International Journal of Information Management 32 (2012) 294298

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International Journal of Information Management

journal homepage: www.elsevier.com/locate/ijinfomgt

Case study

The role of IT in achieving operational agility: A case study of Haier, China

Pei-Ying Huang a, , Tao Hua Ouyang b , Shan L. Pan c , Tzu-Chuan Chou d
a

Department of Information Systems, School of Computing, National University of Singapore, 13 Computing Drive, #COM2-01-02, Singapore 117417, Singapore
School of Economics and Management, Beihang University, 37 Xueyuan Road, Beijing, PR China
c
Department of Information Systems, School of Computing, National University of Singapore, 21 Heng Mui Keng Terrace, ICube #03-05, Singapore 119613, Singapore
d
Department of Information Management, National Taiwan University of Science and Technology, 43, Sec. 4, Keelung Rd., Taipei, Taiwan, ROC
b

a r t i c l e

i n f o

Article history:
Available online 25 February 2012
Keywords:
Operational agility
IT leveraging competence
Order fulllment
China

a b s t r a c t
Operational agility has increasingly become essential for survival and prosperity for contemporary organizations. Given its signicant role in a turbulent business environment, this concept has garnered
considerable research attention over the past ten years. However, due to the complex nature of operational agility, how to achieve this important organizaitonal capability is still not clearly understood. Thus
the present study attempts to open this black box through examing a case study of Haier, the largest
household appliances producer in China. The ndings of this case highlight the signicant role played
by IT leveraging competence in achieving operational agility. It shows that IT leveraging competence
helps enhance rms ability to process information in a turbulent business environment, which results
in information processing efciency and information processing effectiveness. With the enhancement in
the ability to process information, the focal rm is capable to sense and respond to market changes more
readily.
2012 Elsevier Ltd. All rights reserved.

1. Introduction
The new business era in 21st century has made change as
one of its major characteristics. This critical situation is rooted in
factors such as hyper-competition, globalization, time-to-market
pressures, and technological advancements. With the increasingly turbulent business environments, the capability to sense
and respond to market threats and opportunities readily has
gradually become essential for survival and prosperity for contemporary organizations (Pan, Pan, Chen, & Hsieh, 2007). Operational
agility, which is dened as the ability of rms business processes to achieve speed, accuracy, and cost economy in the
exploitation of opportunities for innovation and competitive action
(Sambamurthy, Bharadwaj, & Grover, 2003), is suggested as a crucial capability that helps organizations to achieve this end.
As the business environments in China become increasingly
complex and turbulent, research on operational agility in this context is particularly pertinent and valuable. Since the admission
to World Trade Organization (WTO) in November 2001, the local
Chinese companies, who are familiar with the business environments, have seized these opportunities and grown very fast. To get
a stake in Chinese market, thousands of international competitors
entered the market on a grand scale. Meanwhile, Chinese consumers preference has been continuously changing over the past

Corresponding author. Tel.: +65 92340008.

E-mail address: peiying@comp.nus.edu.sg (P.-Y. Huang).
0268-4012/$ see front matter 2012 Elsevier Ltd. All rights reserved.
doi:10.1016/j.ijinfomgt.2012.02.001

ten years, from purchasing low-end or premium products to purchasing good-enough products (Gadiesh, Leung, & Vestring, 2007).
Furthermore, the transition from a centrally planned economy to
a market economy constantly challenges the political system governing the economy (Tsui, Schoonhoven, Meyer, Lau, & Milkovich,
2004), which results in frequent changes in regulations. All the
conditions lead to the turbulent business environments in Chinese market, making the capability to sense and respond to market
changes readily particularly important. Thus this new economy
provides a unique context that ts the research on operational
agility, which in turn, will offer valuable feedbacks to companies
striving to survive and thrive in the environments.
Given its crucial role in enabling business success, the concept of operational agility has garnered considerable research
attention over the past ten years (e.g. Sambamurthy et al., 2003;
Tallon, 2008). The majority of operational agility research centers
on examining the antecedents of operational agility. For example, in Sambamurthy et al.s (2003) conceptual study, information
technology (IT) is posited as an enabler of operational agility.
Meanwhile empirical research on operational agility, such as the
study examining the relationship among managerial IT capabilities,
environmental dynamism, technical IT capabilities and operational agility (Tallon, 2008) and the research investigating the
effects of a rms IT infrastructure on operational agility (Raschke,
2007), mainly apply variance models to investigate the impacts of
antecedents on operational agility. Yet, despite the growing body of
research on operational agility, how to achieve operational agility
is still not answered by previous research. Given the indispensible

