A wise colleague (David Ball) once taught me, ‘people don’t care how much you know unless they know how much you care’.

I am listing and highlighting all these mistakes with the intention to build a common, uniform and elevated knowledge base among the senior executives in the user base in the supply network information technology systems companies and in the implementation companies so that these mistakes do not continue to happen in different guises.

Some of the key questions which companies must ask at the outset even before starting on this journey are:-

• Why should they do the systems renewal at this point?

• What are the various options that exist in front of them?

• Who will help them in making sure that the internal business people, internal information technology people, external information technology service providers, external process service providers, and external software providers will all work to the same agenda to achieve the business strategy and the supply chain strategy of the company?

In our view, these are the mission critical questions. Delegating the task of answering these questions to a part-time team of internal executives who have massive other business responsibilities and only act as steering committees meeting on an occasional basis would consign the system’s renewal efforts to failure from the start.

For ease of discussion we have divided these mistakes into four categories as shown in the figure 4.1

Key Mistakes in SupplyNetwork IT Systems Deployment

1. Information technology outsourcing strategy development is rarely well thought through

The most common mistake is improper ROI calculations and inadequate budgeting for the cost and time required to achieve the results. Nearly 84% of companies reported after the fact that they should have allowed for more time and money budgets.

Often, there is a major disconnect between the business strategy and the capability of the information technology system that is being bought.

Why does this happen?

In fact, the three different strategies – business, Supply Chain, and IT - need to work in resonance with each other.

For example, if the business strategy is to serve premium customers with customized bundles of products and services at a premium price, then the supply chain strategy is more towards the ‘make to order’ segment of the continuum rather than the ‘make to stock’ element of the supply chain continuum.

A ‘make to order’ supply chain strategy necessitates a much more flexible supply chain information technology strategy so that the systems can respond flexibly to both the supply chain strategy and the business strategy.

On the other hand, if the company hopes to achieve high volume through marketing low profit, low cost products to mass markets, a ‘make to stock’ supply chain strategy makes a lot more sense.

Supply chain information technology systems will tend to be lot more rigid, a lot more efficient and oriented around forecasting demand and managing the safety stocks of the business. Responsiveness is not the key for these kinds of systems.

However, forecasting ability and management of inventories through the system will be critical. All the decision support capabilities of such systems must be oriented around their ability to manage the safety stock through the ups and downs of seasonality and business cycles.

As the market situation changes or the economic conditions change or the geopolitical backdrop of the business strategy changes, these three key strategic elements must be constantly updated in resonance, and clearly articulated to the business network.

However, in the real world these three groups of individuals frequently act in isolation.

The strategists make strategies up in the air, the supply chain executives execute the supply chain down in the warehouses based on their own assumptions about what the business wants to achieve and the information technology staff work away in their cubicles to provide systems based on poorly articulated needs of the business.

2. In the absence of a clear strategy, tactical thinking takes over

When the strategy is not clearly defined or articulated to the information technology staff they start making their own assumptions about what the executive team who sets the strategy want.

Or, they start reacting to the needs of the supply chain staff, who themselves are not clear on supply chain strategy or business strategy, but are very vocal in articulating the tactical problems which they face in their day to day running of the business.

Though it is important to address these tactical issues in the systems renewal effort, they should be escalated up to a strategic level before addressing them.

The following example will give you a better idea about how tactical thinking dominates information technology staff’s thinking during system renewal efforts.

A very recent examination of a business that I worked on revealed that the selection of systems vendor was made entirely on cost constraints rather than envisaged benefits.

As a result, the new system put in place was inferior and did not support the demand forecasting process and the inventory optimization process of the company.

It is pertinent to point out that this business operated in an industry that largely thrives or fails on the basis of its inventory management capability.

However, the information technology personnel who made the systems selection decisions were either unaware or ignored the fact that in the mass retail business in which their company operated, one of the most important determinants of success was the inventory management capabilities.

They were very much aware that the business shareholders and the board were extremely cost conscious and they reacted to that economic constraint far more than to the strategic needs of business for a robust inventory planning system.

The entire effort of two years of systems selection and implementation was wasted as a result of this key tactical blunder. Unfortunately, we were called in to the business far too late when it was already way behind its competitors due to misapplied inventory management capabilities and was on the verge of bankruptcy.

We could immediately diagnose the key strategic blunder that was made several years ago when the new system was put in place. Penny pinching at the time of systems renewal had sunk the business beyond redemption in that case.

3. Lack of visualization leads to a fumbling around

The teamsoften do not attempt to visualize how the day-to-day life will change once the new system is in place.

Without such visualization, perhaps due to an inadequate or improper understanding of the coming change, companies are charting a course while surveying the territory. No wonder they get lost.

What do we mean by visualization of how life will change? The fact is that every company is currently operating under a set of constraints and assumptions.

When the new system is fully functional many of these constraints will disappear and many of the current assumptions will not be valid anymore; a new way of functioning will need to evolve.

With the availability of knowledge about the new systems, it should be easy to understand the complete capability set of what is going to be put in place.

With this understanding, the company should be able to create a reasonable view of how the entire business will work when the new system is in place.

This visualization allows the company to align the new processes with each other and with the strategy of the business. However, lack of this visualization results in critical mistakes being discovered at every point during the execution.

