I’ve previously written about the failure of the “Advanced Automation System,” an FAA/IBM effort to create a new-generation system for air traffic control: the story of a software failure. (The post excerpts the thoughts of Robert Britcher, who was deeply involved in the effort and is an excellent writer–very much worth reading.) The AAS project has been called “the greatest debacle in the history of organized work”–there are a lot of contenders for that honor, though, and here’s another one…
Via Bill Waddell comes this truly horrifying article in Canadian Business about Target’s failed effort to move into Canada on a large scale. It seems that instead of extending their custom software system to deal with Canadian issues…currency, French-language special characters, etc…the company decided to buy an enterprise-software package from SAP, tadalafilhome with the idea of eventually converting US operations to SAP as well. Accenture was hired as lead consultant on the project.
Target believed the problems other retailers faced (with SAP) were due to errors in data conversion. Those companies were essentially taking information from their existing systems and translating it for SAP, a messy process in which it’s easy to make mistakes. Target, on the other hand, was starting fresh. There was no data to convert, only new information to input.
Read the article to see what only new information to input looked like in practice.
I wonder how much productivity and growth is lost in the US and other developed countries as a result of failed system implementations and of systems that were actually implemented but did more harm than good?
Apart from the debacle described the reason Target tanked was simple.
They took our cheap ass store Zellers, and made it into a worse stocked store, a feat considered impossible, if you knew anything about Zellers, and then raised the prices. Zellers was cheap, in every way, and we already have Walmart, which had already put Zellers in the toilet.
Real dumb.
Everyone uses SAP, so it must sound good in principle as an enterprise wide solution, and maybe it actually is. However, I’ve never heard anyone who uses it say anything good about it. Sounds like a business ripe for disruption.
MH, I have also never heard anything good about SAP. I’m going to look at their website to see what their Success Stories look like…they must have some, or even the world’s best salesmanship couldn’t get people to keep buying the thing.
“Enterprise Resource Planning Systems” in general seem to build a lot of rigidity into business processes and make change difficult, and people have to work around them. I’ve heard of a lot of cases, for example, where the billing of a new product or service cannot be accommodated by the ERP system in any business-relevant timeframe….so what is done is to perform the actual calculation with a spreadsheet and script, and to feed the totals into SAP or whatever, which then merely prints the bill and matches the payments.
Here’s the SAP customer stories collection:
http://www.sap.com/customer-testimonials/index.html
“As we enter 2014 with a much cleaner inventory position, the team’s number one operation focus is on in-stocks—ensuring we have the right quantity of each item in the right place at the right time,” Steinhafel said on the earnings call. It was his last as Target CEO. A month prior, Target had disclosed a massive security breach in which hackers stole the personal information of 70 million customers in the U.S. Combined with the bleeding operations in Target Canada, Steinhafel’s position was untenable, and he stepped down in May. (He walked away with US$61 million in compensation.)
Yeah, my credit card number ended up for sale on some Asian website. Thanks a lot jerkface. I hope you choke on that 61 million.
Having read the article, it doesn’t look like the problem lay mainly with SAP. I see things like:
– Incorrect master data. Well, if you mix up lengths and heights of your boxes, they won’t fit in the shelves. If you don’t have the correct pack sizes, your auto-replenishment won’t work.
– No or inappropriate historical transactions data.
– Issues with the POS system – which came from Retalix.
– Some good old-fashioned foul play, with people gaming the system by turning off key features because the truth made them look bad.
I’ll be the first to admit that SAP has issues. I particularly love the description of SAP as an onion. (“It has may layers, and it makes you want to cry.”) However, it’s an enormously powerful system – IF you feed it the right data. It can do pretty much anything. However, cold starting it in a new country, with zero history or experience, apparently without appropriate data verification, integrating non-SAP systems (Retalix, and the legacy Target system), and all that on a tight schedule, is, uh, ambitious.
And yes indeed, SAP does have retail customers, and some of them appear to be happy with it.
