strategic approach for information capital optimization

8/8/2019 Strategic Approach for Information Capital Optimization

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Table of Contents1 Introduction .................................................................................................................................... 4

2 Executive Summary...................................................................................................................... 4

3 Overview of Methodology............................................................................................................. 5

4 Evaluation ...................................................................................................................................... 6

4.1 Business Objective................................................................................................................ 9

4.2 Success Criteria .................................................................................................................. 11

5 Diagnosis..................................................................................................................................... 11

5.1 Collaboration Matrix ............................................................................................................ 11

5.2 Business Value of the Decisions........................................................................................ 13

5.3 Business Needs................................................................................................................... 14

5.4 Key Challenges.................................................................................................................... 16

5.5 Goals for strategic planning................................................................................................ 17

5.6 Critical Success Factors ..................................................................................................... 17

6 Strategic Planning....................................................................................................................... 18

6.1 Objective Issue Strategy Matrix ................................................................................... 18

6.2 ECRR Matrix ........................................................................................................................ 19

6.3 Knowledge Management Strategy..................................................................................... 20

6.4 New Project Identification Strategy .................................................................................... 22

6.5 Project Success Monitoring Strategy................................................................................. 24

7 Conclusion................................................................................................................................... 25


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1 Introduction

In modern economy where globalization has provided the easy access

to physical resources and capital, the competitive business landscape has changed to

efficiency, operational cost and opportunity management. The IT has been able to provide

the due support to the said competitive factors. As a result of that the success of the

organization now depends on availability of information, its accuracy and quality and theorganizations ability to process the same to take the informed decisions. In real life we

have seen sizable or large organizations with number of software applications up and

running, but there are issues like information missing (gap) or inconsistent information

coming from two different sources. That scenario absorb considerable efforts of workforce

as well as top management in retrieving the information and reconcile the same and in

effect making the top management confined to controlling mode. Whereas in efficient

enterprise, the top management must have the birds eye view over enterprise wide

information, retrievable correct in f irst attempt. This way the top management can remain in

just monitoring mode and better focus on future planning. In analysis we can say that the

organizations have three type of capital namely Finance capital, Human capital and

Information Capital. This document is based on a real scenario and presents the strategicapproach to optimize the information capital.

2 Executive Summary

This is the study of Information System of the customer, a

mid size manufacturer of multiple types of machines and equipments. The products are

made by assembling the various types of components. The co. operates in domestic as

well as in international market. In both market segments, the co. also has a few channel

partners, augmenting the cos sales force. The company has decent IT infrastructure and

all managers have a desktop or lap top. The co. has a few applications running, including

one standard package for financial accounting. The applications running at the organizationare also either purchased off the shelf packages or developed as per requisition from one

or more HODs.

The departments of the company work more or less independently and exchange the

information on need basis. The decision making is hybrid in nature and most of the

decisions are made by the department heads and a few functional and the other corporate

level decisions are made by the top management. However for decision making, the top

management considerably leverage on the advice tendered by the departments heads. The

top management had the full confidence in the individual HODs knowledge and

capabilities. Considering the co.s dependency on individuals, the co. adequately take care

of critical people. Despite that the top management feels that the growth of the co. has not

been as per their expectation.

A business consultant has indicated that the co.s Information Management System needs

to be overhauled. Earlier the co. had a plan to go for any reputed ERP package, sometime

in mid of 2010. But in the wake of global meltdown and the feedback of the business

consultant, the co. has deferred the decision for at another two years. Now the co. wants its

whole information architecture to be redefined. The co. also needs the strategic IT planning


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for next 3 year; so that the potential business benefits of ERP implementation and other IS

applications can be optimized.

3 Overview of Methodology

The methodology is designed to ensure a proper,

comprehensive, systematic and consistent approach to Information Capital Optimization.

It embraces the holistic approach to the business objective, strategy, culture, people,

process and technology issues. The methodology is meant to provide the solution to above

converging issues.

The approach has above shown steps, which are well defined, aligned, integrated and yet

flexible to be tailored as per specific need. These steps are explained below in detail.

