Stark Thompson, CEO of Life Technologies, Inc., put down the draft of the "IT Strategy" document with mixed feelings. He was pleased with the work itself but concerned with the need for further progress and concrete results. To what extent and how could the learning of the IT Strategy team be sustained and disseminated to other managers? How could the consensus reached within the team and to some extent by his Executive Team and Board of Directors in reviewing the conclusions of the IT Strategy be maintained? In particular, how could the success to date of the IT Strategy effort be used to ensure success and acceptance of AGILE, the major corporate-wide implementation of the operational packaged software? What if anything should be done to make sure the investment and focus on AGILE led to needed applications in sales, marketing and decision-support in a reasonable time?
Thompson believed the next steps in management of IT were critically important to the success of LTI’s business strategy and competitiveness. After a few moments, he walked next door to the office of Joe Stokes, his CFO and the person to whom corporate IT reported. "Joe," he said, "with the IT Strategy now done, give some thought to what we ought to do next. I’m off to a Board meeting in New York today, then to Europe and around to New Zealand and Japan through Sunday. Let’s meet in a week on this."
Life Technologies, Inc.
LTI was the world’s largest developer and manufacturer of products for use in life science research and biomedical manufacturing. Its 3,000-plus products were used in disease research, genetic therapy research, and large-scale manufacturing by drug firms. 1995 revenue and income were $272 million and $22.3 million, respectively. 1996 appeared to have been another record year. The company employed 1600 people in operations in 21 countries and sold through distributors in others. Over half its sales were outside the U.S. Manufacturing facilities were in the U.S., Scotland, Germany, New Zealand, and in a joint venture in Japan. Growth of sales and income for the past few years had averaged ten to twenty-five percent per year. Growth was achieved about equally between acquisitions and joint ventures with other companies, on the one hand, and internally-generated sales, on the other. The company had been traded publicly on the NASDAQ since 1986. 54% of LTI stock was owned by The Dexter Corporation, which acquired a majority interest in the company in 1983.
LTI was estimated to have 23% of the total markets for its products. The company was matrix-organized by region (U.S., Europe, and Asia-Pacific), by customer (academic, public/private research, and manufacturing), by major product line, and by function. A traditional strength in its growth had been research and new product development. While R&D was seen as a continuing need for market leadership, in 1995 Thompson had led his Executive Team in developing a business strategy which placed additional emphasis on customer satisfaction, manufacturing and IT as elements in future competitive success. (A summary of the 1995 business strategy is given as Exhibit 1.)
IT at LTI, and the AGILE Project
Early computer systems at LTI evolved from the separate systems of the entities which merged to form the company. Early efforts to impose uniform systems across disparate geographies and functional entities were largely successful with financial systems and partially with manufacturing systems, using IBM system 36 and subsequently AS400 platforms. Nevertheless, Thompson recalled that when he became CEO in 1988, systems were "a disaster waiting to happen." Wally Wells was hired as director of I/S under Joe Stokes in 1990, and saw to a significant integration in manufacturing systems using an MRP (materials requirements planning) package on a UNIX platform. Still, local adaptations of systems, combined with a high degree of divisional autonomy in management, led again to incompatibility of applications.
In 1992 Wells and Stokes led an effort to achieve a higher degree of integration, efficiency and commonality using IT. With the support of Thompson and other key members of the Executive Team, a group was formed which led to the selection of JD Edwards packaged software for finance, order entry/distribution, and manufacturing. The team and senior management saw the opportunity to have a uniform platform of transaction systems across the globe, and that such a base for specific and unique applications would provide an efficient infrastructure and common data for enabling of LTI’s business strategy. The overall project, known as AGILE ("A Globally Integrated Life Technologies Enterprise"), had an initial budget of $5 million. It was approved by the Board of Directors in October, 1994, and was expected to be completed by December, 1996. In January of 1997 the financial implementation was substantially complete in the U.S. and Europe, but some 20 full-time equivalents (including several outside consultants) were working on the distribution and manufacturing projects of AGILE. The total revised estimated cost to completion was $5.2 million, and expected final completion date was late 1997. Including AGILE, the total IT staff worldwide in January 1997 was 70 full-time equivalents, and with a total budget of some $8 million annually.
