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NIBCO’S “BIG BANG”
A teaching case, prepared by:
Carol V. Brown, Ph.D. Associate Professor of Information Systems Kelley School of Business Indiana University 801 W. Michigan St. Indianapolis, IN 46202- Phone: 317-274- Email: cbrown@iupui.edu
Iris Vessey, Ph.D. Professor of Information Systems Kelley School of Business Indiana University 1309 E. 10th^ Street Bloomington, IN 47405- Phone: 812-855- Email: ivessey@indiana.edu
Winner of the Best Teaching Case
International Conference on Information Systems, 2000
c) Brown and Vessey 2000
NIBCO’S “BIG BANG”
December 30, 1997 was the Go Live date at NIBCO INC., a privately held mid-sized manufacturer of valves and pipe fittings headquartered in Elkhart, Indiana. In 1996 NIBCO had more than 3,000 employees (called "associates") and annual revenues of $461 million. Although many of the consultants they had interviewed would not endorse a Big Bang approach, the plan was to convert to SAP R/3 at all ten plants and the four new North American distribution centers at the same time. The price tag for the 15- month project was estimated to be $17 million. One-quarter of the company's senior managers were dedicated to the project, including a leadership triad that included a former VP of Operations (Beutler), the Information Services director (Wilson), and a former quality management director (Davis).
One of the major drivers of the whole thing was that Rex Martin said ‘I want it done now.’ That really was the defining moment—because it forced us to stare down these implementation partners and tell them ‘…we’re going to do this Big Bang and we’re going to do it fast’. Scott Beutler, Project Co-Lead, Business Process
We took ownership: it was our project, not theirs. We used the consultants for what we needed them for and that was technology skills, knowledge transfer, and extra hands. Gary Wilson, Project Co-Lead, Technology
It was brutal. It was hard on families, but nobody quit, nobody left…. Professionally I would say it was unequivocally the highlight of my career. Jim Davis, Project Co-Lead, Change Management
Company Background
NIBCO’s journey to the Go Live date began about three years earlier, when a significant strategic planning effort took place. At the same time a cross-functional team was charged with reengineering the company’s supply chain processes to better meet its customers' needs (see Timeline in Exhibit 1 ). One of the key conclusions from these endeavors was that the organization could not prosper with its current information systems. The firm’s most recent major investments in information technology had been made over five years earlier. Those systems had evolved into a patchwork of legacy systems and reporting tools that could not talk to each other.
After initial talks with several consulting firms, top management brought in the Boston Consulting Group (BCG) in August 1995 to help the company develop a strategic information systems plan to meet its new business objectives.
BCG brought in a team and what they instantly did was to start going through each of the functional areas of the company to determine the need for changes….And so they went into each little nook and cranny of the company and sorted out whether we really needed to change every system we had. Jim Davis, Project Co-Lead, Change Management
The consensus among NIBCO's management team was that the company was "information poor" and needed to be "cut loose" from its existing systems. There were also major concerns about being able to grow the company and become more global without an integrated information capability. The December 1st^ BCG recommendation was that NIBCO replace its legacy systems with common, integrated systems that could be implemented in small chunks over a 3- to 5-year timeframe.
They told us ‘you really need to look at integration as a major factor in your thought processes—the ability to have common systems with common communication for the manufacturing area, the distribution area, across the enterprise.' Scott Beutler, Project Co-Lead, Business Process
The company began to reorganize into a cross-functional, matrix structure in January
- It also initiated a new cross-functional strategic planning process. Scott Beutler was relieved of his line management responsibilities to focus on the development of a new IT strategy. Beutler had joined NIBCO in early 1990 as general manager of the retail business unit. When this business unit was restructured, he became the VP of Operations—Residential Division. Beutler was charged with learning whether a new type of integrated systems package called enterprise resource planning systems (ERP) would be the best IT investment to move the company forward.
Information Systems at NIBCO
Gary Wilson was hired as the new head of the IS department in May 1995 and became a member of the BCG study team soon after. Wilson had more than 20 years of IS experience, including managing an IS group in a multi-divisional company and leading four major project implementations. He reported to Dennis Parker, the Chief Financial Officer.
Wilson inherited an IS department of about 30 NIBCO IS specialists, including those who ran mainframe applications on HP3000 and IBM/MVS platforms. About one-half were COBOL programmers. The IS payroll also included a number of contractors who had been at NIBCO for up to five years.
Four major legacy systems supported the order entry, manufacturing, distribution, and accounting functions (see Exhibit 2 ). The business units had purchased their own packages for some applications and plants were running their own versions of the same manufacturing software package with separate databases.
