E Centre for Management Research (1993), the Role of IS in Business Process Reengineering, November

STRATEGY FORMULATION

Phase 3: Implementation

P- E Centre for Management Research (1993), the Role of IS in Business Process Reengineering, November

Porter, M. E. (1980) Competitive Strategy. The Free Press, New York.

Porter, M. E. (1985) Competitive Advantage. The Free Press, New York.

Prahalad, C. K. and Hamel, G. (1990) The Core Competence of the Corporation. Harvard Business Review, May-June, pp. 79-91.

Rockart, J. and Short, J. (1990) IT in the 1990s: Managing Organisational Interdependencies, Sloan Management Review, 30, 2, pp. 7-17.

Scherr, A. L. (1993) A New Approach to Business Process. IBM Systems Journal, Vol. 32, No. 1, pp. 80-98.

Scott Morton, M. S. (1991) (ed.), The Corporation of the 1990s: Information Technology and Organisational Transformation. Oxford University Press, New York.

Stalk, G., Evans, P. and Shulman, L. E. (1992) Competing on Capabilities: the New Rules of Corporate Strategy.

Harvard Business Review, March-April, pp. 57-69.

Venkatraman, N. (1991) IT-induced Business Reconfiguration. In M. Scott Morton, (ed.), The Corporation of the

1990s: Information Technology and Organisational Transformation, Oxford University Press, New York.

Chapter 10—

Putting Soft OR Methods to Work:

Information Systems Strategy Development at Sainsbury's

Richard J. Ormerod Warwick University Introduction

The purpose of this chapter is to relate practical experience in the use of soft OR, systems thinking and other ideas gained in the course of developing an information systems (IS) strategy for Sainsbury's Supermarkets during 1989. It is written from the perspective of the lead consultant engaged by Sainsbury's for the project, fully committed to the success of the project. Other participants would undoubtedly give a different perspective and the paper does not attempt to represent their views. Nor does the paper attempt a critique of Sainsbury's. The case illustrates how, in this instance, a strategy formulation process combined a number of disparate methods and techniques without adopting exclusively the methodology of any one of them.

The interest of the case lies in the design of the process, the choice of methods used, the mixing of several methods in one project and the experience gained in using them to achieve the desired end result. Although there is evidence that the use of soft OR methods is spreading (see, for instance, Mingers and Taylor

¹

), most of the published accounts of use have been by the originators of the methods and their close collaborators: this case is of interest because it was

conducted outside the various methodological 'schools', purely for commercial purposes.

Having described the overall approach to IS strategy development adopted and discussed the issue of choosing, mixing and linking methods, the paper describes the Sainsbury's context and outlines the activities and structure of the project.

The process design and the facilitation issues are then elaborated. Finally, the lessons learnt are discussed based on the practical experience gained. The paper concerns itself with describing the strategy formulation process itself and the methods used. It does not

Reprinted by permission of Stockton Press © 1995 Operational Research Society.

discuss the strategic issues, nor reveal the emergent strategy which is now being implemented.

Approaches to Information Systems Strategy Development

There are many possible approaches to information systems strategy development. Earl

²

suggested that the choice is between 'top-down', 'bottom-up' and 'inside-out'. Ward et al.

³

described a range of approaches and how they link with business strategy. Walsham

⁴

surveyed different ways of viewing the role of information systems in organizations. At the outset of an information systems strategy development exercise for a single business unit, two fundamental choices have to be made, according to Ormerod.

⁵

The first choice is whether to adopt a conventional or a participative

approach. In the conventional approach, the analysis is conducted by specialists who interview and hold meetings with both users and suppliers of IT within an organization. In a participative approach, the users and suppliers carry out the investigation themselves, supported by a process facilitator. This distinction parallels that drawn by Mumford and Henshall

⁶

in the context of systems design. The second choice is whether to take a data orientated or a decision orientated approach. In the data orientated approach the focus is on the analysis of data flows; the aim is to be

comprehensive, resulting in a target architecture and build sequence to guide the development of infrastructure. In the decision orientated approach the method is to identify the most important decisions and to determine how these might be supported by information systems. Both data and decision orientated approaches will result in a list of investment opportunities requiring evaluation against organizational objectives.

