The efficiency-oriented prototypes in Family 1

This family of strategic IT initiatives is characterized by large investments in major business processes leading to large-scale business integration, major cost reductions and business process innovations. The family typically includes mature ERP and CRM platforms provided by vendors like SAP and ending up replacing a large number of legacy systems. The three IT initiatives picked as prototypes to illustrate this efficiency-oriented family are: (1) CRM-ENERGY, (2) ERP-FOOD, and (3) CRM-RESORTS.

The CRM-ENERGY initiative

The company is a large Canadian utility and major investor in R&D, innovation and IT systems.

With deregulation, the company became a holding company (owned by the Quebec government) divided in four units: (1) Production, (2) Transport, (3) Distribution, and (4) Services¹⁶. The CRM initiative is part of the company’s Distribution division. The division has two major functions: (1) maintaining and improving the quality of the distribution network and making sure the electron reaches every client, and (2) managing customer service. The CRM project was launched to improve the second function. The high complexity at the customer service and accounting levels explains the project’s large budget of about $500 million¹⁷.

16 The Services division includes IT, HR and finance.

17 The unit sends an average of 65,000 bills a day and receives $200 million worth of daily payments.

Table 4-6 Respondent profile and stakeholders in the CRM-ENERGY initiative

- The respondent heads the information systems function for the utility’s client services department. He has several years of experience in the company and strong relationships with corporate strategy.

The internal stakeholders and sponsors

- The project’s sponsor is the VP of Sales and Client Relations in the Distribution division.

- The other key internal stakeholders were: the CIO, the board of directors, and the energy department.

- The company had the role of the integrator, which guarantees its control of the project.

The external network (consultants, vendors, etc.)

- The company worked with the strategy consultant PWC to define the problem and come up with an action plan. The utility also bought from PWC the global best practices in the utilities business.

- The vendor is SAP and Capgemini was selected for the professional services and its IT methodologies and approaches were used.

- A third party, R3D, was hired for the Project Management function. The project manager was mainly in charge of coordinating the work of project parties and managing the delivery process (including the constant changes and adaptations of the plan).

The project was triggered by a set of simultaneous factors. Deregulation is one of them, but the complications caused by the accumulation of legacy systems leading to rigidity, inefficiency and in turn the disappointment of clients were the major factors.

The project’s strategic motivations, the system’s new capabilities, the challenges, and the project’s effects on innovation are presented in the table below:

Table 4-7 Key characteristics of the CRM-ENERGY initiative (cont’d) Attribute Description

Project triggers and strategic motivations

- Three major strategic axes triggered the project: (1) the client satisfaction, (2) the organization’s efficiency, and (3) the satisfaction of the Quebec government (the owner).

- The company’s decision was based on two major criteria: (1) the customers’ new needs, and (2) the global utilities best practices.

- Managing the growing complexity of relationships with over 600,000 customers moving every year.

- The creation of high-end jobs in Montreal by hiring Capgemini (two floors in Place Ville Marie, a major office tower in Montreal).

The system and its major capabilities

- Three SAP modules were implemented: (1) the CRM, (2) mySAP for Utilities, and (3) the Business Information Warehouse. These tools multiplied the employees’ capabilities by 50.

- The system simplified the business processes and rules.

- The new system came with a competency center that centralized the IT support function and replaced 250 support teams.

Table 4-7 Key characteristics of the CRM-ENERGY initiative (cont’d and end)

Major

challenges and difficulties

- Reengineer and simplify the business processes

- Replace 250 legacy systems and run the processes with a maximum number of 3 fully integrated systems supporting 80% of the company’s business processes (from 30% only) - Throughout the project, the instability of the company’s senior management was a

challenge. The company’s chairman, the division’s president and the VP for sales and customer service changed.

- Manage change; motivate 6,000 employees to change their ways of functioning, assist them to unlearn the old system and learn the new one

The impact on innovation

- The project had a strong impact on process innovation and service quality and according to the respondent the company went from an old car to a BMW. Yearly benefits of at least

$20 million in the processes were measured.

- The major success factors according to the respondent: rigor in the method, accountability and ownership, and the way the project was modularized.

