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In order to analyse whether Gearbox will be successful and how successful the organisation has been in the past, it is essential to understand what success means or implies in this specific case. Success is generally defined as 'The achievement of something desired, planned, or attempted' (Concise Oxford English Dictionary, 2006). In an IT context the Critical Success Factors can be translated as a system being integrated properly, within the set budget, within a specified time, increased productivity and user satisfaction. In this essay we will refer to Leavitt's Diamond Model to analyse the case and diagnose any issues encountered. After which it will be possible to conclude whether the SAP/R3 system, the culture of the organisation or both were at fault for the non-use and ultimate failure of the ERP system.
Leavitt's Diamond (1965) model
The Leavitt Diamond Socio-technical model (Fig.1) is used for analysing management change. Developed by Harold J. Leavitt in 1965, the model is based on the idea that it is rare for any change to occur in isolation. Thus, a changed task will necessarily affect the people involved in it, the structure in which they work, and the technology that they use. Failure to manage these interdependencies at critical times of change can create problems.
The goal of Gearbox was to be a market leader in China and the number one organisation in the world in the power transmission market (Reimers, 2004). The main task was to sustain the yearly growth rates of 100% which had been achieved each year in the three years prior to the implementation of the ERP SAP/R3 system. The plan was to continue this growth rate over the next 3-5 years to achieve a market share of 10-15%. This would mean greater productivity, increased delivery time and greater sales, all of which would be derived from extensive use of the ERP system. However, the system was not being used for every function in each department (eg. Only the process of purchase order creation is currently supported by R/3 in the purchasing department) and in some circumstances the system made no difference (such as the distribution department where the time for determining delivery time and price did not change). There was an increase in revenue from 100m to 200m RMB after implementation but there is not much evidence that there has been a significant contribution to profit. Although the Managing Director views the implementation as a success, the system is clearly not being fully used. From the evidence we can say that this is either from a lack of trust from the users or minimal training.
An important point to mention is that technology is only one aspect of the model. Many firms believe that a change in technology will bring improvement to the firm as a whole, however, this can only be achieved if there is a balance in the process of change. Cultures and traditions within firms must be observed, as they form an important link between structure and actors. If the new technology does not take into consideration the way things are carried out previous to change, there may be resistance to the change. Thus, the basis of this analysis will be on the cultural and technological concerns (namely BPR) associated with Gearbox.
1. Cultural Issues
The implementation of an ERP system and its associated risks, significantly increase when the attempts are made in a foreign country. Professional and cultural differences can create conflict (Besson, 1999). To some extent simply the fact that the new system comes from overseas is in itself enough to encounter resistance. Zhang et. al (2003) suggested that the success rate of ERP implementation in China was an extremely low figure of 10%. The failings at Gearbox did not necessarily relate to the technology itself, but more to the 'people problems' that were encountered.
1.1 End User Involvement
The Gearbox case shows virtually no end user involvement in the implementation or development of the implementation strategy. Sheu, Hsiuju and Krumwiede (2003) emphasise national differences as one of the biggest threats to multinational ERP implementation. Lack of user involvement meant cultural issues were neither acknowledged nor tackled. This may have resulted in local employees not feeling involved in the project. Gearbox should have spent more time with local staff consulting them in the changes they were looking to make and receive feedback on their plans. Doing this would ease the implementation process and staff could raise any queries or issues that may crop up later. One of the problems encountered was the implementation plan constructed in the German headquarters instructing Chinese staff to be trained on the system whilst commencing general operations. This proved difficult as R/3 system was complex and most staff were new and not familiar with the product. If management were consulted they may have highlighted this problem and allowed sufficient training time for employees thus reducing resistance and chances of workaround. End user involvement is vital to a project's success as they are the final users of the system (Avison and Malaurent, 2007).
Gearbox, in its implementation of ERP did not take into account the differences in the Chinese and German business environment. The key issue that was faced here as stated in the case was the format of printed invoices had to be adapted to Chinese financial regulation. Chinese vendors recognise this potential technicality and thus specifically design modules to meet Chinese accounting regulations (Liang et. al, 2004). At Gearbox the German vendor used a comma as a symbol for radix while a dot is used to indicate the thousand point. In China this is the other way around; the error took a month to discover and shows how local factors play a vital role in a successul implementation. Errors such as this not only reduce the amount of benefits given by an ERP system but also add additional mistakes into the data. This issue relates back to end user involvement. If Gearbox had taken the time to study local cultural aspects before rolling out the ERP system this may have been avoided. This is especially important for Gearbox given Asian territories display the highest cultural differences as shown in Fig. 2.
2. Technological issues
Gearbox exclusively serves the market's higher end thus implying the need for quality products with specifications that directly match the requirements of the client. Gearbox opted to implement a standard package which requires a business to alter its processes to accommodate the system. This leads to a compromise in the way in which a product would be designed as oppose to a bespoke system where the system is tailor made to suit the business. However, the main concern is not the choice between standard and bespoke packages but the fact that Gearbox did not carry out Business Process Re-engineering (BPR).
2.1 Business Process Re-engineering
To take the advantage of 'best practices' embedded in ERP systems, vendors commonly suggest that companies restructure/re-engineer their business processes (Newman and Zhao 2008). Companies such as IBM and Owens Corning implemented ERP systems and conducted BPR simultaneously (Hammer and Champy 2001). The Germans who designed the vanilla system merely sent it over to China with no BPR. This caused a severe lack of familiarity with the ERP system which created greater distrust from the users. Holland and Light (2004) state that due to its pervasive nature, 'a new ERP platform forms a critical infrastructure in any company for at least the next decade'. Hence, it is essential for the firm to undertake BPR to ensure a smooth implementation of the ERP system. In this case, BPR would have allowed Gearbox to understand their current business processes and simplify them in order to accommodate the ERP system. For instance Gearbox at the moment does not use the capacity planning function of the R/3 system in the manufacturing department due to the complexity of the function as explained by the managing director with changes in materials, machine loads and worker schedules depending upon the production order.
Although the ERP system was not used for every function in the various departments, there is no overwhelming proof to suggest that the SAP/R3 system failed to deliver what it was capable of producing. Managing the people, not the technology, was the problem. Indeed, there were unrealistic expectations imposed upon the system and maybe the system was suited for the organisation but not for every department but the bottom line is that the people in the company were ignored. This lack of cultural insensitivity in Gearbox equates to lack of user involvement in the Leavitt's model which in turn affected the technology that they used, the structure in which they worked and the task that they were required to perform.
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