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Change
management or how to manage changes
Businesses
are subject to continuing changes. The success of mergers,
acquisitions and reorganizations depends on how fast organizations
can adapt these changes internally and externally. Critical
in all change processes is the information inside disparate
IT systems. For board executives, fast access to timely
accurate information on any aspect of the business, at any
level of performance, from any perspective, is essential
to make the right decision at the right time. The crux is
maximum ‘visibility’ across the enterprise combined
with maximum ‘flexibility’ to react quickly
to market conditions. For many organizations this has been
a contradiction in terms since IT was introduced.
By Chris Worsley, Kalido Ltd. Typically global businesses
fall into two main categories – the Standardized Enterpriseand
the Decentralized Enterprise. The former has full visibility
across the enterprise and little flexibility, and the latter
the converse. The Standardized Enterprise, where the central
IT function is typically very strong, has decided to invest
the time to create a unified technology environment. In
the Decentralized Enterprise the local business imperatives
hold sway and the emphasis is on flexibility.
They do not
have the time to become Standardized and instead tend to
favor a best-of-breed IT approach to suit local requirements.
Internal and external forces tend to pull global organizations
between these two states as they seek to achieve both visibility
and flexibility. By their very rigid nature Standardized
Enterprises typically do not have the systems in place that
can accommodate change. On the other hand, Decentralized
Enterprises can respond quickly to change at the local level
but cannot obtain a global overview of performance since
there is no fast, cost-effective way of gaining the right
data from all the disparate information systems. Neither
is satisfactory.
Many CEOs tell this story. They know the decisions they
want to make and are prepared to make them. However, they
have no way of accessing the quality of information they
need fast enough to make the critical strategic decisions
they need to drive the business forward.
Adaptive
Enterprise
Organizations
are stuck between these two worlds. They either s uffer
from lack of visibility across the enterprise or force common
practices in order to increase visibility, but then quickly
find themselves suffering from rigidity or information invisibility
when things change. The best of both worlds, rarely achieved
with existing enterprise information systems, is increasingly
becoming a business-critical requirement for the creation
of what many industry experts such as INSEAD1) now call
the Adaptive Enterprise. Such an enterprise has a clear
global view of both its internal and external environment
and can act with agility based on that clear view, while
at the same time is in a position to quickly adapt to change.
Market forces necessitate constant strategy re-alignment,
re-structuring, acquisitions and divestment for all large
organizations. New regulations require new, robust reporting
techniques, and rapid market downturns demand consolidation
of business and product portfolios. Management has no time
to lose if it wants to capitalize on a new opportunity or
survive a market maelstrom. By the end of the quarter, investors
want accurate, positive data. They want a global view but
one compiled from quality information throughout the value
chain and from the very bottom of the organization.
Executives need fast access to timely, accurate information
on any aspect of the business at any level from any perspective
no matter how much or how often it changes. They also need
the ability to keep this high visibility across the entire
organization through major changes of the internal and external
environment.
Executives in an Adaptive Enterprise are able to do exactly
this. They can manage the changes.
Integrate
the Information
But
how do these Adaptive Enterprise executives achieve this?
With their numerous information source systems, such as
ERP, CRM, SCM, each with its own coding structures, how
on earth are they able to synthesize all the data to achieve
full visibility and flexibility even during mergers, acquisitions
and reorganizations? The bottom line is: integrate the information
within the source systems, rather than the systems themselves.
In this way, organizations are able to change their data
models to synchronize with their business models, ensuring
that business reporting is always accurate and up to date.
They are capable to view possible scenarios at any level
without hindering the daily activities of all the business
units. They can view company, product and customer information
in ‘as was’, ‘as is’ and ‘what
if’ scenarios so that the past and potential success
of strategic decisions can be accessed and new strategic
options analyzed.
If systems cannot accommodate change, then all data becomes
effectively obsolete from the moment the change occurs.
Say, for example, a board wishes to review whether a business
customer would be better served by the integration of two
operations. If the country operation has changed its product
portfolio during that time it will only be able to review
performance data from the time the products changed.
Enterprise-wide systems may be able to be re-tooled to reflect
business change, but at great expense and in many months,
if not years.The answer to overcoming the issues of inconsistent coding
structures and business change without huge expense is to
create an adaptive in formation architecture that can accommodate
business change. This architecture is able to consolidate
information from disparate systems despite differing coding
structures, delivering a global view of information, while
still enabling business units or operations to use the applications
best suited for their own specific purposes. This adaptive
information architecture is based on next-generation data
warehousing which provides an open, generic data model combined
with a facility for storing and remembering the information
from the different applications in the original format.
This strategy will drive the creation of a central repository
that separates and holds two sets of information –
transaction data and reference (business context) data.
