What will your Smart Phone do next?

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Pandora Reflection

To the members of the board

I just wanted to follow-up with you after Tuesday night’s consulting presentation to provide my feedback and recommendation.  While our company has been operating for several years and we are still in the red, I felt the consultants provided us with several good options for the future.  First and foremost I would say that selling the company is not an option.  While the consultants’ estimates would provide a net benefit of roughly $35MM, this is not why we started the business and I don’t feel like now is the time to exit. 

Now, moving away from that approach, the consultants’ provided three very viable options for the business.  First, a mobile app that would cost a mere $0.99 for consumers to download – costs for this project would estimate $350k per year for developers and search engine marketing expenses.  However, based on the number of smartphone users and existing Pandora users, the net benefit to the company would be $2.0MM in Year 1 and nearly $2.5MM in year 2.

Another option for our company would be a tiered pricing structure which would have a net benefit of $1.5MM in Year 1 and $3.3MM in Year 2.  The issue that I am wrestling with in this option is the fact that we may lose some of our loyal customers.  While the fee to listen for more than 40 hours is minimal, some customers may not want to pay and would just stop using Pandora.

The final recommendation of the consultants was the use of Audio ads.  This option provided the highest benefit to the company at $4.2MM in Year 1 and $6.3MM in Year 2.  While current Pandora customers do actually like the advertising we provide which is unobtrusive, I feel that audio ads would be a good addition.  Like the consultants suggested, these could be short 15 second clips that are played after every 15 songs.  These ads could be done in such a way that customers may not even notice that they are being played.

My suggestion would be to implement a mobile Pandora app and the use of Audio advertising.  After we go forward with these options, we could further look at the tiered pricing structure.

Thank you for your time and please feel free to reach out to me if you have any further questions and/or comments.

Deidra

Harrah's case reflection

To the members of the board

After last Tuesday night’s presentation by the consulting team, I would say there were some good suggestions made with regard to possible upcoming projects for the future. The first thing to mention is the 62% return on investment that we have received on our current IT investments in our data warehouse and closed loop marketing. The next step for our company is to move into the digital age with an online reservation system. While there is no additional capital needed to implement this project, there is a monthly fee of roughly $25 plus $5 per room that is booked. This will take away from our room charges; however it will make it much more convenient for our customers.  Also, if we find this to be successful bringing in more traffic to our hotels, we may be able to pass this charge along to customers in the future.  There is no real investment to be made with this project, but something that will help to improve our customers’ experience.

Another investment for the future would be to spend roughly $50k on a new enterprise server to enhance our data analytics.  A new server would provide for instant saneness checks on customers, as well as faster and customizable analytics.  Our current system has served us well, but is quickly becoming outdated.  An investment now to enhance this system will be beneficial.

The last suggestion made by our consulting team was to leverage our existing data warehouse and data mining expertise to try and market to those outside of the Total Rewards program.  The upfront cost with this project is minimal at roughly $1,000 for a mailing list to 25,000 consumers.  The marketing offer would be for $210 (a combination of chips and dining) per customer.  Assuming 12,500 accept the offer (50% response rate) it would cost $2.6MM.  Now on the benefit side, assuming 30% of those that respond are “quality” customers spending $1500 per year at Harrah’s, that brings in an additional $5.6MM in revenue for a profit of roughly $3MM.  This project would also be maximizing our existing ROI as it is leveraging the data warehouse that is already in place.

It would be my suggestion to move forward with all three of these projects in order to enhance the capabilities that we already have and to try to gain more quality customers at each of our casinos.

Please feel free to reach out to me with any follow up questions that you may have.  Thank you for the time to review this project with you.

Deidra

Opening Pandora's Box

Problem/Issue Statement

In December, 2007, Tim Westergren, founder and chief strategist of Pandora was stuck at a crossroads; he was struggling to balance the interests of investors while staying true to his dream for Pandora.  At the Company’s current growth rate, they were going to run out of cash by the end of the following year.  Westergren had a big decision in front of him – should he take a more conservative path, pull back on growth and raise just enough money to stay afloat for long enough to reach an exit; or should he go full throttle through viral growth and exploit the first mover advantage, raising a more significant amount of capital with the hopes of a possible future IPO?

Situation Assessment

Westergren and two friends began Pandora with the Music Genome Project, a music discovery engine to help connect listeners with artists.  Each song that was entered into the music library would be dissected by analysts to determine its “musical DNA.”  This was how the Pandora team would be able to determine what music listeners liked and recommend future titles/artists based on each individuals preference. 

Pandora began as a back end music recommendation engine for the likes of AOL and Best Buy, but in 2004, after receiving some additional financing, the Company changed strategies and became Pandora.com, an internet radio service that allowed users to state their preferences and find similar music that they may like based on those preferences. Internet radio had growing popularity, in January of 2007, Pandora.com had roughly 5 million registered users (5 million according to Exhibit 3, however it would appear to be more like 6 or 7 million from the text). 

Then in March 2007, the Copyright Royalty Board instituted a major increase in royalties to be paid by internet radio stations for streaming music during 2007 – 2010.  Westergren felt that the new rates would “kill all internet radio stations, including Pandora.”   In response to the CRB, Westergren sent a letter to all listeners requesting their help and asking them to sign petitions to urge Congress to take action to save internet radio.

