Übersicht
Week One:
Improving company performance
Week
Two: Competing with Information
Week
Three: Managing IT in the Business
Week
Four: Information
in the demand/supply chain
Week
Five: New organisational forms
Week
Six: Knowledge Management
Week
Seven: Electronic Commerce
Week
Eight: The human factor
Week
Night: Strategic uses of IT
Week
Ten: Innovation
and the learning organisation
Week
Eleven: Guru and practitioner
perspectives
Week
One: Improving company performance
Summaries
of the articles in Part 1 are provided below. Part 1 was published in Financial
Times newspaper on February 1st.
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Putting
the I in IT
Thomas
Davenport, Boston University.
We
spend over a trillion dollars a year on information technology. Yet economists
have found little correlation between companies' IT expenditures and financial
performance, while managers complain that the information they receive
is little better than before. The reason for this, says Thomas Davenport,
is that most IT programmes neglect the human side of the information equation
- that is, they take little account of what information people want or
need and how they use it. To redress this balance, there are several steps
that companies can take. These include mapping where information resides
in the organisation; giving librarians a more prominent role than technicians;
adopting journalistic or narrative techniques for corporate communication;
and observing how workers actually use information. We have the technology;
the challenge now is to manage information.
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Company
performance and IM: the view from the top
Donald
Marchand, IMD, William Kettinger, Darla Moore School of Business at the
University of South Carolina, and John Rollins, Andersen Consulting, London.
Senior
managers' views on the relation between information and corporate performance
fall into three main categories. First, there are those who believe that
improved IT alone will boost performance. Then there are those who believe
that improved information practices - for example, policies for capturing
customer information - are what matters. Finally, some senior managers
believe that behavioural factors, such as whether people trust one another
enough to share information, are critical. According to Donald Marchand,
William Kettinger and John Rollins, this explains why so many senior executives
are disappointed by their chief information officers' performance - their
views on this issue fall into different categories. However, the authors'
research indicates that such discrepancies will soon be a thing of the
past in the highest-performing companies, as senior managers move towards
a more inclusive perspective. This emerging "information orientation" mindset
should ultimately close the - currently yawning - gap between corporate
performance and the expectations that senior executives have on the basis
of their IT investments.
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Every
business is an information business
Michael
Earl, London Business School.
There
is nothing new about information-based businesses. Even in the industrial
age, some theorists argue, organisational structure was a consequence of
information-processing goals. And the tasks that managers perform - planning,
co-ordination and decision-making - essentially involve manipulating information.
What has changed in the "Information Age" is that more and more businesses
are defining their strategies in terms of information or knowledge. As
Michael Earl of London Business School points out, this is true not just
of "content" companies such as publishers or film studios but of companies
in sectors such as pharmaceuticals or consumer goods. The result is a blurring
of traditional industrial boundaries, a breakdown in the standard distinction
between "horizontal" and "vertical" integration, and new analyses of the
value chain in terms of opportunities for capturing information.
Further
reading
Rayport,
J.F. and Sviokla, J.J. (1998) "Exploiting the virtual value chain", Harvard
Business Review (Nov-Dec).
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IT:
a vehicle for project success
David
Feeny, Templeton College, Oxford, and Robert Plant, the University of Miami,
Florida.
Leading-edge
information management is not confined to internet start-ups with astronomic
market capitalisations. Companies in more tradtional sectors too are showing
the way. Here David Feeny and Robert Plant describe how focused use of
IT enabled Land Rover to make a success of its innovative Freelander project.
Further
reading
Feeny,
D., Plant, R. and Mughal, H., Land Rover Vehicles: the CB40 Project, case
study, Templeton College.
Feeny,
D. and Islei (1997) "Lasting ideas with turbulent technology", introduction
to Managing IT as a Strategic Resource, McGraw-Hill; reprinted in Leer,
A. (ed.) (1997) Masters of the Wired World, London: Financial Times Pitman.
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A century
of information management
Geneviève
Feraud, Theseus Institute.
As
enterprises grow in size and complexity, information management increases
in importance. And as Geneviève Feraud shows here, the way information
is managed depends upon the technology available. For much of the 20th
century, relatively cumbersome technology - punch cards and mainframes
- necessitated a centralised, hierarchical approach. But now the advent
of the networked PC has shifted the focus to innovation.
Further
reading
Castells,
M. (1996) The Rise of the Network Society, Oxford: Blackwell.
Cortada,
J.W. (1996) Information Technology as Business History: Issues in the History
and Management of Computers, Westport, CT: Greenwood.
CSC
(1997) Critical Issues of Information Systems Management.
Greco,
J. (1998) "Designing for the 21st century", Journal of Business Strategy
(November/December).
Kobrin,
S.J. (1998) "Back to the future: neomedievalism and the postmodern digital
world economy", Journal of International Affairs 51.
McKenney,
J.L., Copeland, D.C., Mason, R.O. (1995) Waves of Change: Business Evolution
through Information Technology, Boston, MA: Harvard Business School Press.
Week
Two: Competing with information
Summaries
of the articles in Part 2 are provided below. Part 2 was published in Financial
Times newspaper on February 8th.
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Strategy
and the new economics of information
Philip
Evans is senior vice-president at The Boston Consulting Group.
Many
business and industrial structures are based on the inefficient flow of
information. But the increasing power of information technology will eliminate
many of the traditional bottlenecks and asymmetries in information. In
particular, says Philip Evans, the traditional tradeoff between "richness"
and "reach" - between the richness of information exchanges and the number
of people with whom those exchanges can take place - will disappear. This
change is being driven by massive growth in the number of people with direct
access to the internet and by the fact that more and more applications
are developing universal standards, not only for transmission but for the
way information is stored and accessed. Large numbers of individuals will
be able to obtain, manipulate and evaluate information - about personal
finance, say - with the ease of professionals. As a result, there will
be less incentive for them to accept the conveniently bundled offerings
of traditional businesses, which may have to redefine themselves in order
to survive. Over the next two decades, such shifts will transform not only
traditional relationships with consumers but also corporate supply chains
and even organisational hierarchies.
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Information
resources: don't attract, addict
Jeffrey
Rayport, Harvard Business School.
As
information officers know all too well, building an intranet is only half
the battle. The other half consists in getting people in the organisation
actually to use it. The best strategy, says Jeffrey Rayport, is to make
it central to users' working lives - in short, to addict them. Like viruses,
intranets need to take advantage of existing behaviour and thus must support
activities (however trivial) that employees regularly perform. They need
to do so so well that employees will spread the word among themselves -
the "cocktail gossip" test. The ultimate goal is to promote lock-in by
making the intranet the medium of choice for essential business processes.
Information officers should pay close attention to the "audience ratings"
that different features generate, and ensure that the intranet is run as
a mission-critical application.
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Attention:
the next information frontier
Thomas
H. Davenport, Boston University School of Management.
The
amount of information with which people are bombarded has grown enormously
in recent years. Yet the human capacity for attention has remained constant.
Therefore the time has come, says Thomas Davenport, to pay attention to
attention. Otherwise managers will find that the information that is most
important to them and their employees will simply be swamped. The four
most important aspects to consider are: the medium used to convey the information
(an audio-visual narrative, for example, is far more attractive than a
set of printed facts); the design of printed or online pages (many companies
seem to grasp only the most rudimentary principles); the level of active
participation by the people at whom the information is aimed (perhaps the
most critical factor in attention management); and the content (is it what
people really want and need?). As a first step, companies should at least
see how much attention the information they currently put out receives.
Further
reading
Goldratt,
E. and Jeff Cox, (1994) The Goal: A Process of Ongoing Improvement, North
River Press, 2nd edn.
Lanham,
R. (1995) The Electronic Word: Democracy, Technology, and the Arts, University
of Chicago Press.
McKinnon,
S. and Bruns, W. (1992) The Information Mosaic, Harvard Business School
Press.
Mok,
C. (1996) Designing Business: Multiple Media, Multiple Disciplines, Macmillan
Computer Publishing.
Schank,
R. (1990) Tell Me A Story: A New Look at Real and Artificial Memory, Scribner's.
Tufte,
E.R. (1992) The Visual Display of Quantitative Information, Graphics Press.
