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Driving change through e-business- the case of Canon

Head of Corporate Planning, Canon Europa


Many major business changes take place in response to a crisis but the best time to undertake a major change is when the business is sound, allowing the time to properly plan moves and make good decisions. Canon Europe decided it was time to change its image and used e-business to drive this change. Four task forces took a corporate approach to turn the company upside down knowing that it was necessary to get fourteen countries to agree on functionality for a pan-European system. They planned a European portal with four main e-services and it was soon realised that the company faced a steep learning curve to reach the desired level of harmonisation. During the implementation process Canon has already learned many lessons about sharing information and standardisation to reach a cross border service. E-business has been the enabler for without it, the necessary changes would not have been achieved. It has brought noticeable gains in efficiency, best practice, knowledge sharing and better communication. It is creating new management structures and greater customer focus.

1. Introduction

The business environment is evolving rapidly, demanding radical change. And, if you ask me, the right time to change is when a company is doing well, not when it hits a rough patch. As business guru Mike Hammer puts it, when it ain't broke, that's the time to fix things. However, when you're not in a period of crisis, it's not easy to convince people of the need for change. Machiavelli understood this 500 years ago, when he wrote: "no undertaking is more difficult or uncertain than introducing change," and this case study confirms that it's no less difficult today. Nevertheless, e-business has made it possible to bring about just the kind of far-reaching changes that are going on right now at Canon.


2. The Objectives and the Mechanism

2. 1 Beyond' the Quality Revolution

Thanks to advanced technology and "just-in-time" production and inventory systems, manufacturers everywhere have been able to optimise their processes. The focus now is on processes and people. While this is to be welcomed, companies whose business models are based on careful, deliberate planning and flawless production don't find it easy to abandon their way of doing things. As such companies tend to be organised rather rigidly and to be risk-averse, they are ill equipped to respond to new market conditions. In Germany and Japan, for example, businesses generally feel much more comfortable when change is gradual rather than radical; decision-making tends to be consensual, and there's no tradition of charismatic leadership.

2.2 Paradigm shift

Management consultants just love using buzzwords like "breakthrough transformation" and "reinventing" - it makes their clients feel outdated, and creates a demand for their services. Nevertheless, thanks to new technologies and global markets, a paradigm shift has taken place in recent years. Canon's experience tells me that companies should react while they're still on top - if they wait for a crisis, it may be too late. So, if you want to survive, you need to institutionalise change as a continuous process. It's not enough merely to respond to it: you must learn to welcome it.

2.3 Why we had to change

For us, change was not so much an option as a matter of survival. In the past, Canon in Europe comprised 13 strong national sales and service companies, backed up by R&D centres and factories. The main task of company headquarters in Amsterdam - where I'm based - was to provide logistics and support. The 'big four' (Germany, France, UK and Italy) worked directly with Canon Inc in Japan, so they had little contact with HQ.

This business model, which encouraged duplication of effort and resources, is now past its sell-by date. Our channel structure, particularly in consumer products, has been strongly influenced by the advent of powerful pan-European wholesalers. The single currency will further sharpen competition by increasing the transparency of pricing and promotion. What's more, benchmarking showed us that many of our competitors had lower overheads than we did.

2.4 Image and Reality

The new direction in our strategy will change our image from a 'shifter of boxes' - whether they contain cameras, copiers, printers or other office equipment - to a digital solutions company capable of supporting customers in all of their network and ICT needs. The prime target sector is small and medium-sized enterprises. Our volume business will of course continue, and here the focus will be on pan-European channels.

In effect, almost everything will be new: the structure of our organisation, our IT backbone, marketing, administration and logistics. New centres of competence will reduce duplication and create efficiencies of scale and scope, from processing expenses, arranging business travel and leasing vehicles, to printing a single invoice for a pan-European customer. In short, we'll be more international, and more customer-focused.

3. Implementing the change

3.1 Task forces

The story of the change process at Canon Europa goes back to March 1999, when Hajime Tsuruoka, our new president, arrived at our HQ in Amsterdam. He had 15 years' experience of European business behind him (in his previous position he was President of Canon Germany). Tsuruoka's mission was to build up Europe as one of three strong geographical regions that would contribute to Canon's overall growth in turnover and profits.

By July 1999, the building blocks for the new structure of Canon in Europe were defined. Top executives from across Europe were appointed to lead four taskforces, each with a change agenda:

· to launch Canon's new business direction - what we call 'value business'
· to carve out a viable strategy for Canon's traditional volume products
· to find ways to cut costs (mainly through economies of scale)
· and to define e-business projects, and prioritise them.