Here is a snapshot of the music industry as a whole in 2007:

• CD’s were quickly becoming a thing of the past, prices were increasing and consumers were less willing to spend money for an entire CD when all they really wanted was 1 or 2 songs.
• Radio – while still a mainstay medium was seeing declining trends due to satellite radio and other emerging technologies of the time such as digital devices (iPods) and internet radio.
• Satellite radio was going through a transformation with the potential merger of XM and Sirius after both companies had a combined loss of $6B.
• Digital music had the highest trends with digital sales nearly doubling in 2005 and downloads projected to grow at compound annual growth rate of 16% by 2011.  Rather than buy entire CDs, consumers could go to iTunes and purchase individual songs for just $0.99.

Recommendation

Looking at the landscape of the music industry, if Westergren and his team are able to raise sufficient capital, I feel that the risk is worth the reward of “putting the pedal to the metal” so to speak.  The industry is in the midst of transformation, listeners are no longer buying CD’s and they do not seem to be happy with their existing radio offerings.  More and more people are switching to satellite radio and why not then switch over to internet radio and to a “station” that has such a broad offering of music with customizable stations.  We are moving into a digital age where consumers want to be able to customize as much as of their consumption as possible, why not offer customizable radio?

Presentation

My presentation to potential investors would emphasize the current state of the music industry and the declining trends in other mediums.  It is important to point out all of the things that people are currently unhappy with in the current environment and point to ways that Pandora resolves these issues.  A lack of “good music” on the radio?  Pandora provides customized stations based on user preferences.  Unhappy with current advertising on your local radio station?  Pandora advertising is almost discrete in nature and very non obtrusive.  Don’t want to pay for satellite radio?  Pandora is a free service; all you have to do is register.  It would also be important to show in the presentation, the increasing trend of registered users to the Pandora site as well as Pandora’s impact on the overall market.  Musicians/Artists are pleased with the exposure that they are able to get on Pandora as opposed to the lack thereof on local/satellite radio.  Pandora also complements retailers with links to purchase songs if users like them – say you like the latest Bon Jovi song, you can buy it for only $0.99 on iTunes.  It is reported that 34% of registered Pandora users actually spent more money on music after switching over to Pandora and finding new songs or artists that they liked and wanted to hear on their iPods as well.

Harrah's IT Gamble

Dear Mr. Harrah

In response to your request Strategic IT Consultants would like to review with you some lessons learned regarding your data warehousing/mining and business intelligence/analytics achievements over the past couple of years.  As you are well aware Harrah’s has been very successful in its implementation of a data warehouse, customer loyalty program (as well as further enhancements to the same), and closed loop marketing.   These combined efforts resulted in a 62% internal rate of return on investments in information technology, 14% revenue growth in same store sales and increased frequency of visits by customers.

Along the way, the first lesson to be learned is that sunken pirate ships and roller coasters may not be the best investment in a casino’s customers.  While some other Las Vegas casinos were spending millions of dollars on frivolous items as previously mentioned, Harrah’s invested in a data warehouse which was used to support its customer loyalty program and closed loop marketing efforts.  While extravagant items may bring people to your casino, it may not bring them there to gamble – as you are aware, visiting a casino and gambling at a casino are two different things.  You want to attract those customers that are going to keep coming back while continuing to gamble.  It is important to continue enhancements to the data warehouse while possibly integrating a more dynamic analytical tool to further evaluate customers and what they would possibly prefer in the future.

Another lesson to be learned is with regard to marketing.  Rather than using “Harrahisms” and extending offers based on perceived future gaming worth, the closed loop marketing allowed Harrah’s to learn what types of marketing campaigns provide the highest net value.  Thousands of experiments can be done with results evaluated and analyzed to provide feedback into which campaigns provide a higher relative value.  For instance, $60 in chips was better received than $30 in chips, a free room and steak dinner for two at the Tunica casino.  It is important for Harrah’s to continue this research and find which campaigns are best received in each of it’s geographies.

Closed loop marketing also assisted with cross-market penetration.  Viewing Harrah’s as a whole rather than as individual properties assisted with better marketing.  Harrah’s cross-market play more than doubled from 1997 – 1999, during a time when billions of dollars were being spent on luxury casinos in Las Vegas.

Harrah’s has learned a lot on its journey about its customers and the casino industry and should continue to build on this knowledge base.  First and foremost, Harrah’s should continue to invest in its customers, knowing your customers, having the largest client database in the industry has served you well; continue to enhance the workbench and data warehouse to capture as much information as possible about customers in order to enhance marketing in the future.  In that vein, Harrah’s should continue to run experimental marketing campaigns through the closed loop process.  Cross market play is an important part of revenue and being able to increase this two-fold in two years is significant.  Geographic marketing based on which casinos customers have visited in the past and trying to gauge where they may be interested in going in the future could increase this revenue even more.

A new project to look at in the future would be enhancements for mobile devices and social media/networking.  Possibly create an app that could be used for Android phones, iPhones, iPads, etc that could replace actually having a loyalty card.  The app could be scanned in at slot machines or tables and customers could keep track of their loyalty rewards.  The internet is also something that is growing at a staggering pace.  It might be worthwhile to link the Rewards program to customers e-mail addresses.