We had a neat manufacturing package that ran on a Hewlett Packard, an accounting system that ran on an IBM, and a distribution package that was repackaged to run on the IBM. Nothing talked to each other. Distribution couldn’t see what manufacturing was doing and manufacturing couldn’t see what distribution and sales were doing. Jan Bleile, Power User
Exhibit 2: Legacy Systems at NIBCO
In July 1996, the ERP selection team recommended to the ELT that NIBCO purchase a single ERP system: SAP R/3. Among the benefits would be multi-million dollar operational improvements and reductions in inventory costs; the ROI was based on a 6% forecast growth rate in NIBCO’s revenues. The cost estimates included the move from a mainframe to a client/server platform and an estimated number of R/3 licenses. Although consulting costs under the Big Bang approach were still expected to be high—about one- third of the project budget—they would be lower than the 1000 days estimated for the 3- to 5-year phased approach. Either approach would involve a big increase in IS spending. The ELT supported the recommendation to implement R/3 as quickly as possible—pull the people out of the business to work on it, focus, and get it done.
The R/3 purchase and Big Bang implementation plan were then presented to NIBCO’s Board of Directors. The Board viewed the Big Bang approach as a high-risk, high-reward scenario. In order to quickly put in place the systems to execute the new supply chain and customer-facing strategies, which had come out of the strategic planning process, the company would have to commit a significant portion of its resources. This meant dedicating its best people to the project to ensure that the implementation risks were well managed.
A contract was signed with SAP for the FI/CO, MM, PP, SD, and HR modules and about 620 user licenses soon afterward. The HR (Human Resources) module would be implemented later. Rex Martin, chairman, president and CEO of NIBCO, assumed the senior oversight role.
The TIGER Triad
Once the team's Big Bang recommendation was endorsed, Beutler began to focus on the R/3 implementation project. The initial idea was to have Wilson co-lead the R/3 project with Beutler. In an earlier position, Wilson had worked on “equal footing” with a business manager as co-leads of a project involving a major platform change, and it had been a huge success. He therefore quickly endorsed the idea of co-leading the project with Beutler. Between the two of them there was both deep NIBCO business knowledge and large-scale IT project management knowledge. Although Beutler was already dedicated full-time to the ERP project, Wilson would continue to manage the IS department as well as co-lead the project for the next 18 months.
Shortly after the Board decision in late July, Rex Martin asked Jim Davis to join Beutler and Wilson as a third co-lead out of concern for the high strategic risk of the project. Martin had been the executive sponsor of a team led by Davis that reengineered strategic planning at NIBCO. The morning after Davis agreed, Martin introduced Davis as the third co-leader of the project, and then let the three directors work out what roles they were going to play.
As the three co-leads looked at what needed to be accomplished, it became clear that Davis’ experience with total quality management initiatives could bring focus to the
Exhibit 3: Tiger Leadership
change management aspects of the project. Davis split his time between his quality management job and the R/3 project for about a month, and then began to work full-time on the ERP implementation.
One of the things we did was a lot of benchmarking…and one of the things we kept hearing over and over was that the change management was a killer. Having been in the IT business for a long time, I realized it was a very, very key element. With the opportunity to give it equal footing, it sounded like we could really focus on the change management piece. Gary Wilson, Project Co-Lead, Technology
I was pretty sensitive to change management because of my TQM role and so in the conversation I could say ‘look guys, if we don’t get people to play the new instrument here, it could be a great coronet—but it’s never gonna blow a note.’ Jim Davis, Project Co-Lead, Change Management
The R/3 project team came to be called the TIGER Team: Total Information Generating Exceptional Results. The project was depicted as a growling tiger with a “break away” motto, symbolizing the need to dramatically break away from the old processes and infrastructure (see Exhibit 3 ). A triangle symbolized the triad leadership with responsibilities for Technology (Wilson), Business Coordination (Beutler), and Change Management (Davis).
The three co-leads spent significant amounts of time together on a daily basis, including Saturday mornings. Each brought completely different perspectives to the project. They
Technology - Wilson
Change Management - Davis
Business Coordination - Beutler
NIBCO’s triad leadership design was also not viewed as optimal for decision-making, and the consultants recommended that a single project leader be designated. The three co- leads considered their suggestion, but turned it down: the triad ran the project, but designated Beutler as the primary spokesperson.
Another risk was that IBM's change management approach in mid-1996 was an off-the- shelf, generic approach that was not ERP-specific. However, it had been used successfully for business process reengineering projects, and it included communications activities and job redesign initiatives. The intent was to tailor it to the TIGER project.