P.-Y. Huang et al. / International Journal of Information Management 32 (2012) 294298

role of operational agility in contemporary business environments,

it is an imperative to investigate how to achieve operational agility.
So the objective of this case study is to examine the approach
to operational agility. Specically, we draw on the literature of IT
leveraging competence (Pavlou & El Sawy, 2006) to investigate the
process of achieving operational agility in the case company. IT
leveraging competence is the ability to effectively use IT functionalities to support IT-related activities (Pavlou & El Sawy, 2006). Since
IT is considered as an enabler of operational agility, the ability to
leverage IT functionalities might play a signicant role in achieving
operational agility. The ndings of this case show that IT leveraging
competence helps enhance rms ability to process information in a
turbulent business environment, which results in information processing efciency and information processing effectiveness. With
the enhancement in the ability to process information, the focal
rm is capable to sense and respond to market threats and opportunities more readily. By doing so, this study highlights the signicant
role played by IT leveraging competence in achieving operational
agility.

2. Case background
The case company we selected is Haier Group. It started as
the Qingdao Refrigerator Factory in the early 1980s, originally an
importer of refrigerator production technologies from Germany.
Since the current CEO Ruimin Zhang took over the company in
1984, the company has grown from a near-bankrupt enterprise
with decit nancing of up to US$230,000 to a prospering Chinese
multinational corporation over the past few decades. Nowadays,
Haier Group has over 240 subsidiary companies, more than 110
design centers, plants and trading companies as well as over
50,000 employees throughout the globe. From the statistics of Euromonitor, the company was ranked third in Global Major Appliances
Millionaires Club 2010 ranking by unit volume, with the strongest
growth of 13% among the top four appliance companies.
With the fast growth, the company faced a myriad of challenges.
For example, one challenge came from its expanding product
lines. Haiers product range had developed from a single line of
refrigerators to 96 product categories with over 15,100 different
specications. As the products diversied, management of the large
product lines became extremely difcult. Meanwhile, the company
had established an extensive sales network globally to facilitate the
sales of its products. Key partners in respective markets included
Sunning and Gome chain stores in China, 10 leading chain stores in
America, 12 of the top 15 chain stores in Europe, and 10 retailers in Japan. Among them, sales network in China contributed
most to Haiers global revenue and was particularly complicated.
The company decomposed the sales network in China into over
33,000 minimal sales network grids. These network grids were
recomposed to form over 5,000 management units. Each unit was
occupied by one salesperson that was responsible to handle sales
issues of customers falling into the unit. Over all there were more
than 10,000 salespersons constituting an intricate sales network in
China. The geographical distribution of the sales network covered
cities in south China such as Guangzhou and Shenzhen as well as
cities in north China such as Changchun and Harbin. With this large
scale of sales force and the broad geographical distribution, detecting and responding to market demands accurately and efciently
relied heavily on the capability to process information from enormous distributed points of sale. Management of the extensive sales
network was faced with great amount of uncertainty, which posed
another big challenge to the company.
Despite various challenges, the constant endeavors in creating and improving innovative management practices guarantee
the companys success, which also enables the transformation of

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a near-bankrupt enterprise to a thriving multinational corporation. Started from April 26th, 2007, the company began its new
journey toward improving its business processes and launched the
program of 1000 days information revolution, which intended
to restructure 20002500 business processes under the support of
IT. Through this program, the company integrated its fragmented
information systems and achieved the alignment of IT and business
processes to create innovative business processes. Order fulllment
process, which was among the business processes improved during
this program, forms the context of this study. We will examine how
the company achieves operational agility and the role of IT leveraging competence under the context of order fulllment process in
the subsections that follow.

