The Challenges Ahead

1. The Challenges Ahead Chapter 15 Information Systems Management In Practice 7E McNurlin & Sprague PowerPoints prepared by Michael Matthew Visiting Lecturer, GACC, Macquarie University – Sydney Australia

2. Part V: Thinking Ahead • This part, which consists of just one chapter, is intended to stimulate thinking about the future and the roles IT could play in the future • It begins by exploring some intriguing thoughts about potential organizing principles for an Internet-based world • These rules of the road do not necessarily extrapolate from the rules of the physical world, so they are worth considering carefully, especially when they appear counter-intuitive

3. Part V: Thinking Ahead cont. • The chapter also looks at the people issues of moving ahead • Such as people’s enthusiasm or reticence to embrace new technologies and • How to spur non-IT executives to learn about their roles in leading the use of IT • In essence, this part is about leadership in the Internet-based economy • So we end this unit / book as we began it, highlighting the leadership box in our framework

5. Chapter 14 • The computer’s capability to leverage people’s brain power allows companies to not only communicate in new ways, but to compete in new ways • It looks at the challenges facing IS organizations worldwide by assembling a collage of opinions about possible principles underlying the e-world • Acknowledging our transformation into a networked world, it describes three viewpoints of the differences between non-networked and networked and their importance • The lecture / chapter concludes with ways to move forward with the people who need to lead us into this new business world and the people who will be led into it • Case examples include NYNEX, a football team, National Semiconductor, Sun Microsystems, Cemex, Semco S.A., Capital One, MIT’s IT for the Non-IT Executive Program and SIM’s Strategic Business Leaders Program

6. Today’s Lecture • Introduction • Organizing Principles • The Learning Organization • Processes Rather Than Functions • Communities Rather Than Groups • Virtual Rather Than Physical • Self-Organizing Rather Than Designed • Adaptable Rather Than Stable • Distributed Rather Than Centralized

7. Today’s Lecture cont. • Understanding A Networked World • The Internet Mindset • Where’s the Value in a Network? • The Rules of Networks • Moving Forward • Understanding Users • Increasing Executives’ Understanding of IT

8. Introduction • Despite all the ‘bad news’ of the dot-com crash etc. • Enterprises around the world are quietly redefining their strategy, work environment, and skills to move into the e-world • In this chapter we address the challenges faced by IS organizations worldwide by assembling a collage of possible principles underlying the ‘e-world’ • The computer is an amazing machine • Leverages people’s brain power, not just muscle power • This capability is being used to process data & communicate in new ways • This communication in turn allows companies to compete in new ways

9. Organizing Principles EXCITING TIMES! We are in a time of grand exploration – a new economy is being born (perhaps in fits and starts) • Equally frustrating though – is that the tenets of this evolving economy are so different that the rules are just now being formulated, reformulated and reformulated again! • As the economy matures – some principles will prove to be true, while others will fall by the wayside • The following opinions offer promising new thinking on organizing principles • They point to areas enterprises need to focus on to succeed in an ‘e-economy’

10. Organizing PrinciplesThe Learning Organization Peter Senge The 5th Discipline: The art & practice of the learning organization. • Most organizations live only 40yrs – 1/2 the life of a person, because they have ‘learning disabilities’ Organizational Learning Disabilities • Enterprises move forward by looking backward in that they rely on learning from experience = companies solve the same problem over & over • Organizations fix on events – yet the real threat comes from processes that move so slowly, no one notices them • Teamwork is not optimal, contrary to current belief. Team based organizations operate below the lowest IQ on the team = skilled incompetence

11. Organizing PrinciplesThe Learning Organization cont. • Organizations that can learn faster than their competitors will survive • In fact, it is the only sustainable advantage • To become a learning organization, an enterprise must create new learning & thinking behaviors on its people

12. Organizing PrinciplesThe Learning Organization cont. • An organization and its people must master the following five basic learning disciplines: • Personal mastery: lifelong learning • People reach a special level of proficiency when they live creatively • This personal mastery forms the spiritual foundation for the learning organization, so organizations need to foster these aspirations • Mental models: deeply ingrained assumptions, generalizations, and images that influence how people see the world and what actions they take • Organizations can accelerate their organizational learning by spurring executives to surface their assumptions and test them for relevancy

13. Organizing PrinciplesThe Learning Organization cont. • An organization and its people must master the following five basic learning disciplines cont.: • Shared vision: organization’s view of its purpose, its calling • It provides the common identity by which its employees and others view it • A shared vision is vital to a learning organization because it provides the rudder for the learning process