Please let me know if you would like for my team to come in for a formal presentation. 

We look forward to hearing from you. Thank you for this opportunity.

Bombardier Reflection

Case: Bombardier:  Successfully Navigating the Skies of a Large Scale ERP Implementation

Members of the Board

I would like to follow-up with you after our presentation by the consulting team on Tuesday night.  The consultants had some interesting ideas and our management team learned some good information about the overall industry 12 step standard for ERP implementations.  My research had come across various “industry standard” practices, while the consulting team’s overall framework appears to definitely be more useful.

The consulting team presented us with 3 recommendations:

• Include function specialists in design and implementation activities with formal processes in place that can be based on a scorecard to show progress for both design and implementation. 
• Hire 3 full time subject matter experts (SME’s) with industry knowledge as well as an SAP knowledge base in order to remove IT consultants from the equation.  
• Either enhance the SAP features to accommodate our current specialized contract management process or standardize the contract management process to conform with SAP functionality.

I would agree that both the formal process and function specialists as well as enhancing the SAP features to accommodate the contract management process would be beneficial in our 3^rd round of implementation, I am a little hesitant with regard to the consultant’s second recommendation of hiring 3 SME’s to replace the existing > 400 IT consultants.  According to the consulting team’s presentation, hiring three SME’s would save roughly $130,000 annually, however I feel that more than 3 SME’s would be needed which would no longer make this option as cost effective as suggested.  While subject matter experts are probably something we should discuss in a little more detail as they are probably beneficial to the implementation, I feel that they would not completely take the place of the IT consultants.  This may be a good proposal, but I feel that we may need some more information and/or discussion around this topic before we could offer it as a true recommendation. 

One additional recommendation that I would have in addition to the above would be enhancements to training.  While the consultants felt that our training practices were acceptable, I feel that they could be adjusted after some feedback from employees at the Maribel and Saint-Laurent sites.  Similar to my initial discussions with you on this topic, a more generalized training before implementation may be beneficial with more specialized follow-up training sessions once employees have had the opportunity to use the system.  Feedback from several employees was that from the time they had training to the time they started using the system they had forgotten things.  It would seem that having more follow-up training once people are slightly familiar with the functionality would ease the transition along.

Thank you for your time and please let me know if you would like for me to set up a follow-up with the consulting team.

MS Project

Dear Lee Ann

I would just like to follow-up with you regarding our initial discussion of possible cost-cutting measures.  I was surprised to learn that all of the employees in the Investments Department have Microsoft Project pre-loaded on their laptops. 

While the program is a “nice to have,” at a cost of $442,493 (750 Investments employees * $589.99), this is not a program that is a “need to have” for all associates.   For those employees that are managing projects, the project manager should have Microsoft Project in order to manage the overall timeline of the project with dates for specific deliverables and necessary milestones for the project.   However, this should be limited to the project manager as this person will be responsible for keeping track of the project and making sure that tasks are being achieved within the specified time period.  Not all employees will need to monitor this level of detail of a project.  Also, not all employees are involved in projects of this nature.

It appears that all of our laptops are leased with the Microsoft Project software pre-loaded.   We lease our laptops for a three year period so the annual cost of the Project software for Investments is roughly $147,498 ($442,493/3 years).  We should work with our laptop lessor to see if we could reduce the cost of the laptops if we were to lease them without the software.   This does not necessarily help with money that has already been spent, but going forward this could save us money over time. 

As an alternative we could add Microsoft Project to our Marimba desktop management site.  Project managers could then log in to Marimba and request the software.  This approach will allow only those employees with a legitimate business reason to download the software. 

There are web-based alternatives to Project such as QuickBase for example but this is not necessarily any cheaper.  The most basic version of QuickBase costs $299/month for up to 10 users.  Assuming only 100 employees would require the application, that comes out to $35,880 annually ($299 * 12 months * 10) compared to an annual cost of $19,666 for MS Project ($589.99*100 = $58,999/3 years).   Also if we moved away from having Project pre-loaded on all laptops, the cost could be spread out over a 4 or 5 year period as opposed to just the three years that we lease our laptops for.

Overall, for project management software, I feel that Microsoft Project would be the best alternative however we currently have too many employees that have the software but are not using.  I was not even aware I had it, if we can find a way to limit the number of licenses, this could be a good route to cut some costs without it even affecting employees.

Bombardier Case

Case:  Bombardier -- Succesfully Navigating the Skies of a Large Scale ERP

Implementation

 

Problem/Issue Statement

In the early 2000’s Bombardier committed to replacing its legacy systems with a state-of-the-art integrated system that would allow efficiency and effectiveness throughout its operations.  Senior management felt that given the competitiveness in the aerospace market, moving to an ERP system was necessary. 

However, these large systems efforts are complex and frequently result in lower than expected performance.  Bombardier went through multiple rounds of ERP implementations; with the Company’s first attempt – in 2000 – being scrapped mid-project after $130MM had been spent.   After hiring a consulting team, establishing a new “One Company” vision throughout Bombardier, getting senior leadership on board and creating a project plan, Bombardier was ready in late 2001 to move forward with their Bombardier Manufacturing Information System (BMIS) – a new integrated manufacturing system that would be implemented through SAP.  All of these practices proved valuable as the second round of implementation was much more successful.  Bombardier successfully implemented BMIS at its Mirabel plant and followed suit with implementation at Saint-Laurent.

