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Introduction

This chapter presents case studies that demonstrate how information technology (IT) and organizational learning occur in the real corpo- rate world. It examines the actual processes of how technological and organizational learning can be implemented in an organization and what management perspectives can support its growth so that forms of responsive organizational dynamism can be formed and developed. I will demonstrate these important synergies through three case stud- ies that will show how the components of responsive organizational dynamism, strategic integration and cultural assimilation, actually operate in practice.

Siemens AG

The first case study offers a perspective from the chief informa- tion officer (CIO). The CIO of Siemens of the Americas at the time of this study was Dana Deasy, and his role was to introduce and expand the use of e-business across 20 discrete businesses. The Siemens Corporation worldwide network was composed of over 150 diverse sets of businesses, including transportation, healthcare, and telecommunications. Deasy’ s mission was to create a common road map across different businesses and cultures. What makes this case so distinct from others is that each business is highly decentralized under the umbrella of the Siemens Corporation. Furthermore, each company has its own mission; the companies have never been asked to come together and discuss common issues with regard to technol- ogy. That is, each business focused on itself as opposed to the entire

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organization. Deasy had to deal with two sectors of scope and hence, two levels of learning: the Americas as a region and the global firm internationally.

The challenge was to introduce a new e-business strategy from the top-down in each business in the Americas and then to integrate it with the global firm. Ultimately, the mission was to review what each business was doing in e-business and to determine whether there was an opportunity to consolidate efforts into a common direction.

IT was, for the most part, viewed as a back-office operation— handling services of the company as a support function as opposed to thinking about ways to drive business strategy. In terms of IT report- ing, most CIOs reported directly to the chief financial officer (CFO). While some IT executives view this as a disadvantage because CFOs are typically too focused on financial issues, Deasy felt that a focus on cost containment was fine as long as the CIO had access to the chief executive officer (CEO) and others who ultimately drove business strategy. So, the real challenge was to ensure that CIOs had access to the various strategic boards that existed at Siemens.

What are the challenges in transforming an organization the size of Siemens? The most important issue was the need to educate CIOs on the importance of their role with respect to the business as opposed to the technology. As Deasy stated in an interview, “ Business must come first and we need to remind our CIOs that all technology issues must refer back to the benefits it brings to the business.” The question then is how to implement this kind of learning.

Perhaps the best way to understand how Siemens approached this dilemma is to understand Deasy’ s role as a corporate CIO. The reality is that there was no alternative but to create his position. What drove Siemens to this realization was fear that they needed someone to drive e-business, according to Deasy—fear of losing competitive edge in this area, fear that they were behind the competition and that smaller firms would begin to obtain more market share. Indeed, the growth of e-business occurred during the dot-com era, and there were huge pressures to respond to new business opportunities brought about by emerging technologies, specifically the Internet. It was, therefore, a lack of an internal capacity, such as responsive organizational dyna- mism, that stimulated the need for senior management to get involved and provide a catalyst for change.

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The first aspect of Siemens’ s approach can be correlated to the strategic integration component of responsive organizational dyna- mism. We see that Siemens was concerned about whether technology was properly being integrated in strategic discussions. It established the Deasy role as a catalyst to begin determining the way technol- ogy needed to be incorporated within the strategic dimension of the business. This process cannot occur without executive assistance, so evolutionary learning must first be initiated by senior management. Unfortunately, Deasy realized early on that he needed a central pro- cess to allow over 25 CIOs in the Americas to interact regularly. This was important to understand the collective needs of the community and to pave the way for the joining of technology and strategic inte- gration from a more global perspective. Deasy established an infra- structure to support open discourse by forming CIO forums, similar to communities of practice, in which CIOs came together to discuss common challenges, share strategies, and have workshops on the ways technology could help the business. Most important at these forums was the goal of consolidating their ideas and their common challenges.

There are numerous discussions regarding the common problems that organizations face regarding IT expenditures, specifically the approach to its valuation and return on investment (ROI). While there are a number of paper-related formulas that financial executives use (e.g., percentage of gross revenues within an industry), Deasy uti- lized learning theories, specifically, communities of practice, to foster more thinking and learning about what was valuable to Siemens, as opposed to using formulas that might not address important indi- rect benefits from technology. In effect, Deasy promoted learning among a relatively small but important group of CIOs who needed to better understand the importance of strategic innovation and the value it could bring to the overall business mission. Furthermore, these forums provided a place where CIOs could develop their own community—a community that allowed its members to openly par- ticipate in strategic discourse that could help transform the organiza- tion. It was also a place to understand the tacit knowledge of the CIO organization and to use the knowledge of the CIOs to summarize common practices and share them among the other members of the community.

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Most of the CIOs at Siemens found it challenging to understand how their jobs were to be integrated into business strategy. Indeed, this is not a surprise. In Chapter 1, I discuss the feedback from my research on CEO evaluation of technology; I found that there were few IT executives who were actually involved in business strategy. Thus, the organization sought to create an advocate in terms of a central- ized corporate headquarter that could provide assistance as opposed to forcing compliance. That is, it sought a structure with which to foster organizational learning concepts and develop an approach to create a more collective effort that would result in global direction for IT strategic integration.

To establish credibility among the CIO community, Deasy needed to ensure that the CIOs of each individual company were able to inter- act with board-level executives. In the case of Siemens, this board is called the president’ s council. The president’ s council has regularly held meetings in which each president attends and receives presentations on ideas about the regional businesses. Furthermore, there are quarterly CFO meetings as well, where CIOs can participate in understand- ing the financial implications of their IT investments. At the same time, these meetings provided the very exposure to the executive team that CIOs needed. Finally, Deasy established a CIO advisory board comprised of CIOs who actually vote on the common strategic issues and thus manage the overall direction of technology at Siemens. Each of these groups established different types of communities of practice that focused on a specific aspect of technology. The groups were geared to create better discourse and working relationships among these com- munities to, ultimately, improve Siemens’ s competitive advantage. The three communities of practice at work in the Siemens model— executive, finance, and technology—suggest that having only one gen- eral community of practice to address technology issues may be too limiting. Thus, theories related to communities of practice may need to be expanded to create discourse among multiple communities. This might be somewhat unique for IT, not in that there is a need for mul- tiple communities, but that the same individuals must have an identity in each community. This shows the complexity of the CIO role today in the ability to articulate technology to different types and tiers of management. Figure 8.1 shows the interrelationships among the CIO communities of practice at Siemens.

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Another way to represent these communities of practice is to view them as part of a process composed of three operating levels. Each level represents a different strategic role of management that is responsible for a unique component of discourse and on the authorization for uses of technology. Therefore, if the three different communities of prac- tice are viewed strategically, each component could be constructed as a process leading to overall organizational cooperation, learning, and strategic integration as follows:

Tier 1: CIO Advisory Board : This community discusses issues of technology standards, operations, communications, and ini- tiatives that reflect technology-specific areas. Such issues are seen as CIO specific and only need this community’ s agree- ment and justification. However, issues or initiatives that require financial approval, such as those that may not yet be budgeted or approved, need to be discussed with group CFOs. Proposals to executive management—that is, the President’ s Council—also need prior approval from the CFOs.

Communities of practice consist of presidents from each company. Regular meetings are designed for discussion over common issues on business strategy. Corporate CIOs can use this forum to present new proposals on emerging technologies and seek approval for their plans and vision.

President’s council

Corporate CIO of the Americas

CFO quarterly meetings

CIO advisory board

Communities of practice consist of CIOs from each company. Forum is designed to openly discuss common challenges, agree on technology initiatives, foster a more united community and build on shared knowledge across businesses.

Communities of practice consist of CFOs from each company. Discussions relate to how strategies can be implemented with respect to ROI. CIOs need to understand IT costs, both direct and indirect.

Figure 8.1 Inter-relationships among CIO communities of practice at Siemens.

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Tier 2: CFO Quarterly : CFOs discuss new emerging technolo- gies and ascertain their related costs and benefits (ROI). Those technologies that are already budgeted can be approved based on agreed ROI scenarios. Proposals for new technology projects are approved in terms of their financial viability and are prepared for further discussion at the President’ s Council.

Tier 3: President’ s Council : Proposals for new technology projects and initiatives are discussed with a focus on their strategic implications on the business and their expected outcome.

Deasy realized that he needed to create a common connection among these three communities. While he depended on the initia- tives of others, he coordinated where these CIO initiatives needed to be presented, based on their area of responsibility.

Graphically, this can be shown as a linear progression of commu- nity-based discussions and approvals, as in Figure 8.2.

The common thread to all three tiers is the corporate CIO. Deasy was active in each community; however, his specific activities within each community of practice were different. CIOs needed to estab- lish peer relationships with other CIOs share their tacit knowledge and contribute ideas that could be useful to other Siemens companies. Thus, CIOs needed to transform their personal views of technology and expand them to a group-level perspective. Their challenge was to learn how to share concepts and how to understand new ones that emanated at the CIO advisory board level. From this perspective, they could create the link between the local strategic issues and those discussed at the regional and global levels, as shown in Figure 8.3.