Wurman,
R.S. (1989) Information Anxiety, Doubleday.
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Beyond
knowledge management: how companies mobilise experience
Yury
Boshyk, Theseus International Management Institute, France.
Surveys
indicate that most companies regard knowledge management as a critical
part of their strategy. Yet the concept is problematic. The plethora of
terms surrounding it is confusing, and implementation requires a learning
culture already to be in place and can be expensive. Perhaps worst of all,
it is hard to correlate with financial performance. Hence it is not surprising
that people are trying to devise refinements. An exciting one is "mobilising
collective intelligence", which, according to its advocates, is more dynamic
and adaptable than knowledge management. Yury Boshyk, however, counsels
against reliance on only a single concept or process at this early stage.
Using a number of examples, he describes how companies and even nations
have managed to mobilise their collective experience without becoming bogged
down in methodological or technological complexity.
Further
reading
Boshyk,
Y. (ed.) (1999) Business Driven Action Learning: Global Best Practices,
Macmillan, forthcoming. (Contains over 20 company perspectives on the subject.)
Davenport,
T.H. and Prusak, L. (1998) Working Knowledge: How Organizations Manage
What They Know, Boston, MA: Harvard Business School Press, p. 12. (Cites
the study into how managers gather information.)
Ikujiro
Nonaka and Hirotaka Takeuchi (1995) The Knowledge-Creating Company: How
Japanese Companies Create the Dynamics of Innovation, New York: Oxford
University Press, pp. 1--55. (Discusses the problem of imprecise terminology
in the "knowledge" field.)
Lackie,
G.L. (1998) "The mobilisation of collective intelligence: one step further
than knowledge management", published in Dutch in Tijdschrift voor Management
Development (September); republished in English in the bulletin of the
European Foundation for Management Development (EFMD). (Includes the survey
of knowledge management in Dutch companies; I am grateful to the author
for providing me with the original English text of his article.)
Society
for Competitive Intelligence Professionals -- Cambridge (Massachusetts)
Educational Programme, 16--17 November 1998. (A valuable source for some
of the data used in this article; in particular the presentations by R.D.
Aaron on "Knowledge management and competitive intelligence", by SAP, and
by Sovereign Hill in reference to Lotus Europe.)
Tamotsu
Nishizawa (1996) "Business studies and management education in Japan's
economic development -- an institutional perspective", in R.P. Amdam (ed.)
Management, Education and Competitiveness: Europe, Japan and the United
States, London: Routledge, p. 106--9. (On the rebuilding of Japan.)
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In
search of the ideal customer
Eric
K. Clemons, Wharton School, University of Pennsylvania.
Service
company managers have known for some time that some customers are more
profitable than others. Indeed, in banking a relatively small proportion
of customers may generate over 100 per cent of profits; unfortunately,
these customers effectively end up subsidising the rest, some of whom are
loss-makers. According to Eric Clemons, companies that fail to address
this problem are vulnerable to new competitors that target the most profitable
customers and - because their profitability is not hindered by loss-makers
- offer them a better deal. It is therefore vital to identify profitable
customers and to create offerings that are attractive to them. The three
main techniques generally in use are data mining, looking out for signals
from potential customers that indicate profitability, and devising product
ranges that screen out unprofitable customers. Companies that are able
to master these techniques should thrive as the transition from scale-based
to skill-based competition takes place.
Week
Three: Managing IT in the business
Summaries
of the articles in Part 3 are provided below. Part 3 was published in Financial
Times newspaper on February 15th.
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Change
isn't optional for today's CIO
Michael
Earl, London Business School Group.
What
qualities does a successful CIO have? A few years ago, Michael Earl's research
indicated that the most important were: a vision shared with the company's
wider management, so that IT supported strategy; a close relationship with
senior executives, especially the CEO; a willingness to pay attention to
day-to-day IT performance; and an ability to judge the importance of changes
in the business. These qualities are still critical for CIOs who want to
flourish in their posts. But IT and all things connected with it change
quickly, and CIOs have been confronted with new responsibilities in recent
years. The perception that CIOs have a good understanding of business processes
means that their job descriptions are now likely to encompass HR and strategic
planning. Like all managers, they have to be able to lead their departments
through rapid change but they are often also expected to be the "corporate
radar" for new technologies. Finally, today's CIO needs to manage relationships
with an ever-growing range of external suppliers and contractors. It is
little wonder that remuneration packages have grown.
Further
reading
Earl,
M.J. (1996) "The chief information officer: past, present and future",
in Earl, M.J. (ed.) Information Management: The Organizational Dimension,
Oxford University Press, 1996 and 1998.
Earl,
M.J. and Feeny, D.F. (1994) "Is your CIO adding value?" Sloan Management
Review 35 (3, spring).
Earl,
M.J. and Vivian, P. (1993)The Role of the Chief Information Officer, London
Business School and Egon Zehnder International.
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Selective
sourcing and core capabilities
David
Feeny and Leslie Willcocks, Templeton College, Oxford University.
Information
technology is becoming more and more important to business. At the same
time, it looks as if IT departments are being sidelined by the increase
in outsourcing. But it would be wrong, argue David Feeny and Leslie Willcocks,
to write off the corporate IT function; across-the-board outsourcing can
often prove to be an expensive mistake. Instead, the IT function should
be analysed as a portfolio of activities to be selectively outsourced.
Internal resources can then be focused on helping the business to grasp
the opportunities represented by IT. Ultimately, the function needs to
develop a set of core capabilities that will enable it to anticipate future
developments in business and technology, maintain the IT infrastructure
over time and manage outsourcing. Above all, it needs skilful leaders to
build an organisation that can achieve these diverse aims.
Further
reading
Cross,
J., Earl, M.J. and Sampler, J.L. (1997) "Transformation of the IT function
in British Petroleum", MIS Quarterly (December): 401--23.
Feeny,
D.F. and Willcocks, L.P. (1998) "Core IS capabilities for exploiting information
technology", Sloan Management Review 39 (3, spring): 9-21.
Lacity,
M.C., Willcocks, L.P. and Feeny, D.F. (1996) "The value of selective IT
sourcing", Sloan Management Review 37 (3, spring): 13--25.
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Organising
a better IT function
M.
Lynne Markus, Peter F. Drucker Graduate School of Management, Claremont
Graduate University.
A critical
factor in the successful management of IT and information, especially in
multinational companies, is the quality of the IT function. According to
Lynne Markus, this should be assessed along two dimensions: the function's
structure and remit within the organisation (the "hardware" question);
and its culture, including the personal skills and qualities of its staff
(the "software" question). Despite its name, however, the hardware should
not be set in stone. Using a case study, the author shows how, as industrial
contexts change and new technologies develop, the IT function may need
to change too - from a decentralised decision-making model, for example,
to one that is more centralised. Such developments may give rise to friction
between the function and the line managers with which it has to work, and
this is where the function's cultural "software" is important. The problem
is that all too many IT professionals have not been educated to handle
the political aspects of the organisations in which they earn their living;
yet quality of relationships is perhaps as important as quality of product
in this field.
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What
makes IT professionals tick?
Geneviève
Feraud, Theseus International Management Institute, France.
With
the dawning of the information economy, companies cannot afford to neglect
their IT professionals. Yet surveys indicate that many are dissatisfied.
This is partly due to factors that affect all people within organisations,
such as re-engineering and inflexible working patterns. But other problems,
says Geneviève Feraud, arise from the changing nature of IT and
from the fact that companies fail to recognise the needs of their IT professionals.
Although they tend to prefer to work autonomously on clearly defined problems,
promotional structures often reward them with more managerial posts - which
have fuzzy responsibilities and entail political wheeling and dealing.
IT professionals are also having to work more and more closely and frequently
with IT users. The solution may be to focus managerial attention on team
behaviour and commitment while allowing a high degree of autonomy in technical
matters.
Further
reading
Couger,
D.J. (1988) "Motivators vs. demotivators in the IS environment", Journal
of Systems Management (June) 36--40.
Couger,
D.J., (1989) "New challenges in motivating MIS personnel", Journal of Information
Systems Management (autumn): 36--41.
Couger,
D.J. and Zawacki, R.A.. (1980) Motivating and Managing Computer Personnel,
New York: Wiley.