The ERP-FOOD initiative

The food company is a world leader in the food industry that specializes in dairy products, baby food and healthy organic foods. The company’s spectacular growth in the past few years was accelerated by its numerous strategic acquisitions in the emerging organic business.¹⁸

The company’s fast non-organic growth in the growing organic foods business triggered an urgent need for a global and centralized ERP platform. It was accumulating legacy systems at an alarming rate and had to quickly find a way to simplify, standardize and centralize its business processes to allow for continuous and controlled growth and innovation. The company could not only focus on its top-line anymore, it had to give more attention to its bottom-line and build a culture of productivity and optimization.

18 For instance the company recently acquired large shares of Stonyfield Farm, the leading US producer of organic yogurt.

Table 4-8 Respondent profile and stakeholders in the ERP-FOOD initiative

- The respondent is the company’s CIO since 2003. He was hired to restructure the company’s IT department and to restart the ERP project that was launched under the previous CIO. He previously worked at Henkel as the VP of IT for a period of 13 years and holds a masters degree in computer science from Columbia University in New York.

The internal stakeholders and sponsors

- A senior business manager was detached from the company’s operations to take charge of the ERP project in association with the CIO.

- The CIO’s decisions had a very strong impact on the company’s organizational structure.

- The decision-making and the program management were kept internally.

- 85 employees were fully allocated to the project (over 150 on average) and 2/3 of them came from the business, the others from IT. The CIO insisted on keeping this ratio to avoid having a technical project instead of a business one.

- About 30 people manage the technical architecture and the outsourcing relationship with IBM for operating the company’s data center in Montpellier (the infrastructure).

- The IS committees created in every business unit and subsidiary ensured an ongoing and very effective communication with the CIO and the central IT function.

The external network (consultants, vendors, etc.)

- The external network mainly consisted of Accenture consultants and SAP people.

- Accenture’s main role was the flexible staffing of the project. Accenture has the ability to manage the variability of the staff allocated according to the project’s needs.

- Accenture also provided valuable program management methodologies and extensive experience in the implementation of SAP.

- IBM was in charge of implementing and managing the data center / IT infrastructure.

Similarly to the IT initiatives CRM-ENERGY and CRM-POST cases, the ERP project here is the largest transformation initiative the company has ever experienced. The initiative’s key characteristics are presented in the following table:

Table 4-9 Key characteristics of the ERP-FOOD initiative (cont’d) Attribute Description

Project triggers and strategic motivations

- According to the respondent, the SAP platform is now a highly strategic weapon for the company that drives 85% of its operations in 80 countries.

- The complications, inefficiencies and coordination problems caused by a dramatic increase in legacy systems. The numerous acquisitions multiplied the problem.

- The need to establish a strong IT governance, to change the company’s approach towards outsourcing and to enhance the IT team’s quality by including IT in its strategic functions.

- Infusing flexibility and increasing efficiency through business integration and control.

- The company also aimed at building capabilities for scalability. The goal was to make sure the IT systems were flexible enough to support the growth of its business units.

The system and its major capabilities

- The new ERP system is considered a highly strategic enabler for the company. By standardizing the ERP processes throughout the company’s global business units around one single Core Model, the company creates unmatched capabilities for quick change.

- The platform creates powerful monitoring capabilities for the company’s executives. For instance, the Swiss subsidiary can be monitored from Germany by hosting the Swiss system in Germany and by combining it with the German system.

- The system facilitates and systematizes mergers and acquisitions.

Table 4-9 Key characteristics of the ERP-FOOD initiative (cont’d and end)

Major

challenges and difficulties

- The major challenge was changing the culture. To transform the business from a culture of decentralization to a culture of standards, processes and productivity.

- Before the CIO took over the project, the company had major problems with its IT function, outsourcing relationships and ERP project. According to him, there was a very weak buy-in for the “process” concept inside the company’s subsidiaries because the benefits were not communicated proactively. Also, the IT team was not qualified enough for effective governance and management of outsourcing relationships. The internal team was not strong enough to challenge consultants.

The

performance and impact on innovation

- The CIO described the project as a “completely radical transformation”, the results as

“miraculous”, the new system as “a strong strategic weapon” and the transformed IT function as “a war machine”.

- The company is now a reference for Best Practices at SAP because of its ability to build and maintain the strong and unique Core Model and to transform the whole organization.

- The measured benefits are extremely satisfying for the CIO and the IT costs over the net revenues decreased considerably after the implementation.

- The new system is evolutionary, flexible and scalable while costing less.