Using this infrastructure, Siemens’ s organizational learning in technology, occurred at two levels of knowledge management. The first is represented by Deasy’ s position, which effectively represents a top-down structure to initiate the learning process. Second, are the tiers of communities of practice when viewed hierarchically. This view reflects a more bottom-up learning strategy, with technological oppor- tunities initiated by a community of regional, company CIOs, each representing the specific interests of their companies or specific lines of business. This view can also be structured as an evolutionary cycle in which top-down management is used to initiate organizational learning from the bottom-up, the bottom, in this case, represented by

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local operating company CIOs. This means that the CIO is seen rela- tively, in this case, as the lower of the senior management population. Figure 8.4 depicts the CIO as this “ senior lower level.”

From this frame of reference, the CIO represents the bottom-up approach to the support of organizational learning by addressing the technology dilemma created by technological dynamism— specifically, in this case, e-business strategy.

The role of IT in marketing and e-business was another important factor in Siemens’ s model of organizational learning. The technology strategy at Siemens was consistent with the overall objectives of the organization: to create a shared environment that complements each

Tier 3

Tier 2

Co rpo

rat e C

IO ov

ers igh

t a nd

m an

age me

nt

Tier 1

CFO quarterly

CIO advisory board

President’s council

Outcomes

Budgeted but not approved implementations. Projects are

approved within budget constraints

Proposals reviewed based on strategy and corporate

direction, and approved for implementation, including

financial commitment

Outcomes

Outcomes

Local or pre-budgeted technology specific

implementation issues

Requires financial approval

Requires strategic approval

Figure 8.2 Siemens’ community-based links.

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Dana Deasy Strategic senior Management level

President and executive

management

Chief financial officer

Local CIO

Financial senior Management level

Senior lower level

Figure 8.4 CIO as the “ senior lower level.”

Company president

CIO advisory board

Company CFO

Technology issues related to sharing across businesses or issues for discussion that require consesus among CIO population

Company-specific strategic issues regarding how technology affects specific corporate goals and objectives

Financial implications and direct reporting at the company level

Figure 8.3 Siemens’ local to global links.

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business by creating the opportunity to utilize resources. This shared environment became an opportunity for IT to lead the process and become the main catalyst for change. I discuss this kind of support in Chapter 5, in which I note that workers see technology as an accept- able agent of change. Essentially, the CIOs were challenged with the responsibility of rebranding their assets into clusters based on their generic business areas, such as hospitals, medical interests, and com- munications. The essence of this strategic driver was to use e-business strategy to provide multiple offerings to the same customer base.

As with the Ravell case discussed in Chapter 1, the Siemens case represents an organization that was attempting to identify the driver component of IT. To create the driver component, it became necessary for executive management to establish a corporate position (embodied by Deasy) to lay out a plan for transformation, through learning and through the use of many of the organizational learning theories pre- sented in Chapter 4.

The Siemens challenge, then, was to transform its CIOs from being back-office professionals to proactive technologists focused primarily on learning to drive business strategy. That is not to say that back-office issues became less important; they became, instead, responsibilities left to the internal organizations of the local CIOs. However, back-office issues can often become strategic problems, such as with the use of e-mail. This is an example of a driver situation even though it still per- tains to a support concern. That is, back-office technologies can indeed be drivers, especially when new or emerging technologies are available. As with any transition, the transformation of the CIO role was not accomplished without difficulty. The ultimate message from executive management to the CIO community was that it should fuse the vital goals of the business with its technology initiatives. Siemens asked its CIOs to think of new ways that technology could be used to drive strategic innovations. It also required CIOs to change their behavior by asking them to think more about business strategy.

The first decision that Deasy confronted was whether to change the reporting structure of the CIO. Most CIOs at Siemens reported directly to the CFO as opposed to the CEO. After careful thought, Deasy felt that to whom the CIO reported was less important than giving access and exposure to the President’ s Council meetings. It was Deasy’ s perspective that only through exposure and experience could

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CIOs be able to transform from back-office managers to strategic planners. As such, CIO training was necessary to prepare them for participation in communities of practice. Eventually, Siemens recog- nized this need and, as a result, sponsored programs, usually lasting one week, in which CIOs would be introduced to new thinking and learning by using individual-based reflective practices. Thus, we see an evolutionary approach, similar to that of the responsive organiza- tional dynamism arc, presented in Chapter 4; that is, one that uses both individual and organizational learning techniques.

Deasy also understood the importance of his relationship and role with each of the three communities of practice. With respect to the CEOs of each company, Deasy certainly had the freedom to pick up the phone and speak with them directly. However, this was rarely a realistic option as Deasy knew early on that he needed the trust and cooperation of the local CIO to be successful. The community with CEOs was then broadened to include CIOs and other senior manag- ers. This was another way in which Deasy facilitated the interaction and exposure of his CIOs to the executives at Siemens.

Disagreement among the communities can and does occur. Deasy believed in the “ pushing-back” approach. This means that, inevitably, not everyone will agree to agree, and, at times, senior executives may need to press on important strategic issues even though they are not mutually in agreement with the community. However, while this type of decision appears to be contrary to the process of learning embed- ded in communities of practice learning, it can be a productive and acceptable part of the process. Therefore, while a democratic process of learning is supported and preferred, someone in the CIO posi- tion ultimately may need to make a decision when a community is deadlocked.

The most important component of executive decision making is that trust exists within the community. In an organizational learning infrastructure, it is vital that senior management share in the value proposition of learning with members of the community. In this way, members feel that they are involved, and are a part of decision mak- ing as opposed to feeling that they are a part of a token effort that allows some level of participation. As Deasy stated, “ I was not try- ing to create a corporate bureaucracy, but rather always representing myself as an ambassador for their interest, however, this does not

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guarantee that I will always agree with them.” Disagreements, when managed properly, require patience, which can result in iterative dis- cussions with members of the community before a consensus posi- tion may be reached, if it is at all. Only after this iterative process is exhausted does a senior overarching decision need to be made. Deasy attributed his success to his experience in field operations, similar to those of his constituents. As a prior business-line CIO, he understood the dilemma that many members of the community were facing. Interestingly, because of his background, Deasy was able to “ qual- ify” as a true member of the CIO community of practice. This truth establishes an important part of knowledge management and change management—senior managers who attempt to create communities of practice will be more effective when they share a similar back- ground and history with the community that they hope to manage. Furthermore, leaders of such communities must allow members to act independently and not confuse that independence with autonomy. Finally, managers of communities of practice are really champions of their group and as such must ensure that the trust among mem- bers remains strong. This suggests that CIO communities must first undergo their own cultural assimilation to be prepared to integrate with larger communities within the organization.

Another important part of Deasy’ s role was managing the technol- ogy itself. This part of his job required strategic integration in that his focus was more about uses of technology, as opposed to commu- nity behavior or cultural assimilation. Another way of looking at this issue is to consider the ways in which communities of practice actually transform tacit knowledge and present it to senior management as explicit knowledge. This explicit knowledge about uses of technology must be presented in a strategic way and show the benefits for the organization. The ways that technology can benefit a business often reside within IT as tacit knowledge. Indeed, many senior manag- ers often criticize IT managers for their inability to articulate what they know and to describe it so that managers can understand what it means to the business. Thus, IT managers need to practice transform- ing their tacit knowledge about technology and presenting it effec- tively, as it relates to business strategy.

Attempting to keep up with technology can be a daunting, if not impossible, task. In some cases, Siemens allows outside consultants

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to provide help on specific applications if there is not enough expertise within the organization. The biggest challenge, however, is not necessarily in keeping up with new technologies but rather, in testing technologies to determine exactly the benefit they have on the business. To address this dilemma, Deasy established the con- cept of “ revalidation.” Specifically, approved technology projects are reviewed every 90 days to determine whether they are indeed providing the planned outcomes, whether new outcomes need to be established, or whether the technology is no longer useful. The concept of revalidation can be associated with my discussion in Chapter 3, which introduced the concept of “ driver” aspects of technology. This required that IT be given the ability to invest and experiment with technology to fully maximize the evaluation of IT in strategic integration. This was particularly useful to Deasy, who needed to transform the culture at Siemens to one that rec- ognized that not all approved technologies succeed. In addition, he needed to dramatically alter the application development life cycle and reengineer the process of how technology was evaluated by IT and senior management. This challenge was significant in that it had to be accepted by over 25 autonomous presidents, who were more focused on short and precise outcomes from technology investments.

Deasy was able to address the challenges that many presidents had in understanding IT jargon, specifically as it related to ben- efits of using technology. He engaged in an initiative to communi- cate with non-IT executives by using a process called storyboarding. Storyboarding is the process of creating prototypes that allow users to actually see examples of technology and how it will look and operate. Storyboarding tells a story and can quickly educate executives without being intimidating. Deasy’ s process of revaluation had its own unique life cycle at Siemens:

1. Create excitement through animation. What would Siemens be like if ... ?

2. Evaluate the way the technology would be supported. 3. Recognize implementation considerations about how the

technology as a business driver is consistent with what the organization is doing and experiencing.

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4. Technology is reviewed every 90 days by the CIO advisory board after experimental use with customers and presented to the president’ s council on an as-needed basis.

