Informatization Promotion Strategies for SME Management Innovation in APEC in the Digital Economy

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Informatization Promotion Strategies for SME
Management Innovation in APEC in the Digital
Economy

• Prof. Ook Lee, Ph.D.College of Information and
  CommunicationsHanyang UniversitySeoul,
  Korea(South)

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Table of Contents

• 1. Introduction
• 2. Informatization Network Cluster Utilization
• 3. Characteristics of Information Systems which
  are effective in producing positive result for
  SMEs
• 4. Government Policy for Informatization which
  facilitates growth of SMEs
• 5. Solving Digital Divide Problem among APEC
  member countries
• 6. Policy Direction emerged from Case Studies of
  SMEs in terms of Informatization
• 6.1 The Philippines
• 6.2 Indonesia
• 6.3 Australia
• 6.4 USA
• 7. Best Practices in Management Innovation
  Utilizing Information Technology
• 7.1 Best Practice Case 1 Bank SinoPac(Taiwan)
• 7.2 Best Practice Case 2 Commonwealth Bank of
  Australia(Australia)
• 7.3 Best Practice Case 3 Heineken USA(USA)
• 8. Conclusion

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1. Introduction

• In the digital economy, enterprises need to adopt
  digital technology to compete effectively.
• SMEs can be benefited especially from
  informatization.
• This study investigates informatization promotion
  strategies for SME management innovation in APEC
  member countries.
• It is obvious that SMEs will find it difficult to
  invest in ICT since they usually lack sufficient
  fund and resources. Thus the role of government
  policy is important in facilitating
  informatization of SMEs.
• ICT is essential in successfully performing
  innovation in management of SMEs.

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2. Informatization Network Cluster Utilization

• Network clustering implements communication
  infrastructure for SMEs in a certain region which
  includes high-speed/broadband Internet network.
• This approach lets SMEs to share value-added
  service from advanced communication
  infrastructure, which might result in reducing
  the problem of digital divide.
• South Korean government implemented this policy
  of creating regional clusters with government
  fund.
• The Korean model also needs more improvement
  since it lacks effective follow-up network
  utilization policy such as promoting advanced
  value-added services, e.g., Internet-based EDI,
  VoIP, Extranet, e-SCM, and e-CRM.

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3. Characteristics of Information Systems which
are effective in producing positive result for
SMEs

• Most of advanced information systems such as MIS,
  DSS, EIS, ES, ERP, CRM, and SCM were implemented
  for large businesses. However SMEs also need
  these advanced information systems which will
  give them competitive advantage and a tool for
  more effective control of their businesses.
• Following characteristics are required for an
  advanced information system that is intended for
  the use in SMEs. 1. Size should be appropriately
  small. 2. How to use should be easy to learn. 3.
  Implementation process should not be too complex.
  4. Hardware requirements should not exceed what
  the particular SME has as its infrastructure.

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4. Government Policy for Informatization which
facilitates growth of SMEs

• Empirical evidences often show mixed results on
  the effect of informatization especially with
  measure such as revenue, stock price, market
  share, etc., which is, in general, called IT
  Productivity Paradox.
• Where have all the benefits of informatization
  gone? Following areas can be cited. 1.
  Operational Efficiency informatization on
  manufacturing often results in gains in
  efficiency of operation. 2. Customer
  Satisfaction even if there is no visible effect
  due to informatization, the benefit could have
  been already materialized as more customer
  satisfaction.
• government policy should take an aim at the
  following points. 1. Support of informatization
  of SMEs in order to increase operational
  efficiency such as manufacturing information
  systems, SCM systems, communication
  infrastructure build-up, and e-business. 2.
  Support of informatization of SMEs in order to
  increase customer satisfaction such as CRM
  systems, and e-business. Overall, ultimate goal
  of government policy must emphasize e-business.

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5. Solving Digital Divide Problem among APEC
member countries

• APEC member countries are composed of the ones
  with highly developed national IT infrastructure
  and others with very less developed national IT
  infrastructure. Thus there exists a serious
  digital divide problem in the APEC region.
• One way to solve this problem is to create
  informatization frontier teams whose members are
  recruited from advanced countries.
• These teams can be sent to less developed
  countries to solve digital divide problems as
  done in medicine, food and education.
• These teams will provide PCs and software
  education and if possible, some communication
  infrastructure building.

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6. Policy Direction emerged from Case Studies of
SMEs in terms of Informatization

• In order to find the appropriate policy
  direction, case studies were conducted through
  web sites, e-mail-based survey and physical
  visits where possible.

