Case Game: The Case Of Managing IT

CASE GAME
The Case Of Managing IT

How can Total leverage IT without becoming a victim of its rigidity? V.S. Krishnan of RPG Enterprises, A. Bagdadi of Godrej-GE Appliances, and A. Dasgupta of PricewaterhouseCoopers debate how.

By R. Chandrasekhar

Abhinav Kumar couldn't help but marvel at the power of information technology (IT). Here he was, sitting in the Jalandhar branch office of Total Industries, and with a few clicks of the mouse he had all the details of his diversified company's operations for that day: how many CTVs and refrigerators, switchgears, batteries, and soaps had moved out of the factories in the last two shifts; what was the inventory levels in each of the four businesses; and-among other things-how much credit had been offered to each of the major distributors. ''Good investment,'' the 30-something CEO of the family-managed company said to himself, logging off the computer.

Total had spent nearly Rs 30 crore on an enterprise resource planning (ERP) package a year ago, and over the past months it had been put in place a wide area network (WAN) with access to managers across all its offices. In fact, two days thence, a review meet was planned back in the headquarters in Mumbai.

The Jalandhar experience still fresh in his memory, Kumar was expecting his senior executives to rave about the IT initiative. But five minutes into the meeting was all it took him to discover he was gravely mistaken. The first to complain, surprisingly, was Vinay Chatterjee-the man Kumar had personally recruited to head Total's IT initiative. ''I am sorry to say this, Abhinav, but our managers are not using it to the extent they should.''

''How's that?'' asked Kumar. There was a murmur among the other executives around the table.

''Let me give you an example,'' offered Chatterjee. ''Two months ago, the Delhi office received orders from a PSU for 10,000 CTVs worth Rs 20 crore. The customer wanted full delivery within a week at its township. The marketing manager checked with the depots in northern zone and found that there were only 2,000 sets in stock. Production said that its capacity was booked for a month and would be unable to meet an exigency.''

''But did we have only 2,000 sets lying around? What about the dealers?'' Kumar wanted to know.

''I am coming to that. When I came to know about the order a fortnight after it had been received, I asked the marketing manager why he had not checked with depots in other parts of the country or our dealers, all of whom are linked to the Total network.''

Kumar looked at Srikant Suresh, the Head of the consumer durables division. ''It was relatively a small order,'' Suresh tried to defend his team.

''Give me a break, Suresh," Kumar said impatiently. "Rs 20 crore is not a small amount. ''

''The problem,'' Chatterjee continued, encouraged by Kumar's remark, "is that our business decisions are not driven by IT. Our business processes are not integrated with it."

''Probably for good reason," said Manoj Kohli, Head of switchgears division, icily. "Integration will generate its own set of problems. Order processing is central to the ERP system, which is activated only against an order-say a sales order from the dealer. Without an order, the system just does not start functioning. That is a limitation."

"The consumer durables business is particularly vulnerable to this imperfection," concurred Suresh. "The business is such that we do not always produce on demand. We also need to produce for stock. But the system does not have the necessary degree of flexibility in the trigger mechanism. It has often created problems for us in the division."

Ratika Sahai, President of Total's batteries division, intervened at this stage to say that the reason why ERP did not have flexibility was its strong internal focus. "The core of ERP is essentially internal," she said. "It concentrates on cost-reduction, efficiency, and capacity utilisation, in isolation from the needs of the external customer." Kohli added that ever since ERP was put in place at Total, the focus was moving towards reducing the Total Delivered Cost (TDC) and away from customer satisfaction.

''As someone with a clear mandate to make Total an it-driven organisation, my problem is more fundamental,'' countered Chatterjee. ''Total is a hash of cultures. Only the newcomers and a few middle-level executives are tech-savvy. Although the top management is committed to IT per se, the faith has not translated into an internal movement. It has not become an ethos. It has made little difference to employee attitudes.''

''Not entirely true, Vinay,'' the head of HRD, Vinod Rao, spoke up. ''We have carried out several drills at various levels, and you have been part of those drills too. But given the sheer size of the organisation and the fact that people are hostage to their old mindsets, the pace of change has not been in tune with the speed with which Vinay has been spearheading the technology drive.''

''Well, then get your team to move at his pace,'' snapped Kumar.

''I have a suggestion,'' said Rao. ''We should identify success stories like design engineering, where using the Demapro software we have dramatically cut down the turnaround time. Such examples will help drive home the benefits of enterprise-wide it.''

''Frankly,'' remarked Sahai, ''our efforts have largely been confined to putting the hardware in place and in speeding up communications. We have not addressed the soft issues of technological change. I know of several employees who just can't bring themselves to use the pc for simple e-mail messaging. They even find it difficult to use the 'help' option. A senior general manager at my own division still insists that the units send reports to him in hard copy form, when he can very well access the intranet.''

''I agree,'' said Chatterjee. ''Many of our managers have not appreciated how this integrated environment could be used efficiently. For instance, the sales teams at many of our profit centres do not know about the debtors collection module that could send on-line reminders to dealers defaulting on payments. I have just discovered that 10 out of the 30 profit centres at Total do not use this facility, while four of them do not even know the facility exists.''

''The problem is compounded,'' noted Guneen Roy, president of the soaps division, ''by the fact that some units are on enterprise resource management (ERM) while the others continue with the legacy systems. Some divisions have integrated functions, while the others, like soaps, don't. Data is being entered into the system manually and balances are adjusted manually. The very imperfections that made us opt for ERM are now part of the ERP itself.''

''Let me now deal with a core area of business systems where the top management assembled here is equally at fault,'' Chatterjee continued with his typical no-nonsense attitude that Kumar had begun to like in him. ''The moment all the business systems are computerised and IT becomes interactive, all internal business processes must become consistent. Are you ready for this? I don't think so.''

''Can you explain?'' Kumar asked Chatterjee.

Rao squirmed in his seat.

''When I was setting up the systems,'' Vinay explained, ''it had been agreed that the compensation system would be standardised for obvious reasons. But over the last six months, Rao has recruited-together with business heads-as many as 35 senior managers whose salary structure has overshot the upper limit.''

Rao stepped in to explain. ''My point was that we cannot be tied down by a system. We must be open-minded, or we won't be able to attract and retain talent.''

''Sure, there can be exceptions,'' countered Chatterjee. But the point is that we must create a culture of it-based business processes and IT-driven decision making. And that means adherence to well-delineated and accepted practices. That means consistency.''

''No, Vinay,'' Kumar said. ''We must be flexible. True, when you put a system in place, you need to work within a structure, planned and scheduled. But you cannot allow the system to override business needs. You must allow for deviations.''

''That was just an illustration,'' defended Chatterjee. ''The absence of a systems ethos is making my task difficult. And in integrating the old with the new, the very integrity of the information is getting corrupted.''

"That's a harsh comment to make," cried Suresh.

''Harsh, but not untrue," replied Chatterjee. "The information being generated by the system is neither complete nor accurate. There have been instances, I believe, where departmental heads tell the systems department-after the reports have been generated-that they forgot to add some data for the last day of the month,'' said Chatterjee. ''There is a general loss of faith in the system, and managers are blaming it for IT.''

''All these are issues we can resolve easily. What I want to know,'' Kumar declared, ''is how can we exploit the benefits of it without becoming a hostage to its rigidity. Because in the final analysis, IT has to be a tool that strengthens our strategy. We should not lose focus of that.''