Steps 1- To begin with the business objectives are identified. These attributes are derived

from Vision and Mission of the company. All subsequent stages need to be aligned with the

business objectives. This phase also identify the internal stake holders of the business

objectives. For external stakeholders, the internal interfaces to the external stakeholders

will play the later role.

Steps 2- To achieve the business objectives there must be a solution of the well defined

problem, within existing constraints and all the stake holders must have the consensus on

all those artifacts. To review and monitor the strategy, the success criteria are also defined.

Steps 3- The solution of the defined problem, will be redefining the information architecture.

The existing information architecture is reviewed and analyzed with respect to identified

problem areas. The gaps identified and planning for filling the gaps is done.

Steps 4- The road map is made to fill the gaps over period of time. The gaps need to be

filled in structured manner and through prioritization based on business value of the

information needed. To maximize the benefits, the technology advancements are also

considered in the planning,

Steps 5- Based on the roadmap based strategic IT planning, the key focus areas are

identified and the projects are prioritized and planned accordingly.

Steps 6- On successful execution of the project(s) progress is reviewed and monitored to

ensure that the delivered results are duly aligned with the objectives. For deviations, the

appropriate actions are taken.


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4 Evaluation

The co. has the work force of around 800 including 100 computer users. The co. has two

offices, one for sales, HR, finance, purchase and corporate activities and the second is

works office where the manufacturing is done. Both of these offices are located in the same

city, but at different locations. The modes of communication are phone, e-mail, and fax. The

company has following departments.

1. Corporate

2. Marketing

3. Finance

4. HR & Admin

5. Purchase

6. Design

7. Production

8. Quality

9. Logistics

10. Customer Service

11. IT

All of above department work more or less independently and collaborate with each other on

need basis. The co. has following applications / packages along with the respective usersand stake holders. All of these packages are working independent and the information

exchange between users and stake holders are using e-mail, telephonic or verbal.

No. Process Packages Users Stake Holders

1 Accounting Tally 9 Account All HODs

2. Payroll Pay Pack 4.6 HR Finance

Corporate

3. PerformanceManagement

System (PMS)

ASP.Net / SQLServer based

custom development

HR Production

Quality

4. Design Auto CAD 2007 Design Production

Quality


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5. Inventory MS Access Store Production,

Quality

6. Customer Complaint

Tracker

ASP / SQL Server

based custom

development

Customer

Care

Design

Table: 1

The IT department is responsible for maintenance of these applications, along with the

network and hardware. Regarding procurement of off the shelf packages or development

project, this department is just a facilitator as actual decision is taken be respective HOD.

Following is the distribution summary of the decisions often made at department level, in the

course of business.

Figure: 1

The higher number of expert judgements, in key ares like Sales, Purchase, Production,

Quality, Logistics and Customer Services are noticeable.It will not be difficult to assess the

business vale of such key areas.

Given below is the organization wide break up of informed decisions and expert judgements.


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Figure: 2

Following points are worth noting from the above graphs.

1. Instead of leveraging on data supported analytical decisions, the co. is heavily

relying on expert judgements

2. The co. is too dependent on individuals for such expert judgements

As per given below figure, its observed that a sizable amount of high business value

information have no retrievable business reference.

Figure: 3

Thus the decision making is more like expert judgment & person dependent rather than

being with data and analysis.


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For efficient and effective use of information system, it must be duly aligned with the basic

objectives of the information system. Below given is the figure depicting the state of

information system at organization level.

Figure: 4

Hence it can be safely concluded that the co. has been partially managing the information.

However from the business value perspective, the information system needs to be

restructured to optimize the benefits.

4.1 Business Objective

The co. wants to restructure the information system with the

vision and aligned with its business objectives. The co. has following business objectives.

1. Improve the operational efficiency

2. To expand the customer base

3. To reduce the risk of meeting loss in any big order

4. To reduce the order execution cycle

For above objectives, the Key performance indicators are defined separately.

In the figure 5, as given below are the business objectives are defined and aligned with

corresponding operational aspects. In turn the operational aspects are aligned to information

aspects. The first objective, to improve the operational efficiency, requires the functionalshift from independent to collaborative model.


