Toys R Us Microsoft System Upgrade: Lessons for Business

Introduction: Choosing the Right Computer System

It is impossible to imagine that any business can be run in the 21st century without an adequate computer system. And yet therein lies the rub: determining what computer system is adequate for any business purpose is, in many cases, a complex and difficult process. All too often, when a manager is faced with choosing a new computer system — usually at the point when the old one has completely crashed, losing valuable information that was never backed up — he or she simply grabs the nearest brochure and orders that system.

But this is not the way to proceed. Acquiring the right information system is essential to keeping a company healthy. This paper examines a real-world case in which a major corporation — Toys R Us — adopted a new computer information system, analyzing what went right in the process, what went wrong, and what those involved might learn from the experience to make the next shift in information technology go more smoothly. In the 21st century, there will always be a next shift.

A key element of analyzing the decision by Toys R Us executives to adopt various forms of Microsoft software is to investigate how closely these computer information systems mesh with the company's internal social and organizational structure, for software is only as useful as the particular workers using it can make it.

Competition is fierce in the retail toy industry, especially as more large discount chains enter the market. To help maintain its competitive edge, Toys R Us — the world's leading toy retailer at the time — adopted Microsoft Exchange Server and Microsoft NetMeeting to improve communication among the company's national offices and U.S. distribution centers. A key question that must therefore be addressed is the extent to which the company's changes in its internal organization, and especially in its communications infrastructure, were sufficient to enable it to meet future challenges.

Any company seeking to maintain its footing in the retail market — and even to expand its position — should consider implementing a systems approach to problem solving at every level. If such a system is already in place, it can be expanded; otherwise, it will have to be blended into every department. The approach used in determining how smoothly the implementation of new computer systems proceeded — along with how smoothly organizational changes were made to take advantage of new computing capabilities — must be considered by examining all departments.

This approach to analysis is referred to as the systems approach to problem solving, and it involves viewing the organization as a component of a larger environment with which it interacts. Furthermore, the organization itself is viewed as a system with mutually dependent components. The behavior of any particular department influences, and is influenced by, the behavior of other departments. A change in any one aspect of the company's information system and/or organization must therefore be assumed to affect the entire company. It is impossible, then, to assess how well changes in any one department have occurred without considering how the company as a whole has been affected.

Goals and Strategy Behind the Technology Adoption

Toys R Us executives appear to have understood the importance of integrating all of their departments and recognizing how those departments must interact with each other when choosing which computer information systems to adopt.

In order to assess the company's performance, it is necessary to understand something about its basic structure. Toys R Us sells toys, games, and sporting goods in hundreds of Toys R Us stores; children's apparel in its Kids R Us stores; and both clothing and accessories for young children in its Babies R Us stores. Like many other large corporations today, the organization is extremely geographically dispersed, with workers split among a number of different divisions. Both of these characteristics had, in recent years, impeded efficient communication. Since efficient internal communication is essential to staying competitive for any large corporation, company executives decided to adopt new software that would substantially increase the efficiency and ease of internal communication.

The changes made by the company were in fact relatively straightforward; they did not incorporate cutting-edge technologies. For example, the installation of Microsoft Exchange Server at the Toys R Us national offices and distribution centers allowed instant messaging to become an integral part of the workplace culture. This is a well-established technology in many businesses, but it was not being used by Toys R Us. This is an important lesson for many managers: it is important to keep abreast of technological developments, because one has to know what is available before one can take advantage of it.

The director of operations development for Toys R Us emphasized the importance of something as simple as incorporating instant messaging:

"Since we started using Microsoft Exchange Server, I would guess that, from my vantage point, productivity has increased by 400%. Everyone loves to check their e-mail every day, and because e-mail is the primary vehicle for communication, it's essential to check it frequently."

In addition to using Exchange Server for daily communications, Toys R Us employed Microsoft technologies to address a variety of longer-term needs and goals. For example, employees became able to use Exchange Server public folders to collaborate on developing store promotions, and a number of departments were able to take advantage of the real-time collaboration features of Microsoft NetMeeting rather than waiting, as they had before, for ideas to circulate on paper through each department. Both the speed and the quality of communication improved: workers heard about projects sooner and from an accurate source. This meant they no longer had to rely on gossip or memos that allowed no follow-up questions, and it also meant that their opinions were now solicited at the beginning of a project — when they could still be meaningfully incorporated.

Toys R Us chose to adopt an entire package of Microsoft products because executives believed it would cause fewer integration issues. As the director of systems technology explained:

"It's simpler for users if they don't have to learn several different environments, and it's easier for the IT department to support a single solution. An integrated solution also avoids the finger-pointing that typically happens when something goes wrong and you are using products from different vendors."

LAN, WAN, and the Networking Infrastructure

Such integration of technology is essential and can be furthered by an even greater reliance on both wide-area and local-area networks. A local area network (LAN) is simply a group of computers and other devices dispersed over a relatively limited area and connected by a communications link that enables any device to interact with any other on the network. The opposite of a LAN is a Wide Area Network (WAN), in which the physical components of the system are spread out over a much greater distance. A WAN is a much harder system to design because the components are generally not physically attached to each other by cables and other physical means as in a LAN — one of the major reasons that WANs are far less common.

Another reason for the greater prevalence of LANs has less to do with the physical constraints of networked hardware and far more to do with common office practices: most businesses tend to operate within a relatively restricted physical space, with the result that their computer networks are also installed in a relatively small area. Toys R Us stores are very large, but the office space within their retail locations is in fact quite small, and corporate office space is as constrained as it is anywhere. This underscores the importance of LANs to the workings of nearly all businesses above the level of the very smallest offices. Toys R Us adopted computer information software that allows it to take advantage of the full range of services a LAN can provide.

One specific use of the new Microsoft software package was the integration of promotional strategies. Toys R Us headquarters instructed its stores to mount various kinds of promotions, but these used to be accomplished in a haphazard way — very much at the discretion of the individual store manager — even though people could communicate by phone or email. Often, the people who could help most with a specific promotion did not contribute simply because they did not know about it. The adoption of public folders has ended this inefficiency: now every worker is kept in the loop.