14. Organizing PrinciplesThe Learning Organization cont. • An organization and its people must master the following five basic learning disciplines: • Team learning: “dialog”: where people essentially think together, occur when people explore their own and others’ ideas, in order to arrive at the best solution; “discussions”: occur when people try to convince others of their point of view Few teams dialog; most discuss, so they do not learn. • Systems thinking: to understand systems, people need to understand the underlying patterns • Systems thinking is a conceptual framework for making complete patterns clearer

15. Organizing PrinciplesThe Learning Organization cont. • Of these 5 disciplines – systems thinking is the cornerstone • Until organizations look inwardly at the basic kinds of thinking and interacting they foster, they will not be able to learn faster than their competitors

16. Organizing PrinciplesProcesses Rather Than Functions Key point in the re-engineering movement wasn’t that changes needed to be dramatic – but that they needed to be made from a process centered rather than task centered view Tasks - about individuals Processes – about groups, we are now in a ‘group economy’ • The shift to processes ramifications include: • Need for new position, such as process owners • In one process virtually all departments are involved • One person needs to have end-to-end responsibility • Process owners provide the knowledge of the process – not just manage people (still important!) • Sense of urgency & intensity as teams are more intense & allow less slack time

17. Organizing PrinciplesProcesses Rather Than Functions cont. Requires measuring a process: • How long it takes to complete • Accuracy rate • Cost, etc. • Process centered structure requires: • Measures of processes which are different from measures of tasks • Measuring a process means measuring an outcome from the customers’ point of view Process Centering: • Turns people into professionals rather than workers • If you define a professional as someone who is responsible for achieving results rather than performing a task • The professional is responsible to customers, solving their problems by producing results

18. NYNEXCase Example: Process centered organization (1) • Targeted 12 major processes for redesign in a company wide business process redesign initiative • 11 used the traditional approach. • The 12th group used participative design & involved the Work Systems Design group, along with 8 employees from across one provisioning process • This project was the only one of the 12 implemented, and = excellent results • It followed a socio-technical approach to design a new process for handling customer orders. Rather than pass a customer among specialized groups, all the people in the process worked together, in one area, as a multifunctional team — with engineers working alongside salespeople. • A major difficulty with an innovative new process was under-rating how difficult it would be tokeep it going when it is counter cultural

19. A (U.S.) FOOTBALL TEAMCase Example:Process centered organization (2) • Has 2 processes: • Offensive • Defensive • Process owners: • Offense co-ordinators • Defense co-ordinators • Team has: • Position coaches • Head coach Once on the field – the team is self-directed. It adapts to the unfolding play

20. Organizing PrinciplesCommunities Rather Than Groups Communities – form of their own volition Groups– formed by design, their members are designated a priori • Communities: • Perform the same job, or collaborate on a shared task/product • They have complementary talents & expertise • They are held together by a common purpose & a need to know what the others know

21. Organizing PrinciplesCommunities Rather Than Groups cont. • Most people belong to several communities of practice, and most important work in companies is done through them • Note: not necessarily ‘defined’ • Communities are the critical building blocks of a knowledge-based document • Three reasons: • People, not processes, do the work • Learning is about work, work is about learning, and both are social • Organizations are webs of participation

22. NATIONAL SEMICONDUCTORCase Example: Community of Practice • Company began encouraging communities after its business model that built low margin commodity chips collapsed • Community of practice: • Energize & mobilize the firms engineers • Shape strategy & then enact it • A community of practice on signal processing grew slowly over 18 months & now includes engineers from numerous product lines & has been influential in strategy decisions

23. NATIONAL SEMICONDUCTORCase Example: Community of Practice cont. • National is extending communities of practice by: • Formally recognizing them • Offering funding for their projects • Handing out a toolkit to help people form their own communities of practice

24. Organizing PrinciplesVirtual Rather Than Physical A virtual organization doesn’t exist in one place or time – it exists whenever & wherever the participants happen to be • The virtual organization is a popular description of new organizational form • Underlying principle = time & space are no longer the main organizing foundations

25. SUN MICROSYSTEMSCase Example: Virtual rather than physical organization Chief Scientist – John Gage • The network creates the company • “Your e-mail flow determines whether you’re really part of the organization: the mailing lists you’re on say a lot about the power you have.”