Drucker,
P.F. (1952) "Management and the professional employee", Harvard Business
Review (May--June): 84--90.
Ferratt,
W.T., and Short, L.E. (1988) "Are information systems people different:
an investigation of how they are and should be managed", MIS Quarterly
(September): 427--43.
Henderson,
J.C. and Soonschul, L. (1992) "Managing I/S design teams: a control theories
perspective", Management Science 38 (6, June): 757--77.
Zawacki,
R.A. (1992) "Motivating the IS people of the future", Information Systems
Management (spring): 73--88.
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Local
lessons for global businesses
Michael
Earl, London Business School.
One
of the forces behind the sense that we live in a "global village" is the
growing power of information technology. Hence it is tempting for corporations
to assume global homogeneity in the way information and IT are managed.
But according to research carried out by Michael Earl and his colleagues,
significant local and cultural differences manifest themselves in this
area of corporate activity. For one thing, adoption of new technologies
is not instantaneous but diffuses across the world over time. And whereas
western companies have tended to see IT's decision support capabilities
as a reason to spread decision making powers more widely, Japanese decision
making is still normally more organisational in nature. Such differences
mean that companies should be on the lookout for best practices that may
be hidden within local units. Perhaps the most important lesson that western
companies can learn from their Japanese counterparts is a more down-to-earth,
more integrated view of IT strategy.
Further
reading
Bensaou,
M. and Earl, M.J. (1998) "The right mindset for managing information technology",
Harvard Business Review (September--October).
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Competing
with IT infrastructure
Peter
Weill, Melbourne Business School, University of Melbourne, and Marianne
Broadbent, Gartner Group Pacific.
Decisions
about IT infrastructure are critical to companies' long-term competitive
prospects. They are therefore not easy to make - a difficulty compounded
by the fact that competing companies adopt a wide range of strategies.
Here Peter Weill and Marianne Broadbent present a framework for any company
facing this challenge. The first requirement is deep understanding of the
strategic context and of the degree to which the company should exploit
synergies between its business units. Business and IT executives must collaborate
to distil this understanding into "business maxims", which clearly describe
the company's strategic aims. Next, the executives deduce a set of "IT
maxims", which specify how the company needs to deploy its IT and therefore
what level of infrastructure - if any - is needed. The maxim approach contrasts
with the "deal" approach, whereby IT managers negotiate with business unit
managers about the level of infrastructure services; the drawback of this
approach is to make it unlikely that a flexible company-wide infrastructure
will ever emerge, even if one is desirable in the long term.
Further
reading
Weill,
P. and Broadbent, M. (1998) Leveraging the New Infrastructure: How Market
Leaders Capitalize on IT, Cambridge, MA: Harvard Business School Press.
Broadbent,
M. and Weill, P. (1997) "Management by maxim: how business and IT managers
can create IT infrastructures", Sloan Management Review (spring).
Week
Four: Information in the demand/supply chain
Summaries
of the articles in Part 4 are provided below. Part 4 was published in Financial
Times newspaper on February 22nd.
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Building
a smarter demand chain
Thomas
Vollmann and Carlos Cordon, IMD, Switzerland Group.
A first
step in releasing the value locked away in inefficient supply chain practices
is to pose the problem in terms of the "demand chain", say Thomas Vollmann
and Carlos Cordon. Demand chain thinking starts from the customer's needs
and works backwards, replacing narrow focus on transport costs with consideration
of how to achieve "mass customisation". This entails ever more precise,
swift and efficient delivery of product/service bundles, which in turn
places considerable demands on the information systems along the chain.
But given good management of the right systems, suppliers should be able
to anticipate customer companies' needs and deliver what is needed without
the need for ordering. Internet technology -- via which suppliers can hook
up to customers' intranets at very little cost -- can play a big part in
this. Such approaches require companies continuously to transform the way
they work together. Information systems are important but are best seen
as a fast follower of this strategic process rather than as a driver.
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Enterprise
systems and process change: still no quick fix
Thomas
Davenport, Boston University Business School.
Enterprise
resource planning systems are software packages that enable companies to
meet the information needs of all their functions. Because they are fully
integrated across functions -- so marketing can access manufacturing data,
say, as readily as manufacturing -- they facilitate a "process" view of
business. But as Thomas Davenport points out, while these systems remove
a substantial barrier to process management other measures are needed,
such as changes in styles of leadership and in organisational structures.
The eventual cost can be very high. Unlike the early days of business process
re-engineering, however, at the beginning of the 1990s, the availability
of "off-the-shelf" enterprise systems means that companies have a template
against which to work. Even so, there are no quick fixes; process management
must always be responsive to changes in the business environment and in
the technology available.
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Sensitivities
of shared product development
Francis
Bidault and Jukka Nihtilä, Theseus International Management Institute,
France.
Development
of high-technology products in today's global market is an expensive, complex
process. Hence it is not surprising that many projects involve collaboration
between companies, using information technology to share technical documents
among managers and engineers. However, research by Francis Bidault and
Jukka Nihtilä suggests that even where there is a common IT infrastructure
there are significant differences in the way project information is shared
within and between partners. These stem partly from the "language barrier"
-- the fact that companies have different standards and procedures for
handling documents -- and partly from a natural desire to protect core
processes. Careful planning of the desired information flow at all stages
of the project is therefore vital. The authors also consider research into
"early supplier involvement" (ESI) initiatives which shows that success
depends as much on organisational solutions as on IT applications. Despite
the abundance of information about the capabilities of partners and possible
partners, new product development is such a risky business that trust remains
as important as ever.
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How
to keep up with the hypercompetition
Donald
Marchand, IMD, Switzerland.
Many
manufacturing companies are implementing new information systems to improve
their supply chain management. These projects typically cost tens or hundreds
of millions of dollars and take four or five years to complete. This is
fine in moderately competitive markets, says Donald Marchand, but in hypercompetitive
markets, where competitive advantage is sustained by continuous short-term
changes, the time and expense are likely to be excessive. Such markets
require a "demand chain" approach, which focuses on fast, responsive interactions
with the customer; unlike moderate markets, standardisation of data upstream
-- in financial an inventory management systems, say -- is not the main
source of advantage (and may even be a hindrance as the competitive environment
evolves). Fortunately, over the past 10 years, companies have begun to
offer flexible software packages that can be rapidly implement and are
thus well suited to fast-changing hypercompetitive markets. The author
concludes with a look at the "dynamic stability" strategies being pursued
by major global manufacturers, who are establishing standard global IT
infrastructures to lower costs while customising local systems to maximise
customer value.
Further
reading
Boynton,
A.C. (1993) "Achieving dynamic stability through information technology",
California Management Review, 58--77.
Marchand,
D.A. (1998) "Balancing flexibility and global IT", in Mastering Global
Business, London: FT Pitman Publishing, 91--96.
Oliver,
D. and Marchand, D.A. (1997) "Hewlett-Packard (HP): competing with a global
IT infrastructure", IMD International, Case Study GM 653.
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When
should you bypass the middleman?
Eric
Clemons, The Wharton School, University of Pennsylvania.
The
internet gives companies an opportunity to boost profits by selling directly
to consumers. But before embarking on such a strategy managers should ask
themselves three questions: is there really a new opportunity to bypass
intermediaries? Is it possible to do so profitably? And what resources
do the middlemen have to defend themselves? To see how these questions
might be answered in practice, Eric Clemons looks at air travel and grocery
distribution. In the case of air travel, airlines have a motive to bypass
travel agencies, which take up profitable corporate business that airlines
could easily handle directly -- and which they can easily target given
all the customer information they have. But matters are less straightforward
in the grocery distribution channel. Retailers hold detailed information
about customers that manufacturers lack, and, until e-shopping is established,
can retaliate against "enemy" manufacturers by not co-operating in promotion.
Ultimately, online grocery shopping may come from companies over which
retailers currently have no power, such as internet service providers.
Week
Five: New organisational forms
Summaries
of the articles in Part 5 are provided below. Part 5 will be published
in Financial Times newspaper on March 1st. To purchase back copies, ring
+44 (0)181 688 6323.
