The IT Organization, IT as a Business and BPR

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The IT Organization, IT as a Business and BPR

• Chapters 7 and 13
• IS 577
• DePaul University CTI
• John Fisher

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What we will cover

• Questions from last class
• Evaluations MYCTI.COM
• Major points from Chapters 7 and 13
• IT Organization
• IT as a Business
• Tribal Warfare in the Corporation
• BPR
• Case Study
• General Dynamics and CSC

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Information, Organizations, Processes and Control

• The Past
• Hierarchical organizations
• Formal structure and relationships
• Today
• Process-oriented, Learning, Team-based, and
  Fast-cycle organizational models
• Flat, flexible, focused on core competence
• Inside, empowered, interfunctional teams of
  knowledge workers are reengineering and
  continually improving core business processes.

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Information, Organizations, Processes and Control

• Strategic alliance and partnership that will
  enable them to focus on core competence while
  expanding capabilities, scale and scope.
• Creation of virtual organizations
• Challenge
• How do we meet these challenges?
• How can organization be both global and local,
  big and small, and radically decentralized with
  centralized reporting and control?

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Flattening the Organizational Structure
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Information, Organizations, Processes and Control

• Question
• Can firms take the advantage of the information
  management communication tools this revolution
  provides to create an information age
  organization that simultaneously manages speed
  and complexity?

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Information, Organizations, Processes and Control

• Although the networked IT infrastructure can
  provide important tools, it can not define
  neither the information that needs to be in the
  systems nor the meaning of the information and
  how to use it to coordinate and manage the
  business.
• Nor can the networked IT infrastructure define
  the organizational structures, processes, and
  culture required to enable people to use the
  information to make decisions and take actions.
• These tools cannot provide incentives that would
  motivate people to use the information to meet
  both organizational and personal objectives.
• What should firms do?

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Information, Organizations, Processes and Control

• To accomplish the organizations of the year 2000
  and beyond firms must change the way they are
  organized, and employees at all levels must
  become information literate - not just computer
  literate.

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Information, Organizations, Processes and Control

• Implementing networked information and
  communication system in a traditional,
  hierarchically structured organization will not
  work.
• A much more comprehensive approach to
  organizational change is required.
• In general implementing the technology is the
  least complicated part redesigning the
  organization and defining the information to
  manage it constitute major constraints on
  organizations attempts to meet the challenges of
  the 21st Century

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Creating the Information Age Organization

• Speed Counts, but not at the Expense of Control
• New products must be introduced quicker, order
  processing cycle must be cut dramatically, etc.
• The faster the pace, the greater the need to
  monitor business operations and clearly define
  and enforce rules.
• Empowerment is not Anarchy
• In an empowered organization, senior managers are
  more involved, not less and organizational
  boundaries and value systems must be more clearly
  communicated, closely monitored, and more
  consistently enforced.

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Creating the Information Age Organization

• Transforming an Organization Requires more than
  just Changing the Structure.
• True change occurs deep within the organization
  as individuals and work teams redefine the way
  they work and the values that guide decision
  making and action.
• Managers need to rethink the nature of control
  and authority
• Smashing together the features of the hierarchy
  with features of an entrepreneurial firm will not
  work.
• Work must change and people must change
• New knowledge and skills are needed

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Creating the Information Age Organization

• Transforming an Organization Requires more than
  just Changing the Structure.
• The personal values and frameworks that people
  people use to make decisions and take actions
  must be realigned with new organizational
  priorities and goals.
• The ability to transform the firms information
  infrastructure is a critical component that both
  supports and enables the organizational
  transformation
• Change must not stop at the doors of the
  corporate headquarters but must be infused
  throughout every part of the organization
• Laying collaborative structures (e.g. team-based
  units and incentives) over a traditionally
  structured organization will not work neither.

