Think business first; specify the IT second

IT systems today have the power and sophistication to help manufacturers compete, innovate and develop their businesses pretty much any way they like to keep ahead of the game. But it hasn't always been so, and to take full advantage of today's technology we have to unlearn some of our previous understanding, and change our ways – most important, we have to change the way we go about specifying IT in the first place. It's no secret that solutions have in many cases been selected for less than ideal reasons. Some were bought for compatibility with group or parent company systems; others for year 2000 compliance; others again because they ran on the preferred platform at the time. Then again, systems were purchased because they alone provided specific functions; and yet more were acquired almost only because they were 'fashionable', hot topics at the time – sometimes with very unfortunate results. The bottom line: "Companies have been constrained by the software they invested in," observes Clyde Bennett, product solution marketing manager at Microsoft Business Solutions. "They got themselves into a position where they just had to hope they could change the software to keep up with what innovations they were making on the business front." Things are very different today. Through greater sophistication, flexibility, customisation and integration capabilities, platform and technology convergence, standards and the rest, your choice of software should no longer be constrained. Just as important, the economic environment is very different, and no manufacturer should be risking investing in IT merely to keep up with 'hot topics' or, for that matter, to stay in the comfort zone of their legacy systems. Most important of all, business today is much removed from the previously quite fixed positions in rigid supply networks – so you need to be revisiting your strategy, and seeking and tuning appropriate systems more frequently and more diligently. "If you look at our medium-sized enterprises, they are in complex supply chains today," observes Bennett. And their position is changing all the time, adds Simon Holloway, senior IT architecture engineer in Microsoft's enterprise and partner group. "Manufacturers have to be able to understand the supply chain at any moment in time, and where they fit in according to the contracts they have." Change and innovation Conventional, rigid IT systems weren't designed for the myriad information flows that today's business environment might require – and which will certainly be necessary tomorrow. So change is likely to be on the agenda. As Holloway says: "Innovation isn't just about product any more, but also process. So the more the software is flexible and agile enough so you can tune it to the way you work with customers, partners and consumers, the better it positions you for market share." What we're saying is that any IT solution considered today needs to be thought of in terms not only of fulfilling the immediate business requirements and yielding a demonstrable return on investment in the short term, but also enabling the company to compete better, almost whatever the future holds. That's a tall order, but we can get most of the way there by thinking about our business strategy up front, alongside the 'art of the possible' in IT – certainly not the IT first – to give ourselves the best shot. In other words, we need to do a fundamental piece of work: make sure we understand exactly what value our company adds, how it competes and what differentiates it from its competitors. So before approaching any IT company, the advice is do your homework. As Bennett says: "If someone's going to come to an IT company for an IT strategy, they should first have a business strategy in a condition they can hand over. Think business first, and then follow through with the IT – I think that's still largely missing today." Sometimes, the only solution is to engage consultants for this exercise. Indeed Peter Anderson, managing consultant in the supply chain strategy group at IBM Business Consulting Services, says: "Getting into some of the in-depth discussions about what type of planning or forecasting you do, needs quite a lot of expertise." But Bennett counters: "You don't always need to sit down with an expensive consultant and come out with a big document. SME companies should know their differentiators – although they may not always be able to articulate them." Simon Bragg, European research director with analyst ARC Advisory Services, offers some advice: "You have to ask yourself what is your core competence? Is it product innovation, customer intimacy or operational excellence? A company really needs to choose on what basis it's going to compete and what capabilities are going to be distinctive before it can start looking at IT solutions." OK, but while there are modelling tools and methodologies to help with business analysis, these are generally in the hands of either IT vendors or consultancies. Given that you don't really want to choose your IT supplier before you start modelling the business, consultancy might yet be the best bet. "We try to help companies with what they need to do differently either to catch up with their competitors or to differentiate themselves," says Anderson. "We do the strategy work up front, or help people design their processes before we get into software selection. A typical assignment is that we go and spend three to four months with a client looking at their as-is processes, and bringing best practice processes to them, before we get to the technology." At the very least, look for flexibility. The Phoenix Mecano group made a corporate decision to implement Microsoft Navision ERP in part because it could be customised to meet individual company requirements. For Phoenix Mecano in the UK, a firm that imports and modifies enclosures from the other group members, as well as manufacturing other products, that was useful in meeting its strategic goals for greater efficiency. "For example, we had a cutting routine added," explains Paul Burnham, finance director at Phoenix Mecano. "We cut steel bars into all sorts of different lengths for various frameworks, such as machinery stands. The added control made it possible to give more accurate quotations, and made it much easier to find a bar of the right length. We can now also track wastage." Best practice? Incidentally, it's easy to fall into the trap of believing software vendors that claim they've discovered 'best practice' for conventional processes, and built them into their software. Remember, what's best practice today won't necessarily be tomorrow. As Bennett warns, "By the time an ERP vendor has decided something is best practice, there is innovation somewhere else." As competition becomes tougher, that's going to become even more important: being constrained by someone else's idea of how you should run your business won't earn many brownie points when it all goes pear shaped. "There is no need to accept second best," agrees Anderson. "If you look across different templates you can pick and choose what's right for your business. Our knowledge allows us to get best practice not just from a customer's own industry but from other sectors entirely. For example, someone who makes brake shoes may be able to teach something to someone who makes sandwiches for next-day delivery. They both understand the meaning of having something there at the right time at the right price." Incidentally, the business analysis process doesn't end with a statement of strategy. "That's just the start," says Holloway. "The other piece you have to look at is the way in which you work out the return on your investment, and even the total cost of ownership. Our partners can provide tools that have the capability to work out ROI [return on investment] and TCO [total cost of ownership], and that doesn't take a lot of time."