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All
change for the e-lance economy
Thomas
W. Malone and Robert J. Laubacher, MIT.
Despite
the wave of big mergers and acquisitions over the past year or two, the
days of the big corporation - as we know it - are numbered. While the cash
flows that they control are growing, the direct power that they exercise
over actual business processes is declining. Because modern communications
technology makes decentralised organisations possible, control is being
passed down the line to workers or outsourced to external companies. In
fact, say Thomas Malone and Robert Laubacher, we are moving towards an
"e-lance economy", which will be characterised by shifting coalitions of
freelancers and small firms collaborating on particular projects. In some
ways, this recalls preindustrial economic models, dominated by large numbers
of competing microbusinesses; but a critical difference is that these small,
agile companies will enjoy the information resources traditionally associated
with large corporations. The power of e-lancing can be seen in the explosive
growth of the internet, which is taking place without any overall management.
The role of the manager will change dramatically as companies see the virtue
of achieving results by allowing them to emerge rather than by controlling
them at all stages.
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Strategies
for converging industries
David
Oliver, Johan Roos and Bart Victor, IMD.
Boundaries
between industries are blurring. This process, known as "convergence",
is taking place not only in high-tech industries but also in more traditional
sectors, such as banking and insurance; in Switzerland, for example, a
new bancassurance industry is emerging. There are two types of convergence.
"Supply-driven convergence", in which products from one industry enhance
the value of products from another industry, occurs when companies strive
to shape (or at least conform to) emerging technical standards. "Demand-driven
convergence", in which products from different industries come to be seen
as interchangeable, happens when companies attempt to provide broader products
to increasingly demanding customers. A useful way to understand corporate
strategy in converging industries, say David Oliver, Johan Roos and Bart
Victor, is to examine companies' "intellectual capital profiles", which
indicate the degree to which businesses focus on customers, internal processes,
employees and long-term investments. Generally, companies seek mergers
and alliances with companies with dissimilar (and therefore complementary)
intellectual capital when convergence is demand-driven; but when it is
supply-driven, "like attracts like".
Further
reading
Greenstein,
S. and Khanna, T. (1997) "What does industry convergence mean?" in Yoffie,
D. (ed.) Competing in the Age of Digital Convergence, Boston, MA: Harvard
Business School Press.
Oliver,
D. and Roos, J. (1999) Striking a Balance in Complex Organizations, Maidenhead:
McGraw-Hill.
Roos,
J. et al. (1997) Intellectual Capital: Navigating in the New Business Landscape,
London: Macmillan.
Victor,
B. and Boynton, A. (1998) Invented Here: Maximizing Your Organization's
Internal Growth and Profitability, Boston, MA: Harvard Business School
Press.
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Are
globally standardised information systems worth the bother?
David
Feeny, Templeton College, Oxford University, and Geoffrey McMullen, Ukerna.
Managers
in multinationals have long recognised the desirability of standardised
global information systems. But it is only in the 1990s that projects to
put such systems in place have met with much success. According to David
Feeny and Geoffrey McMullen, this is primarily due to better project management;
among other things, companies now recognise the need for senior business
managers to support such projects and for stakeholders' involvement and
expectations to be carefully managed. Of less importance has been the emergence
of packaged "enterprise resource planning" systems, although these do allow
managers to focus on implementation while reducing the need for debate
on data standards and common business processes. The authors conclude with
a discussion of the business benefits. Oddly, of seven multinationals that
they studied recently, only two - which undertook their global IS projects
to support specific strategic objectives - were able to articulate tangible
benefits.
--------------------------------------------------------------------------------
Time
for the big small company
Lynda
M. Applegate, Harvard Business School.
Managers
today are fascinated by new organisational possibilities for their companies.
Because speed is increasingly seen as the key to competitive advantage,
the dream is to marry the resources and reach of a global player with the
adaptability and speed of a start-up. Such ideas are not new; as Lynda
Applegate points out, companies in the 1960s experimented with new organisational
structures such as the matrix which were intended to achieve very similar
aims. Unfortunately, the volume and complexity of information flows required
by such structures were too great for the information systems of the time,
so many companies reverted to more traditional hierarchies. Now, however,
advances in IT mean that these ideas' time has come. Complex operating
processes can be accelerated and information about them - and about company
performance in the market - can be fed back in real time to all levels
of the organisation; the perspectives of senior managers and employees
on the ground can converge. This shared understanding of the business,
combined with suitably aligned incentives, makes the "big small" company
feasible.
Further
reading
Nolan,
R., Pollack, A. and Ware, J. (1988) "Creating the 21st-century organisation",
in Stage by Stage, Nolan Norton Research Report 8 (4).
Perrow,
C. (1992) "Small company networks" in Nehria, N. and Eccles, R. (eds) Networks
and Organisations, Boston, MA: Harvard Business School Press.
Powell,
W. (1990) "Neither market nor hierarchy: network forms of organisation",
Research on Organisational Behavior 12: 295-336.
Reich,
R. (1991) The Work of Nations, New York: Vintage Books.
Rockart,
J. and Short, I. (1991) "The networked organisation and the management
of interdependence", in The Corporation of the 1990s, New York: Oxford
University Press.
--------------------------------------------------------------------------------
Five
principles for making the most of IT
John
C. Henderson and N. Venkatraman, Boston University School of Management.
IT
has gone from being a separate, rather arcane business function to being
a central part of competitive strategy. But how can companies maximise
its potential to create value? According to John Henderson and N. Venkatraman
they need to adhere to five principles. First, they must understand that
IT is far more than just a means of boosting operational efficiency. It
can change profoundly the nature of products, services and business processes.
Second, successful implementation of IT systems requires the establishment
of cross-functional "communities of expertise", for which hierarchical
"command and control" management is inappropriate. Third, as we have seen
earlier in this series, the ever-increasing complexity of the IT market
requires extensive use of selective outsourcing. Fourth, companies must
ensure that their IT infrastructures maximise the knowledge locked within
them and allow it to be directed wherever there are problems to be solved.
Finally - and most importantly - managers must constantly work to keep
this principles in alignment with one another and with their corporate
strategies in a fast-changing world economy.
Week
Six: Knowledge management
Summaries
of the articles in Part 6 are provided below. Part 6 will be published
in Financial Times newspaper on March 7th. To purchase back copies, ring
+44 (0)181 688 6323.
--------------------------------------------------------------------------------
-
Is KM
just good information management?
Thomas
Davenport, Boston University School of Management, and Donald Marchand,
IMD.
Over the
past 20 years or so, managers have had to master data processing, information
management and knowledge management (KM). The more cynical among them --
noting that KM has the same advocates and often uses the same tools as
information management -- suspect that nothing more substantial than "terminological
inflation" is taking place. Part of the problem is that there is no hard
and fast distinction between information and knowledge; information may
be (theoretically) public and knowledge locked in people's minds, but for
the purposes of KM they occupy a continuum of increasing value. And as
Thomas Davenport and Donald Marchand point out, many KM projects have a
significant element of information management; after all, people need information
about where knowledge resides, and to share knowledge they need to transform
it into more or less transient forms of information. But beyond that, KM
does have two distinctive tasks: to facilitate the creation of knowledge
and to manage the way people share and apply it. In the end, the companies
that prosper with KM will be those that realise that it is as much about
managing people as information.
Further
reading
Davenport,
T.H. and Prusak, L. (1998) Working Knowledge: How Organizations Manage
What They Know, Harvard Business School Press.
Davenport,
T.H., DeLong, D.W. and Beers, M.C. (1998) "Successful knowledge management
projects", Sloan Management Review (winter): 43--57.
Ikujiro
Nonaka and Hirotaka Takeuchi (1995) The Knowledge-Creating Company: How
Japanese Companies Create the Dynamics of Innovation, Oxford University
Press.
Leonard-Barton,
D. (1995) Wellsprings of Knowledge, Harvard Business School Press.
Marchand,
D.A. (1997) "Competing With Information: Know What You Want", FT Mastering
Management Reader (3, July/August).
--------------------------------------------------------------------------------
-
Navigating
knowledge management
Charles
Despres and Danièle Chauvel, Theseus Institute.