The case described in this paper is an example of a participative, decision orientated approach. A participative

approach was taken, both because Sainsbury's wanted to develop a new cadre of senior managers to take on the mantle of systems champions, and because it helps gain ownership and commitment to the implementation of the resultant strategy. A key contextual feature was Sainsbury's willingness to commit the necessary resources, particularly senior management time, which has a high opportunity cost. A decision orientated approach was adopted because most of the key operational systems were already in place, supported by a data architecture that was considered by the information technology (IT) managers to be appropriate. More important to the project was to determine how information could be used to support operational and strategic decisions better. With the participative approach, the necessary understanding of how information flows would be useful in making decisions would be available within the project.

Choosing, Mixing and Linking Methods

The methodological approach adopted for the project has its roots in the interactive planning paradigm proposed by

Ackoff

^7,

8. The aim is to design a desirable future and invent ways of bringing it about. Ackoff's 'interactive planning'

paradigm, based on

the participative, continuity and holistic principles, includes such concepts as formulating the mess, idealized design, technological feasibility and operational viability. Ackoff makes a series of assertions which capture the essence of what was required from this project:

'. . . there are no experts when it comes to answering the question: what ought a system to be like? Here every stakeholder's opinion is as relevant as any other's.'

'Because engaging in such design is fun, participation is not hard to get.'

'. . . idealized design facilitates the incorporation of the aesthetic values of the stakeholders into its planning.' '. . . participation in idealized design tends to generate consensus among the participants.'

'. . . idealized design mobilizes its participants into a crusade in pursuit of its product.'

'. . . idealized design releases large amounts of suppressed creativity and focuses it on organizational development.' '. . . the idealized design process expands its participants' concept of feasibility.'

These ideas resonate in many of the strategic problem solving methods such as strategic choice

⁹

and soft systems methodology (SSM).

¹⁰

It was envisaged from the start that a mix of methods would be used within the process decision. At the time of the project there was little in the literature to guide such choice, notable exceptions being the papers by Bennett

¹¹

and Matthews and Bennett.

¹²

Bennett suggests some useful distinctions and frameworks when considering linking two or more methods. One distinction he draws is between 'theoretical' and 'practical' aspects of each method. He takes 'theory' to include the particular models, formalisms and the background assumptions, stated or unstated. 'Practice' refers to the process of decision-aiding. A second distinction identifies two classes of 'theory'. Methods such as

hypergaming are underpinned by 'theories about the structure of the (social) world'. Others, such as cognitive mapping and strategic choice, also contain 'theories of decision processes'. These latter 'theories' can inform 'practice'.

Linkage can be considered between two sets of theories, two sets of practice or between the theory of one method and the practice of another. Further, Bennett distinguishes three types of linkage, which he labels comparison, enrichment and integration. Under 'comparison', methods are compared for theoretical or practical similarities or differences as a precursor to more ambitious forms of linkage. 'It has the direct benefit of clarifying the applicability of the various methods in different circumstances.' 'Enrichment' refers to the improvement of one method by taking on board elements of another, without producing any new overall content. 'Integration' is 'reserved for work which while involving elements of existing approaches, also provides something new'. Bennett gives brief examples of

'experiments' involving hypergames, cognitive maps and strategic choice. In one example, cognitive maps are used to enrich a hypergame analysis. In a second, strategic choice is used to pull together the results of hypergame analysis and cognitive mapping conducted in parallel.

Matthews and Bennett describe a case study involving both cognitive mapping and strategic choice. Cognitive

mapping was used to support the interviewing stage of the process; strategic choice was used at a group meeting to

develop decision packages.

The authors report that 'Translating from the maps into the strategic choice format, while not a mechanical process, had proved fairly easy.'

Since Sainsbury's project was completed a number of other relevant papers have been published, notably in a book edited by Eden and Radford

¹³

. A section of the book dedicated to mixing methods includes articles by Cropper, Bennett, Bryant and Huxham and Eden. Cropper

¹⁴

suggests that the use of methods is constrained by:

• the nature of the problem or task being addressed

• the degree to which a formalism is employed, and

• the personal style of the consultant and the way in which the method is used with clients.

