Frameworks used to develop an SME’s IT strategy

Abstract

At the beginning of this analysis the aim is:

“Developing an IT strategy to align the business strategy to the IT technology to gain and sustain a competitive advantage ”.

In writing a critical appraisal of developing an IT strategy we should start by justifying why an IT strategy for an SME is needed. A good place to start is Earl’s nine reasons why a company should have an IT strategy

• 1. IT involves high costs.
• 2. IT is critical to the success of many organisations.
• 3. IT is now used as part of the commercial strategy in the battle for competitive advantage.
• 4. IT is required by the economic context
• 5. IT affects all levels of management.
• 6. IT has meant a revolution in the way information is created and presented to management.
• 7. IT involves many stakeholders, not just management, and not just within the organisation.
• 8. The detailed technical issues in IT are important.
• 9. IT requires effective management, as this can make a real difference to successful IT use.

The failure of an SME to have an IT Strategy may result in:

• a. Competitors, suppliers and customers gaining advantage.
• b. Company objectives becoming unachievable due to systems limitations.
• c. Systems are not integrated thus causing duplication of effort, inaccuracy, delays and poor quality management information.
• d. Systems’ implementations are late, over cost and fail to deliver expected benefits.
• e. No means exist to establish appropriate IS/IT resource levels, to evaluate investments and set priorities.

In this critical review of the frameworks and models used to develop the IT we should describe

• The usefulness or otherwise of the models that were used to develop the Strategy and to want extent the models can aid the analysis to avoid the failures outlined above.
• Additional frameworks that may have helped the analysis.
• Support for the premise that models and frameworks can be used to develop IT strategies for SME.
• How effectively were the frameworks and model used by the group.

Frameworks and Models used in developing the IT Strategy

The frameworks and models were used to develop the strategy. These were

• Greiner Growth Phases model.
• PEST.
• Porter's Five Forces.
• SWOT Analysis.
• A composite model overlaying Rich Picture Soft Systems Methodology approach with Porter’s Value Chain analysis.
• Information Requirements of Key Business Processes
• McFarlan’s Strategic Grid.
• Pascale’s 7S’s model.
• Kaplan’s Balanced Scorecard

and

• Ormerod’s Priority Framework

The following frameworks would also aid the analysis

• Nolan’s Lifecycle Model
• Scott Morton / MIT90’s
• Venkatraman’s Business Transformation Framework

Summary of the approach used to develop the strategy

The use of Information Strategy Model ensures that the Business Context, Business Process and Strategic Content were evaluated when developing the IT strategy and placed each of the models within one of the segments of the Model. PEST can be used for instance, to explain the external Business Content. This was followed by analysis of the Business Process by using the Value Chain and McFarlan’s Strategic Grid. To ensure that the human influence was considered 7S’s model was used to capture both hard and soft systems and Checkland’s Soft System’s Methodology. From this the IT strategy is and developed and prioritized and to measure the success of the strategy use Omerod’s System’s Prioritisation and Kaplan’s Balanced Scorecard.

This outside-in, sequential approach is additive and consistent in terms of the analysis that was developed, measurable internally as well comparative against other companies IT strategies. It is iterative in the sense the company can repeat the analysis periodically.

Earl’s Framework of Frameworks categorizes frameworks as Awareness, Opportunity and Positioning. We can reconcile the two approaches as follows:

From the choice of models, many analyze the business context, perhaps too many. A complementary and comprehensive set of models were used to describe the business process as well analysis of how to prioritize and measure the success of the recommended IT strategy. It therefore balances the Why of business strategy with the How of implementation.

When the findings were presented to XYZ it became apparent that it had not used frameworks in the past to develop a business strategy that aligned it with IT resources yet nonetheless had implemented IT resources that were designed to deliver the Business Strategy for over 15 years. This is the norm for small companies. Chell at al commented on the lack of strategic awareness of small firms. “For small firms implicit strategies are the norm” and many firms do not have “the IT resources to use IT strategically” .

The dilemma would be if the recommended IT strategy was fundamentally different to the way XYZ was using its IT resources today given that XYZ had been profitable for the past 15 years. Therefore we need to be aware that

• The analysis could be wrong or incomplete.
• There was a problem with the framework.

or

• There were some other forces at play that was reducing the impact of the analysis.

A critical assessment of the models and frameworks

Position Models

Greiner’s Growth Model helps to understand whether the Awareness, Opportunity and Positioning models are appropriate for XYZ and provides the context in which the subsequent models can be used. This model is itself a positioning model and identifies XYZ as a small company that was approaching the end of the second Phase “The Crisis of Autonomy”. The company had grown to a point where XYZ's CEO could no longer effectively develop the business strategy as well as run many of the operational functions. It was important to interpret the findings that were generated using the frameworks by taking account of the size of the company and to ensure that the recommendations were appropriate for a company of that size noting that the lack of a formal business structure can hamper the development of an effective IT policy. In hindsight, Nolan’s Stages of Growth Model , which shows Six stages of IT Implementation and Growth would have described the same the issues more insightfully within a much more IT focused strategic framework.

Business Context models

Walsham says that Strategic Context models can be broken down in to Multi-level and Historical context models such as PEST and SWOT to describe more nebulous political, social and business contexts in which SME’s compete. They help to formulate a strategy but only insofar as setting the boundaries in which the chosen strategy must operate. There is an implicit path-dependency that suggests that the strategy adopted must be made with the assumption that SME’s cannot influence the context. Whereas large multi-national companies can be shown to influence the economic and political environment to suit the business strategy (e.g. energy companies in the United States), XYZ cannot. In the report the it could be observed, for example, that XYZ was subject to a political environment that encouraged entrepreneurial businesses and a technological infrastructure that enabled E-business to thrive. On the other hand it was observed that the economic climate had caused a recession in the retail market that XYZ operated that had caused a fall in sales revenue. However, it is debatable whether such an explicit construction of the model was needed. The inclusion of this model might be more useful if XYZ were entering a new market or geographical location but in this case provided no additional insight because XYZ was already established and all the factors were already known, accepted and been responded to.

The SWOT model highlighted historical actions that resulted in its current Strengths and Weaknesses and the Opportunities and Threats that resulted from the external environment. However, there is a risk that the IT analyst could inadvertently fit the observation to the framework. For instance because XYZ had developed a competent set of websites and concentrated on Search Engine Optimization to ensure that XYZ was at the top of Google searches, it was considered a strength. What the SWOT framework failed to do was to put that strength in to context. It does not help us understand whether it is a unique strength in the market, a sustainable strength or a strength that is valued by the customer. Nor is that strength measurable. Consequently analysis of further frameworks was required.

