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.
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
· to find ways to cut costs (mainly through economies
· 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
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
· 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
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
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
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
· 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. 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.