Canadian Shield - Case Study Example

Canadian Shield 1. We are able to put Canadian Shield in one of the four appropriate governance quadrants, based on two of its key characteristics. It is obvious that Canadian Shield should be put into the category of Efficient, Predictable Operators. There are two reasons for that. First of all, the company in question does not rely on differentiation as its major competitive advantage. While indeed it expanded its scope and now it provides more services and covers more areas than before, but the range of services that competitors provide is somewhat similar. Which is why the company may be willing to compete using lower prices if compared to its opponents. In addition to that, minimization of operating costs as well as effective deliverance of services can be seen as yet another competitive advantage with the help of which the company retains its market share. Therefore, minimize operating costs is one of the major priorities when it comes to strategic development of the company. In other words, the company is likely to lose its position if its services become more expensive as people can always switch to a different insurance company that charges less. The second reason for placing it in this category is that the company adopts changes at relatively low rate. One can hardly call Canadian Shield the leader of innovation in the industry. For example, they have been using a program that utilized a text-based interface for a considerable period of time while the graphical user interface has been already invented. This shows that the company is not quick in adopting innovation. Furthermore, Seamus thought that one of the options was to improve the ALPHA software which means that the company was not willing to stop using the outdated software. With this in mind, one is able to point out that the company in question is characterized by attention to controlling costs, operational efficiency and a slow rate of change. For these reasons it should be put into the quadrant of Efficient, Predictable Operators. 2. Speaking of the person who is responsible for making the key decision concerning the company’s software, one should mention that at the present moment Seamus possesses a considerable amount of power in this area. On one hand, he is the head of the IS department; so, it is his call when it comes to implementation of new IT solutions. On the other hand, he has been focused on developing the in-house ISS that he is experiencing troubles with. In other words, at the present moment he is the expert on the new software that is being developed. Additionally, he has been conducting research on commercially available software and found that there is software out there that can be compared with the system that he has been working on. This means that he was able to collect a lot of knowledge about the current situation, and he has made a reasonable decision. However, it is quite understandable that such an important decision can hardly be put on the shoulders of a single person. Therefore, the board of directors should make the call regarding the decision to move on with the custom software or switch to systems which were developed by other companies. Indeed, this is a rather important change that is likely to affect numerous people and there might be situations where its effect will not be positive. That is why the board of directors should weigh all the possibilities and choose the variant that suits the company best both in the short term and the long-term perspective. It is quite possible that Seamus’s decision can be biased: for example, he was deeply concerned about the future of his team, knowing that they can hardly find a job later. With that in mind, one should note that the decision in question might be placed in different decision areas, according to the Weil & Ross governance model. First of all, it surely deals with IT infrastructure strategies since it focuses on establishing a single IT standard across the company which is something that has been desired for a considerable period of time. Another point that should be mentioned is that the decision in question can also be seen as one that can be related to IT architecture. Indeed, the IS team was trying to develop technical choices that would help the company meet its needs. As a result, these choices will have a significant affect on company’s performance. 3. Having answered the previous question, we are able to make certain judgments about the IT governance at Canadian Shield. First of all, it is obvious that the company has made minimizing operating costs its major priority and this has had a negative impact on the pattern of its development. For example, as it has already been stated, the company in question designed a program that relied on text based interface. While it was suitable for the time when the speed of the Internet was slow, it can hardly be acceptable at the present moment. Of course, it is obvious that changing the system will take time and money, but that would put the company in line with today’s technology and capabilities. Nevertheless, the organization was reluctant to introduce such changes, probably, fearing that it would result in additional costs. As a result, it is still struggling with outdate technology. In addition to Canadian Shield’s governance, it is clear that power is not distributed evenly within the company. Thus, Seamus was the head of the IS department, but later he spearheaded the project in question. This means that there was too much responsibility