Week 5 Monday, February 20

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Week 5Monday, February 20

• Networked Organizations
• IT Infrastructure and Operations
• Strategic Alignment
• IT Adoption

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Leveraging IT
Business
IT
Alignment
Vision
Strategy
Strategy
Business networks (Competitive Advantage)
Process Reengineering (Control, enhancing,
leveraging)
Capabilities
Capabilities
IT infrastructure
Alignment
Value
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Management Challenge Issues

• IT infrastructure as a strategic resource
• Types of infrastructures
• Independent - without regard to strategies
• Reactive - development in reaction to a
  particular thrust
• Interdependent - coalignment with the strategic
  context
• Modifications to the IT infrastructure signal
  implications for possible changes and
  improvements in strategy, while modifications to
  strategic thrusts trigger appropriate changes in
  the IT infrastructure

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Move to Networked Organizations
IT-Enabled Networks
Need to Effectively Manage Organizational
Interdependence
Need to Increase Organizational Performance
Competitive Business Environment
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Move to Networked Organizations
IT-Enabled Networks
Need to Effectively Manage Organizational
Interdependence

• Global marketplace
• New and powerful strategies of globalization
• Advances and diffusion of IT into businesses

Need to Increase Organizational Performance
Competitive Business Environment
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Move to Networked Organizations

• Compressed time to market
• Organizational service to the customer
• Product and process quality
• Managing risk obsolesce, inadequacy,
  misunderstanding
• Managing costs
• Partnerships with other organizations

IT-Enabled Networks
Need to Effectively Manage Organizational
Interdependence
Need to Increase Organizational Performance
Competitive Business Environment
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Move to Networked Organizations
IT-Enabled Networks

• Improve coordination and cooperation
• Shared decision making
• Moving from silos to enterprise

Need to Effectively Manage Organizational
Interdependence
Need to Increase Organizational Performance
Competitive Business Environment
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Move to Networked Organizations

• Integration to coordinate across functional
  boundaries, yet along organizational structure
• Managements reach to all levels of the
  organization
• Exchange of information

IT-Enabled Networks
Need to Effectively Manage Organizational
Interdependence
Need to Increase Organizational Performance
Competitive Business Environment
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Leveraging IT
Business
IT
Alignment
Vision
Strategy
Strategy
Business networks (Competitive Advantage)
Process Reengineering (Control, enhancing,
leveraging)
Capabilities
Capabilities
IT infrastructure
Alignment
Value
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Business Opportunities and Market Potentials

• By 2008, half of the US population (approx. 250
  million) will purchase its goods and services
  online through the Internet (vs. 30 percent in
  2004)
• Estimated spending per buyer will average 780
  (vs. 585 in 2004)
• Translates to 117 billion in retail sales
• B2C e-business poses several new challenges
• Trend toward selling micro-segmented, tailored
  products and services
• Requires businesses to establish and build closer
  learning relationships with their customers

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Investments

• For example
• Worldwide investments in CRM technology (software
  and technology services) in 2002 estimated at
  USD2.3 billion
• Investments were predicted to quadruple to 10.8
  billion in 2004

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Emerging IT Strategic Role

• IT offers the capability to redefine the
  boundaries of markets and structural
  characteristics, alter the fundamental rules and
  basis of competition, define business scope, and
  provide a new set of competitive weapons.
• N. Venkatraman, 1991
• (from Corporations of the 1990s)

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New technologies open new opportunities
How does a business benefit from new technologies?
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MIT90 FrameworkFive Inter-Related Components
Organization and coordination
Structure
Information Technology
Vision and direction
Planning and control
Strategy
Management Processes
Technology
Individuals and Roles
Human resources
Dynamic Equilibrium Any change to a component
requires an adjustment to the others
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Architecture vs. Infrastructure

• Architecture a blueprint that shows
  interrelationships of the components of a system
• Emphasis on the whats
• Based on the business model
• IT Infrastructure implementation of the
  architecturePurpose To deliver the right
  information to the right people at the right time

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Architecture

• Defines guidelines and standards
• Service Oriented Architecture (SOA)
• Emphases on accessibility of others systems to
  data and functions, and reusability of
  programming code
• Supports the organization's agility
• Four attributes Distributed vs. Centralized
• Location of processing
• Connectivity among processors
• Location of data repository (data storage)
• Systemwide rules (information security,
  accessibility, etc.)

