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OHT 10.1

© Marketing Insights Limited 2004

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Chapter 10

Change management

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OHT 10.2


Learning objectives

• Identify the different types of change that needto be managed for e-commerce;

• Develop an outline plan for implementing e-

commerce change;• Describe alternative approaches to

organisation structure resulting fromorganisational change.

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OHT 10.3


Issues for managers

• Should we change organizational structure inresponse to e-business? If so, what are theoptions?

•

How do we manage the human aspects of theimplementation of organizational change?

• How do we share knowledge between staff inthe light of high staff-turnover and rapidchanges in market conditions?

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OHT 10.4


Key change management issues

• Schedule – what are the suitable stages for introducing change?• Budget – how do we cost e-business?• Resources needed – what type of resources do we need, what are

their responsibilities and where do we obtain them?•

Organizational structures – do we need to revise organizationalstructure?• Managing the human impact of change – what is the best way to

introduce large-scale e-business change to employees?• Technologies to support e-business change – the role of

knowledge management, groupware and intranets are explored.• Risk management approaches to e-business led change.

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OHT 10.5


Key factors in achievingchange

Figure 10.1 Key factors in achieving change

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Scale of change

• Hammer and Champy (1993) defined BPR as

the fundamental rethinking and radical redesign of business processes toachieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service, and speed.

•

Fundamental rethinking – re-engineering usually refers to changing of significant business processes such as customer service, sales order processing or manufacturing.

• Radical redesign – re-engineering is not involved with minor, incrementalchange or automation of existing ways of working. It involves a completerethinking about the way business processes operate.

• Dramatic improvements – the aim of BPR is to achieve improvementsmeasured in tens or hundreds of percent. With automation of existingprocesses only single figure improvements may be possible.

• Critical contemporary measures of performance – this point refers to theimportance of measuring how well the processes operate in terms of thefour important measures of cost, quality, service and speed.

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OHT 10.7


Different scales of change

Term Involves Intention Risk of failure

Business processre-engineering

Fundamental redesign of all main company

processes

Large gains inperformance

(>100%?)

Highest

Business processimprovement

Targets key processes insequence for redesign

(<50%) Medium

Business processautomation

Automating existingprocess

(<20%) Lowest

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OHT 10.8


Project management activities

• Estimation – identifying the activities involved in theproject, sometimes referred to as a work breakdownstructure (WBS).

• Resource allocation – after the initial WBS,appropriate resources can be allocated to the tasks.

• Schedule/plan – after resource allocation, the amountof time for each task can be determined according tothe availability and skills of the people assigned to thetasks.

• Monitoring and control – monitoring involves ensuringthe project is working to plan once it has started.Control is taking corrective action if the projectdeviates from the plan. In particular the projectmanager will want to hit milestones

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Stages in developing ane-business solution

Figure 10.2 Stages in developing an e-business solution

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An example web site developmentschedule for the B2C Company

Figure 10.3 An example web site development schedule for The B2C Company

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Automating the employeedevelopment process

Figure 10.4 Automating the employee development process

Source: Confirmit Copyright © 2003 FIRM

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Organisational structures for e-business and e-commerce

Organizational structure Circumstances Advantages Disadvantages

(a) No formal structure for e-commerce

Initial response to e-commerce or poor leadership with noidentification of need for change.

Can achieve rapid response to e-commerce service responses (e-mail, phone). Priorities notdecided logically. Insufficientresources

Poor quality site in terms of content quality and customer

(b) A separate committeeor department managesand coordinates e-commerce

Identification of problem andresponse in (a)

Coordination and budgeting andresource allocation possible.

May be difficult to get differentdepartments to deliver their

input due to other commitments

(c) A separate businessunit with independent

budgets

Internet contribution (Chapter 6)is sizeable (>20%)

As for (b), but can set own targetsand not be constrained by

resources. Lower risk option than(d)

Has to respond to corporatestrategy. Conflict of interests

between department andtraditional business

(d) A separate operatingcompany

Major revenue potential or flotation. Need to differentiatefrom parent

As for (c), but can set strategyindependently. Can maximizemarket potential

High risk if market potential isoverestimated due to start-upcosts

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Summary of alternative organizational structures for e-commerce suggested in Parsons et al .