26. Organizing PrinciplesSelf-Organizing Rather Than Designed • Form of future organizations – chaos theory, ecology, biology, and look at nature & how it organizes itself • The basic tenet is that nature provides a good model for future organizations that must deal with: • Complexity • Share information & knowledge • Cope with change The message is about being to adapt, it’s like imitating structures found in nature

27. CEMEXCase Example: ‘Self organized’ organization • Cemex (Cementos Mexicanos) delivers ready mix cement in Monterey Mexico • Delivering mix on time difficult – traffic jams, poor road conditions, contractors not ready for their order • Delivery rate = 35% • Deal with problem of unpredictability: • No reservations required • Deliver faster than pizza • Turned attention to managing information rather than assets

28. CEMEXCase Example: Self designed organization cont. • To do so: • They installed a GPS system for all the trucks & full information to all employees • Drivers to schedule themselves in real time as calls came in, rather than dispatchers • Result = 98% delivery rates = delivery time 20mins, (rather than 3hrs) = less wasted, hardened cement = 35% fewer trucks = lower fuel costs = happier customers

29. Organizing PrinciplesSelf-Organizing Rather Than Designed cont. The self-organization point-of-view • Requires taking the perspective of “organizing-as-a-process” rather than “organization-as-an-object” • Self-organizing systems create their own structure, patterns of behavior, and processes to accomplish their work

30. SEMCO S.ACase Example: An organization with a self organizing principle • Maverick the success story behind the worlds most unusual work place – CEO Semco Richard Semler • Company – a Brazilian manufacturer of industrial equipment moved from 56th to 4th place in its industry by breaking all the rules to get costs down & productivity up

31. SEMCO S.ACase Example: An organization with a self organizing principle cont. Result = • Factory workers: • At times set up their own production quotas • Help redesign products • Formulate marketing plans • Choose their own bosses • Bosses: • Set their own salaries – yet everyone knows what they are as workers have unlimited access to Semco’s one set of books

32. SEMCO S.ACase Example: An organization with a self organizing principle cont. • The changes have been rough & not undertaken in an orderly or cohert manner • BUT the radical changes to a far more democratic workplace allowed the company to grow 600% at the same time that the Brazilian economy was faltering • A dramatic story & illustrative of the benefits of self-organization

33. Organizing PrinciplesAdaptable Rather Than Stable • Speculation on future organizations • Successful organizations will be structured to naturally support (perhaps even foster) volatility and continual surprises • Today’s organizations are structured to maintain stability; change is minimised • Change costs a lot • Firms built for stability are not adaptable • IT is causing the world to become more connected • Connectivity increases volatility • To keep pace companies will need to adapt more quickly • The only way to achieve adaptability = through distributed intelligence and action • Thus organizational models will be built around networks and will be designed to evolve

34. CAPITAL ONECase Example: Adaptable Rather Than Stable • Credit company that believes in “the law of large numbers” • Conducts ‘000s of tests to read the marketplace • Strategy = dreaming up credit programs that might have value to customers • Then = testing numerous variations of each program to see which yield the best results • Example = discovered from its first test that “balance transfer” was a winning offer • Strategy goes with its bottom-up culture where decisions are made at the bottom based on the market tests • Management controls funds for rolling out new products but not for conducting the testing • Has the lowest charge-off rate and the highest risk adjusted margin in the industry • Grew 45% in one year!

35. Organizing PrinciplesDistributed Rather Than Centralized • Organizations of the future could become more distributed. Two views: • Distributed Capitalism • Commercial purpose of organizations is changing, hence structures will change • Managerial capitalism will not really satisfy today’s consumers due to the huge gap between consumer desires and the good and services for sale • Will possibly lead to federations • Market-Based Organizations • Cost of communications has influenced the structure of organizations • High = centralize • Reducing (like now) = more decentralized • Organizations will structure more like democracies or markets • Job of management will move from command and control to coordination and cultivation

36. Understanding A Networked World • Our networked world has different characteristics from the non-networked world many people are used to living in

37. Understanding A Networked WorldThe Internet Mindset Just as PCs turned the mainframe data processing mindset upside down, this new world of communications, with its multi-dimensions and interactivity, wreaks havoc with businesses unless they understand and embrace the mindset of the global online world The Internet mindset: • Communication is personal, not mass market • Customer contact is interactive, not broadcast • The customer time frame is theirs, not yours • The culture is bottom-up, not top-down

38. Understanding A Networked WorldThe Internet Mindset cont. • Communication is personal, not mass market • Communication is ‘up close and personal’, not top-down mass marketing • Message to traditional marketing departments = “Your ad copy is boring” • Some corporate Web pages are stuck in the traditional advertising model, ‘duplicating’ the ‘printed page’ • THEY ARE USING THE WRONG MINDSET: MASS MARKET RATHER THAN PERSONAL • Others get it ‘right’ and give people a way to create their ‘own’ pages e.g. My-Yahoo, My-CNN etc.

