful cases, there are one or more functional champions for the globalization of processes who create the pull for standardizing the technology. Examples include global vice presidents of engineering, manufacturing, finance or distribution. In many cases these global process owners and IT management have partnered to define the desired technological end-state, based upon the desired business outcomes. In very large organizations, it is often useful to take the vision one step further during the conceptual stage and construct a high-level business process model. The business process model then becomes a guide in the subsequent configuration of the application software to be used. The key result of the process-modeling exercise is to clearly define the level of process standardization required, and at what level the model is open to local practices or local statutory requirements.

All large project undertakings, and especially global initiatives, require the ownership by business executives at both the process (e.g., manufacturing, finance, distribution) and line of business (international region or product line) levels. This can most effectively be achieved through an outcomes-based project governance structure, as depicted in Figure 6.

Figure 1: Outcomes-Based Project Governance

This organizational structure explicitly recognizes that process-oriented corporate structures are inherently matrices. Process owners are responsible for the design and performance of processes wherever they are executed. Business owners, like divisional and location heads, are responsible for the work of organizational units. They have P&L responsibility, hence the most direct vested interest in realizing business outcomes. They and their people use the global systems, ongoing education and training is in their budgets, and they have the ability to motivate people to change.

This project management structure continuously incorporates, coordinates and aligns both of these constituencies. Process owners reshape processes to enable business outcomes. Business owners reshape organizations to realize the outcomes and their benefits. Coordinating mechanisms are embedded in, not tacked onto, the project structure. Rapid issue resolution draws on both constituencies. And change management is the explicit and ongoing responsibility of both.

In this model, process ownership is clearly established and executed through a team of process experts. These team members are typically selected from the most successful line managers in operations, and are assigned the temporary duty of full-time leadership of the global initiative’s business process improvements. These process experts help articulate the business process model to drive the project, interpret and resolve any local issues, and help to promote the benefits of the project to their functional counterparts across the enterprise. The process teams are in turn supported by process executive sponsors.

Utilizing process experts from across the enterprise has obvious benefits in speeding acceptance and ownership of the business process models. It also gives added assurance that important local capabilities and requirements are not overlooked. The teams must also communicate with stakeholders at the process and business unit level at regular intervals during technology development. The communications themes include promotion of the vision, solicitation of input, and building awareness and knowledge. Updates from the global process team members to their local, regional or line of business management is another valuable mechanism to aid communication with line management across the corporation.

Senior managers, including process executives, business unit general management and the corporate CEO, play a vital role in the success of global projects, especially as these projects begin to move from the conceptual to the implementation stage. Having provided leadership and guidance in shaping the key business strategies and outcomes, these leaders must now function as articulate advocates for the programs’ rationale. In this way they can help overcome local resistance. They will also support the process teams in resolving issues around the degree of process standardization required to achieve the business outcomes.

Senior management must send the consistent and unmistakable message that the project is an important investment for the overall good of the enterprise. On very large enterprise projects, project success has been made a significant component of the incentive bonus of line executives.

Regards Shaun

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Comet

How to not use channel power!

Pundits, journalists, and  executives all agree: the Internet is the biggest thing since sliced bread – or maybe since the invention of double-entry accounting. Yet anyone who has been awake and breathing for the past several years knows that things are changing. The stock market is certainly different, and more and more companies are offering their products for sale over the Internet and World Wide Web. Its hard to believe many companies have not developed channel power to their full capability, recently noted  Comet and Best Buy both high street electronics stores in the UK.

“Comet sold for £2 and new owners get £50m sweetener”  http://www.bbc.co.uk/news/business-15660345 “Anglo-French electrical goods retailer Kesa announces plans to sell off its troubled UK-based Comet stores for £2 to a private equity firm. The buyer is a group of companies under the name “Hailey” advised by retailer turnaround specialists OpCapita. Kesa said it will itself invest £50m into the new holding company, and will retain liability for the Comet employees’ final salary pension scheme.”

