The Top Management at MDCM - Assignment Example

MDCM, Inc. (B) 12 May Introduction The top management at MDCM, Inc. is in a mad scramble to find solutions to its bad financial results. Among several options considered were aligning its corporate strategy with its core competencies through the creation of a strategic profile which will determine what is the best type of market approach will work best to halt its slide in terms of performance. It is a dilemma that required a complete review and possibly an overhaul of its existing computer systems because it was found a rapid expansion in the prior years had resulted to an amalgam of firms consisting of subsidiaries in various countries. It was found out most of these systems do not communicate well with each other because they are legacy systems and had different protocols to begin with. The key to reversing its alarmingly poor financial performance is to have modern business information systems that will allow key people access to information at the right time when they need it the most to create advantages ((Thompson & Strickland 204). A number of options are presently being considered by top management such as earlier attempts to re-align its corporate strategy by a pre-planning activity to produce a good profile of the firm (Sherman, Rowley & Armandi 163) that will in turn be used to produce analysis. A key finding by the top management through the newly-formed interdisciplinary IT Portfolio Management (ITPM) executive committee was to identify and then prioritize the important IT initiatives that need to be undertaken in view of its available resources, the time involved and the degree of importance of an IT project to the firm. Obviously, it cannot hope to undertake everything at once and so a system of priority has to be formulated to guide its decisions on which projects to fund. In other words, the adoption of an appropriate IT strategy has to be based on a projects relevance and urgency to separate them for what are merely important. Discussion This paper examines the various ways by which the ITPM executive team had gone about its task of selecting the best IT projects to be pursued based on a set of criteria it had set for itself with regards to evaluating competing projects that need funding from the limited but available resources at MDCM, Inc. It simply means some projects are urgent, some important and some necessary with varying degrees of chances of success during implementation. Also, not all the IT projects have the same time frames, some are quick to do and other projects may take a bit longer due to their complexity. The fast-paced growth of MDCM, Inc. during its early years of existence had been on using an acquisition strategy of firms with similar competencies in contract manufacturing. It had however, resulted into an aggregation of firms with vastly different computer systems and it is causing major problems with the company in terms of communicating properly among its subsidiaries and the head office and between the subsidiaries themselves. It was this lack of a good communications system that is thought to be at the heart of its troubles resulting into an erosion of profits because of a lack of coordination (Jeffery & Norton 3). The company had increased sales but profit margins are becoming slimmer resulting into some $33 million in losses for the current quarter. The main problems facing the firm are what responses to industry changes should it pursue and how to do it. It was already initially decided that a good IT strategy executed properly can turn it around and this was what ITPM had been specifically tasked to do. An IT audit had already given Shawn Atkins a good idea on how things are at MDCM, Inc. and the ITPM executive committee had identified twelve areas in which IT would serve a very good purpose of achieving the companys strategic aims. The overall objective would be bring the IT capability of MDCM, Inc. at par with global sets of standards within the next thirty-six months. Each project will be discussed briefly. The ITPM had come up with an objective way of measuring how important a project is and what are its chances of success during implementation if ever it is chosen. This way, an objective set of criteria will pave the way for a critical evaluation of each project and the set of criteria can be divided and categorized into two main groups: each projects objective value to the business as part of its overall strategic plans and likelihood of success. Points will then be assigned to each project to serve as the basis for final selection for its implementation. In a table presented later in this paper, each project is shown in terms of total points earned so that a good comparison can be made among these competing IT projects. Theoretically, maximum of 200 points is possible for each project and a cut-off of 75% (150 points) is designated. Unifying Technical Standards (Project 1) – this had been the overall and primary goal of why this IT initiatives were being studied by the executive committee in the first place. It is a compelling reason to have a single set of standards so business units can communicate with each other quickly but this applies to new projects only but this is the first crucial step toward attaining compatibility across all existing systems (95 pts + 78 pts = 173 pts total). Consolidate Data Centers and Networks (Project 2) – this is an attractive project from a financial point of view because some $1.1 million in savings is projected to be realized once it is implemented. Its downside is that it has a high risk probability of disrupting the important aspects of the business if something goes horribly wrong and the ITPM also considered it as a complex project