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Streamlining the Business Cycle

• Operating Cycle
• The activities through which an organization
  designs, produces, markets, delivers, and
  supports its product and services
• Management Cycle
• The activities through which an organization
  manages the design, produces, markets, delivers,
  and supports its product and services

Operational Process
Management Process
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Strategic Alignment

• Basic questions confronting managers
• What are the implication of IT in my business
  operations? Today and in the future?
• What are the alternative perspectives for
  leveraging IT capabilities for business
  operations?
• Is the locus of IT component inside or
  outside the operation?
• What is the executive role of senior management
  for leveraging IT capabilities?
• How should the IT function be organized, and what
  is the role of IT outsourcing
• What are the appropriate criteria for assessing
  IT based benefits

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Strategic Alignment

• Examples of how some organizations have address
  these questions
• Kodak outsourcing with three companies (IBM, DEC,
  Computerland Corp.)
• E-commerce
• BPR
• TQM
• Etc.

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Strategic Alignment

• No single IT application - however sophisticated
  and state of the art it may be - could deliver a
  sustained competitive advantage. Rather,
  advantage is obtained through the capability of
  an organization to exploit IT functionality on a
  continues basis.
• This required a fundamental change in managerial
  thinking about the role of IT in organizational
  transformation, as well as an understanding of
  the critical components of IT strategy and its
  role in supporting and shaping business strategy
  decision.

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Alignment Perspectives

• Three dominant alignment perspectives
• Strategy Execution
• Technology Transformation
• Competitive Potential

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Strategic Alignment (Strategy execution)
Business Strategy
IS Infrastructure
Organizational Infrastructure
DRIVER BUSINESS STRATEGY Role of top
management strategy formulator Role of IS
management strategy implementor Performance
criteria Cost/service center
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Strategic Alignment

• Business strategy as the driver (Strategy
  execution)
• This perspective is anchored on the notion that a
  business strategy has been articulated and is the
  driver of both organizational design and the
  design of IS infrastructure.
• This is the most common and widely understood
  perspective.
• Analytical methodologies to make this perspective
  work include CSF, BSP, Enterprise modeling.

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Strategic Alignment

• Business strategy as the driver (Strategy
  execution)
• It is important to identify the specific role of
  top management to make this perspective succeed.
• Top management should play the role of strategy
  formulator
• IT manager should be strategy implementor.
• The criteria for assessing performance are based
  on financial parameters reflecting a cost center
  focus

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Strategic Alignment (Technology Transformation)
Business Strategy
IT Strategy
IS Infrastructure
DRIVER BUSINESS STRATEGY Role of top
management technology visionary Role of IS
management technology architect Performance
criteria technology leadership
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Strategic Alignment

• Business strategy as the driver (Technology
  Transformation)
• This alignment perspective involves the
  assessment of implementing the chosen business
  strategy through appropriate IT strategy and the
  articulation of the required IS infrastructure
  and process.
• In contrast to the strategy execution logic, this
  perspective is not constrained by the present
  organizational design.
• Instead seeks to identify the best possible IT
  competence through appropriate positioning in the
  IT marketplace, as well as identifying the
  corresponding internal IS architecture.

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Strategic Alignment

• Business strategy as the driver (Technology
  Transformation)
• The role of IS manager should be that of the
  technology architect (scope, competencies and
  governance)
• Performance criteria are based on IT leadership
  in marketplace
• The role of top management in this perspective is
  to provide IT vision that could best support the
  chosen business strategy
• Examples United Services Automobile Association

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Strategic Alignment (Competitive Potential)
Business Strategy
IT Strategy
Organizational Infrastructure
DRIVER IT STRATEGY Role of top
management business visionary Role of IS
management catalyst Performance
criteria business leadership
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Strategic Alignment

• IT strategy as the enabler (Competitive
  potential)
• Concerned with the exploitation of emerging IT
  capabilities to impact new products and services.
  Unlike previous scope that consider business
  strategy as given or a (constraint for
  organizational transformation), this perspective
  allows the adaptation of business strategy via
  emerging IT capabilities.
• This perspective seeks to identify the best set
  of strategy options for business strategy and the
  corresponding set of decisions to organizational
  infrastructure and process
• Example Federal Express.