3. Order fulllment process in Haier

Order fulllment process is commonly dened as the complete
business process from points of sale inquiry to delivery of a product to the customer. Order fulllment in the case company goes
through three main business processes sequentially and iteratively:
order forecasting, sales and production planning, and goods production. Each of them will be examined in the following sections.
3.1. Forecasting process
The order fulllment in Haier began with the order forecasting process which aimed to acquire accurate customer demands.
This process included acquiring customers orders for production
and forecasting customers future demands for procurement. It was
challenging to cope with the process for the reason that customer
demands kept changing in contemporary business environments.
Meanwhile the large sales force in Haier made the process more
complex by increasing the difculty to trace and monitor the performance of salespersons. Thus it was imperative for the company
to nd solutions to deal with these challenges. As it was stated by
Haier CEO:
If every customer is a ying target, then the number of ying
targets is countless. It is impossible to rely merely on a small
number of decision makers to understand all the ying targets
thoroughly since every target is different. Therefore, it is imperative for each employee to face market directly. Everyone has
to nd his or her own target and market; otherwise we cannot
win the market.
In order to acquire accurate customer requirements timely,
Haier established direct information exchange channels between
salespersons in points of sale all over China and sales department in
the headquarters based in Qingdao. One example is the salesperson
portal. In the past, market demands gathered by salespersons went
through several levels of hierarchies to approach sales department
in the headquarters, through which information became distorted.
This phenomenon could be vividly described as the bullwhip effect.
The salesperson portal solved this problem by enabling direct information exchange between salespersons that were close to local
market and sales department in the headquarters. The Director of
Division One described as follows:
We provided a portal for product representatives (salespersons). They can not only make sales orders, but also view the
sales of their own customers . . . They can view the balance of
their individual goal combination account. They can see the
amount of income and loss every day. They can also see new
tasks assigned by the headquarters. If they have any problems,
such as some problems in customers model machine, they can
feedback to the headquarters directly.

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Haier also relied on performance management program to

motivate salespersons to actively communicate with their customers to ensure the accuracy of customer demands acquired. The
performance management program was named as salespersons
individual goal combination.1 Salespersons performance was
evaluated and classied based on the extent to which the performance was consistent with organizational goals. There were several
evaluation criteria, such as accuracy of order forecasting and order
fulllment. While desired performance would be rewarded, undesirable outcome was punished monetarily. This program enhanced
salespersons responsibility to ensure the accuracy of customer
demands collected. The Manager of Division Two introduced the
performance management program:
If you can nish your plan completely, you can get your salary
and season rewards completely. If you want to get your salary,
you have to develop a reasonable product structure, which is
to sell protable products and to sell fast. This is the premise
to increase income. Individual goal combination mechanism is
the combination of individual and order as well as the combination of individual and loss. If individual is combined with his
order, he can make money; otherwise, he will lose.
Providing tools to support order forecasting was also helpful in
improving forecasting accuracy. An order forecasting system which
integrated complex forecasting models and large amount of sales
data was developed to assist order forecasting.
The salesperson portal and the order forecasting system were
leveraged to support the order forecasting process, which was further complemented by the performance management program. By
doing so, information was gathered from points of sale timely;
meanwhile, it guaranteed that information collected was accurate
and comprehensive. Through achieving information processing
efciency that denotes processing information in a timely and cost
economic manner and information processing effectiveness that
indicates that the information processed is accurate and comprehensive, the company was capable to detect market changes timely
and accurately.

3.2. Planning process

Once sales orders were determined, sales department initiated
the sales and production planning process with other departments
including production, procurement, logistics, nance, design, etc.
The objective of this process was to generate a congruent plan to
guide the actions of diverse departments. It was particularly challenging to coordinate their actions due to diverse requirements and
goals of different departments. One example was that sales department considered whether their sales orders could be fullled while
production department cared about how many products it could
produce with limited resources. It was possible that the sales orders
generated by sales department exceeded the capacity of production department. Thus diverse situations of different departments
placed a big challenge of planning and required a large amount of
interaction and communication across departments. The Director
of Division Three stated:
Everyone must pay close attention to the whole process. For
example, logistics department must communicate with product
development department. They have to nd the sources of problems in advance, to solve suppliers problem, to provide support