Knowledge
management is a puzzling field. Companies that claim to be implementing
KM programmes do very different things. And every year the number of KM
books, articles and software products increases massively. The result is
confusion over the definition of KM and vague, contradictory prescriptions
as to what managers need to do. To clarify matters, Charles Despres and
Danièle Chauvel undertook a research programme in which they closely
analysed the academic, consultancy and business literature. They concluded
that KM can be analysed along four dimensions: the process of cognition;
the type of knowledge (tacit or explicit); the level of activity (individual,
group or organisational); and the context in which the knowledge is used.
These dimensions define a map of KM, on which companies' different activities
can be plotted; in the end, KM just is the map. Companies implementing
KM initiatives can use the map to suggest how they might extend them in
future.
--------------------------------------------------------------------------------
-
The role
of the chief knowledge officer
Michael
Earl and Ian Scott, London Business School.
The growing
popularity of knowledge management is reflected in the fact that more and
more companies are employing chief knowledge officers (CKOs). Unlike the
chief information officer, whose task is to oversee the deployment of IT,
the CKO's job is to maximise the creation, discovery and dissemination
of knowledge in the organisation. Recent research by Michael Earl and Ian
Scott indicates that the broadness of this remit is echoed in the personality
of the typical CKO: he or she tends to be lively, infectiously enthusiastic,
flexible, willing to work with anyone anywhere, and interested not only
in the latest IT but in "soft" organisational mechanisms for promoting
knowledge. The best CKOs fulfil four roles: entrepreneur (willing to champion
risky new initiatives); consultant (able to match new ideas with business
needs); technologist (fully IT-literate); and environmentalist (able to
design settings and processes to maximise knowledge). While most hope that
once knowledge management becomes ingrained in the company their role will
be finished, the transitional period is taking longer than expected.
Further
reading
Davenport,
T.H. and Prusak, L. (1998) Working Knowledge: How Organizations Manage
What They Know, Harvard Business School Press.
Earl,
M.J. and Scott, I.A. (1998) What on Earth is a CKO? Research Report, London
Business School and IBM, August.
Earl,
M.J. and Scott, I.A. (1999) "What is a Chief Knowledge Officer?" Sloan
Management Review (winter). (Discusses the results of psychometric tests
carried out on CKOs.)
--------------------------------------------------------------------------------
-
Making
knowledge visible
Larry
Prusak, IBM Institute for Knowledge Management.
Cynics
argue that knowledge management is impossible: knowledge is invisible stuff
that resides in people's heads, whereas management deals with what is tangible
and measurable. But this conclusion is too stark, says Larry Prusak; after
all, we value many things without expecting to be able to measure their
value. More importantly for KM, knowledge in companies can be made visible
if we focus on knowledge activities, outcomes and investments. Analysing
these three manifestations of corporate knowledge is a critical step for
companies that want to create, share and apply it. Activities include networks
of experts (which can be "mapped" by network analysis software to benefit
the whole organisation), pronouncements by senior management, and incentive
schemes that reward knowledge sharing. Outcomes include things such as
patents, product launches and cycle-time reductions; however, knowledge
managers need to make explicit the connection between these and knowledge
activities. Finally, knowledge investments -- in training, for example,
or groupware -- reveal the importance that companies attach to different
sorts of knowledge.
--------------------------------------------------------------------------------
-
How smarter
companies get results from KM
Peter
Murray, Cranfield School of Management.
Knowledge
management can be plausibly broken down into five stages: data becomes
information, which in turn becomes knowledge; knowledge results in informed
actions, and these produce business results. According to Peter Murray,
many knowledge managers make the mistake of "going with the flow", of concentrating
on the supply of knowledge rather than the desired business results. They
would do better to start with the results and deduce what knowledge will
be needed to achieve them. This falls into two categories: knowledge as
a body of information (which can be readily processed by suitable IT and
resides at the "data/information" end of the flow) and knowledge as knowhow
(which requires good people management and is found at the "action" end).
Reporting on Cranfield School of Management's recent survey of KM in European
businesses, the author argues that KM is primarily a "people and process"
issue. A particularly effective strategy is to create and nurture "virtual
teams", which can leverage knowledge across geographical and organisational
boundaries.
Further
reading
Copies
of the survey report (which also includes details of the Economist awards)
are available from the Information Systems Research Centre at Cranfield
School of Management (+44 (0)1234 75 4477).
"Week
Seven: Electronic commerce
Summaries
of the articles in Part 7 are provided below. Part 7 will be published
in Financial Times newspaper on March 14th. To purchase back copies, ring
+44 (0)181 688 6323.
--------------------------------------------------------------------------------
Surfing
among sharks: how to gain trust in cyberspace
Sirkka
Jarvenpaa and Stefano Grazioli, University of Texas at Austin.
Internet
merchants face an inherently bigger challenge than their brick-and-mortar
counterparts when it comes to winning the consumer's trust. As Sirkka Jarvenpaa
and Stefano Grazioli explain, reputation and size are harder to convey
and close customer relationships more difficult to develop in cyberspace
than in a traditional physical setting. Tampering and eavesdropping continue
to discourage some electronic shoppers, although technology and the law
are coming to the rescue. A more serious problem is fraud and the growing
number of "fly-by-night" operators attracted by the internet's low entry
and exit costs. The authors document some recent scams and draw on fresh
research to advise companies on the best ways to gain customer confidence.
Seller size, they stress, is not enough on its own but needs to be coupled
with a good reputation and endorsements from independent third parties.
--------------------------------------------------------------------------------
Websites
with a personal touch
John
Walsh, IMD.
Internet
retailers are set to dominate consumer markets. According to John Walsh,
they have the potential to combine "corner shop" service with hypermarket
prices. Much of their advantage will come from their ability to profile
individual customers by tracking their pattern of clicks online. This will
enable them to tailor the site to the customer, boosting revenue from consumers
and advertisers. The challenge for managers is to collect and use "clickstream"
data in a way that people do not consider obtrusive.
--------------------------------------------------------------------------------
Internet
distribution strategies: dilemmas for the incumbent
Nirmalya
Kumar, IMD.
Like
all innovations in distribution the internet can disrupt businesses as
readily as it can transform them. Different industries - and different
companies within the same industry - have been affected in different ways.
Just as television and later home video extended the film industry's distribution
channels, so the internet looks to be expanding the market for retail investment
brokers. Travel agents, on the other hand, are suffering as airlines reach
out directly to consumers. According to Nirmalya Kumar, manufacturers have
four choices: not using the net for sales at all, letting resellers use
it exclusively, using it themselves, and opening it to everyone in a market
free-for-all. Cannibalisation is a danger - but history suggests that most
companies cling to declining distribution networks for too long.
--------------------------------------------------------------------------------
Markets
for everything in the networked economy
Andrew
Whinston, Manoj Parameswaran and Jan Stallaert, Center for Research in
Electronic Commerce, University of Texas at Austin.
Digital
technology will have far-reaching impacts on economic markets. Here Andrew
Whinston, Manoj Parameswaran and Jan Stallaert provide an overview of the
likely developments. Perhaps the most important will be increasing use
of market mechanisms to solve resource allocation problems; this will be
made possible by the internet's capacity to carry information swiftly among
large numbers of economic agents. At the same time, a new breed of e-commerce
intermediary is emerging to supply information and facilitate trades; over
time, various forms of auction may displace the conventional posted price
system. The virtual environment makes possible unprecedented customisation
and bundling of products, and companies that leverage these and other features
will be more successful than those that try to mimic traditional business
models.
Further
reading
Whinston,
A., Choi, S. and Stahl, D. (1997) Economics of Electronic Commerce, Macmillan.
--------------------------------------------------------------------------------
Moving
to the net: leadership strategies
Robert
Plant, University of Miami, Florida, and Leslie Willcocks, Templeton College,
Oxford University.
Managers
are confused by the way the boundaries of competition and strategic thinking
are expanding in the information economy. The result is often failure to
implement an effective e-commerce strategy. Where companies do have a strategy,
say Robert Plant and Leslie Willcocks, they focus on four key areas: technology,
branding, service and market growth. Developing technology just to be in
the race generally does not pay off Ð companies with good e-strategies
simply "pick up" the technology in developing an information or marketing
strategy. The authors' interviews with executives in US and European corporations
indicate that the most important success factors include strong leadership,
a flexible IT infrastructure and active support by the corporate website's
"content owners".
