As the furniture chain admits to problems with an
implementation, Colin Beveridge says being flexible with your
business model will enable you to make changes more
effectively
The MFI Furniture Group is the latest business to suffer
from the true cost of new technology as their share price tumbled
dramatically following news of computer system
difficulties.
MFI blames problems with its new supply chain system
implementation for a substantial loss in its UK retail business and
the parent group has warned investors that group profits for the
first six months of the year are down by almost 50% when compared
with the same period last year.
That’s one hell of a hit for any business to sustain, and it
will give more ammunition to those who challenge the value of
sinking millions into major IT programmes. They will point their
fingers at MFI’s experience and say there is further clear evidence
that IT is a waste of money.
And the splash-back from the MFI losses could affect all of us,
particularly those who are seeking approval for similar spending
initiatives.
But that might not be a bad thing because the MFI supply chain
system problems appear to be symptomatic of too many failing
programmes.
We haven’t seen the full numbers yet but let’s consider the
evidence in the public domain so far and see if there are any
lessons to be learned.
For a start the MFI supply chain programme has the classic
pre-requisite element for major IT disappointment, an imposing
programme name: Atlas.
Nevertheless, in my experience, big project names are often an
early warning alert for big underachievement and this seems to be
borne out in this instance too.
The scale of the apparent underachievement in the MFI supply
chain system scenario is fairly substantial. As reported by
Computer Weekly in September 2003, the Atlas programme was
scheduled to cost up to £25m and deliver annual benefits of around
£35m in reduced operational costs, described by the chief
information officer at MFI as vast cost savings.
I suspect that these ambitious projections will now have been
seriously revised, in line with the announced £27m fall in
half-yearly group profits.
Furthermore, I presume that the Atlas costs had already been
properly factored into the 2004 financial position so the full
bottom line impact of the Atlas programme on the MFI group
finances, both in terms of revenue and share price, must have blown
the Atlas business case to absolute smithereens.
No doubt there will be some very interesting discussions in the
months to come as the MFI management try to unpick the root of
their problems and understand where it went wrong.
As a relatively uninformed observer I would humbly suggest that
MFI’s Atlas programme was probably fatally flawed long before
conception, for two reasons.
First, the programme was heralded as a solution to earlier
problems of falling sales at MFI - and I have never been convinced
that any new computer system can resolve a fundamental sales
problem. In fact, where such a problem exists, it could be
foolhardy in the extreme to compound a bad revenue position by
spending millions on a new system without properly addressing the
real problem of poor sales.
Second, the stated technology rationale for the Atlas programme
was to achieve vast cost savings through improved systems
integration. A worthy ambition, and often stated, but rarely
delivered in practice, which is why systems interoperability is
rapidly replacing systems integration in the strategic planning
arsenal.
Monolithic ERP systems are difficult to implement, as MFI has
discovered to its cost, and impose serious constraints on future
commercial agility.
If we really want to deliver agile business systems I believe
that we should abandon the fully integrated, modular “Lego-brick”
mentality of the past 20 years and embrace the much more flexible,
albeit less aesthetically pleasing, “stickle brick” approach.
This would make it much easier for us to bring together
interoperable system components that can be quickly assembled and,
more importantly perhaps, disassembled as our business needs
change.
After all, isn’t that precisely the business product model
successfully adopted by self-assembly furniture retailers?
Colin Beveridge is an independent consultant and leading
commentator on technology management issues. He can be contacted
atcolin@colin.beveridge.name
MFI to save £35m a year from SAP-based overhaul >>