Seeing the improvement and success with these plants, Bombardier would like to further analyze their implementation efforts and look at a Best Practices approach to ERP implementation to further enhance their project.  Senior management would like to evaluate their situation and see how a Best Practices approach could assist with an even more successful next round of implementation.

Situation Assessment

The first step in a Best Practice approach to ERP implementation would be to define clear goals and objectives.  An ERP system will affect many departments and business processes throughout any organization. Making sure goals are clearly defined as well as what objectives and deliverables each group within Bombardier is looking to achieve will help better ensure the system is capable of effectively achieving the overall goals. Having goals and objectives goes along with having strong management support. 

Another best practice is to ensure that you are choosing the right software.  To gain full value from an ERP system, Bombardier must match the software to the organization’s information needs, processes, functional requirements, and workflows. After much consultation, Bombardier chose to use SAP and implement the BMIS system for manufacturing facilities as management felt it was the best option for the Company.

Bombardier should also prepare for business transformation.  ERP is fundamentally about transforming information flows through an organization.  By definition, therefore, both roles and processes are likely to change during the ERP implementation. Bombardier will need to devote time and resources to change management – ensuring that a clear process is defined and implemented to help workers through the process of change from the old system to the new.

Training and support resources are also essential.  A new ERP system will need highly qualified consultants experienced at implementation and training. The vendor chosen should have consultants readily available to train and support users on the daily use of the system and any problems and questions that could arise. A training program should also be established for new hires.

The next step in ERP best practices is to have a clear implementation plan and timeline.  A crucial part of implementing an ERP system is deciding the exact steps of how it will be done and when. Management at Bombardier will need to make sure all affected departments are consulted as to when the best time is to implement the new system. (For example, choosing to implement an accounting ERP system at year-end accounting closing would be a bad decision.) Making the cut over to a new system in the most crucial periods of business is not a good decision.

Bombardier will also need to allocate the necessary resources.  Allocating the necessary resources, across financial, managerial and end to end support for training and change management is necessary in order for a successful implementation of an ERP system.

Recommendation

Looking at the differences between Bombardier’s implementation at both the Mirabel and Saint-Laurent plants, while both were successful, the process went smoother at Saint-Laurent.  Bombardier had more management support, clearer goals, and better training when beginning the implementation at Saint-Laurent.   The changes made during the process made the implementation at Saint-Laurent go smoother.  Below I will outline some of the missteps at Mirabel that were corrected at Saint Laurent and what Bombardier could do to improve even further.

While the VP of Operations and Project Sponsor continued to show support for the project, the plant manager at Mirabel did not agree with the scope of the project and some internal managers and users felt that the system was being forced upon them.  They were not as eager to implement – attendance at meetings was being delegated downward and IT was complaining that users were not providing sufficient information for training materials.  When examining the Saint-Laurent plant, management was much more involved.  The plant managers felt that the project was theirs, not just IT’s, and took control early on in the process.  This aided with getting all other employees on board.  The vision for the project was clearer when it came time for implementation at Saint-Laurent.  Employees had presentations that preceded training which enabled users to have a better understanding of the change leadership that would be occurring.  Employees felt that there was a need for change and were all on board.  These visual aids/presentations should be continued for all further facilities.  It was good for employees to see how Bombardier was doing versus its competitors and to see that the new ERP system will aid in the Company’s vision.

Training was another key issue.  The Mirabel plant felt that they had insufficient training too far in advance of implementation.  When it came time for implementation they could not remember everything they had learned during training and felt “behind the eight ball” when the BMIS system was launched.  Training materials were re-vamped and the users at the Saint-Laurent plant were more satisfied.  Both facilities however felt that support left too soon after implementation.  Management at the Mirabel plant noted that issues may not arise within the first few weeks of implementation, but rather several weeks or even months later (at this point there was no support staff on the premises – other than power users).  At Saint-Laurent there were similar issues, however the issues that came up after the “Go Live” were more specific in nature and not necessarily general.  These required more in-depth and detailed follow-ups without necessary professionals on site.  For the next round of implementation, Bombardier should make sure that there are at least 1 or 2 people that stay on for an extended length of time at facilities to provide needed support.  Even if it is done on a part time basis, users of the new system need to have the proper training and support available to them in order for the implementation to be truly successful.

Also, training is so important for any new system; as previously mentioned some changes were made between the implementations at Mirabel and Saint-Laurent, these should be carried forward to the next stage of facilities for implementation with some further enhancements.  Training should be closer to implementation with a more generalized theme and then have follow-up, more detailed training once the system is up and running and users have a chance to see it with their own eyes and touch it with their own hands.  Going to training on something that you’ve never seen or used in some respects can be a waste of time.  People may not know the right questions to ask until they can “play” with it.