The analysis of Porter’s Five Forces and Generic Strategy provided additional insight but also some problems. Using the Generic Strategy help to conclude that XYZ was following a differentiated approach and attempting to create defendable target markets . This is echoed by Cragg

“Studies lend support to Porter’s Generic Strategies applying to small firms. For example, Storey observed that rapidly growing small firms often occupied niche markets. Reid (1993) found that the focus strategy emphasized by SME’s was based more of diffentiation that cost leadership”

Earl states that awareness models such as Generic Strategies are more useful at the industry level but “have highlighted issues specific to (SME’s)”

An Opportunity model such as Five Forces helped answer one hypothesis.

Could the use of IT change the forces to generate a sustainable competitive advantage or was it more of a Hygiene Factor?

It was concluded that the implementation of a successful IT strategy that was

• A. Aligned to the business objectives

and

• B. Included investment in IT systems and resources was likely to be successful because e-business was a way of increasing access to suppliers, developing more sales channels and generally leveling the field with larger companies who had larger sales and marketing resources. This is echoed by Powell and Levy

“The five forces model (is) invaluable in supporting the understanding of the potential of IS/IT to individual SME’s. They provide a means of highlighting key strategic areas where SME’s can reap benefits”

Although it was concluded that this would be true at the industry level it did not necessary imply that it would be true for a every firm within that industry. The difficulty therefore is whether the Five Forces is appropriate to use for XYZ. For instance, when trying to determine the intensity of competition we had to define the industry in which XYZ competed. This was difficult because XYZ competed in many industry segments. If it was broadened to encompass all its markets and defined merely as the Giftware Industry, it is an enormous market covering an infinitely diverse and ever changing number of products and companies. It is impossible to calculate the attractiveness of the market because of the possibility of the number of profitable niches within that market. If XYZ was defined as per their market in branded fashion accessories the industry and perhaps the analysis is quite different. Therefore Five Forces can be used in SME’s but one might choose to create separate analyses for each market XYZ competed in.

Business Process Models

Although still a small company XYZ had developed a well-defined Value Chain especially in the operational areas although its support activities were less well defined. The group believed it was valid to overlay a SSM approach using Rich Pictures over the Value Chain [See Appendix E] to show the communication and information flows and the company structure. The approach was superior to a traditional process flow diagram because it highlighted the human activity in the business process. By focusing on the human element the group was looking for evidence of anomalies, inconsistencies or obstacles within the business process. What was found was the relative importance of the sales quotation system, customer service and the web-sites as the main drivers of the business. It also highlighted the lack of integration when it came to analyze information flow from, and to, the web-sites at the front end of the business and gaps between sales, forecasting planning and purchasing at the back-end. By overlaying the rich picture over the Value Chain the group identified issues and opportunities that provided the basis of the recommendations. The overlapping frameworks were successful at describing the problems that SME’s have such as:

• Lack of management skills.
• Selling and marketing expertise.
• Research and development.

But did not emphasize what advantages SME’s have

• Quality of service.
• Flexibility.
• Low overhead.
• Product development and innovation.

It is difficult not to impose a particular structure and bias that predefines the solution. By definition, using a model simplifies what is really happening and by doing so risks losing a critical interaction between two processes or actors. That is why the 7S’s framework was used fill in the gaps in analysis. This framework has both a mixture of soft and hard systems and could be used as a checklist of prerequisites required to deliver the business strategy and measure the core competences that the company possessed.

At this point we can adopt the MIT90’s framework. This would have been useful to show the relationship between the internal and external structures and how well they were aligned to the business strategy. It could also have provided a strategy through which transformation and IT induced business reconfiguration could be implemented.

There is a tendency to use the frameworks too descriptively, focusing too much on the current systems and environment. However, McFarlan’s Strategic Grid encourages the analyst to think strategically. It does that by distinguishing between the current IT systems that add value and those that maintain current operations and looks at current and future impacts of IT on the organization. One such High Impact Strategic IT asset was Axapta; XYZ’s ERP system. Levy and Powell state that there is little evidence that SME’s use their MRP systems strategically; relegating them to managing inventory. Although this had been true at XYZ, it was actively pursuing a strategy that would utilize the ERP system to integrate the front end of the business (the web-sites) to the back end (order fulfillment, planning and procurement). Consequently when developing its recommendations the group could evaluate improvements to the current IT assets to better serve the organization today but also look at longer-term, more fundamental recommendations for the future growth of XYZ. (See Recommendations). Using Ormerod’s Prioritising framework to rank the recommendations in terms of long-term and short-term goals, financial impact, comparative advantage and scope of effort is the final stage of the analysis.

Conclusions

The hypothesis posed at the beginning asked whether the frameworks and models were appropriate to use for an SME and if they are, how successful was the Group in using them to develop the IS Strategy? To test this we could use Ward and Griffiths suggested four ways that IS/IT could be used for competitive advantage. In brackets is added the Recommendation number found in the report

• 1. Linking the organisation to customers or suppliers, e.g. EDI, website, VANs, extranets. [Recommendation 2,5,9,11]
• 2. Creating effective integration of the use of information in a value-adding process, e.g. data mining, data warehousing, ERP. [1,3,6,8,10]
• 3. Enabling the organisation to develop, produce, market and distribute new products or services e.g. CAD, CRM. [4,5]
• 4. Giving senior management information to help to develop and implement strategy, e.g. knowledge management. [3,7]

On this level at least the analysis seems to have used the frameworks to generate an IT strategy that is likely to generate a competitive advantage. The frameworks chosen are scalable to an SME but as Levy and Powell seem to suggest, industry specific and positioning frameworks are less applicable than firm specific, awareness frameworks. One reason for this may lie in the value of information. Information is the key. Where you get it from, how you validate its usefulness, what information is missing, how biased it is, how current it is and how useful it is to predict the future strategy. Consequently, I had doubts that SME’s had the resources and access to information in order to analyze PEST and Porter’s Five Forces in sufficient detail to make valid conclusions.

A pitfall to avoid is using the frameworks to oversimplify what is a complex system or worse merely to justify a pre-defined course of action or bias or use them didactically and ignore an observation and avoid making a common sense conclusion just because it does not fit the boundaries of the framework. To avoid this the choice of a range of frameworks to describe and develop an IS Strategy is required.

Finally, it is useful to outline some critical success factor criteria for the successful implementation of an IT strategy. The Balance Scorecard and Prioritizing techniques provide a systematic methodology to measure the adoption of the IT strategy. However, case study research points to the overwhelming requirement for the SME CEO or close confidant to the CEO to be involved in the adoption of the strategy .

Copy of Report sent to Company XYZ

XYZ Trading Ltd. Information Systems Strategy Report

Date:31.03.06

Executive Summary

Developing an IT strategy to align the business strategy to the IT technology to gain and sustain a competitive advantage is the objective of this report and is the basis of the recommendations that have beenmade.