Further
reading
Hagel,
J. III and Armstrong, A.G. (1997) Net Gain, Boston, MA: Harvard Business
School Press.
Kelly,
K. (1999) New Rules For The New Economy, London: Fourth Estate.
Plant,
R. and Willcocks, L. (1999) Internet-Based Business Strategies: The Search
For Leadership, Oxford Executive Research Briefing, Templeton College,
Oxford, April.
Willcocks,
L, and Lester, S. (1999) "Cybernomics and IT productivity: not business
as usual", in Willcocks, L. and Lester, S. (eds.) Beyond The IT Productivity
Paradox, Chichester: Wiley.
Willcocks,
L., Feeny, D. and Islei, G. (eds) (1997) Managing IT as a Strategic Resource,
Maidenhead: McGraw-Hill.
--------------------------------------------------------------------------------
Reaching
the next level in e-commerce
William
Kettinger and Gary Hackbarth, Darla Moore School of Business, University
of South Carolina.
Companies
need to break with prevailing ways of thinking about e-commerce if they
are to exploit information asymmetries and fully leverage relationships
with customers and partners, argue William Kettinger and Gary Hackbarth.
There are three levels of strategic sophistication. At the most basic,
individual departments take a lead in developing specific internet applications;
the result is disparate "islands" of e-commerce initiative not tightly
tied to business strategy. At level two, companies incorporate e-commerce
to support their current business models by integrating across functional
departments. To reach the third level, however, a "breakout" strategy which
disrupts the status quo is likely to be necessary. Such a change may be
too radical for many companies to undertake immediately. The authors conclude
with a list of questions to help executives determine at what level their
company is operating.
Week
Eight: The human factor
Summaries
of the articles in Part 8 are provided below. Part 8 will be published
in Financial Times newspaper on March 21st. To purchase back copies, ring
+44 (0)181 688 6323.
--------------------------------------------------------------------------------
How
workers react to new technology
M.
Lynne Markus, Peter F. Drucker Graduate School of Management.
As
the pace of technological change accelerates, workers are expected to learn
more and more new IT applications. Unlike managers and IT specialists (who
naturally support the systems they buy) their reactions to new technology
vary greatly; although in some cases they are enthusiastic, in others poor
communication, organisational power shifts and a host of other factors
can lead to hostility or apathy. Fortunately, says M. Lynne Markus, negative
reactions usually die down as people become accustomed to new systems and
glitches are ironed out. But the bad news is that many people simply "get
by" with IT applications and do not use them with maximum effectiveness.
Worse still, many companies fail to push for continuous improvement and
do not treat training as a priority. Another issue is the rise of standardised
enterprise resource planning packages, which may entail more work for some
employees in spite of overall benefits.
--------------------------------------------------------------------------------
One
cheer for the virtual office
Thomas
Davenport, Boston University School of Management
The
concept of the virtual office covers a range of working arrangements from
occasional telecommuting, with perhaps one day a week spent at home, to
full mobility of the kind practised by field sales and customer service
types. According to Thomas Davenport, the IT, professional services and
consumer products industries have been quickest to introduce "virtual"
programmes - but informal analysis suggests that the rate of adoption has
slowed in the past couple of years. Cost and worker convenience are the
main benefits of virtuality but shortcomings such as lack of contact with
the corporate culture, communication difficulties, and poor access to people
and materials often outweigh them. These can be overcome but, as the author
points out, desirable offices may be a good way to attract talented staff
and, where possible, companies should try to make virtual arrangements
voluntary. He concludes with some observations arising from his own experience
in a "hotelling" environment.
Further
reading
Davenport,
T.H. and Pearlson, K.L. (1998) "Two cheers for the virtual office", Sloan
Management Review (summer).
--------------------------------------------------------------------------------
Closing
the cognitive gaps: how people process information
Chun
Wei Choo, University of Toronto.
Information
can be seen in two ways: as an object that can be manipulated by technology;
and as the outcome of social interactions that create meaning in the minds
of human beings. In this article, Chun Wei Choo outlines a model of how
people acquire and process information. The three basic steps are determination
of information needs, information seeking and information use, each of
which can be considered in terms of cognitive, emotional and situational
factors. Information needs arise when people experience "cognitive gaps"
that hinder their progress and induce uncertainty; to bridge these, they
must seek good, accessible information sources. The way they use the information
acquired depends upon their personality, organisational culture, and emotional
factors such as the desire to preserve group identity (hence resistance
to information "not invented here"). Ultimately, if we can understand the
social aspects of information we will be able to design better information
systems.
Further
reading
Choo,
C.W. (1998) The Knowing Organization: How Organizations Use Information
to Construct Meaning, Create Knowledge, and Make Decisions, New York: Oxford
University Press.
Dervin,
B. (1992) "From the Mind's Eye of the 'User': The Sense-Making Qualitative-Quantitative
Methodology", in Glazier, J.D. and Powell, R.R. (eds) Qualitative Research
in Information Management, Englewood, CO: Libraries Unlimited.
Kuhlthau,
C. (1993) Seeking Meaning: A Process Approach to Library and Information
Services, Norwood, NJ: Ablex.
Taylor,
R.S. (1991) "Information use environments", in Dervin, B. and Voigt, M.J.
(eds) Progress in Communication Science, Norwood, NJ: Ablex.
Wilson,
T.D. (1997) "Information behaviour: an interdisciplinary perspective",
Information Processing and Management 33 (4): 551--72.
--------------------------------------------------------------------------------
Managing
use not technology: a view from the trenches
Wanda
Orlikowski, Sloan School of Management.
The
"IT productivity paradox" arises from the fact that companies spend billions
on IT with no commensurate increase in productivity. Yet according to Wanda
Orlikowski, the paradox is misconceived: we should expect returns from
the use of technology not technology itself. Drawing on the work of social
scientists Chris Argyris and Donald Schon, the author distinguishes between
"espoused technologies" - what companies buy and install - and "technologies-in-use"
- what employees actually use. For example, a company that invests in groupware
might look at the number of user accounts and judge the project to be a
success; but if no one actually uses the technology to share knowledge
- because of a competitive, individualistic culture, say - then the company
will not see the returns it anticipates. The problem is that we are not
very good at managing technology use. Businesses must dedicate resources
over time to help employees develop effective use habits; use of technology
rather than technology itself should be evaluated, and innovative uses
of IT should be rewarded.
Further
reading
Kraut,
R. et al. (1998) "Social impact of the Internet: what does it mean?" Communications
of the ACM 41 (12, December): 21.
Rheingold,
H. (1993) The Virtual Community: Homesteading on the Electronic Frontier,
Reading, MA: Addison-Wesley.
Lam,
A. (1998) "Virtual Vietnam", on National Public Radio: All Things Considered,
Washington, DC, November 20.
Orlikowski,
W.J. et al. (1994) "Helping CSCW applications", Proceedings of the Fourth
Conference on Computer-Supported Co-operative Work, Chapel Hill, NC (October):
55--65.
Orlikowski
W.J. and Hofman, J.D. (1997) "An improvisational model of change management:
the case of groupware technologies", Sloan Management Review 38 (2, winter):
11--21.
--------------------------------------------------------------------------------
Two
views of data protection
H.
Jeff Smith, Babcock Graduate School of Management.
The
social aspects of information become clear when one looks at the issue
of data protection. Here Jeff Smith considers the very different approaches
taken by the US and the EU. In the US companies can collect, use and share
customer data with few restrictions; federal law seldom requires them to
tell consumers about secondary use of data, or to offer "opt outs". In
Europe, by contrast, consumers are assumed to have a legal interest in
data about themselves; companies must inform them if they want to use the
data for purposes other than billing, and provide clear "opt outs". Given
such differences, global executives must become familiar with different
countries' laws, industry practices and cultures.
Further
reading
Bennett,
C.J. (1992) Regulating Privacy: Data Protection and Public Policy in Europe
and the United States, Ithaca, NY: Cornell University Press.
Smith,
H.J. (1994) Managing Privacy: Information Technology and Corporate America,
Chapel Hill, NC: University of North Carolina Press.
