Enterprise Resource Planning Systems Implementation: A Knowledge ...

WARWICK BUSINESS SCHOOL

WARWICK B USINESS SCHOOL NO. 341 ENTERPRISE RESOURCE PLANNING SYSTEMS IMPLEMENTATION: A KNOWLEDGE -FOCUSED PERSPECTIVE BY

Jimmy C. Huang, Sue Newell, Brad Poulson and Shan L. Pan

JANUARY 2000 RESEARCH PAPERS at the cutting edge of theory and practice

Enterprise Resource Planning Systems Implementation: A Knowledge-Focused Perspective Jimmy C. Huang University of Aberdeen, Department of Management Studies, Edward Wright Building, Dunbar Street, Aberdeen, AB24 3QY [email protected]

Sue Newell Nottingham Business School, The Nottingham Trent University Burton Street, Nottingham, NG1 4BU [email protected]

Brad Poulson Warwick Business School, The University of Warwick, Coventry, CV4 7AL [email protected]

Shan L. Pan Department of Information Systems, School of Computing, National University of Singapore, 10 Kent Ridge Crescent, Singapore 119260 [email protected]

Abstract The growing number of firms adopting ERP systems demonstrates not only the increasing dependency of organizations on new technology, but also an emerging need to evaluate it and to ensure the success of implementation. Focusing on processes of knowledge sharing and knowledge integration, this study explores the dynamics of ERP implementation and appropriation based on the empirical findings from two longitudinal cases. The research findings suggest the need to take into account how ERP systems change supplier relationships, and also indicate the importance of clearly defined information and project ownership. Additionally, overcoming resistance, whether it is created by lack of commitment or time, from the end users is equally important as well as continuously obtaining support from top management. The research findings not only extend previous studies related to technology implementation and appropriation, but also support the usefulness of employing a knowledge-focused perspective as an effective lens with which to explore the dynamics of technology implementation.

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Introduction The rate of diffusion and implementation of ERP systems across a range of industries has been extremely rapid over the last few years (see for example, Bancroft, Seip and Spriegel, 1998; Caldwell and Stein, 1998; Kirschmer, 1999). The goal in most cases has been to increase productivity and efficiency by integrating information and processes across increasingly global operations. This goal of integration was very difficult when each business within a global company used different systems and technologies. ERP systems involve the implementation of a common IT infrastructure and common business processes (Cooper and Kaplan, 1998; Davenport, 1998). Thus, ERP systems are sold as a means of integrating the core corporate activities of an enterprise, such as finance, logistics and human resources, so making it easier to manage these activities on a global basis (Bond, Pond and Berg, 1999; Glover, Prawitt, and Romney, 1999).

There have been a variety of studies that have looked at the implementation of ERP systems. Some of these have focused on identifying the critical success factors for implementation (Harris, 1999; Jacob and Wagner, 1999; Riper and Durham, 1999), while others concentrated on the redesign of business processes as a means of enabling and leveraging new technology (Bashein, Markus, and Finley, 1997; Davenport, 1996; Davenport, 1998; Larsen and Myers, 1998; Sawyer and Southwick, 1997). In this paper we adopt a knowledge-focused perspective on the diffusion and implementation of ERP systems (Newell, Swan & Galliers, 2000). This perspective focuses not on the spread and adoption of particular technological artifacts (e.g. ERP systems as bundles of software and hardware) but on the knowledge sharing and knowledge integration processes involved in implementation and appropriation. Appropriation occurs when a new technology that has been implemented has become routine (Clark and Staunton, 1989). From this perspective implementation and appropriation are viewed as complex processes of knowledge sharing/integration since these processes involve the development and utilization of large amounts of specialist knowledge and expertise. In particular, the focus is on the sharing and integration of ideas and knowledge embedded in particular technologies (in this case ERP) with existing organizational knowledge and routines. The implementation and appropriation of new technologies is then a process of sharing and integrating 2

knowledge across disparate communities, including consultants, vendors and organizational representatives (both project team members and end users) from the variety of functions and departments who will be affected by the new technology. Knowledge sharing and integration during ERP implementation and appropriation is therefore a process of collective social construction (Berger and Luckmann, 1967) which can be influenced by external parties such as suppliers and consultants, as well as internal participants, such as project team members, project sponsors and end users. Thus, in contrast to previous studies that have focused on narrow aspects of the success/failure of ERP projects, this study focuses on the complex and dynamic processes involved in the social construction of knowledge during ERP implementation and appropriation.