The challenge

The challenge facing senior executives is that the business rules – and who is winning and losing – are changing at lightening speed. “Internet time” is not just a cute concept; it is a very real phenomenon in today’s economy. Yet as a business executive you must define and execute strategies, invest funds, ensure operational capability, and make strategic commitments to suppliers, business partners, and customers now, well before there is any clarity about how the new game of digitally-enabled business will be played.

No one can tell you today what the electronic marketplace of tomorrow will look like. The only thing we can say with any certainty is that it will be big, it will be important, and it will be different. But those “certainties” are hardly a sufficient basis for committing major corporate funds and human resources to new strategies and new partnerships.

The most fundamental characteristic of electronic commerce in 2009 is that it has created almost overwhelming strategic uncertainty, with the rise of social media. Yes, there are wonderful opportunities for reaching and satisfying more customers more effectively at lower cost than ever before – but you also face major new competitive threats. Your competitors can reach your customers just as quickly, and just as efficiently, as you can (and they can do that from literally any continent, anywhere on the planet).

Many of the barriers to entry that have protected your business for decades are disappearing overnight. New companies, unburdened by legacy systems, legacy investments, legacy products, and legacy mindsets, are inventing new ways of creating value for customers.

Best Buy

Slow entry in the UK for eCommerce - Electronic presence world have been a better choice over bricks and mortar!

Even those who believe these new conditions are indeed truly revolutionary cannot predict how fast they will grow, how widely they will penetrate, or what kinds of markets will develop. Everyone has questions. What kinds of products and services will dominate electronic markets? Should you use the technology to go “direct” to your end customers, or continue to rely on more traditional distribution channels? Who will be the Wal-Marts, the Starbucks and McDonalds, the Chevrons and the Mobils, the Home Depots, the USA Todays of the next two decades? How will consumers shop for goods and services ten or even five years from now? Who will provide the distribution outlets? Who will “own” which customers? Will every purchase decision be based on price? What position should you take with your existing channel partners?

The core question facing almost every major corporation today is what position to take regarding customers and distribution channels. No one today knows how fast business will move to the Internet, or how it will affect relationships between sellers and customers. But everyone knows these are issues that matter.

Perhaps the most important thing to understand at the outset is that the pace of change, and the shape of the future, will be different in every industry. There are some leading-edge industries where the game is already over, there are some where the game is just beginning, and there are some industries where no one even knows when, or if, the game will ever be played, let alone what game it will be.

Yet managers must make critical new choices about products, markets, delivery mechanisms, and service and support capabilities, and they must do it in “Internet time,” before these uncertainties have been fully resolved.

Unquestionably the most dangerous and irresponsible thing you can do is nothing. The future is full of uncertainty, but that is no reason not to act. Companies are using several specific techniques now to deepen their understanding of what the future might be like, and they are relying on that insight to prepare contingency plans and take actions to increase their chances of thriving no matter what the future turns out to be. This report explores channel power, how it influences channel conflict and channel strategies, and how companies can plan for the future even when it is chaotic, unpredictable, and full of surprise.

Guidelines

To summarize, I believe channel power and channel conflict can be understood most effectively in economic terms, and I recommend that companies cope with the uncertainties of the digital future by acknowledging what they cannot know, planning for multiple futures, and building resource capabilities that allow for the greatest possible range of options.