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IT ArchitectureAnother View

• defines the technical computing, information
  management, and communications platform.
  provides an overall picture of the range of
  technical options available to a firm, and as
  such, it also implies the range of business
  options.

Enables Opportunities
Coordination (information flow and linkages)
Vision
Control
What design gives the organization the best use
of its information? What technology
configurations will best support the business?
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InfrastructureDelivering the right information
to the right people at the right time

• Delivering IT resources to support users
  throughout the organization
• Four layer infrastructure (Weill and Broadbent)
• IT components
• Human IT infrastructure
• Shared IT services services that users can draw
  upon and share to conduct business
• Shared and standard IT applications stable
  applications that change less frequently

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IT Infrastructure

• Three categories
• Network technologies that permit exchange of
  information between processing units and
  organizations
• Processing systems encompass hardware and
  software that provide an organizations ability
  to handle business transactions
• Facilities physical systems that house and
  protecting computing and network devices

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IT Infrastructure Network

• Management issues
• Selecting technologies and standards
• Selecting partners and managing their
  relationships
• Assuring reliability
• Maintaining security

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IT Infrastructure Network

• Technological Elements
• Local area networks (LANs)
• Hubs, switches, wireless access points and
  network adapters
• Wide area networks (WANs)
• Routers
• Firewalls and other security systems and devices
• Caching, content acceleration and other
  specialized network devices

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IT Infrastructure Processing Systems

• Management issues
• Deciding what to keep in-house vs. out-sourced
• Deploying, growing an modifying
• Enterprise system vs. best of breed hybrid
• Managing incidents
• Recovering from disasters

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IT Infrastructure Processing Systems

• Technological elements
• Client devices and systems
• Server devices and systems
• Mainframe devices and systems
• Middleware
• Infrastructure management systems
• Business applications

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IT Infrastructure Facilities

• Management issues
• Governance Internal vs. external management
• Aligning the facilities and business models
• Assuring reliability
• Maintaining security

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IT Infrastructure Facilities

• Technological elements
• Building and physical spaces
• Network conduits and connections
• Power
• Environmental controls
• Security

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Potential Benefits of a Real-time Infrastructure

• Better data, better decisions synchronizing
  data to ensure their quality and reliability
• Consistency throughout the enterprise
• Improved process visibility open standards,
  open interconnectivity between business partners
• Improved process efficiency enhanced process
  visibility and quicker response to changes in the
  environment
• Sense and respond sensing actual events (e.g.,
  customer demand) vs. forecasting outcomes

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Infrastructure Another View

• IT infrastructure as a strategic resource
• Types of infrastructures
• Independent - without regard to strategies
• Reactive - development in reaction to a
  particular thrust
• Interdependent - coalignment with the strategic
  context
• Modifications to the IT infrastructure signal
  implications for possible changes and
  improvements in strategy, while modifications to
  strategic thrusts trigger appropriate changes in
  the IT infrastructure

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Five Levels of IT-Induced Reconfigurations
Greater degree of business transformation Greater
range of potential benefits
Radical
Business Process Redesign
Business Network Redesign
Business Scope Redefinition
Maximum exploitation of available IT capabilities
Alignment between technology and the organization
Internal Integration
Evolutionary
Local exploitation
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1. Local Exploitation

• Exploitation of IT within a business function
• Development of applications that improve task
  efficiency
• Target functional-specific goals without
  influencing related areas of operations

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Local Exploitation Managerial implications