5. Establish responsive organizational dynamism with cultural assimilation; that is, recognize the instability of technol- ogy and that there are no guarantees to planned outcomes. Instead, promote business units to understand the concept of “ forever prototyping.”

Thus, Siemens was faced with the challenge of cultural assimi- lation, which required dramatic changes in thinking and business life cycles. This process resembles Bradley and Nolan’ s (1998) Sense and Respond —the ongoing sensing of technology opportunities and responding to them dynamically. This process disturbs traditional and existing organizational value chains and therefore represents the need for a cultural shift in thinking and doing. Deasy, using technology as the change variable, began the process of reinventing the operation of many traditional value chains.

Siemens provides us with an interesting case study for responsive organizational dynamism because it had so many diverse companies (in over 190 countries) and over 425,000 employees. As such, Siemens represents an excellent structure to examine the importance of cul- tural assimilation. Deasy, as a corporate CIO, had a counterpart in Asia/Australia. Both corporate CIOs reported to a global CIO in Germany, the home office of Siemens. There was also a topic-centered CIO responsible for global security and application-specific planning software. This position also reported directly to the global CIO. There were regional and local CIOs who focused on specific geographical areas and vertical lines of business and operating company CIOs. This organization is shown in Figure 8.5.

Deasy’ s operation represents one portion (although the most quickly changing and growing) of Siemens worldwide. Thus, the issue of globalization is critical for technologies that are scalable beyond regional operating domains. Standardization and evaluations of tech- nology often need to be ascertained at the global level and as a result introduce new complexities relating to cultural differences in business methods and general thinking processes. Specifically, what works in one country may not work the same way in another. Some of these

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matters can be legally based (e.g., licensing of software or assumptions about whether a technology is legally justified). To a large extent, solv- ing legal matters relating to technology is easier than cultural ones.

Cultural assimilation matters about technology typically occur in global organizations with respect to acceptability of operational norms from one country to another. This becomes a particularly dif- ficult situation when international firms attempt to justify standards. At Siemens, Deasy introduced three “ standards” of technology that defined how it could be used across cultures, and communities of practice:

1. Corporate services : These are technologies that are required to be used by the business units. There are central service charges for their use as well.

2. Mandatory services : Everyone must comply with using a par- ticular type of application; that is, mandatory software based on a specific type of application. For example, if you use a Web browser, it must be Internet Explorer.

3. Optional : These are technologies related to a specific business and used only within a local domain. There may be a preferred solution, but IT is not required to use it.

This matrix of standards allows for a culture to utilize technologies that are specific to its business needs, when justified. Standards at Siemens are determined by a series of steering committees, starting

Siemens global CIO (Germany)

Topic centered CIO

Regional CIOs Operating

company CIO Operating

company CIO Regional CIOs

Corporate CIO Asia/Australia

Corporate CIO Americas

(deasy)

Figure 8.5 Siemens’ CIO organization.

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at the regional level, that meet two to three times annually. Without question, implementing standards across cultures is, as Deasy phrased it, “ a constant wrestling match which might need to change by the time a standard is actually reached.” This is why strategic integra- tion is so important, given the reality that technology cannot always be controlled or determined at senior levels. Organizations must be able to dynamically integrate technology changes parallel to business changes.

Deasy’ s longer-term mission was to provide a community of CIOs who could combine the business and technology challenges. It was his initial vision that the CIO of the future would be more involved than before with marketing and value chain creation. He felt that “ the CIO community needed to be detached from its technology- specific issues or they would never be a credible business partner.” It was his intent to establish organizational learning initiatives that helped CIOs “ seize and succeed,” to essentially help senior manage- ment by creating vision and excitement, by establishing best practices, and by learning better ways to communicate through open discourse in communities of practice.

Three years after his initial work, I reviewed the progress that Deasy had made at Siemens. Interestingly, most of his initiatives had been implemented and were maturing—except for the role of e-business strategy. I discovered, after this period, that the orga- nization thought that e-business was an IT responsibility. As such, they expected that the CIOs had not been able to determine the best business strategy. This was a mistake; the CIO could not estab- lish strategy but rather needed to react to the strategies set forth by senior management. This means that the CIO was not able to really establish stand-alone strategies as drivers based on technology alone. CIOs needed, as Deasy stated, “ to be a participant with the business strategist and to replace this was inappropriate.” This raises a number of questions:

1. Did this occur because CIOs at Siemens do not have the edu- cation and skills to drive aspects of business strategy?

2. Did the change in economy and the downfall of the dot-coms create a negative feeling toward technology as a business driver?

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3. Are CEOs not cognizant enough about uses of technology, and do they need better education and skills to better under- stand the role of technology?

4. Is the number of communities of practice across the organi- zation integrated enough so that IT can effectively commu- nicate and form new cultures that can adapt to the changes brought about by emerging technologies?

5. Is there too much impatience with the evolution of tech- nology? Does its assimilation in an organization the size of Siemens simply take too long to appreciate and realize the returns from investments in technology?

I believe that all of these questions apply, to some extent, and are part of the challenges that lie ahead at Siemens. The company has now initiated a series of educational seminars designed to provide more business training for CIOs, which further emphasizes the importance of focusing on business strategy as opposed to just technology. It could also mean the eventual establishment of a new “ breed” of CIOs who are better educated in business strategy. However, it is inappropriate for non-IT managers to expect that the CIOs will be able to handle strategy by themselves; they must disconnect e-business as solely being about technology. The results at Siemens only serve to strengthen the concept that responsive organizational dynamism requires that cul- tural assimilation occur within all the entities of a company.

Aftermath

Dana Deasy left Siemens a few years after this case study was com- pleted. During that time, the executive team at Siemens realized that the CIO alone could not provide business strategy or react quickly enough to market needs. Rather, such strategy required the integra- tion of all aspects of the organization, with the CIO only one part of the team to determine strategic shifts that lead or use components of technology. Thus, the executives realized that they needed to become much better versed in technology so that they also could engage in strategic conversations. This does not suggest that executives needed technology training per se, but that they do need training that allows them to comment intelligently on technology issues. What is the best

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way to accomplish this goal? The answer is through short seminars that can provide executives with terminology and familiarize them with the processes their decisions will affect. The case also raised the question of whether a new wave of executives would inevitably be required to move the organization forward to compete more effec- tively. While these initiatives appear to make sense, they still need to address the fundamental challenges posed by technology dynamism and the need to develop an organization that is positioned to respond (i.e., responsive organizational dynamism). We know from the results of the Ravell case that executives cannot be excluded. However, the case also showed that all levels of the organization need to be involved. Therefore, the move to responsive organizational dynamism requires a reinvention of the way individuals work, think, and operate across multiple tiers of management and organizational business units. This challenge will continue to be a difficult but achievable objective of large multinational companies.

ICAP

This second case study focuses on a financial organization called ICAP, a leading money and securities broker. When software development exceeded 40% of IT activities, ICAP knew it was time to recognize IT as more than just technical support. Stephen McDermott provided the leadership, leaving his role as CEO of the Americas at ICAP to become CEO of the Electronic Trading Community (ETC), a new entity focused solely on software development. This IT community needed to be integrated with a traditional business model that was undergoing significant change due to emerging technologies, in this specific case, the movement from voice to electronic trading systems.

This case study reflects many aspects of the operation of responsive organizational dynamism. From the strategic integration perspec- tive, ICAP needed to understand the ways electronic trading could ultimately affect business strategy. For example, would it replace all voice-related business interactions, specifically voice trading? Second, what would be the effect on its culture, particularly with respect to the way the business needed to be organizationally structured? This study focuses on the role of the CEO as a pioneer in reexamining his own biases, which favored an old-line business process, and for developing

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a realization to manage a major change in business strategy and organizational philosophy. Indeed, as McDermott stated, “ It was the challenge of operating at the top, yet learning from the bottom.” This sentiment essentially reflects the reality of a management dilemma. Could a CEO who, without question, had substantial knowledge of securities trading, learn to lead a technology-driven operation, for which he had little knowledge and experience?

To better understand the impact of technology on the business of ICAP, it is important to have some background information. Since 1975, the use of technology at ICAP was limited to operations of the back-office type. Brokers (the front-end or sales force of a trad- ing business), communicated with customers via telephone. As such, processing transactions was always limited to the time necessary to manually disseminate prices and trading activity over the phone to a securities trader. However, by 1997 a number of technological advancements, particularly with the proliferation of Internet-based communication and the increased bandwidth available, enabled bro- kers and dealers to communicate bidirectionally. The result was that every aspect of the trade process could now be streamlined, includ- ing the ability for the trader to enter orders directly into the brokers’ trading systems. The technological advancements and the availability of capital in the mid-1990s made it difficult to invest in computer operations. Specifically, the barriers to investing in technology had been high as developing proprietary trading systems and deploying a private network were all costly. The market of available products was scarce, filled with relatively tiny competitors with little more than a concept, rather than an integrated product that could do what a com- pany like ICAP needed, in order to maintain its competitive position. The existing system, called the ICAP Trading Network application was far from a trading system that would compete against the newer emerging technologies. The goal was to develop a new trading sys- tem that would establish an electronic link between the back-office systems of ICAP and its clients. The system would need to be simple to use as the traders were not necessarily technology literate. It would need to be robust, include features that were specific to the markets, and easily installed and distributed. In addition, as ICAP decided to fund the entire project, it would have to be cost-effective and not burden the other areas of the business. As competitive systems were

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already being introduced, the new system needed to be operational within three to six months for ICAP to remain competitive.

