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OHT 10.1
Chapter 10
Change management
© Marketing Insights Limited 2004
OHT 10.2
Learning objectives
• Identify the different types of change that need
to be managed for e-commerce;
• Develop an outline plan for implementing ecommerce change;
• Describe alternative approaches to
organisation structure resulting from
organisational change.
© Marketing Insights Limited 2004
OHT 10.3
Issues for managers
• Should we change organizational structure in
response to e-business? If so, what are the
options?
• How do we manage the human aspects of the
implementation of organizational change?
• How do we share knowledge between staff in
the light of high staff-turnover and rapid
changes in market conditions?
© Marketing Insights Limited 2004
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 organizational
structure?
• 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.
© Marketing Insights Limited 2004
OHT 10.5
Key factors in achieving
change
Figure 10.1 Key factors in achieving change
© Marketing Insights Limited 2004
OHT 10.6
Scale of change
•
Hammer and Champy (1993) defined BPR as
the fundamental rethinking and radical redesign of business processes to
achieve 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, incremental
change or automation of existing ways of working. It involves a complete
rethinking about the way business processes operate.
Dramatic improvements – the aim of BPR is to achieve improvements
measured in tens or hundreds of percent. With automation of existing
processes only single figure improvements may be possible.
Critical contemporary measures of performance – this point refers to the
importance of measuring how well the processes operate in terms of the
four important measures of cost, quality, service and speed.
© Marketing Insights Limited 2004
OHT 10.7
Different scales of change
Term
Involves
Intention
Risk of failure
Business
process reengineering
Fundamental redesign
of all main company
processes
Large gains in
performance
(>100%?)
Highest
Business
process
improvement
Targets key processes
in sequence for
redesign
(<50%)
Medium
Business
process
automation
Automating existing
process
(<20%)
Lowest
© Marketing Insights Limited 2004
OHT 10.8
Project management activities
• Estimation – identifying the activities involved in the
project, sometimes referred to as a work breakdown
structure (WBS).
• Resource allocation – after the initial WBS,
appropriate resources can be allocated to the tasks.
• Schedule/plan – after resource allocation, the amount
of time for each task can be determined according to
the availability and skills of the people assigned to
the tasks.
• Monitoring and control – monitoring involves ensuring
the project is working to plan once it has started.
Control is taking corrective action if the project
deviates from the plan. In particular the project
manager will want to hit milestones
© Marketing Insights Limited 2004
OHT 10.9
Stages in developing an
e-business solution
Figure 10.2 Stages in developing an e-business solution
© Marketing Insights Limited 2004
OHT 10.10
An example web site development
schedule for the B2C Company
Figure 10.3 An example web site development schedule for The B2C Company
© Marketing Insights Limited 2004
OHT 10.11
Automating the employee
development process
Figure 10.4 Automating the employee development process
Source: Confirmit Copyright © 2003 FIRM
© Marketing Insights Limited 2004
OHT 10.12
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 no
identification of need for
change.
Can achieve rapid response to
e-commerce service
responses (e-mail, phone).
Priorities not decided logically.
Insufficient resources
Poor quality site in terms of
content quality and
customer
(b) A separate
committee or
department manages
and coordinates ecommerce
Identification of problem and
response in (a)
Coordination and budgeting
and resource allocation
possible.
May be difficult to get
different departments to
deliver their input due to
other commitments
(c) A separate business
unit with independent
budgets
Internet contribution (Chapter
6) is sizeable (>20%)
As for (b), but can set own
targets and not be constrained
by resources. Lower risk
option than (d)
Has to respond to
corporate strategy. Conflict
of interests between
department and traditional
business
(d) A separate operating
company
Major revenue potential or
flotation. Need to differentiate
from parent
As for (c), but can set strategy
independently. Can maximize
market potential
High risk if market potential
is overestimated due to
start-up costs
© Marketing Insights Limited 2004
OHT 10.13
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)
© Marketing Insights Limited 2004
OHT 10.14
Hallowell on scalability 1
‘described as “virtual’’ (either pure information or
automated) and “physical’’ (requiring some degree of
human intervention).
… because the nature and quantity of physical service
necessary to deliver value to customers influences the
quantity 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 is
viewed negatively by many venture capitalists and
proponents of ecommerce, the cause of that reduction in
scalability, human intervention, may help a firm to
differentiate its offering to customers, thus providing a
source of competitive advantage.’
© Marketing Insights Limited 2004
OHT 10.15
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 is
relatively 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 from
the 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 goods
such as books, toys, or antiques require significantly more complex physical
service operations. The degree to which they need more physical service is
inversely proportional to the degree to which they are “scalable”.’
© Marketing Insights Limited 2004
OHT 10.16
Outsourcing example
Amazon:
‘manages customer relationships through its
website while relying on publishers for product
development, Visa and Mastercard for
revenue collection and UPS, the parcel
service, for logistics. It also outsources much
of its call-centre management to specialist
suppliers’.