It had become evident early in 1995 that the initial target implementation dates for AGILE were much too ambitious. Line managers, particularly in marketing and sales, while expressing continued full commitment to AGILE, proposed to Thompson and Stokes the parallel development of non-AGILE applications, particularly in what was called "electronic marketing". This was discussed and generally accepted in an Executive Team (the top ten managers, who met monthly) meeting in August, 1995, and reinforced in a meeting of the World Wide Leadership Team (the top 70 managers, who met quarterly) early in 1996.
While Stokes and Wells wanted to meet the important systems needs of users, they were concerned that the electronic marketing effort would detract scarce resources from AGILE. Moreover, they felt the need for new applications was not always as urgent as their advocates perceived. They believed that with some patience by user management, and full support by line management of AGILE, the applications could come as the next steps after package implementations with much greater efficiency and long-term benefit. Finally, the implementation of financials, the first phase project of AGILE, was meeting some resistance in Europe and Asia-Pacific as the implementation team pressed to meet deadlines and users discovered unanticipated changes required by the new system. Early in 1996 Stokes commented:
We had support for AGILE from the line and senior managers, but they are under pressure to meet their business targets and continue operations, which can run counter to changing things in an organization as lean as ours. AGILE is the biggest project of any kind in the company’s history, and we are not a project-management oriented culture. People are not used to setting deadlines and having to meet them. We respect the customer, but what our managers see as customer demands for EDI (electronic data interchange) and internet connections usually turn out to be unreal. Our guys have to understand what we are doing and not think the sky is falling...
The outcome of these pressures and concerns was agreement by Thompson and the Executive Team to undertake an IT Strategy exercise. The purpose of this was to develop an IT Strategy and, in the process, initiate education of the participants and other line management.
The CEO and Development of the IT Strategy
As Thompson had listened to the arguments for and against doing applications in parallel with the AGILE projects in 1995, he saw an opportunity to address a deeper problem. In his view most of his managers did not understand IT, and did not typically engage in strategic thinking as compared to tactical and operational activity. He supported the idea of n IT Strategy team and exercise as a step toward addressing this problem. As he put it:
The Executive Team needs to have a strategic view of IT, but without some guidance and some reason to do it they like everyone else will stay mired in the tactics, looking for specific ways IT can help, say, manage R&D or gain market share. Unless we change the way we think about IT, as a resource with infrastructure and as a means to change the way we do business, that is, unless we think about it strategically, tactical projects will not put us permanently ahead of our competition.
Thompson recalled his background under a division head and mentor at DuPont who had embraced IT. He had pioneered the use of laptops and email. Thompson came to believe that IT must be managed from the top, managed with a disciplined process, and with careful needs analysis at the front end of applications. He brought in these beliefs when he became CEO of LTI in 988.
At LTI Thompson allowed and encouraged decentralized management of all functions except finance, regulatory affairs, and IT. He introduced the "systems review board" to set priorities on IT projects across functions and business units. It consisted of the Executive Team. However, Thompson observed that the priority setting role was not fulfilled. He recalled his views and involvement in IT as follows:
The LTI culture just didn’t have the discipline for managers to evolve uniformity of systems across the corporation. It became clear to me it would take a major disciplined project and overhaul of our systems for us to get the integration and uniformity, the information processing basis, for our business to move forward and use IT competitively. This was what led to my support of AGILE, and to my insistence that we focus on that. I was heavily personally involved in it for the first six months. I had to insist to those who did not want to change their local ways of doing things; I had to put my foot down more than once, and even openly overrule a senior person here and there.
But line managers need more than just education about IT. They need to take charge in specifying applications. In the past, managers have hoped the IT function would tell them what they needed. They complained that the IT staff was not "creative". On the other side, IT wanted to know what the business problem was, so they could understand the need. We still have a long way to go in creating the right process here. It’s complicated by, or maybe helped by, the fact that a lot of our users are now on the internet and seeing what customers are expecting. Many of our customers are scientists and early internet users.
All this conceptual discussion should not hide the specifics of what IT can do. Casey, a member of the IT Strategy team, is a seasoned senior manager in our business and an IT visionary. He pushed us to get a home page, and to allow customers to order through the internet. He told me the other day LTI should have a device like a new hotel minibar that lets you take something and it automatically puts it on your bill through the computer. This would be to put electronic dispensing into our freezer centers, which are mini storerooms of our inventory on customer premises.
