November 29, 2018
Large multi-site and multi-division businesses are often challenged with a very pragmatic question early in transformational planning: how should new capabilities and business processes be sequenced? The need for phased approaches are many, but the top tradeoffs businesses must evaluate are:
- Project scope required for desired outcomes,
- Scope similarities and transition plans per phase, and
- Available team capacity per phase.
Each project needs an evaluation of these factors given the magnitude of the organizational change and the organizational cultures in play, and thus no hard and fast rules can be applied. That said, Vendavo has helped hundreds of organizations through their journeys and there are a few common themes that ultimately leads to greater value capture and customer satisfaction.
1. Project Scope
Scope of the project or change to be applied is often the most critical aspect to consider because it drives both the risk entailed and the workload of the teams involved. A project that rolls out a pricing program for all product families vs a few trial families, for example, inherently requires additional demands on the project team due to the greater amount of product being addressed. It would be easy to expect that the total risk of the project to increase in this case, but that can be an erroneous assumption. Partial solutions that require end business users to manage not one, but two processes for some duration is a surefire way to erode organizational patience – first at the operational level and then with a growing clamor at the management level. The need to demonstrate quick-wins is a good one, but adoption of the proposed process needs to be considered as well.
As an example, consider a spare parts supplier that sells not only new parts but also repair services, remanufactured parts, overhauls, and assemblies. Typical business process in a parts business is to relationally price these offerings such that the profitability of the base machine’s lifecycle is maximized and that competing solutions do not undercut one another. It would thus be an error to define the scope of the change project to entail only new parts, as users would need to maintain both their old process and the new one to address their key challenges. It would be better in this case to aim for more complete acceptance at the operational level in trade for greater project scope to lower the overall risk of the project.
2. Risk Mitigation by Phasing
Risk mitigation is thus best achieved by phasing. After each phase, the businesses are recognizably “changed” post deployment and not straddling both the past and the future. Geographic sites can be a viable phasing strategy as sales personnel are often limited to a single geography. Distribution businesses with multiple branches often fall into this scenario, as does plant-centric or line-centric sales teams. Projects that focus on product management as users (such as a list price setting process) can be successfully phased by product lines so long as the change is transparent to sales and customers.
One important stakeholder that needs to be addressed is IT. The prioritization as described above often necessitates technology to have a delayed cut-over time from old systems to new systems. Many projects often begin because an aging system needs to be retired, but it would be in error to put the business at risk by spinning down existing systems prematurely. By ensuring that users are completely adopted to a new process, however, IT can confidently recoup system cost savings when the time is right.
3. Team Capacity
Having discussed scope and risk mitigation by phasing, let us circle back to the most cited reason for delaying or phasing projects: team capacity. The capacity for an organization to take on change ultimately boils down to the capacity of two categories of resources: the technology team and the businesses themselves. Leadership must carefully evaluate their team’s ability to change versus preexisting commitments and the benefits of change vs maintaining the status quo. It is typically in these evaluations that Vendavo’s expertise in both consulting and technology can be leveraged to assess opportunity, map transition plans, as well as temporarily augment existing resources. Typically, there exists a phasing that capitalizes on early adopter enthusiasm and permits the organization to grow in confidence while managing risk.
There is no one-size-fits-all approach to project design, but successful projects typically start with the end user in mind. Their buy-in on a new process ensures a positive internal reference and allows for a clean switch over from previous systems and ways of doing business. To drive that buy-in, projects should include sufficient functional scope to meet their needs yet limit the number of scenarios through careful segmentation of the business.
It can be particularly helpful to consult with experts in these journeys to illuminate potential pitfalls. In this way, the “Right” way to roll out for each business can be developed that delivers the most value for the smallest amount of risk.
If you’re about to undergo a pricing project, consider downloading our new guide, 10 Tips for a More Successful Price Optimization Project.