Transcript Informatization Promotion Strategies for SME Management

Informatization Promotion Strategies for
SME Management Innovation in APEC in
the Digital Economy
Prof. Ook Lee, Ph.D.
College of Information and
Communications
Hanyang University
Seoul, Korea(South)
Table of Contents
• 1. Introduction
• 2. Informatization Network Cluster Utilization
• 3. Characteristics of Information Systems which are effective in
producing positive result for SMEs
• 4. Government Policy for Informatization which facilitates growth of
SMEs
• 5. Solving Digital Divide Problem among APEC member countries
• 6. Policy Direction emerged from Case Studies of SMEs in terms of
Informatization
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6.1
6.2
6.3
6.4
The Philippines
Indonesia
Australia
USA
• 7. Best Practices in Management Innovation Utilizing Information
Technology
– 7.1 Best Practice Case #1: Bank SinoPac(Taiwan)
– 7.2 Best Practice Case #2: Commonwealth Bank of Australia(Australia)
– 7.3 Best Practice Case #3: Heineken USA(USA)
• 8. Conclusion
1. Introduction
• In the digital economy, enterprises need to adopt
digital technology to compete effectively.
• SMEs can be benefited especially from
informatization.
• This study investigates informatization promotion
strategies for SME management innovation in APEC
member countries.
• It is obvious that SMEs will find it difficult to invest in
ICT since they usually lack sufficient fund and
resources. Thus the role of government policy is
important in facilitating informatization of SMEs.
• ICT is essential in successfully performing innovation
in management of SMEs.
2. Informatization Network
Cluster Utilization
• Network clustering implements communication
infrastructure for SMEs in a certain region which
includes high-speed/broadband Internet network.
• This approach lets SMEs to share value-added
service from advanced communication infrastructure,
which might result in reducing the problem of digital
divide.
• South Korean government implemented this policy of
creating regional clusters with government fund.
• The Korean model also needs more improvement
since it lacks effective follow-up network utilization
policy such as promoting advanced value-added
services, e.g., Internet-based EDI, VoIP, Extranet, eSCM, and e-CRM.
3. Characteristics of Information
Systems which are effective in
producing positive result for SMEs
• Most of advanced information systems such as MIS,
DSS, EIS, ES, ERP, CRM, and SCM were
implemented for large businesses. However SMEs
also need these advanced information systems which
will give them competitive advantage and a tool for
more effective control of their businesses.
• Following characteristics are required for an
advanced information system that is intended for the
use in SMEs. 1. Size should be appropriately small. 2.
How to use should be easy to learn. 3. Implementation
process should not be too complex. 4. Hardware
requirements should not exceed what the particular
SME has as its infrastructure.
4. Government Policy for
Informatization which facilitates
growth of SMEs
• Empirical evidences often show mixed results on the effect of
informatization especially with measure such as revenue, stock
price, market share, etc., which is, in general, called “IT
Productivity Paradox”.
• Where have all the benefits of informatization gone? Following
areas can be cited. 1. Operational Efficiency: informatization on
manufacturing often results in gains in efficiency of operation. 2.
Customer Satisfaction: even if there is no visible effect due to
informatization, the benefit could have been already materialized
as more customer satisfaction.
• government policy should take an aim at the following points. 1.
Support of informatization of SMEs in order to increase
operational efficiency such as manufacturing information
systems, SCM systems, communication infrastructure build-up,
and e-business. 2. Support of informatization of SMEs in order
to increase customer satisfaction such as CRM systems, and ebusiness. Overall, ultimate goal of government policy must
emphasize e-business.
5. Solving Digital Divide Problem
among APEC member countries
• APEC member countries are composed of the ones
with highly developed national IT infrastructure and
others with very less developed national IT
infrastructure. Thus there exists a serious digital
divide problem in the APEC region.
• One way to solve this problem is to create
informatization frontier teams whose members are
recruited from advanced countries.
• These teams can be sent to less developed countries
to solve digital divide problems as done in medicine,
food and education.
• These teams will provide PCs and software education
and if possible, some communication infrastructure
building.
6. Policy Direction emerged from
Case Studies of SMEs in terms of
Informatization
• In order to find the appropriate policy
direction, case studies were conducted
through web sites, e-mail-based survey
and physical visits where possible.