When the change management consultants came to NIBCO, none of them had ever heard of ERP or SAP, so it was difficult to directly apply their principles to NIBCO’s situation. They stayed with us for four or five months into the project so that we could get enough learning from them, couple that with our own internal understanding and then tailor these ideas to the specific ERP change issues. Jim Davis, Project Co-Lead, Change Management
The IBM contract was signed in late August 1996. Six functional consultants would work with the project team throughout the project. Consultants with ABAP development and training development expertise would be added as needed. Knowledge transfer from the consultants to NIBCO's associates was part of the contract: NIBCO's employees were to be up-to-speed in R/3 by the Go Live date.
Selecting the Rest of the TIGER Team
The TIGER project team had a core team that included three business process teams, a technical team, and a change management team. Each business process team had 7 or 8 people with primary responsibility for a subset of the R/3 modules (see Exhibit 4 ): 1) Sales/Distribution, 2) Finance and Controlling, or 3) Materials Management/Production Planning. NIBCO associates on the three business process teams played the following roles:
- Business Review roles were filled by business leaders who could make the high-level business process redesign decisions based on their own knowledge and experience, without having to "ask for permission."
- Power User roles were filled by business people who knew how transactions were processed on a daily basis using the existing legacy systems and were able to capture operational details from people in the organization who understood the problem areas.
- Business Systems Analyst roles were filled by persons with strong technical credentials who were also able to understand the business.
Sales Distribution Team
Finance Controlling Team
Materials Management Production Planning Team
Business Review Role
Power User Role Power User Role Power User Role
Analyst Analyst
Business Systems Business Systems Business Systems Analyst
Consultant Consultant Consultant
Business Review Role
Business Review Role
Change Management Team Consultants
Technical Team
Exhibit 4: Project Team Composition
Wilson led the Technical Team of IS specialists, which was responsible for designing and building the new client/server infrastructure as well as providing ABAP programming support, PC training, and help desk support. The new infrastructure would link more than 60 servers and 1,200 desktop PCs (with standardized email and personal productivity tools) to a WAN. Almost every existing PC was to be either upgraded or replaced, and the WAN would be upgraded to a frame relay network that would link headquarters with all North American plants and distribution centers. New technical capabilities would also be required for the product bar-code scanning and labeling functions that were to be implemented as part of the warehouse management changes.
Jim Davis led the three-person Change Management team. A public relations manager, Don Hoffman, served as the project team's communications/PR person. Steve Hall, an environmental engineer, was responsible for ensuring that all team members and users received the training they needed. Davis had witnessed some training that Hall had done and selected him to lead the training effort for the project.
Early in the project it was decided that the project team members would be dedicated full-time to the project, but there would be no backfilling of their old jobs. Team members were expected to remain on the team throughout the project plus four additional months following the Go Live date. They would then be redeployed back to business units.
IBM consultants were also assigned to each of the five project teams. The IBM project team members brought their technical knowledge to the project not only so that the business could make smart decisions among the R/3 options, but also for knowledge transfer to the NIBCO core team. Many of these consultants also brought experiences from R/3 implementations at other companies that could be used to help NIBCO avoid similar pitfalls. Consultants from the software vendor (SAP) were also occasionally brought in throughout the project—including BASIS and Security consultants.
We said all along, from day one, that we expected to become competent with the tools. We didn’t take the approach of ‘do it to us’ like it’s done in many places. We took the approach of ‘show us how’ to be an oil painter, and we’ll be the artist. We wanted them to show us how the tools work and what the possibilities were. Then we’d decide how we were going to operate. We started with that from day one. Scott Beutler, Project Co-Lead, Business Process
Their job was to bring to the table a deep knowledge of SAP and how it functions and enough business savvy to be able to understand the business case to help us best configure it in SAP. But we were responsible for all the decisions. We considered them critical members of the team, not somebody separate and apart. But our goal all along was that as soon as we went live, the consultants would go away and we’d manage the business on our own. We didn’t want to have to live with them forever. Jim Davis, Project Co-Lead, Change Management
We used the consultants for what we needed them for—and that was knowledge transfer, extra hands, and technical skills. Gary Wilson, Project Co-Lead, Technology
In addition to these formal team roles, Extended Team Members would be called on to help with documenting the gaps between old and new business processes and helping with master data loads and testing. Because the business employees designated to these roles would continue to work in their business areas during the project, several of them would also be the primary user trainers in preparation for Go Live. After the cutover, many would also serve in "local expert" roles.