on his shoulders and major decisions regarding the development of the project were made solely by him rather than a group of people. It is obvious that this must have drawn his attention away from the other tasks that he had to execute. While indeed, he might be the person who is most knowledgeable about the current events, but it is obvious that he should share this responsibility with others so that this burden would not be as heavy on a single person. As a result, now the development of the entire company depends on one person’s decisions and he is too afraid to think about different options other than continuing the project that will fail. 4. It is obvious that the concept of sunk costs can be easily applied to this particular situation. To begin with, if we recall the amount of money that was allocated for the project, we will be able to see that it is rather a big investment. It was paid over five years and now it is impossible to return this money. Moreover, one should also note that the sunk costs are even bigger if adjusted due to inflation. Therefore, the quarter of a million that was directed to this project is a sunk cost as it will never be recovered by the company. Furthermore, at this point the project does not seem to be promising. In other words, the money which was spent on it might be wasted. That is one of the biggest concerns, experienced by Seamus: he is in charge of a project that has generated a considerable amount of sunk cost. Indeed, at first everyone was enthusiastic about the new system, but one should also keep in mind that at the time there was no other alternative. Therefore, this kind of investment seemed reasonable. Of course, it is obvious that if the people had known that within five years there would be commercially available software, they would have waited and switched to it. This is one of peculiarities of sunk costs concept: everything seems to be different if people possess the right knowledge about the situation. However, one should keep in mind that throughout the project Seamus and his team made right decisions and they could not have anticipated that a better alternative will emerge. 5. See spreadsheet. 6. See scorecard. 7. System ALPHA ISS AIS Scorecard  value 35.1  39.6 40 Scorecard rank  3  2 1  NPV  $5 063 $7 290 $5 651 NPV rank  3  1  2 Extra revenue possibilities?  No No no Strategic Considerations  Good Bad excellent Control over IS retained? Yes Yes No Implementation Date Past No known Present Decision “reversible”? Yes No No Key employees vulnerable?  None None Seamus Vulnerable to outside supplier?  No No Yes Develop competitive advantage through IS? No No Yes Updates?  No Yes Yes Pressure to keep system current? Yes Yes No 8. My first recommendation to Seamus in particular and the organization in general. First of all, it is crucial for him to inform senior management about the problems that the project is experiencing. The fact that the VP of Operations congratulated him shows that Hart may not have been aware of the current state of affairs, and he is under impression that the project is likely to be a successful one. In order to soften the future blow, Seamus should tell him that there are some concerns about the new system and that it has not been a complete success. For example, implementation date of the new system is still unknown, but implementation date of AIS is not an issue: the company can by it any time it wants. By keeping the problem secret Seamus will make things worse, he should share the real statistics Secondly, I would recommend to take a close look at the IS that is available. On the one hand, he should consider the possibility of adopting it instead of the system that was developed in-house. This will require a careful assessment of the associated cost, but it may happen so that in the long run this all will appear quite beneficial. For example, NVP of AIS is significantly smaller that one of ISS and is only slightly bigger than one of ALPHA. In other words, by switching to AIS the company will not lose as much money as it will if it chooses to continue development of the project. On the other hand, a careful examination of the competing system might inspire the developers to change the code and achieve the same level of functionality. Of course, this does not mean that they can copy the code of the program and use it for their purposes without proper acknowledgement of the authors. However, it does mean that this system shows an effective way to achieve the goals which were set by the company. In other words, it might serve as evidence that the desired level of performance is possible. Finally, my last recommendation would be to make the right decision about before it since otherwise the costs that will be associated with the projects will increase. As of now, around $1,000,000 were directed to ISS. This project is already two times more expensive than AIS and it is not reasonable to increase its cost even more. One of the concerns that Seamus had was the well being of the people on his team. However, the future of a handful of specialists can hardly overweigh the future of the entire company and numerous people who work for it. That is why he should share his concerns about the current situation and try to find the best solution that all sectors would agree on. For example, adopting the commercial software will indeed terminate the project, but it might present some efficiency and solution opportunities for the specialist. Therefore, they should see it as an opportunity rather than a threat. Read More