• Identification of high-leverage activities
• Effective systems must be within the context of
  competitive and organizational conditions, and
  strategic thrusts
• Rejection of generic strategic information
  systems
• Specifically designed systems that provide
  maximal benefits
• Recognition of the scope of transformation
• Other areas of operation should be aware of the
  localized system benefits

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Enablers and Inhibitors
Enablers
Inhibitors
Local Exploitation

• Technological
• Favorable cost-performance trends
• Vendor push - system solutions
• Organizational
• Localized impact
• Ease of assessing efficiency benefits
• Minimal disturbance to operations

• Technological
• Obsolescence
• Further reduction in cost-performance
• Organizational
• Lack of strategic vision
• Unwillingness to recognize the strategic role of
  IT and IS

IT-Induced Reconfiguration
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2. Internal Integration

• The deployment of a common IT platform serves to
  integrate the organizations business processes,
  potentially enhancing efficiency and
  effectiveness
• IT capabilities are exploited in all the possible
  activities within the business process
• Technical integration
• Integrating systems and applications using a
  common IT platform
• Organizational integration
• Integration of roles and responsibilities that
  exploits the technical integration capabilities

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Internal IntegrationBenefits

• Efficiency
• Compression of time and distance leading to cost
  savings
• Effectiveness
• Opportunities to develop new competitive weapons
  or value-added services

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Internal Integration Managerial Implications

• Articulation of the logic and rationale for
  internal integration
• Serves as the basis for developing detailed
  technological and organizational decisions to
  achieve integration
• Recognition of the dynamics of integration
• Constant review and reassessment of the business
  integration requirements through the IT platform
  are necessary as business conditions and
  technological developments evolve over time

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Enablers and Inhibitors
Enablers
Inhibitors
Internal Integration

• Technological
• Increasing connectivity
• Favorable cost-performance trends
• Vendor push-system solutions
• Organizational
• Strategic vision for integration
• Centrality of IT to the strategic context

• Technological
• Uncertainty
• Integration costs
• Organizational
• Lack of strategic vision
• Organizational inertia and resistance to change
• Centralization-decentralization conflict

IT-Induced Reconfiguration
Idiosyncratic
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3. Business Process Redesign

• Revolutionary changes in the design of
  organizational processes are necessary to best
  exploit the emerging technological capabilities
• Reconfiguration of the business using IT as a
  central lever
• Business processes are redesigned to maximally
  exploit the available IT capabilities
• Redesign of relevant processes
• Respecification of organizational roles,
  reporting relationships, and managerial
  responsibilities

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Business Process RedesignManagerial Implications

• Recognition of the nature and impact of business
  process redesign
• Recognizing and understanding the scope and
  impact of potential IT-enabled process redesign
• The role of strategy in business process redesign
• Balance between technological and organizational
  capabilities
• Dependent on the goals and strategies of the
  organization

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Enablers and Inhibitors
Business Process Redesign
Enablers
Inhibitors

• Technological
• Favorable cost-performance trends
• Organizational
• Awareness of the power of IT
• Willingness to make quantum changes
• Marketplace
• Competitive pressure

• Technological
• Uncertainty
• Redesign costs
• Organizational
• Lack of strategic vision
• Organizational inertia and resistance to change
• Cost of transforming the organization

IT-Induced Reconfiguration
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4. Business Network RedesignElectronic
Integration

• Redesigning the nature of exchange among multiple
  participants in a business network through
  electronic integration
• Reconfiguration of the scope and tasks of the
  business network involved in the creation and
  delivery of products and services
• Includes business tasks within and outside the
  organization
• Electronic integration across key partners
  becomes the dominant strategy
• Business issues involving the relative authority
  and responsibilities of the participants

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Strategic Options

• Strategies for business governance
• Relationships with key participants
• Loose vs. tight
• Depends on the partnership and what is expected
  from it
• Strategies for IT governance
• Govern IT network across all participants
• Common vs. unique role