For a company of just 16 employees, XYZ has achieved a high degree of technical competence and innovation and has been flexible in meeting the challenges of an increasingly e-commerce-centred market place. However, the market continues to be highly competitive and XYZ must innovate and differentiate its products if it is going to continue to grow.

The business strategy articulated by XYZ is one of both increased efficiency through cost control and the better use of resources on the one hand and revenue growth through the introduction of new products, developing brand awareness and exploiting new sales channels on the other. The targets for the business are not overly ambitious given the difficult trading environment but the key to achieving the targets is through more definitive performance measurements that include plans to meet those targets.

The business processes described below highlight many innovative successes. XYZ has, for instance, used Search Engine Optimisation to ensure that the company is placed at the top of the search engine requests for its products. This is identified as a core competence. The back-end processes are less well defined and require process improvement. One of the crucial decisions is to integrate the back-end processes to allow information to flow to and from the web-sites through the ERP system to improve customer service and enhance customer loyalty. We note that XYZ’s current technology architecture is highly scalable and will not be a constraint on future innovation.

Prior to the set of recommendations we have included a Gap Analysis. Here we analyse specific gaps between the business strategy and business processes and have attempted to identify “best practices” that XYZ should use as the company grows larger and the processes become more formal. This section also provides more detail on the gaps in the IT infrastructure that may prevent XYZ meeting its targets.

The recommendations were developed understanding the constraints of a limited financial budget and employee resources. Given the short consulting engagement the recommendations focus on providing the means for John to make the best strategic decisions based on the best available information. Consequently, there has been a focus on recommendations to improve the information flow between the back end and front end of the business through integration of applications, interfaces to 3rd party applications and better MIS reporting. There has also been a focus on “soft systems” issues such as better training and, in particular, an Axapta Internal Champion.

Finally, in the appendix we have attempted to underpin our observations and recommendations by comparing them with widely used Strategic and IT models and frameworks to ensure that our approach is consistent with those adopted within the business and academic community.

• Table of Contents
• 1 Executive Summary 2
• 2 Introduction 4
• 3 The Business Context 5
• 3.1 Business Strategy 5
• 3.1.1 Products 5
• 3.2 Business and Wider Environment 6
• 3.3 Competitive Environment 6
• 3.4 Generic strategies and information 7
• 3.5 Summary 7
• 4 The Business Process 8
• 4.1 Business Activities 8
• 4.2 Understanding the information flows between processes 8
• 4.3 Review of Existing Information Systems 9
• 4.4 High level view of existing information technology 10
• 4.5 Summary 11
• 5 The Business Content 12
• 5.1 Gap Analysis 12
• 5.2 IS Success 13
• 6 Recommendations 14
• 6.1 Implementation 17
• 6.2 Summary 17
• Appendix A 18
• Appendix B 19
• Appendix C 20
• Appendix D 21
• Appendix E 22
• Appendix F 24
• Appendix G 25
• Appendix H 26
• Appendix I 27
• Appendix J 28

Introduction

XYZ Trading Limited (which is commonly known as XYZ) is privately owned by John Smith . XYZ has been trading for 15 years importing and distributing silver-plated and leather giftware. The giftware is sold under the brand name of Maze. XYZ position themselves as a “high-end”, “design-led” company. They have an in-house engraving and blocking facility and their products are packaged in presentation boxes. Consequently they believe that their unique product offering gives them a competitive advantage in the market. XYZ aims for 15% organic growth of sales year on year and in the near future, XYZ will branch out in to Direct Mail to grow the company further. The development of XYZ's many websites is a main force in driving the IT requirements from the front end as XYZ attempts to reach as many potential customers through more varied sales channels. The back end processing IT requirements are largely covered by the Axapta ERP system.

The Business Context

It is of paramount importance that all Information Systems implementation at XYZ are aligned to meet the long term business strategy of the company. This requires a detailed understanding of the business and its strategic goals. This section analyses the business context. Business Strategy The business strategy of XYZ was confirmed through both a detailed discussion with the Managing Director and a review of the written business plan covering the period 2006 to 2009. XYZ’s recent refocused strategy on outsourcing production, expanding their own brand product lines and using alternative market channels, has helped the business grow over the past few years. Using Greiner’s growth phases framework (refer to Appendix A), XYZ is in Stage 3, where they are growing through delegation. The company is starting to have a more decentralised organisational structure to support their strategy with operational and market level responsibilities. John is the key decision maker and strategist. However, he does involve management in regular meetings, formal communication and day-to-day decisions as they arise. John has also been very open to suggestions from external consultants. This has helped him to shape much of his current vision of the company, especially with regards to the use of technology. However, as John tries to grow the company further to Stage 4, he seems to be faced with a control crisis.

The main objectives to be achieved by 2009 are:-

• Increase turnover from £2 million to £3 million
• Receive 90% of all order through XYZ’s websites
• Promote Maze series of leather goods to the retail markets and build awareness of the Maze and values
• Achieve:-
  • 60% gross margin
  • Increase stock turn from 5 to 8
  • Increase velocity ratio from 250-300 to 440
  • ROS 25%
  • Overhead ratio to Sales 30%

Products

XYZ sources, engraves and distributes various gift products, primarily silver-plated gifts for the corporate community. During discussions with the Managing Director, it was made clear that due to the highly competitive nature of the industry, XYZ did not compete on price, but differentiated all products through customised engravings and quality packaging. In addition the products are promoted using multiple, customised websites that target and provide channels to specific markets and segments, both in the UK and overseas. XYZ purchase mainly for stock and hold approximately £150,000 of inventory. Sourcing from the exporters in East Asia takes approximately 30-45 days using either air or sea freight. Payment for purchases is usually made prior to shipment in US Dollars. XYZ has a rotating product range of approximately 400 items and they have segmented and targeted four customer markets:

• Promotional Trade - Promotional Goods that sells through distributors and intermediaries and accounts for 50% of turnover
• Promotional Direct – Promotional Goods business to business via the web and accounts for 15% of turnover
• Retail Trade – Wholesale to approximately 600 UK retailers
• E-Commerce – End consumers are targeted worldwide via the web

Business and Wider Environment

XYZ operates in a highly competitive environment, with many competitors that have well developed e-commerce sales channels. Majority of the products are sourced from East-Asian countries and many of the suppliers serve XYZ’s competitors. Their primary market is in the UK but they also serve Europe and the US. The global market potential for corporate gifts is estimated at £8 billion. In the UK, the estimated market share for XYZ is around 15% for silver plated gifts. There are three main competitors with similar market share (UK). The remaining UK market share is divided amongst numerous other competitors. There has been some downturn in the UK retail sector recently and this has caused a slowing in the growth of XYZ’s sales performance.