for modulization. In fact it is a coordination process, including

order delivery, production progress, and product delivery.
The key to perform this task was to facilitate tight communication and information exchange across departments. To achieve
this end, the company restructured its IT infrastructures and integrated existing information systems to boost extensive information
exchange across departments. For example, the company integrated a myriad of existing systems and established the data
sharing platform to expedite information sharing. The Global Value
System (GVS), which was Haiers ERP system, also played a pivotal
role in facilitating timely information exchange across departments. The Director of Division Four explained:
When the company becomes larger, responding slowly (to
customer demands) is undesirable. To be fast, we have to use
information technology to achieve process synchronization. In
the past, it is in serial. For instance, sales department received
sales order then passed to production department, and then
passed to procurement department, and so on. But now all
the departments, including salespersons, production staff and
research staff will receive orders at the same time, this is also
the goal of developing information systems.
To further guarantee sufcient communication and coordination across departments to support sales and production planning,
Haier established a series of clear procedures for coordination.
These procedures formulated concrete time and activities to be performed by specic department as well as individual. For instance,
the company conducted routine cross-departments meeting every
Wednesday to communicate and negotiate sales and production
issues. Apart from the clear procedures, the company developed an
order review system to check the alignment between requirements
and constraints of different departments so that the outcomes of
planning were accurate and feasible. The Manager of Division One
stated:
We have a set of procedures and mechanisms to cope with
coordination between sales and operation. Sales persons will
report results of order prediction on every Monday; the headquarters will adjust the results of order prediction on every
Tuesday; then estimate short-term order prediction on every
Wednesday; estimate long-term order prediction on each Friday.
In the sales and production planning process, the data sharing platform, GVS, and the order review system were leveraged
to support planning activities, with the support of a series of clear
procedures. Through these mechanisms, accurate and consistent
information was exchanged across departments timely. With the
achievement of information processing efciency and effectiveness, the company was capable to conduct effective sales and
production planning to respond to market opportunities more
readily, which is reported by the Director of Division Three:
Technically, we implemented an information sharing platform.
It helps to save money, save time and save efforts. Saving time
means accessing to information is very fast. Saving money actually means information is shared and there is no necessary to
purchase additional devices. In the past some tasks took us lots
of efforts, such as we had to negotiate a lot for the procurement
task and it took us 40 days to deliver. But now it only takes one
day.

3.3. Production process

1

Individual goal combination is a performance management program which

evaluates employees performance and provides incentives based on their performance.

The outcomes of sales and production planning process served

as guidance for production process. The objective of this process

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was to manufacture various products to fulll customer demands.

As a household appliance giant with the large product lines, production in Haier was extremely complex. This was because the
production task required manufacturing various types and a large
number of products, meanwhile assembling various types and a
large number of elementary components into each item. Thus, how
to manage the complex product structure in an effective and efcient manner raised a big challenge to the company. The Director
of Division Four explained:
From the traditional data management view, it (the modules
management system) is a very large components warehouse
or modules warehouse. (In the past) which one was universal,
which one could be combined, did the inventory increase or
decrease, all of these cannot be observed directly. For manager
and user, this problem is very complex.
To cope with the challenge, information systems, such as the
GVS, were used to support the information dissemination to the
manufacturing plants. For example, when sales orders arrived, production department used GVS to transform the sales orders into
production orders which were then sent to factories distributed
in different regions. Accordingly, each factory deployed its own
production plans based on its resources. Thus information of sales
orders was transformed and distributed through information systems to approach each manufacturing plant. One technical leader
of Division Three stated:
The systems are used to conrm and distribute sales orders.
After some manual adjustments, production orders will be
transferred to factories. Production department in each factory
will organize its production accordingly. All of these are implemented by systems.
Accurate and rapid production relied on clear rules and procedures. Although the complex product structure was particularly
tough to cope with, establishment of clear rules and procedures
enabled division of the complex task into simple and orderly ones.
These rules and procedures pre-specied detailed processes to be
followed by individuals. Furthermore, information systems were
also used to control and record the execution of the pre-identied
procedures. Similar to the forecasting process, Haier implemented
performance management program in production department,
which served to motivate individuals. The performance of individual was evaluated and payment was provided based on the
evaluation outcomes. The Manager of Division Two articulated:
(The evaluation criteria for production department include,)
rst, deliver on time; second, accuracy of order delivery. Furthermore, we also evaluate fulllment of production capacity.
For example, our production capacity is 5000 per day, but we
only produce 4000 (which is not desired). This can be considered
as usage rate of production capacity. Another example is product
type contract. We will evaluate that whether the types of products produced are the same as what sales department ordered.
The evaluation criteria are different from that for salespersons.
Again, the company leveraged its GVS to support the production process, which was complemented by a series of procedures
and the performance management program. With these mechanisms, information was distributed across departments timely and
orderly; meanwhile these mechanisms ensured that information
disseminated was accurate and comprehensive. Through achieving
information processing efciency and effectiveness in this process,
the company was capable to accomplish accurate and rapid production, which is reported by Director of Division Four:
We look at the efciency of the whole supply chain, from the
input of customer orders to output of products. The cycle is