Cropper concludes that a simple contingency theory of choice of method is insufficient as a methodology for group decision support. More specifically, he considers the problems of mixing cognitive maps

¹⁵

and hypergame analysis

¹⁶

. Bennett

¹⁷

considers the combination of conflict analysis (metagames

¹⁸

, hypergames, etc.), cognitive mapping, and strategic choice. Recognizing an element of happenstance in this choice of methods, Bennett builds the intellectual case for linkage by considering both similarities and differences between them. As to similarities he suggests that all the methods are designed to help small, relatively autonomous groups of people make non-routine choices. His second similarity is that all the methods he considers are designed primarily for a style of working in which consultants work with clients, rather than producing analysis for them. In terms of differences, Bennett points out that the characteristic nature of 'surprises' produced by each method is different. For instance, the hypergame model may suggest an

apparently powerful threat can be evaded whereas cognitive mapping may unearth virtuous and vicious circles.

Bennett suggests the choice between, for instance, strategic choice and hypergaming, turns on whether the problem can best be defined in terms of uncertainty or conflict.

Bryant

¹⁹

considers mixing cognitive mapping with hypergame analysis. Huxham and Eden

²⁰

consider the use of formal game theory and hypergaming for the analysis of the dynamics of competition. They report on the difficulties they experienced in attempting to use gaming theory within a cognitive mapping process.

Common to all the discussion of choosing, mixing and linking referred to above, is an interest in cognitive mapping and gaming. Ackoff's interactive planning, Checkland's SSM and other possible approaches are not considered.

Interactive planning centres on practical aspects, sharing with cognitive mapping and strategic choice the recognition

that decision-making practice is a social process. SSM, like hypergame analysis, has at its centre a particular way of

conceptualizing the world. However, SSM also includes a process design for practice. Common to all the 'soft'

methods considered above is the recognition that there are actors with different points of view, the actors each have

their own interpretation of reality, and agreement to act depends on negotiation between the actors. This underlying

interpretive philosophy contrasts sharply with the positivist approach assumed in many methods. On the evidence

cited, there would appear to be no reason to believe that mixing soft methods within a project leads to insurmountable

difficulties.

The Need for a New Strategy

Sainsbury's is a leading supermarket chain in the UK with a turnover in the year of the project, 1989, of about £6 billion. A wide range of food and non-food, branded and own label, products are obtained from suppliers. The goods are received into over 20 centralized warehouses which hold stock and prepare daily vehicle loads for the branches.

Some 300 branches receive and display the goods and serve customers. A large, out-of-town store will consist of over 30,000 square feet of selling space, a large car park and other facilities which may include a coffee shop and petrol station. Current investment is dominated by a programme of some 20 new stores per annum.

Both inside and outside the company there is widespread recognition that the use of IT has contributed significantly to the successful record of profitable growth. The results can be seen in a direct and measurable way in terms of reduced depot stock and enhanced depot service to the branches. Less measurable, but no less real, has been the ability to manage the increased volume and product range that the systems enable. It is this ability, to reliably handle large volumes of a wide variety of products in a dynamic market environment, that underpins Sainsbury's growth; a growth which Sainsbury's management readily acknowledge would not have been possible without IT.

The foundations for Sainsbury's IT systems were laid in an outline IS strategy in the late 1970s. Against this strategy, a set of computer systems had been progressively developed, providing basic support for the business. Early in 1988, the company concluded that the implementation of the plan, which they believed had successfully put them ahead of the competition, was largely complete; that there was an opportunity to move further ahead; that to do so, a new strategy for the 1990s needed to be devised.

It was decided that the next stage required a formally managed project which came to be referred to as the Corporate Systems Strategy Project. It was envisaged that the project would be progressed by a team of senior managers from the main line departments led by the Data Processing (DP) Department. The team would be required to understand the current business processes, to evaluate the future scope of technology and then to identify user needs and opportunities that would increase profitability, service and competitive advantage and would reduce cost.

It was felt that a one-off exercise such as this would benefit from outside advice and assistance. Proposals were sought from several major consultancies, from which PA Consulting Group were chosen with the author as the lead

consultant.

The Context

Over the preceding ten years, Sainsbury's had achieved an outstanding financial record of sustained profit growth, year on year. Sainsbury's management believe that clear direction, attention to detail and willingness to innovate had

maintained Sainsbury's at the forefront of grocery and food retailing.