In previous years John has implemented a number of strategies in order to adjust to the changes in the wider business and market environments. One such strategy was to change the business model from being a manufacturer of gifts to a distributor of value-added gifts by sourcing products from low-cost suppliers in East Asia. See Appendix B for a more detailed treatment of the wider business environment in the PESTEL analysis.

Competitive Environment

It is useful to analyse the competitive environment in which XYZ operates and the relationships it has with customers, suppliers, potential competitors and firms offering alternative products. In addition XYZ’s key strengths and weaknesses need to be assessed in order to evaluate its ability to exploit market opportunities and counter threats. These have been analysed using Porter’s 5-forces model Appendix C and SWOT analysis Appendix D respectively. The two analyses have identified the following conclusions:-

• The market structure would be characterised as “perfect competition” with low entry and exit barriers, numerous buyers and sellers and free flow of information.
• Demand and Supply profiles are perfectly elastic.
• XYZ’s identified strengths include the following:
  • Value-adding to products through personalised engravings and gift boxes
  • Satisfying customer demands by providing quality products, with good customer service in fast time-scales.
  • Exploitation of existing IS infrastructure to develop multi-sales channels, including e-commerce.
• XYZ’s identified weaknesses include the following:
  • High cost of freighting products from East Asia, and relatively long lead-times and large minimum order quantities for products.
• Opportunities open to XYZ include the chance to develop additional sales/marketing channels.
• The threats that XYZ faces include strong exposure to competition from new entrants to the market and innovation by their competitors. Another threat is the influence that ‘Google’ or similar internet influencers have over delivery of XYZ’s web sales channels.

Generic strategies and information

The above analyses of the markets and competitive environment in which XYZ competes, suggests that the business strategy that XYZ has adopted aligns with the business environment in which they compete. Porter identifies three generic strategies that may be adopted by any business. These are - Cost Leadership, Differentiation and Focus. XYZ is realistic that they cannot be the cost leader in the market. The market is very mature and the tooling and techniques are readily available for any competitor to achieve a cost advantage in the market. XYZ manages costs carefully as products in different markets are priced competitively. It is difficult for any firm to adopt a strategy based on low cost in this market. To manage costs XYZ has outsourced the production of their in-house designed leather goods. In addition, XYZ purchases all other products from the East Asia. Internal processes are currently being managed to reduce costs, as described in section 4.2. These approaches to cost management place stringent requirements for availability of costing information on the business to enable periodic review of firm’s costs and prices. XYZ has not adopted a Focus strategy since niche products and/or suppliers tend not to display longevity within their current markets. The size and maturity of these markets, the low barriers to entry (in particular the ease with which any niche products can be copied and provided by other suppliers) and the numbers of competitors make this generic strategy inappropriate within this market. As with the need to maintain cost parity with competitors, the “me-too” approach to the market places an information requirement on the company to constantly scan the market in order to identify shifts in product demands, so as to source and offer new, fashionable products.

The generic strategy that XYZ has adopted within this market is one of Differentiation. XYZ tries to differentiate their offerings using quality presentation packaging and providing quality customer service around the customisation of products. These qualities are important as they target the corporate gifts segment of the market. They also use Internet technology to differentiate themselves, making them easy to find and do business with. In these types of market, a key challenge is the need to sustain the differentiation strategy with constant effort in monitoring, assessing and innovating.

Summary

The general strategic direction of the company is to increase the customer-base for its gift products and XYZ has developed a business plan with very specific targets. There are some performance measurements related to these targets but as detailed in the further sections and Appendix H, formal performance measurements are generally lacking. Although XYZ has tried to differentiate themselves in terms of product presentation, in-house engraving and use of technology, these do not provide them with sustainable competitive advantage. XYZ needs to strive for superior customer service through the efficient use and processing of information, and the development of staff members to manage the information.

XYZ have used market, product, supplier and internal information wisely and effectively to grow their business. However, they must recognise that the markets in which they compete demand that they continue to use this information effectively, in order that they can continue to innovate and differentiate themselves from their competitors in this highly competitive market.

The Business Process

Business Activities

XYZ’s operation aims to deliver on its promises to its customers every time. John said that they have 100% on time delivery. This is seen as a key quality measure for XYZ. The following core business processes, which are documented as a Rich Picture in Appendix E, must be performed in order to do this: • Marketing / Sales Campaigns • Order Processing / Fulfilment • Inventory Control • Financial Performance Monitoring • Staff Development • Quality Control

Within the marketing and sales campaign activities XYZ has concentrated on Search Engine Optimisation (SEO) to gain high ranking in Search Engines, especially Google. This is a key to the company’s e-commerce success. Policies on product development and discontinuations are made by performing regular market analysis on an informal basis. Orders are taken and quotes given based on descriptions of customer’s requirements. This information is received via telephone, fax or email. To fulfil an order the stock is picked, packed and then dispatched via courier services. When customer orders require personalisation, engraving or blocking on leather items, the capacity of the engraving department is checked before the order is taken. To fulfil the order the engraving is scheduled, the product picked and unpacked, the engraving or blocking is performed and the product must be re-picked and packed before shipment. The inventory control process aims to optimise stock levels within the constraints of minimum order quantities and lead times from suppliers and the needs to satisfy on-time customer delivery. Future demands are forecasted, forward planning is performed and purchase orders are placed with the suppliers. Decisions on whether to use air or sea freight are made at the point of ordering.

The accounting function in Axapta provides some financial information. Customer and Supplier invoicing and payments are transacted in the module. Cost accounting and associated management reports are generated by an external accountant. The payroll administration is performed by an outside provider, using information gathered in-house. Staff development is important for the business in terms of further education and training of the existing staff, and the business is attempting to implement a management by objectives approach specifying targeted objectives for all staff and holding regular staff reviews.

Quality Control processes include the monitoring of incoming products as well as investigation of problems identified by customers. Received goods are quality checked using a sample. Customer complaints and returns are investigated and recorded and the customer is provided with replacements, refunds or credit as appropriate.

Understanding the information flows between processes

Many of the information flows required by XYZ’s different business activities are handled within the Axapta software package. These are routinely supported by the creation of manual records. Reports from the financial and management accounting processes go to JOHN, together with market data, historic sales information as well as website traffic data and search engine rankings. These form the information input for marketing campaigns. It is also used for the planning and forecasting activities. The resulting forecast, usually with a 3 month horizon, is entered into Axapta and a Manufacturing Requirements Planning (MRP) run generates purchasing suggestions. Purchase orders are revised and adjusted where necessary before they are released. A decision is made about whether to use air or sea freight delivery, or a mix of the two. This depends on current stock levels, future sales forecasts, lead-times and minimum order quantities. Purchase orders then go to the accounts function and pre-payments are wired in US dollars where necessary. When the goods are received they are matched to the original Purchase order.

