THE ROLE OF INFORMATION RESOURCES AND ENTERPRISE SYSTEM IN DYSON

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This is a report submitted as a part of Dyson Cae Study in my MBA course

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THE ROLE OF INFORMATION RESOURCES AND ENTERPRISE SYSTEM IN DYSON

  1. 1. THE ROLE OF INFORMATION RESOURCES AND ENTERPRISE SYSTEM IN DYSON<br />MODULE NAME:INTERNATIONAL MANAGEMENT<br />MODULE CODE: BSNMIM001<br />MODULE TUTOR: Dr. PHIL KELLY<br />SUBMITTED BY: <br />SREERAG THAZHISSERY GANGADHARAN 393609<br />SUBMITTED ON: 20-04-09<br />Executive Summary<br />Dyson Limited is a domestic appliance manufacturing company headquartered in the UK. Their product range includes vacuum cleaners, washing machines and hand driers. This report provides a brief discussion on Dyson considering the importance of information resources and Enterprise Systems in the present corporate world. The effect of information resources and information technology on the value chain and how it helps to achieve a sustainable competitive advantage is being discussed in the first part of the report. The second part of the report deals with the need of an Enterprise System in Dyson and how it integrate the key business process by allowing a free flow of information in the organization. Finally, in the third part, the implementation methods of Enterprise Systems are analysed and suggestions are made on which method is to be selected.<br />Introduction<br />Dyson Limited is an electric domestic appliance manufacturing company headquartered in the UK, and founded in 1993 by Sir James Dyson. Their products include vacuum cleaners, washing machines and hand driers. Initially, all Dyson vacuum cleaners and washing machines were made in England. In 2002, the company transferred vacuum cleaner production to Malaysia keeping the Research and Development (R&D) operations at the firm’s base in Malmesbury, Wiltshire. Dyson always comes out with products that use better technology, better design and better engineering for which they charge premium prices to fund research and development to help bring out more products. According to Dyson, ‘Manufacturing goes beyond making things in the factory. For us, assembly comes at the very end of a long period of research, design and development.’ <br />The report discusses about the significance of information resources and Enterprise Systems (ES) in the context of Dyson. The report is divided into three parts and the first part explains how information resources provide sustainable competitive advantage. According to Barney (1991), a firm is said to have sustainable competitive advantage when it implements a value creating strategy different to its competitors and when this strategy become unable to imitate. Value chain is used to analyse the importance of information resources and information technology in Dyson. The second and third part of the report deals with the acquisition and implementation of an Enterprise System (ES). Enterprise system is a comprehensive package of software solutions which seek to integrate the complete range of business processes and functions in order to present a holistic view of the business from a single information and IT architecture (Klaus et al., 2000). The enterprise system provides end-to-end connectivity and thus enable the company to enhance their manufacturing performance (Palaniswamy, R. and Frank, T., 2000).Various advantages and challenges of enterprise system are discussed. The report concludes with suggestions on the methods to be selected for the implementation of an enterprise system.<br /> <br />Information resources – a source of sustainable competitive advantage<br />After the ‘Knowledge Economy’ in the 1990s; the business world, presently, is in the era of ‘Intangible Economy’. Eustace (2003) discusses about the shift of corporate value system from the physical assets towards the intangible assets. In the present era, sustainable competitive advantage can be derived from ‘hard’ and ‘soft’ assets which in turn is the technology and information resources. The current world business activities are fuelled by the growing realisation that the strategic use of information can enable a firm to improve how it meets the needs of global products and customers (King and Sethi, 1999). It is becoming increasingly important to be able to integrate demand and consumer-led information along with the operations within the organization (Sharif et al., 2007).<br />According to Kelly (2009), Information Resource Management (IRM) helps managers assess and exploit their information assets for business development. Information resources can be explored mainly by focusing on data, information, knowledge and wisdom (DIKW). Data is regarded with raw facts while information is the summarization of data. Knowledge is the understanding, awareness or familiarity acquired through education or experience. Knowledge along with experience and cognitive abilities comprises wisdom and unlike other information resources, this can only be found in people.<br />Dyson is operating nearly in 50 countries and an effective management of information resources is vital for their consistent performance. They need to clearly understand what all are their critical success factors in order to determine what all information they need. Moreover, they need to ensure a smooth information interchange between the factory in Malaysia and R&D in UK, as information flow is a major differentiator for every business (Gates cited in Kelly 2009: 358). They need to be clear in how people receive and share information as it depends upon the cultural factors and structural conditions of various nationalities and organization itself. Information and knowledge management strategy in Dyson should reflect their competitive strategy; how they create value for the customers, how that value supports an economic model, and how the company’s people deliver on the value and the economics (Hansen et al., 1999).