Perhaps one of the most surprising things about Sainsbury's, the largest food and grocery retailer in the UK, is the focus it retains. The centre not only determines direction but it is close to the front-line operations and the marketplace.

This is possible

because the 300 branches are all doing essentially the same thing. The business is comprehensible as a whole: the practical implications of policy changes can be envisaged or seen. Experience is transferable and cumulative: a problem in one branch leads to changes in practice applicable in all; best practice can be captured in standards and procedures. The result is a clarity of purpose emanating from the centre in the form of both direction and standards, supported by a well honed administrative system. A description of Sainsbury's approach to management can be found in Reference 21.

It is part of the company's folklore that attention to detail has been fundamental to success. There have also been a number of upheavals in retailing since the second world war, including the moves to self-service, centralized

distribution and out-of-town superstores. However, between these upheavals there have been relatively long periods of stability; during these stable periods protagonists in the marketplace compete on product and service.

Innovation is considered by Sainsbury's to be a key component in the pursuit of the company's objectives of offering the customer quality product, value for money and service, all to high trading and hygiene standards. Notably, Sainsbury's led UK food and grocery retailing in the introduction of high quality own label products, centralized distribution, checkout scanners and debit card facilities. Innovative leadership is not considered by Sainsbury's as an end in itself: they believe that the choice of improvement, the timing of its introduction and getting it to work in the demanding retail environment are all more important attributes.

To achieve the tight, disciplined operation required to handle the variety and volume safely and efficiently, in common with other large food multiples, Sainsbury's have adopted a functional organization, the main three operational

functions being the Trading, Retail and Distribution Divisions. Each of these divisions contains an operational

hierarchy together with a planning and direction setting capability. There are clear lines of demarcation and established procedures for coordination between functions. Operational policies and joint direction are determined centrally by a combination of formal and informal processes. A key role is played by Board sub-committees, many of which meet weekly to respond to market and operational issues as they evolve. Other major divisions include Development (property acquisition, development and construction), Personnel, Finance and Data Processing.

Systems support the ordering-supply-logistic process, the front end of the stores and the buyers. These operational systems, which manage the basic processes of the business, provide data to support the accountability, policy setting and directional activities.

An Outline of the Project

The project commenced in the second week of February 1989. The approach proposed by the consultants was:

to work closely with Sainsbury's in a learning process, involving a new generation of managers, fostering creativity and mind broadening, producing an IT strategy that fits Sainsbury's, based on a shared understanding to generate commitment at Board Level.

The emphasis on learning, creativity and mind broadening signalled a radical break with traditional IS strategy development exercises. The emphasis on fit is a reminder that before embarking on any course of action the Board needs to reassure itself that Sainsbury's basic trading stance and values remain intact. Thus, a creative approach with a safety net was envisaged. This section of the paper is a formal description of how these high level aspirations were put into effect.

The approach adopted evolved around the participation of different groups in a process of seminars, workshops and project work. The role of each group had to be clearly defined.

The Groups

Four groups were distinguished whose composition and roles were as follows.

(1) The Steering Committee consisted of the joint Managing Directors and the Board Member for Distribution and IT, advised by the Director of IT, and the author. The role of the Steering Committee was to monitor progress, provide guidance, explain policy and to exercise judgment on the desirability and feasibility of potential systems. The Steering Committee would provide the bridge to the rest of the Board, reporting on progress and obtaining agreement to the resulting strategy.

(2) The Task Force consisted of 16 senior managers chosen to provide experience of the different aspects of the business. The role of the Task Force was to conduct the study within the guidelines laid down by the Steering Committee, to input their knowledge of the business, to identify those areas of the business where systems might be developed to advantage and to draw up a list of the candidate systems.

(3) The Advisory Group consisted of the senior managers of the DP Department. Their role was to understand the approach taken by the Task Force in order to provide systems support, including the evaluation of the technical feasibility and cost of the suggestions.

(4) The Project Team consisted of the IT Director, the author and two assistants. The role of the Project Team was to guide, stimulate and assist the Task Force, to administer the project and to communicate with the Steering Committee.

It was also their task to pull the final strategy together for agreement by the Steering Committee.

The Project Phases