3.2 Moment of truth

At the end of 1999, Mr. Tsuruoka gathered the presidents of the national companies to help him evaluate the initial results from the taskforces. The decisions made that day demanded a lot more co-operation across borders than even we - a company that employs 12,500 people across Europe, African and the Middle East - were used to.

Forrester (the high-tech research group) has predicted that by 2005 one third of all business transactions will be carried out via the 'Net. We aim to achieve at least that percentage, but our first priority is to communicate with dealers and large accounts, people who depend on our products and services to make their profits. Our strategy right now is to focus on relatively high-margin Business-to-Business, rather than Business-to-Consumer systems.

I'll now focus on the way we have used e-business to drive change at Canon.

3.3 World-class, Internet-based

The Internet is already changing our company. It affects the way we:

· market and sell our products
· source and purchase products and services
· plan and co-ordinate projects with our partners
· meet customer demand and deliver customer service
· access information and measure performance, and
· inspire people to share best practice, and to excel.

However, we aim to go a lot further. Our target is to become a world-class Internet-based company. But what exactly does that mean? Basically, it means that we have to turn the traditional company pyramid upside down and put business critical processes on line.

3.4 Turning the company upside down

Traditionally, Japanese companies have had lower production costs, but higher overheads. So while we can all learn something from leading ICT companies like Cisco, I believe that our ideal profile might actually lie somewhere in between. In the meantime, perhaps I should state that one thing, at least, is clear: academics and business experts all agree that investments in IT produce the greatest returns in organisations that are willing to embrace change.

There's certainly no doubt about Canon's commitment to change. Instead of being based on fixed assets like factories and inventory, our new core business model will be built on customer relationships. This, in a nutshell, is our vision.

3.5 Corporate approach

We're currently focusing on e-business solutions that will save costs, especially in e-procurement. However, the wider challenge we set ourselves was to change from a decentralised network of national sales organisations into a highly co-ordinated pan-European organisation. And we had to do this rather quickly - within two years. The difficulty, we had in finding experienced people to help us in this process, suggests that very few companies are doing this yet.

The strategic importance of Canon Europa's e-business plans is reflected in the involvement of the President of the company and our Chief Information Officer, Mogens Molgaard-Jensen. His experience as President of Canon Denmark meant that new e-business initiatives would come not only from the business units, but also from his own central ICT organisation. This group has the complete range of e-business skills and expertise in-house. The e-business division (my department) develops overall strategy and business cases, and we present them to the board for a 'go/no go' decision. Second in line are the people in the programme office, who are entrusted with managing development and implementation. And then there's our IT competence centre, which will take over the maintenance of the e-business system once it's up and running.

3.6 Developing an e-mindset

We were faced by the daunting task of getting all 13 countries to agree on the functionality that should be included. So we brought people who represented all parts of the company together for workshops, which produced a long list of possible e-services. Each participant then had to go back and prioritise the list, both with customers and with colleagues.

Then we made a mock-up of each e-service, together with a business case. The e-business team presented the business case to the Canon companies' top executives and managers. The outcome was a 'fit gap' analysis to see where the proposals matched each company's business model. An IT assessment of the most common Enterprise Resource Planning (ERP) systems was also conducted. Only then was a formal decision taken to start developing and building the system.

3.7 Steep learning curve

To explain what I'm going to say next, I should point out that there are two main parts to an e-business system: the central platform and the local interfaces to, for example, ERP systems. Originally, we'd asked a firm of consultants to build both for us. That turned out to be a mistake. It's an enormous task - one that's almost impossible for outside consultants to achieve. We now know that Canon experts in the various countries, with their valuable experience of the national interfaces, are in a far better position. We also soon realised that we'd underestimated both the complexity and the cost of the project - in some areas by up to 150%. We changed consultants after the first six months, and had to revise our initial over-ambitious timeframe.

3.8 Gaining broad acceptance

The next hurdle we faced was how best to gain broad acceptance of e-business plans? At first, we'd intended to hold a big corporate 'kick-off event in London. Later on, we cancelled it, and instead we visited each country separately. After all, as I said earlier, change inevitably creates feelings of insecurity, especially when it's driven by HQ. So the presidents of each country organisation invited their staff to meet us, saying: "Stefan Pilotti and his team are here to explain a draft plan for a pan-European e-business system. This is your chance to give them your views."