American
privacy laws are well documented by Paul M. Schwartz and Joel R. Reidenberg,
Data Privacy Law (Charlottesville, VA: Michie Law Publishers, 1996). For
late-breaking developments, see the Privacy Times newsletter, published
by Evan Hendricks (PO Box 21501, Washington, DC, 20009).
European
privacy legislation is covered well by the Privacy Laws and Business newsletter,
published by Stewart H. Dresner (Roxeth House, Shaftesbury Avenue, Harrow,
Middlesex, HA2 0PZ, UK).
Week
Nine: Strategic uses of IT
Summaries
of the articles in Part 9 are provided below. Part 9 will be published
in Financial Times newspaper on March 28th. To purchase back copies, ring
+44 (0)181 688 6323.
--------------------------------------------------------------------------------
Making
the case for IT investments
Lynda
Applegate, Harvard Business School.
Information
technology is already shaping most aspects of companies' operations and
strategies. Yet many managers treat IT investments as budgeted expenses
to be justified on a project-by-project basis - and are then disappointed
with the return. They would do better, says Lynda Applegate, to think of
IT investments as investments in an infrastructure that will deliver benefits
at once and in the future. These benefits are of two main types: improvements
in infrastructural efficiency, as information systems assembled piecemeal
over the years are replaced with systems that are more flexible, have greater
reach and cost less to run; and new business opportunities opened up by
new IT platforms. These opportunities include improvements in external
and internal processes, tapping employees' and outsiders' knowledge and
expertise, and the creation of networked communities of customers and staff.
The ideal IT project - at least to begin with - will streamline a highly
leveraged, resource-intensive activity, produce measurable results within
a year and have a clearly defined scope; but astute managers will also
look out for any new business opportunities it opens up.
Further
reading
Applegate,
L.M. (1999, forthcoming) Electronic Commerce: Looking Back as we Look Ahead,
Harvard Business School paper no. 397-056. This paper, which includes an
account of American Airlines' community-building strategy, is part of the
forthcomingBuilding Information Age Businesses casebook, HBS no.399-097.
Applegate,
L.M. (1999, forthcoming) TPN Register: The Trading Process Network, Harvard
Business School Publishing, no. 399-015; part of the forthcoming Building
Information Age Businesses casebook, HBS no. 399-097.
Applegate,
L.M. Frito-Lay, Inc.: A Strategic Transition, 1980-1986 (HBS no. 194-107)
and Frito-Lay, Inc.: A Strategic Transition 1987-1992 (Abridged) (HBS no.195-238).
Goldman,
K. and Applegate, L. RealNetworks: Converging Technologies/Colliding Worlds,
Harvard Business School Publishing (HBS no. N9-398-133.)
Kerwin,
W. (1997) "TCO: new technologies, new benchmarks", Gartner Group Research
Note (#K-TCO-252), December 5. (Includes estimates of the costs of client-server
systems.)
--------------------------------------------------------------------------------
Strategic
dimensions of IT outsourcing
Leslie
Willcocks, Templeton College, Oxford, and Mary Lacity, University of Missouri
While
some have no significant contracts and a few put their entire budgets out
to third parties, most organisations adopt a mixed approach to IT outsourcing.
There are risks with both extremes - keeping everything in-house can be
expensive and inflexible, while going outside can involve unanticipated
overhead costs. Cost reduction, efficiency and improved service continue
to drive many initiatives in the 1990s - but according to Leslie Willcocks
and Mary Lacity, companies are increasingly seeking ways to gain strategic
advantage from outsourcing. Examples include long-term financial restructuring,
the ability to focus on core competences, the "catalysing" effect of an
external service provider, help during organisational transitions (such
as mergers or restructuring), support for innovation, and joint ventures
with a vendor partner. The authors conclude with a list of the capabilitities
required to pursue IT outsourcing for strategic advantage.
--------------------------------------------------------------------------------
Sustainable
competitive disadvantage in financial service markets
Eric
K. Clemons, the Wharton School, University of Pennsylvania.
Information
technology enables new entrants to "cream skim" a market - to target a
company's most profitable customers and to reprice others or shift them
to less nimble competitors. According to Eric Clemons, this has undermined
the role of scale as a source of competitive advantage in financial services.
Thanks to skill-based advantage, it is not necessary to be the low-cost
producer, as long as you can be the low-price provider to the most profitable
accounts. Nor is it sufficient to be the low-cost producer if you cannot
identify and retain your most profitable accounts. Established competitors
who have previously dominated their industries are therefore increasingly
vulnerable. The author here explores the strategic implications for new
entrant "attackers" and established "defenders" alike.
Further
reading
Clemons,
E.K. (1997) "Technology-driven environmental shifts and the sustainable
competitive disadvantage of previously dominant service companies", in
Day, G. and Reibstein, D. (eds) Wharton on Dynamic Competitive Strategies,
99--121.
Clemons,
E.K., Croson, D.C. and Weber, B.W. (1996) "Market dominance as a precursor
of companies' underperformance: emerging technologies and the advantages
of new entrants", Journal of Management Information Systems (autumn): 59--75.
Clemons,
E.K. and Weber, B.W. (1997) "Information technology and screen-based securities
trading: pricing the stock and pricing the trade", Management Science (December):
1693--1708.
--------------------------------------------------------------------------------
Business
platforms for the 21st century
N.
Venkatraman and John Henderson, Boston University.
The
concept of "alignment" is a critical one in IT strategy. In recent years
it has meant ensuring that IT strategy supports business strategy. Now,
say N. Venkatraman and John Henderson, it means business and IT strategists
working together to shape new business platforms; IT is not subordinate
to business strategy but an inextricable part of it. The best new business
platforms - which essentially determine a company's value proposition to
customers and its core processes - have three interdependent vectors: a
customer connection vector, whereby companies sense and respond to customer's
fast-changing needs; an asset configuration vector, whereby companies form
close relationships with one another and outsource key processes; and a
knowledge leverage vector, whereby companies identify, nurture and create
knowledge assets. The role of IT is to create a common foundation for these
three vectors. Companies will create the greatest value if they can incorporate
all three into their strategies simultaneously; unfortunately, most companies
focus only on individual vectors.
Further
reading
Amram,
M. and Kulatilaka, N. (1999) Real Options: Managing Strategic Investments
in an Uncertain World], Boston, MA: Harvard Business School Press.
Henderson,
J.C. and Venkatraman, N. (1993) "Strategic alignment: leveraging information
technology for transforming organizations", IBM Systems Journal 32 (1).
Kulatilaka,
N. and Venkatraman, N. (1999) "Are you preparing to compete in the new
economy? Use a real options navigator" Working Paper, Boston University
Systems Research Center (February).
Venkatraman,
N. and Henderson, J.C. (1998) "Strategies for virtual organizing", Sloan
Management Review (autumn).
Week
Ten: Innovation and the learning organisation
Summaries
of the articles in Part 10 are provided below. Part 10 will be published
in Financial Times newspaper on April 5th. To purchase back copies, ring
+44 (0)181 688 6323.
--------------------------------------------------------------------------------
Hard
IM choices for senior managers
Donald
Marchand, IMD International.
Rapid
developments in IT and information management have left senior managers
uncertain about their strategy. They want to know how to compete with IT
to improve business performance. According to Donald Marchand, the problem
breaks down into four main challenges. First, senior managers must develop
the right mindset to manage business change; they must realise that adjustments
to strategy, organisational structure, processes and culture need to be
supplemented with knowledge management, information management and an understanding
of the critical role of IT. Second, they must also understand how information
creates value - through risk management, more efficient processes, better
products and services, and innovation. The third challenge is to use IT
to build organisational competences that will enable a company to operate
more efficiently, keep up with competitors and provide distinctive value
to customers. Finally, managers need to be able to balance flexibility
in local markets with cost-reducing standardisation of IT infrastructure
and processes.
Further
reading
Marchand,
D.A. (1997) "Competing with information: knowing what you want", FT Mastering
Management Review (July): 7--12.
Marchand,
D.A. (1997) "Competing with information: a diagnostic for managers", FT
Mastering Management Review (November): 18--22.
Marchand,
D.A. (1998) "Balancing flexibility and global IT", in Mastering Global
Business, London: FT Pitman Publishing, 91--96.
