Managing change with Information Technology

 Many companies were forced to make radical changes to their business operations within the last 5 years because of global competitive pressures.

 With each new global trade agreement and technological innovation, companies see new opportunities as well as greater threats to their businesses. Each new technological innovation can offer a cheaper and better way to conduct business and each new trade agreement opens a new market for products or services.

 Now, both you and your competitors have new tools and avenues to compete with, either to raise the competitive stakes or to get a competitive advantage.

 Whether you concern yourselves in running a business or public service organization, what needs to be in focus is your “Primary objective”. In trying to achieve that objective you need to manage Resources, evaluate Risks and obtain Rewards in ever changing market conditions.

Your business may be only supplying products or services locally, but your competition comes from the global market. The Internet has resulted in building ever-closer ties between buyer and supplier, while at the same time giving a wider choice to the buyer as well as the supplier. We see the global interlinking of markets due to Political, Economic, and Technological developments. Technological changes in the West could lead to Social changes in the East. Political changes in the East forces Economic changes in the west.

In such an unpredictable business environment, Information Technology (IT) offers a new tool that allows organizations to do things differently. To meet the demands for better value by faster delivery, higher quality, better service at lower costs.

 IT also becomes the biggest threat to your business when your competitor adopts IT to take away your market. You can rely on your customer loyalty only as long as you deliver value.

 Quite often the term Information technology is simply thought of as computerization and is differentiated from Telecommunication. But telecommunication and computer technology together form IT to create the main element of the competitive advantage, not just a computerization of a process.

 EDI or electronic data interchange is one aspect in where the power of the Computer and telecommunication is used in combination to make international trade fast, efficient and productive. It enables even a small player to operate effectively in the international market.

However, investing on IT without changing the way you manage offers no added value. It would simply add to your costs. Information Technology in itself offers “Zero Value”. It is how you apply this technology that leads to added value. Furthermore, IT implementation without change management has not led to expected productivity dividends. Therefore, not only do we have to change, but also manage change.

 In other words, re-engineering and managing your business to deliver better value through improved productivity.

 The fundamental reason for carrying out Business process re-engineering or BPR and adopting IT is to help improve the operational productivity. That is to work smarter, not harder, to offer better value and not add overheads. It should lead to greater efficiency and lower costs.

 However, to quote the Harvard Business review, Sept 98, “Although most executives in the West recognize the importance of Information Technology (IT), their experience with it as a strategic business tool is often frustrating.” “Too many executives in the West are intimidated by the task of managing technology. They tiptoe around it, supposing that it needs special tools, special strategies, and a special mind-set. Well it doesn’t. Technology should be managed-controlled, even like any other competitive weapon in a manager’s arsenal” -15 years later things haven’t changed much in many organizations. 

 We are still none the wiser. What IT does is to allow you to better manage your resources and clearly identify your risks and reach higher returns or rewards. In combination, IT and BPR offers a competitive tool and the process to manage and target a sustainable competitive advantage.

 Before you ask the question: How do I apply BPR, or is BPR applicable to my organization, first ask yourself these questions: what business are we in? What products, delivery and price do our customers demand? How can we consistently deliver better value than our competitors? What do we promise our customers and what do we deliver?

With BPR, the opportunities and challenges are many, but the risk and rewards are equally high.

IT investment in two companies in the same sector may see vast differences in rewards depending on how they invest. “Where a Western manager might go for a leading edge application in the almost mystical belief that it would deliver competitive advantage, a Japanese manager would look at performance goals and choose technology-whether old or new- that would help him achieve goals.” HBR sept/Oct98

 Technology should help achieve the goals in a way that it supports the people using it and not visa versa.

 Look at your company’s business process and identify which units add value. In a manufacturing organization, where production adds most of the value and finance adds administrative overheads, it is common practice to see organizations simply computerising the finance functions first. The risk is that you may be adding further overheads with not much to show for the investment. The result is that no further IT investment is seen going towards the Production process because the management has now lost confidence in IT investment altogether. Remember, if you computerise a system that is a mess, all you end up with is a computerised mess.

 With BPR, one could critically identify the areas generating the most value and prioritise IT investment accordingly.

 IT investment priorities will depend on what business you are in and the cost of your product to your end customer, which includes the cost to your customer searching for your product, cost of buying your service and the time to acquire it to consume. Can you use IT to reduce this cost?

 If you were an exporter, what would be your competitive advantage against a new competitor with lower labour costs and shorter lead times? If it is quality of service, could IT help to maintain this advantage?

 Whether you are in banking, retailing, travel, manufacturing transport or distribution, IT has revolutionised every aspect of how these services are delivered to the customer. It has put the small player in an equal footing, and sometimes at an advantage when it comes to delivering services. IT can invite many new competitors into the field.

 With the introduction of IT, supermarkets have changed the concept of grocery shopping. Does this mean the end to the high street grocer or can the small retailer use IT to deliver better value?

 Transport sector has seen new small scale operators manage a wider market and offer better value with lower overheads when compared to a large organization with heavy overheads. For the larger organization to compete it should offer better value. Investment on IT would mean change in the organizational structure from hierarchical and bureaucratic to flat and lean.

On the one hand, BPR with IT offer greater flexibility, lower stock holding, warehousing, and transportation costs. On the other hand heavy IT investment could unwittingly take you away from the very operational flexibility that was expected, into a realm of higher fixed cost operations and production.

