Table 15.4 lists the principal management problems posed by developing international systems. It is interesting to note that these problems are the chief difficulties managers experience in developing ordinary domestic systems as well. But these are enormously complicated in the international environment.
1. A Typical Scenario: Disorganization on a Global Scale
Let’s look at a common scenario. A traditional multinational consumer-goods company based in the United States and operating in Europe would like to expand into Asian markets and knows that it must develop a transnational strategy and a supportive information systems structure. Like most multinationals, it has dispersed production and marketing to regional and national centers while maintaining a world headquarters and strategic management in the United States. Historically, it has allowed each of the subsidiary foreign divisions to develop its own systems. The only centrally coordinated system is financial controls and reporting. The central systems group in the United States focuses only on domestic functions and production.
The result is a hodgepodge of hardware, software, and telecommunications. The email systems between Europe and the United States are incompatible. Each production facility uses a different manufacturing resources planning system (or a different version of the same ERP system) and different marketing, sales, and human resource systems. Hardware and database platforms are wildly different. Communications between different sites are poor, given the high cost of European intercountry communications.
What do you recommend to the senior management leaders of this company, who now want to pursue a transnational strategy and develop an information systems architecture to support a highly coordinated global systems environment? Consider the problems you face by reexamining Table 15.4. The foreign divisions will resist efforts to agree on common user requirements; they have never thought about much other than their own units’ needs. The systems groups in U.S. local sites, which have been enlarged recently and told to focus on local needs, will not easily accept guidance from anyone recommending a transnational strategy. It will be difficult to convince local managers anywhere in the world that they should change their business procedures to align with other units in the world, especially if this might interfere with their local performance. After all, local managers are rewarded in this company for meeting local objectives of their division or plant. Finally, it will be difficult to coordinate development of projects around the world in the absence of a powerful telecommunications network and, therefore, difficult to encourage local users to take on ownership in the systems developed.
2. Global Systems Strategy
Figure 15.4 lays out the main dimensions of a solution. First, consider that not all systems should be coordinated on a transnational basis; only some core systems are truly worth sharing from a cost and feasibility point of view. Core systems support functions that are absolutely critical to the organization. Other systems should be partially coordinated because they share key elements, but they do not have to be totally common across national boundaries. For such systems, a good deal of local variation is possible and desirable. A final group of systems is peripheral, truly provincial, and needed to suit local requirements only.
2.1. Define the Core Business Processes
How do you identify core systems? The first step is to define a short list of critical core business processes. Business processes are defined and described in Chapter 2, which you should review. Briefly, business processes are sets of logically related tasks to produce specific business results, such as shipping out correct orders to customers or delivering innovative products to the market. Each business process typically involves many functional areas, communicating and coordinating work, information, and knowledge.
The way to identify these core business processes is to conduct a business process analysis. How are customer orders taken, what happens to them once they are taken, who fills the orders, and how are they shipped to the customers? What about suppliers? Do they have access to manufacturing resource planning systems so that supply is automatic? You should be able to identify and set priorities in a short list of 10 business processes that are absolutely critical for the firm.
Next, can you identify centers of excellence for these processes? Is the customer order fulfillment superior in the United States, manufacturing process control superior in Germany, and human resources superior in Asia? You should be able to identify some areas of the company, for some lines of business, where a division or unit stands out in the performance of one or several business functions.
When you understand the business processes of a firm, you can rank-order them. You then can decide which processes should be core applications, centrally coordinated, designed, and implemented around the globe and which should be regional and local. At the same time, by identifying the critical business processes, the really important ones, you have gone a long way to defining a vision of the future that you should be working toward.
2.2. Identify the Core Systems to Coordinate Centrally
By identifying the critical core business processes, you begin to see opportunities for transnational systems. The second strategic step is to conquer the core systems and define these systems as truly transnational. The financial and political costs of defining and implementing transnational systems are extremely high. Therefore, keep the list to an absolute minimum, letting experience be the guide and erring on the side of minimalism. By dividing off a small group of systems as absolutely critical, you divide opposition to a transnational strategy. At the same time, you can appease those who oppose the central worldwide coordination implied by transnational systems by permitting peripheral systems development to progress unabated with the exception of some technical platform requirements.
2.3. Choose an Approach: Incremental, Grand Design, Evolutionary
A third step is to choose an approach. Avoid piecemeal approaches. These surely will fail for lack of visibility, opposition from all who stand to lose from transnational development, and lack of power to convince senior management that the transnational systems are worth it. Likewise, avoid grand design approaches that try to do everything at once. These also tend to fail because of an inability to focus resources. Nothing gets done properly, and opposition to organizational change is needlessly strengthened because the effort requires extraordinary resources. An alternative approach is to evolve transnational applications incrementally from existing applications with a precise and clear vision of the transnational capabilities the organization should have in five years. This is sometimes referred to as the “salami strategy,” or one slice at a time.
