Strategy improvement through intelligent management tools in Croatian firms
Marina Dabić[1]
Vice Dean
Assosciate Professor
University of Osijek
Mechanical Engineering Faculty
Management, Organisational and Informational Department
35000 Slavonski Brod
Trg Ivane Brilic Mazuranic 18
Croatia
tel:++385 (0)35 446718
Mirjana Pejić-Bach
Assistant Professor
University of Zagreb
Graduate Business School
Informational Department
Kennedyev trg 6
10000 Zagreb
e-mail:
1. Introduction
Trends that appeared together with the development and the increasing application of information technology, whose influence on the organization structure is the greatest, are the business globalization, change in the structure of employees, elimination of boundaries among the parts within the organizations, but also among individual organizations.
With the increasing globalization of the business the Central Eastern European Countries (CEE) such as Croatia will face mounting competitive pressures and further squeeze on effectiveness. For the adequate running of the business operation all the requisite various information with which quantity, value and quality (or any other important) characteristics of operations are presented. However, their treatment is linked to the variety of content and methodology issues (Gunton, 1998; Fry, Stoner, 2000). Given the complexity of the management environment the development of a corporate managerial tools and techniques is likely to include the applications of strategy methodologies and information systems as tools to facilitate the exploitation of the full potential of management. What is happening is the realization that there is a new measure of tools, global tools, which incorporates the accelerating tempo of decision-making and at the same time the growing complexity of the basic concept of managerial tools due to its global nature.
This paper examines the dimensions of accepted managerial tools and techniquesin Croatian companies, develops a means for visualizing global management and provides insights into how to develop a support infrastructure for middle managers who have to deal with the issues associated with competitionin global time. In sum, this study addresses the following research question. To what extent are intelligent managerial tools recognized in Croatian firms as the importance attributing to corporate success by managers and professionals?
2. Theoretical background
In each company, there seems to be something that is as the core competence of the firm’s existence, and has roots of the firm’s in driving it forward. Quality and process improvements are recognized major strategic issues for those who wish to compete successfully. Comparatively few studies have examined the role of managerial tools as a tool for middle mangers to anticipate and address success (Reh, 2005; Singh et.Al.,2000; McQuater et.al., 1995; Rigby et.al., 2005).However, there are two factors, information technology and management, which are considered both by a great number of theoreticians as well as practitioners as being those that will make possible the construction of an organisation that will satisfy the challenges of flexibility, and in the same time provide the needed control, because in today’s companies everything seems as if it were getting out of control.
Possibilities of information technology are being increasingly studied and accepted by the modern business world (Malhotra, 1999). To be able to determine oneself within a turbulent environment and not just overcome the turbulence means to gain advantage. However, how is one to provide constant monitoring and responding to the changes in the mean time? Within the field of management there appears to be shortage of tools and techniques that describes best practice for managed business improvement by implementation of management tools and tecniques.
Firstly, some definitions are required. What are tools and techniques? According the McQuarter et al (1995) they are practical skills, methods means or mechanisms that can applied to particular task. A very simple tools can be Pareto analysis, control charts etc. A techniques has specific application and resulting in the search and needs for more training, knowledge and skill if we wish to used them efficiently. In 1993 Bain and Company launched a multiyear research project to get the facts about management tools. The research is conducted every two years. The full definitions of the 25 tools along with the guide to resources on each one appear in the Bain & Company booklet Management Tools 2005An Executives Guide (Rigby, 2005).
Altough in the Bain research 25 management tools are examined, this research is focused only to themanagement tools that heavily lie on the extensive use of information technology. We call these tools intelligent management tools because of extensive use of information technology increases capability of firm to learn (Sharif, 2006).
These tools are: Strategic Planning; Total Quality Management;Knowledge Management;, Customer Relationship Management; Business Process Reengineering; Balance Scorecard, Scenario and Contingency Planning, Supply Chain Integration,Mass Customization, Six Sigma, and RFID. In the next session we shall describe them briefly.
2.1. Strategic planning System
Lorange and Vancil (1977) in their work,Strategic planning System, make useful definitions of strategy, objectives and goals and put forward five pillars for planning, as follows:(1) Planning systems should help to formulate strategic choice, (2) Plans must be understood at all levels, communication, opinions interaction and iterations are to be stressed. (3) Plans have to be consistent in formats, method, deadlines so that confusion in planning reviews and consolidation can be minimized, (4)Planning system should be integrated with other management systems, and (5) Line mangers must be centrally involved in planning.
However, in the last decade approaches to strategy has been changed and adopted as a new management paradigm. In addition, much attention is given to the role of “new manager”(Mintzberg, 1994; Porter, 1991). As Davidson described (1995) change management has its basis in leadership, shared purpose and values and the role of the manger as facilitator and coach.Today, strategic thinking offers managers and their companies the opportunity to move beyond theautomatic application of traditional strategic frameworks to identify and to achieve breakthroughmarketing strategies (Fodness, 2005).