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Strategic Alignment

• IT strategy as the enabler (Competitive
  potential)
• The role of top management to make this
  perspective succeed is that of the business
  visionary (IT) - one who articulates how the
  emerging IT competence and functionality as well
  as changing governance patterns in the IT
  marketplace would impact the business strategy
• The role of IS manager is that of the catalyst -
  one who identifies and interprets the trends in
  the IT environment to assist the business manager
  to understand the potential opportunities and
  threats from IT perspective.
• Performance criteria - business leadership with
  qualitative and quantitative measurements
  pertaining to product leadership e.g. market
  share.

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Strategic Alignment

• Which alignment perspective is the best?

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Tribal Warfare in Corporations

• Peg C. Neuhauser
• Author and speaker
• Culture.com Building Corporate Culture in the
  Connected Workplace
• Tribal Warfare in Organizations Turning Tribal
  Conflict into Negotiated Peace
• Brings ideas from anthropology and the study of
  human culture into the corporate world to help
  understand organizational behavior

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Four Fundamental Rules

• These four rules of tribal behavior apply to all
  interactions between groups within an
  organization and external to an organization

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Rule One
Fact of Life in a Matrix Organization Focus on
the collective IQ. Teams are smarter than
individuals.
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Rule Two
Fact of Life in a Matrix Organization Dont
blame each other. If there is a hole in the
boat, you all sink.
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Rule Three
Fact of Life in a Matrix Organization You live
or die by the quality of your relationships--inter
nally and externally. Respectful treatment is
the key.
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Rule Four
Fact of Life in a Matrix Organization You have
very little real power over each other. People
will follow those they trust and like.
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Tips for Building a Team Culture
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Tip One
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Tip Two Generalist and Specialist . . . Treat
with Care
GENERALISTS
Broad range of knowledge about products and
services.
SPECIALISTS
In-depth knowledge of one product or service line.
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Tip Two
Make a habit of studying your successful bridge
building Questions to ask yourselves
routinely What is an example of past
success? Why were we successful in that
situation? Where we can repeat the same skills?
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Individual Skills for Success in a Team Culture
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Tip Three
Watch Your Language Use It as a
Linkage Tool Dont turn it into a weapon that
drives people apart.
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Tip Four
To be prepared to negotiate, you must be able to
state the other persons point of view more
eloquently and persuasively than he can.
Roger Fisher Harvard
Negotiation Project Getting to Yes
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Tip Five
Genius of the AND and the Tyranny of the
OR Make it a habit to look for the AND
Jim Collins Built to Last
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Tip Six
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IT as a Business

• What are the components of a business?
• The same components apply for the IT business
• Do you make a profit or not?
• Depends on the business model
• How to price?
• Determine fixed costs
• Determine variable costs
• Determine margin

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The New IT Business Model

• To function as a strategic partner with the
  business, to create value for the enterprise
• Value Creation through
• Business alignment and partnerships
• Delivery on commitment and promises
• Operational excellence
• Actively managing IT systems, data, staff and
  infrastructure as an asset
• Time to value how long it takes from the start
  of an IT initiative until the business obtains
  value from it

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The New IT organization

• Is agile and is a business organization
• Bottom line orientation
• Opportunity seeking
• Customer focus
• Accountability
• Risk versus reward tradeoffs
• Active management of the IT investments
• Collaboration and participating in all business
  levels

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BPR

• Business Process Redesign
• The fundamental rethinking and radically redesign
  of business processes to achieve dramatic
  improvement in critical, contemporary measures of
  performance such as cost, quality, service and
  speed.
• The implementation of deliberate and fundamental
  change in business processes to achieve
  breakthrough improvements in performance.
• Enabled by IT

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BPR

• Business Process Redesign
• Also known as Reengineering or Process
  Innovation is offered as an enabler of
  organizational transformation.
• Organization embrace a BPR approach when they
  believe that a radical improvement can be
  achieved by marring business process,
  organization structure, and IT change.
• Examples
• Taco have embraced BPR to enable the redefinition
  of their business