I have a vision of the plant of the future. It’s really the business of the future. A customer reads a journal article on the Net about an experiment, say in AIDS drug technology, and says to themselves, "I’d like to do that." So they click on that. Linked to the experiment description is our catalog list of LTI products for performing that experiment. The customer creates their order by clicking and dragging. The order is routed around their company to get approval, such as could be done at NIH (National Institutes of Health, a major research customer) or AMGEN (a major biomedical manufacturing customer) today. Once approved, the order is sent to LTI where it is routed to the warehouse. The products are automatically picked and packed. The electronic invoice is automatically generated and sent. When they get the delivery, they pay electronically. Meanwhile, our factory can be automated to be driven off orders and inventory levels: we could cut factory staff to seven people. This is already being done by a chemical company in Italy, where the cost of personnel is so high automation is a no brainer.
To get to these kinds of competitive edge uses of IT is taking a lot longer than I had hoped. When I came as CEO there were critical priorities that had to be dealt with, especially building a management infrastructure. The company had been without a CEO for fifteen months; a Board member headed R&D; regulatory affairs did its own thing. It took two years to get the team right. In our former state there was no one to hear direction for IT or any other integrative, strategic initiative.
When all is said and done, our business is all information. We sell products that are physical, but they are bought on the basis of information and they are used in research and manufacturing by our customers to generate information as their primary product or as a critical byproduct to a physical product. The R&D process is generating and evaluating information.
We have to raise the level of thinking of our managers about IT. I saw the IT Strategy development as a way to do that.
The IT Strategy was developed by a team of eleven managers headed by Thompson. With assistance from two outside consultants, the team met four times between June and November of 1996 for one- to two-days each time. A first outline was presented to the World-wide Leadership Team in their quarterly meeting in September by Thompson. Highlights were discussed with the Executive Team and Board of Directors in meetings late in the year. The conceptual outline of the IT Strategy is presented as Exhibit 2, and excerpts from the Introduction of the IT Strategy as Exhibit 3.
What Next?
As Thompson read the final draft of the IT Strategy in early February, 1997, he reflected how useful the process had been in achieving a degree of consensus and greater knowledge among the IT Strategy team. "We got a better understanding on the IT Strategy team of the importance of infrastructure and its investment, while at the same time we looked at projects which included very specific wish lists and got some consensus on priorities. I only regret the entire Executive Team was not part of the full exercise...," he thought.
Coming up was the monthly Executive Team meeting and the quarterly World-wide Leadership Conference. While Thompson wanted to disseminate the Strategy document widely, he knew the mere reading of it might not be sufficient to extend the full understanding of what had been learned. There was an opportunity here to extend strategic thinking about IT.
At the same time, Thompson wanted to be careful not to disrupt the focus on AGILE and the need for all managers to recognize that it was the essential platform to future applications. Despite the active discussion which had gone on among senior managers during the development of the IT Strategy, including considerable pressure for getting to needed applications before AGILE, Thompson was somewhat surprised that no senior manager had come forth offering to support such parallel efforts out of his own budget. It made him wonder just how important these vital new applications were.
Finally, Thompson had just learned that the deadline for a key milestone of the AGILE distribution project, set in December to be April 1, and accepted by the Executive Team, was now in some doubt. Apparently, however, the key players had come to agreement that in Europe the manufacturing project would be put ahead of some parts of the distribution project, and in doing so some resources on distribution might have to be shifted to manufacturing.
Thompson did not want to get involved in the details of AGILE project work, and he knew that Stokes and Wells shared his position that they focus on AGILE. He also recognized that key senior managers were involved in the AGILE Steering Committee, which met monthly and got project updates from Stokes, Wells, and the project managers. But repeated delays and uncertainty and complaints from some line management about the state of IT applications left him feeling impatient. He wondered exactly what and how he should be involved in the project and the discussions, and looked forward to hearing Joe Stokes’ recommendations.
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This case was prepared for use in course 15.568 at the MIT Sloan School and MIS7550 at the Olin School, Babson College. It is not for reproduction or other use except by permission.