In order to develop this knowledge-focused perspective of ERP implementation and appropriation empirical material from two companies will be used. The findings from these two cases endorse previous accounts that have demonstrated the importance of overcoming end users’ resistance and obtaining support from top management (e.g. Davis, 1989; Sayer, 1998). However, the findings of our study suggest that the type of top management support needed and the way in which this support is perceived can vary from division to division. In addition the findings also reveal that the change of supplier relationships and the management of information and ERP project ownership are equally critical to implementation and appropriation.

This study is constructed as follows: after the introduction, a critical review of relevant literature is presented in the section ‘Current Debates and Perspectives’. The ‘Research Methodology’ section then depicts the research design, research site selection, and data collection methods. This section also includes a brief introduction to the two companies and the background to the ERP projects is given. In the section ‘Research Results and Cross Case Comparison’ an integrative account of the comparative analysis is given. Theoretical and managerial contributions and implications are highlighted in the final section.

Current Debates and Perspectives The increasing popularity of ERP systems is reflected in the growing number of firms that have implemented such systems in the past decade. By 1999, a striking number of 3

53,000 firms worldwide had adopted ERP systems (Cerullo and Cerullo, 2000). While the motivation for implementing such systems clearly varies, there are some common objectives that can be identified. These underlying objectives include the free flow of information from one division to another (Bylinsky, 1999), improving production efficiency (King, 1999), and enhancing the quality and speed of decision-making (Wagle, 1998). However, it is also clear that in some cases these objectives are not met so that firms fail to obtain the potential advantages of their intensive capital investments. Some previous studies have focused on understanding these failures. For example, Wagle (1998) found that ambiguity of responsibility occurring during implementation was the main factor leading to failure, while Laughlin (1999) found that lack of the ‘right’ support from top management was a key factor. Others (e.g. Miller, 1999) have focused on technical problems and shown that failure is often caused by the inappropriate attempt to integrate systems which are not compatible because of different approaches to storing, coding and managing information.

While these studies of ERP are useful they do not help in understanding the knowledge integration processes involved in implementation and appropriation that this paper focuses on. Here we need to consider more broadly accounts of innovation processes. Historically, innovation characteristics have been seen as the key issue influencing the adoption of technology (Rogers, 1962). In particular, the importance of ‘compatibility’ between technology used and the nature of the assigned task has been highlighted in the study of Tornatzky and Klein (1982). Additionally, it is argued by other scholars that the influence of the external environment is equally critical in understanding how firms adopt new technology. For instance, in Swan, Newell and Robertson’s (1999) study, they examined the influence of professional associations on firms’ decisions to adopt new technology, while Orlikowski (1993) demonstrates that the influence of competitors, customers, and the availability of technology is crucial. Internally, how ‘user-friendliness’ (Markus, 1983) is perceived and how ‘perceived usefulness’ of new technology (Davis, 1989) is formed have also been found to be crucial. In another study, Markus and Keil (1994) further examine the implementation issues in terms of managerial influence on end users in determining the success of technology development.

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Whether taking an internal or external perspective in understanding the dynamics of ERP implementation, it can be said that most previous studies have focused on the “outcome of the implementation” rather than on “the processes” (knowledge sharing and knowledge integration). Nevertheless, it is clear that during implementation, there is the need for the free flow of knowledge (Starbuck, 1992) facilitated by crossfunctional knowledge sharing (Pan and Scarbrough, 1999). The importance of crossfunctional knowledge sharing has been identified as one of the key elements in enabling effective knowledge creation (Nahapiet and Ghoshal, 1998; Nonaka and Takeuchi, 1995; von Krogh, et al, 2000). The importance of sharing and integrating knowledge in the implementation process has also been identified by innovation studies that reveal the need to encourage exchanging knowledge across divisions by breaking down departmental boundaries (Cooper, 1988). Moreover, other key issues that have been identified as influencing cross-functional knowledge sharing and integration include cultural differences (Collins, 1993; Lam, 1997), the dispersion of knowledge (Tsoukas, 1994), as well as the social embeddness of knowledge (Blackler, 1995; Nonaka and Konno, 1998).

