Blue Rhinos Business Strategy and Information Systems - Essay Example

Blue Rhino’s Business Strategy and Information Systems Abstract A well planned and implemented Business Information System has the potential to enable a business to achieve partial or full Business Process Automation thus improving the Information Accuracy, Data Consistency, Turn around Time, Staff Productivity, Data Security, Compliance to Regulations & Global Standards, Customer Satisfaction, Customer Retention and the Bottom Lines. (Dunshee, ERPN, 2001, p. 2-3 and Upadhyaya, 2005, p.4-11). This paper presents strategies & methodologies of planning & implementing Business Information Systems and their impact in the overall Organizational Change and Governance of Business pertaining to the case study of Blue Rhino. This paper also covers how a Regulatory requirement helped the Blue Rhino in making the change happen more effectively. Introduction: In fast growing complex businesses, the uncertainties in employee productivity levels, customer satisfaction levels, operating costs, duplication of work, operations performance, actual revenues, ability to grow, forecasting & hypothecations, etc. increases beyond the comfort levels of the Management and Stake Holders. In light of these uncertainties, an organization may need to implement an effective, integrated & controlled Business Information System (BIS). However, such a system is not just a product which can be purchased, plugged and played. Management commitment and end user buy-in are critical to implement the BIS (The ERP Selection process survival guide, Relevant Business Systems Inc, 2005, p.3). In this case-study, Blue Rhino Management did take the wise decision to implement BIS and provide interfacing to employees, suppliers and customers via an Intranet. The implementation actually became faster and more collaborative & effective because of Sarbanes-Oxley legislation that was implied on the organization. Blue Rhino’s Business Strategy and Information Systems prior to revamp Blue Rhino is a national leader in their business that deals with Propane Cylinder Exchange Services. Their growth soared in a very short time due to aggressive spirit of the organization, macro management by the CEO (empowerment of staff) and a major strategic change in their business – exchanging cylinders rather than refilling cylinders. Employee empowerment works well for this kind of retail business analogous to the Wal-Mart business model (Malone, Thomas W. 1997, Sloan Management Review, Winter97, Vol.38, Issue 2, p.125-125, 1/2p). This business system, however, created small pockets of numerous management styles not well connected to the bigger system thus resulting in business processes relying on manual and disconnected systems in Blue Rhino. The problem statement of poor control on inventory because of manual data collection & reporting in spreadsheets justifies this gap (IT not automated). Thus Blue Rhino needed an integrated & controlled Business Information System and major Organizational Change pertaining to cultural, operational, management style, horizontal & vertical collaboration, interfacing with clients and interfacing with suppliers. The reluctance to change, however, was not able to ensure a proper commitment although revamp of financial practices was attempted. The reasons assessed are lack of urgency, lack of a powerful coalition committed to the change (people culturally work in silos here), lack of vision (or under-communication of vision if one exists), ignoring obstacles to change, and finally lack of management commitment (as an anchor to the change) (Kotter, John P, 1995, Harward Business Review, Mar/Apr95, Vol. 73, Issue 2, p.59 – 67). The start of revamp of Blue Rhino’s Systems and Business Processes It is assessed that BR had poor management commitment. The CEO was needed to trigger and anchor the change, but it appears that he himself needed a trigger that came in the form of Sarbanes-Oxley (SOX) legislation. SOX require publishing of audited and signed financial statements to an absolute level of accuracy (Sarbanes-Oxley Act of 2002. 