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Strategic Options
Tight
Collaborative advantage
Business network redesign
Improved efficiency
Electronic integration
Business governance
Electronic infrastructure
Competitive advantage
No strategic advantage
Short-term advantage
Loose
Common
Unique
IT governance
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Electronic Integration

• A quasi-firm or a quasi-market mechanism that is
  fundamentally designed and operated through the
  capabilities offered by IT
• Emerging roles
• Transactions - supports the exchange of data
• Inventory - provides a means for determining
  status and triggering events (movement of goods)
• Process - manages and coordinates processes over
  all parties
• Expertise - provides intellectual support

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Business Network RedesignBenefits

• Operational efficiency
• Savings in operating costs and time
• Market positioning
• Benefits gained by occupying certain positions in
  the marketplace
• Partnership conditions
• Scope of the business network in terms of the
  characteristics of the partners
• Strategic capabilities
• Extent to which innovative mechanisms can be
  deployed in each role

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Business Network Redesign Managerial implications

• Conceptualizing strategies for electronic
  integration in terms of the intersection of three
  key decisions
• Business governance decisions
• IT governance decisions
• Scope of integration
• Conceptualizing organizational boundary in
  virtual terms

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Enablers and Inhibitors
Business Network Redesign
Enablers
Inhibitors

• Ability to specify and/or create standards for
  integration
• Identification of the value-added service
• Recognition of mutual benefits

• Lack of standards
• Lack of vision and understanding
• Lack of commitment to integration
• Possible erosion of market positions

IT-Induced Reconfiguration
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5. Business Scope Redefined

• Explicate the logic underlying the portfolio of
  businesses
• Identify differential strategic thrusts
• Develop criteria for allocation of scarce
  resources among the businesses
• Redefinition issues
• Enlarging the business mission and scope
• Shifting the business scope

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Business Scope Redefined

• Enlarging the business scope
• Selling information as a new product
• Offering value-added services related to the
  original business
• Shifting the business scope
• Redirecting core scope due to advances in
  technology

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Management Challenge Issues

• IT infrastructure as a strategic resource
• Types of infrastructures
• Independent - without regard to strategies
• Reactive - development in reaction to a
  particular thrust
• Interdependent - coalignment with the strategic
  context
• Modifications to the IT infrastructure signal
  implications for possible changes and
  improvements in strategy, while modifications to
  strategic thrusts trigger appropriate changes in
  the IT infrastructure

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Adoption ITAssimilating Emerging Technologies

• Technology identification and investment
• High impact, high profile
• Technological learning and adaptation (light
  fires)
• Introducing IT to end-user computing
• Innovation
• Realization management control (formalization)
• Controls for the effective use and diffusion of
  IT
• Maturity/widespread technology transfer
• Sustained application and introduction of IT

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Assimilating Emerging Technologies
Phase 1 - Infusion

• Introduction of new IT

• Expansion throughout the organization

Phase 2 - Diffusion

• Setting policy of ITs use (application)

Phase 3 - Policy
Phase 4 - Acceptance

• Maturation and further assimilation

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Assimilating Emerging Technologies
Phase 1 - Infusion

• Technology identification
• Decision to invest in new IT
• Complementary project implementations with high
  investment and benefits uncertainty

Phase 2 - Diffusion
Phase 3 - Policy
Phase 4 - Acceptance
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Assimilating Emerging Technologies
Phase 1 - Infusion

• Technological learning and adaptation
• Apply new technology to new tasks

Phase 2 - Diffusion
Phase 3 - Policy
Phase 4 - Acceptance
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Assimilating Emerging Technologies
Phase 1 - Infusion
Phase 2 - Diffusion

• Rationalization/Management Control
• Control for guiding the design and implementation
  of systems (i.e., institutionalizing)

Phase 3 - Policy
Phase 4 - Acceptance
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Assimilating Emerging Technologies
Phase 1 - Infusion
Phase 2 - Diffusion

• Maturity/Widespread Technology Transfer
• Technology embraced throughout the organization
• New technologies emerge

Phase 3 - Policy
Phase 4 - Acceptance
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