Thus, despite various efforts to understand the dynamics of ERP implementation (Davenport, De Long and Beers, 1998; Ramesh and Tiwana, 1999), there are no studies that conceptualize the implementation and appropriation of ERP systems in terms of the sharing and integration of knowledge. In other words, there is almost no account of how knowledge is shared and integrated among the ERP consultants, internal project team members, and other end-users within an organization. This lack of focus on understanding implementation and appropriation processes from a knowledge-focused perspective becomes the main research objective of this paper.

Specifically, the rationale behind adopting a KM focus in understanding the dynamics of ERP implementation is threefold. Firstly, both ERP and the knowledge-focused perspective are similar, in that they are multi-disciplinary and multi-faceted in nature. This is because both concepts are concerned with issues of organizational efficiency and how such efficiency can be enhanced through effective information and knowledge sharing across divisions and functions. Secondly, the need for process innovation to enable ERP implementation and improved knowledge sharing and integration is evident. Such an argument is supported by studies, see, for example 5

Markus and Keil (1994) and Davenport (1993), which address the importance of business process reengineering as a means of implementing new technology. Similar arguments can also be found in the concept of building a learning organization (see, for example, Jones and Hendry, 1992; Senge, 1990), which indicates the need for radical change through generative learning (Miner and Mezias, 1996). Thirdly, the effectiveness of ERP and knowledge sharing and integration for organizational competitiveness lies in their scope. That is both approaches are typically designed and implemented on an organization wide basis, rather than a divisional or departmental basis.

Research Methodology The research is based on a two-year longitudinal comparative study conducted in two organizations 1 from 1997 to 1999. The focus of this study is placed upon exploring the dynamics of ERP implementation within the two organizations in terms of knowledge sharing and knowledge integration. Such a focus allows the study not only to bridge the gap between ERP research and practice, but also to conceptualize the process of ERP implementation with a unique theoretical lens - cross-functional knowledge sharing and integration. The following discussion is divided into three sections: research design, data collection processes and methods, and finally data analysis.

Research Design The rationale behind adopting the case study research design was threefold. Firstly, case study design allows flexibility with respect to the adoption of multiple data collection methods (Robson, 1993; Yin, 1984). Secondly, case studies generate insightful stories rather than statistical information, and this permits a better understanding of organizational complexity from an insider’s viewpoint (Mitchell, 1983). Finally, case studies enable the researcher to formulate a more holistic perspective on the studied phenomenon (Evered and Louis, 1981; Van Maanen, 1979). In particular, the case study approach is useful to explore a ‘previously littlestudied area’ (Benbasat, et al, 1987), in this case the dynamics of ERP implementation from a knowledge-focused perspective.

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The names of the two organizations have been disguised and labeled as case A and case B. 6

Research Sites Selection Cases A and B were selected because of both their contextual similarities and differences in order to allow for data contrasting (Orlikowski, 1993) and cross-case comparison (Ragin, 1987). In terms of similarities, in addition to the adoption of ERP systems, both cases had initiated and implemented organization wide knowledge management programs within the past five years. The ERP systems implemented were philosophically similar, both based on SAP software. Additionally, another dimension of similarity was that the implementation was facilitated by external organizations. In case A, an IT service provider 2 was involved in the implementation, while in case B, a consulting firm3 was used. On the other hand, the two cases differed in terms of their organizational characteristics, such as industry, location, size, culture and strategy. More details about the differences between the cases are provided in the case description and analysis sections.

Contextual similarities provide a basis for cross case comparison, while differences enable the researcher to enhance the findings by expanding the theoretical implications (Bryman and Burgess, 1999). In particular, selecting cases where the ERP systems adopted are similar eases the comparison and conceptualization of implementation and appropriation processes. On the other hand, selecting cases that are different in terms of the organizational context offer opportunities to consolidate different findings from the two cases.

Data Collection Methods The longitudinal comparative case study can be characterized as a multi-method, indepth field research study (Miles and Huberman, 1994). The paucity of prior theoretical and empirical research on the topic of ERP implementation from a knowledge-focused perspective necessitates 'going into the field' to observe organizational efforts as a means of advancing understanding. Consequently, the general approach of this study is interpretative in character (Benbasat, et al, 1987; Lee, 1989; Orlikowski and Baroudi, 1991), with qualitative research methods being 2 3

The name of the IT service provider in case A has been disguised and labeled as Firm X. The name of the consulting firm, one of the ‘big five’, has been disguised and labeled as Firm Y. 7

employed to explore and conceptualize the studied phenomenon. The ERP project is considered as the unit of analysis for each case.