Thus, preparing for the digital future involves the following specific understandings and actions:

  • Begin with a deep understanding of the economic structure of your industry and your particular channel.
  • Recognize the sources of channel power and pay attention to which firms in your extended supply chain hold channel power and how they use it.
  • Identify the most important strategic uncertainties for your business as it moves into a digital environment.
  • Develop multiple scenarios describing plausible futures.
  • Build a playbook outlining the specific moves that you could make for each key scenario, and define how you would react to potential moves by your competitors and other channel players.
  • Identify the critical resource requirements for each scenario and strategic move in the playbook, as well as indicators that will signal how the real future is unfolding.
  • Watch for meaningful change – monitor the external environment and look for the strategic indicators.
  • Meanwhile, conduct real-world experiments to test your scenarios and strategic moves and to build capability.
  • When the time comes to execute the playbook, move quickly and decisively.
Need more information? Contact Shaun

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Business outcomes (not systems outcomes) are the primary drivers of change in the well-governed project. They must be clearly articulated, encompass characteristics that are highly specific, be measurable by a system that is easy to implement and easily understood by all concerned, and be focused on high-value features, that will make a significant difference to the enterprise. The important feature is that the new capabilities or improved levels of performance are defined as imperatives for the systems delivery team. In addition, the business outcomes that are sought after should be linked to future success and change in business processes throughout the organization. In this way, the features and capabilities of the system are linked into meaningful dimensions.

Outcomes Supporting the Strategies and Future Success

Business OutcomesWorld-class governance aims not only at managing the present day operations and making the operational decisions that involve tasking, feedback and delivery, it must also aim at the future. Governance in this sense is a type of navigation for the enterprise. The navigation beams for governance are the future strategies that are going to be employed by the enterprise to carry out its mission. How is this future vision achieved? It is accomplished through a systematic and regular series of consultations between IT and the executive committees involved with the project. Of particular importance is that the outcomes that are defined to guide the project be oriented toward the future strategies and success and not toward merely improving the ways in which things are doing at the moment. The best practice is to make future orientation one of the important internal screens that are used to guide governance decisions.

Outcomes and Required Process Change

One of the most difficult of all aspects of large-scale system delivery involves management and governance of how the information system, in its new form, will influence how the organization conducts its business, and in particular the business processes. One of the common problems with ERP rollouts, for example, is expressed in the rejoinder, “We could not change the system, so we changed the way work is done so that we could get the system installed.” Inevitably both the system and the way that work is carried out must adjust to each other and both must take on change, nevertheless the expression has an embedded truth. The truth is that new information systems are inevitably going to introduce a considerable amount of change in how the business operates. It is usually that specific change that is a primary goal of the new information system. The question, then, from the point of view of governance, is how to make that change happen throughout all of the business lines.

Process change is traumatic, and can be highly destabilizing as a causative element if a backlash develops. How to avoid the backlash? This is done through a constant stream of monitoring between business ownership and operations ownership to the program office.

It is only when the required process change is linked in the minds of those who have to endure the change with the business outcomes that are sought after that resistance will die down. Instead of becoming obstacles in getting the change put into place, the people involved will become advocates and supporters of the change. Making the communications necessary to convince people of this need, or even of having them come up with the process changes themselves in order to make the entire business work better is best practice.

Outcomes-Based Governance Structure

In the outcomes-based governance structure, the central coordinating organization is the program office. It is responsible for the overall project management, but more importantly for the liaison between the different business elements that are responsible for the system. Technology management, involving the development and operation of applications, and control over infrastructure, supports the program office. Although under the classical way of thinking about development of systems, such as taught in most textbooks, this in itself is enough to get the system built; best practices involve other more complex layers of communications and coordination.

Two other groups are set up side-to-side with the program office in order to smooth the development of the new system. Business operations ownership is a key player since it is involved in formulating and carrying out the implementation strategy for the rollout matching local requirements. It is through the business ownership operations group that the key messages regarding value are communicated to end-users, and also through which the feedback regarding how the system is working or might work in the future is sent back through the system to the planning group in the program office. The key persons involved are the operation leaders. It is through this function that the important problem of how business operations and process will change with the new system in place is tackled. Without the participation of this group, the chances of failure of the system are very great.