39. Understanding A Networked WorldThe Internet Mindset cont. • Customer Contact is Interactive, Not Broadcast • The single most important point of view to take toward the Internet is to view it as interactive, not broadcast: • Incoming, not outgoing • In essence, the Internet is a customer’s window to companies • It is substantially different from TV because customers can initiate communications with a firm rather than merely react to their ads • Customer-initiated dialog supported by the Internet significantly challenges marketing departments, customer support groups and fulfillment folks

40. Understanding A Networked WorldThe Internet Mindset cont. • The customer time frame is theirs, not yours • Customers are closer than most companies have ever experienced • Being put on hold increasingly irks • Today’s consumers are busy with little patience with waiting • As with TV remote controls, customers who do not get immediate satisfaction will switch to the competition with a point and click • Assess any proposed Internet business solution: • WILL OUR FIRM’S INTERNET STRATEGY TRULY HELP OUR CUSTOMERS COMMUNICATE WITH US?

41. Understanding A Networked WorldThe Internet Mindset cont. • The culture is bottom-up, not top-down • The Internet is not the expert’s world where the few impart their knowledge to the many • The message is clear for IS departments: • IS cannot work in the top-down broadcast mode, “I’m IS and I’m the expert, so here’s your solution customer” • More than ever, IS must get input from its customers to determine the services they want, when they want them and where they want them • Hearing directly from customers is both a goldmine and a massive challenge, especially to those with a broadcast mindset • FEEDBACK, FEEDBACK, FEEDBACK!!

42. Understanding A Networked WorldWhere’s the Value in a Network? • To leverage the Internet (or any network), it helps to understand where value is created • When computers (or items containing computers) are not networked, each one needs to provide both front-end and back-end intelligence (coupled intelligence) • Introduce a network and these two forms of intelligence can be decoupled, and better optimized

43. Understanding A Networked WorldWhere’s the Value in a Network? cont. • The back-end intelligence (to store and process data) is best when centralized, made robust, is stable, is standardized, and can be housed in a core-shared infrastructure • The front-end intelligence (for interacting with the user), is most useful when it can be dispersed to a myriad of devices that can be small, mobile, customized, and specialized • Networks allow value in four places, leading to four new kinds of businesses: • At the core and periphery • In common infrastructures • In modules • From orchestration

44. Understanding A Networked WorldWhere’s the Value in a Network? cont. • Core and Periphery Services • Value moves to the ends • Value is in the core (leadership and strategy handled by top management) and the periphery (customer-facing employees making decisions and taking actions) – or in the IT infrastructure and end devices • Common Infrastructures • Elements of any infrastructure • An organization, a system, a business process… • That were distributed are being pulled together and operated as a utility

45. Understanding A Networked WorldWhere’s the Value in a Network? cont. • Modules • Software, devices, organizational capabilities, and business processes are being divided into self-standing modules so that they can quickly and easily connect to form a value chain for responding to circumstances • Orchestrating Modules • When modules are abundant, there’s value in being able to bring them together

46. Understanding A Networked WorldThe Rules of Networks • Three distinguishing characteristics of e-economy: • It is global • It favors soft things - intangibles, such as software, information, ideas, and most importantly relationships - over hard things, such as trucks, steel, and cement • It is intensely interlinked

47. The Rules of Networks cont.1. Aim for Relationship Tech. • All about connecting • Connecting more devices to a network exponentially increases the value of the network for everyone involved as so many new connections are created • Today’s world is all about networks = connecting. • With unlimited connections & abundant information, the organization is peer-to-peer rather than hierarchical • Customer & company create together on a peer-to-peer basis, they both get smarter together & develop a closer relationship • Technology that enhances these relationships is called relationship tech • Company with the smartest customers wins – requires more trust from both company & customer

48. The Rules of Networks cont.2. Follow the Free • The best gets better and cheaper at the same time • The network economy is founded on this principle of decreasing price for increasing quality – smart companies anticipate this & offer products for free • The most valuable goods & services are those that are most abundant – they increase the value of every other one • Netscape gave the browser away free & sold the servers. This strategy worked until Microsoft with a large market did the same thing & took away the market share • How you make money in this market: • Aim for free, but only achieve cheap = same effect • Give away the core product & sell the service • Structure the business so that you will be profitable when your product is free

49. The Rules of Networks cont.3. Feed the Web First • More important to be on the right network or network platform. • It is important to be on the right network, or network platform – a Mac or Windows person? • A companies success depends on the standards it chooses – choice of ERP packages & bolt-ons to then choose from • In the network economy, enterprises will shift their focus from maximizing their own value to maximizing the value of their network • Its to early to tell how important one wireless Internet access platform will be over another & to whom the choice will have the greatest value

50. Moving Forward • So far (this chapter) = about processes, structures and technologies • Moving forward though, is about people • It is people who will lead us into this new business world and the people who will be led. • First = discuss the followers • Then = what the leaders need to know to be comfortable with talking about IT • N.B.: Not all people have the same inclinations to use IT