We probably consumed anywhere between 150 to 200 resources throughout the project in one way or another—either scrubbing master data, or training, or who
knows what else. If we needed hands to key, we went and got them. That's how many people really got involved—and there were a lot. Rod Masney, Business Systems Analyst
The project kickoff was September 30 th^. It took the company 14 months of planning to get to the kickoff, and the team had 15 months to deliver the ERP system. During the first week, formal team-building exercises were conducted offsite. During the second week, IBM facilitators led the entire team through discussions about the kinds of changes the project would necessitate. For example, team members were asked to think through what it would mean to change to standardized processes from ten different ways of doing things in ten different plants with ten different databases. The intent was to sensitize the entire team to potential sources of resistance and the need for early communication efforts.
Introductory-level training and training on R/3 modules were held on-site; team members were sent to various SAP training sites in North America for more in-depth, 2- to 5-day courses. Altogether, the team received almost 800 days of training.
Working in the TIGER Den
Rex Martin was committed to housing the entire project team in a single physical location. The original plan was to move the team to a building across town, but Martin wanted the group to be located closer to NIBCO's senior managers.
A major remodeling project was in progress at the headquarters building, and the team was allocated 5,000 square feet on the first floor. Beutler and Davis read books on team management and came up with a plan to configure the space, which came to be called the TIGER Den. The company’s furniture manufacturer designed a movable desk (Nomad), which would enable flexible workspace configurations.
In the end, we were less mobile than we thought we might be, but it created an environment of total teamwork and lack of individual space that forced us to work together and get done what we needed to get done. Jim Davis, Project Co-Lead, Change Management
The Den had no closed doors and no private offices. A large open space called the "war room" had whiteboards on every wall. It was used for meetings of the whole project team, "open" meetings with other NIBCO associates, system prototyping and for core team training during the project. Beutler and his administrative assistant, the change management team, and the IBM project manager used an area with a six-foot partition, that had a U-shaped conference table and workstations. Wilson kept his office within the IS area in another section of the same building, but spent about 40% of his time in the Den.
sheer number of locations. A distribution center consolidation prior to the ERP Go Live date would therefore reduce both technology costs and implementation complexity.
Although the detailed planning for the distribution center (DC) consolidation was not complete when the final project plan was presented to the Board, by March 1997 the company had committed to consolidate from 17 small DCs to 4 large ones: 1 existing facility would be enlarged, and new managers and associates would be hired to run the 3 new DC facilities. The goal was to complete the consolidation by September 1997 to allow time to prepare for the cutover to the ERP system.
SAP provides opportunities for consolidation, so it's not uncommon for companies to decide on a certain amount of consolidation for something… The original timing had the warehouse consolidation getting done ahead of SAP by a couple of months. Gary Wilson, Project Co-Lead, Technology
There were several major business risks associated with the project that also would have to be managed. First, the integration really had to work, because otherwise any one part of the organization could claim that they were no better off, or even less well off, than before the project. This meant the team would have to make decisions focused on the integration goals, which would result in killing some "sacred cows" along the way.
Second, the company could be significantly harmed during the project because most other company initiatives would basically be put "on hold." The exception was the distribution center consolidation, and this would involve large-scale personnel changes and increased demands for training. At the same time, it would be important to maintain as much customer satisfaction as possible.
Management also knew that if the project ran late, it could really hurt the company. So the project had to be completed on time with a quality result.
You can't pull 27 full-time people out of a business that runs fairly lean, and then not backfill and expect business to go merrily on its way. We actually watched one competitor of ours go live with SAP during the course of our implementation, and the first two weeks they were live they could not take a customer order. And so we were seeing some real life horror stories in front of us. So, the risk management from our perspective was: we're gonna 'deep six' this company if we do this poorly or if we don't do it on time. Jim Davis, Project Co-Lead, Change Management
Because there was no back-filling of the jobs held by the project team members, NIBCO associates not on the project team had to take on extra work to sustain normal operations. This meant that the whole organization needed to be committed to the ERP project. An upfront goal of participation by one-third of NIBCO's salaried associates was established to be sure they understood where the project was going, to promote buy-in, and to get the work done.