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6.1 The Philippines

• PhilStar.com is an online news portal company
  which provides local news of the Philippines to
  worldwide audience of Filipino people.
• A. hardware 5 HP servers, software Apache web
  server and Oracle database, networks Notel
  backbone.
• B. IT investment US0.5million, IT education
  level very high, User experience and knowledge
  very high.
• C. Top managements view on IT very positive.
• D. Current business environment Buyers banner
  advertisers, Vendors none, Large firms
  yahoo.com and cnn.com which are multinational
  portals, Alliance Philippine Star newspaper
  which is a sister company to PhilStar.com,
  Industry news portal market is dominated by
  multinational portals in the Philippines with the
  niche market of exotic and sensational local news
  market available for a company like PhilStar.com.

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6.2 Indonesia

• Daytona, PT Company is a manufacturer of car
  accessory specializing car seats.
• A. hardware 3 Pentium II PCs, software Java and
  MS Access database, networks no local area
  network, only dial-up internet connection.
• B. IT investment US0.01million, IT education
  level low, User experience and knowledge low.
• C. Top managements view on IT interested in web
  technology.
• D. Current business environment Buyers
  Automobile manufacturers, Vendors none, Large
  firms no large firms operate in this area,
  Alliance none, Industry automobile car seat
  manufacturing area is mainly populated with SMEs
  whose informatization level is quite low however
  this company noticed the advertising effect of
  web sites and published introductory pictures and
  descriptions in their web site but due to lack
  of technical skill on e-business technology,
  there is no e-commerce(buy/sell on web site)
  capability available on their web site.

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6.3 Australia

• Fast Enterprises Pty Ltd. is an online flower
  delivery company with the URL of
  www.fastflowers.com.au
• A. hardware 12 HP servers, software MS IIS and
  MS-SQL database, networks intranet, extranet,
  high-speed Cisco backbone.
• B. IT investment US5.1million, IT education
  level very high, User experience and knowledge
  very high.
• C. Top managements view on IT very positive.
• D. Current business environment Buyers web
  users, Vendors Fastflowers Sydney shop, Large
  firms no large firms operate in this area,
  Alliance alliance with many overseas flower
  online flower delivery companies which allows the
  company to be able to deliver flower almost
  anywhere in the world, Industry even though
  there is a heavy competition in flower delivery
  industry in Australia, utilizing advanced
  national IT infrastructure effectively, the
  company grows to a large scale online flower
  delivery firm which covers the globe.

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6.4 USA

• Ostergard Gynecology Female Urology
  Partnership/Medical Group is a small hospital
  which specializes in uro-gynecology
• A. hardware 5 Pentium II PCs, software MS
  office, MS frontpage, MS Access database,
  networks no intranet, connection to outside
  high-speed Internet available.
• B. IT investment US0.02million, IT education
  level medium, User experience and knowledge
  medium.
• C. Top managements view on IT somewhat
  interested in web technology for PR purposes.
• D. Current business environment Buyers
  patients, Vendors none, Large firms this area
  is dominated by large general hospitals however
  this small hospital attracts many patients due to
  the fame of Dr. Ostergard, Alliance since Dr.
  Ostergard can not perform so many surgeries
  simultaneously, UCLA and UC-Irvine university
  hospitals are in alliance with this hospital
  very difficult surgery often requires an
  excellent surgeon rather than any advanced
  technology thus IT is mainly used for
  administrative purposes and advanced features
  such as online appointment, streaming video of
  surgery, and chatting function are not
  implemented.

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6. Policy Direction emerged from Case Studies of
SMEs in terms of Informatization(cont.)

• By contrasting the previous 4 case studies, we
  can point out following differences in
  informatization policy among APEC member
  countries.
• 1. Among two companies of under-developed
  countries, one was much informatized while the
  other was not at all. Thus an assumption that
  informatization of SMEs will be minimal in all
  under-developed countries does not stand. They
  pursue informatization if they see a business
  need in it.
• 2. In advanced countries, because of
  well-developed national IT infrastructure,
  companies utilize many complex information
  systems as seen in Australias flower delivery
  company case. However even on very advanced
  national IT infrastructure such as USs, some
  firms do not implement high-level information
  systems as seen in Ostergard hospital case. This
  confirms the principle found from under-developed
  country cases that informatization of a firm is
  dictated by the law of business need. Namely when
  the companys business is doing well at the
  current level of informatization, the company
  wont try to pursue higher level informatization.
  