Bombardier now has clear goals and objectives in place, the most important steps are to continue disseminating the goals and objectives throughout all of the Company’s facilities so that they are aware early on of the changes that are going to be made.  Employee buy in is important for any system, if employees are not going to be willing to use the system it is bound to fail.  Everyone wants their life to be a little easier, showing how the system can and will do that is important.

Presentation

In order to present this case, the consultants should go through some of the Best Practice frameworks that exist and give a detailed approach that Bombardier could use.  It would be helpful to see the successes and missteps along the journey in order to see where the Company did a good job and where improvements could be made.

Is Ubuntu the right choice?

Sir

In our discussion of the Ubuntu operating system, I would like to refer back to our discussion of Google Drive. While it is important to save the company money, and Ubuntu is “free,” saving money may come at a higher cost through a need for a new IT infrastructure.

Although Ubuntu on the surface is free (i.e. no license fees), there is an annual service cost for professional use which I will touch on shortly.  The first important thing to note is that we are leasing our laptops currently, and they come pre-installed with the latest version of Windows.  Laptops are typically refreshed every three years and each computer has the most recent Windows operating system already pre-loaded.  The cost for Windows is therefore irrelevant as it is not something that we are technically paying a separate fee for.

Moving away from the discussion of the operating system itself, Ubuntu runs LibreOffice as an alternative to the Microsoft Office Suite of products.  Using the cost analysis of Microsoft from my earlier Google Drive report, the cost of MS Office 2010 professional for our department is roughly $262k ($349*750 employees).  The last time we upgraded the Microsoft suite was 3 years ago, assuming we can annualize the $262k over 3 years – it comes to approximately $87k/year for our department.   This cost savings would be offset by the cost of Ubuntu professional support services which run $165 per laptop or roughly $124k/year (750 employees * $165).  This would be a net increase in costs of $37k annually.

On top of the $37k annual increase in costs, we should definitely factor in downtime for all associates as they attempt to navigate through and find what they are looking for in a new environment.  While I found LibreOffice (which includes word processing, spreadsheet and presentation capabilities) fairly easy to navigate after just a short period of time, there are still many features that would take time before anyone would be at the same knowledge base as they are with Microsoft.   It could take several months before employees are at efficient usage levels of these products.

Going back to my earlier statement about a new infrastructure; in order to implement Ubuntu in exchange for Windows and MS Office, we would need to hire consultants to work with us for integration with our existing systems and programs.  In particular our trading systems and accounting systems to make sure everything can and will run smoothly.  While I am sure there is a way for everything to work well together, it would require a significant upfront cost.  My suggestion would be to work with Canonical as they are the leader of the Ubuntu project and in my opinion have the most knowledge of the system.  We would need to get an official estimate from Canonical (and other possible vendors), but this could run the Company approximately $1-5MM depending on the length of time and the necessary requirements and changes to our IT infrastructure.

To sum it up, while Ubuntu and Libre offer an alternative to our current technology, I do not feel that the costs would be warranted given our systems are running smoothly in our current environment.  Like Google Drive, Ubuntu seems free on the surface, but would take a significant amount of capital in order to implement.

Zara reflection

As a follow-up to Tuesday night's presentation by the consulting team and our further discussion afterwards, I feel that an upgrade of Zara's DOS based system will definitely be something that we should implement in the future. However, I don't feel that the implementation is absolutely imminent. I do fear that we will lose the ability to have our terminals run on DOS in the future and as such we should begin with new upgraded terminals for any new stores going forward combined with a very slow implementation at existing stores. What we are doing is working and working well, the risk of a complete overhaul and related "down time" in the event of any errors in implementation would be too high.

Overall, my recommendation to the rest of the Board would be to start a slow change over beginning with any new store openings. This will be a good way for us to monitor the new system and really be able to compare and contrast the two operating environments.

Zara: IT for Fast Fashion

Problem/Issue Statement

The question in front of Zara is whether or not to upgrade a currently functioning system, based on the fear of falling behind the technological times. The age old comment is “if it ain’t broke, don’t fix it”; but how could a Company in 2003 continue to use an out of date, DOS operating system for their retail point of sale (POS) terminals. DOS was no longer supported by Microsoft at this time and the Company’s vendor for POS terminals advised Zara that they were the only company that continued to use the “ancient” operating system. While they [the vendor] had no plans to change the POS terminals in such a way that DOS would no longer function on them, Zara management could not get this in writing.

The main issue was that DOS and the applications Zara had built to run on the system worked well. There were hardly ever any calls to IT and the stores were running quite smoothly with the existing infrastructure. Where the existing POS terminals and applications were lacking were in terms of the individual stores inventory management. When a sale was entered into a terminal, there was no way to track that drop in inventory. Inventory was monitored by store managers manually by walking around the store and actually hand counting the number of items that were still on shelves in order to determine what items should be entered into their bi-weekly order forms.

Terminals were also using floppy disks with no networking. One terminal at each location was connected to Zara’s headquarters via a dial-up modem. Employees would need to copy daily sales onto a floppy disk from each of the other [non-networked] terminals and bring it over to the terminal with a modem to transmit sales information to headquarters.

Situation Assessment

While the process that Zara has in place is working just fine for now, the Company is growing at a rapid pace, adding 24 stores from 2001 – 2002 in various different countries. There is no reason to believe that this expansion and growth would cease in the near term. That being said, continuing to use an ancient system with no vendor support runs the risk of having more issues down the road when the Company has even more stores.