Figure 10.5 Summary of alternative organizational structures for e-commerce

suggested in Parsons et al. (1996)

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OHT 10.14


Hallowell on scalability 1

‘described as “virtual’’ (either pure information or automated) and “physical’’ (requiring some degree of humanintervention).

… because the nature and quantity of physical servicenecessary to deliver value to customers influences thequantity of human intervention required, it also influences a

firm’s ratio of variable to fixed costs, which alters its“scalability’’.

The paradox comes in that while reduced scalability isviewed negatively by many venture capitalists and proponents of ecommerce, the cause of that reduction in

scalability, human intervention, may help a firm todifferentiate its offering to customers, thus providing a sourceof competitive advantage.’

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Hallowell on scalability 2

‘For firms that are very high on the scalability continuum, the need for physical service does not present a “scalability” problem.

At these firms, information is the core service offering. Physical service isrelatively insignificant, both from customers’ perspectives (use of physical service is infrequent,if at all) and from the firm’s perspective (it represents a

very small portion of total costs).

Thus, these firms do not rely on physical service (and the employees it requires) to differentiate their offering; their differentiation tends to come fromthe quality of their content and the ease with which users can access it.

In contrast, firms that sell non-information services such as travel, or goodssuch as books, toys, or antiques require significantly more complex physical service operations. The degree to which they need more physical service isinversely proportional to the degree to which they are “scalable”.’

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OHT 10.16


Outsourcing example

Amazon:

‘manages customer relationships through its

website while relying on publishers for productdevelopment, Visa and Mastercard for revenuecollection and UPS, the parcel service, for logistics. It also outsources much of its call-

centre management to specialist suppliers’.

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OHT 10.17


Outsourcing benefits – activity

• • • • •

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BUT…

• ‘The snag, as many failed internet venturesdiscovered, is that it is hard to co-ordinate theactivities of business partners without a large

supporting bureaucracy. Poor customer service and higher-than-anticipated costsoften resulted. Amazon is one of the fewcompanies of its generation that made the

idea work.’

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Outsourcing risks - activity

• • • • •

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Outsourcing - Hagel’s view

Companies try to excel at three differenttypes of activity:

managing customer relationships,

routine processing of information and

development of new products.

He believes that companies will in future tendto concentrate on just one, while buying in theothers as required.

Examples?

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OHT 10.21


Oticon

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Transition curve indicating thereaction of staff through time from

when change is first suggested

Figure 10.7 Transition curve indicating the reaction of staff through time fromwhen change is first suggested

Source: Bocij et al . (2003)

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OHT 10.23


Key staff in systems acceptance

•

System sponsors –

• System owners –

• System users –

• Stakeholders –

•

Legitimizer –

• Opinion leaders –

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OHT 10.24


The role of organisational culture

• Survival (outward-looking, flexible) – the external environmentplays a significant role (an open system) in governing companystrategy. The company will likely be driven by customer demands and will be an innovator. It may have a relatively flatstructure.

• Productivity (outward-looking, ordered) – interfaces with theexternal environment are well structured and the company istypically sales-driven and is likely to have a hierarchicalstructure.

• Human relations (inward-looking, flexible) – this is theorganization as family, with interpersonal relations moreimportant than reporting channels, a flatter structure and staff

development and empowerment is thought of as important bymanagers.• Stability (inward-looking, ordered) – the environment is

essentially ignored with managers concentrating on internalefficiency and again managed through a hierarchical structure.

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OHT 10.25


Knowledge Management – Saunders (2000)

‘Every day, knowledge essential to your business walks out of your door, and much of it never comes back. Employees leave, customers

come and go and their knowledge leaves withthem. This information drain costs you time,money and customers.’