Full disclosure: I work at SAP in the retail sector, for the auto-replenishment part.
Within the chain’s replenishment system was a feature that notified the distribution centres to ship more product when a store runs out. Some of the business analysts responsible for this function, however, were turning it off—purposely. Business analysts (who were young and fresh out of school, remember) were judged based on the percentage of their products that were in stock at any given time, and a low percentage would result in a phone call from a vice-president demanding an explanation. But by flipping the auto-replenishment switch off, the system wouldn’t report an item as out of stock, so the analyst’s numbers would look good on paper. “They figured out how to game the system,” says a former employee. “They didn’t want to get in trouble and they didn’t really understand the implications.”
If I understand this situation correctly, Target had no experience using this complex enterprise software that their new multi-billion dollar operation critically depended on. They had no idea how it would work with this launch into another country, a launch that was unprecedented in its huge scale and unrealistically rapid time frame.
In response to this fact they decided to place untrained entry level employees in charge of using it, kids who were more concerned about getting getting scolded than avoiding bankruptcy.
Well, what could possibly go wrong with that plan?
One of the things that was mentioned was that there was no validity check on the length of the UPCs entered…they are supposed to be 12 digits. I would think that SAP would have a validity-check option for this…Stephan K, could you verify this?…but even if they don’t, it should be simple to write a hook or a preprocessor to accomplish this. I would also think this is something Accenture should have flagged as a problem.
What a disaster. The chaps running Target just weren’t very good businessmen, were they?
“Business analysts (who were young and fresh out of school, remember) were judged based on the percentage of their products that were in stock at any given time, and a low percentage would result in a phone call from a vice-president demanding an explanation. But by flipping the auto-replenishment switch off, the system wouldn’t report an item as out of stock, so the analyst’s numbers would look good on paper.”
Yet another example of poor incentive-system design. The same people who are judged on in-stock percentages should also be judged on revenue and profitability for their items. Then any gamesmanship with out-of-stock will show up in the weak sales caused thereby.
When designing incentive systems, it is wise to think about what *direction* the incentive pulls people in, and then add a countervailing incentive in a different direction. Measure your sales reps only on revenue, and you will get a lot of sales of low-margin but easy-to-sell products.
I’m curious how Target’s “Business Analysts” in the US (actually, the role sounds like “buyer”) are measured.
I also mentioned Target in my post Iatrogeny in Management reporting.
But the poster child for that post is the British National Health System.
https://chicagoboyz.net/archives/26876.html
Many nuclear power plants and reactor vendors in the US have moved to SAP for business and technical management (commercial stuff like spare parts and managerial functions like corrective action programs.)
People uniformly hate it. Steep learning curve and arcane date entry screens.
But then, is Oracle much better?
Be fair, the business disaster wasn’t just the cruddy software. To rush the introduction of the company into a country where it had no experience was pretty reckless. They should probably have started on a smaller scale, and on a more forgiving timetable, accepting early losses as being an investment in learning about their new market and in acculturating their new staff. For instance, why on earth buy all those leases; why do the whole nation at once? Why not start with one province, or even a smaller area? Heavens, there’s even a hint there that they overpaid for the leases.
Above all, perhaps, why would anyone of judgement decide to introduce unfamiliar software into what was already a difficult business venture? Why combine the risks of the software, the risks of undertrained staff, and the risks of an unfamiliar market?
Dearieme…they *had* to do something with the software to accommodate Canadian conditions, but it probably would have been lower risk to make these changes to their existing system than to do something radical and new. And you are quite right that they would have done much better to start with a smaller number of stores.
That was a good article. There were so many nuggets of information that we can quote and discuss here. I’ll choose this one:
I’m not sure that this was actually the smart play. The US is a mature market, so Target isn’t going to get a lot of growth from focusing solely on domestic operations. Walmart is expanding into numerous markets all over the world. Target is going to have to follow along with international expansion or stagnate. By pulling out of Canada they’ve essentially ceded the entire market to Walmart. Walmart Canada was interested in some of those Zellers leases but wouldn’t bite on taking them all or paying full, inflated, prices. Well, now that Target is bankrupt, doesn’t this strengthen Walmart’s hand with respect to acquiring the leases it wants on good terms, thereby strengthen their grip on the Canadian market.