2.2. Total quality management
Total quality management has been stimulated by the need of firms to sustain unchanged quality of its products or services. The fundamental principle behind TQM is that management of quality is addressed at all levels of an organization. Luthans (1995) summarized TQM as being a participative system that empowers all to take responsibility for improving quality in the organization.Improvements are made on a continuous basis by applying the theories and approaches of managers in an attempt to improve quality and decrease costs (Hellsten, 2000). Recently, sustainability of values, tools and techniques as additional core value of the components of TQM are evaluated based on perspective of sustainable quality management, rather than tactical and operative ones (Svensson, 2006).
2.3. Knowledge management
In the "new economic growth theory" various scholars shifted their focus from traditional, tangible capital assets in the neo-classical model to intangible knowledge assets accumulated through science and technology investments. Knowledge management has continued to generate an enormous amount of interest from the early 1990s, with some proponents contending that the knowledge-based view represents a fundamentally new theory of the firm (e.g., Nonaka and Takeuchi, 1995).
Knowledge management is here defined as the management of tacit and explicit knowledge with the purpose of creating organizational learning innovation and sustainable competitive advantage through the use of information technology.Much of this debate began by distinguishing between information and knowledge and has subsequently delved into the meaning of knowledge, determining how knowledge is generated and disseminated, setting out the foundations of a knowledge-based theory of the firm, prescribing the adoption of a knowledge perspective and so forth (Nonaka, 1994; Kogut and Zander, 1992, 1993; Spender, 1996; Grant, 1996; Nonaka and Takeuchi, Teece, 1998, Nonaka and Teece, 2000).
Acquiring managerial skills and technical know-how will further improve operational efficiency and enhance the competitiveness of organizations in Eastern Europe, ultimately improving living standards and broadening the market base which is currently constrained by poverty and high unemployment.
2.4. Customer relationship management -CRM
Kotler and Armstorng (2004) define CRM as “the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction.”Customer relationship management (CRM) is a process or methodology used to learn more about customers’ needs and behaviors in order to develop stronger relationships with them. CRM frequently employs IT technology as a means to attract, develop and retain customers (Lindgreen, et.al., 2005). However, CRM is not primarily technological term, but it consists on many components: key customer focus, CRM organization, knowledge management, and technology-based CRM (Sim et.al, 2005).
Accurate customer data is essential to successful CRM performance and according to that fact, technology plays an important role in CRM as value added to organizational intelligence (Abbott et al.,2001). AlthoughCRM is not primarily the information tool; it is associated with heavy investments in information technology that has not always proved their profitability (Compton, 2004). Still, investments in CRM have top priorities according to the Morgan Stanley CIO Survey (Zencke, 2004).
2.5. Business Process Reengineering
Re-engineering is alternatively known as re-cyclin, reclamation, remarketing, de- manufacturing and has the various means by which product or components can be re-used. Hammer and Champy (1993) in their work recognized some frequent themes in re-engineering process such as worker participation in decision making is increased; there are fewer checks and controls; the work is done where it makes sense; and the steps in completing a process are done in a natural order. The different surveys existed in that field and they concluded that the introduction and implementation of process reengineering has produced mixed results(Stoddard et al., 1996)
2.6. Balanced scorecard system (BCS)
Over the last decade there has been move toward a more balanced measurement process. Kaplan, Lowes and Norton developed the balanced scorecard system (BCS) (1996). The balanced scorecard seeks to assist business in clarifying their visions and strategies and provide them with a means by which they can be translated into action. The BSC is designed to link the data together in ways that produce better information and decisions across all levels of the organizations. The four perspectives of the BSC framework include:
- Financial - which includes metrics such as cost benefit analysis and financial risk assessment
- Internal business processes –how well your core processes produce value
- People and knowledge- which seek to identify where employee training budget can be best deployed with the goal of ensuring continued individual and corporate improvement
- Customer – This focuses on the analysis of customer satisfaction and different types of mechanisms for that.
2.7. Scenario and Contingency Planning
The majority of today’s production companies are subjected to the influence of an extremely dynamic, even turbulent environment (Schoemaker, 2002).Frequent, stormy and above all, unpredictable changes occur in such environments, whose causes and consequences are sometimes hard to find and relate. One tries to explain such environment and its influence on the business activities through theses of new scientific disciplines such as synergetic and theory of chaos (Gharajedaghi, 1999).
Scenario management combines methods of systems thinking, future-open thinking and strategic thinking (Fink et al.;2000; Fink; 2002). A scenario is “one of several future images that describe a future situation based on a significant number of consistent developments”. The use of these scenarios in corporate or business planning is described as scenario management. Strategic contingency controlling is usedin order to ensure that their strategy is always in line with the current developments of their industry, market, competitors and global situation.
2.8. Supply Chain Integration
Both information and material flow from the supplier to the customer, through a manufacturing company. Although firms traditionallygave much attention to the flow of material, it has become important to firms to manage the supply chain in order to improve customer service, achieve a balance between costs and services, and thereby give a company a competitive advantage.At strategic, tactical and operational level the use of all of the firms’ resources have to be coordinated, which could be achieved in three phases: (1) evaluation of the competitive environment; (2) diagnostic review of the supply chain; (3) development of the supply chain, which involves functional integration, internal integration and finally external integration (Stevens, 1990). The sudden increase in electronic commerce and the Internet have resulted in new opportunities to improve the performance of the supply chain (Lankford, 2004).