<br />The basic tool for understanding the influence of information resources on any organization is the value chain. Value chain divides the company’s activities into technologically and economically distinct activities it performs to do business. Therefore, it is a chain of value adding activities, where value ‘is measured by the amount that buyers are willing to pay for a product or service’ (Porter and Millar, 1985). Because every activity in an organization involves the creation, processing and communication of information, information technology has an important role in the value chain (Porter 2001). Porter and Millar (1985) point out the spreading of information technology in the value chain and transforming the way value chain is being performed and the nature of linkages between them. There is a physical and an information-processing component for each value activity and all these value activities create and use information of some kind. A major challenge Dyson facing is the co-ordination of these information that is scattered in Malaysia and UK in order to enhance company’s competitive advantage (Govindarajan and Gupta, 2001). Decision-making, possibly the most important of all managerial activities, depends on the availability of suitable information. <br />Exhibit I shows the impact of information and information technology in Dyson’s value chain. <br />Support ActivitiesFirmInfrastructureStructuring and planningHuman ResourceManagementUp-to-date employee detailsTechnologyDevelopmentmarginHelps in R&D, which is the key operationProcurementOn-line availability of partsPrimary ActivitiesInbound logisticsConnected with suppliers, so that they can readily meet the needsOperationsAvoiding unwanted operations and thus enhance the flexibilityOutbound logisticsFast and direct link to distributors all over the worldMarketing & SalesElectronic market researchServiceEffective after sales services and can also provide feedback to operations<br />Exhibit I: Information resource effects on Dyson value chain (source: modified from Porter and Millar (1985))<br />Cost and differentiation are the key factors for creating sustainable competitive advantage. Dyson can cut down the cost dramatically by the effective management of information system. Information technology is a powerful and efficient tool to reduce the documenting cost and can help in easy accessibility of information in various sections of the organization. Dyson has already differentiated them in the present market, and information technology can help them enhance on this. These imply the need of an Enterprise System (ES) in the organization so that it can bring together the scattered information and speed up information interchange. Thus by the central management of information resources, Dyson could be benefitted by the reusability and sharing of the same. <br />Dyson should not isolate their information and knowledge management in functional departments as it might risk the benefits that could be achieved by efficient spreading of the same throughout the organization (Hansen et al., 1999). According to Kelly (2009), ‘information and knowledge strategy should support (‘fit’) the organizational strategy’. Effective management of information resources makes value chain management much more efficient and can help Dyson to co-ordinate, schedule and control the operations, and delivers better products and services to the customers. <br />Enterprise Systems<br />For an organization to be effective, it must adjust its design and structure in accordance to the changes in the environment, technology and other contextual factors (Contingency theory). This change is a continuous process of experimentation and adaptation, aimed at matching an organization’s capabilities to the demands of a dynamic and uncertain environment (Kelly, 2009). Drucker (1994) suggests each organization to develop a self- challenging behaviour to each of its products, policies and distribution systems. For this Dyson need to adapt a Business Process Re-engineering (BPR) method; that is, to fundamentally or radically redesigns processes ‘through the application of enabling technology’ to gain drastic improvements in the critical contemporary measures of performance, inspired from a new mission, such as cost, process efficiency, effectiveness, productivity and quality (Kelly, 2009). And hence the acquisition of an Enterprise System is definitely a good idea.<br />The R&D department of Dyson is in UK, the factory is in Malaysia and it operates in nearly 50 countries, and these results in a fragmented operation in the organization. The information is spread across dozens of separate computer systems (legacy systems). Presently, the company is like a bunch of individual units and their headquarters, each having different platform of information system. ‘If a company’s systems are fragmented, its business is fragmented’ (Davenport, 1998). Enterprise Resource Planning (ERP) systems solve this problem by providing a standard platform and by collecting data from various key business processes and storing the data in a single comprehensive data repository to be used by all parts of the business (Laudon and Laudon, 2002). All the functional entities of Dyson such as Engineering, Manufacturing, Operations, Finance, Sales, Marketing, Human Resources, Legal, Logistics and any other supporting entity could be incorporated into the ES. The enterprise system can also be expanded to include partners, suppliers, and vendors which are the periphery elements of the enterprise structure (Stephenson and Sage, 2007). The ERP is thus a complete flexible business solution.<br />According to Davenport (1998), an Enterprise System streamlines a company’s data flows and provides management with direct access to the real-time operating information. This can dramatically influence the productivity and speed. On the other hand, they also involve the centralization of control over information and the standardization of processes and thus allow Dyson to minimise excess manufacturing capacity and reduce both component and finished goods inventory. This will have a positive impact on the management structure of Dyson by creating a flatter, more flexible and more democratic organizational behaviour. Moreover, the sharing of information cuts cost, because it helps reduce redundancies and eliminates errors by providing smoother communication and better visibility across the organization (Dredden and Bergdolt, 2007). Enterprise systems help in data reusability. Further, it translates into less rework, better decision making, and gets products to the customers faster and more efficiently. Thus along with the inventory levels, labour and distribution expenditures can also be reduced, and the company can expect the system will reduce the annual operating cost.