A large global company had largely autonomous business units in several countries and a central group IT function.
Group IT observed it would clearly be better to have common systems (rather than dozens of countries developing virtually identical functionality for their own markets). A common system was developed for Finance/ERP and then for each of several business functions (e.g., Retail, Online, …).
Centralising ERP/Finance went well. There was a powerful Group CFO who championed it. There were business-related economies of scale from consolidating back offices to fewer countries and there were common reporting requirements. It should be noted that the IT costs ended up significantly higher as a result but the project overall was a success.
Attempts to centralise the other business functions were a disaster.
Larger markets (countries) felt they were subsidising the smaller markets (they missed out on economies of scale). Smaller markets felt they were paying for a more sophisticated system than they needed – “gold plated”. Advanced markets felt the common system was a retrograde step. Nobody was happy.
The final killer blow was funding. Corporate governance required services from Group to be charged as revenue (whereas systems developed within the markets could be capitalised). The market leadership was rewarded based on EBITDA and preferred to be able to capitalise investments. The IT Organisation appealed — saying the finance system was “wrong”. The CFO and CEO disagreed and the funding model remained.
The Group IT Departments own estimate of the investment wasted in this exercise over a 3 year period was over $300M U.S.
The root cause of the waste was failing to establish informed consent to an IT Value Proposition
(See also section on importance of addressing stakeholders needs in chapter on What makes a strategy ‘good enough’ )
Heritage: We were asked to support the execution of the strategy for a large global company. They said they were very happy with their strategy but were having some issues in executing it successfully. It soon became clear that problems in execution were because the strategy was not accepted by the stakeholders, as it was not in their interests.