--------------------------------------------------------------------------------
Transforming
IT-based innovation into business payoff
Leslie
Willcocks, Templeton College, Oxford, and Mary Lacity, University of Missouri
Introducing
new IT is a risky business. But failure is not inevitable; and according
to David Feeny and Leslie Willcocks, a number of success factors can be
identified. One of the most important is that technical innovations need
to be applied to new business ideas to produce significant benefits. Such
ideas usually come either from recognition of a business opportunity by
executives, or from identification of customer requirements by those at
the "sharp end". When it comes to implementation, it is important to involve
users throughout the organisation rather than just specialists, especially
when a technology is immature. External suppliers must remain under in-house
direction. A high-level sponsor and a "project champion" are also required,
as is strict time management. However, companies must be prepared to accept
that a system may provide just 80 per cent of desired functionality to
begin with.
Further
reading
Feeny,
D., Earl, M. and Edwards, B. (1996) "Organisational arrangements for IS:
the roles of users and specialists", in Earl, M. (ed.) Information Management
- the Organisational Dimension, Oxford: Oxford University Press.
Leonard-Barton,
D. (1995) Wellsprings of Knowledge: Building and Sustaining the Sources
of Innovation, Boston, MA: Harvard Business School Press.
Nonaka,
I. and Takeuchi, H. (1995) The Knowledge-Creating Company, New York: Oxford
University Press.
Plant,
R. and Willcocks, L. Internet-Based Business Strategies: the Search for
Leadership, Oxford Executive Research Briefing, Templeton College, Oxford.
Willcocks,
L., Feeny, D. and Islei, G. (eds) (1997) Managing IT as a Strategic Resource,
Maidenhead: McGraw-Hill. (See especially chapters 8, 9 and 14.)
Willcocks,
L., Graeser, V. and Pisanias, N. (1998) Developing the IT Scorecard, London:
Business Intelligence. (See chapters 4 and 5.)
--------------------------------------------------------------------------------
A common
language for strategy
Daniel
Erasmus, Rotterdam School of Management.
The
impact of technology on organisations has been enormous. To benefit, organisations
will need the skills and expertise of all their people; technical or managerial
competence on its own will simply not suffice. Yet managers and IT professionals
continue to talk past each other. The solution, says Daniel Erasmus, is
scenario thinking, in which managers and technologists work together to
construct plausible strategic scenarios. Because this process involves
challenging old assumptions and developing new ones, the two sides together
create a shared language. Internet technology will enable more employees
- and suppliers and customers - to participate in a continuous strategic
conversation.
Further
reading
van
der Heijden, K. Scenarios: the Art of Strategic Conversation.
de
Geus, A. The Living Organisation.
Weick,
C. Sensemaking in Organisations.
Turkle,
S. On the Screen.
Castells,
M. The Rise of the Network Society.
Rotterdam
School of Management -- Future of the Information Society: http://rsmcourse.dtn.net
(a summary of the "future of organisations study is available from info-dtn@dtn.net)
The
Digital Thinking Network: http://www.dtn.net
FutureScape:
http://www.siemens.com/public/uk_sys/future/sys/sys_us.htm
Global
Business Network: http://www.gbn.org
--------------------------------------------------------------------------------
IT
and the challenge of organisational learning
George
Roth, MIT Sloan School of Management.
Major
IT change programmes often run into major difficulties. Yet even as things
fall apart on the ground, the view from the top remains rosy. A technology's
advocates may characterise "non-believers" as simply resistant to technology,
and use measurement systems with too narrow a focus. Here George Roth discusses
this and other ways in which IT projects, like other organisational improvement
initiatives, overlook opportunities for building an organisation's learning
capabilities. We usually think of introducing new IT as a one-time opportunity
for change. But if we consider the use of the technology as an opportunity
for learning, we can continually improve the organisation's functioning.
Learning implies engaging people at all levels in the change process, not
just requiring new behaviours in the traditional "top-down" way. Organisations
that can overcome the challenges of continuous learning-driven change will
escape the "gaps" - between different perspectives at different corporate
levels, between aspirations and results, and between experience and learning
- that mar all too many IT initiatives.
Further
reading
Kleiner,
A. and Roth, G. (1997) "How to make experience your company's best teacher",
Harvard Business Review (September--October). (For more information see
www.fieldbook.com/rla-what.htm)
Roth,
G. (1998) "Crossing theory and practice boundaries to create new knowledge",
Academy of Management Conference Proceedings, San Diego, California (August).
Roth,
G. (1998) "Paper documents: implications of changing media for business
process redesign", in Wakayama, T. et al. (eds) Information and Process
Integration In Enterprises: Rethinking Documents, Boston, MA: Kluwer Academic.
Roth,
G. and Kleiner, A. (1998) "Developing organisational memory through learning
histories", Organisational Dynamics (winter). (For more information see
http://ccs.mit.edu/lh and http://www.sol-ne.org/res/wp/18001.html)
Senge,
P., Kleiner, A., Roberts, C., Roth, G., Ross, R. and Smith, B. (1999) The
Dance of Change: the Challenges to Sustaining Momentum in a Learning Organization,
New York: Doubleday Currency. (For more information see http://www.fieldbook.com)
--------------------------------------------------------------------------------
Strategy
and the forgetting organisation
Eric
Clemons, The Wharton School, University of Pennsylvania.
The
corporate scene - notably but by no means exclusively in technology-centred
industries - is littered with examples of new players that have overtaken
previously successful innovators. There are several explanations for this,
including vested employee interests and the common tendency to focus too
narrowly on the needs of existing customers. Learning organisations are
all very well, explains Eric Clemons, but until companies have discarded
their old skills the danger is that they will continue to learn the wrong
lessons as they go forward. Hence companies must embrace the ideal of the
"forgetting organisation". This article illustrates how corporate doctrine,
often unconsciously, encourages core rigidities; the author urges executives
to employ scenario analysis to identify and rank key uncertainties, to
create alternative futures, and to turn them into plausible stories to
sweep away outdated and inappropriate assumptions.
Further
reading
Christensen,
C.M. (1997) The Innovator's Dilemma, Boston, MA: Harvard Business School
Press.
Clemons,
E.K. (1995) "Using scenario analysis to manage the strategic risks of reengineering",
Sloan Management Review (summer): 61--71.
Clemons,
E.K. (1997) "Creating the forgetting organization: using the scenario process
to facilitate learning during rapid technology-driven environmental change",
in Kemerer, C. (ed.) Information Technology and Industrial Competitiveness:
how IT Shapes Competition, 197--214.
Schwartz,
P. (1991) The Art of the Long View, Doubleday.
Tushman,
M.L. and Anderson, P. (eds) (1997) Managing Strategic Innovation and Change,
New York: Oxford University Press.
Week
Eleven: Guru and practitioner perspectives
Summaries
of the articles in Part 11 are provided below. Part 11 was published in
Financial Times newspaper on April 12th. To purchase back copies, ring
+44 (0)181 688 6323.
--------------------------------------------------------------------------------
The
invisible computer
Donald
A. Norman is professor emeritus at the University of California, San Diego,
and a former executive at Apple Computer and Hewlett-Packard. He now has
his own company, the Nielsen Norman Group.
The
personal computer has become central to today's business infrastructure,
yet it is poorly suited to many of the tasks that it has to perform. Perhaps
its worst fault is excessive complexity, which stems from the fact that
it is designed to suit multiple tasks and customers. Another factor is
the PC industry's business model, in which a revenue stream is generated
by continuous upgrades of "obsolete" hardware and software. This produces
high profit margins and growth but sales volumes -- relative to the potential
market -- are low. The time has come, says Donald Norman, for a new generation
of technology -- the information appliance. The information appliance is
specialised for a particular task and matches the needs of the user; unlike
the PC, the technology it contains is invisible and is subordinated to
function. Information appliance markets will be characterised by massive
sales volumes but relatively low growth and profit margins. Information
appliances exist today -- examples are mobile phones and electronic reference
books -- but only when there are universal protocols for sharing data will
their full potential be realised.
This
article is taken from The Invisible Computer: Why Good Products can Fail,
the Personal Computer is so Complex and Information Appliances are the
Solution, by Donald A. Norman (MIT Press, 1998).