Typically in huge volumes, transaction data is a record
of each business dealing, such as sales price of a product
or volume of sales. The transaction data is taken from all
the various operational systems across the organization.
On the other hand, the reference data defines the context
around the transaction data, such as the customer organization,
service offering and account management hierarchies. All
of the transaction data is then viewed through the lens
of the reference data to provide a coherent, enterprise-wide
perspective of the customer, service offering or organization.
To quickly accommodate change in business structures, in
this approach, each piece of reference data is ‘time-stamped’.
In addition, the reference data can be easily reorganized
when the business changes. This way, the view of aggregated
information about the customer (or service offering) always
keeps pace with changes in business structures – furthermore,
the business context of data is not lost when things change.
The integrated information is made available to business
intelligence and performance management tools for analysis,
reporting and feed back to source applications. The information
can be viewed at any level, and from any perspective, such
as finance, sales, marketing, customers, suppliers and products
Furthermore, if the Adaptive Enterprise has more than one
‘next generation’ data warehouse, the warehouses
are then federated ‘pyramid fashion,’ with country
warehouses linked into a top-level warehouse at a contextual
level. This structure retains consistency of information
across the whole organization, but enables simultaneous
top-level and local reporting formats in styles that suit
each levelgiving
global visibility with local flexibility.
Pay-back
When
an organization becomes an Adaptive Enterprise, then it
can start to run its businesses very differently and see
the opportunities before the competition. For example, an
organization may wish to see how its customer base would
look if viewed on a global product -line rather than geographic
basis. For the first time, an organization can view information
on global customer accounts wherever and whatever they worked
with them. The company could look at the past five years’
business performance in this context and the implications
for the five-year forward business plan. This might mean
that it would see a trend toward, for example, greater demand
for after-sales service support in a particular region and
would therefore decide to invest in a regional support center.
Previously if companies wanted information on global customers,
for example, they would have needed to request all the business
units to compile information in a special report format.
Assuming the information was available, this would have
been a time-consuming process. Indeed by the time the information
was compiled and collated it would probably be out-of-date
and thus worthless from a decision-making perspective. Now
with the Adaptive Enterprise model they can extract the
information they need on customers, or any other aspect
of the business, from across the whole business safe in
the knowledge that, whatever happens to their business or
their customers, they will be making decisions based on
quality information. They can start to manage the relationship
as a global one and offer the appropriate range of products,
pricing and service/support.
Both complexity and change are facts of life – they
will get more, not less, intense over time. Increasingly
boards will demand information on customers that has factored
in these and remains robust whatever happens. In this way
all the investment in customer-facing systems will generate
pay-back as they will be able to see the opportunities before
the competition. They can manage the changes.
BOX
Halifax
Bank of Scotland HBOS plc, formed in September 2001 from
the merger of Halifax Bank and Bank of Scotland, has assets
of more than 500 billion euro and 20 million customers.
The UK's leading mortgage and savings provider, HBOS is
also one of the most innovative players in the corporate
and business banking markets.
The merger between Halifax and Bank of Scotland (BoS) aimed
to deliver UK pounds sterling £320 billion in cost
savings, partly through procurement savings. In order to
support group-wide procurement activities, HBOS needed a
single view of data held across the merged companies, but
was hampered by the inconsistent data structures and systems
used by the banks. Therefore, HBOS needed to create a flexible
data warehousing and business intelligence layer above them.
This would allow the business to minimize disruption to
operational systems and increase its ability to accommodate
future organizational change. Ian Taylor, Head of Group
Procurement, HBOS plc, comments: “We knew as a business
we were going to change, so the more flexible we could be
in our approach, the easier it would be.” HBOS implemented
the KALIDO™ Dynamic Information Warehouse to integrate
data from disparate systems. T he HBOS Supplier Relationship
Management (SRM) implementation began in February 2002,
and the first stage of the solution was successfully delivered
just three months later.
The solution has produced a central repository for procurement
data, allowing consistent group-wide management information
to be generated for the first time. This enables HBOS to
analyze and manage supplier performance across its complex
organizational structure. The new system delivers fast,
accurate management information to support procurement initiatives,
and is playing a significant role in deliverin g procurement
cost savings at HBOS. HBOS has developed a consistent group-wide
commodity structure, consolidating 17,000 account codes
by eliminating duplicates and re-ordering them into just
27 commodities split into 142 categories. Taylor: “A
key advantage of the solution is its ability to cope with
change.
We know HBOS is not going to be static, and that
there will be further changes that will affect the business.
With HBOS SRM, using KALIDO Dynamic Information Warehouse,
we know that if we suddenly have to switch to the Euro,
or find ourselves in new merger or acquisition activity,
we have the flexibility to do so quickly and with minimal
disruption.”
Notes
1)
June 2002 – Building the Adaptive Enterprise , Theodoros
Evgeniou, INSEAD
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