Information Systems in the Consumer Industry/A case study - industry

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A case study of reengineering of information systems – industryA case study of reengineering of information systems – retailIntroduction to methodologyGeneral processesIndustrial processesRetail processesConclusionAppendix AAppendix BBibliography

The company: this case history is about a middle-sized industry in the market of apparel and fashion.

The total business is fairly split between production of fabric and underwear, especially beach wear.

The company was historically a weaving site and the apparel part was created to fill the period of the year when fabric production was low.

The company was created by a single person, a fairly typical situation, and grew up on such a one-person organizational schema. As time passed and markets changed, this model showed its limits and the whole company was suffering poor sales. Everybody was feeling that something new was needed but there was no clear model to follow or copy. The company was slowly losing all its assets: market as well as culture, including human expertise in management, control and operations.

The market: as you might have guessed the main part of the customers belong to two different categories:

  1. Other companies buying fabric
  2. Retailers buying underwear and beachwear.

We are thus talking about two different classes of customers with two different sales channels (direct sales vs. sales agents) and different habits. Geographically the company was selling mainly in Italy with little or no foreign turnaround.

From the “marketing” point of view the two parts had a completely different approach:

  1. The “fabric” department had very little “brand awareness” as the product was thought for a technical market where the customers are specialists
  2. The “underwear” department had a definite need for “brand recognition” as this is a large part of the final sale.

The existing information system: as it often happens the actual IT was the result of many years overlapping without the possibility of a real radical rethinking. This was due to two major reasons:

Any radical reorganization of the IT system would have meant discussing the real essence of the company both in scopes and in structure

The IT manager did not have the organizational strength and will to pursue such a task, a job which would have meant criticizing actual high class managers.

The whole situation was also worsened by the fact that the new line of business (“the underwear”) started as a result of another company acquisition.

All of these factors lead to the existence of two different systems, almost non compatible and with double costs in terms of maintenance and development; worst of all the existence of two technical worlds created the idea that two different companies were acting and that no synergies were possible.

Control system was also a problem as the two systems used different coding and taxonomy so a third system had to exist to aggregate the final data.

Economical perspectives: the international market context and production methods were driving the company to a slow decline in spite of local situation like crisis of recoveries. The whole business model had to be redesigned and the IT was a problem for this.

First of all the company needed to understand what was important and what was not; this information was not in the IT capabilities as the system was the image of the company situation and it could not merge internal information with external signals also because people working in it was too busy in getting it going on the operational side.

The turn point of the situation came when a new CEO was appointed. He decided to analyze every process to create a more elastic and homogeneous company structure. This decision put the top manager in a very delicate position: he could have been the successful innovator, the visionary leader or the excuse for a failure. Particularly in one-man company (level 2 of the Greiner model) product and direct processes are so deeply tangled that any structure variation is seen as an “offense” to the history of the enterprise and these changes are not considered as rational necessities for the company health. Service processes, and IT especially, are not felt as “communication needs” as this job was done by the founder as a physical person. Obviously we all know that is one of the deepest reasons why that communication model (the one-man company) cannot raise over a certain dimension and therefore cannot gain certain dimensional efficiencies.

With the help of an advisor the new CEO has looked into the problem of updating the IT system and his first problem was to decide which kind of approach was to use:

The content approach: this is the most common approach and it start from defining the typical parameters connected to:

  • Technology situation: both technical and functional (HW, SW, user requests coverage etc.)
  • Consultancy situation: both related to the existence of “best practices” in the field and to the presence of players (consultancy firms) available
  • Project content: typically you tend to copy the actual requirement schema because it is what users ask for
  • Timing: months to years horizons
  • Objective: to a have a more flexible and usable platform; an updated environment.

The functional approach: this approach starts from a different point of view: “we want to improve customer service” where “the customer” is both the internal user but mainly the external sales customer as this last one certifies the company in the market. So, for each process, we it was necessary to define:

  • The customer: who is he? (both known and potential)
  • The service: what does this mean? product, attention, social needs
  • The product: what the expectations of the customer (the standard we want) as a function of reliability, availability, fashion alignment.
  • Esteem needs: achievement, attention, recognition
  • Social needs: belonging, recognized interaction
  • How do we define and how do we measure these needs?
  • How do we acquire these informations?