297

only around 21 days. I cannot remember exactly the number,

but it does improve a lot. Our delivery cycle is the best in our
(household appliance) industry. Our delivery efciency is quite
high.
4. Lessons learned
In general terms, this case shows that IT leveraging competence plays a crucial role in achieving operational agility. Given the
turbulent environments and the complex business processes, organizations are facing with great uncertainty that stops them from
sensing and responding to market changes readily. As a result, the
ability to process information in an efcient and effective manner
becomes particularly signicant for the reason that it allows organizations to reduce uncertainty and make more accurate decisions.
This case further indicates that IT leveraging competence enhances
organizations ability to gather, synthesize and disseminate information, enabling them to achieve information processing efciency
and information processing effectiveness. The enhancement in the
ability to process information facilitates sensing and responding
activities during the exploitation of opportunities for innovation
and competitive action, so that operational agility is achieved. Some
implications from the case are discussed as follow.
Firstly, it is found that the way that organizations leverage IT
to enhance information processing capability is contingent on the
nature of the business process they are confronting. This is consistent with the ndings from previous research that organizations
should leverage IT to facilitate the right amount of information
needed to cope with task uncertainty and achieve desired performance (Mani, Barua, & Whinston, 2010). The case shows that
three different processes are facing different types of uncertainty
which require the company to leverage IT for information processing differently. For example, the forecasting process is lled
with great uncertainty stemmed from demand uncertainty, which
indicates the changes in demand for products and the inability to
accurately predict these uctuations. To deal with demand uncertainty, the company leveraged IT to facilitate direct information
exchange between salespersons and the headquarters, as well as to
implement performance management program to motivate salespersons. This is different from what had been done in other two
processes which confronted different types of uncertainty.
Secondly, this case informs us that the ability to process information is crucial to organizations facing great uncertainty. The case
shows that as the company grows, its operations become more
complex. A simple business process will become complicated with
more actors involved and more procedures to go through, which
might stop information from owing uently. As a result, the company becomes slow in sensing and responding to market changes,
which raises the importance of the ability to process information
in an efcient and effective manner. We found some potential
approaches used by the company to enhance the ability to process information, such as greater investment in IT, establishing
clear rules and procedures, and implementing performance management program.
Last but not least, this case demonstrates the signicant role of IT
leverage competence in facilitating the execution of organizational
controls. Many studies show that IT can be used to control business
processes and manage employees performance. This is also found
in our case. For example, as increasing information of salespersons
performance was gathered by the salesperson portal, the company
further leveraged the system to implement the performance management program to manage its salespersons performance. It is
a cost economic way to manage their performance, which otherwise will be difcult to achieve due to the geographical boundary
between the headquarters and salespersons. Thus it is of great help
to leverage IT to execute organizational controls.

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5. Conclusion
While the signicance of operational agility in contemporary
business environments is obvious, the approach to achieve operational agility remains elusive to many rms. Findings from our case
study emphasized the essential role played by IT leveraging competence in achieving operational agility, which is not examined by
previous research. With the ndings abovementioned of this case,
we hope that this study will provide some practical implications to
attain operational agility, which is especially signicant for rms
competing in large-scale and complex market places, such as the
Chinese market. Our study informs CEOs and CIOs the signicant
role of IT leveraging competence in achieving operational agility.
Future research should also be conducted to extend our understanding of how operational agility is attained through leveraging
IT functionalities.
Acknowledgements
Funding for this research was provided by Chinas NSFC General
Project (70772092 and 71072021).
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Pei-Ying Huang is a PhD candidate of the Department of Information Systems in
the School of Computing at National University of Singapore. His research interests include IT-enabled enterprise agility, IT-enabled organizational information
processing, and other IT-related management issues. He has published his work
in International Conference on Information Systems 2010 and 2011.
Tao Hua Ouyang is a Professor of School of Economics and Management at the Beihang University, China. She received her master degree of Economics from Wuhan
University, China in 1993 and PhD degree of Management Science from Kobe University of Japan in 2002. Her research interests include strategic management, modern
business management.
Shan L. Pan is an Associate Professor of Information Systems and the Academic
Director of the Strategic Technology Management Institute at the National University of Singapore (NUS). His research work has been published in various top tier
academic and practitioner journals such as Information Systems Research, MISQ
Executive; IEEE Transactions on Systems, Man, and Cybernetics; IEEE Transactions
on Engineering Management; and the Journal of the American Society for Information Systems and Technology.
Tzu-Chuan Chou is an Associate Professor in the Department of Information
Management, National Taiwan University of Science and Technology, Taiwan. He
received his Ph.D. from Warwick Business School, the University of Warwick, UK in
1999. His research interests include IT outsourcing, IT governance, knowledge management, and E-government. He has papers published in a number of international
journals.