Data collection methods employed in the study included interviewing, on-site observation, and documentation. The reasons for adopting multiple methods are to enhance the richness of findings, as well as to ensure validity through the process of triangulation (Denzin, 1988; Stake, 1995; Yin, 1984). 37 semi-structured interviews were conducted in case A, which included 25 first interviews and 12 follow-up interviews. In case B, 27 first interviews and 9 follow-up interviews made up the total of 36. In both cases the interviews were conducted primarily with project team members and sponsors and included individuals from various hierarchical levels as well as divisions. All interviews were conducted face-to-face and tape-recorded with the permission of interviewees. On-site observation serves the purpose of gaining first-hand knowledge of how the researched act in their social settings (Altheide and Johnson, 1997). In this study, the main goal of on-site observation was to experience how the ERP projects were managed through the social interaction of the internal and external participants 4 . In particular, attending meetings and undertaking discussions with project members during coffee- and lunch-breaks allowed the researchers to make sense of the data from an insider point of view (Evered and Louis, 1981). Additionally, physical artifacts such as the office layout were also included in the observation. Data were also collected from documents, including letters, written reports, administrative documents, newspapers, company archives, as well as information stored in the company Intranet. The latter was especially useful in Company A for understanding the feedback from end users and the vital lessons learnt through the company’s numerous on-line forums.

Data Analysis The data collected was analyzed based on various coding techniques proposed by Strauss and Corbin (1990) and Miles and Huberman (1994). Starting with case A, open coding (Strauss and Corbin, 1990) helped to reduce the volume of data and to

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categorize the data according to various key concepts. The technique of matrix displays (Miles and Huberman, 1994) was then used to manage primary findings generated from open coding. Primary findings from the data analysis were then presented to Company A, and feedback was further incorporated to ensure the accuracy of ERP-related details, and clarify issues emerging from the analysis. During the axial coding (Strauss and Corbin, 1990), themes generated from open coding were analyzed to articulate interrelationships amongst themes. Also, themes generated from case A were used as a theoretical basis to analyze the data from case B through open coding. Similar procedures in terms of presenting primary findings to Company B and getting feedback were also carried out. The final stage of the analysis, selective coding (Strauss and Corbin, 1990), emphasized the selection, validation and refinement of the core facilitators and enablers of knowledge sharing and integration related to the implementation and appropriation of the ERP systems. The following two sections provide some essential company background information for each case site and also provide information related to the ERP project.

Case A Company A is in the heavy engineering business and provides a broad range of products and services to clients in various sectors, such as utility, transportation, and manufacturing. It serves a worldwide market although its biggest market is within Europe. The company has a strong reputation for creating innovative solutions. Creativity has long been emphasized in the corporate strategy, and is developed through the intensive use of cross-functional project teams. Intensive use of project teams is seen as a mechanism for knowledge sharing between organizational members.

Initiated in 1995, the ERP project started with an evaluation study conducted by Firm X, a long-term strategic partner of Company A. The business case for the project, gave the estimated cost of close to £20 million (including software and some hardware upgrading) and 36 months implementation time were proposed based on a global scale of coverage. One internal team was formed prior to the evaluation study, 4

In case A, internal participants include project sponsors, steering group, project team members and end users. In case B, internal participants include project sponsors, project team members and end users. 9

and more members joined in when the implementation process started. In addition to the project team, a steering group 5 was formed to facilitate problem solving and ensure project progress.

Despite the fact that feedback from interviewees and evidence from internal documents suggested the success of the ERP project, two main debates arose and remained unresolved right through the implementation stage. The first problem related to the exclusion of suppliers from the early stages of new projects. The ERP system was designed to centralize the procurement of components and materials for all projects. The rationale for this was that the company could then rationalize its list of suppliers and buy more in bulk from larger suppliers. This was strongly opposed by many project leaders. The reason for this opposition was that they felt this would exclude suppliers, especially the smaller ones, who had traditionally been involved in the design and development stages of projects. Many of the project leaders felt that the consequence of this would be that they would no longer be able to obtain useful insights from the suppliers which had in the past often helped them to avoid problems that might otherwise have occurred during the production stage. The second problem was related to information ownership. The Engineering and Production divisions were constantly debating the conversion of information from the already existing Product Data Management (PDM) system to the ERP system. Before the introduction of the ERP system, Engineering released the drawing and related information to the Production division. Project ownership was gradually transferred from the Engineering division to the Production division, while Engineering still had the ownership of all information they produced and stored in the PDM system. After the implementation of the ERP system, all information produced and managed by the Engineering division was simultaneously converted into the ERP system largely controlled and managed by the Production division. The debate of information ownership was further intensified because there was no device that could perform a two-way translation between ERP and PDM information. This explains why the Engineering division complained that they had lost the overall ownership of information that they produced and used to manage.