Customer orders are entered into the system when received. Orders may have been received into other systems (e.g. Web Orders) and represents additional unnecessary processing that would not be required were the applications interfaced. The orders are then processed by the warehouse department, which looks at reports from the Axapta system showing which and when orders are due. Couriers are scheduled by the warehouse manager through their respective website and the dispatch details are entered in Axapta. A hardcopy of the delivery note with the tracking number is given to the accounts department. Here the invoice and payment is checked and updated in the system.

For items that are engraved or blocked a separate engraving schedule is maintained. Customer orders with engraving are scheduled for processing using a manually updated timetable in Lotus Suite. Although we believe that this information could be incorporated within Axapta there is no doubt that the system meets its requirements. When delivery times need to be given for quotations or orders, a sales person will contact the engraving supervisor for available time slots and negotiate the priorities if necessary. The artwork for the engraving is provided by the customer and both the original artwork and the files for controlling the engraving machines are stored, on the order details within Axapta. Goods received from suppliers are entered into Axapta against their respective purchase order and the delivery note is passed on to Accounts for the payment. Findings from quality inspections are communicated internally via email to the Managing Director, as part of performing his quality monitoring role.

Appendix F shows a list of the relevant information inputs and outputs for the different business activities. Overall, there is evidence both formally (via management reports) and informally that information from operational activities are being fed back to senior management.

Review of Existing Information Systems

Generally, XYZ is conforming to best practices in terms of deployment of its IT infrastructure. XYZ have used external consultants to assist them in key decisions made in the use of IT and are advanced in the use of IT for a firm of its size. There are however some ongoing IT technical and implementation issues that are impacting the efficiency of its business operations.

There is a lack of data integrity in Axapta. The Axapta system was implemented around 18 months ago and replaced the accounting package Sage Line 50. Prior to the data migration from the Sage Line 50 application there was no data validation or cleansing.

Opportunities were not taken to re-evaluate the data sets to improve the transaction flow and analysis of data in Axapta. For example, the accounting coding system does not entirely meet the needs of the financial analysis requirements; It is not able to provide the VAT reporting requirements required by law, these have to be produced outside of the system. Also, data was not populated extensively in Axapta which devalues the effectiveness of the application, for example, not all customer data was migrated across into Axapta.

There was limited initial training for the users and users have been poorly supported through the implementation of Axapta. This was not an oversight in systems specification or poor planning, so much as, misfortune in the key supplier going bust at a vital time in the implementation. There is a little external consultancy support but this is expensive and is focused on technical issues and not using the application more extensively or effectively. As a results of all of this the help screens are still not configured and users do not have an “Axapta Champion” (i.e. an internal Axapta expert, knowledgeable in the XYZ use of Axapta) to solve functionality issues readily. Although these issues are recognised within the firm, at the time of writing this report, the external support routes for the Axapta application are still unresolved There is also a lack of application integration between XYZ’s primary business systems. Key enterprise applications are not integrated leading to duplication of data entry which increases the potential for data transcription errors and reduces customer service satisfaction levels. For example, orders entered through the website must be printed and re-entered in to the Axapta Order Entry system. Customers are also unable to view real time information such as delivery status, stock levels or account status.

XYZ has experienced slow processing in Axapta, which is believed to be due to slow broadband connection speeds. This slows down the searching of data on the system and is most prominently noticed when a customer calls up to ask for the status of their orders. Some troubleshooting has been performed to try to assess whether the application or the internet is the cause but evidence has been inconclusive.

High level view of existing information technology

Enterprise Applications

Axapta

One year ago XYZ replaced Sage Line 50 enterprise software with Axapta ERP. This is a hosted solution and uses a SQL server database. Axapta currently includes some front office functions and performs all the back office functions such as:

• Order Enter, delivery and Invoicing.
• Demand Planning and Purchasing
• Location and Stock control
• Accounts Payable, Receivable and General Ledger.

ACT

XYZ uses ACT to maintain their customer contact information and this is currently only used by one of the sales people. Customer information is also held in Axapta and 12 access databases linked to XYZ’s 12 websites. There is no company wide integration.

Actinic

This is an application used to develop XYZ’s web sites and shopping cart solutions. Access is used as the database. This enables XYZ’s customers to order through the web that they design and maintain in-house.

Microsoft Office and Lotus Suite

XYZ uses Outlook email running on Microsoft Exchange Server. Email is used in the sales order fulfilment process to inform and request approval of the engraving artwork. In addition employees use further Microsoft office applications such as Word and Excel to generate financial reports and business documentation. Lotus Suite is used to generate the schedule of work to be performed by the engraving function.

Corel Draw and Adobe Photoshop

These graphic design packages are used to adjust and prepare artwork (logos etc.) for engraving on silver plated products or blocking on leatherwear, and to prepare images of finished products to accompany quotes. The artwork can then be transferred to external die-makers for production of blocking dies or to the computer controlled engraving machines.

Network and Hardware

XYZ operates a small Ethernet network running on Windows 2003 Server. This is linked to a 2mb broadband connection provided by IT and fully managed by a company called Premiere. XYZ runs approximately 17 Pentium class pc’s and other networked printers. Dan Vince who is the web designer also performs the role as network administrator.

Security

Premiere provides a managed firewall to the internet. In addition the Windows Explorer personal firewall is enabled on all PC’s. Spamware, spyware and anti-virus applications are running on all PC’s. John saves all his critical files to the server and Dan makes multiple back-ups of the websites and databases. The server is periodically backed up to an external hard drive which is then taken off site. Other users do not back up their personal data but losing this data is not critical to the running of the business. A UPS (Uninteruptible Power Supply) is attached to the server to prevent corrupt to the server during a power interruption. However, the PCs do not have any power surge protection, and it is advised that suitable sockets are used in order to avoid a risk of data loss during a power surge.

Summary

This section outlines the main business processes beginning from the planning of marketing campaigns, through the ordering and sales fulfilment processes including inventory control and supporting processes such as financial monitoring and quality control. It was found that the processes are well established and that the main functions are supported by the information systems used.

Due to the turbulent and dynamic nature of the industry, XYZ’s IT planning has evolved rather than been performed on an ad hoc basis. In fact, IT has had a high impact on XYZ and has shaped its strategy and objectives. XYZ are currently using the appropriate technology based on their business strategy, requirements and limited resources.

The McFarlan Strategic grid in Appendix G summarises XYZ’s current systems but also identifies the future impact of information systems. Gaps were found within the implementation and integration of the Axapta software. The accounting function is poorly used due to; poor data migration from the previous Sage package, poor configuration leaving the software not fully meeting the basic accounting requirements of the business and user training being incomplete. An Axapta champion who is able to advise and train other users is missing. In the area of sales channel information systems, integration between the Actinic software and the Axapta package has not been performed, resulting in multiple databases and manual re-entering of web-orders into Axapta. Slow connection speeds are a concern for the staff and testing and measurements have not yet clearly identified the root cause.