107th Congress of the United States of America. Second Session. Provided by www.findlaw.com). Fraudulent statements can lead to severe penalties including a long jail term. Investigations by the CFO revealed that there were major process gaps, lack of controls and security gaps which would result in non-compliance to section 404 of Sarbanes-Oxley legislation. Hence, the first process in this change was to clearly identify the requirements of the business systems in terms of organizational units, functions, processes, and data elements with key entities & attributes (Prentice Hall, 2006. Chapter 14. p.14.5). The CFO’s team in collaboration with IT and few other operating teams carried out intense assessment within the organization and finally prepared an end to end Process/Data Class Matrix used to map the processes of all departments with the corresponding data classes clearly indicating whether a creator of data or user of data is involved in the process (Figure 1) (Prentice Hall, 2006. Chapter 14. p.14.7). Figure 1 BR needed automation urgently because the data collation & publishing methodology is manual resulting in surplus inventory in the stores. Efforts were applied by Blue Rhino in implementing the automation by deployment of Megastorm’s E-Work. However the processes were being implemented in as-it-is mode which was lacking effective contribution to the business. Sarbanes-Oxley legislation invoked an urgency to detect process in-efficiencies that resulted in Rationalization of processes in many areas (identified by the CFO). By deploying the Intranet & Extranet, the organization witnessed a complete re-engineering of the processes (on-line continual operation than offline batch mode operation). The outcome was so effective and advantageous that the CEO & CFO could plan for a Paradigm shift of the way business is done targeting 25% growth in net earnings per year as a result of the Organizational change. The organization thus transitioned through all the four major factors for organizational change – Automation, Rationalization of Processes, Business Process Re-engineering and Paradigm Shift (Prentice Hall, 2006. Chapter 14. p.14.9 – 14.10). The Organizational Change of Blue Rhino is analyzed critically in the subsequent sections in this paper. Management, Organizational and Technological Issues in the process of revamp Before the Organizational Change is attempted, the major challenge is to establish the critical success factor that includes commitment from all managers, distributors, suppliers and the business support functions. This must have happened via effective communications by the CEO to the entire organization. Definitely, a number of people didn’t like the idea given their culture of operating as sectors of power in small pockets. But this is a CEOs initiative who along with CFO is acting as the project sponsor. Hence, the commitment to the Organizational Change was guaranteed from all quarters. The efforts of core team including CFO, IT and few operating teams must have been presented to the much wider forum. It is definite that the Process/Data Class Matrix must have taken everyone by surprise. Culturally, the organization is not used to such collaborative and tightly controlled process-data relationship. The organization at such a juncture needs to be flexible enough to give room for anticipatory, emergent as well as opportunity based change management (Orlikowski, Wanda and Hofman, J Debra, 1997, Sloan Management Review, Winter97, Vol.38, Issue 2, p.125-125, 1/2p) as explained below: Anticipatory: This approach involves anticipation of the changes required in the organization that can be incorporated in the steps of implementation. This is achieved by participation of the brightest individuals from all departments and the IT team that gets deep into understanding & documenting the existing good practices, process performance measurements & improvements needed (Prentice Hall, 2006. Chapter 14. p.14.13 – 14.14). This activity was carried out in Blue Rhino sponsored by the CEO, CFO & CIO. Emergent Changes: In this change approach, as the project proceeds, new kinds of changes emerge that were not anticipated earlier. This would happen as a result of much larger participation from the end users. Opportunity based changes: This essentially requires keeping a close eye on the new opportunities that are greeting the company’s business. It would be wise to include the corresponding changes in the system when it is at the planning or development stages. Emergent and opportunity based changes essentially require an iterative development methodology tightly controlled by a Software Change Management process in the software development & customization environment. Although not mentioned explicitly, it is assumed that Blue Rhino must have followed an extensive process to shortlist the Megastorm’s E-Work BPM with the help of an external, neutral, consultant (Litzenburg, Dave. 2002, p.8-9). The major task of an external consultant is to map the work done by the internal teams pertaining to the overall enterprise analysis to establish the right direction of systems development (or customization if an off-the-shelf product is considered) and the implementation plan in line with the rationale, management strategy and the allocated budget (Prentice Hall, 2006. Chapter 14. p.14.7; Irani, Zahir. 