Pirelli’s information systems strategy, however, focussed on the central role of information and employees being able to access necessary data immediately and completely. Andreoni concluded that the IT departments had to be redesigned and standardised enabling their business to produce and deliver an unprecedented range of high quality goods and services, while competing in a global environment. The stages to develop a coordinated strategy are:
- Strategic Analysis
- Strategic Implementation
- Strategic Choice
STRATEGIC ANALYSIS
Johnson and Scholes (1993) states that strategic analysis involves understanding three factors:
- Environment
- Values and Objectives
- Resources
The fourteen countries that Pirelli operates would have individual family conventions, religious traditions and forms of education that are synonymous with their respective countries. The development of common expectation, shared norms and values would have to be understood in this analysis stage.
The information systems of Pirelli within all these countries were developed locally with no guidance from the corporate office, as Pirelli did not establish international standards for either hardware or software. As standardisation did not initially play an integral role, the various operations within the different countries would result in their being at different levels of the value chain.
Organisations have competitive advantage when they provide more value to their customers or when they provide the same value to customers at a lower price. According to Laudon and Laudon (2002). ‘The value chain model highlights the primary or support activities that add a margin of value to a firm’s products or services where information systems can best be applied to achieve a competitive advantage’.
The primary activities include:
- Inbound Logistics
- Operations
- Outbound Logistics
- Marketing and Sales
- Service
Each of the activities was essential to the competitive advantage but because of the different local structures found at Pirelli’s subsidiaries, which was compounded by the lack of integration across national borders, and a staff of more than 51 000 people, connection would be even more difficult. Understanding the use of the value chain and defining the activities, whereby linkages between activities could be identified and lead to more optimal make or buy decisions, is an attempt to gain competitive advantage.
Andreoni’s key approach was his belief that IT “must be in tune with the overall business strategy”. A SWOT analysis needed to be done in each country looking at the external factors of political, economic, social, technological, environmental and legal, as well as the domestic economic growth, the stability of the respective governments and looking at their attitudes towards protections laws and regulations are important. The slowing down of the global consumption caused the development of an information systems strategy. Andreoni’s aim was the establishment of a fully-fledged global network, with each national unit linked to the Milan Headquarters, through the use of a UNIX server. A number of systems were automated to reduce the need for manpower.
An open system was the selected resource. The advantages of open systems are as follows:
- Less reliance on proprietary products
- More competition leading to lower cost
- Decreased probability of schedule delay
- Better tested products (more users)
- Portable applications
- Interoperability
- Faster technology insertion
- Foundation for system evolution
Corporate culture at Pirelli posed a threat because the local units made their own decisions and built their own systems to meet their specific local needs.
The objective was to cut costs, however, the support activities that would be needed in order to ascertain the objective, also added additional costs to the project:
- Procurement, purchasing of inputs used in the company’s value chain.
- Technological development to meet needs of developing countries
- Human Resource Management activities involved in the hiring, training of personnel
- The Company’s infrastructure, including management, planning and financial accounting
STRATEGIC CHOICE
The use of Porter’s Five Forces Model could evaluate the available choices, in keeping with the business and IT strategy:
Porter’s Five Forces Model
Information Technology has a unique impact on the competitive climate and on the degree of interrelatedness of products and services with rivals. This can lead to unusual degrees of simultaneous competition and collaboration between companies. A company must understand that the changed nature of one’s competitive climate is important in an era of growing IT pervasiveness. Once installed Pirelli can keep track of new entrants into the global market. This knowledge can assist in avoiding sales decline.
Competitive and technological forces simply do not seem to permit any one organisation to enjoy a sustainable competitive advantage just from its use of Information Technology. However, it has been possible for an organisation, over the last decade to capture many competitive benefits and advantages. Thus, the benefits do not flow from the mere use of IT but occur from the human, organisational and system innovations that are all a part of the company’s structure. Scott Morton states that, “IT is merely an enabler that offers an organisation the opportunity to vigorously invest in added innovations if it wishes to stay ahead of its competitors.” This information can assist in the sale of goods.
In order for an organisation to implement a new form of information technology upper management must be able to assess the company’s needs. Organisations do this by analysing past performance and expected future trends, so that a future direction can be planned. Once these characteristics are assessed then a company can develop a plan on how to increase the efficiency of their IS systems, to achieve and even surpass their goals. Pirelli strives to continuously improve the quality of their products or services, therefore Information Systems that are introduced into the organisation must be able to enhance these objectives, directly or indirectly.