McDermott recognized that designing a new product would require that IT developers and business matter experts learn to work together. As a result of this realization, a representative from the operation was selected to see if a third-party developer could modify an existing product. After exploring and evaluating responses, the search team concluded that off-the-shelf solutions, prohibitive in cost, were not available that would meet the critical timing needs of the business. However, during the period when IT and the business users worked together, these groups came to realize that the core components of its own trading system could be modified and used to build the new system. This realization resulted from discussions between IT and the business users that promoted organizational learning. This process resembles the situation in the Ravell study, in which I concluded that specific events could accelerate organizational learning and actually provide an opportunity to embed the process in the normal discourse of an organization. I also concluded that such learning starts with individual reflective practices, and understanding how both factions, in this case, IT and the business community, can help each other in a common cause. In the case of Ravell, it was an important relocation of the business that promoted integration between IT and the busi- ness community. At ICAP, the common cause was about maintaining competitive advantage.

The project to develop the new electronic trading application was approved in August 1999, and the ETC was formed. The new entity included an IT staff and selected members from the business commu- nity, who moved over to the new group. Thus, because of technologi- cal dynamism, it was determined that the creation of a new product established the need for a new business entity that would form its own strategic integration and cultural assimilation. An initial test of the new product took place in November, and it successfully executed the first electronic trade via the Internet. In addition to their design responsibility, ETC was responsible for marketing, installing, and training clients on the use of the product. The product went live in February 2000. Since its introduction, the ETC product has been modified to accommodate 59 different fixed-income products, serving more than 1,000 users worldwide in multiple languages.

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While the software launch was successful, McDermott’ s role was a challenge, from coordinating the short- and long-term goals of ETC with the traditional business models of ICAP to shifting from management of a global financial enterprise to management of an IT community. The ICAP case study examines the experiences and per- ceptions one year after the launch of the new entity.

The first most daunting result, after a year of operations, was the significant growth of technology uses in the business. Initially, McDermott noted that electronic trading was about 40% of opera- tions and that it had grown over 60%. He stated that ETC had become, without question, the single most important component of the ICAP international business focus. The growth of electronic trad- ing created an accelerated need for transformation within ICAP and its related businesses. This transformation essentially changed the balance between voice or traditional trading and electronic trading. McDermott found himself responsible for much of this transforma- tion and was initially concerned whether he had the technical exper- tise to manage it.

McDermott admitted that as a chief executive of the traditional ICAP business, he was conservative and questioned the practicality and value of many IT investments. He often turned down requests for more funding and looked at technology as more of a supporter of the business. As I explain in Chapter 3, IT as a supporter will always be managed, based on efficiencies and cost controls. McDermott’ s view was consistent with this position. In many ways, it was ironic that he became the CEO of the electronic component of the business. Like many CEOs, McDermott initially had the wrong impression of the Internet. Originally looking at it as a “ big threat,” he eventually realized from the experience that the Internet was just another way of communicating with his clients and that its largest contribution was that it could be done more cost-effectively, thus leading to higher profits.

One of the more difficult challenges for McDermott was develop- ing the mission for ETC. At the time of the launch of the new product, this mission was unclear. With the assistance of IT and the business community, the mission of ETC has been developing dynamically; the business is first trying to protect itself from outside competi- tion. Companies like IBM, Microsoft, and others, might attempt to

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invade the business market of ICAP. Thus, it is important that ETC continues to produce a quality product and keep its competitive edge over more limited competitors that are software-based organizations only. The concept of a dynamic mission can be correlated to the fun- damental principles of responsive organizational dynamism. In fact, it seems rather obvious that organizations dealing with emerging tech- nologies might need to modify their missions to parallel the acceler- ated changes brought about by technological innovation. We certainly see this case with ICAP, for which the market conditions became volatile because of emerging electronic trading capacities. Why, then, is it so difficult for organizations to realize that changing or modify- ing their missions should not be considered that unusual? Perhaps the approach of ICAP in starting a completely separate entity was correct. However, it is interesting that this new organization was operating without a consistent and concrete mission.

Another important concept that developed at ETC was that technology was more of a commodity and that content (i.e., the dif- ferent services offered to clientele) was more important. Indeed, as McDermott often stated, “ I assume that the technology works, the real issue is the way you intend to implement it; I want to see a com- pany’ s business plan first.” Furthermore, ETC began to understand that technology could be used to leverage ICAP businesses in areas that they had never been able to consider before the advent of the technology and the new product. McDermott knew that this was a time, as Deasy often stated, to “ seize and succeed” the moment. McDermott also realized that organizational learning practices were critical for ideas to come from within the staff. He was careful not to require staff to immediately present a formal new initiative, but he allowed them to naturally develop a plan as the process became mature. That is one of the reasons that ETC uses the word community in its name. As he expressed it to me during a conversation:

Now that is not my mandate to grow into other areas of opportunity, my initial responsibility is always to protect our businesses. However, I will not let opportunities go by which can help the business grow, especially things that we could never do as a voice broker. It has been very exciting and I can see ICAP becoming a considerably larger company than we have been historically because of our investment in technology.

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McDermott also was challenged to learn what his role would be as a chief executive of a software technology organization. In the early stages, he was insecure about his job because for the first time he knew less than his workers about the business. Perhaps this provides organizational learning practitioners with guidance on the best way of getting the CEO engaged in the transformative process; that is, getting the CEO to understand his or her role in an area in which, typically, he or she does not have expertise. McDermott represented an executive who reached that position coming up through the ranks. Therefore, much of his day-to-day management was based on his knowledge of the business—a business that he felt he knew as well as anyone. With technology, and its effect as technological dynamism, CEOs face more challenges, not only because they need to manage an area they may know little about but also because of the dynamic aspects of technology and the way it causes unpredictable and acceler- ated change. McDermott realized this and focused his attention on discovering what his role needed to be in this new business. There was no question in McDermott’ s mind that he needed to know more about technology, although he also recognized that management was the fundamental responsibility he would have with this new entity:

[Although] I was insecure at the beginning I started to realize that it does not take a genius to do my job. Management is management, and whether you manage a securities brokering firm or you manage a deli or manage a group of supermarkets or an IT or an electronic company, it is really about management, and that is what I am finding out now. So, whether I am the right person to bring ETC to the next level is irrelevant at this time. What is more important is that I have the skills that are necessary to manage the business issues as opposed to the technological ones.

However, McDermott did have to make some significant changes to operate in a technology-based environment. ETC was now des- tined to become a global organization. As a result, McDermott had to create three senior executive positions to manage each of the three major geographic areas of operation: North America, Europe, and Asia. He went from having many indirect reports to having just a few. He needed four or five key managers. He needed to learn to trust that they were the right people, people who had the ability to nurture

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the parts of each of their respective divisions. “ What it leaves now is being a true CEO,” he stated, “ and that means picking your people, delegating the responsibility and accepting that they know the busi- ness.” Thus, we see technological dynamism actually realigning the reporting structure, and social discourse of the company.

My presentation in previous chapters focused on helping orga- nizations transform and change. Most important in organizational learning theories is the resistance to change that most workers have, particularly when existing cultural norms are threatened. ICAP was no exception to the challenges of change management. The most sig- nificant threat at ICAP was the fear that the traditional voice bro- ker was endangered. McDermott understood this fear factor and presented electronic trading not as a replacement but rather, a sup- plement to the voice broker. There was no question that there were certain areas of the business that lent themselves more to electronic trading; however, there are others that will never go electronic or at least predominantly electronic. Principles of responsive organizational dynamism suggest that accelerated change becomes part of the stra- tegic and cultural structure of an organization. We see both of these components at work in this case.

Strategically, ICAP was faced with a surge in business opportuni- ties that were happening at an accelerated pace and were, for the most part, unplanned, so there was little planned activity. The business was feeling its way through its own development, and its CEO was pro- viding management guidance, as opposed to specific solutions. ICAP represents a high-velocity organization similar to those researched by Eisenhardt and Bourgeois (1988), and supports their findings that a democratic, less power-centralized management structure enhances the performance of such a firm. From a cultural assimilation perspec- tive, the strategic decisions are changing the culture and requiring new structures and alignments. Such changes are bound to cause fears.