6.1 The Philippines
• PhilStar.com is an online news portal company which provides
local news of the Philippines to worldwide audience of Filipino
people.
• A. hardware: 5 HP servers, software: Apache web server and
Oracle database, networks: Notel backbone.
• B. IT investment: US$0.5million, IT education level: very high,
User experience and knowledge: very high.
• C. Top management’s view on IT: very positive.
• D. Current business environment: Buyers: banner advertisers,
Vendors: none, Large firms: yahoo.com and cnn.com which are
multinational portals, Alliance: Philippine Star newspaper which
is a sister company to PhilStar.com, Industry: news portal
market is dominated by multinational portals in the Philippines
with the niche market of exotic and sensational local news
market available for a company like PhilStar.com.
6.2 Indonesia
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Daytona, PT Company is a manufacturer of car accessory specializing
car seats.
A. hardware: 3 Pentium II PCs, software: Java and MS Access database,
networks: no local area network, only dial-up internet connection.
B. IT investment: US$0.01million, IT education level: low, User
experience and knowledge: low.
C. Top management’s view on IT: interested in web technology.
D. Current business environment: Buyers: Automobile manufacturers,
Vendors: none, Large firms: no large firms operate in this area, Alliance:
none, Industry: automobile car seat manufacturing area is mainly
populated with SMEs whose informatization level is quite low; however
this company noticed the advertising effect of web sites and published
introductory pictures and descriptions in their web site; but due to lack
of technical skill on e-business technology, there is no ecommerce(buy/sell on web site) capability available on their web site.
6.3 Australia
• Fast Enterprises Pty Ltd. is an online flower delivery company
with the URL of www.fastflowers.com.au
• A. hardware: 12 HP servers, software: MS IIS and MS-SQL
database, networks: intranet, extranet, high-speed Cisco
backbone.
• B. IT investment: US$5.1million, IT education level: very high,
User experience and knowledge: very high.
• C. Top management’s view on IT: very positive.
• D. Current business environment: Buyers: web users, Vendors:
Fastflowers Sydney shop, Large firms: no large firms operate in
this area, Alliance: alliance with many overseas flower online
flower delivery companies which allows the company to be able
to deliver flower almost anywhere in the world, Industry: even
though there is a heavy competition in flower delivery industry in
Australia, utilizing advanced national IT infrastructure effectively,
the company grows to a large scale online flower delivery firm
which covers the globe.
6.4 USA
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Ostergard Gynecology & Female Urology Partnership/Medical Group is a
small hospital which specializes in uro-gynecology
A. hardware: 5 Pentium II PCs, software: MS office, MS frontpage, MS
Access database, networks: no intranet, connection to outside highspeed Internet available.
B. IT investment: US$0.02million, IT education level: medium, User
experience and knowledge: medium.
C. Top management’s view on IT: somewhat interested in web
technology for PR purposes.
D. Current business environment: Buyers: patients, Vendors: none,
Large firms: this area is dominated by large general hospitals; however
this small hospital attracts many patients due to the fame of Dr.
Ostergard, Alliance: since Dr. Ostergard can not perform so many
surgeries simultaneously, UCLA and UC-Irvine university hospitals are
in alliance with this hospital; very difficult surgery often requires an
excellent surgeon rather than any advanced technology; thus IT is
mainly used for administrative purposes and advanced features such
as online appointment, streaming video of surgery, and chatting
function are not implemented.
6. Policy Direction emerged from
Case Studies of SMEs in terms of
Informatization(cont.)
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By contrasting the previous 4 case studies, we can point out following
differences in informatization policy among APEC member countries.
1. Among two companies of under-developed countries, one was
much informatized while the other was not at all. Thus an assumption
that informatization of SMEs will be minimal in all under-developed
countries does not stand. They pursue informatization if they see a
business need in it.
2. In advanced countries, because of well-developed national IT
infrastructure, companies utilize many complex information systems as
seen in Australia’s flower delivery company case. However even on
very advanced national IT infrastructure such as US’s, some firms do
not implement high-level information systems as seen in Ostergard
hospital case. This confirms the principle found from under-developed
country cases that informatization of a firm is dictated by the law of
business need. Namely when the company’s business is doing well at
the current level of informatization, the company won’t try to pursue
higher level informatization.