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Expand Customer Base

Reduce the risk of loss inbig orders

Reduce Order executioncycle

Improve Operationalefficiency

Objectives Operational Aspects Information Aspects

Sales:1. Improve Market Research

2. Expand Geographically3. Strategic Sales Planning

Customer Service:1. Improve Customer Service2. Inputs for Product Improvements3. Follow up and relationship

Design:1. Improve Product Design

Sales:1. Accurate Pricing & costing

2. Competition Analysis

Design:1. Innovative Cost effective product

Production:1. Optimum Production Plan

Purchase:1. Regular monitoring of RawMaterial prices

Purchase:1. Optimize the Lead Time

Design:1. Innovative Design withReusability

Production:1. Backward Planning2. Better Outsourcing Management

Quality:1. Ensure Greater Quality

Compliance

All Department:1. Build Collaborative InformationSystem

Sales:1. Record Market Surveys2. Analyze & Record CustomerFeedbacks3. Record Emerging Trends4. Identify and Record HiddenCustomer needs5. Update the Product Brochure

Customer Service:1. Record the technical issues2. Record and analyze the ProductFeedback and Customersexpectation

All Departments:1. Collaborative Intranet to manageand control the information, so thatknowledge is not person dependent

Customer Service:1. Analyze the reported technicalissues and innovate the solutions

Sales:1. Analyze the price and costing dataperiodically2. Record the bids lost to thecustomer, price difference andcompetitions comfort in execution atthat price

Production:1. Plan and track the production2. Leverage on best practices3. Document and Analyze in ProcessQuality Checks

Purchase:1. Maintain the list of suppliers withitems and respective supply timealong with the track record of thevendor

Design:1. Document the best designpractices

Production:1. Leverage on past data for

backward planning2.Document the SLA for

Outsourcing and track the vendorperformance

Note: Being Sample Report, the complete picture is not included.

Figure: 5


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4.2 Success Criteria

The project will be considered as successful, based on following.

1. The detailed collaborative Information map, exhaustively covering all Critical & High

business value information, is delivered. Based on that information map, an intranet

application is developed and No Critical or High category issue is reported in first quarter

after deployments.

2. Key projects are identified (in the order of priority) to fill the information gaps and a road

map to execute them in next 3 years are planned.

3. If the co. is able to expand the customer base by 20% in first quarter after executing the

plan. Alternatively the co. increases its RMS by 20% in first quarter after executing the

project.

5 DiagnosisBased on the dependencies of all departments on one and another, following

is the collaboration matrix. The matrix covers the owner and other stake holders for each

specific piece of information. This matrix will become the basis of any kind of new process

definition or proposed Business Process Reengineering (BPR), within the co.

Similarly there are couple of other matrices for information archival and retrieval and

business value of decisions, which will form the basis of identifying the needs of information

archival and access control, along with the prioritize the automation projects and defining the

scope. These matrices will facilitate with the birds eye view on processes, degree of

automation, owners, stake holders and integration needs.

5.1 Collaboration Matrix

Department Information Key Findings

Owner (O) / Participant(P) / Decision (D) / Access (A)

Marketing

Marketing Budget The requirement is - Finance (O) / Marketing (D) /

Corporate (A)

Whereas current state is Non Existing Process

Customer Database The requirement is - Marketing (O), Finance (A),

Corporate (A), Customer Care (A,P)

Whereas current state is Marketing (Full Control)


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Channel Partner Database The requirement is - Marketing (O), Finance (A),

Corporate (A), Customer Care (A,P)

Whereas current state is Marketing (Full Control)

Competition Details The requirement is - Marketing (O), Corporate (A),

Design (A)


Contracts / PO The requirement is - Finance (O), Marketing (A,P),

Corporate (A)

Whereas the current state is Marketing (O),

Finance(A)

Proposals Submitted The requirement is - Marketing (O), Corporate( A)

Whereas the current state is - Marketing (O),

Corporate( P)

HR

Employee Database The requirement is - HR(O)/ Finance (A,P), All

Employees(A)

Whereas the current state is HR (O), Finance (A)

No access to anybody else.