In addition, the staff end up using no more than 40% of the functionality that they enthusiastically pay for.

4. Budgeting is still ‘massaged’ to game the decision making

The fourth critical mistake is an improper budgeting process. I have already outlined above how most projects end up over budget and past due.

Cost escalations are the norm rather than exception. I believe that this is a fundamental strategic mistake. Vendors have an incentive to give out information strategically and only when they have to.

It is imperative for the company to keep digging information to enable it to budget fully before the project even goes past the comparison of various options stage.

Just because the vendors do not give out enough information to create cost comparison is not an excuse for a company not to do their budget in sufficient depth and with sufficient rigor.

5. IT vendor selection process is muddled through

Many companies have a very democratic systems selection process with a ‘one person one vote system.’ However, they forget that it is easy for many staff members to get distracted by flashy systems features that will yield hardly any practical benefits to the users.

It is customary to blame the system for process or skills short-comings. It is equally customary to have an expectation that the IT systems upgrade or new deployment will resolve these short-comings automatically. Nothing could be further from the actual outcomes in most instances.

There are many legitimate reasons for seeking new IT systems – e.g. enhanced capabilities, measurable and clear increases in supply chain efficiency/effectiveness, support for business strategy etc. Many companies,

However, seek new or upgraded systems for the wrong reasons – e.g. competitors are doing it, or this will make us look good. Coupled with the above three problems is the problem of unclear or wrong selection criteria.

Frequently, companies fail to look behind the veil and discern what appears to be a single system is actually a mish-mash resulting from multiple acquisitions.

Risks are frequently underestimated and benefits are overestimated. Realistic expectations, clearly articulated selection criteria, along with weights attached to each, weighted voting rights, well developed systems selection process based on meaningful benefits are some of the ways to achieve better results.

Most decision support systems have sophisticated algorithms built into the code. All systems have process assumptions built into them.

In many cases, the selectors do not adequately understand these algorithms, process assumptions and systems capabilities. The decisions are based on vague understanding of the capabilities and algorithms. No wonder the results are far from expectations.

During the systems integration phase, users frequently lose control of the project

During the implementation process the flaws in the previous two steps manifest themselves clearly. Time and cost overruns are frequent.

Few, if any, projects deliver on time precisely what they set out to deliver. Frequently, companies lose control of the implementation process from the beginning by relying far too much on the implementation partners.

Another very common complaint from the users is the insufficiency of training. Frequently, due to budget overruns towards the end, training is cut short. All this minimizes the benefits of the new system.

By the time the systems implementation process is underway, most people have lost sight of whatever strategic objectives existed in the first place. Goal posts are changed mid-way through the process due to this inability to see the final outcomes clearly.

A ‘big bang’ approach to change is another key mistake, where enough pilots and testing are not undertaken. This was a common problem earlier, but is still encountered sometimes where companies take on too much change without enough testing.

Similarly, not enough understanding and usage of change management principles is also a major mistake. Despite all the focus on change management over the past decade, critical steps are often missed in the change management process.

Stakeholders are not adequately covered, top management is not fully involved in the process, and incentives are not properly aligned for all the stakeholders.

On-going relationship management is frequently formulaic and lacks substance

Because of insistence on flashy features during the systems selection process, and due to inadequate training, companies frequently end up using only a very small percentage of all the functionality that is paid for.

It is also common to pay significant sums for customizing the systems with functionality that is later found to be redundant or unusable.

Despite the fact that one of the main reasons for IT systems upgrade or deployment is the lack of data accuracy and completeness, frequently it is discovered after the completion of the project that the original problem remains.

There are many reasons for this – mainly encountered in the first two steps. After the initial systems deployment, further upgrades are frequently left up to the mercy of the vendor.

A streamlined process is rarely deployed to assess each upgrade for its suitability to the business strategy.

Due to lack of skills and a rigorous process in the first three steps, it is rarely possible to isolate root causes of most of the problems encountered during the journey.

The systems companies and the implementers are rarely held accountable for their respective roles in accentuating the chaos. Inadequate feedback results in problems manifesting themselves over and over until a sufficient body of disgruntled customers builds up, who gradually air the problem in vague terms.

Lacking in timely and accurate feedback, improvement is only gradual and sporadic.

This is where the benefits from the previous 3 steps are expected to manifest themselves and make it all worthwhile to have made the effort.

We frequently find that because of all the other critical errors made during the previous three steps, companies sub-optimize the usability of the system quite dramatically and fail to gain the expected jump in productivity or competitive advantage or enhanced effectiveness in their supply chains.

I make no apologies for taking the time and making the effort to clearly articulate the problems with the information technologies systems that fail in supporting the business networks.

No business network can truly be great (in both its effectiveness and efficiency) unless it is underpinned by a robust and functional information technology system.

So what does a functional information technology system look like?

What would support a business network of the future?

This is the key question we address in the rest of this chapter. Let us see how the business networks have evolved in the last few decades, and how the functional information technology systems have evolved in line with the evolution of the business networks.

TEST YOUR RETENTION

On"WHY TRADITIONAL OUTSOURCING FAILS"

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Key Mistakes In Large Scale Information Technology Deployment

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