© Marketing Insights Limited 2004
OHT 10.17
Outsourcing benefits – activity
•
•
•
•
•
© Marketing Insights Limited 2004
OHT 10.18
BUT…
• ‘The snag, as many failed internet ventures
discovered, is that it is hard to co-ordinate the
activities of business partners without a large
supporting bureaucracy. Poor customer
service and higher-than-anticipated costs
often resulted. Amazon is one of the few
companies of its generation that made the
idea work.’
© Marketing Insights Limited 2004
OHT 10.19
Outsourcing risks - activity
•
•
•
•
•
© Marketing Insights Limited 2004
OHT 10.20
Outsourcing - Hagel’s view
Companies try to excel at three different types
of activity:
managing customer relationships,
routine processing of information and
development of new products.
He believes that companies will in future tend
to concentrate on just one, while buying in the
others as required.
Examples?
© Marketing Insights Limited 2004
OHT 10.21
Oticon
© Marketing Insights Limited 2004
OHT 10.22
Transition curve indicating the
reaction of staff through time from
when change is first suggested
Figure 10.7 Transition curve indicating the reaction of staff through time from
when change is first suggested
Source: Bocij et al. (2003)
© Marketing Insights Limited 2004
OHT 10.23
Key staff in systems acceptance
• System sponsors
–
• System owners
–
• System users
–
• Stakeholders
–
• Legitimizer
–
• Opinion leaders
–
© Marketing Insights Limited 2004
OHT 10.24
The role of organisational culture
•
•
•
•
Survival (outward-looking, flexible) – the external environment
plays a significant role (an open system) in governing company
strategy. The company will likely be driven by customer
demands and will be an innovator. It may have a relatively flat
structure.
Productivity (outward-looking, ordered) – interfaces with the
external environment are well structured and the company is
typically sales-driven and is likely to have a hierarchical
structure.
Human relations (inward-looking, flexible) – this is the
organization as family, with interpersonal relations more
important than reporting channels, a flatter structure and staff
development and empowerment is thought of as important by
managers.
Stability (inward-looking, ordered) – the environment is
essentially ignored with managers concentrating on internal
efficiency and again managed through a hierarchical structure.
© Marketing Insights Limited 2004
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 with them. This information drain costs
you time, money and customers.’
© Marketing Insights Limited 2004
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)
© Marketing Insights Limited 2004
OHT 10.27
Differences between knowledge management, data
processing 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 this
data 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 one
region 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
and experience.
© Marketing Insights Limited 2004
OHT 10.28
Explicit and tacit knowledge
•
•
•
Knowledge Management - Techniques and tools for
capturing and disseminating knowledge within an
organization.
Explicit – details of processes and procedures.
Explicit knowledge can be readily detailed in
procedural manuals and databases. Examples include
records of meetings between sales representatives
and key customers, 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 many
different variables are involved. It is more difficult to
encapsulate this knowledge, which often resides in
the heads of employees.
© Marketing Insights Limited 2004
OHT 10.29
Binney – classes of KM applications
1. Transactional. Help desk and customer service
applications.
2. Analytical. Data warehousing and data mining for
CRM applications.
3. Asset management. Document and content
management.
4. Process support. TQM, benchmarketing, BPR, Six
Sigma.
5. Developmental. Enhancing staff skills, competencies
– training and e-learning.
6. Innovation and creation. Communities, collaboration
and virtual teamwork.
© Marketing Insights Limited 2004
OHT 10.30
2 perspectives on KM
• It is impossible to achieve full benefits from
knowledge management unless individuals
are 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
© Marketing Insights Limited 2004
OHT 10.31
Chevron example – connections in $2 billion saving
1. Connection to the explicit knowledge via an intranet
with 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
phone directory with people in different expertise
categories, again also accessed via search tools.
3. Connection to communities of practice which can
help sharing and learning between people.
4. Connection of knowledge and people with processes,
products and services.
© Marketing Insights Limited 2004
OHT 10.32
Risk Management
1. Identify risks including their probabilities and
impacts.
2. Identify possible solutions to these risks.
3. Implement the solutions, targeting the
highest impact, most likely risks.
4. Monitor the risks to learn for future risk
assessment.
© Marketing Insights Limited 2004
OHT 10.33
OpenText Livelink
(www.opentext.com)
© Marketing Insights Limited 2004
OHT 10.34
Activity – identify risks for e-business project
Risk
Probability
Impact
Solution
Insufficient senior management
commitment
5
7
Education/training/lobbying by e-business manager to
achieve buy-in
High staff turnover/key staff
leave
6
5
Use monetary incentives and improve working
environment
Project milestones not met,
overrun budget
8
6
Appoint experienced project manager and provide
support and resources needed. Manager will perform
risk management such as this
Problems with new technology
delaying implementation (bugs,
speed, compatibility)
8
8
Allow sufficient time for volume, performance testing
Staff resistance to change
4
4
Education, training identification of change facilitators
amongst staff
Problem with integrating with
partner’s systems (e.g.
customers or suppliers)
6
8
Tackle these issues early on, identify one contact
point/manager for each of partnerships
9
See solution to delayed implementation
New system fails after
changeover (too slow or too
many crashes)
© Marketing Insights Limited 2004
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)
© Marketing Insights Limited 2004