Salary Record The Requirement is - HR(O)/ Finance (A,P),

Corporate (A), Employees (A-Restricted to

individual data)

Whereas the current state is- HR(O)/ Finance (A)

Training Calendar The requirement is HR(O) / All (A)

Whereas the current state is in practice manually.

Purchase

Approved Requisition The current requirement is Purchase (O), Finance

(A,P), Corporate (A,P)

Whereas the current state is Purchase (O)

PO / Contracts The requirement is - Purchase (A,P), Corporate(A,P), Finance (O)

Whereas the current state is Finance (O)

Invoices Payables The requirement is - Purchase (A,P), Corporate

(A,P), Finance (O), Store (P)

Whereas the current state is Finance (O), Store


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(P)

Inventory Details The requirement is - Store (O)


Note: Being sample report, the data is not exhaustive

Table: 2

5.2 Business Value of the Decisions

Decision making is the heart of any

organization. More effective are the decisions, better is health of the organization. The quality

of the decision depends on the availability of data, its analytical results and the associated

risk. Again the risk, its probability and associated impact can be derived from the past data.

Each decision has different business value for the organization; hence also decision making

is also distributed across the hierarchy of the organization.

Department Decisions Basis of

Decision

Business

Value

Priority for

Automation

Marketing

Prospecting Expert Judgment High High

Customer Segmentation Expert Judgment High High

Costing Informed Decision High Low

Parameters for Market

Research

Not Done Critical Critical

Parameters for

Competition Tracking

Not Done Critical Critical

HR

Training Needs Not Done Low Low

Remuneration Expert Judgment Critical Low

Purchase

Purchase

EOQ Expert Judgment Average Average

Lead Time Informed Decision High Average

Buffer Stock Expert Judgment Average Average

ABC Analysis Informed Decision Average Average


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Design

Quality Parameters Informed Decision High High

Product Specifications Expert Judgment High Low

Capability Development Expert Judgment Average Average

Production

Schedule Expert Judgment High Critical

Shift Planning Expert Judgment Average Average

Manpower Expert Judgment High High

Customer

Service

Request Priority Expert Judgment High Critical

Expected Resolution

Time

Expert Judgment High Critical

Task Allocation Expert Judgment Average High

Note: The data is not exhaustive

Table: 3

Above is the mapping of decisions with respective business value. A subjective evaluation of the

same has enabled us to prioritize the need for automation.

5.3 Business Needs

A holistic view of all of above, gives us the business needs of

Information System aligned with the business objectives. A further analysis of below given

Performance Importance Matrix (modified for information System), emphasizes on followingbusiness needs.

1. Marketing Department needs to capture more relevant data and analyze the same.

2. Customer service needs to improve the decision making, which must be based on actual

data.

3. Inventory and Scheduling related data need to be analyzed for optimization of Order

execution time.

4. There must be information sharing with controlled access among stake holders.


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Performance - Importance Matrix

1

2

3

4 TechCapability

5Best

Practices

Alternatives

of

procurement

Customer

Service

Forecasting

6

Standardized

BOM

Info Sharing Indentify

Dependencies,

Customer

Feedback,

Booking Data

7Info

Capturing

Competition

Monitoring

Customer

Needs

8Info. Control Market

Analysis

9

9 8 7 6 5 4 3 2 1


Figure: 6

Hence there is the need of following applications, in the order of priority.

1. A dedicated application Marketing Manager for Marketing to capture the data, related toProspects, Customers, Market and Competition. The application must be able to

generate the analytical reports aligned with the business objectives.

2. Enhancements in Customer Complaint Tracker and add analytical reports to improve

the decision making.

Excess

Appropriate

Improve

Urgent Action

Performance

Scale

Importance Scale


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3. A customized corporate intranet (Intranet) with workflow is needed for better

collaboration among stake holders. The Intranet will enable the stakeholders and

decisionmakers to view the real time data. The Top management can get the birds eye

view of the organization.

4. The existing Inventory Package which has become obsolete now. Replace the same

with some other package, having the features like computing EOQ and doing ABCAnalysis etc.