As a result of recognizing the inevitable changes that were becom- ing realities, McDermott reviewed the roles and responsibilities of his employees on the brokering side of the business. After careful analysis, he realized that he could divide the brokers into three dif- ferent divisions, which he branded as A, B, and C brokers. The A brokers were those who were fixed on the relational aspect of their jobs, so voice interaction was the only part of their work world. Such

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individuals could do things in the voice world that electronic means could not reach. They were personal experts, if you will, who could deal with clients requiring a human voice. Thus, the A broker would exist as long as the broker wanted to work—and would always be needed because a population of clients wants personal support over the phone. This is similar to the opposition to the Internet in which we find that some portion of the population will never use e-com- merce because they prefer a live person. The B broker was called the hybrid broker—an individual who could use both voice and electronic means. Most important, these brokers were used to “ convert” voice- based clients into electronic ones. As McDermott explained:

Every day I see a different electronic system that someone is trying to sell in the marketplace. Some of these new technologies are attempting to solve problems that do not exist. I have found that successful systems address the content more than the technology. Having a relationship for many of our customers is more important. And we can migrate those relationships from voice to electronic or some sort of a hybrid combi- nation. The B brokers will end up with servicing some combination of these relationships or migrate themselves to the electronic system. So, I believe they have nothing to fear.

The C brokers, on the other hand, represented the more average voice brokers who would probably not have a future within the busi- ness. They would be replaced by electronic trading because they did not bring the personal specialization of the A broker. The plight of the C broker did raise an important issue about change management and technological dynamism: Change will cause disruption, which can lead to the elimination of jobs. This only further supported the fears that workers had when faced with dynamic environments. For McDermott, this change would need to be openly discussed with the community, especially for the A and B brokers, who in essence would continue to play an important role in the future of the business. C brokers needed to be counseled so that they could appropriately seek alternate career plans. Thus, honesty brings forth trust, which inevi- tably fosters the growth of organizational learning. Another perspec- tive was that the A and B brokers understood the need for change and recognized that not everyone could adapt to new cultures driven

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by strategic integration, so they understood why the C broker was eliminated.

In Chapter 2, I discussed the dilemma of IT as a “ marginalized” component of an organization. This case study provides an opportunity to understand how the traditional IT staff at ICAP made the transi- tion into the new company—a company in which they represented a direct part of its success. As noted, ICAP considered the IT depart- ment as a back-office support function. In the new organization, it represented the nucleus or the base of all products and careers. Hence, McDermott expected ETC employees to be technology proficient. No longer were IT people just coders or hardware specialists—he saw tech- nology people as lawyers, traders, and other businesspeople. He related technology proficiency in a similar way to how his business used to view a master’ s degree in business (MBA) in the late 1980s. This issue provides further support for the cultural assimilation component of responsive organizational dynamism. We see a situation in which the discrepancy between who is and is not a technology person beginning to dwindle in importance. While there is still clear need for expertise and specialization, the organization as a whole has started the process of educating itself on the ways in which technology affects every aspect of its corporate mission, operations, and career development.

ICAP has not been immune to the challenges that have faced most technology-driven organizations. As discussed in Chapter 2, IT proj- ects typically face many problems in terms of their ability to complete projects on time and within budget. ICAP was also challenged with this dilemma. Indeed, ICAP had no formal process but focused on the criterion of meeting the delivery date as the single most important issue. As a result, McDermott was attempting to instill a new culture committed to the importance of what he called the “ real date of deliv- ery.” It was a challenge to change an existing culture that had difficulty with providing accurate dates for delivery. As McDermott suggested:

I am learning that technology people know that there is no way that they can deliver an order in the time requested, but they do not want to disap- point us. I find that technology people are a different breed from the peo- ple that I normally work with. Brokers are people looking for immediate gratification and satisfaction. Technology people, on the other hand, are always dedicated to the project regardless of its time commitment.

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McDermott was striving to attain a mix or blend of the traditional culture with the technology culture and create a new hybrid organiza- tion capable of developing realistic goals and target dates. This process of attainment mirrors the results from the Ravell case, which resulted in the formation of a new hybrid culture after IT and business staff members were able to assimilate one another and find common needs and uses for technology and the business.

McDermott also understood his role as a leader in the new orga- nization. He realized early on that technology people are what he called more “ individualistic” ; that is, they seemingly were reluctant to take on responsibility of other people. They seemed, as McDermott observed, “ to have greater pleasure in designing and creating some- thing and they love solving problems.” This was different from what CEOs experienced with MBAs, who were taught more to lead a group as opposed to being taught to solve specific problems. Yet, the integra- tion of both approaches can lead to important accomplishments that may not be reachable while IT and non-IT are separated by depart- mental barriers.

Ultimately, the cultural differences and the way they are managed lead to issues surrounding the basis of judging new technologies for future marketing consideration. McDermott understood that this was a work in progress. He felt strongly that the issue was not technology, but that it was the plan for using technology competitively. In other words, McDermott was interested in the business model for the tech- nology that defined its benefits to the business strategically. As he put it, “ Tell me how you are going to make money, tell me what you can do for me to make my life easier. That is what I am looking at!” While McDermott felt that many people were surprised by his response, he believed its reality was taken too much for granted. During the dot- com era, too many investors and businesses assumed that technologi- cal innovation would somehow lead to multiples of earnings—that simply did not happen. Essentially, McDermott realized that good technology was available in many places and that the best technology is not necessarily the one that will provide businesses with the highest levels of success.

Judging new technologies based on the quality of the business plan is an effective method of emphasizing the importance of why the entire organization needs to participate and understand technology.

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This inevitably leads to questions about the method in which ROI is, or should be, measured. The actual measurement of ROI for ICAP was remarkably simple yet effective. There were four methods of determining ROI. The first and most significant was whether the technology would increase volume of trades along the different prod- uct lines. The second was the amount in dollars of the securities being traded. That is, did technology provide a means for clients to do larger dollar trades? The third factor could be an increase in the actual num- ber of clients using the electronic system. The fourth might be allevi- ating existing bottlenecks in the voice trading process, whether it was a legal issue or the advantage provided by having electronic means. We see here that some of the ROI factors are direct and monetary. As expected methods, the first and second were very much direct mone- tary ways to see the return for investing in electronic trading systems. However, as Lucas (1999) reminds us, many benefits derived from IT investments are indirect, and some are impossible to measure. We see this with the third and fourth methods. Increasing the number of cli- ents indirectly suggested more revenue, but did not guarantee it. An even more abstract benefit was the improvement of throughput, what is typically known as improved efficiency in operations.

While all of the accomplishments of ICAP and McDermott seem straightforward, they were not accomplished without challenges; perhaps the most significant was the approach, determination, and commitment that were needed by the executive team. This chal- lenge is often neglected in the literature on organizational learning. Specifically, the executive board of ETC needed to understand what was necessary in terms of funding to appropriately invest in the future of technology. To do that, they needed to comprehend what e- business was about and why it was important for a global business to make seri- ous investments in it to survive. In this context, then, the executive board needed to learn about technology as well and found themselves in a rather difficult position. During this period, McDermott called in an outside consultant who could provide a neutral and objective opinion. Most important was to define the issue in lay terms so that board members could correlate it with their traditional business mod- els. Ultimately, the learning consisted of understanding that technol- ogy and e-commerce were about expanding into more markets, ones that ICAP could not reach using traditional approaches. There was a

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realization that ICAP was too focused on its existing client base, as opposed to reaching out for new ones—and there was also the reverse reality that a competitor would figure out a strategy to reach out to the client base of ICAP. What is also implied in expanding one’ s client base is that it means going outside one’ s existing product offerings. This had to be carefully planned as ICAP did not want to venture outside what it was—an intermediary brokering service. So, expan- sion needed to be carefully planned and discussed first among the executive members, then presented as a challenge to the senior man- agement, and so on.

This process required some modifications to the organizational learning process proposed by such scholars as Nonaka and Takeuchi (1995). Specifically, their models of knowledge management do not typically include the executive boards; thus, they are not considered a part of the learning organization. The ICAP case study exposes the fact that their exclusion can be a serious limitation, especially with respect to the creation of responsive organizational dynamism. In previous chapters, I presented a number of management models that could be used to assist in developing and sustaining organizational learning. They focused fundamentally on the concept of whether such manage- ment should be top-down, bottom-up, or, as Nonaka and Takeuchi suggest, “ middle-up-down.” I laid out my case for a combination of all of them in a specific order and process that could maximize each approach. However, none of these models really incorporates the out- side executive boards that have been challenged to truly understand what technology is about, their approach to management, and what their overall participation should be in organizational learning.

Perhaps the most significant historical involvement of executive boards was with the Year 2000 (Y2K) event. With this event, executive boards mandated that their organizations address the potential tech- nology crisis at the turn of the century. My CEO interviews verified that, if anything, the Y2K crisis served to educate executive boards by forcing them to focus on the issue. Boards became unusually involved with the rest of the organization because independent accounting firms, as outside objective consultants, were able to expose the risks for not addressing the problem. The handling of e-commerce by ICAP was in many ways similar but also suggests that executive boards should not always wait for a crisis to occur before they get involved. They also

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must be an important component of organizational learning, particu- larly in responsive organizational dynamism. While organizational learning fosters the involvement of the entire community or workers, it also needs advocates and supporters who control funding. In the case of ICAP, organizational learning processes without the participation of the executive board, ultimately would not have been successful. The experience of ICAP also suggests that this educational and learning process may need to come from independent and objective sources, which integrates another component of organizational learning that has not been effectively addressed: the role of outside consultants as a part of a community of practice. Figure 8.6 depicts the addition of the ICAP ETC executive board and outside consultants in the organiza- tional learning management process.

