Credibility of the pilot location

The data in this study indicates that early adoption was at least partially connected to reputation or status-based processes. Global project leaders reported that it was not possible to demonstrate or to measure economic benefits e.g. revenue increases, cost decreases or efficiency improvements during the short duration of the pilot (2-12 months – see Table 7) because these results would take longer to generate than the planned pilot duration. As the CRM global project leader said:-

At the beginning of the pilot some people want to measure if you get business benefit. But this is not possible in one year because introducing the CRM may put the organization under stress and so it might have another effect to decrease the sales before increasing the sales. If you want to measure the benefit then you have to take 2 years.

– Global project leader

For this reason I use the term credibility, defined as the reputation or knowledge of the attributes of the pilot location within the MNC, rather than the term trustworthiness which is used in the knowledge transfer literature. The distinction in the definition is important. Trustworthiness, as defined in the knowledge management literature, signifies that the results of the new practice are visible, stable and measurable in the source (Jensen et al, 2006). Credibility refers to a perception or belief that the location selected for the pilot has the capability to create an appropriate template that will eventually yield economic benefits.

In comparing the more highly adopted cases with the less highly adopted cases I found that in the more highly adopted initiatives global team and steering members selected locations which they perceived as having high credibility in the organization (Table 14).

Table 14:

Pilot credibility

SI Co Capabilities

i.e. knowledge, skills and experience, track record for best practice in functions related to strategic initiative

Business coverage

i.e. number of business units, product and service offerings, geographic spread or functional complexity, IT systems in use ITX B High and really, really experienced companies

with experienced people – Pilot manager

High we cover all the IT operations because we service the whole cluster – Pilot manager

OFX B High and they had obviously people who had the knowledge – Steering manager

High and they also have quite a complex factory with…

running all the different types of production. - Global team member

CRX A High I was very happy that the US was part of it, because they are much more advanced – Pilot manager

High so we wanted to make sure that we have as much as possible three front-line that represent the diversity of our different countries - Global project leader

NKX A High we have many services that others don’t have. And therefore is very good to test with our customers – Pilot manager

High we have service for elevators, but we also have store business. And we are also very active in recruiting. So it was – we have the full scope of information needed on the website. – Pilot manager ASX A Low they are kind of really relaxed and happy

people, but they don't like to work in a very disciplined way. – Global project leader

Low Thailand was new in the KONE organization and so was not accustomed to selling our products and services – Subsidiary manager

KCX A High But in this particular case it was very clear we wanted Germany, because they are…

they have the best know-how there. – Global project leader

High I think they use a large extent of the local system;

some countries only use minute portions. – Global team member

FTX B Low I think it would have been easier if we had gone for the countries who had already been in a shared service environment - Global project leader

Average we have the same set of processes as the other subsidiaries in Europe, but of course, we don’t use the shared service centre – Pilot manager

SI Com Capabilities (cont.)

i.e. knowledge, skills and experience, track record for best practice in functions related to strategic initiative

Business coverage (cont.)

i.e. number of business units, product and service offerings, geographic spread or functional complexity, IT systems in use EDX B Low the users were not skilled and so no

comparison – Subsidiary manager

Low it’s a simple market from a complexity point of view…So in case of a really big client it’s not so dangerous from a business perspective – Global team member

Selecting locations with higher credibility was reflected in two ways. Firstly, locations were selected with a high level of capabilities in the functional areas relevant to the specific strategic initiative versus other subsidiaries. Capabilities are defined here as the ability of the subsidiary to combine efficiently a number of resources to engage in productive activity and a certain objective (Amit &

Shoemaker, 1993; Dutta, Narasimhan & Rajiv, 2005). Capabilities were coded in the data analysis as references to knowledge, skills and experience in the subsidiary, as well as reputation for best practice in the functional areas relevant to the specific strategic initiative versus other subsidiaries. Recurring phrases are, “people who had the knowledge”, “leading all this best practice”, “very good expertise.” For example, in the OPX initiative the global project leader said about the pilot in Brazil:-

They were the ones that were leading all the best practice experience among our factories themselves. – Global project leader

Or the global CRX steering member and pilot manager said about the pilot in the US:-

Well the US, it was absolutely a pocket. In fact, that culture was probably the complete opposite from the traditional KONE culture, where the culture was highly sales-oriented and less so on R&D and technology. - Steering member & Pilot Manager

Interview data from the subsidiary managers indicated that they were paying careful attention to the skills, experience, and best practice track record of the selected pilot location and had strong opinions about the pilot locations selected.