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BPR

• CIO Comments
• As I began to focus on what we are doing, it was
  clear that, generally, we did not change the
  processes that were being automated. Rather, we
  took sophisticated applications and layered them
  onto an old organization. I began to envision a
  need to engineer.
• BPR is about changing the engines of a flying
  airplane

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BPR

• Hammer and Champy
• It is an all-or-nothing proposition that produces
  dramatically impressive results. Most companies
  have no choice but to muster the courage to do
  it. For many, reengineering is the only hope for
  breaking away from the ineffective, antiquated
  ways of conducting business that will otherwise
  destroy them.

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BPR

• BPR Objectives
• To dramatically reduce cost
• Reduce time
• To dramatically improve customer services or to
  improve employee quality of life
• To reinvent the basic rules of the business e.g.
• the airline industry
• taco bell from Mexican food to fast to feeding
  people anywhere, anyhow.
• Customer satisfaction
• Organizational learning

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BPR

• Change
• To transform an organization, a deep change must
  occur in the key behavior levels of the
  organization
• jobs, skills, structure, shared values,
  measurement systems and information technology.
• Role of IT
• BPR is commonly facilitated by IT e.g.
• Organizational efficiency
• Effectiveness
• Transformation

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BPR

• Efficiency
• Applications in the efficiency category allow
  users to work faster and often at measurable
  lower cost
• Mere automation of manual tasks, resulting in
  efficiency gains (least deep)
• Effectiveness
• Applications in the effectiveness category allow
  users to work better and often to produce higher
  quality work.
• Requires changes not only in technology, but in
  skills, job roles, and work flow (deeper).

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BPR

• Transformation
• Applications in the the transformation category
  change the basic ways that people and departments
  work and may even change the very nature of the
  business enterprise itself.
• Assumes a major in most of the change levers of
  the organization, including structure, culture,
  and compensation schemes (deepest).

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BPR

• Process
• A process is set of logically related tasks
  performed to achieve a defined business outcome
• A collection of activities that, taken together,
  create value for customer e.g. new product for
  customer. This tasks are inter-related tasks

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BPR

• Core Processes

Functional departments
RD
Sales
Manufacturing
New Product development
Order Entry
CUSTOMER
Business Processes
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BPR

• How can Companies Identify their Business
  Processes. Examples
• Manufacturing As the procurement-to-shipment
  process
• Product development as the concept-to-prototype
  process
• Sales as the prospect-to-order process
• Order fulfillment as the the order-to-payment
  process
• Service as the inquiry-to-resolution process

Business Processes
Business functions
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BPR

• How can Companies Identify their Business
  Processes.
• Dysfunction Which process are in the deepest
  trouble
• Important Which process have the greatest impact
  on customer
• Flexibility which process are the most
  susceptible to redesign.

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BPR

• Embarking on Re-engineering
• Persuade people to embrace or at least not to
  fight -the prospect of major change by developing
  the clearest message on
• 1 A case for action- Here is where we are as a
  company and this is why we cant stay here
• show your balance sheet
• show competitors balance sheet
• 2 A vision statement - This is what we as a
  company need to become

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BPR

• Simple Rules
• Start with a clean sheet of paper.
• With my current experience what can I do today
• If I were to re-create this company today, given
  what I know and current technology, what would it
  look like.
• How will I be focusing, organizing and managing
  the company?
• Transition from a vertical functional departments
  to one that is horizontal, CUSTOMER focused and
  process-oriented?

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BPR

• Simple Rules
• Listen to customer
• Enhance those things that bring value to the
  customer or eliminate those that dont
• Be ambitious, focus your commitment to radical
  change on the process

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BPR

• Process Improvement and redesign Process

Improvement Innovation/Reengineering
Magnitude Increment Radical Improvement
30-50 10x-100x Sought Starting
base Existing Process Blank sheet Top
management Relatively low High commitment Rol
e of IT Low High Risk Low High