BPR does not come without risks. Consider its impact on the people culture, management structure and organizational systems.

 What are the main causes of failure and risks involved in the process of introducing BPR and IT Change? Some of the common factors are:

Lack of continuous commitment by top management

Underestimating the impact of change

Underestimating the cost of resources needed

Over estimating the rewards.

Having blind faith in technology

Leadership and commitment to change must come from the organization within. Top management must be involved in planning the change process at all levels. The organization’s top management resources must change from a “fire fighting” regime to one of strategic planning. External resources may be used as change agents, but ensure that the working relationship is that of a close partnership.

 In a human resource sense, it means changing the way people operate, the way they communicate, inter-relate and a break in established career paths. The reluctance to change comes from the fear of loss of security, power, and status, which are all linked, to information. Therefore, within an organization, where the hierarchical culture is so embedded in, the question is not if the shock of change be acceptable, but would the organization survive without radical change.

 The benefits of change may be obvious to you in top management in terms of competitive advantage with faster delivery, higher quality and lower costs. But what is in it for all those employees involved and affected? The risks and returns of change must be communicated clearly and truthfully.

 IT investment is not fundamentally different to managing Quality, customer service, or new product development. However its rewards should be seen as supporting Quality of service leading to a competitive advantage. IT investment and BPR should give targeted, measurable results in productivity, taking into account the opportunity cost of the IT investment itself.

 Today, technology changes so fast that top management cannot keep up with the latest technical advances. However, when it comes to IT, they must understand what technology can offer, at what cost, the risks and rewards including the laws of diminishing returns.

 There is no such thing as successful BPR and IT investment without the necessary skills development. The overall change implementation plan must detail the type of training, tailored to suite the organizational need. The Human Resources management should be involved when specifying training requirement for all concerned.

 The cost of quality training is considerable and should not be under estimated. For example, within a service organization, if each employee spends 10 days in any one year, that is over 5% of effective time lost apart from the other direct costs involved. Therefore training should result in tangible productivity improvements and benefits.

 Rewards from IT investment must be tangible. Investment on IT believing it to be intangible runs the risk of embarking on an endless investment commitment and never seeing any returns.

What BPR and IT offer us in the context of a borderless world is a new opportunity to innovate, to upgrade, to change, not only to compete in the international markets, but also to facilitate those who provide services to uplift the quality of life.

 BPR and EDI

Unlike a single organization adopting IT, for EDI to be effective, it must be adopted within partnerships in several related sectors of service. For example it should enable an exporter to enter consignment information once and send the information to all parties concerned with. With EDI what might now take up to three days could be reduced to say fifteen minutes in total.

 This requires getting all the relevant public sector organizations to work together to arrive at a common goal. To achieve this is not a simple task of writing a software package. It means managing change, and changing the way we manage. It is BPR over an extended value chain.

 However, we must not be dragged away from our main operational or business objective, merely to be fashionable in using, new jargon and hi-tech phrases. The truth in over 50% of organizations in the industrial nations that embarked on business process re-engineering and heavy IT investment, the process has ended in failure.

 So EDI and BPR is not just a matter of getting the technology and the method right, but to ensure that it moves trade along, efficiently and not add to the bureaucratic delays. It is a matter of knowing what is appropriate for the relevant organization, for the people/institution and the operation. It is a matter of understanding the market and the complete value chain.

 And it is also a matter of understanding the technology as to what it can deliver and what it can’t, what are mere promises and what reality is. Understanding the capabilities and limitations of the very people who have to implement and operate, after the experts and suppliers have left for greener pastures are key factors.

 This is where training and skills development come in. A large number of organizations have invested in IT, which simply ends up not as added value but as overheads. The services offered then become less productive, of poor quality and less competitive.

 A well-implemented EDI project offers tremendous gains in productivity. Take for instance the situation where, if a ship could be pre-cleared before its arrival at port, the ship turnaround time could be doubled, effectively doubling the ship handling capacity, doubling the revenue, halving the waiting time for ships, for only a fraction of the cost of doubling port capacity. But the implementation of EDI within the port alone will not give such results. It must be done together with other service organizations.

So the whole process should be driven by the necessity to facilitate trade and not be driven by technology. Technology is merely the tool we need to adopt, use and manage.

 Management principles such as team working, empowerment, shared values and creativity come only with change in management thinking.

 BPR is primarily about people; competitive advantage will not be the result of a faster chip, but through human creativity in using and adapting that speed to add value. Ultimately, IT, BPR and productivity are all a matter of “adding value to the quality of life”

To quote “Companies are realizing that it is ‘people’ that improve productivity. Computers are merely powerful tools. The first step is to define and analyze the actual work being done. Without going back to the basics of corporate strategy and good management, the addition of new technology can actually screw things up, making them more complex, confusing and expensive.

 But once the computer goals are understood and the flow of work is clear, applying IT can boost productivity.

 The choice of technology should be appropriate to its strategy.

 All the other steps involve making technology work the way people work. The temptation by corporate information Managers to buy the most powerful technology often results in bells and whistles that white collar workers don’t understand and don’t use. By buying much simpler, tried and tested products, companies can, not only raise productivity but also save money.” -NEWSWEEK