Please reload

Recent Posts

Moving to become decentralized but integrated business model - three recent examples

September 27, 2019

Designing an implementing a new enterprise system is like drawing and building a new house. Not only do you need to describe the appearance but also the construction, assembly methods, how the house is integrated into its environment and how you maintain it over time. All companies have an operational model. To move from a purely decentralized operating model means many processes changes and decisions gets made elsewhere. These changes needs to be managed with a solid understanding of the consequences by all stakeholders in the company. 

 

Companies seeking to modernize their business platform, either to secure future growth or enhance operational efficiency, or both, typically chooses to aim for an integrated business platform. In this article we will use three recent transformations that we have been part of, or know of, to charter the journey for you. In the article we will refer to these companies as "Unintegrated", "Semi-integrated" and "Integrated". These companies all have multi-country operations and are well in excess of 10 000 employees each. Further, they all deliver services, very few products in the business mix. 

  

Achieving the ROI:

The business cases for these companies transformation hinge on the following conclusions: 

  1. We are able to implement global business processes with local flavors.

  2. Our ability to generate profits in the profit centers will not be impacted by integration

  3. Legacy technology is a back-pack getting heavier each year

The benefits targeted for these companies differs though, depending on where they are on the way to becoming integrated and what previous merger approach they have had over the years. 

  

Benefit targets for "Unintegrated" was to support global capabilities  by global processes and global integrated applications. Business performance, operational efficiency and a platform for future growth were key factors.  

  

Benefit targets for "Semi-integrated" was to copy the model of the best performing business unit (BU) and spread it to the other business units. With the intent to create performance and comparability. A stronger growth platform was secondary but also part of the picture. 

  

Benefit targets for "Integrated" was to modernize it to get rid of legacy technologies and to increase customer and employee experience while also improving the governance process around the modernization process and investment decisions. Even though the company already had a global platform,

The starting points for each company 

Unintegrated...

  • Had no global capabilities as their corporate services were heavily tilted towards one country and the services from the IT department was limited to the "mother" country.

  • No global processes were enforced. Decision making about developing new capabilities and changing existing ones where fully autonomous on BU level.  

  • Corporate mostly held BU managers accountable on BU financial and HR performance metrics which were reported through a global reporting system. Some risk management and investments were also subject to corporate scrutiny.  

  • A limited IT cost allocation model was in place mostly covering BUs in the "mother" country but also some bread & butter licensing. But very little corporate knowledge existed about the full range of processes/applications in use throughout the company.  

  • A very strong line-oriented culture was present. 

 

Semi-integrated… 

  • Had very few global capabilities in place but did have a technical platform.

  • It allowed standardization of information and hence business performance on a lower level than BUs were possible to extract.  

  • IT services were provided to a range of countries, both bread & butter licensing as well as application services on individual BU basis.  

  • A full IT cost allocation model was in place and corporate had a fairly good understanding of the IT spend.  

  • The culture of the company was to distrust matrices, it dilutes accountability in their mind. 

  

Integrated…  

  • Has for years maintained an integrated approach. 

  • As example, a clear rip-n-replace strategy was employed on acquisitions leading to no BU applications needed for the business platform. 

  • Responsibilities for global capabilities where dsitributed to function heads who could more or less themselves decide what to change, within budget restrictions of course. A fairly advanced entreprise architecture map was contiously maintained and the management team was quite familiar with getting information presented along those lines. 

  • The cost allocations for IT services was no longer contested and just followed the yearly budget cycle.

  • With such a tightly integrated company the presence of a matrix structure centrally was natural. 

For the unintegrated the key to success consisted of two large moves; firstly the evaluation and decision to harmonize the operating model, including core business processes, between BUs as well as mapping out and agreering what should be considered global applications supporting the harmonized business processes.  

 

The main benefit of initiating the transition like this was that it built a mutual understanding in top management for what the coming changes consisted of and what the opportunity for operational improvements associated. So the engagement and acceptance for the projects that also needed launching in order to deliver the benefits were embraced.   

  

For the semi-integreated the key to success was to negotiate a new operational model where the emphasis was more on the role and core operating units level, leaving out much of the technical side of the change. The decision on a roadmap to carry out the transition led to intense dialogue and strong agreement in the top management team about what performance looked like and what the best way to organize the company in each country was. 

 

The main benefit for top management was to get a tool, containing the best performing operating model in the company, and copy-paste into other BUs. The bottom line potential was huge. 

  

The integrated company was in deep need of finding benefits at all as the journey had already been carried out. So what could be the ROI on investing in new technology? As it turned out, the company was struggling to increase employee experience as well as customer experience in all the online services provided by the company. So the starting point for this transition was to convert fluffy benefits into a very concrete map of actions and desired outcomes including KPIs to measure results. From there it was possible to find RIOs motivating the investments needed. 

 

The process to anchor these desired outcomes was designed to involve top management, including the CEO, the topic itself got a lot of attention and approval as the outcomes came to be belived to be a matter of life and death for the company. As a result the investments needed were in most cases granted. However, the need to replace an outdated ERP was not approved as the benefits were very hard to find.   

  

What can be learned? 

In all major transitions you need to find a way to engage top management as they are responsible for the strategic direction of the company. A good way to build this engagement is to actually start addressing topics that they are more interested in, such as operational model, business performance enhancements and employee experience.  

 

Everything that truly builds a stronger company has an ROI, you just need to find out what is relevant in your specific company and what pain-points that exists to be managed and solved. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share on Facebook
Share on Twitter
Please reload

Please reload

Search By Tags
Please reload

Archive
Erp & Friends logo

© 2017 by ERP & Friends AB

  • Facebook Social Ikon
  • Linkedin Social Ikon

Contact

stefan.schnitzer@erpandfriends.se

håkan.lundmark@erpandfriends.se

RSS Feed