that will preoccupy all networking staff for six months (85 + 72 = 157). Standardized Server Hardware and Platforms (Project 3) – the potential savings are a bit big estimated to be $1.5 million annually. Another plus factor is the standardized hardware will serve as the jump-off point for future upgrades of existing systems. This is one area of the IT initiatives that has to be explained sufficiently to board of directors for them to appreciate its importance to the company as it is not considered a priority (80 + 88 = 168). Implement ERP (Project 4) – this has the huge potential of finally putting all separate functional departments of MDCM, Inc. into one combined computer system. It is however an expensive undertaking and takes a long time to properly implement. Further, it is a bit risky in terms of technical complexity, the reason why it had been delayed twice already but it enables suppliers to connect with both warehousing and production facilities. Furthermore it will also finally connect consumers with sales and marketing (95 + 56 = 151). Employee Intranet Portal (Project 5) – this initiative has the potential to improve its human resource functions because it will allow employees to access their own records and at the same time cut down on employee headcount at the HR department. The implication is that it will vastly improve HR-related administrative tasks and increase efficiency (75 + 85 =160). Manage the Supply Chain (Project 6) – this is the ultimate in any logistics initiative as it will connect suppliers with the production department, thereby causing a tighter or closer type of coordination that can prevent stock-outs or any disruptions to the production process. It can vastly improve communications with far-flung suppliers and immediately raise a few important concerns such as quality of raw materials, scheduling of deliveries, price quotations and other matters important to logistical-related problems (90 + 90 = 100). Streamline Design Systems (Project 7) – the choice facing MDCM, Inc. in this project is whether to utilize its own custom-built system in its UK subsidiary or to leverage the one it is already using in its French subsidiary by buying the Cadam and Catia software programs. If the second option is chosen, investment costs will be much lower as all the previous payments can be considered as advances already towards the purchase price of the software products (assuming it was a lease-to-buy arrangement). The decision therefore is not only in financial terms but also as to which program is technically superior over the other software program. CAD design systems are very crucial to the firms success (95 + 85 = 180). Improve Collaboration Systems (Project 8) – this can be considered as the centerpiece project that will finally allow employees in all subsidiaries to communicate with each other in a timely manner. However, this is good for knowledge management applications but can also potentially be disruptive to the work of employees because it provides e-mail capability and discussion boards. The firm must put in place various monitoring systems to make sure that employees do not use this system for personal purposes but it has the potential to improve all on-going projects because it has a calendar scheduling capability (60 + 92 = 152). Begin and Create CRM (Project 9) – this project has a high-impact influence on the firm as it can now improve its customer service through the use of business analytics. It is the scientific way to create marketing programs, for example, that will generate customer loyalty and in turn higher sales (with less returns also and better feedback) for its marketing and sales activities. The implication is regain market share especially from big clients who in the past had provided the company with healthy profit margins (90 + 95 = 185). Customer Self-service Portal (Project 10) – perhaps this project is the most important for the company as far as customer service is concerned. This will vastly improve its ability to serve its various clients because people will not longer wait for sales representative to call on them for the customers to place their orders. Maintaining a Web site will definitely have very positive impact on future sales where customers can contact immediately whoever is the sales representative they want to get in touch with regarding their concerns (90 + 95 = 185). Implement E-procurement System (Project 11) – this is a step in the right direction as the firm is planning to cut down its number of suppliers from the thousands to a few hundred. This will mesh in nicely with its ERP system once up and running because purchasing can be done now in bulk and volume orders of supplies can lead to a significant bargaining leverage when it comes to pricing concessions from suppliers (85 + 60 = 145). Outsource Non-strategic IT Services (Project 12) – this project can be considered as belonging to those which can be classified as important (in the long term) but not very urgent. In other words, this can be done when the other projects have been implemented already so it will not interfere with other projects which are more urgent. However, this project should still be pursued when circumstances allow although not right away. Although this project acquired a relatively low score compared to the other IT projects, it can serve as a good psychological boost to show employees the benefits of technological changes (55 + 73 = 128). The two tables below capture the values (points system) assigned per project. Summary of Score Cards (Figure 1): PERCEIVED VALUE to the BUSINESS Project Number (based on the discussion) 1 2 3 4 5 6 7 8 9 10 11 12 Financial Returns (estimated potential) 30 25 30 30 25 30 30 20 30 25 30 15 