• Educating executives on the benefit of
  informatization regardless of level of
  informatization of the country where the company
  is operating should be an essential program in
  government policy.

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7. Best Practices in Management Innovation
Utilizing Information Technology

• When IT is well used for the business
  organization, it can induce management innovation
  which, subsequently, produces lots of benefits.
• To achieve this, business process redesign method
  should be applied where all aspects of business
  activities in the organization are viewed as a
  collection processes, which is called
  process-point-of-view. With this view, a map of
  detailed processes of the organization will
  emerge and the person who is in charge of BPR
  will look into any possibility of utilizing IT to
  change existing processes which should bring
  excellent savings or gains as a result.
• Case studies were conducted through web sites,
  e-mail survey, and physical visits where possible.

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7.1 Best Practice Case 1 Bank SinoPac(Taiwan)

• SinoPac is a commercial bank established in 1992
  which is a SME in its size as a bank. The bank
  was growing rapidly and required new business
  platform based on information technology.
  Business process redesign was necessary since its
  business encompasses vast areas including China
  proper, Taiwan, Hong Kong, and USA.
• SMEs do not have much expendable time to spend
  for BPR and, due to lack of money, need systems
  which can be used over and over again and operate
  under unexpected circumstances, and since SMEs
  can not afford to spend much time and money in
  training employees, the system must be easy to
  use and quickly learnable.
• They developed such an information system which
  was called model Blue IT. This system brought up
  30 increase in productivity, that is, savings in
  time and expense of business process operations
  were 30. The model Blue IT was implemented on
  IBM WebSphere Application server.

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7.2 Best Practice Case 2 Commonwealth Bank of
Australia(Australia)

• Commonwealth bank is based in Sydney whose number
  of employees exceeds more than 35,000 and covers
  entire country of Australia. The bank spends more
  than AUSD120million for temporary wages.
• The current business processes allow hiring of
  temporary workers on the spot and had to pay for
  introduction fee to the human resource agency.
• Too much time of regular employees was used to
  handle the management of temporary workers. Thus
  the bank hired human resource management system
  firm called peoplesoft and centralized hiring
  processes and got rid of inefficient processes.
• The result was savings of AUSD11million for 3
  years and each branch office on average freed 3
  regular workers time and was able to put them in
  more productive works.

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7.3 Best Practice Case 3 Heineken USA(USA)

• Heineken USA is a subsidiary of Heineken of the
  Netherlands which mainly does distribution of
  Heineken beer in USA. Since 1995, Heineken USA
  has been operating distribution and advertising
  in domestic USA. The competition among imported
  beer companies got intensified starting from late
  80s.
• In order to survive the competition, Heineken USA
  conducted business process redesign using
  information technology.
• HOPS(Heineken Operational Planning System) was
  implemented and effective in eliminating
  problematic business processes.
• The biggest challenge to imported beer such as
  Heineken is the fact that it is difficult to
  adapt to the changing demand of consumers
  quickly.
• This problem was overcome by establishing
  Internet-based Extranet which enabled the parent
  company to be aware of whats going on in
  American market and act accordingly in real time.
  Thus the parent company was able to reduce time
  delay caused by delivery time from the
  Netherlands to America, which resulted in much
  fresher beer and reduced inventory with 10
  increase in sales.

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8. Conclusion

• The solution for SMEs in APEC member countries to
  achieve management innovation lies mainly with
  IT-enabled business process redesign plus
  e-business technology use.
• Unlike BPR for large companies, BPR for SMEs
  requires somewhat different approach as
  following. First, the method has to be fast and
  effective. Second, it has to be reusable and
  flexible enough to cope with unexpected
  situation. Third, the system should be easy to
  use and quickly learnable.
• In order to encourage BPR action in SMEs,
  government needs to educate executives on process
  point of view, the benefit of IT, and the
  possibility of market expansion through online
  trade utilizing e-business technology.

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8. Conclusion(cont.)

• In summary, government can run an educational
  program for top executives of SMEs in which
  process point of view, business process redesign,
  IT mindset, and e-business technology are taught.
  
• E-business technology can be a simple web site
  for PR purpose which then can be improved to
  include e-commerce capability. Advanced
  e-business technology such as e-CRM, e-SCM,
  Internet-based EDI, and Logistics and Order
  Management can be added later.
• However this kind of educational program is not
  easy to implement for under-developed countries.
• Creation of Informatization Frontier team whose
  members will be from well-developed countries is
  suggested since the team might contribute to the
  poor country for providing education as well as
  basic hardware, software, and communication
  devices.

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Thank You !