For instance, an ITX subsidiary manager said:-

Here was a good pilot, absolutely, because they are in the forefront when it comes to IT, such as the US. So that seems to be a good pilot. – Subsidiary manager

In addition there was evidence from several of the initiatives that subsidiary managers were also paying attention to other status-related features of the pilot locations, such as revenue size, growth rates, market share, and profitability. For instance, one of the steering members for CRX said:-

Netherlands was chosen because it is a very strong European country for KONE; we are market leader there. – Steering member

Secondly, pilot location credibility in terms of the extent of business coverage was an important consideration, defined as the number of business units, number of products and services, geographic spread, or functional complexity.

For instance, the OFX global project leader explained:-

..because one of the Brazilian ones had not only one type of production but it had also different types of production. And including the straw

production which we don't have in all the factories.” – Global project leader

Again, this is consistent with status-driven processes.

Evidence from the subsidiary managers was that they were also evaluating the selected pilot location to judge how alike the location was to their own subsidiary in terms of business coverage. For instance, a subsidiary manager from ITX said:-

As I said it (the pilot location) is a big organization already for IT, so if they managed to drive through these central initiatives with quite a lot of people, it should have been possible for us to do the same, as we have many less people already on IT. – Subsidiary manager

So it can be seen that comparisons of likeness in business coverage also included whether or not the pilot location was using the same IT systems.

Likeness was also related to geographic location and cultural considerations.

For instance, a NKX subsidiary manager commented:-

But for the European countries we think a bit differently; we interacted very differently with our websites – so that is one reason that it is very good to have European countries as the pilot sites.- Subsidiary manager

Given that likeness was an important consideration, not all subsidiary managers held the same point of view about a given pilot location. For instance, although many European subsidiary managers were positive about the pilot being located in France, one manager from Germany said:-

Our business (as compared to the pilot location) is very different. If you compare the elevator business with the door business, the customers are so different and the product information is so different, and also the requests for high-value content are so different. – Subsidiary manager This reinforces that perceptions of the template from the different viewpoints of business coverage were important.

In contrast, in the initiatives with lower adoption these two factors were mostly absent in the selected pilot locations. Firstly, concerning the capabilities in the pilot locations, for instance, the ASX steering member commented:-

We underestimated the lack of depth of management skills and recognized qualifications inside their company. – Steering member

And in FTX, one of the global team members acknowledged that when they selected US and Canada they actually did not realize how far away these organizations were from conforming to the best practice processes that were being used in the subsidiaries in Europe.

I don't think actually we understood just how, if you like, non-standard the activities that we were going on in the US and Canada actually were.

– Global team member

Subsidiary managers were also aware of this lack of capabilities of the selected location for these initiatives. For instance, an FTX subsidiary manager commented:-

I thought it would have been somewhere in Europe, who were already working with Manchester (shared service centre, so I was a little surprised that US and Canada were chosen. I thought it should have been one of the cluster in Europe, actually, that should pilot this setup.

And we were used to the routines. – Subsidiary manager

Secondly, business coverage in some of these pilot locations was perceived as overly limited. For instance, one of the subsidiary managers complained about the location selected for the EDX initiative:-

In comparison, the Nordic was really a more simple organization. So we went from nothing to a new system. So no benchmark, no comparison between the two. And cluster south has really a huge complexity in terms of business, in terms of number of designs to be managed in the system. And so, in comparison with the existing systems. So, more or less we had a lot of complaints from the end users saying this functionality was in the previous system and now it’s not there anymore.

– Global team member & Subsidiary manager

The complaint in this case was that the Nordic organization was not really adequate to pilot the initiative and that the template created in the pilot was “too small” or did not cover enough of the business activities to be relevant to subsidiaries already running quite complex local systems.

The only exception to this lack of credibility was KCX where the pilot location was highly credible. For instance the global project leader said:-

And on the other hand, we were lucky to have the best possible location of the pilot and very knowledgeable people there, so we get all the necessary feedback from that location. It obviously makes a difference if it is one country or another. – Global project leader

But at the time of collecting the case data the pilot was nearly a year late in delivery and still incomplete, and hence did not meet the feasibility criteria (see section 4.1.3). One of the drivers of the incompleteness of the pilot may well have been the level of complexity of the business coverage, where Germany was the most experienced country because it was using the highest level of functionality of the system.