There was a team of people who were living and breathing it everyday, but it truly was a whole company effort. I had 2 individuals that left my organization and were full-time members of the team. We did their work; we absorbed it. That was universal throughout the company. Diane Krill, Director, Customer and Marketing Services
Criterion Measures
Impact on
Incentive Pay
On Time
SAP must be live on or before 12/31/
Required for any incentive pay
Successful
- Client-server environment measures:
- available 90% of agreed upon time
- 95% of real-time response times are less than 2 seconds
Executive Leadership Team will review the results of these four measures and make a recommenda- tion to the Board as to whether or not project was a success
- Business processes supported by SAP:
- one day after Go Live, no transaction data entered into legacy systems
- 45 days after implementation, less than 15 open data integrity problem reports
- Core management and administrative processes supported by SAP:
- close books through SAP within 15 days at first month end
- Training of NIBCO associates in use of SAP and processes:
- a minimum of 95% attendance at training classes across the organization
Within
Budget
Control spending to at or below project plan approved by Board 1/28/
Every $1 over budget reduces the incentive pool by 50 cents
Exhibit 5: Criteria for Incentive Pay
A few months after the project began, a special incentive pay bonus was established for every salaried NIBCO associate. The bonus was tied to a half-dozen criteria (see Exhibit 5 ). The Go Live schedule had to be met, or no incentive pay would be distributed: a 30- day grace period, only, would be allowed from the original date set, which was the Monday after Thanksgiving (November 29th^ ). The incentive pay pool would be reduced by 50 cents for every dollar over budget. Four overall project “success” criteria were also established, along with specific measures. The results of these measures would be available for review by the ELT within two months after implementation, and the Board
Phase Major Activities
Preparation
Final project plan – scope and cost. “As-is” business analysis. Technical infrastructure specifications. Project management and tracking tools developed.
Analysis
Document “as-is” processes as “to-be” processes. Analyze gap between “to-be” processes and R/3 processes. Identify process improvements and changes to fit R/3. Documentation of inputs, outputs, triggers, business activities, (process) roles, change categories, training requirements.
Design
Configure R/3. Develop training materials. Develop and document specifications (master data, external systems interfaces, reports) Develop prototypes:
- Operational : module-oriented; prototyping and testing of business processes; reviewed by Business Review team.
- Management : module-oriented; demonstrated functionality needed to run business.
- Business : integrated; all key deliverables configured.
Implementation
Some overlap with Design Phase. New tactical teams formed with directors heading up risky areas:
- Master Data Teams : data cleanup.
- Customization Team : determine customization needed across plants.
- Implementation Infrastructure Team : address outstanding hardware issues; plan transition to new system.
- Helpdesk Team : develop post-live support processes.
Exhibit 6: Implementation Phases
the VP of Marketing, but also with the CFO—because the tactical managers of the new Controlling module would be controllers within the Accounting/Finance group.
My Business Review role responsibility was to make sure that the functional organizations who would be taking ownership for the Controlling module, once we turned it on, were pulling for it. I kept them up to speed on how we were doing on the issues, on the things they needed to help with along the way, so that they knew what their role was to hit each of these critical milestones. None of us wanted to not make it, so we knew how it had to knit together—we knew our job was to hit the milestone. Steve Swartzenberg, Business Review Lead
There were two IBM consultants on the Controlling team. One helped with the Controlling (CO) module functions of product costing, cost center accounting, and internal orders; team members relied on this consultant to answer detailed questions about what the package could and could not do. The second consultant supported the team on the profitability analysis (PA) and profit center accounting (PCA) sub-modules. When the second consultant left the project, Swartzenberg helped select a replacement who not only understood R/3 details, but also had a strong financial background.
Not coming from accounting, I kind of used him as my accounting consultant—as a kind of sanity check…. The controlling module in SAP really is the spot where it all comes together. What you find out is no part of the organization is disconnected from another. It's all connected; the processes are all integrated. If one part falls out, it doesn't link up. Steve Swartzenberg, Business Review Lead
A major business process change would be to centralize all accounts payable entries that had been decentralized to the plants in the past. Swartzenberg spent extra time developing documentation that included flowcharts and other tools to help with the transition. For example, a check-and-balance process was designed for looking at transactions in specific areas where problems would first be visible. The Accounting group did these checks every day for the first month after Go Live so that problems could be fixed as they happened, and to avoid snags at the time of the first financial close.
An Extended Team member from marketing helped develop profitability reporting (P&L's) for each of the product lines—copper fittings, cast fittings, plumbing, and heating valves, etc.—information that was not available under the old systems.
Materials Management/Production Planning Team The Business Review lead for the manufacturing Production Planning (PP) module was John Hall, a 20+-year veteran at NIBCO. Hall had been a member of the BCG study team and was involved in the decision to take the Big Bang approach. Six months prior to the TIGER project kickoff, Hall had become Director of Plastics manufacturing.