The sequential activities that occurred among the different communi- ties are shown in Table 8.1. While Table 8.1 shows the sequential steps necessary to complete a transformation toward strategic integration and cultural assimilation, the process is also very iterative. Specifically, this means that organizations do not seamlessly move from one stage to another without setbacks. Thus, transformation depends heavily on dis- course as the main driver for ultimate organizational evolution.

Figure 8.7 shows a somewhat messier depiction of organizational learning under the auspices of ROD. The changes brought on by dynamic interactions foster top-down, middle-up-down, and bottom- up knowledge management techniques—all occurring simultane- ously. This level of complex discourse creates a number of overlapping communities of practice that have similar, yet unique, objectives in learning. These communities of practice overlap at certain levels as shown in Figure 8.8.

As stated, organizational learning at the executive levels tends to be ignored in the literature. At ICAP, an important community of practice emerged that created a language discourse essential to its overall success in dealing with technological dynamism, brought on by technological innovation in electronic communications. Language was critical at this level; ICAP is a U.K.-based organization and as such has an international board. As McDermott explained:

As you know, from travelling anywhere around the world, cultures are different. And even the main office for our company, ICAP in England,

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and even with the English, we are separated by a common language, as we often say. There is a very, very different culture everywhere in the world. I will tell you that information technology in our company is separated from electronic trading—there is a difference.

Thus, McDermott’ s challenge was to establish a community that could reach consensus not only on strategic issues but also

Advisement on e-commerce business opportunities

Overall changes to corporate mission financial commitments approve major organizational changes—form ETC

Discourse and learning at the organizational level, non-event specific. ICAP board focused on impact of technology on trading operations.

Senior management team meets and determines strategy and organization for creating new corporate entity.

Middle managers determine how and when operations will be changed. �is includes personnel changes and development of specific implementation schedules through group discourse.

Operations personnel work with middle management to determine change in organization structure and duties and responsibilies of new and old positions.

Individual reflective practice, tacit knowledge of how to actually implement changes at the individual and group levels

Buy in modify implementation plans based on discourse and knowledge of how the business operates

Buy in modify strategic plans based on discourse and knowledge of specific areas of the business

Specific skills in technology strategy objective analysis of business realignment education of executive board

Initiator of change knowledge and strategic management organizational change agent

ICAP ETC executive board

Independent consultants

CEO

Senior management

Middle management

Operations

Figure 8.6 ICAP ETC management tiers.

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Table 8.1 ICAP—Steps to Transformation

STEP LEARNING ENTITY(S) LEARNING ACTIVITY

1 CEO Americas Initiates discourse at board level on approaches to expanding electronic trading business

2 Executive board Decides to create separate corporate entity ETC to allow for the establishment of a new culture

3 Outside consultant E-commerce discourse, ways in which to expand the domain of the business

4 Executive board Discussion of corporate realignment of mission, goals, and objectives

5 CEO/senior management Establishes strategic direction with senior management

6 Senior management/middle management

Meet to discuss and negotiate details of the procedures to implement

7 Middle management/operations communities

Meet with operations communities to discuss impact on day-to-day processes and procedures

Discourse initiated

Discourse on “how” to

implement

Rollout of new organization and

strategies

Interactive discussions

Questions and responses Executive

board CEO

Americas

Senior management

Middle management

Operations

Operations adjustments based on reflective practices

Adjustments as a result of discourse with operations

community

New ideas and adjustments

Objective advice and education

Objective advice and education

Meetings and discussions on

day-to-day operations

Consultants

Figure 8.7 ICAP—responsive organizational dynamism.

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on the very nomenclature applied to how technology was defined and procedures adopted among the international organizations within ICAP. That is why outside consultation could be effective as it provided independent and objective input that could foster the integration of culture-based concepts of technology, strategy, and ROI. Key to understanding the role of executive communi- ties of practice is their overall importance to organizational learn- ing growth. Very often we have heard, “ Can we create productive discourse if the executive team cannot discuss and agree on issues themselves?” Effectively, ICAP created this community to ensure consistency among all the levels within the business. Consistent with the responsive organizational dynamism arc, learning in this community was at the “ system” or organizational level, as opposed to being based on specific events like Y2K. These concerns had a broader context, and they affected both short- and long-term issues of business strategy and culture.

Another community of practice was the operations manage- ment team, which was the community responsible for transform- ing strategy into a realistic plan of strategic implementation. This team consisted of three levels (Figure 8.9). We see in this commu- nity of practice that the CEO was common to both this commu- nity and the executive community of practice. His participation in both provided the consistency and discourse that pointed to three valuable components:

1. The CEO could accurately communicate decisions reached at the board level to the operations management team.

CEO Americas

Executive board

Consultants

Questions and responses

Objective advice and education

Objective advice and education

Interactive discussions

Discourse initiated

Figure 8.8 ICAP—community of practice.

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2. The operations team could provide important input and sug- gestions to the CEO, who could then provide this informa- tion to the executive community.

3. The CEO interacted in different ways between the two com- munities of practice. This was critical because the way things were discussed, the language used, and the processes of con- sensus were different in each community.

The operations management community was not at the detailed level of implementation; rather, it was at the conceptual one. It needed to embrace the strategic and cultural outcomes discussed at the execu- tive community, suggest modifications if applicable, and eventually reach consensus within the community and with the executive team. The operations management community, because of its conceptual perspectives, used more organizational learning methods as opposed to individual techniques. However, because of their relationship with operations personnel, they did participate in individual reflec- tive practices. Notwithstanding their conceptual nature, event-driven issues were important for discussion. That is why middle management needed to be part of this community, for without their input, concep- tual foundations for implementing change may very well have flaws.

CEO Americas

Senior managementNew ideas and

adjustments

Middle management

Rollout of new organization and

strategies

Discourse on “how” to

implement

Adjustments as a result of discourse with operations

community

Figure 8.9 ICAP—community of practice interfaces.

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Middle management participated to represent the concrete pieces and the realities for modifications to conceptual arguments. As such, middle managers could indirectly affect the executive board commu- nity since their input could require change in the operations man- agement community, which in turn could foster the need for change requests back to the board. This process provides the very essence of why communities of practice need to work together, especially with the dynamic changes that can occur from technological innovations.

The third community of practice at ICAP was at the operations or implementation tier. It consisted of the community of staff that needed to transition conceptual plans into concrete realities. To ensure that conceptual ideas of implementation balanced with the concrete events that needed to occur operationally, middle managers needed to be part of both the operations management, and implementation communities, as shown in Figure 8.10.

Because of the transitory nature of this community, it was important that both organizational learning and individual learning occurred simultaneously. Thus, it was the responsibility of middle managers to provide the transition of organizational-based ideas to the event and concrete level so that individuals understood what it ultimately meant to the operations team. As one would expect, this level oper- ated on individual attainment, yet through the creation of a commu- nity of practice, ICAP could get its operations members to begin to think more at the conceptual level. This provided management with the opportunity to discuss conceptual and system-level ideas with

Middle management

Operations

Meetings and discussions on

day-to-day operations

Operations adjustments based on reflective practices

Figure 8.10 Middle-management community of practice at ICAP.

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operations personnel. Operations personnel could review them and, under a managed and controlled process, could reach consensus. That is, changes required by the implementation community could be rep- resented to the operations management community through middle management. If middle management could, through discourse and language, reach consensus with the operations management commu- nity, then the CEO could bring them forth to the executive commu- nity for further discussion. We can see this common thread concept among communities of practice as a logical process among tiers of operations and management and one that can foster learning matura- tion, as identified in the responsive organizational dynamism arc. This is graphically shown in Figure 8.11.

Figure 8.11 shows the relationships among the three communi- ties of practice at ICAP and how they interacted, especially through upward feedback using common threads of communication. Thus, multiple communities needed to be linked via common individu- als to maintain threads of communication necessary to support

Executive community of practice

Operations management community of practice

CEO Americas

CEO AmericasNew ideas

and adjustments

Implementation community of practice

Senior management

Operations

Adjustments as a result of discourse with operations community

Middle management

Middle management

Executive board

Consultants

Figure 8.11 ICAP—COP common threads.

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responsive organizational dynamism and learning across organiza- tional boundaries.

Another important observation is the absence of independent con- sultants from the operations management and implementation com- munities of practice. This does not suggest that consultants were not needed or used by these communities. The independent consultant in the executive community provides organizational-level learning, as opposed to the consultant who is, for example, a specialist in database design or training.

This case study provides an example of how an international firm dealt with the effects of technology on its business. The CEO, Stephen McDermott in this case, played an important role, using many forms of responsive organizational dynamism, in managing the organiza- tion through a transformation. His experience fostered the realiza- tion that CEOs and their boards need to reinvent themselves on an ongoing basis. Most important, this case study identified the number of communities of practice that needed to participate in organiza- tional transformation. The CEO continued to have an important role; in many ways, McDermott offered some interesting advice for other chief executives to consider:

1. The perfect time may or may not exist to deal with changes brought on by technology. The CEO may need to just “ dive in” and serve as a catalyst for change.