2002. Information & Management. Oct2002. Vol.40, Issue 1. p.11-11). The CEO himself adopted the Change Agentry role of facilitator, the CFO as the advocate and the CIO as the IS Change agent (Markus, Lynne. M and Benjamin, Robert I. 1996. MIS Quarterly, Dec96, Vol. 20, Issue 4. p385 – 385, 1/2p). The case study indicates evidences of process gaps in inter-department co-ordination (evidence of a gap in HR and IT co-ordination), Inventory Management (extra inventory dumped in outlets due to delay in data processing), data security issues (IT having privileges to modify data) and Purchasing & Customer Servicing. The first challenge in the overall organizational change is an effective “Automation System”. An integrated framework of central Database system integrated with a horizontal distribution (across departments) of the frontline forms, queries, reports, procedures, etc. can ensure an effective automation system. Such a system (Megastorm’s E-Work BPM) was selected and implemented by Blue Rhino but the system was not able to achieve a maturity before the Sarbanes-Oxley legislation was implied. Benefits that Blue Rhino derived from the new Business Information System As a result of reconciliation and re-engineering of the processes and introduction of the Intranet, the organization experienced a paradigm shift in the overall cultural framework and the way business was done. The users are now more empowered by technology thus having enormous opportunity to contribute to Total Quality Management & Six Sigma by practicing continuous improvement and assuming ownership in the quality controls (Prentice Hall, 2006. Chapter 14. p.14.18-14.19). Inter & intra department collaboration is more effective and integrated & accurate BIS & MIS reporting have become a part of the culture. This happened due to the Intranet that integrated all the departments seamlessly and connecting their systems to customers & suppliers via an Extranet achieved by enabling the servers over Internet. All transactions are electronic such that the turn around times must have improved drastically. Moreover, all transactions can be tracked by quality controllers in the back-end. With the incorporation of Intranet and Extranet, the organization is now able to define a Service Catalogue and meet an end-to-end Service Level Agreement right from request logged to the final deliverables. Moreover the communication & E-Mail costs must have reduced drastically because all customers, suppliers, and employees in branches are able to connect seamlessly to the corporate office over the Internet. An Intranet integrates all departments of an organization to form a common, collaborative framework in which all departments collectively operate as single large team. Processes become more integrated with proper feedbacks to enhance the inputs. In a manual mode, processes follow a discrete, table-to-table approach where scope of collaboration, strings of interactions and opportunities of feedbacks are very limited. Following is the representation of a system comprising of the relationship among Intranet, Extranet and the Internet (Figure 2): OLTP – On-Line Transaction Processing DSS – Decision Support System MIS – Management Information System OLAP – On-Line Analytical Processing Figure 2 The Intranet comprises of a number of intra-department workflows that very closely collaborate with each other to ensure workflows among departments. The workflows are accessible via user-friendly screens over a browser interface within a closed user group. These workflows in turn interact with a separate workflow engine deployed for interfacing with Customers and Suppliers via an Open User Group (Extranet). The Extranet is accessed by the Customers & Suppliers over the Internet. The combination of Intranet and Extranet makes every information and report on-line with restricted privileges based on need to know basis. Example, HR would publish the organization wide policies, employee information & reports, etc. Finance would publish ledger details, costing, budgets & finance reports, etc. Sales & Marketing may publish competitor information, prices, promotions, contracts, etc. Manufacturing may publish quality measurements, machine outputs, design details, order processing details, etc. IT may publish system reports, service level achievements, IT policies, IT processes, etc. Management may publish executive message boards (e.g., from the CEOs Table) instructions, guidelines, employee communications, growth plans, diversification plans, etc. (Prentice Hall, 2006. Chapter 4. p.4.34-4.39) Extracts of implementation of this framework in the Blue Rhino case is evident from the deployment of Inventory Management (positioned at the O&M and C&S workflow engines), HR to IT Workflow (positioned at IT and HR workflow engines) and the Purchasing & Customer Service Systems (positioned at the C&S workflow integrated back to back to S&M and O&M workflow engines). Intranet & Extranet must have served as a catalyst to Organization change for Blue Rhino. Organizational Change achieved as a result of the revamp Change Management and Management Commitment are the key to success of Blue Rhino BIS. A case study on Change Management Approach to evaluating ICT investment initiatives justifies this thought process (Williams, Janet and Michael, Williams D 2007. Journal of Enterprise Information Management. Vol20, Issue 1. p32-50). This paper justifies the practical implications of Change Management framework, Change communication, Change Championing, Change skills and Change Agentry that Blue Rhino followed due-diligently (analyzed earlier). One very important aspect presented in this paper is the need for accurate measurement of investment pay-off (i.e., return of investment). The BIS implementation does show tangible ROIs. However, a majority of the ROIs are intangible that needs very objective methodology of measurements. An excellent methodology for intangible measurements is the “Balance Score Card” (Kaplan, Robert and Norton, David R. 2005. Harward Business Review. Vol. 83, Issue 7/8. p172-180). The method involves performance measurement criteria to be defined and measurements conducted. Examples are: Customer Satisfaction Index, Employee Satisfaction Index, Reduction of Transactions Times, Employee Productivity, Stake Holder Satisfaction index, etc. These are measurement charts that are populated against responses to structured questionnaire and trend analysis on various reports. Blue Rhino has major opportunity to prepare and publish their Balance Score Cards against the various performance metrics. Another organizational change that Blue Rhino must have experienced is the way IT is looked at by the Management and the change in mode of IT investments. Investments in IT would be considered as Business Investments to support Profit Centers and not only Technology Investments to enhance a Cost Center. It has already been demonstrated in this paper how IT proved to be a major catalyst to the overall Organizational Change. The goals pertaining to IT investments are now pertaining to short term and long term business survival that requires a number of in-house experiments in IT to evaluate the success factors of the planned business strategies. The funding is managed under the CTO whereby the factors under consideration are obsolescence of current systems, Capacity upgrades, future process enhancements and experimentation on new business models (Ross, Jeanne and Beath, Cynthia. 2002. MIT Sloan Management Review. Winter2002, Vol.43, Issue 2, p51-59). Blue Rhino now has the power of virtual computing whereby a number of customer & product categories and business forecasts & hypothecations can be derived using the reports, trend analysis and balance score card generated by the BIS. Customers can now be categorized at different levels that can be treated differently. Example, under this classification a customer can be classified as silver, gold or platinum. Customer at each level can be treated differently. An interview record with Michael Dell (CEO of DELL Computers) gives a deep insight into how Michael Dell was able to surpass all competitive retail service channels by achieving highest customer satisfaction by using the power of transformational outsourcing and virtual computing very objectively (Magretta, Joan. 1998. Harvard Business Review. Mar/Apr98. Vol76, Issue 2, p72-84.). After the effective BIS implementation, the next step that Blue Rhino CEO may like to consider is Transformation Outsourcing. The implementation anyway was done with the help of an expert company – Megastorm. After a number of processes contributing so effectively to the business, it is important for Blue Rhino that the systems are managed by experts. Blue Rhino has more end users than experts. Hence, outsourcing to a specialist company to maintain the current levels of efficiency and the pace of business process enhancements will prove to be beneficial. The major advantages that Blue Rhino can achieve from transformation outsourcing are speed of operations, expertise, transaction volume based costs (i.e., reduced capital and manpower expenses), standardization, and above all achieving a strong business support partner with long term commitment that will mitigate the risks from disgruntled employees and attrition of key staff (Linder, Jane C. 2004. MIT Sloan Management Review. Winter2004. Vol.45, Issue 2, p52-58.). Benefits to Blue Rhino from the Sarbanes-Oxley Legislation A change is definitely