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The steering group was formed of 11 senior managers in four different operation sites. 10

Case B Company B is in the chemical industry manufacturing mass production products to industries, such as pharmaceutical and consumer goods companies, as well as developing new products based on customer’s requests. The largest one of its four operation sites is based in the UK, while the other three are located in North America and South East Asia. Severe price competition from India and some Asian countries on standardized products, had led Company B to gradually shift its business from mass production to custom built products and solutions. In some divisions, in particular R&D and Engineering, such a transformation had resulted in the formation of an increasing number of project teams.

The ERP project was initiated in 1997, starting with an evaluation study carried out by Firm Y, one of the ‘big five’ consultancy firms, while software design by SAP was recommended and implemented later. The project scope and coverage initially proposed in the business case were turned down for two main reasons, namely costs and time. The final decision was made to narrow down the scale of the project to cover only the UK operation, namely the divisions of Accounting, Production, Procurement and Warehousing, while the rest of the worldwide operation would be considered after the UK trial. The estimated cost of this smaller project was £7.6 millions over 18 months, and the potential of cost-savings were estimated at £25 millions over 4 years. This project was agreed by the project sponsors. Internal project team members were selected from the above divisions, as well as three members from the Information Systems (IS) division.

After nearly two years of effort and investment, most of the interviewees agreed that the project was virtually a complete failure, even though the CEO had stated in the company newsletter that Company B had achieved the cost-saving targets in 1998 and 1999. Warehousing was the only division that used ERP. End users’ resistance and lack of support from top management were understood to be two main factors that led to the failure. However, interviewees from the Production division argued that resistance was a misperception of other divisions. This was because the rest of the organization did not fully appreciate the tight production schedules and numerous deadlines faced by the Production division. In terms of lacking support, interviewees mentioned issues such as insufficient IT investment, top management’s poor 11

understanding of ERP, as well as the ambitious but unreasonable timetable. One senior manager argued that the blame lay with the external consultants team, because they lacked adequate experience and knowledge in organizing and managing the project.

Research Results and Cross Case Comparison Despite the fact that some similarities, such as software and the approach to ERP implementation, are evident, the data from the two cases suggest rather different sets of problems faced, and also indicate that the problems were managed rather differently. Instead of providing another prescriptive account on how ERP should or can be implemented, this study emphasizes the theoretical implications of the analytical outcomes focusing on the issue of cross-functional knowledge sharing and knowledge integration. Four distinctive but interconnected themes in the organizational context are evaluated here - the involvement of suppliers, information and project ownership, end users’ resistance, and top management’s support.

Involvement of Suppliers One of the most contentious issues of implementing ERP in case A was the elimination of some existing suppliers due to the centralization of procurement. Despite the fact that such a change is necessary to increase purchasing power and reduce cost through building strategic partnerships with fewer suppliers, impacts of such a change on knowledge creation and sharing can often be underestimated. In examining the diversity of products and services offered by Company A, 4 interviewees argued that the sheer amount of suppliers was not only inevitable, but also necessary.

This suggests that there may be contradictions between the requirements for product innovation and supply chain management. While the former emphasizes the strategic importance of suppliers’ knowledge in foreseeing and detecting potential production risks and problems (e.g. Bozdogan, et al, 1998; Clark and Fujimoto, 1991), the significance of procurement in relation to production cost is often neglected. On the other hand, the latter concentrates on the issue of minimizing production cost through strategic selection of and partnerships with suppliers (Anderson and Favre, 1997; King, 1999). However, the issue of how suppliers contribute to the process of product 12

development is ignored by those considering supply chain management. Differences in focus between these two groups also reflect the orientation differences between the two cases. For instance, in contrast to Company A that strongly emphasized the involvement of suppliers in product development, Company B was found to place more emphasis upon cost reduction by having less suppliers. This explains why the impact of ERP implementation on supplier relationships is less noticeable and problematic in case B than case A.