Target boxed itself into a corner by withdrawing. Where is it going to grow now?
“To rush the introduction of the company into a country where it had no experience was pretty reckless. ”
Not really a new story. In 1957, my cousins moved to Australia. Sears, for whom the father was a long term employee and a senior buyer of household goods, had bought a chain of department stores in Australia. I’ve forgotten the name of the chain but it was one of the largest, if not the largest in Oz. His job was to make the merger work and integrate the product lines. He had been very successful in the US and was experienced as a buyer in foreign countries, unusual in 1957.
He spent about three years and they finally gave up the merger. The Aussies did not like the house brands of Sears and there must have been other reasons I did not hear about. He loved Australia but his wife, my mother’s niece did not. His two boys had been educated there for three years. One loved it and the other did not much like it. They returned and he never got over the experience. He had been promised that the move would not sideline has career if it failed but the CEO had retired when he came back and he never really got anywhere after that.
That was when Sears was thriving but might be an indicator of trouble to come.
Long ago, when I was concerned with such things, we had a rule “only one big innovation per project”. So if, for example, you were going to build a car powered by fuel cells, you wouldn’t also try a radical redesign of how a car is steered. We also tended to the idea that it wasn’t wise to pile commercial risk and technical risk together if they could be kept separate.
Everyone can cite projects that worked in spite of piling risks together, but it’s even easier to cite projects that failed because risks were piled unnecessarily on top of each other.
“only one big innovation per project”
But where is the drama in that.
“Only one big innovation per project”….of course, there are *some* projects where that rule isn’t feasible. The development of ballistic missiles, for example, required at least 3 major innovations:
–the rocket propulsion equipment and associated fuels
–nosecones allowing re-entry without burning up
–autonomous guidance systems
In those cases, it is wise to pursue multiple parallel paths and to expect multiple setbacks; also to accept that performance compromises may be necessary. In the US intercontinental missile program, for example, the early missiles were developed with *both* fully-autonomous inertial guidance *and* with radio-inertial guidance that was dependent on ground-based computers for the first part of the flight.
Yeah, but that wasn’t business. That was the taxpayer paying, or in the case of the pioneering work, it was paid for by the countries the Nazis looted.
If you want a successful business example of multiple risks taken simultaneously, I would say one example is IBM’s transition to the System/360 product line….new architecture, new circuit technologies, new operating system. Tom Watson Jr wrote about the CEO view of this project in his autobiography Father, Son, & Co.
https://chicagoboyz.net/archives/42515.html
I was involved with IBM when they went from vacuum tubes to transistors.
I was working for Douglas when the the 704, which was the first real scientific computer, was replaced by the IBM 7040, which was transistorized.
The article says it was introduced in 1963 but, by that time, I was in medical school.
A number of IBM 7040 and 7044 computers were shipped, but it was eventually made obsolete by the IBM System/360 family, announced in 1964. The schedule delays caused by IBM’s multiple incompatible architectures provided motivation for the unified System/360 family.
It was replaced by the 360 series.
David, maybe there’s a generalisation possible; if you want to take the risk of a project with multiple big innovations, make sure that if successful it will give you near-monopoly of a market.
I suppose the other point would be that IBM was sufficiently well run that it didn’t let those beasties out into the market until they’d been pretty well tested. Target took no such precautions.
As soon as you said Accenture was the chief consultant, I knew it was doomed. Once they get beyond their forte as hatchet men for hire, they’re basically just standing there and nodding their heads (with a blank expression).
Just my 2 cents, based on experience.
I have experience supporting and configuring SAP
A rule of thumb is: A SAP implementation requires $9 of spend on professional services to configure for every $1 spent on SAP license fees. It’s powerful, complex to support, and not easily loved.