The decision criteria for Zara are not necessarily about the cost of the change to a new operating system in 2003, but what the difference in cost would be if they are blindsided by an issue further down the road. The Company will need to evaluate where they see the most risk and combine that with the cost of an upgrade.

Alternative Courses of Action and Evaluation

Zara really only has two main choices in front of them – whether to keep their existing DOS operating system for their POS terminals or to switch over to a newer, supported operating system. They have 3 choices for which Company to use for a new operating system; Microsoft, Unix or Linux.

Zara does not have any cost hurdles to overcome and does not typically use cost-benefit analysis for justifying IT decisions, however their decision criteria should be to evaluate the cost of each of the three providers for a new operating system; running that analysis will give management an idea of the costs in front of them at the present time. They will also need to be very realistic about the probability that terminals will not be able to use DOS in the future.

Management should also consider benefits of upgrading in their decision. New terminals will have the ability to be networked not only within the store, but with other stores and Zara’s headquarters. The terminals would be able to handle returns (currently only done on PDAs) as well as track theoretical inventory with each transaction. Individual stores would also be able to see if other Zara stores had an item in stock, as opposed to calling another store to see if they have a specific item. Also, there would be no need for floppy disks and dial-up modems. With networking sales could automatically be transmitted to headquarters each night. A new operating system would bring about many efficiencies.

Evaluation of Alternatives

Alternative 1 would be to do nothing. While this would cost the Company nothing currently, this runs a very high risk of having issues down the road that will need to be taken into consideration. If Zara’s terminal vendor were to make changes to the terminal that would prohibit the use of DOS going forward, this could delay Zara from opening any new stores. If the Company were to kept the existing growth trend, averaging one new store every two weeks, this could end up costing Zara millions of dollars in lost sales.

Alternative 2 is to choose a new operating system. Here the Company will need to evaluate the three operating systems, mainly on cost. Microsoft, Linux and Unix will all be able to provide the Company with an updated, vendor supported operating system that they can use for all retail stores into the future. All three will have networking capabilities, the ability to better monitor inventory and continue to be used for point of sale transactions. The main difference will lie in the upfront and annual costs for all three.

Recommendation
Choosing Alternative 1 and doing nothing currently is really just postponing the inevitable. DOS is not going to be around forever, the one person at the Company who built the DOS applications may retire and the last thread of support that the Company had will be gone. Zara should choose a new operating system with the decision of which one being based on cost as all three options have the functionality that the Company will need.

Presentation

The presentation should reinforce that while DOS is currently working for Zara, it is an ancient system. Work flow diagrams showing how processes could be more efficient would be helpful. Higher levels of efficiency could tie to better inventory management which in turn leads to higher sales and revenue for the Company.

Junk Van Reflection

Mr. Kingo

I just wanted to follow-up regarding our consultants presentation on Tuesday night of the new proposed IT infrastructure for our organization. I feel that listening to their analysis combined with further review of the Platform as a Service and System as a Service functionalities, has confirmed my initial recommendation for this alternative.

The Platform as a Service / System as a Service alternative will provide the Company with the tools that we need to run the business as well as grow the business in the future (through franchising).

Case: 1-888-Junk-Van

Problem/Issue Statement

Marcus Kingo entered the waste collection business in 2008 and his company grew at a rapid pace.  However, his current IT system was causing information handling errors which was leading to a loss of customers.  Kingo needs to find an affordable IT system that would meet his operational requirements (keeping the virtual business model) and allow the business to grow.

Some of the symptoms of Kingo’s problems: errors in customer contact information, forgotten emails, manual calculations and billing mistakes were causing negative customer interactions – with the most serious issues stemming from the data clerk.  Incorrect versions of the Company’s database were sent to the morning call operator on several occasions causing major delays since only one version of the database could be used at a time.

Most Canadian waste collection businesses were small models, typically operating with one truck.  Customers tended to have many options of who they could use for their waste collection.  Knowing this, Kingo needed to fix his problems before he lost too many customers. 

Situation Assessment

The context of Kingo’s problem lies in the fact that customers were becoming dissatisfied with the Company’s service. 1-888-Junk-Van grew rapidly from 2008-2009, doubling their sales from $300k to $600k, but their operational model was not following suit.  Kingo believed in his virtual model and not having a central office location, however having a database that needed to be e-mailed back and forth without the ability to be used by multiple employees at a time was causing issues. 

The decision criteria for Kingo in the new IT system were as follows:

1.      There needed to be a centralized database which could be accessed remotely since everybody would be working on it simultaneously from different locations.  Internal information should no longer be e-mailed back and forth between the call operators and the data clerk.

2.      E-mails to customers should be automatically sent from the system in order to avoid mistakes and resulting delays.

3.      With no IT background and a business too small to justify hiring a dedicated IT worker, the solution needed to be easy to implement and operate.

4.      The system needed to be flexible and robust enough to handle evolutionary changes in the market or the business.

5.      Vendor support was essential; Kingo wanted to be able to rely on someone for support for as long as his Company was using the system.