In addition to the loss of critical expertise provided by some specialist suppliers, such a change in Company A also has its socio-emotional affects. As explained by one of the interviewees in case A: “A reason to oppose the central procurement is not only because we will have no choice in terms of selecting our suppliers, which are often the leading specialists in the field. More fundamentally, it is because we have to abandon some solid working relationships built over the last few years and start all over again”.

The notion of ‘social capital’ (Nahapiet and Ghoshal, 1998), makes it clear that a social network plays a vital role in knowledge creation, because it facilitates the processes of knowledge exchange and combination. In other words, knowledge sharing that enables knowledge exchange and combination is largely influenced by the structure of social network both intra- and inter-organizationally (e.g. Buckley and Carter, 1999; Liedtka, et al, 1997). The findings generated from the two cases support the significance of social networks to cross-functional knowledge sharing and integration. Importantly, the philosophy of ERP ignores the importance of these networks and is likely to destroy (Shah, 2000) rather than reinforce these networking relationships with suppliers.

Information and Project Ownership In addition to the debate over the suppliers, the ownership issue was found to be another highly disputed topic during the implementation of ERP in case A, including the ownership of information stored in ERP, as well as ownership of the ERP project. Even though similar problems were found in case B, they were comparatively less 13

significant than in case A. As indicated earlier, the problem of information ownership occurred due to the one-way information translation from PDM to ERP.

However, the lack of two-way translation between systems was considered by the interviewees as a solvable technological problem, and portrays only a partial view related to this problem. The underlying problem found in Company A was the change of power distribution (Brass and Burkardt, 1993; Pfeffer, 1981) between R&D, Engineering and Production divisions. As one interviewee recalled: “Traditionally, Production is a dominant department in our company, because they are the people who make substantial profits for us. Prior to the introduction of ERP, we would have the overall project control before we passed the engineering drawing to them. Now, all PDM information is converted into an ERP version. So, they get what we have, but we do not have the legitimacy of benefiting from what they have. Unfortunately, a gradual transfer of information ownership from R&D to Engineering to Production has been replaced by a radical change so that Production has the overall control at a very early stage”.

Also, defining ERP project ownership was found to be problematic across the two cases, as reflected in the ambiguity of authority and responsibility. Despite the fact that the IS division in Company A claimed the legitimate ownership due to the project nature and the number of participants in the project team, other divisions did not agree with this, particularly those from production and procurement. This was because these two divisions had contributed a larger amount of funding in sponsoring the ERP project compared to other divisions. Also, it was found in case A that debates over project ownership were closely related to the issue of information ownership. In contrast to case A, the debates over project ownership in Company B were dramatically different. It was less problematic in terms of which division(s) could have the ownership, because management allocated funding centrally. However, problems occurred when identifying which division(s) should be responsible for the

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failure of the ERP project. More details about the failure in case B are outlined in the following two sections.

The theoretical implication of the radical transformation of information ownership in case A is that the dynamics of cross-functional knowledge sharing are interrupted, because of an imbalance of power distribution between divisions. Hence, it is clear that even though the implementation of ERP might contribute to the efficiency and effectiveness of producing accurate information for decision-making, how to ensure cross-functional knowledge sharing with the adoption of ERP can remain a great challenge for organizations. Also, the two cases make clear that defining ERP project ownership can be problematic. Practically, the need for a clear definition of project ownership is needed in order to identify where and how responsibility should be located and shared. It is also important in relation to planning how ERP should be used. The notion of project and information ownership provides an alternative approach to explain why firms fail to benefit from their innovation initiatives. In other words conflict over project and information ownership can lead to inter-group conflicts, which may be poorly managed (Sessa, 1996; Smith and Berg, 1987) as in Case A. Moreover, this in turn impedes cross-functional knowledge sharing and integration. Thus, because of the ambiguity and conflict over project and information ownership and the resultant lack of knowledge sharing, firms fail to learn from what they do (Baird, Holland and Deacon, 1999; Bush and Dooley, 1992; Fiol and Lyles, 1985) and apply lessons learnt from failure to further actions (Kogut and Zander, 1995).