A second major group involved in the rollout of a large-scale system is the global function leaders organized into the business process ownership group. Coordination between the program office and this group is concerned with the higher-level designs of process re-design, and reaching an understanding of what measurements are most important to get the desired business outcomes. This group, it must be pointed out, are also responsible for approving budgets, and pulling the project out of the fire if it runs into problems. Without the support of these business process owners, the large-scale system group does not have the political power to get things done. In many cases, it is this political power that helps the project get through some of its toughest points.

Finally, the top of the project is operated by the executive committee. This group is the fountainhead of power, and is the first that breaks through obstacles that might arise in the project. These obstacles always arise in a project, and if there is not a stand-by executive committee ready to help, it is impossible to get them resolved, thus torpedoing the project. Taken together, these different actors form the governance structure that is capable of either turning around a failing large-scale project, or taking on a new enterprise-wide initiative.

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What do advanced CRM companies offer to the customer, and how do they operate to be effective? Some of their important capabilities include:

  • One-to-one marketing. Each customer experiences a different universe of interactions from the company. Even though these initially are defined in general sets based on customer segmentation, the experience quickly changes as they interact. Whether placing a telephone call, sending an email or using the Web, each customer interaction will be unique but consistent.
  • Flexible internal procedures. Flexibility of internal procedures means that the organization is attuned to new ways of operating. That is, instead of the usual foot-dragging
    CRM Winners

    CRM Winners

    and obfuscation, change is considered to be the normal way to work. As new customer demands and preferences appear on the horizon, the organization quickly makes adjustments. It does not fall prey to the common mistake of failing to make changes in the host organization’s policies and processes when changes are made in the way in which customer interactions take place.

  • Tight operational discipline. Although the way in which new procedures are put into place and are modified according to customer need is highly flexible, any given set of procedures is followed with rigorous discipline, so as to continue to guarantee high-quality performance.
  • Thoughtful customer experience. The company has invested a large amount of time and resources in designing the total customer experience and documenting it for both internal communication and coordination purposes, but also to serve as a basis for continual improvement and change. Tools for this design include iterative scenario planning, focus groups, Web behavior analysis, customer surveys, intensive collaboration with sales, and a lot of common sense.
  • Channel harmonization. What a customer sees or hears in one channel is consistent with what they experience in any other channel. The company seems to remember their preferences and importance, even as they randomly switch from one channel to another. If an email is sent one day, and the customer places a call the next, the CSR is aware of the email, so the customer is not forced to explain their particular concerns for a second time.
  • Performance measurement. Performance measurement and assessment is used to ensure that all channels operate with the same level of quality. In most companies, call centers for a long time have been subjected to rigorous performance management. In the CRM space, all channels have specific performance requirements, and measurement is used to target problem areas so they can be fixed. Performance measurements divide into two categories. Category 1 measurements focus on the customer experience, wait times in particular, to see the results of their transaction with the company. Category 2 measurements focus on internal systems coordination. For example, one measure frequently used assesses synchronicity of customer information. What is the time it takes from when a customer enters a transaction until when the CSR can see the transaction? In many companies this is more than 24 hours, due to a reliance on batch updating processes. In others, such as Schwab, the information updating across different channels is a matter of minutes or seconds. This simple concept is extraordinarily difficult to achieve in practice, particularly when there is wide-spread use of legacy systems.
  • Journaling. Customer litigation, particularly in North America, always is a concern for companies. What information the customer received via email, Chat, brochure, from the Web site, or from a live CSR during a phone conversation must be completely consistent. In the pharmaceutical industry, for example, regulatory requirements force the company to keep track of all correspondence and interaction through the call center with major customers, usually doctors. What does the IT department do when a subpoena comes for all communications with a customer more than 6 months ago?
  • Reusable procedures. Companies good at CRM also have learned how to minimize the effort required to instill customer handling procedures and supporting business processes across multiple channels. For example, if the business launch of a new product requires that calls be handled by a newly-formed special group of CSR’s, then incoming email concerning the new product also is routed to the new group. This type of flexibility in configuration means that procedures are reusable across channels, cutting down the amount of work investment required to make them operational.

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