6.      Time to implement was critical.  The new system needed to be up and running as soon as possible.

7.      Last, but certainly not least, Kingo was on a budget.  The system needed to be affordable.

Alternative Courses of Action and Evaluation

After some research, Kingo came up with five options.  Here is a list of each of the options with their benefits and pitfalls.

1.      Enterprise Resource Planning (ERP)

a.       Pros:  ERP systems were built around a central database, they were designed to be accessible remotely and claimed to integrate business processes by covering all aspects of a business.

b.      Cons:  An ERP system would be something for a larger organization; even small business quotes were for 20 to 25 users and were typically $2,500 per user per year with additional upfront costs close to the same amount.  Kingo read online that a starting package for a business with 4 user licenses was actually $12,000.  While it was nice to have a system that would encompass a whole business, ERP systems seemed mainly focused on production and finance modules which were not top priorities for Kingo.

2.      Microsoft Access. 

a.       Pros: Upgrading from Works to Access could be done on a budget and in a short time frame.  Access could be installed on individual machines or remotely through the internet and accessed through a secure virtual private network.  Licenses were $179 each and Kingo felt that he could use his personal time on nights and weekends to install the needed software on individual machines.

b.      Cons: While Microsoft Access would seem easy to implement, has vendor support and could be implemented in 2 weeks, in order for the system to be a central database on a remote server would require Kingo to most likely hire some additional IT support which could be costly and time consuming.  MS Access also does not e-mail directly through the system. 

3.      Google Docs

a.       Pros:  Google Docs offered online applications to easily create text documents, spreadsheets, slide presentations and forms.  Forms would be particularly useful to Kingo as they could be easily created and shared with employees.  Employees could work collaboratively on the same file and e-mail distribution was supported.  The cost was relatively low as well.  For Kingo it would be approximately $50 per user per year.  Google Docs could also be implemented in a matter of a few weeks.

b.      Cons:  Kingo knew of some friends who were afraid of using cloud computing, storing sensitive company data on tools and resources that were not completely in Kingo’s control.  Also, data would have to be in one large spreadsheet, forcing everyone to see every field.  Google Docs did not support the idea of a relational database where tables can reference certain information or fields in different tables. 

4.      Custom Application. 

a.       Pros: Kingo could have someone completely customize an application for his business.  It could be web-based, which would be a central database and provide remote access.  The development could take approximately 4 weeks which may be longer than Kingo would like, but still a relatively short time period.

b.      Cons: While this seems like a good alternative, this could be very costly.  King received an initial estimate of $2,000, however this did not include data migration which would be an added cost.  Maintenance would also be an additional $60 per hour per developer and there is no way to estimate how much maintenance would be required.  Another risk with a custom application – there is no way to preview it.  You simply explain to the developer what you want and get an end result; there is no way of knowing if his needs are actually being met.  Also, “vendor support” is billed by the hour post-implementation.  This could easily add up, again with no way to estimate how much.

5.      Platform as a Service (PaaS)

a.       Pros:  PaaS was defined as the provision for computational resources, namely storage, hardware, network capacity and some basic software functionality.   With PaaS, users could use common applications, as well as build their own unique applications using a shared computing platform.  After a trial by a PaaS provider, Kingo felt he would be able to build forms and connect tables himself.  The system was fairly robust and easy to use. Also, implementation, including data migration would take only 3 days. This could be a system that could grow with the Company, and there was no long term contract required, Kingo could increase or decrease his service as needed, even having the ability to cancel with one month’s notice.

b.      Cons:  Similar to Google Docs, PaaS was on a cloud computing infrastructure bringing about the same hesitance in terms of sensitive client information being stored in the “cloud”.  Service packages for PaaS ranged anywhere from $300 to $600 per month, depending on how much storage space, the number of user licenses and the number of applications needed.  Also, if customization was required, there would be an additional charge billed at the rate of $180 per hour. 

Evaluation of Alternatives

In looking at each of Kingo’s alternatives, it is important to look back at the drivers for his decision.  1-888-Junk-Van’s new IT system needs to have remote access, be a central database, have e-mail functionality, be implemented in a short time frame and not be excessive in terms of cost.   Each of Kingo’s 5 alternatives should be ranked for each of his decision criteria. After the ranking, Kingo should see which option comes out as a top choice in the majority of the decision criteria.

Recommendation

I would recommend going with the PaaS system.  While the system could cost $300-$600 per month, implementation would only take 3 days and the system has the resources necessary to have a centralized database and forms.  After the onsite trial, Kingo felt the system was easy enough to use where he could build the forms and tables himself, without the need for additional IT resources.  It is also beneficial to Kingo that there is no long term contract required.  If he felt after implementation that the system was not as straightforward to use he could cancel with only one month’s notice and try to find a different solution.

Presentation

For my presentation, while I think my recommendation may not be the least costly I think it is the most effective in terms of the business processes and where Kingo would like to take the Company in the future.  It would be important to show the pros and cons of each alternative, but reiterate to the Company’s management that they need to have a good system in place that is able to grow with the business.  It only took one year for their existing system to start causing problems.  While cost is definitely an issue and a key driver, a good reliable system is going to come with a cost.  I think Kingo’s statement, “people do not fail, only bad systems do” is important to mention here.  We don’t want to establish another bad system that will only cause more delays and customer complaints in the future.  As mentioned under Evaluation of Alternatives, a table showing each option with each of the decision criteria may be helpful for management to easily see the pros and cons of each alternative. 