End Users’ Resistance The analysis of the case material indicated that one of the key issues that led to the failure of the ERP implementation in Company B was resistance from end users, in particular from those who worked in the Warehouse and Production divisions. This resistance, however, and the rationale for the resistance, varied across divisions. For instance, in the warehouse, members of staff resisted ERP because of their previous experience with the introduction of new technology. As one of the project team members explained: “The difficulty of conveying a concept such as ERP and getting it implemented in the warehouse isn’t really 15

because people aren’t aware of it’s value. It’s just that there is a misconception; at least I believe it is a misconception, that new technology will threaten job security. This has been around for many years. I can give you an example. Three years ago, we introduced a new system in the warehouse and shortly afterwards two people left the company. Their leaving had nothing to do with the new system and simply reflected the fact that historically the warehouse had been over-staffed. Unfortunately, it was just a case of bad timing, but it fuelled the belief amongst the remaining workforce that new systems and new technologies means fewer jobs”.

In contrast to the form of resistance found in the warehouse, the way in which resistance was expressed in the production division was more about the issue of time and commitment. As indicated earlier, numerous deadlines faced by the production division were found to be a critical factor that inhibited their involvement and participation in the ERP project. As one interviewee stated: “We are so busy at the moment, I reckon we’re running at least at 110% of our usual capacity. That’s three shifts a day, and seven days a week, it just never stops. We’d be more than happy to get the ERP stuff in our division, but it’s just impossible to spend any more time on it at the moment. We’ve got to be fully committed to our normal duties if we are going to keep on top of the current workload.”

In addition to the two forms of resistance found in case B, a distinctive form of resistance was also found in Company A, even though such resistance did not seriously affect the implementation of ERP. Here the resistance resulted from people suffering what can be described as ‘initiative overload’. Internal documents collected from Company A showed that major organization wide initiatives took place on an annual basis. For instance, the establishment of a common IT infrastructure in 1992, a

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major system upgrading in 1993, and the introduction of a worldwide videoconferencing system in 1994 are just some of the examples.

The findings derived from this present study thus support the strategic importance of continuous IT investment as one of the key elements to enable organizational renewal (Davenport, 1993; Gunasekaran and Nath, 1997). However, the evidence also indicates a challenge for organizations in terms of how the pace of technological innovation should be managed to avoid task interruption. In particular, there is a problem of an increasing overload of information created by the advancement of information communication technology (Speier, Valacich and Vesey, 1999). This highlights that resistance to new technology should not simply be perceived as a psychological issue, influenced by an individual’s perception and willingness to change, as implied by some studies (see, for example, Davis, 1989; Sawyer, 1998). Similarly, the breakdown of cross-functional knowledge sharing and integration during the implementation of new technology cannot be regarded merely as an issue influenced by an individual’s willingness. Rather, resistance to technology and knowledge sharing is a dynamic concept that is not only experience-based, as shown in the case B, but also commitment dependent, as evident across the two cases.

Top Management’s Support Closely related to the issue of resistance, lack of support from top management was found to be another issue that influenced the ERP implementation in case B. Even though the implementation of ERP was regarded as one of the key strategic developments for the company, according to an internal report, 7 interviewees indicated that: “support from top management could have been better”. Despite common agreement about the lack of support, divisions varied in terms of their perception of this. For instance, the project manager indicated that top management had been indecisive in sanctioning the ERP project because of a potential acquisition opportunity that had arisen in 1997. As elaborated in the earlier discussion, the ERP project covered Company B’s UK operation only. The key reason for this was that the organization needed to restrict its financial expenditure if it was to successfully take advantage of an acquisition opportunity. As was explained by one of the senior managers:

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“We have to be extra careful in terms of what and where resources are allocated at the moment. Given the uncertainties surrounding the company, it just doesn’t make strategic or financial sense to begin the implementation of a new system, knowing full well that we may need to start all over again in a couple of months time”.

Project participants based in the Accounting division complained that the reduced scale of the project meant that one of the key advantages of an ERP system was not achieved. As explained by the Finance Director in Company B, to implement ERP in its UK operation only, would not allow them to consolidate the financial accounting system across the global operation.