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OHT 10.26


IDC – objectives of KM

• Improving profit/growing revenue (67 per cent)• Retaining key talent/expertise (54 per cent)• Increasing customer retention and/or satisfaction (52

per cent)•

Defending market share against new entrants (44 per cent)• Gaining faster time to market with products (39 per

cent)• Penetrating new market segments (39 per cent)• Reducing costs (38 per cent)• Developing new products/services (35 per cent)

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Differences between knowledge management, dataprocessing and information management

• Consider a retail manager analysing their sales figures.• Raw data on sales figures consist of figures in each

individual store for a given month. IS can present thisdata within the context of sales compared to previous

months as information.• This information is of little value if the manager does not

know how to act in response to it. Managers apply their knowledge to decide how to respond if the sales in oneregion are much lower than others, or if one store is

underperforming against budget.• Thus knowledge is the processing of information and is a

skill based on previous understanding, procedures andexperience.

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Explicit and tacit knowledge

• Knowledge Management - Techniques and tools for capturing and disseminating knowledge within anorganization.

• Explicit – details of processes and procedures. Explicitknowledge can be readily detailed in proceduralmanuals and databases. Examples include records of meetings between sales representatives and keycustomers, procedures for dealing with customer service queries and management reporting processes.

• Tacit – less tangible than explicit knowledge, this is

experience on how to react to a situation when manydifferent variables are involved. It is more difficult toencapsulate this knowledge, which often resides in theheads of employees.

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OHT 10.29


Binney – classes of KM applications

1. Transactional . Help desk and customer serviceapplications.2. Analytical . Data warehousing and data mining for CRM applications.

3. Asset management . Document and contentmanagement.4. Process support . TQM, benchmarketing, BPR, SixSigma.5. Developmental . Enhancing staff skills, competencies –

training and e-learning.6. Innovation and creation. Communities, collaborationand virtual teamwork.

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2 perspectives on KM

• It is impossible to achieve full benefits fromknowledge management unless individualsare willing and motivated to share their knowledge or unless organizations lose their structural rigidity to permit information and knowledge flow - IDC 2000

•

Knowledge can only be volunteered – it cannot be conscripted Snowden 2002

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Chevron example – connections in $2 billion saving

1. Connection to the explicit knowledge via an intranetwith a portal with search tools and a directory of information.

2. Connection of people to people with specialized

knowledge through an expertise locator; a type of phonedirectory with people in different expertise categories,again also accessed via search tools.

3. Connection to communities of practice which canhelp sharing and learning between people.

4. Connection of knowledge and people with processes,products and services.

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OHT 10.32


Risk Management

1. Identify risks including their probabilities andimpacts.

2. Identify possible solutions to these risks.

3. Implement the solutions, targeting thehighest impact, most likely risks.

4. Monitor the risks to learn for future riskassessment.

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OpenText Livelink(www.opentext.com)

http://www.opentext.com/

http://www.opentext.com/

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OHT 10.34


Activity – identify risks for e-business project

Risk Probability Impact Solution

Insufficient senior managementcommitment

5 7 Education/training/lobbying by e-business manager toachieve buy-in

High staff turnover/key staff leave 6 5 Use monetary incentives and improve workingenvironment

Project milestones not met,overrun budget

8 6 Appoint experienced project manager and provide supportand resources needed. Manager will perform risk

management such as this

Problems with new technologydelaying implementation (bugs,speed, compatibility)

8 8 Allow sufficient time for volume, performance testing

Staff resistance to change 4 4 Education, training identification of change facilitatorsamongst staff

Problem with integrating withpartner’s systems (e.g. customersor suppliers)

6 8 Tackle these issues early on, identify one contactpoint/manager for each of partnerships

New system fails after changeover (too slow or too many crashes)

9 See solution to delayed implementation

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OHT 10.35


Barriers to KM – IDC survey

• Lack of understanding of KM and its benefits (55 per cent)

• Lack of employee time for KM (45 per cent)• Lack of skill in KM techniques (40 per cent)•

Lack of encouragement in the current culture for sharing (35 per cent)• Lack of incentives/rewards to share (30 per cent)• Lack of funding for KM initiatives (24 per cent)• Lack of appropriate technology (18 per cent)• Lack of commitment from senior management (15 per

cent)

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