P&G Case Reflection

As a follow-up to last night’s presentation from  our consulting team, while I think a leap into the digital age in 2001 is a hurdle we will need to get over, I feel that of our alternatives, the Web enabled EDC will assist the most with our main problem – time to data lock for drug trials.  Looking at our two other alternatives (enhancements to the paper based model and digital imaging), while improvements over our existing method, are not substantial enough to really cut down on the time to data lock.  These methods while not significantly cutting time also come with added costs; express shipping for paper based enhancements and significant data storage costs for digital imaging.

As we all know, for each day a drug is not on the market, there is possibly $1MM in revenue that we are missing out on.  The evidence has proven that although we will need to get some sites up to speed with the EDC technology, over time we can expect to cut the time to data lock by approximately 4 – 5 weeks, which could increase revenues by $28MM – $35MM per trial.  The EDC model will also be beneficial in cutting close to $500k in costs (per trial) just on paper and shipping alone.  It would appear that from a time, revenue and cost perspective EDC is the option to choose for P&G.

CASE: P&G -- Electronic Data Capture and Clinical Trial Management

Problem/Issue Statment:

• Procter & Gamble’s Health Care division completes clinical data trials as a requirement in order to receive approval to market a prescription drug in the United States.  The problem for the Company was what they refer to as the time to data lock.  As defined in the case, the “time to data lock was measured as the elapsed time between the collection of the last piece of data on the final patient in the study (at the site) and the locking of the database.”  It was quoted that for the average prescription drug, each day of delay in market entry for the product costs the sponsor roughly $1MM in lost sales.
• The main problem as mentioned above is the time to data lock.  The longer it takes, the more money the Company is losing from not having the given drug on the market.  The symptoms are what are causing the delay in data lock.  The symptoms here are in the paper based process, the need to complete double entry of data for reconciliation purposes, incorrect data entry which would need to be re-done, etc. The case focuses on the paper-based process, digital imaging and Web-enabled data capture as three possible altneratives to assist in aiding with these symptoms.
• The scope of the problem would be the entire clinical trial management process.  Obviously, clinical trials are necessary in order to have prescription drugs approved for marketing in the United States, the scope of P&G’s problem is looking at this process from start to finish and analyzing all of the areas where the length of time may be shortened in order to speed up the process, without affecting the results. 

Situation Assessment

• Thinking about the context of the problem, it would seem almost ludicrous that clinical trials were taking place on paper and not through some type of electronic technology; how can technology aid in the clinical trial process and decrease the amount of time necessary to complete the trials.  D’Alonzo realized that there is only so much you can do to quicken a paper process, can digital imaging or web-enabled electronic data capture help here?
• The decision criteria are actually quite simple, will the offered alternatives decrease the length of time to data lock while at the same time not raising costs.  Basically, will these process improvements add value to the organization by having the ability to bring drugs to market faster and not increase costs in the meantime.

List of Plausible Alternative Courses of Action

• The case evaluates improvements to the paper based process including using express mail shipments from sites on a daily basis and increased staffing to perform site monitoring and source-data verification more rapidly.  This alternative tries to cut down on time, however there are still many people that need to touch the data and there is only so much that can be done in order to cut down on time.
• The second alternative was for the use of digital imaging.  In this alternative, as opposed to case report forms (CRF’s) being maintained on site in a binder, they would be faxed after verification and stored digitally.  However, this alternative still followed the paper based process, other than the digital image being captured.  Again, this alternative is working toward cutting down time, however the data still needs to be captured on paper and faxed for entry into the back end database.  The data still goes through a double entry process for reconciliation and now there is the cost of storing this data.  Thinking about very large studies, the cost of storage could add up significantly while not really cutting down on time.
• The third alternative was for web-enabled electronic data capture (EDC).  The process allowed for CRF data to be captured into a web based data management system on site.  Predefined validation rules were built into the system, meaning there would be no need for double data entry.  This alternative is the most viable in terms of the ability to cut down on the time to data lock. 

Evaluation of Alternatives

• In order to evaluate the alternatives, the Company should use process flow maps to see where there may be overlap or duplication of duties/efforts where additional time can be saved.  There should also be an evaluation of the costs of each alternative compared with the amount of time that the Company will save.  The evaluation of each criterion will lead to a decision of whether or not to move forward with the alternative.  The evaluation should not be imaginative, but realistic in how much money the Company could be saving and how much more in revenues they could be earning by decreasing the amount of time to data lock.

Recommendation

• A logical recommendation would be to choose the alternative or alternatives that would cut the most time since that is the biggest problem here, but the quality recommendation would also include the actual costs associated with each alternative.

Presentation

• The best way to sum up the case is to go through the clinical trial process and why it was taking P&G so long to complete a trial.  Some good visual aids may show the actual millions of dollars that are being lost during the process.  Selling the recommendation will rely on proving the best alternative saves time and does not add significant costs to the process.  This could tie back to the visual aid showing the amount of money being lost with a new version showing how much more money the company could be earning when cutting time in half.