The CRM-RESORTS initiative

The company is a French company of high-end vacation resorts found in many parts of the world, usually in exotic locations and seen by many as having started the all-inclusive resort concept. In 2008, the company employed about 20,000 people in 40 countries and sold for over

$2 billion of stays in its resorts.

Table 4-10 Respondent profile and stakeholders in the CRM-RESORTS initiative Attribute Description

The respondent position / profile

- The respondent was recently appointed CIO of Accor Services, one of Accor’s two main divisions, after having successfully implemented the CRM system and mass customization capabilities at the resorts company where he worked as CIO.

- He worked as a consultant for Capgemini but he quickly became frustrated with the fact that he could only observe others do the job instead of doing it himself. He regards his CIO role as doing business.

The internal stakeholders and sponsors

- The CIO focused on maintaining the IT competence inside his IT team.

- The role of the IT function was to find creative ways to effectively use the CRM tool and to design and maintain powerful business processes that differentiated the company from its competition. The CIO focused on what he calls ‘innovation by utilization’.

- The sponsor (owner) of the project was the VP of Sales and Marketing and the Human Resources function was actively involved because the project has a serious impact on the jobs of thousands of employees at the company. They were involved in training and change management activities for instance.

The external network (consultants, vendors, etc.)

- Capgemini was the major consultant and system integrator.

- Web agencies were hired for the website design and the look and feel, the main one was the Belgian company, Selligent.

- The back-end platform and database system was provided by Oracle.

- The American marketing company Wunderman was selected for the esthetics and communications side of the project.

This initiative is another business transformation project with a CRM at the core. The company hired Capgemini for the consulting and system integration job, Oracle for the back-end and database system and a number of smaller firms for the front-end (the company’s website and e-commerce capabilities) with a Belgium Web Agency called Selligent as the main partner. The project’s strategic motivations, innovation outcome and key characteristics are presented in the following table:

Table 4-11 Key characteristics of the CRM-RESORTS initiative Attribute Description

Project triggers and strategic motivations

- Shifting from a BtoB to a BtoC sales process through the CRM system with a dynamic and appealing interface to give all consumers the ability to book directly on the company’s website or through the company’s hotline without needing to contact any travel agency.

- The project provided both efficiency gains and a serious increase in growth.

- Building a mass customization capability to stimulate demand leading to better marketing campaigns and increased growth.

The system and its major capabilities

- The system is a CRM platform that creates substantial value for both the company’s internal and external clients by offering new functionalities and capabilities.

- The systems provides powerful mass customization capabilities: (1) it gives the clients the ability to search and find a very large variety of products and packages and to build their own packages on the company’s website, and (2) it gives the employees (in call centers for instance) the tools to quickly access information on resorts, to make smart

recommendations and to quickly book trips.

- The system combines economies of scale with economies of scope by providing a central platform with centralized functionalities used by all the company’s outlets around the world while enabling the adaptation of local cells to take the local needs and cultures into account.

- The CIO emphasizes the capability to use the system effectively; the way the new business process is utilized. He focused on increasing the company’s competitiveness through the optimization and effective usage of the new IT-enabled processes.

Major

challenges and difficulties

- The CIO had a hard time finding hybrid people for his project; people who speak both the business and technical language, people with both experience in business and consulting.

According to him, the issue is more prevalent in Europe than North America. IT jobs are becoming translation jobs and the IT people need to be hybrid.

- The fast rate of technological change was a challenge (technology changes on a 3-years basis) and the CIO created an SOA environment to address this problem. This fact explains the constant need for new IT initiatives to remain competitive.

- The CIO found it difficult to keep the project’s owners motivated and focused on the project. According to him, the sales and marketing teams are scattered around the world, which multiplied the ownership, accountability and attention problems.

The

performance and impact on innovation

- Business innovation for growth and efficiency: The project created new mass

customization capabilities enabling the direct distribution of resort stays to consumers, increasing sales, improving the company’s brand image and enhancing its customer satisfaction. The project has impacts on both the company’s growth and efficiency.

- Internally, the CIO used the project to reinforce the concept of “innovating by utilization”

to optimize the usage of IT systems. His approach has a positive impact on internal business efficiency, the quality of customer service and the company’s sales.

In document The Governance of Strategic IT Initiatives for Innovation (Page 154-160)