2. Stay on course with the fundamentals of business and do not believe everything everyone tells you; make sure your busi- ness model is solid.

3. Trust that your abilities to deal with technology issues are no different from managing any other business issue.

As a result of the commitment and the process for adapting tech- nology at ICAP, it has realized many benefits, such as the following:

• Protection of tacit knowledge : By incorporating the existing trading system, ICAP was able to retain the years of expe- rience and expertise of its people. As a result, ICAP devel- oped an electronic system that better served the needs of broker users; this ability gave it an advantage over competitor systems.

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• Integrated use : The combination of the new system and its compatibility with other ICAP legacy systems enabled the organization to continue to service the core business while increasing access for new clients. This resulted in a reduction of costs and an increase in its user base.

• Transformation of tacit knowledge to explicit product knowledge : By providing an infrastructure of learning and strategic inte- gration, ICAP was able to bridge a wide range of its employ- ees’ product knowledge, particularly of those outside IT with a specific understanding of trading system design, and to transform their tacit knowledge into explicit value that was used to build on to the existing trading systems.

• Flexibility : Because multiple communities of practice were formed, IT and non-IT cultures were able to assimilate. As a result, ICAP was able to reduce its overall development time and retain the functionality necessary for a hybrid voice and electronic trading system.

• Expansion : Because of the assimilation of cultures, ICAP was able to leverage its expertise so that the design of the electronic system allowed it to be used with other third-party trading systems. For example, it brought together another trading system from ICAP in Europe and enabled concurrent development in the United States and the United Kingdom.

• Evolution : By incorporating existing technology, ICAP con- tinued to support the core business and gradually introduced new enhancements and features to serve all of its entities.

• Knowledge creation : By developing the system internally, ICAP was able to increase its tacit knowledge base and stay current with new trends in the industry.

ICAP went on to evolve its organization as a result of its adop- tion of technology and its implementation of responsive organiza- tional dynamism. The company reinvented itself again. McDermott became the chief operating officer (COO) for three business units in the Americas; all specific business lines, yet linked by their inte- grated technologies and assimilated cultures. In addition, ICAP purchased a competitor electronic trading product and assimilated these combined technologies into a new organization. Business

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revenues rose at that time from $350 million to over $1 billion four years later. The company also had more than 2,800 staff members and operated from 21 offices worldwide. Much has been attrib- uted to ICAP’ s investment in electronic trading systems and other emerging technologies.

Five Years Later

I returned to meet with Stephen McDermott almost five years after our original case study. Many of the predictions about how technol- ogy would affect the business had indeed become reality. In 2010, technology at ICAP had become the dominant component of the business. The C brokers had all but disappeared, with the organiza- tion now consisting of two distinct divisions: voice brokers and elec- tronic brokers. The company continued to expand by acquiring other smaller competitors in the technology space. The electronic division now consisted of three distinct divisions from these acquisitions, with ETC just one of those divisions. In effect, the expansion led to more specialization and leveraging of technology to capture larger parts of various markets.

Perhaps the unseen reality was how quickly technology became a commodity. As McDermott said to me, “ Everybody (our competi- tors) can do it; it’ s now all about your business strategy.” While the importance of strategy was always part of McDermott’ s position, the transition from product value to market strategy was much more transformative on the organization’ s design and how it approached the market. For example, the additional regulatory controls on voice brokering actually forced many brokers to move to an electronic interface, which reduced liability between the buyer and the broker. McDermott also emphasized how “ technology has created overnight businesses,” forcing the organization to understand how technology could provide new competitive advantages that otherwise did not exist. Today, 50% of the trading dollars, some $2 trillion, occurs over electronic technology-driven platforms. Undoubtedly, these dynamic changes, brought on by technological dynamism, continue to chal- lenge ICAP on how they strategically integrate new opportunities and how the organization must adapt culturally with changes in indi- vidual roles and responsibilities.

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HTC HTC (a pseudoacronym) is a company that provides creative business services and solutions. The case study involving HTC demonstrates that changes can occur when technology reports to the appropriate level in an organization. This case study offers the example of a com- pany with a CEO who became an important catalyst in the successful vitalization of IT. HTC is a company of approximately 700 employees across 16 offices. The case involves studying the use of a new applica- tion that directly affected some 200 staff people.

The company was faced with the challenge of providing accurate billable time records to its clients. Initial client billings were based on project estimates, which then needed to be reconciled with actual work performed. This case turned out to be more complex than expected. Estimates typically represented the amount of work to which a client agreed. Underspending the budget agreed to by the client, however, could lead to lost revenue opportunities for the firm. For example, if a project was estimated at 20 hours, but the actual work took only 15, then most clients would seek an additional five hours of service because they had already budgeted the total 20 hours. If the recon- ciliation between hours budgeted and hours worked was significantly delayed, clients might lose their window of opportunity to spend the remaining five hours (in the example situation). Thus, the incapacity to provide timely reporting of this information resulted in the actual loss of revenue, as well as upset clients. If clients did not spend their allocated budget, they stood to lose the amount of the unused portion in their future budget allocations. Furthermore, clients had expecta- tions that vendors were capable of providing accurate reporting, espe- cially given that present-day technology could automate the recording and reporting of this information. Finally, in times of a tight econ- omy, businesses tend to manage expenditures more closely and insist on more accurate record keeping than at other times.

The objective at HTC was to transform its services to better meet the evolving changes of its clients’ business requirements. While the requirement for a more timely and accurate billing system seems straightforward, it became a greater challenge to actually implement than it otherwise seemed.

The first obstacle for HTC to overcome was the clash between this new requirement and the existing ethos, or culture of the business.

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HTC provided creative services; 200 of its staff members were artisti- cally oriented and were uncomfortable with focusing on time-based service tracking; they were typically engrossed in the creative per- formance required by their clients. Although it would seem a simple request to track time and enter it each day, this projected change in business norms became a significant barrier to its actual implemen- tation. Project managers became concerned that reporting require- ments would adversely affect performance, and thus, inevitably hurt the business. Efforts to use blunt force—do it or find another job — were not considered a good long-term solution. Instead, the company needed to seek a way to require the change while demonstrating the value of focusing on time management.

Many senior managers had thought of meeting with key users to help determine a workable solution, but they were cognizant of the fact that such interactive processes with the staff do not always lead to agreement on a dependable method of handling the problem. This is a common concern among managers and researchers working in orga- nizational behavior. While organizational learning theorists advocate this mediating, interactive approach, it may not render the desired results in time and can even backfire if staff members are not genu- inely willing to solve the problem or if they attempt to make it seem too difficult or a bad idea. The intervention of the CEO of HTC, together with the change in time reporting methods, directly involv- ing IT, made a significant difference in overcoming the obstacle.

IT History at HTC

When I first interviewed the CEO, I found that she had little direct interaction with the activities of the IT department. IT reported to the CFO, as in many companies, because it was seen as an opera- tional support department. However, the CEO subsequently became aware of certain shortfalls associated with IT and with its report- ing structure. First, the IT department was not particularly liked by other departments. Second, the department seemed incapable of implementing software solutions that could directly help the busi- ness. Third, the CFO did not possess the creativity beyond account- ing functions to provide the necessary leadership needed to steer the activities of IT in a more fruitful direction. As a result, the CEO

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decided that the IT department should report directly to her. She was also concerned that IT needed a more senior manager and hired a new chief technology officer (CTO).

Interactions of the CEO

My research involving 40 chief executives showed that many execu- tives are unsure about what role they need to take with their chief IT managers. However, the CEO of HTC took on the responsibility to provide the financial support to get the project under way. First, the CEO made it clear that a solution was necessary and that appropri- ate funds would be furnished to get the project done. Second, the new CTO was empowered to assess the needs of the business and the staff, and to present a feasible solution for both business and cultural adaptation needs.

The CEO was determined to help transform the creative-artistic service business into one that would embrace the kinds of controls that were becoming increasingly necessary to support clients. Addressing the existing lag in collecting time records from employees, which directly affected billing revenue, seemed like the logical first step for engaging the IT department in the design and implementation of new operating procedures and cultural behavior.

Because middle managers were focused on providing services to their clients, they were less concerned with the collection of time sheets. This need was a low priority of the creative workers of the firm. Human resources (HR) had been involved in attempting to address the problem, but their efforts had failed. Much of this difficulty was attributed to an avoidance by middle managers of giving ultimatums as a solution; that is, simply demanding that workers comply. Instead, management subsequently became interested in a middle-ground approach that could possibly help departments realize the need to change and to help determine what the solution might be. The ini- tial thinking of the CEO was to see if specialized technology could be built that would (1) provide efficiency to the process of recording time, and (2) create a form of controls that would require some level of compliance.

With the involvement of the CEO, the embattled IT depart- ment was given the authority to determine what technology could

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be employed to help the situation. The existing application that had been developed by the IT department did not provide the kind of ease of use and access that was needed by operations. Previous attempts to develop a new system, without the intervention of the CEO, had failed for a number of reasons. Management did not envision the potential solution that software was capable of delivering. It was not motivated in getting the requisite budget support; no one was in a position to champion it, to allocate the needed budget. Ultimately, management individuals were not convinced of the importance of providing a better solution.

