There’s a chill in the air, the chill of fear. Sales and profits are down. A new CEO is in town. The head of manufacturing is gone, and the supply-chain head may be the next to roll -- unless she can deliver some wins. She has a plan: Rationalize the vendors, realign accountabilities, and roll out new technology to the field. And survival is all about increasing the bottom line. Your inner bean counter knows how to control costs. But it’s not so easy to control the supply-chain head, who reports to the COO. Her plan comes with a hefty price tag. She wants to develop a custom vendor management and procurement solution. Initially, the estimated price tag approached half a million dollars, but further analysis points to substantial integration costs that will raise the ante to $3 million and counting. Adding insult to injury, a good chunk of the investment will be spent replicating the functionality of your existing multimillion-dollar ERP technology. The head of supply chain isn’t stupid. She just got tired of waiting for IT to give her what she believes she needs. Now she has their attention, but as far as she’s concerned, it’s too little, too late. She’s hired her own IT expert and now she’s calling the shots. Last night, you had dinner with your CFO. He is equally at a loss for a strategy to get a handle on the developing situation with the supply-chain head. You both agree that her “IT expert” isn’t an expert, and that the procurement and field organizations don’t have the IT smarts necessary to convert that $3 million custom vendor management and procurement system investment into something that will realize significant cost savings or drive revenue. You both agree that as currently conceived, this roll-your-own procurement solution is a waste of precious time and money. And there's nothing you can do to stop it. The question now becomes: What can you do to help make sure that this investment pays off? Well? Let me know. Orginally published on CFO.com .
You know that these changes won’t reverse the decline. The Internet has shifted the balance of power in the marketplace to the customer, and dramatic, albeit unknown, changes to your business model are required. While the powers that be work on envisioning a new future, the rank and file focus on survival.
Follow Valuedance
Pound the existing system to find out how to do what you want using it, pour over unused functionality in their manuals, get the stats on what it takes to get your goal in sight and have in hand the estimated costs & effort to do it ... then spring your plan, everyone can then see clearly why to fund it, this allows things to move on more easily for all parties.
Susan, Unfortunately this kind of situation occurs often in business. The supply chain head should not be allowed to operate his own IT department anymore than he would be allowed to operate his own financial operation. There needs to be a steering committee staffed by the corporate officers who make these kind of decisions. If the committee agrees with the supply chain head, then IT takes on the project. i don't believe IT should put itself in the position of knowing more about the needs of the corporation than the corporate officers.
Having said that, the IT head is on the committee and has the right and the duty to express her concern about the project and its potential. She also can talk to the supply chain head and discuss her concerns. At the end of the day, however, the committees decision prevails.
BTW, we had a great session in California teaching about the 10 secrets. At the end of the second day, the IT leader worked with his staff to begin a plan to implement our recommendations. It doesn't get any better than that. What did you think of the list? I have great respect of your opinion and I was concerned that I hadn't heard from you. Paul
It seems to me that the best way to approach this is to give the Supply Chain organization all the help they need to make a good decision based upon more information. Certainly we can empathize with the Supply Chain concerns.
Perhaps it might be best if we smother the Supply Chain head with executive help (steering committee if you must), alternatives from SaaS vendors, analysis of the value chain analysis of the existing applications and a gap analysis to drive out requirements in depth. Overwhelm the Supply Chain "IT expert" with real expertise shown to every executive. But, I'd be careful not to do it in a way that makes anyone lose face.
It seems to me that powerful, revenue creating parts of companies have an increased number of options to "go around" IT. It appears that we should consider a more outside-in, customer-focused approach than what may have been our mode of business in the past.
IT would seem to have an interest to act on behalf of the corporation as a whole to serve as stewards for the corporations investment through governance, architecture and cost management to reduce the overall enterprise risk of systems. In this case, I might be inclined to press that point from a helping point of view.
Good question.
I'd do two things. One is a tactic to head things off at the pass but build a new capability for the future. The second is a strategic endeavour to stop this happening again.
First, I'd use the CFO to set a mandate that the custom solution have a strong, and living business case based on benefits to stakeholders following a benefits management model. This does a number of things - it starts building the business case, it puts in place a strong business case based on change, it may well prove that many of the benefits have their point of risks with the 'field organisation' and it may also prove many of the benefits would also flow from the ERP. It also builds a firm foundation for managing projects and programmes in the future. Start small though, get people together and nail these benefits - it makes sense.
That should clear some of the fog and makes perfect business sense.
Second, I'd then begin the process of designing the correct governance to ensure we have desirable accountability and behaviour in the organisation, currently we don't. It's not about control. Once this body (or multiple mechanisms) was set-up it can be used a vehicle to mature practices around taking a more architectural approach to these issues. Get a centralised view of IT projects, a project selection procedures, etc, etc. It can all be done with different practices prioritised depending on the organisation.
So, benefits to assess discuss the venture, then Governance to establish the right mechanisms in the future. Ultimately form it on three pillars (longer term): IT Governance, Architecture (the right level of process and data integration and standardisation) and Benefits Management. Deal with those pillars to the right degrees for cultural fit.
“Sales and profits are down.” Why? If a true analysis of the business situation has been conducted and the remedy alternatives have been deliberated through among senior management, the CFO, the CIO, and the rest of the C-suite would not be skeptical of the proposed solution and the return on that investment. Otherwise this could well be another pill to cure the wrong illness – alas, a frequent occurrence in many organizations. Technology solutions succeed in delivering their intended value only when the CIO (IT) and her executive peer (i.e., the SVP of Supply Chain) share the exact vision of the shape of the business 6 months, 12 months, and two years after the roll-out of a technology solution.
The CIO should meet with the CEO and COO and admit to a failure to create, solve and resolve technical solutions and issues fast enough for the business units. Even a bad idea is better than no idea at all. At least with a bad idea, it gets people thinking differently so they can change course and work at solving the problem. Recognize what you have been doing didn't work and stop looking for validation for your ideas and concerns from the CFO. Their motivations are different from yours. The CFO will survive even if his/her support is not behind the project.
Tell the business unit they are right and you were wrong. Tell them that you still have reservations but let's get moving and we will resolve them together as we go.
The project is going forward with or without you. Get on the wagon early or leave is pretty much what I am hearing. Seems like a great opportunity to partner, change your organization and save everyone's job.