The Business Content

Gap Analysis

This gap analysis will consider the differences between the strategic needs of the business identified within Section 3 and the business processing described in Section 4 above. This will be performed from an informational perspective, analysing the difference between what information is available/generated and that which is required for the business to be successful and grow, and from a perspective of strategic coherence, identifying the synergy between the strategy of the business and its structure, management processes, technology and people. This will help to identify whether, and what, changes are required.

An analysis of the core processes that XYZ operate and the informational requirements of those processes appears in Appendix F. From this and the discussions held within the business during our fact finding, the following gaps can be identified.

In the Marketing and Sales Campaigns processes no significant information gaps were identified except that customer information collected via XYZ’s web sites, is not currently being used for marketing campaigns. In the Order Processing and Fulfilment processes it was identified that some of the Product Pricing related information was not readily available outside of particular individuals, particularly around distribution costs of products and information such as weight, volume and number per case.

In the Inventory Control processes there is no accurate forecasting information available and optimisation of the MRP outputs are required. Freight decisions are made manually and purchase order suggestions show release dates in the past when an item sold out due to a sudden large order of a customer. Information on supplier quality assessments is not available within the system.

In the Quality Control processes no formal record on findings during the incoming quality inspection is kept, which will make it difficult to do a supplier assessment. Customer complaints are dealt with on an individual basis, but without reviewing the results for improvement.

Financial and Performance Monitoring are mostly performed off the main processing systems. Axapta is not adequately configured to provide the reports required to run the business, it cannot currently provide the necessary VAT reports required for regulatory reporting. All of this reporting, therefore, relies on spreadsheet analysis and duplicated data entry from data held within Axapta.

XYZ’s Staff Development processes are all performed outside of the Axapta system. John has been implementing Investors In People (IIP) procedures. All staff have individual objectives defined, which are reviewed regularly. Though it is recognised that these have not been tangibly measurable in the past, John is in the process of “hardening” staff objectives so as to be more directly measurable and to be more related to overall business performance. For the numbers of staff employed there would be little benefit in managing these processes within Axapta, however as identified above, the lack of direct MIS reporting makes visibility of achievements against objectives difficult for staff and this may limit any benefits hoped for from pursuing a management by objectives approach.

It could be said that XYZ has quite advanced IT systems for the scale of operation that it has, but this is in synergy with the company’s growth strategy. Indeed many of the gaps identified above will only become problems as the plans to develop business growth are implemented.

The company’s structure is becoming more formalised as it grows and through the implementation of the IIP procedures John is attempting to formalise a management hierarchy and form a management team with his direct reports. As the structure is formalised then so are the responsibilities around management processes. Though John retains responsibilities for many ancillary, administrative processes, he has recognised in the past that he must delegate key responsibilities to others as the workload grows, and has shown that he is capable of relinquishing such control. As the business grows he will need to identify resources to take on further of his workload and free his time onto the key activities.

IT Success

The firm’s operations is currently driven by workflow and processes that rely a lot on human intervention, as described in Section 4 above. Staff salaries constitute a significant expense item in the firm’s ‘Profit and Loss’ account statement. A close examination of the financial statement reveals a loss in the ‘retail’ market segment, for which the ‘big-ticket’ expense item is ‘salaries’.

While some of the tasks needed to achieve these operation activities may not be candidates for automation through investment in Information Technology, there is scope for some automation. The potential impact of the investment in Information Technology for XYZ could be an improvement on the cost structure supporting the business, potentially reducing the need to recruit further as the business grows. This will contribute positively to the key business indicators the firm has identified. At the same time, appropriate investment in Information Technology would be needed to create the capacity to handle increased e-trading, which is another key strategic objective of the firm. Further to this is the capacity created to expand the web sales channel and thus support the strategic objective to achieve £3M turnover by 2008/2009. Information systems and technology can assist XYZ to change the way it does business and sustain their competitive position in a number of ways. These include:

• 1. Appropriate deployment of information systems and technology can help XYZ maintain low costs in its business, thus improving profit margin. For example, tasks such as manual entering of sales orders would no longer be necessary once the integration between the websites and Axapta CRM is implemented. Given that the firm competes in the market using a “differentiation” strategy (which requires continuous innovation as a means of achieving and sustaining competitive position), the extra profit margin can be deployed to sustain innovation in its product and service offerings to the market.
• 2. The adoption of e-commerce has increased the number of sales channels being used by XYZ. With this sales channel, a unique opportunity has been created by XYZ to translate some of the sales competences it had developed as a ‘bricks and mortar’ firm to the internet sales channel, and integrate both sales channels to leverage some scale economies in operations. A direct consequence of this has been an improvement in the firm’s cash flow as an increasing proportion of orders are paid for upfront via web transactions, as opposed to orders made on credit terms. The improved cash flow is a strategic asset to XYZ in funding business growth initiatives that will sustain their competitive position.
• 3. Another obvious assistance of information systems and technology to XYZ Trading lies in the increased efficiency in internal operations as a result of modification of the workflow patterns. For example, tasks such as manual entering of sales order would not be necessary anymore once the integration between the websites and the Axapta CRM is done. This changes the way the organisation does things, and frees up human resource to focus on more value-added tasks that will help the firm sustain its competitive position.

Recommendations

The context of change (‘the why of change’) for XYZ was detailed in Section 3 and it appears that the key context of change is constant innovation so that XYZ can stay ahead of their competitors. The content (‘what of change’) has been addressed in section 5 but also in our below recommendations. We have also identified the ‘how of change’, so as to ensure that there is a balance between these three areas.

The analysis work performed in producing a proposed Balanced Scorecard for XYZ (Appendix I) has helped us to produce the recommendations described below. By producing a prioritisation of our recommendations, using the techniques as prescribed by Ormorod (seen in Appendix J), we have also been able to structure our recommendations into short, medium and long term suggestions for improvement. We therefore recommend the following for XYZ:

Short term (Quick wins)

*1. Enhance XYZ’s current MRP system

Currently the MRP systems within Axapta are not trusted and cannot be used to generate acceptable purchase orders of products. The effort required to enhance this to become reliable is currently being investigated together with an external provider and the work performed as appropriate. A reliable MRP schedule would release John from much of the administration around purchasing and free him up for other activities. Automation of some of these tasks may obviate the immediate need for an experienced purchasing manager to be recruited. John could retain supplier relationship management responsibilities, but have administrators perform the actual purchasing. With improved product reference data the MRP system could also optimise the decisions around freighting methods.