2.4. Make the Benefits Clear
What is in it for the company? One of the worst situations to avoid is to build global systems for the sake of building global systems. From the beginning, it is crucial that senior management at headquarters and foreign division managers clearly understand the benefits that will come to the company as well as to individual units. Although each system offers unique benefits to a particular budget, the overall contribution of global systems lies in four areas.
Global systems—truly integrated, distributed, and transnational systems— contribute to superior management and coordination. A simple price tag cannot be put on the value of this contribution, and the benefit will not show up in any capital budgeting model. It is the ability to switch suppliers on a moment’s notice from one region to another in a crisis, the ability to move production in response to natural disasters, and the ability to use excess capacity in one region to meet raging demand in another.
A second major contribution is vast improvement in production, operation, and supply and distribution. Imagine a global value chain with global suppliers and a global distribution network. For the first time, senior managers can locate value-adding activities in regions where they are most economically performed.
Third, global systems mean global customers and global marketing. Fixed costs around the world can be amortized over a much larger customer base. This will unleash new economies of scale at production facilities.
Last, global systems mean the ability to optimize the use of corporate funds over a much larger capital base. This means, for instance, that capital in a surplus region can be moved efficiently to expand production of capital-starved regions; that cash can be managed more effectively within the company and put to use more effectively.
These strategies will not by themselves create global systems. You will have to implement what you strategize.
3. The Management Solution: Implementation
We now can reconsider how to handle the most vexing problems facing managers developing the global information systems architectures that were described in Table 15.4.
3.1. Agreeing on Common User Requirements
Establishing a short list of the core business processes and core support systems will begin a process of rational comparison across the many divisions of the company, develop a common language for discussing the business, and naturally lead to an understanding of common elements (as well as the unique qualities that must remain local).
3.2. Introducing Changes in Business Processes
Your success as a change agent will depend on your legitimacy, your authority, and your ability to involve users in the change design process. Legitimacy is defined as the extent to which your authority is accepted on grounds of competence, vision, or other qualities. The selection of a viable change strategy, which we have defined as evolutionary but with a vision, should assist you in convincing others that change is feasible and desirable. Involving people in change, assuring them that change is in the best interests of the company and their local units, is a key tactic.
3.3. Coordinating Applications Development
Choice of change strategy is critical for this problem. At the global level there is far too much complexity to attempt a grand design strategy of change. It is far easier to coordinate change by making small incremental steps toward a larger vision. Imagine a five-year plan of action rather than a two-year plan of action, and reduce the set of transnational systems to a bare minimum to reduce coordination costs.
3.4. Coordinating Software Releases
Firms can institute procedures to ensure that all operating units convert to new software updates at the same time so that everyone’s software is compatible.
3.5. Encouraging Local Users to Support Global Systems
The key to this problem is to involve users in the creation of the design without giving up control over the development of the project to parochial interests. The overall tactic for dealing with resistant local units in a transnational company is cooptation. Cooptation is defined as bringing the opposition into the process of designing and implementing the solution without giving up control over the direction and nature of the change. As much as possible, raw power should be avoided. Minimally, however, local units must agree on a short list of transnational systems, and raw power may be required to solidify the idea that transnational systems of some sort are truly required.
How should cooptation proceed? Several alternatives are possible. One alternative is to permit each country unit the opportunity to develop one transnational application first in its home territory and then throughout the world. In this manner, each major country systems group is given a piece of the action in developing a transnational system, and local units feel a sense of ownership in the transnational effort. On the downside, this assumes the ability to develop high-quality systems is widely distributed and that a German team, for example, can successfully implement systems in France and Italy. This will not always be the case.
A second tactic is to develop new transnational centers of excellence, or a single center of excellence. There may be several centers around the globe that focus on specific business processes. These centers draw heavily from local national units, are based on multinational teams, and must report to worldwide management. Centers of excellence perform the initial identification and specification of business processes, define the information requirements, perform the business and systems analysis, and accomplish all design and testing. Implementation, however, and pilot testing are rolled out to other parts of the globe. Recruiting a wide range of local groups to transnational centers of excellence helps send the message that all significant groups are involved in the design and will have an influence.
Even with the proper organizational structure and appropriate management choices, it is still possible to stumble over technology issues. Choices of technology platforms, networks, hardware, and software are the final element in building transnational information systems architectures.
Source: Laudon Kenneth C., Laudon Jane Price (2020), Management Information Systems: Managing the Digital Firm, Pearson; 16th edition.