Proposed

Applications

Existing

Applications

Markeing

Manager

Customer

Complaint

Tracker -II

Inventory

Package (TBD)

Intranet

Accounting Integration Integration

Payroll Integration

Performance

Management

System (PMS) Integration

Design Integration

Inventory Replace Integration

Customer

Complaint

Tracker Integration Enhancement Integration

Table: 4

Above matrix lay down the roadmap for the future projects and their respective integration

needs.

5.4 Key Challenges

In the execution of above projects, following challenges are

anticipated.

1. Applications based on different technology groups are likely to increase the

maintenance cost and also likely to have integration challenges.

2. Intranet will be the heart of information system; hence its availability must be very

high.


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3. Existing Inventory application will be replaced by a new Inventory Package (TBD).

Data migration to new product / application will be a major challenge.

4. The integration with existing application, need extra involvement of the

stakeholders of both systems.

5. Application integration may corrupt the existing data.

5.5 Goals for strategic planning

1. After completing the proposed projects, IT maintenance cost is expected to be

reduced by more than 10 %

2. After completing the Marketing Manager Project, the sale is expected to improve

by more than 20% for the first year, with same resources

3. After completing the Marketing Manager and Intranet projects, the relative

market share (RMS) will considerably improve after 1 year. This cannot be

quantified, as no current RMS data is available.

4. Within 1 year of completing the Intranet project, the co. will be able to retain

around 80% of knowledge base.

5. To improve the average Order Execution Time for each product, by more than

15% , within 6 months of execution of Intranet Project.

5.6 Critical Success Factors

1. There is the assumption that there would not be any kind of organizational

restructuring. However if due to some imperative reasons that happens, this

document need to be revisited to realign as per changing needs.

2. The scope of all of the above projects must be carefully determined and verified,

prior to document the Request for Proposal (RFP).

3. For scope verification, requirement gathering and conducting the User Acceptance

Testing (UAT), it must be the same team throughout. The members of this team

should be from the category Indispensable, not the dispensable one. The HODs

must make available, such indispensable resources, for the purpose of the

respective projects. The reason is that these resources have the thorough

knowledge about the system.

4. For successful execution of the project, the decision making related to

requirements must be faster.

5. The strategy document needs to be periodically reviewed to make minor

adjustment, as per changing situations.


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6 Strategic Planning

To achieve the above stated goals, the co. needs a strategic

plan to execute in structured manner. In the diagnosis phase, all key aspects are identified

and analyzed. Based on analysis, issues are identified and the strategic plans are chalked

out accordingly. Given below are the various plans to deal with various aspects of Information

system.

6.1 Objective Issue Strategy Matrix

This matrix lists the interim objectives,

corresponding issues and respective strategies to overcome those issues and achieve the

objective. For the co. the Objective Issue Strategy Matrix is given below.

Objectives Issues Strategy

To improve the operational

efficiency, the departments

need to be more collaborative

Currently all departments are

functioning independently and

the information sharing isdone only on need / request

basis. Hence at operational

level, each department is not

able to view the complete

picture.

But changing the style of

functioning require greater

amount of efforts and

commitments from respective

HODs.

Change management through

selling the benefit, should be a

better strategy. Thecollaboration should become

a norm, by the time Intranet

project is completed.

The staff can be disciplined to

have at least a weekly

meeting, sharing the

information. This will help

them to see the bigger picture

and understand the

importance of informationsharing.

There must be single

ownership of Information

There are many instances,

where duplicate records of

information are being

maintained by different

department. Each of these

departments feels that the

particular piece of information

is highly relevant for its

operation; hence that

department should own the

information.

Information ownership and

sharing must be strictly as per

collaboration matrix. However

in the larger interest of the co.,

the owner of the data, must

consult the other information

users, so that comprehensive

data format is prepared. That

will ensure that the

information related

requirements of each user

group are adequately taken

care of.

For Intranet to be effective, The technology and data Regarding technology, the co.


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there must be seamless

integration among the

applications

format may become the

challenge seamless

integration

should adhere to one

particular group of

technologies. That will also

reduce licensing and

maintenance cost. Data

format can be determined as

indicated above. However thedata exchange format should

be compatible to Existing

Infrastructure and can be

exchanged over internet as

well as with mobile based

applications, which the co.

may need in future.