*2. Interface to couriers

XYZ could consider integrating the information from the various courier websites into Axapta. Currently, the code generated from the courier’s website is written down on a piece of paper and then typed back into Axapta. This is not a problem for the amount of orders they currently deal with but would be relevant if they want to grow their mail order business. A small application could be developed that could capture the code generated from each of the courier websites and then pass this information onto Axapta in a standard format. This can either be done via web services or else batch updates via FTP. The application would require about a man week of development from an external supplier and then a few weeks on in-house testing. XYZ have got relationships with 2 potential suppliers and this option should be explored further in terms of the feasibility, costs and timing.

*3. MIS for financial analysis

XYZ has a unique opportunity to extend the features implemented in the financial analysis module of the Axapta system. This will only require extra configuration in the existing system. This will be useful in generating management information for monitoring key business indicators outlined in the firm’s strategic business objectives and financial indicators identified in the balanced scorecard.

XYZ have already identified a trusted supplier to assist them with the enhancements they require to Axapta. They should however ensure that they maintain a good relationship with this supplier and perhaps dedicate an internal resource to project manage the planned work.

*4. Interface between Axapta and XYZ’s websites

XYZ has integration issues between their Enterprise applications. They are currently faced with three options in terms of interfacing their websites to Axapta, as depicted below.

Option 1 - Interface Actinic to Axapta.

Pro’s

• A relatively cheap solution
• Could be quickly implemented
• Will allow the seamless downloading of customer orders from the website to the Axapta and avoid the double entry
• Newer versions of Actinic will provide more features for a low investment.

Con’s

• Does not provide the ability to upload stock levels, order status and account status to the customers, which is the ultimate requirement of the business.
• This does not provide some of the advanced features required by John such as Favourites and Last viewed items.

Option 2 - Interface to DotNetNuke (or other open source software)

Pro’s

• Could provide the seamless two-way integration between the web sites and Axapta that the business requires to generate a true competitive advantage
• Would provide advanced features of sites like Amazon and Tesco that John aspires to.

Con’s

• The network is currently slow and slower uploading speeds may further degrade the network. XYZ need to ensure that the broadband network can cope with additional uploads and downloads
• Developers will be required to build the interface and this is a relatively more expensive solution.
• Final costs are difficult to predict since any changes or bug fixes could result in additional costs and delay.
• Dan’s buy-in would be required
• This solution will take longer to implement.

Option 3 - Postpone integration effort until Axapta improves its Webshop Solution

Pro’s

• A less risky solution that requires no integration and full functionality.
• A cost effective solution.

Con’s

• It could take at least two years before the required functionality exists in Axapta and this may hold back innovation in the company in the meantime.

The solutions should not be a viewed as an “either” “or” choice. XYZ should consider a short-term solution that builds an interface between Actinic and Axapta (Option 1). They can then use the experience of Option 1 to assess the impact on business process, after which a comprehensive functional specification could be generated to implement DotNetNuke or similar open source software. This solution balances the right level of risk, cost and process improvement

*5. Customer data integration

As mentioned in section 4.4, XYZ’s customer is fragmented and held in 14 separate databases. Axapta has capabilities of storing customer information and therefore all this information could be integrated into one database. This does however require that the CRM module in Axapta would need to be configured correctly, as well as recommendation 4 would need to be completed first. An interim solution could be to get all sales people to use Act more effectively (especially since most of this information is currently held within each sales person’s head) and then at a later date, this could be migrated to Axapta. John would have to be aware that there may be some resistance to sharing knowledge because employees will not feel that indispensable.

*6. Website enhancements & reporting

*6.1 Conversion rates report

- A simple report can be created, in Excel, to show the conversion rates of site visitors to sales in a given period etc. This would allow XYZ to get a better understanding of how effective their websites are at getting potential customers to actually purchase items.

*6.2 Email newsletters

– XYZ are not using customer information gathered via their websites and trade shows to target them with email promotions and regular newsletters. This is a very cost effective solution compared to direct mails and XYZ have the necessary skills to design the HTML newsletter. There are also numerous cost effective solutions available (Vertical Response, Constant Contact etc.), that could be used to send the newsletters.

*6.3 Customer satisfaction

- as the analysis has shown, XYZ performs no formal measurements of customer satisfaction. They do have a feedback section on their websites but XYZ could enhance this form further to focus on specific areas and perhaps incentive customers to complete the survey.

Medium term

*7. Succession plans

John has many roles and it was obvious that he is spending far too much time. In fact, John had even worked the time out and realised it was a significant part of his daily tasks. He has considered taking on a procurement staff member who also would be in charge of quality. The reason that he has not done this so far, is due to the additional expense. However, we feel that the additional expense could be justified in terms of three main reasons. The first is that John has no previous background in purchasing and so the new staff member could improve the purchasing process and therefore make savings for the company. The second is that John is the best resource for marketing the company but also his strengths lie in coming up with the ideas. His time will be freed up to focus on these efforts and so he could be generating more revenue for the company instead of trying to save the cost of a salary. Thirdly, this resource could be trained to use Axapta and become an internal champion.

*8. Order Tracking System

The interfaces identified in recommendation 4 above, focuses on the transfer of data from websites through to Axapta, to improve the accuracy and efficiency of storing customer data. It should also be recognised that providing data out of Axapta to the websites, for customer account management and order tracking could be provided with additional middleware and the appropriate developments in Actinic/DotNetNuke.

*9. Customer networks

With the introduction of the direct mail catalogue, XYZ could consider sharing the costs with complimentary products/competitors. This option could also be considered for the Internet channel. XYZ could consider creating a portal for gifts or complimentary products to their leather items. They have the necessary skills to do this and with their SEO skills, they could build up traffic and sales to the site. That way, they can not only sell their own products but also could charge small commission for complimentary products.

Long term

*10. HR system

XYZ should explore options to implement some of the functionality within Axapta which supports:

• • Automating and managing the flow of information and activities required to support the annual pay review process
  • career planning and leadership development
  • performance management process

11. Supplier networks

At the moment it is not very realistic that XYZ works together with competitors to purchase from suppliers (this is not done within the industry). However, there are already some portals that are used for buying commodities, livestock etc. (refer to www.sourceguides.com/markets). XYZ should therefore look out for any future online e-commerce marketplaces and auctions for buying and selling giftware.

Implementation

It is essential that XYZ’s employees are involved in the specification of requirements but also they should be involved to ensure acceptance of the new systems that will affect some of their daily tasks. End user training is critical, especially for the recommended enhancements to Axapta.

Finally, XYZ should conduct post implementation reviews to ensure that the systems are used in the way they are intended and to gather feedback from employees for any further improvements.

Summary

In summary it was recommended that XYZ continue to assess its business situation, the market that it competes in, the processes it uses to compete and the information it needs to perform those processes. The urgency of implementation of the recommendations above all depends on the rate of continued business success achieved by XYZ. The means of achieving benefits from these recommendations will predominantly be derived by them enabling future growth. It is therefore imperative that the investment made in adopting these recommendations is made to synchronise with the steps in XYZ’s business growth.