The main purpose of this approach is to define some quantitative parameters for a business model with particular attention to the idea of “customer service”.

This second approach was really appreciated also for its “push” attitude on people who had somehow lost what the market really asked for, even though this analysis requires, as an assumption, that a customer knows what he wants, a “mature” approach, and this, by itself, is a statement to be demonstrated.

The first real step was then to figure out what the customer real needs were, differentiating them from what were historically thought them to be or from what were perceived by the various intermediate acting agents. The basic idea was to compare which information were in the IT system and which one were needed to be really customer compliant as to decide which way to invest in the general company information system.

On the external customers, the real steps which followed began with

  • Identify “representative customer” by the sale force
  • Check whether these customers were really representative of the whole internal market by defining the selection criteria for a sample
  • Make an interview to “random customer”, “statistically sample customer” and “representative customers”
  • Collect their needs and cross table the results.

The beginning was a disaster, the general attitude was:

Sales people: customers are an asset of “my” division; it is only me who should talk to them

Marketing people: the product is “right”; it is the customer who does not understand it (!).

The CEO skill was to be able to maintain the right direction and get everybody to understand that the company could only grow if it would face the real changing world, avoiding closures and blind behaviors; a formal check is something which is in the nature of improving processes.

As a result of this phase it turned out that the important parameter to be fixed was “time-to-market”: both the fabric and the underwear department could not compete with far-east productions in terms of prices so, assuming that quality was perceived as “sufficient” (therefore a correct positioning on the market) the request was for small production quantities which were to be available quickly.

From the company point of view, this meant:

  1. A better information system connection
  2. A better relation system between customer and vendor
  3. A product industrial design which could allow a quicker response
  4. A different industrial relation management for customer who need products with a long lead time
  5. A better forecasting and projection system.

This whole analysis was then enlarged to non-covered channels like e-commerce and direct retail.

The solution approach: obliterate or improve. This question has been raised so many times by the times of Hammer and Davenport and we know that it has no general answer but it must be correctly posted in the real context. This pragmatic approach must also keep into consideration that the smaller the company the more important is the role of individual physical persons which are themselves “organizational customers” with their background of Maslow needs.

Inside the company the process started requesting each key employee how he felt about the idea of “customer” whether internal or external. We then reversed the question and asked everyone how he felt as being a “customer”, which kind of expectations he had, whether fulfilled or not. In this way we arrived to define a map of “needs”. We then matched these “needs” with their coverage both declared (by the function) and perceived (by the customer).

The difficulties we found, at this stage, were essentially two:

  • The capacity of “customer” and “supplier” to estimate the importance and the coverage of problems; aggressive users tent to impose small problems as important mainly to show that were important people while passive persons would adapt to uneasy situations for the sake of peace
  • The difficulty in accepting the idea that, being the company a whole system, the total result is the combination of all parts running well and not just a sum of parts each running at its own speed.

The fact that external consultants were involved helped people to question themselves as well as gave the company an external evaluation of specific professional capability.

In this analysis period the IT group showed its greatest limits as it was trying to support individual needs without having the chance of harmonizing the whole system. Individual requests were pushing into specific directions so the general feeling was that of a waste of time and money. From the outside we can say that it was just a representation of the company situation but to the inside this was the excuse for the falling efficiency.

The final choice: as we said the CEO found himself in the middle of

  • The outside world and the its dynamics
  • The needs of the internal operators and especially of the owner.

The way he chose included:

  • Making the situation clear to everybody including the owner
  • Understanding the stakeholder needs and make them the strategic goals
  • Formally analyze the market needs
  • Define the organizational model including the operational role and responsibility of the stakeholder
  • Getting all the human resources through a processes of upgrading their attitude to “customer service”
  • Define the instruments to control both the “service” and economic indicators of each department.

As far as the IT department the choice was:

  1. Simplify the existing reporting processes as much as possible so that the actual technical infrastructure would last some time allowing the company to concentrate on other projects
  2. Invest very much on instruments related to “company critical” issues like
  • Style research
  • Product design and management
  • Technical product definition
  • Market analysis
  • CRM
  1. Define a strategy to clear out the dependence of the company from a few IT people who actually could not be changed and get the user to accept some minor cut in service level as a function of a clearer general view on the whole system. This part was to support the company up to the change of the system in a medium time period (2–3 years), mainly through a process of data and process definition.