We got much better feedback this way. People tend to clam up in big corporate meetings - they need the opportunity to say "Yes, but.. ." So we showed them our system mock-ups, and found that about 85% was immediately acceptable and 15% needed to be customised. This was an important learning point: you have to go out and sell your ideas to the people who'll have to use the systems.

4. The target

4.1 Tower of Babel

Before you can grow a new crop, you must prepare the soil. The ERP systems, office platforms and web applications used in the 13 different countries had very little in common, making them virtually useless for building the new strategy. We started harmonising all of Canon's systems across Europe, but in certain key areas we soon realised we would have to move faster. So we decided as a first priority to build a B2B portal for Europe.

4.2 European portal

The portal will provide access to four main e-services:

· First, a marketing management service to handle marketing material more efficiently, and to support dealers and our own sales forces better.
· Then there was an e-commerce module for simple online shopping. The focus here is on tracing and tracking purchased goods (we discovered that up to 80% of an order-administrator's work consisted of tracing and tracking orders!)
· Next, there's service management - we need to give our customers rapid access to help, and an easy way to place a service call online.
· The final e-service in Release 1 of our B2B portal is a fleet management tool, which will help Canon's larger customers manage their 'fleet' of copiers etc. more efficiently. The idea here is to encourage customers to make their orders online, thereby cutting our order costs significantly. Our target is that by 2003, thirty percent of all orders will be placed online.

5. Results

5. 1 E-business benefits

The Internet drives change a bit like a snowplough (I'm a Swede, so you'd expect me to use a
Northern metaphor). Information about customers, for example, will not be jealously guarded by local sales organisations, but shared with product development and marketing people. Each customer will be identified by one code, so that information can flow from customers to all parts of Canon and to our suppliers.

We now all use Microsoft Office, with on-line learning and one support desk for the whole of Europe. The 'Net also allows you to present information in a standard way, enhancing clarity, coherence, and consistency. Have a look at our new website pages, and you'll see that space is defined for corporate, business unit and local information.

One advantage of e-business is that it's immediately seen as a cross-border service, which most people tend to support. Secondly, as a 'leading edge' development, it's more likely to be accepted and used to create greater competitiveness. Thirdly, the investments in this area are so large that most companies will want to share the costs and risks with others, even if this means you can't always get everything you ask for in the first release. Finally, national barriers come down as everyone starts to talk the same e-language.

5.2 What else have we learned?

I've come to the conclusion that, without e-business, we couldn't carry through the kind of changes we need to make. It will create greater efficiency, help us share knowledge and best practice, and enhance communication between product developers, partners, customers, employees and suppliers. We've learned that it's important to involve as many people as possible right from the start and to bring in experienced consultants early in the process. We've also learned that while you can't impose a 100% standard business model on Europe - arguably the most culturally diverse continent in the world - there's a lot you can share. As for the costs, there's not much difference between developing e-business centrally and developing it per country, but it makes a huge difference if you maintain it centrally.

5.3 No big bang

Change is full of sweaty complexity. In our e-priorities we had to take account of existing ITC plans and the availability of people with the right skills. So we decided to phase in the changes. On a project this large, I would counsel against going for the 'big bang' approach. A much better way is to pick a 'beta' and then an 'alpha' company to act as pilots. Only after they've fully tested the embryonic e-business platform is it wise to start rolling out programmes. That's why we created three clusters of countries: early adopters, those in the middle, and finally those who prefer to adapt last. They can learn from the integration experience of the pioneers. So how far have we got? We've built the central platform and standard interface. By the end of this year the first five countries will be on-line. The rest will follow in 2002.

5.3 Beyond the hype

Although e-business solutions are just part of our determination to become a world-class Internet-based company, I hope I've convinced you that they're an excellent way to drive change in large, diverse organisations. We believe in a multi-channel line of attack, with the Internet supporting other approaches. A strong local presence is also essential. There are more components under development; some are still just great ideas. But one thing I can tell you: it's great fun building a new company!

Fortunately, the first peak of inflated expectations about e-commerce is now behind us. Like all the other speculative bubbles before it, the dot-com bubble finally burst. But we should beware of throwing out the baby with the bath water. I'm glad to report that e-business at Canon is a healthy baby and it's growing. It's already creating flatter management structures, greater customer-focus, and more innovation. The so-called "digital revolution" - like the beginnings of the industrial revolution in the 19th century - is really just the birth pains of much bigger changes ahead. We're tightening our e-business seatbelts, because it looks like an exciting ride ahead.