The in-house solutions to competitiveness – conclusions

When faced with yet another call on scarce resources to bring one or more functions up to the desired level of efficiency, senior management ought to be very firm in their dealings with the project sponsors. To start with, the business plan must take account of the anticipated life span of the systems to be implemented. If it is decided that it will be a minimum of five years before a further performance improvement could begin, then the minimum aim must be that the service is still competitive in five years’ time. If it is fair to counter that statement by asking ’How can we possibly know how competitive it will be in five years’ time?’ it must be equally fair to ask ’Why spend so much money if you can not be reasonably certain of long-term competitiveness?’.

I believe that internal performance improvement projects that do not result in lasting post implementation competitiveness for the functions concerned, are not only failures, they are a waste of time, money and opportunity.

Most organizations require their managers to produce business plans for major performance improvement projects and these business plans require a trade-off. Therefore, the anticipated cost of new equipment, software, communications, consultants, contractors, etc. are added together and balanced in some financial way with future reduced costs and improved service. Not surprisingly, the vast majority of such business plans forecast future savings and improvements after implementation that at least covers the anticipated costs. My argument is that the savings and improvements need to be substantial to justify the expenditure of a major project and to be effective, they must include some promise of continuous improvement.

When projects have taken two years or more to implement, it is often difficult to measure the finished results because time has taken its toll. Customers may have requested changes to the service, and acquisitions or sales of business divisions may have taken place. Two years is a long time in the current commercial environment and a number of project sponsors have begun projects in recent times quite convinced that any failure will be disguised by changes that will inevitably be required during the project’s life. Some changes occurring during the project may help to improve the chance of success, but normally the opposite is the case. Given these problems, any project team that gets close to its targets after a long project is due some measure of praise.

Getting close to or achieving the targets set may not be the same as putting the function in a lasting competitive situation. Benchmarking current and medium term competitiveness is not going to be easy or particularly accurate, but a serious attempt to achieve such a measure must surely be made before every sizeable project. If taking this action achieves nothing else, it will help to emphasize that it is ultimate competitive success that is the real aim; not achieving stage targets set by the business plan which may not be meaningful in the long term.

The fact that a performance improvement project lasts many months or years automatically means that in most organizations a further attempt is unlikely to be made within the same function for a further five to seven years. Where a project fails, therefore, this cost of lost opportunity, although almost impossible to quantify, can be substantial and in terms of future profitability, the effect may be far greater than the total initial expenditure on the failed project.

There must be serious doubts about the chances of success when trying to bring about performance improvements on a purely in-house basis. My concern is based upon the following.

• To bring about a significant change, a major project will be necessary. However, even minor projects are disruptive, time consuming and costly.

• Even with major ERP projects covering most of an organization’s functions, it is often deemed necessary to complete the work on one function before starting on another. If the whole process takes several years to complete, there is always the chance that the first function worked on will be out of date by the time the overall project is completed.

• Although it is not possible to provide accurate figures regarding the success/failure rate of internal performance improvement projects, the general perception is that a significant number fail to meet all the targets set for them.

• Even where a performance improvement project meets the targets set, there is a good chance that cost savings will be considered of disproportionately greater importance than service improvements. Unless great care is taken, undue emphasis placed on cost savings could result in redundancies that seriously limit future opportunities to recruit top quality staff.

• Even where internal performance improvement projects are considered successes, how long will that success last? If the function that has just achieved a true competitive rating is not permanently staffed by specialists and cannot recruit sufficient specialists because it cannot grow by taking on new clients – how long will it remain competitive?

As stated earlier, it is always going to be difficult to estimate the degree of success or failure for any single project if true lasting competitiveness is the target. Amongst the difficulties involved are confused or inadequate targets and the natural desire to be associated with success. For commerce as a whole, therefore, it is probably never going to be possible to give accurate estimates, because however good the research skills, the individual organizations will be loath to admit failure and will consequently disguise it.

However, I don’t think it matters that we cannot be sure of the exact failure rate. We are all sufficiently aware of the major failures to accept that they do happen frequently and common sense dictates that there must be many other failures that don’t get publicity because they don’t directly affect the public. Add to that the admitted narrow failures and the significant number of instances where the target was not set high enough, then the situation is bound to be more dismal than is generally accepted.

I believe that if the true level of failure were known, then Chief Executive Officers would be far less inclined to approve the considerable costs involved with internal projects. Just consider what is involved in most organizations. First function A starts its project and when it is finished it is function B’s turn and so on. In this way it is hoped to improve the competitiveness of the organization by applying the scarce resources needed in a balanced manner. But concentrating on one single function or group of functions at a time does not mirror what is happening in the real world, where developments tend to take place on a continuous and seamless basis across all functions.

This may appear to be a plea to confine internal projects to multi-function, totally integrated, ERP-type systems that involve almost all areas of an organization. I do accept that there is sound logic in integrating systems throughout an organization, but I am certainly not in favour of lengthy projects. Therefore, I accept that mammoth, organization-wide projects lasting many years and operating on a continuous basis are not desirable.

If, however, attention could be given to all the information systems requirements of an organization in a project lasting a few months instead of a few years, then an ERP type implementation could really begin to make sense. For that reason, the ASP concept of rapid Web-enabled implementations would be extremely valuable if they can be made to work for the many rather than the few. In addition, the tenure of office of senior managers is getting shorter all the time and this creates a tendency for these senior managers to ignore the medium and long term in favour of the short term. Therefore, the ASP concept is likely to match the personal targets of these senior managers whilst providing a measure of external specialist support on a long-term basis. Internal solutions that do not benefit from utilizing external specialists on a continuous basis will rarely make sense in the future.

The ASP route, therefore, offers some prospects for success with internal projects, but the skill shortage is very likely to limit use of even seemingly ’magical’ new developments for some time to come, so pinning all hope in one area of technology is never a very good idea.