BU481 – E Tabatha Dominguez Tuesday, November 29, 2011
PROBLEM AND RECOMMENDATION Paragon Information Systems is a wholly-owned subsidiary of Newtel Enterprises Limited, that operates in Atlantic Canada’s information systems industry. They meet their customers’ needs for information systems hardware and provide them with excellent customer service as well. There was recently a crisis as the founders of Paragon left the company, with the entire sales force, to start a new company in direct competition. Paragon was rebuilt and has become a stronger company since the founders left (EX1). Information systems hardware is a largely undifferentiated product so Paragon needs to deliver something unique and of value to customers. This can be done by adopting a focus differentiation strategy based on offering superior customer service (EX 8-9). Also, they will provide services that complement their hardware. This will allow Paragon to capitalize on their relationship with NewTel Information Systems (NIS) and become more profitable. ANALYSIS Focusing on the customer will create switching costs that will help to better protect Paragon’s position in the market (EX3,5). This will enable them to differentiate their company from competitors with a more sustainable method than simply competing on price. The new strategy will allow Paragon to fully realize the potential of their relationship with NIS (EX6-7). NIS has experience with selling services for information systems that Paragon can use to help their focus on services succeed. Working with an established organization like NIS will give them an opportunity to identify where there are gaps in their strategy and how they can best deal with those deficiencies. The services that accompany the hardware have much better margins than the hardware itself. Including services in the product market focus of Paragon will increase the profitability of the company and increase switching costs for clients (EX10). This change in focus will provide the management with the sustainable growth they wanted (EX2). Finally this alternative will properly align Paragon’s goals, product market focus and core activities with their now formalized value proposition (EX4). This will guide the actions of employees as it gives them direction for how they can provide value to the organization. IMPLEMENTATION The First thing Paragon needs to do is to meet with their employees and inform them that excellent customer service is how the company plans to differentiate themselves. Employees that will be trained to become capable of providing the services Paragon will now offer. The sales department will need to learn the specifics of the new services and will also receive customer service training. As the employees are being trained Collins will meet with NIS management and establish a formal relationship between the two subsidiaries. Paragon has moved from the crisis/reactive stage of the crisis curve to the anticipatory stage. With this in mind they should continue to use the participative leadership style they have been using so that they can gain acceptance for the changes that are planned more quickly. A more detailed outline of actions can be found in Exhibit 11.
Exhibit 1 - Assessing Performance Customer Financial Innovation and Learning Internal Business processes Balanced Scorecard -Market share is increasing -Revenue has increased since the crisis -Investment in training tripled -Improved productivity -Had highest net income in company’s history
Implications: Currently Paragon Information Systems is performing quite well. The changes they made have enabled them to change their position on the crisis curve from the reactive/crisis stage to the anticipatory stage. Exhibit 2 - Direction NEL Mission Statement – To provide sustained and consistent growth in shareholder value, through primary focus on telecommunications and related businesses...