Appendix A

Growth Phases Model

The growth phases model of Larry E. Greiner suggests that organisations go through 5 (6) stages of growth and need appropriate strategies and structures to cope. It is a descriptive framework that can be used to understand why certain management styles, organisational structures and coordination mechanisms work, and why some don't work at certain phases in the development of an organization.

Appendix B

PEST Analysis

The table below shows a PEST analysis of XYZ. It provides a checklist of the wider environmental factors that might affect XYZ or the corporate gifts industry in general. The list is helpful in assessing the importance of each item to XYZ at the present time and how they might change over time, and can be used for developing appropriate strategies.

Political Future

• Globalisation of trade – competition from Far East, but also open markets overseas

Economic future

• Slow down in UK retail economy

Socio-cultural future

• Acceptance of e-commerce Technological future
• Web-based selling – lower selling costs and better cash flow

Conclusions:

• Seek new market opportunities
• Hedge UK retail economic cycle risk with new overseas markets. Perhaps using distributors connected to XYZ websites
• Develop user-friendly e-commerce websites

Appendix C

Porter’s five forces Analysis

Porter’s five forces analysis of the market for corporate gifts is shown below. It analyses the attractiveness and the dynamics of the industry by evaluating the ease by which new firms can enter the market, the bargaining power of suppliers, the bargaining power of customers, threat of substitute products and the competitiveness of the industry.

Conclusions:

• The corporate gifts market structure could be characterised as “perfect competition” with low entry and exit barriers, and numerous buyers and sellers
• The industry is attractive to niche players who can differentiate and provide superior customer service
• Brand building should be sought as an alternative channel to Google search engine optimisation

Appendix D

SWOT Analysis

The diagram below shows a SWOT analysis of XYZ. The SWOT analysis can be used for matching XYZ’s key internal resources and values to the demands of the environment in order to achieve a competitive advantage.

Conclusions:

• Leverage key strengths to provide superior customer service
• Develop key in-house skills, e.g. Axapta
• MD should consider delegating some routine tasks, e.g. procurement and QA
• Leverage the marketing channels and brands of other firms by developing a network of distribution partnerships. Example, i.e. partners could be connected to XYZ’s websites, to increase the partners’ product offerings
• Develop a staged information systems integration strategy

Appendix E

The diagram below shows a rich picture of the XYZ processes.

The production of this diagram helped to understand the processes being performed within XYZ and the information flows between those processes. The “crossed sword” ( ) marks shown on the diagram helps to identify where problem processes and information flows exists. Drawing the rich picture on the Porter value chain generic process map helped perform a completeness check and helped to visualise those process areas where little processing is evidenced. In these areas the processing is often performed within XYZ by John, the Managing Director, himself.

The issues, initiatives and comments about the processes are also shown against the value chain below. This analysis helped us understand the positioning and nature of the problems/opportunities within XYZ.

Appendix F

Information Requirements of Key Business Processes The table below shows the different information requirements of XYZ’s key business processes. Both the information input and the information output are shown.

Information Required to Undertake the Activity	Activity	Information Resulting from the Activity
Strategies for Web Marketing	Marketing / Sales Campaigns	Marketing Plan / Strategy
Website Traffic Stats		Sales Campaigns
Search Engine Ranking Data		Approaches to Market
Exhibition Dates & Costs		Website Updates
Historical Market Data		Product Policies
		Product Pricing
		Sales Forecasts
Orders from Customers	Order Processing/Fullfilment	Order Details
Stock Availability (Held & On-order)		Order Fulfillment Stats
Engraving Schedule		Invoice Details
Product Pricing
Current Stock Level	Inventory Control	Purchase Forecast
MRP Output		Purchase Orders
Stock Requirement for Open Orders		Freight Decisions
Supplier Quality Assessments
Product Policies
Invoice Details	Financial Performance Monitoring	Cash Flow Forecast
Debtor Details		Business Performance Data
Order Details		Cost Data
Supplier Invoices		Sales Campaign Performance
Bank Statements		Payroll Data
Staff Levels & Competences	Staff Development	Competence Gap Analysis
Staffing Requirements		Training / Learning Plan
		Recruitment Plan
		Role/Job Descriptions
Customer Issues/Complaints	Quality Control	Root Cause Findings
Product Quality Information		Supplier Quality Assessments
		Revised Procedures

Appendix G

McFarlan Strategic Grid for XYZ

The diagram below shows the McFarlan Strategic Grid applied to XYZ. The upper horizontal line contains the information systems that will have a future impact on XYZ, whereas the lower horizontal line maps the current systems. In the left column are the systems with high impact and in the right columns those with a low impact on XYZ.

Mcfarlan Grid

The resulting four quadrants have the following meaning: • Upper left = Strategic: shows information systems that will provide XYZ with a strategic advantage in the future • Upper right = High Potential: shows information systems that could provide XYZ with an advantage in the future, but it is not evaluated or tested so far • Lower left = Key Operational: shows the current information systems that are key to XYZ’s operation • Lower right = Support: shows the current information systems that support XYZ’s operation

High Low

Future Impact Strategic High Potential Axapta (with Customer Management enabled) Enhanced MRP Integration of Website Databases with Axapta Web interface to Couriers Websites Web interface for Orders MIS for Financial Analysis Staff Performance System Current Impact Key Operational Support Internet MS-Office Axapta (Current Configuration) Lotus Suite Actinic Corel Draw & Adobe Photoshop ACT

Appendix H

Seven-S Model

The 7s McKinsey model describes how one can holistically and effectively organise a company. Together these factors determine the way in which XYZ operates.

McKinsey's Seven S's

Strategy Owner led, informal, sharing of strategy is limited to management Structure Flat, web management style

Systems Mix of paper-based and technological but are moving towards technology (make Internet main marketing channel) Initially not well-defined, some integration between systems, scalable.

Staff MD central to everything! Dan – key person for developing e-commerce

Style Facilitating and directive

Skills Design Web development/marketing Engraving

Shared Values Growth through sales

Appendix I

Balanced Scorecard

The diagram below shows the Balanced Scorecard applied to XYZ. This has been derived by taking into consideration XYZ’s strategic objectives. The Performance measures in blue fonts are our suggested metrics for measuring the respective scorecard perspectives they are listed against.

Appendix J

Omerod’s Priority Framework

The table below is the ranked priority of the various Information Systems that have been identified in the course of the consultancy exercise as having the potential to improve the business fortunes of XYZ Trading. The process involves first ranking the four priority parameters listed below, bearing in mind the firm’s business strategic thrusts. Then, ‘weight factors’ from a scale of 1 to 5, indicating the relative indication of importance of each of these priority parameters were assigned. The priority parameters and their assigned weight values are as follows: market position – 5 , competitive advantage – 4, financial return – 3, and Ease of Implementation - 2