Table: 5

6.2 ECRR Matrix

A further analysis of Performance Importance Matrix, along with that of

Objective-Issue and Strategy Matrix, following ECRR Matrix is deduced.

Eliminate People dependent expert judgments

Myths, Perceptions, Arbitrariness and

independent functioning

Raise

Data supported analysis based informeddecisions

Information access control & management

Forecasting

Customer Service

Reduce

The Order Execution Time

Dependence on individuals

Create

People independent organization wideknowledgebase

Effective Market and Competitionmonitoring and tracking mechanism


Table: 6

Above matrix depicts the operational aspects, which need to be eliminated, created,

reduced or raised.


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6.3 Knowledge Management Strategy

In modern information age, knowledge management is the key business imperative. Following

are the reason for having effective and efficient knowledge management.

Sharing the knowledge in structured and controlled manner, to improve efficiency &

productivity

Avoid to reinventing the wheel for the problems / issues, repeated in nature

Enable the organization in more people independent manner

Presenting the broader perspective to stakeholders


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Project Prioritization Matrix

Criteria Scoring Project 1 Project 2 Project 3 Project 4

Competitive Advantage

Rating

Weighting

Score

Customer Satisfaction

Rating

Weighting

Score

Estimated Project Cost

Rating

Weighting

Score

Potential revenue

Rating

Weighting

Score

Ease of Implementation

Rating

Weighting

Score

Total Score

Table: 7

Step 5: Allocate a weighting number to each criterion on a scale of 1 to 5, with 1 being leastimportant and 5 being most important to the operation of the business.

Step 6: On a similar scale of 1 to 5, rate each project on its impact on each criterion identified inStep 5, with 1 being the least positive impact and 5 being the most positive impact on thatparticular criterion.


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Step 7: Multiply each rating from Step 6 by the weighting number allocated to each criterion inStep 5 to get the score for each project for each criterion.

Step 8: The matrix is complete when all the weighted scores from Step 7 are added up for eachproject. The matrix clearly shows which projects have the highest scores, and thus which onesshould be the top priority projects.

The total score will help in identifying and selecting the projects to be executed on priority basis.

6.5 Project Success Monitoring Strategy

Just like information & skill, the project also has its business value. Hence it is essential that

the project success is appropriately measured and monitored by the top management. Any

kind of subjective feedback from individual stake holder or the group will give only restricted

view of project success.

We suggest following strategic approach to monitor the projects success. This will also help

the project owner in the co. to keep the hawks eye on the projects to ensure that all theindicated parameters are appropriately taken care of at the execution stage.

Project Success Measurement Matrix

Parameter Wt. Rating Score

Aligned with Business Objectives

Meets the Users Needs

Able to provide Decision Support Data

Cost Performance Indicator

( With respect to budgeted cost)

Schedule Performance Indicator

(With respect to original schedule)

ROI Performance Indicator

( With respect to originally indicated

ROI)

Quality Performance Indicator

(With respect to original schedule)

Total Score

Table: 8


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The top management of the co. is advised to seek quarterly report based on above

parameters on all executed new IT projects or major enhancements done within a year. This

will help them to evaluate the performance of IT projects and redefining the IT budget.

7 Conclusion

Thus we can conclude that for the success of the enterprise, it must treat

the information as capital and manage that accordingly. It must be considered as asset,

hence all information management related technology projects must be evaluated by the top

management very carefully ensuring that they are aligned with the business objectives and

prioritized as per the business value of the information to be managed. If that is done

successfully, the top management of the enterprise can be more focused on future planning

by getting into monitoring mode rather then being stuck in just controlling mode at the

expense of efficiency and opportunity slippages.

About the author:

Anurag Johari

He has been leading the Enterprise Applications and Consulting practice. He has 15 year

experience in IT implementation, Strategic Planning, Project Management, Account

Management, Business Analysis and Consulting.

He has managed the ERP implementation and Custom Development projects for variousbusiness verticals like Media, BFSI, Real estate, Bio science, Manufacturing, Commodity

Trading, Supply Chain and Energy.

Prior to joining WiEn Tech, he has worked with RMSI, Fujitsu Consulting and Sify etc.

strategic approach for information capital optimization

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