• Educating executives on the benefit of informatization
regardless of level of informatization of the country where the
company is operating should be an essential program in
government policy.
7. Best Practices in
Management Innovation
Utilizing Information
Technology
• When IT is well used for the business organization, it
can induce management innovation which,
subsequently, produces lots of benefits.
• To achieve this, business process redesign method
should be applied where all aspects of business
activities in the organization are viewed as a
collection processes, which is called “process-pointof-view.” With this view, a map of detailed processes
of the organization will emerge and the person who is
in charge of BPR will look into any possibility of
utilizing IT to change existing processes which
should bring excellent savings or gains as a result.
• Case studies were conducted through web sites, email survey, and physical visits where possible.
7.1 Best Practice Case #1: Bank
SinoPac(Taiwan)
• SinoPac is a commercial bank established in 1992 which is a
SME in its size as a bank. The bank was growing rapidly and
required new business platform based on information
technology. Business process redesign was necessary since its
business encompasses vast areas including China proper,
Taiwan, Hong Kong, and USA.
• SMEs do not have much expendable time to spend for BPR and,
due to lack of money, need systems which can be used over
and over again and operate under unexpected circumstances,
and since SMEs can not afford to spend much time and money
in training employees, the system must be easy to use and
quickly learnable.
• They developed such an information system which was called
model Blue IT. This system brought up 30% increase in
productivity, that is, savings in time and expense of business
process operations were 30%. The model Blue IT was
implemented on IBM WebSphere Application server.
7.2 Best Practice Case #2:
Commonwealth Bank of
Australia(Australia)
• Commonwealth bank is based in Sydney whose number
of employees exceeds more than 35,000 and covers
entire country of Australia. The bank spends more than
AUSD$120million for temporary wages.
• The current business processes allow hiring of
temporary workers on the spot and had to pay for
introduction fee to the human resource agency.
• Too much time of regular employees was used to
handle the management of temporary workers. Thus the
bank hired human resource management system firm
called peoplesoft and centralized hiring processes and
got rid of inefficient processes.
• The result was savings of AUSD$11million for 3 years
and each branch office on average freed 3 regular
workers’ time and was able to put them in more
productive works.
7.3 Best Practice Case #3:
Heineken USA(USA)
• Heineken USA is a subsidiary of Heineken of the Netherlands
which mainly does distribution of Heineken beer in USA. Since
1995, Heineken USA has been operating distribution and
advertising in domestic USA. The competition among imported
beer companies got intensified starting from late 80s.
• In order to survive the competition, Heineken USA conducted
business process redesign using information technology.
• HOPS(Heineken Operational Planning System) was implemented
and effective in eliminating problematic business processes.
• The biggest challenge to imported beer such as Heineken is the
fact that it is difficult to adapt to the changing demand of
consumers quickly.
• This problem was overcome by establishing Internet-based
Extranet which enabled the parent company to be aware of
what’s going on in American market and act accordingly in real
time. Thus the parent company was able to reduce time delay
caused by delivery time from the Netherlands to America, which
resulted in much fresher beer and reduced inventory with 10%
increase in sales.
8. Conclusion
• The solution for SMEs in APEC member countries to
achieve management innovation lies mainly with ITenabled business process redesign plus e-business
technology use.
• Unlike BPR for large companies, BPR for SMEs
requires somewhat different approach as following.
First, the method has to be fast and effective.
Second, it has to be reusable and flexible enough to
cope with unexpected situation. Third, the system
should be easy to use and quickly learnable.
• In order to encourage BPR action in SMEs,
government needs to educate executives on process
point of view, the benefit of IT, and the possibility of
market expansion through online trade utilizing ebusiness technology.
8. Conclusion(cont.)
• In summary, government can run an educational program for top
executives of SMEs in which process point of view, business
process redesign, IT mindset, and e-business technology are
taught.
• E-business technology can be a simple web site for PR purpose
which then can be improved to include e-commerce capability.
Advanced e-business technology such as e-CRM, e-SCM,
Internet-based EDI, and Logistics and Order Management can be
added later.
• However this kind of educational program is not easy to
implement for under-developed countries.
• Creation of Informatization Frontier team whose members will be
from well-developed countries is suggested since the team
might contribute to the poor country for providing education as
well as basic hardware, software, and communication devices.
Thank You !