<br />Laudon and Laudon (2002) discuss about the beneficial changes an ES bring to the four dimensions of business. Firm Structure of an organization is being supported by an ES to create a more disciplined organizational culture. It also supports the Management by improving the reporting and decision making processes. ES promise to create a single, integrated repository that gathers data on all business processes and thus provides a uniform platform for the Technology. And finally, it enhances the Business by more efficient operations and customer driven business processes. It achieves this by integrating the discrete operations in the organization. Thus an ES would allow Dyson to better position its products and services against the competition (Stephenson and Sage, 2007). Better product positioning eventually leads to increased market share for the company.<br />Dyson should conduct a preliminary analysis and should develop a plan for ES acquisition and implementation (Beheshti, 2006). The general acquisition process of an ES starts with the Initiation process (Kelly, 2009). It could be from a failure or to capture an opportunity. In Dyson, the initiation is to build up on their market shares, unify the information resources platforms and to centralise the management structure. A cost benefit analysis (CBA) will be helpful for the Feasibility Study. Exhibit II shows the cost benefit analysis of implementing an ES in Dyson. This is done in order to justify and secure funding for the project. Searching is the next step in acquisition process. A request for information (RFI) or a request for proposals (RFP) might be used for this step. A RFP is more suitable for Dyson as it identify the possible solutions and covers a detailed report on the product and thus helps to determine if the ES can meet the organization’s specific requirements. Competitive Tendering Process and Systems or Developer Selection are the final steps where the decision is made on which vendor is to be selected for the ES development. <br />COSTSBENEFITSTANGIBLEINTANGIBLEHardwareSoftwareServicesPersonnel – Consultants, Staff training Increased ProductivityReduce operational costsReduced annual costsIncreased market shareData reusability Controlled inventory levelIncreased asset utilizationBetter information flowImproved decision makingImproved resource controlHigher client satisfactionBetter corporate image<br />Exhibit II: Cost Benefit Analysis of implementing an ES in Dyson<br />Dyson should not view the ES project as a technology initiative; rather they should take it as an opportunity to take a fresh look at the company’s strategy and organizational structure (Davenport, 1998). They should also be aware of the challenges and difficulties associated with the enterprise system. Being a system that is going to effect the entire organization, an enterprise system is a very complex and large system and is very expensive. Extra care is to be taken on the acquisition and implementation as it is a long term investment and is difficult to change and modify (Trott and Hoecht, 2004). Over-reliance on the ERP providers is another drawback of the enterprise systems. The inflexibility of the system is another problem. If an ERP is not compatible with the way the company does business, the company lose a better way of performing a key business process; that is, the business often must be modified to fit the system (Laudon and Laudon, 2002). But as Davenport (1998) states, ‘the long-term productivity and connectivity gains created by ES are often so compelling that not adopting one is out of the question.’<br />Implementation of an Enterprise System<br />The previous section of the report discusses about enterprise systems and shows how they help integrate organizations and their functions to serve all of the various organizational needs. Enterprise systems enable different operational departments to share information and communicate with each other more efficiently and effectively. This section of the report deals with the implementation of ES in Dyson. Installing an ES requires large investments of money, time and expertise. According to Davenport (1998), Enterprise Systems can deliver great rewards, but the risks they carry are equally great. So an understanding of the needs of the organization and business implications is a must before installing an ES.<br />According to Kelly (2009), the implementation of an ES impact upon all managerial sectors of the organization. ES implementation includes hardware and software installation, system configuration, customization, integration, user-training, data migration and testing. Implementation continues until the new system is embedded into the organization. The first thing to make sure in the implementation of an ES is that the time and circumstances in the organisation are highly adequate to assure a strong top management support for the project (Sanchez and Bernal, 2007). The implementation requires commitment from top-level management of Dyson and full employee support. Senior management must provide guidance and keep the organization focused throughout the project (Dredden and Bergdolt, 2007). According to Davenport (1998), the project team should include both business analysts and information technologists, and should be assisted by user representatives from all business units and functions. These users helps ensure that decisions about the system’s configuration are made with the broadest possible understanding of the business. They also play a crucial role in explaining the new system to their respective departments and in training people.