1. OHT 10.1 © Marketing Insights Limited 2004 Chapter 10 Change management

2. OHT 10.2 © Marketing Insights Limited 2004 Learning objectives Identify the different types of change that need to be managed for e-commerce; Develop an outline plan for implementing e- commerce change; Describe alternative approaches to organisation structure resulting from organisational change.

3. OHT 10.3 © Marketing Insights Limited 2004 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?

4. OHT 10.4 © Marketing Insights Limited 2004 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.

5. OHT 10.5 © Marketing Insights Limited 2004 Key factors in achieving change Figure 10.1 Key factors in achieving change

6. OHT 10.6 © Marketing Insights Limited 2004 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.

7. OHT 10.7 © Marketing Insights Limited 2004 Different scales of change TermInvolvesIntentionRisk of failure Business process re- engineering 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

8. OHT 10.8 © Marketing Insights Limited 2004 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

9. OHT 10.9 © Marketing Insights Limited 2004 Stages in developing an e-business solution Figure 10.2 Stages in developing an e-business solution

10. OHT 10.10 © Marketing Insights Limited 2004 An example web site development schedule for the B2C Company Figure 10.3 An example web site development schedule for The B2C Company

11. OHT 10.11 © Marketing Insights Limited 2004 Automating the employee development process Figure 10.4 Automating the employee development process Source: Confirmit Copyright © 2003 FIRM

12. OHT 10.12 © Marketing Insights Limited 2004 Organisational structures for e-business and e-commerce Organizational structureCircumstancesAdvantagesDisadvantages (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 e- commerce 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

13. OHT 10.13 © Marketing Insights Limited 2004 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)

14. OHT 10.14 © Marketing Insights Limited 2004 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.’

15. OHT 10.15 © Marketing Insights Limited 2004 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”.’

16. OHT 10.16 © Marketing Insights Limited 2004 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’.

17. OHT 10.17 © Marketing Insights Limited 2004 Outsourcing benefits – activity

18. OHT 10.18 © Marketing Insights Limited 2004 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.’

19. OHT 10.19 © Marketing Insights Limited 2004 Outsourcing risks - activity

20. OHT 10.20 © Marketing Insights Limited 2004 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?

21. OHT 10.21 © Marketing Insights Limited 2004 Oticon

22. OHT 10.22 © Marketing Insights Limited 2004 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)

23. OHT 10.23 © Marketing Insights Limited 2004 Key staff in systems acceptance System sponsors – System owners – System users – Stakeholders – Legitimizer – Opinion leaders –

24. OHT 10.24 © Marketing Insights Limited 2004 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.

25. OHT 10.25 © Marketing Insights Limited 2004 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.’

26. OHT 10.26 © Marketing Insights Limited 2004 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)

27. OHT 10.27 © Marketing Insights Limited 2004 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.

28. OHT 10.28 © Marketing Insights Limited 2004 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.

29. OHT 10.29 © Marketing Insights Limited 2004 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.

30. OHT 10.30 © Marketing Insights Limited 2004 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

31. OHT 10.31 © Marketing Insights Limited 2004 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.

32. OHT 10.32 © Marketing Insights Limited 2004 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.

33. OHT 10.33 © Marketing Insights Limited 2004 OpenText Livelink (www.opentext.com)www.opentext.com

34. OHT 10.34 © Marketing Insights Limited 2004 Activity – identify risks for e-business project RiskProbabilityImpactSolution Insufficient senior management commitment 57Education/training/lobbying by e-business manager to achieve buy-in High staff turnover/key staff leave 65Use monetary incentives and improve working environment Project milestones not met, overrun budget 86Appoint 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) 88Allow sufficient time for volume, performance testing Staff resistance to change44Education, training identification of change facilitators amongst staff Problem with integrating with partner’s systems (e.g. customers or suppliers) 68Tackle these issues early on, identify one contact point/manager for each of partnerships New system fails after changeover (too slow or too many crashes) 9See solution to delayed implementation

35. OHT 10.35 © Marketing Insights Limited 2004 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)