2.9. Mass customization
In the past, firms had to choose to produce either product specifically customized to the customer, or product that is standardized. The firms had to choose, to be large and standardized or small and customized. Therefore, the idea of mass customization is basically contradictive, because it allows firms to produce customized products to the large number of customers.
Mass customization involves the production of mass produced, standard products, with slight variations for particular marketor customer segments.According to Sean (1996) the customers now has been pushed to specify their exact requirements without extra charge for it. Pine (1993) cites five methods that firms should use in order to achieve mass customization: (1) customize services around standard products; (2) create customizable products; (3) provide point of delivery customization; (4) provide quick response; and (5) modularize components.
2.10. Six Sigma
Researchers and consultants have tried to set criteria in which one six sigma methodology becomes a priority over the other for current processes and products. Current literature presents growth and investment of six sigma in industry.It is focused on improving processes by eliminating variation using a well-structured methodology.The main objectives of six sigma is to reduce potential variability from processes and products by using either a continuous improvement methodology or a design/redesign approach known as design for six sigma (DFSS). The former follows the phases: define, measure, analyse, improve and control.(Bañuelaset.al.,2004)
2.11. RFID
RFID is a short term for Radio Frequency Identification. This technology uses devices attached to objects (e.g. products) that transmit data to an RFID receiver. Back in the 90-s RFID technology was novel and promising but with high costs of implementation (Byfield, 1996). Today, RFID is used as an alternative to bar coding. Its advantages are large data capacity, read/write capability, and no line-of-sight requirements. Its disadvantage is today the same as ten years ago – high investment costs.
3. Research approach
Survey research on using intelligent management tools in Croatian firms was carried out in December, 2005 on a random sample of 200 firms by mail. The questionnaire was mailed to the sample firms, among with 53 firms participated in the survey.
In each selected firm the interviewed person was determined to be involved with strategic decision making. In small companies the interviewee was at least information manager or the owner of the firm. For this quantitative survey research a special questionnaire for applying the method of mail interviewing was designed.
The goals of the survey were to estimate familiarity of Croatian firms with intelligent management tools, and to compare the results with the survey on usage of the same tools in world-wide companies (Bain, 2005).
3.1.Intelligent management tools in Croatian firms
In this part of the paper familiarity, usage and satisfaction of Croatian managers with intelligent tools is presented.
Croatian managers are rather familiar with intelligent management tools (Table 1). The most familiar intelligent management tool is Strategic Planning (86,7%). It is closely followed by Total Quality Management (71,7%), Knowledge Management (69,8%), Customer Relationship Management (67,9%), and Business Process Reengineering (66%). Other tools are familiar to less than half of the managers in the sample.
Table 1. Number of respondents that are familiar with the tool
Number of firms / % in total number of firms1.Strategic Planning / 46 / 86,8%
2.Total Quality Management / 38 / 71,7%
3.Knowledge Management / 37 / 69,8%
4.Customer Relationship Management / 36 / 67,9%
5.Business Process Reengineering / 35 / 66,0%
6.Balance Scorecard / 24 / 45,3%
7.Scenario and Contingency Planning / 20 / 37,7%
8.Supply Chain Integration / 19 / 35,8%
9.Mass Customization / 15 / 28,3%
10.Six Sigma / 7 / 13,2%
11.RFID / 4 / 7,5%
The usage of intelligent management tools can give us feeling of where do executives’ strategic priorities lie (Table 2). Usage of intelligent management tools in Croatian firms indicates that their managers are oriented to three things: future, customers, and quality.
Croatian managers most intensively think about the future. Strategic planning is their preoccupation (69,8%), but they do not use Scenario and Contingency Planning too often. However, they are ready to reorganize itself with the Business Process Reengineering (28,3%).
Based on high usage and satisfaction with Customer Relationship Management (39,6%) both with Knowledge Management (35,8%), Croatian managers obviously think about customers, how to acquire them, keep them, learn more about what they want, and satisfy their needs.
Global economy turned the whole world into the one marketplace. Strong competition forces the firms not only to monitor the customers, but also to take care on the quality of its products. Based on high usage of Total Quality Management (28,3%), Croatian managers are following the trend. However, in the same time they rarely not use Six Sigma method in obtaining that goal.
Table 2. Number of respondents that use the tool
Number of firms / % in total number of firmsStrategic Planning / 37 / 69,8%
Customer Relationship Management / 21 / 39,6%
Knowledge Management / 19 / 35,8%
Business Process Reengineering / 15 / 28,3%
Total Quality Management / 15 / 28,3%
Supply Chain Integration / 8 / 15,1%
Balance Scorecard / 7 / 13,2%
Scenario and Contingency Planning / 6 / 11,3%
Six Sigma / 1 / 1,9%
Mass Customization / 1 / 1,9%
RFID / 0 / 0,0%
Respondents were asked to evaluate intelligent management tools with score from 1 to 5, where 1 means “Not at all satisfied”, and 5 means “Very satisfied”. The average satisfaction scores for each tools are presented in the Table 3.