successful if made inevitable. This is what Sarbanes-Oxley did to Blue Rhino. Fearing penalties against non-compliance the management commitment and involvement was in-depth that ensured proper employee involvement as well. A budget of $400000 and 25% time of the IT staff was set aside. This resulted in two fold achievements for Blue Rhino: (a) Compliance to Sarbanes-Oxley Legislation (b) Successful Implementation of an Integrated Business Information System using Intranet and Extranet After the implementation is complete Blue Rhino is well placed to harness the power of BIS to achieve better turn-around-times, employee productivity, customer satisfaction and growth in revenues. As a matter of fact, the CFO expects a rise in 25% of revenues every year as a result of lower costs of operations & people. Sarbanes-Oxley legislation did add layers of bureaucracy in BR (against their usual culture) but resulted in an effective Business Information system. Conclusion Enterprise wide automation of an organization is needed when a number of controls in the business seem to be loosing their effectiveness. Hence, implementation of Business Information System with the help of multiple IT decisions is critical. It is important that the representatives of the Management, Stake Holders and Users are involved to a good extent such that all approvals and buy-ins happen seamlessly. Blue Rhino felt the need for integrated BIS and took steps to implement the same by purchasing appropriate systems. However, Management and People participation improved drastically when the Sarbanes-Oxley Legislation was implied. The activities resulted in a major Organizational Change by achieving Automation, Rationalization of Procedures, Business Process Re-Engineering and Paradigm Shift. The organization benefited from the Intranet-Extranet framework ensuring a collaborative framework of all internal departments, Management, Suppliers and Customers. The organization can derive return of investment by practicing the Balance Score Cards and ensure sustained growth in business by Transformation Outsourcing. Reference List: Irani, Zahir. (2002). Information Systems Evaluation – Navigating through the problem domain. Information & Management. Oct2002. Vol.40, Issue 1. p.11-11 Kaplan, Robert and Norton, David R. (2005). The Balance Scorecard – Measures that Drive Performance. Harward Business Review. Vol. 83, Issue 7/8. p172-180 Kotter, John P. (1995). Leading Change: Why Transformation Efforts Fail. Harward Business Review.. Mar/Apr95, Vol. 73, Issue 2, p.59 – 67) Linder, Jane C. (2004). Transformational Outsourcing. MIT Sloan Management Review. Winter2004. Vol.45, Issue 2, p52-58.) Litzenburg, Dave. (2007). Software Selection. 4, 8-9. Technology Group International, M2M United. Magretta, Joan. (1998). The Power of Virtual Integration – An interview with Dell Computer’s Michael Dell. Harvard Business Review. Mar/Apr98. Vol76, Issue 2, p72-84. Malone, Thomas W. (1997), Is Empowerment Just a Fad? Control, Decision Making and IT. Sloan Management Review, Winter97, Vol.38, Issue 2, p.125-125, 1/2p Markus, Lynne M and Benjamin, Robert I. (1996). Change Agentry – The Next IS Frontier. MIS Quarterly, Dec96, Vol. 20, Issue 4. p385 – 385, 1/2p Orlikowski, Wanda and Hofman, J Debra. (1997), An Improvisional Model for Change Management – The Case of GroupWare technologies. Sloan Management Review, Winter97, Vol.38, Issue 2, p.125-125, 1/2p) Purdue University On-Line Writing Lab (OWL) (2008), APA Formatting and Style Guide, Retrieved September 19, 2008, from http://owl.english.purdue.edu/owl/resource/560/01/. Prentice Hall, (2006). Redesigning the Organization with Information Systems. Chapter 14. p.14.5, 14.7, 14.9-14.10, 14.18 – 14.19. Prentice Hall, (2006). The Digital Firm – Electronic Business and Electronic Commerce. Chapter 4. p.4.34-4.39 Relevant Business Systems Inc. (2005). The ERP Selection process survival guide. 3-6 Ross, Jeanne and Beath, Cynthia M. (2002). New Approaches to IT Investment. MIT Sloan Management Review. Winter2002, Vol.43, Issue 2, p51-59 Sarbanes-Oxley Act of 2002. (2002). One Hundred Seventh Congress of the United States of America. P.45, Second Session. Retrieved on September 19, 2008. Provided by www.findlaw.com. Upadhyay, Ankur. (2005), ERP Research, 4-11 Williams, Michael .D and Williams, Janet. (2007). A Change Management Approach to evaluating ICT Investment Initiatives. Journal of Enterprise Information Management. Vol20, Issue 1. p32-50) In addition to the cited references, I would like to extend my special thanks to all those who extended to me knowledge and information that helped me to put together this paper. On their request, their names have not been published herewith. End of Document Read More