<br />There are two fundamental approaches to an ES implementation. One is to acquire an off-the-shelf solution; that is to go for an ERP or Fully Integrated Software (FIS). The second one is to customize the software to meet the needs of the organization; that is to adapt a best of breed (BoB) approach. An ERP system helps in creating a more uniform organization and is a highly efficient system. It also improves the decision making and provides a better control throughout the organization. Some of the well known ERP providers are SAP, PeopleSoft and BAAN. However, an ERP is a generic solution and it often imposes its own logic on the company’s strategy, organization and culture (Davenport, 1998). Best of breed approach is more closely aligned with the business processes of the organization as it is customized according to that. BoB provides greater flexibility and tends to better fit the organizational requirements. BoB can be viewed as an integration of standard software from a variety of vendors. <br />An ERP system could be implemented using a ‘big bang’ approach, or a phased implementation approach, or a combination of both. ‘Big bang’ approach is compatible with global strategy as it gives high priority to the operational efficiency and standardization. It is centralized and the decision making is concentrated on the head quarters. A well executed ‘big bang’ approach will enable an organization to efficiently transform from its legacy systems to an enterprise wide integrative and standardize system (Madapusi and D’Souza, 2005). Phased approach is best suited to the multinational strategy, by giving priority to differentiation (local responses) in each international location. It is a decentralized system where the national units are typically local and have independently run IT. <br />A BoB approach is suggested for the implementation of ES in Dyson. BoB is not only more flexible and more aligned to the business process than FIS; but also supports the BPR to a higher degree by facilitating implementation and the management of complexity (Kelly, 2009). Dyson get the flexibility to select IT components on the basis of how well they think they will support the business processes and thereby enhances the enterprise integration and process orientation. They can use standard software from a variety of vendors and can also use custom components in the absence of best in class standard software. Thus they can have the most appropriate software functionality and that in turn is regarded as the strength of BoB. Dyson might use standard ERP as SAP in their Finance, Marketing, Sales and Logistics as these business units are functioning almost similar to many successful organizations all over the world. Being a global company, centralization and standardization is important to Dyson; and hence, a ‘big bang’ approach is suggested to implement SAP in the business units. This can reduce the integration cost and can start functioning effectively if the implementation is carried out in a thorough and careful manner. On the other hand, it might not be a good idea to use ERP in the Engineering (R&D), Manufacturing and Operations as they are the business units that give competitive advantage to Dyson. So a customized approach might be well suited. Although it takes more time and cost than the ERP, this can keep Dyson’s market authority and can help in keeping the sustainable competitive advantage. Moreover, a BoB component can be considered as a stand-alone application and this means an early payback from the project. An FIS can function in its full capacity only after the successful completion of the project. Again, an incremental approach deals with a smaller amount of change, thereby reduces organizational trauma.<br />As Kelly (2009) suggests, business and organizational change necessitates a constructional (white box) perspective; that is, how the system is to be designed and built. Careful deliberation should be the keyword for Dyson in change management. Four options are generally considered when changing over from an old system to the new system: Parallel, Pilot, Phased and Direct cutover. A phased changeover method might suit for Dyson as it supports a sequential introduction of modules. A change management plan should be developed. An inspirational leader like James Dyson can lead his team and company in the right direction and make them feel confident in the change. <br />The most difficult challenge Dyson might face in the implementation of an ES will be determining what should be common throughout the organization and what should be allowed to vary (Davenport, 1998). Reengineering of the business may be needed to utilize the full potential of ES. Dyson should always remember that a speedy implementation of an ES may be wise move; but a rash implementation is not. Also, data integrity and employee training are vital elements in making an ES implementation successful (Dredden and Bergdolt, 2007). According to Kelly (2009), after the change employees will resign themselves to the fact that change has happened and will adapt themselves to the new requirements. However, Dyson should try to achieve an appropriate fit between their ES systems and international strategies to achieve a better business performance.<br />Conclusion<br />The report has discussed how information resources might provide Dyson with a source of sustainable competitive advantage, the significance of Enterprise System in the present corporate world and suggestions for the acquisition and implementation of an ES in Dyson. The importance of information resources in this ‘Intangible economy’ is studied using the value chain and the report also shows how information and information technology permeates into the value chain. With reference to the contingency theory, the report supports Dyson’s decision of acquisition of the ES. The advantages of ES over legacy systems are discussed and a cost benefit analysis is performed to analyze the after effects. Different approaches for the implementation of ES has analysed and a BoB method is suggested. A ‘big bang approach’ is put forward for certain business units and customized systems are recommended for the key business parts. A phased changeover strategy might be adapted by the change management for transforming from the legacy systems to the ES. The challenges Dyson might face in this transformation and implementation is also discussed. Finally, the report suggests, Dyson should plan their ES configuration in such a way to ensure that they are compatible and aligned with the international strategy of the company<br />References<br />Barney, J. (1991), ‘Firm Resources and Sustained Competitive Advantage’, Journal of Management, 17(1): 99-120<br />Beheshti, H. (2006), ‘What managers should know about ERP/ERP II’, Management Research News, 29(4): 184-193<br />Davenport, T. H. (1998), ‘Putting the Enterprise into the Enterprise System’, Harvard Business Review, (July/August 1998): 121-131<br />Dredden, G. And Bergdolt, J. C. 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