Understanding Change in the Context of IT Investment

by John Berry

The only eternal truths are death, taxes, and change. Companies should know this. They experience change often. Ask Kodak, as it dies ever so slowly due to the profound change in technology that is influencing consumer preferences in the photography universe.

Organizations -- IT, LOB, and operations -- could do a much better job when it comes to planning for change in the context of technology investment. Big iron software purchases almost always come with change attached; change in people's roles, changes in required skills, changes in business processes, changes in organizational and reporting structures. But companies simply do not plan for change adequately by actually analyzing before investment what the change drivers are likely to be. With a solid understanding of the features, functions, and benefits of the investment, a PhD is not required to anticipate and plan for the change that IT introduces.

Consider this example of supply chain investment. Let's assume that a manufacturer wants to invest in a comprehensive suite of supply chain modules to work collaboratively with its trading partners in order to eliminate supply chain inefficiencies.¹ Here are some of the change drivers that emerge out of an economic analysis this manufacturer would do well to consider:

• The economic model reveals a manufacturer can dramatically reduce its held finished goods inventory in a collaborative supply chain environment. The assumed change? Retailers have to extend their short order cycles to better align with longer manufacturing cycles. Are they prepared to do this when it might mean carrying more items for a somewhat longer period of time?

• The economic model reveals that working capital efficiency can improve if the manufacturer can better manage its raw material inventories. The assumed change? That retailers share proprietary information about customer behavior at the point-of-sale, since coordinated supply chain value derives fundamentally from a universal view of customer behavior. Given this, manufacturers and retailers must also build in organizationally collaborative processes to plan for future customer demand. This is called trust and cooperation.

• The economic model reveals a host of other metric-based benefits: better asset utilization because of tight collaboration with the retailer partner and increased revenue because not only is the retailer conducting smarter merchandising planning and promotional events through its own deployment of supply chain applications but the incidence of out-of-stock items is greatly reduced. The assumed change? One is that your manufacturing rep, retained to earn commission on sales to this particular retailer, is loving all this.

  Consider the reps who are independent contractors who sell a range of complementary items to retailers from different manufacturers. Life may be very different after IT enables a scenario where manufacturers and retailers are joined at the cash register. In the rare case where a large manufacturer employs reps, how can it deploy their knowledge and skills to other activities when at least some of their job functions have been automated?

These examples might represent a fraction of the change wrought by collaborative supply chain management. Whether any of these specific scenarios comes to pass is less important than the idea that since change is inevitable, the economic model might be the best place to clarify thinking about the implications of the investment. What costs will this change introduce? What delays or other resource demands?

And if you hire a change management guru, hand them the economic model with all the metrics that hint at impending change and suggest they start there. This might be a welcome change.

-- John Berry

(A future Business IT Strategies Advisor will explore the types of change that exist and how an understanding of the subtle differences between those types add clarity to an understanding of the business calue of IT investment.)

NOTES

¹ This very work happens to be going on at the Collaborative Planning, Forecasting and Replenishment Committee.