Copyright 1997 Massachusetts Institute of Technology. revised 10/8/98
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Exhibit 1
Summary of Business Strategy
Corporate Mission
To be the undisputed global leading developer, manufacturer and supplier of biologicals, biochemicals, media, consumables and value-added services in our served markets, as measured by customer satisfaction, market share and increased shareholder value.
Corporate Strategies
1. Effectively expand and leverage our world-wide market presence and technical sales support to increase global market share and build better customer relationships.
2. Aggressively manage our product portfolio to ensure maximum market competitiveness.
3. Leverage LTI technology capabilities to ensure effective implementation of our technology strategy in support of the business.
4. Develop our manufacturing, logistics, regulatory and sourcing capabilities to be a competitive advantage for LTI.
5. Develop our information systems capability to become a strategic competitive advantage for LTI.
6. Continue to improve our work environment so that it embodies the LTI way, makes going to work fun, improves skill retention, provides opportunities for learning and advancement, and recognizes the value of every individual’s contribution.
Exhibit 2
Framework for IT Strategy
Note: Lines connecting some boxes may not appear on some browers. In general, the top three boxes provide information "downwards."
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Exhibit 3
IT Strategy: Executive Summary (draft of 2/6/97)
The purpose of this Information Technology Strategy is:
While we have made great progress in our use of Information Technology over the last several years, the opportunities and costs for the future and the challenge of managing a new era of IT usage are significantly greater than anything we have experienced to date. The need for a uniform infrastructure, such as the AGILE applications now being implemented, is clearly a high priority step toward a corporate-wide competitive base. The advent of the Internet for electronic commerce and links with our customers has the potential to significantly impact how we do business. The competing requests for applications and investments exceed what we can afford. Differences of opinion and priority for IT will only be appropriately resolved if we have a better and common understanding of the technology and related management issues.
The attached IT Strategy summarizes our thought in seven connected segments
Business Context describes key factors in LTI’s competitive position, the implications of the six corporate strategies for IT, and the implications of our organization and culture for IT. We have a strong competitive business position, but IT needs to be perceived as a competitive resource. To do so will require changes in the way we work, and in our very culture.
Technology Trends describes the driving forces behind IT products and services of interest to us from vendors, and three potential future scenarios with very different implications for us. We must be prepared for continuing rapid change in the technologies, and for unfulfilled fads as well as promising developments.
The State of IT describes our summary assessment of where we are today at LTI in the deployment of IT. A sample survey of senior managers reveals the view we are not seen as using IT as a competitive weapon. The principles by which we appear to operate need changing. Existing applications, while valuable locally and in specific situations, do not have the flexibility and robustness required for IT to be competitive in the long term. Our current emphasis is on AGILE as a common set of applications.
These three inputs then lead to three high-level chapters that are the heart of the IT Strategy:
Vision is our high level statement of where we want to go with IT.
We will develop our Information Technology capability to become a strategic competitive advantage for LTI, and use this capability to support and enable our Corporate Business Strategies.
New Principles are statements of how we need to work together to achieve the vision. These are grouped into the areas of
IT Strategies are statements of strategic intent.
1. Customer Support
We will effectively support our customers by leading our industry in the use of electronic value added services, and better understand and meet their needs by the development of systems to acquire detailed customer information and feedback.
2. Operational Efficiency
We will improve all aspects of operations, from R&D to manufacturing to delivery, financial and administrative support and reporting, and the management of our product portfolio by the use of IT to provide efficient transactions and better access to data and information.
3. Organizational Effectiveness
LTI will provide the support to ensure that our culture allows us to become a leader in the use of IT.
4. Infrastructure
We will develop and maintain a flexible but robust infrastructure that is world wide and integrated but allows us to meet local requirements.
Plans
In the process of developing the strategy extensive project wish lists have been developed. Resource and cost to completely this apparently impossible task is not understood. A first pass prioritization by the Executive Team resulted in a listing of the seven most important projects globally : AGILE Distribution and Manufacturing, EDI/DOE, Barcoding for distribution, Business datamining, Project management and Internet site enhancement.
Further steps in project planning and the execution of this strategy are as follows:
Estimate the human and dollar resources required for each project.
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