Many factors must be considered for an organisation to accurately clarify all of their needs and determine what IS will best meet their needs. These factors include:
- Business relationships
- Technology
- Strategic options
- Integration scope
- Participant roles
STRATEGIC IMPLEMENTATION
Andreoni had to make an informed decision as to options, evaluation of options and selecting a suitable option. He chose SAP’s R/3 as the centrepiece of the new infrastructure. He hoped that R/3 would act as a catalyst for company wide re-engineering.
Successful solution management unites people in different roles who deal with the operation of the solution – bringing them together to work toward common goals.
Andreoni developed an approach he called, ‘democratic governance’. Indirectly he directed what had to be done.
A pilot project was introduced; On the value chain, he chose tyre distribution in Spain – Outbound Logistics and in Scandinavia the use of the Internet for transacting business – Sales and marketing. He believed that after the pilot was successfully implemented the overall staff support would grow. However, enough study was not initially done in the stages of systems development to detect the errors. (See Fig 2)
Ideally, the process occurs in tandem with a review of the organization's strategic plan to ensure that IT is being used to help the organization achieve its strategic objectives
The requirements should be recorded in a document, email, user interface storyboard, executable prototype, or some other form. This should be referred to throughout the rest of the system development process to ensure the developing project aligns with user needs and requirements.
Andreoni had to involve end users in this process to have them share their idea for improving their work and ensure that the new system will function adequately and meet their needs and expectations, taking into consideration the different countries involved.
The design will serve as a blueprint for the system and help detect problems before errors or problems are built into the final system.
Andreoni selected the system design, but must review his work with the users to ensure the design meets users' needs.
Coding and debugging is the act of creating the final system. This step was not sufficiently done by Andreoni.
The system must be tested to evaluate its actual functionality in relation to expected or intended functionality. Some other issues to consider during this stage would be converting old data into the new system and training employees to use the new system. End users will be key in determining whether the developed system meets the intended requirements, and the extent to which the system is actually used.
Pirelli units maintained their old systems as they made the change over to R/3, this is the most expensive but effective implementation tool.
In each country outsourcing was used to handle both the old and the new systems. Choosing to outsource critical network services is a big step, but it is one that can benefit the business greatly if the proper planning and relationships are in place.
EVALUATION
- Pirelli did not fully understand that the project would affect every aspect of the business and every person in the organisation, should have been involved.
- The right resources were not committed to the project. They needed to have business managers on board who had adequate knowledge of the business.
- The entire business had to embrace the new roles in the integration process. Key individuals at Pirelli should be given responsibility for end-to-end businesses.
- Internal support services can become a strategic facilitator for the organisation. Building internal centres of expertise can reduce consulting costs in the future and Pirelli’s objective was to cut cost.
CONCLUSION
Businesses today need to integrate information to drive customer loyalty and satisfaction, improve operational efficiency, compete for online customers and trading partners, and identify and respond to emerging opportunities. In short, information integration provides a competitive advantage.
Complete integration architecture should include multiple technology approaches to address the range of integration challenges businesses face. Pirelli needs to understand this, providing the most comprehensive business integration solution on the market.
Andreoni’s goal was to provide a comprehensive, scalable and open database platform and infrastructure for building the new generation of Web-based database applications, while allowing users to rely on their existing databases. This would make them better positioned than any of its competitors to achieve its goal because its platforms, infrastructure and middleware are so comprehensive and suited for them to become a truly global multi national organisation.
BIBLIOGRAPHY
Cleary, T.1998, Business Information Technology, England, Prentice Hall
Laudon, K.C., and Laudon, J.P. 2002, Management Information Systems: Managing the Digital Firm, New Jersey, Prentice Hall
NCC Education Limited, 2002, Business Systems Analysis, UK, NCC Education Limited
NCC Education Limited, 2002, Business Systems Design, UK, NCC Education Limited
NCC Education Limited, 2002, Computer Technology, UK, NCC Education Limited
Robson, W. 1997, Strategic Management Information Systems: An Integrated Approach, England, Prentice Hall
http://www.computerworld.com/developmenttopics [2003.Dec.17]
http://www.aisel.isworld.org/subject_by_publication.asp [2003.Dec.22]
http://www.convergex.co.uk/TNH/advantages.htm [2003. Dec.22]
http://www.informationr.net/tdw/publ/papers/1998Isstrat.html [2003.Dec.23]
Robson, W. 1997, Strategic Management Information Systems: An Integrated Approach, pp7
Laudon, K.C., and Laudon, J.P. 2002, Management Information Systems: Managing the Digital Firm,
pp 86