Consumer or Customer Focus 20 20 15 20 10 15 15 10 20 20 10 10 Supply Chain Business Benefits 15 13 10 15 10 15 15 10 15 15 15 10 Technology Efficiency 15 15 10 15 10 15 15 10 15 10 15 10 Knowledge Advantages 8 6 8 10 10 10 10 5 5 10 10 5 Work and Life Balance 7 6 7 5 10 5 10 5 5 10 5 5 Sub-total Score (tentative only) 95 85 80 95 75 90 95 60 90 90 85 55 Summary of Score Cards (Figure 2): LIKELIHOOD OF SUCCESS Project Number 1 2 3 4 5 6 7 8 9 10 11 12 Technical Standards 10 10 10 5 10 10 10 10 10 10 5 5 Skills Training Required 10 10 10 5 10 10 10 10 10 10 5 5 Scope & Complexity 10 15 20 10 20 20 20 20 20 25 5 20 Business Alignment 22 20 20 15 15 20 20 20 22 20 17 20 Technical Risks Involved 17 11 18 15 20 20 15 20 21 20 18 15 Management Capability 9 6 10 6 10 10 10 12 12 10 10 8 Sub-total Score (tentative) 78 72 88 56 85 90 85 92 95 95 60 73 TOTAL FINAL SCORES 173 157 168 151 160 180 180 152 185 185 145 128 Recommendations Based on the scoring systems, it is now clear which projects can be recommended for implementation to the Board of Directors and to the rest of the senior executive team. It shows the selection process needs to consider the potential value of a project to the business in terms of how it fits into the overall strategies of the firm but also needs to consider the risks in it. For instance, we can see in Figure 1 that three projects failed when considered alone from the standpoint of potential value to the business (without taking into account the likelihood of its success when implemented). These three are employee intranet portal (75 pts), improving the collaborative systems (60 pts) and outsourcing non-strategic IT services (55 pts). Project nos. 5, 8 and 12 would have low chances of being adopted for implementation if considered only in isolation from the other factors. But this is not the complete picture. From Figure 2, five projects have less chances of succeeding and these are unifying technical standards (78 pts), consolidating data centers and networks (72 pts), implementing the ERP system (56 pts), the E-procurement system (60 pts) and finally, the outsourcing of non-strategic IT services (73 pts). Project nos. 1, 2, 4, 11 and 12 therefore have likewise very low chances of being selected for funding when considered only singly. However, one has to take a more comprehensive or holistic approach with regard to these projects and to see them as either furthering or hindering a firm’s strategic plans. They must fit in with strategy. When the sub-total of both Figures 1 & 2 are combined, one gets a different picture than was earlier projected with the initial observations. Out of the twelve IT projects being considered by the ITPM executive committee, only six of them truly qualify as priorities that deserve funding and attention from management as critical to success for the company. In other words, this initial finding still need to be further reviewed before finally deciding these six projects are really the drivers for competitive advantages that will translate to success. Conclusion IT has the potential to save the firm from its predicament and arrest the slide in its financial performance if implemented properly. The company would do well to implement only six (at the most) projects out of the twelve projects under consideration by the ITPM committee because it cannot hope to fund all these projects at once. Secondly, it would not be good to undertake several projects simultaneously as it will not allow the firm’s management to really focus on the important things. Another consideration would be the time constraints and the number of personnel that would be available to help these projects along. Obviously, a firm does not operate in a vacuum nor does it operate without certain constraints in its resources. Any business organization must learn to make compromises when it is absolutely necessary to choose between competing investment alternatives and must in a very systematic way choose which ones get priority in terms of funding and attention. This is the case here facing MDCM, Inc. top management in which so many things need to be done at once but unfortunately, it cannot hope to realistically do all these projects at the same time. Realistically speaking, only 3 to 4 projects should better be undertaken by the firm. Three or four projects are aligned with its new corporate strategy of regaining its market share and improving financial performance through better profit margins. These four projects are the management of the supply chain (Project 6), streamline design systems (Project 7), begin and create CRM (Project 9) and lastly, customer self-service portal (Project 10). IT projects can help MDCM, Inc. attain its business corporate objectives because it is a very potent tool in todays highly-competitive environment. It is a great enabler of business strategy to attain long-lasting competitive advantages. However, a company using this points system must look at the numbers as an aid in decision and not as substitute for judgment. For example, implementing ERP (Project 4) might get sidelined although it is a vital component to the overall IT upgrading plans of the firm because it will let MDCM transform itself. Works Cited Jeffery, Mark and Joseph F. Norton. MDCM, Inc. (B): Strategic IT Portfolio Management. Kellogg School of Management (KEL172). Evanston, IL: Northwestern University, 2006. 1-8. Print. Sherman, H., Rowley, D. J. & Armandi, B. R. “Developing a Strategic Profile: The Pre-planning Phase of Strategic Management,” Business Strategy Series, 8 (3), (2007). pp. 162-171. [on-line] Available at: ABI/INFORM Global. Thompson, Arthur A. and Alonzo J. Strickland. Strategic Management Concepts and Cases. Homewood, IL: Irwin, 1995. Print. Read More