The Production division perceived another problem related to the lack of support from top management. As elaborated earlier, interviewees from the Production division argued that top management did not provide sufficient time for their members of staff to participate in the ERP project. Their performance was assessed on production output and involvement in the ERP project would have detracted from this. This explains why the Production personnel were more willing to engage in production activities than in ERP implementation. Also, this illustrates the relationship between how organizational members prioritize their activities and how their performance is measured (Agarwal and Singh, 1998; Wageman and Baker, 1997).

The viewpoint of the external consultant team in perceiving the ERP failure also surfaced another different set of problems in terms of the support they received. It was suggested by one of the consultants that lack of support from the top management was derived from their poor understanding about the concept of ERP. As the consultant noted: “Between you and me, you’d be amazed by how little the majority of senior managers know about ERP. We do our best to educate our clients, we run workshops and seminars, but at the end of the day it is up to the individuals as to how much information they actually 18

take away with them. Unfortunately, for one reason or another, most managers here failed to pick up too much and you can’t expect your clients to buy your ideas unless they can really appreciate what you are talking about”.

The diversity of viewpoints provided by the interviewees from case B not only demonstrates how the issue of lacking support from top management was perceived so differently, but also pinpoints the fact that types of support required by different divisions and external participants also differs. In terms of managing the issue of support, the findings from case A indicate that in this case support was sustained from various hierarchical levels. In particular, the steering group acted as a buffer between top management and the project team not only to help problem solving, but also to ensure the availability of resources. In this case the steering group was made up of members who had substantial seniority and so they were able to ensure the support and authority from the top management.

It is clear from the above discussion that top management’s support is critical not only to ensure the success of an ERP implementation, but also to encourage knowledge sharing and integration by providing conditions that allow cross-functional interaction. From the two cases, it is also clear that sufficient time for participation is crucial and that this is affected by the way in which individual’s performance is assessed. Also, to sustain support from top management can be equally vital to overcome resistance from end users. On the one hand, the findings presented here support various previous studies that have addressed the importance of the management

and

end

user

relationship

during

technology

adoption

and

implementation (see, for example, Markus, 1983; Yoon, et al, 1995). On the other hand, this study extends the current literature by providing insights in how managerial support can be perceived differently from division to division, and how the need for different types of support can vary across an organization.

Conclusion and Implications Providing empirical evidence derived from the comparative analysis of two cases, this study has outlined various problems faced by the two companies during the 19

implementation of ERP from a knowledge-focused perspective. By comparing and contrasting the experiences faced by each organization, this research provides a comprehensive picture that portrays the dynamics of ERP implementation and appropriation. Major theoretical contributions of this study are twofold. First, it is to conceptualize the implementation and appropriation of ERP from a knowledgefocused viewpoint. In addition to the multi-faceted and multi-disciplinary nature of the implementation process, ERP implementation is found to be a collective social construction activity (Burger and Luckmann, 1967) influenced by external parties, such as suppliers and consultants, as well as internal participants, such as project sponsors and end users. In particular, the social construction of technology pinpoints that the adoption and appropriation of ERP is more than just the advancement of technology or the sophistication of technology per se. Instead, it is a knowledge sharing and integration process which is largely influenced by the power distribution and network structure between different stakeholder groups internally and externally. The second theoretical contribution is to unveil the dynamics of knowledge sharing and integration within the context of technology adoption and appropriation. The findings not only reflect the need for changing business processes to leveraging new technology as argued by the literature, but also indicate the importance of a fundamental shift in the way by which knowledge is shared and integration as a means of enabling the business processes change. Derived from the findings, it is clear that changing the dynamics of knowledge sharing and integration requires more than merely the formation of cross-functional project teams. Moreover, it demands the penetration of boundaries between different departments, communities and stakeholder groups, as well as the commitment and support from existing and potential participants.

In terms of future implications, the findings are useful for future studies that aim to explore the adoption and implementation of new technology, either ERP or others, in different organizational contexts. From a managerial perspective, the findings are useful in providing guidelines for managers who are involved or will be involved in the implementation of ERP or other new technologies. In particular, the findings suggest that maintaining supplier relationships, sharing information and project ownership, overcoming resistance and sustaining support from top management are critical and should be taken into account during the evaluation and planning stages. 20

Moreover, it is also important to note that implementation of ERP can improve the efficiency of information processing and distribution, but it does not necessarily mean that cross-functional knowledge sharing and integration are enhanced. This pinpoints not only an unsolved challenge for practitioners but also a further research agenda for those interested in the implementation and appropriation of new technology.

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