The Process

The new CTO determined that there was a technological solution that could provide greater application flexibility, while maintaining its necessary integrity, through the use of the existing e-mail system. The application would require staff to enter their project time spent before signing on to the e-mail system. While this procedure might be seen as a punishment, it became the middle-ground solution for securing compliance without dramatically dictating policy. There was initial rejection of the procedure by some of the line managers, but it was with the assistance of the CEO, who provided the necessary support and enforcement, that the new procedure took hold. This enforcement became crucial when certain groups asked to be excluded from the process. The CEO made it clear that all departments were expected to comply.

The application was developed in three months and went into pilot implementation. The timely delivery of the application by the IT department gave IT its first successful program implementation and helped change the general view of IT among its company colleagues. It was the first occasion in which IT had a leadership role in guiding the company to a major behavioral transformation. Another positive outcome that resulted from the transition occurred in the way that resistance to change was managed by the CTO. Simply put, the cre- ative staff was not open to a structured solution. The CTO’ s response was to implement a warning system instead of immediately disallow- ing e-mail access. This procedure was an important concession as it

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allowed staff and management to deal with the transition, to meet them halfway.

Transformation from the Transition

After the pilot period, the application was implemented firm-wide. The results of this new practice have created an interesting internal transformation: IT is now intimately engaged in working on new enhancements to the time-recording system. For instance, a “ digital dashboard” is now used to measure performance against estimates. More important, however, are the results of the new application. The firm has shown substantial increases in revenue because its new time- recording system enabled it to discover numerous areas in which it was underbilling its clients. Its clients, on the other hand, are happier to receive billing statements that can demonstrate more accurately than before just how time was spent on their projects. Hence, the IT-implemented solution proved beneficial not only to the client but also to the firm.

Notwithstanding the ultimate value of utilizing appropriate tech- nology and producing measurable outcomes, IT has also been able to assist in developing and establishing a new culture in the firm. Staff members are now more mindful and have a greater sense of cor- porate-norm responsibility than they did before. They have a clearer understanding of the impact that recording their time will have and of how this step ultimately contributes to the well-being of the business. Furthermore, the positive results of the new system have increased attention on IT spending. The CEO and other managers seek new ways in which technology can be made to help them; this mindset has been stressed further down to operating departments. The methods of IT evaluation have also evolved. There is now a greater clarification of technology benefits, a better articulation of technology problems, less trial and error, and more time spent on understanding how to use the technology better.

Another important result from this project has been the cascad- ing effect of the financial impact. The increased profits have required greater infrastructure capacity. A new department was created with five new business managers whose responsibility it is to analyze and interpret the time reports so that line managers, in turn, can think of

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ways to generate greater profit through increased services. The project, in essence, has merged the creative performance of the firm with new business initiatives, resulting in a higher ROI.

In analyzing the HTC case study, we see many organizational learning techniques that were required to form a new community that could assimilate multiple cultures. However, while the organiza- tion saw the need, it could not create a process without an advocate. This champion was the CEO, who had the ability to make the salient organizational changes and act as a catalyst for the natural processes that HTC hoped to achieve. This case also provides direction on the importance of having the right resource to lead IT. At HTC, this person was the CTO; in actuality, this has little bearing on the over- all role and responsibilities that were needed at HTC. At HTC, it became more apparent to the CEO that she had the wrong individual running the technology management of her firm. Only the CEO in this situation was able to foster the initial steps necessary to start what turned out to be a more democratic evolution of using technology in the business.

Companies that adapt to technological dynamism find that the existing leadership and infrastructure may need to be enhanced or replaced as well as reorganized, particularly in terms of reporting structure. This case supports the notion that strategic integration may indeed create the need for more cultural assimilation. One question to ask, is why the CEO waited so long to make the changes. This was not a situation of a new CTO who inherited resources. Indeed, the former CTO was part of her regime. We must remember that CEOs typically concentrate on driving revenue. They hope that what are considered “ back-end” support issues will be handled by other senior managers. Furthermore, support structures are measured differently and from a specific frame of reference. I have found that CEOs inter- vene in supporter departments only when there are major complaints that threaten productivity, customer support, sales, and so on. The other threat is cost, so CEOs will seek to make supporter departments more efficient. These activities are consistent with my earlier findings regarding the measurement and role of supporter departments.

In the case of HTC, the CEO became more involved because of the customer service problems, which inevitably threatened revenues.

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On her review of the situation, she recognized three major flaws in the operation:

• The CFO was not in a position to lead the organizational changes necessary to assimilate a creative-based department.

• Technology established a new strategy (strategic integration), which necessitated certain behavioral changes within the organization (cultural assimilation). The creative department was also key to make the organizational transition possible.

• The current CTO did not have the management and business skills that were necessary to facilitate the integration of IT with the rest of the organization.

HTC provides us with an interesting case of what we have defined as responsive organizational dynamism, and it bears some parallels to the Ravell study. First, like Ravell, the learning process was triggered by a major event. Second, the CTO did not dictate assimilation but rather provided facilitation and support. Unlike Ravell, the CEO of the organization was the critical driver to initiate the project. Because of the CEO’ s particular involvement, organizational learning started at the top and was thus system oriented. At the same time, the CTO understood that individual event-driven learning using reflective practices was critical to accomplish organizational transformation. In essence, the CTO was the intermediary between organizational-level and individual-level learning. Figure 8.12 depicts this relationship.

Five Years Later

HTC has been challenged because of the massive changes that adver- tising companies have faced over this timeframe, particularly with the difficulty of finding new advertising revenue sources for their clients. The CEO has remained active in technology matters, and there has also been turnover in the CTO role at the company. The CEO has been challenged to find the right fit—a person who can understand not only the technology but also the advertising business. With media companies taking over much of the advertising space, the CEO clearly recognizes the need to have a technology-driven market strategy. Most important is the dilemma of how to transform what

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was once a “ paper” advertising business to what has become a lower- cost media market. “ Advertising companies need to do more business just to keep the same revenue stream and that is a big challenge in today’ s volatile market,” the CEO stated. The time-recording system has gone through other changes to provide what are known as value­ added services , not necessarily tied to time effort, but rather, the value of the output itself.

The experience at HTC shows the importance of executive partici- pation, not just sponsorship. Many technology projects have assumed the need for executive sponsorship. It is clear to me that this position is obsolete. If the CEO at HTC had not become involved in the prob- lem five years ago, then the organization would not be in the position to embrace the newest technology dynamism affecting the industry. So, the lessons learned from this case, as well as from the Ravell case, are that all levels of the organization must be involved, and that exec- utives must not be sacred. Responsive organizational dynamism, and the use of organizational learning methods to develop staff, remains key concepts for adapting to market changes and ensuring economic survival.

Organizational and system level learning

Organizational and individual-level learning

Individual learning

Learning facilitator

CTO

CEO

Middle management

Creative operations

Figure 8.12 HTC—Role of the CTO as an intermediary.

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Summary

This chapter has provided three case studies that show the ways technology and organizational learning operate and lead to results through performance. The Siemens example provided us with an opportunity to see a technology executive formulate relationships, form multiple communities of practice, and create an infrastructure to support responsive organizational dynamism. This case provides a method in which IT can offer a means of handling technology as new information and, through the formation of communities of practice, it can generate new knowledge that leads to organizational transforma- tion and performance.

The case study regarding ICAP again shows why technology, as an independent variable, provides an opportunity, if taken, for an inter- national firm to move into a new competitive space and improve its competitive advantage. ICAP was only successful because it under- stood the need for organizational learning, communities of practice, and the important role of the CEO in facilitating change. We also saw why independent consultants and executive boards need to par- ticipate. ICAP symbolizes the ways in which technology can change organizational structures and cultural formations. Such changes are at the very heart of why we need to understand responsive organi- zational dynamism. The creation of a new firm, ETC, shows us the importance of these changes. Finally, it provides us with an example of how technology can come to the forefront of an organization and became the major driver of performance.

HTC, on the other hand, described two additional features of how responsive organizational dynamism can change internal processes that lead to direct returns. The CEO, as in the ICAP case, played an important, yet different, role. This case showed that the CTO could also be used to facilitate organizational learning, becoming the nego- tiator and coordinator between the CEO, IT department, and cre- ative user departments.

All three of these cases reflect the importance of recognizing that most technology information exists outside the organization and needs to be integrated into existing cultures. This result is consistent with the findings of Probst et al. (1998), which show that long-term sustained competitive advantage must include the “ incorporation and integration

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of information available outside the borders of the company” (p. 247). The reality is that technology, as an independent and outside variable, challenges organizations in their abilities to absorb external informa- tion, assimilate it into their cultures, and inevitably apply it to their commercial activities as a function of their existing knowledge base.

These case studies show that knowledge creation most often does not get created solely by individuals. It is by using communities of practice that knowledge makes its way into the very routines of the organization. Indeed, organizational learning must focus on the transformation of individual skills into organizational processes that generate measurable outcomes. Probst et al. (1998) also shows that the development of organizational knowledge is mediated via multiple levels. Walsh (1995) further supports Probst et al.’ s findings that there are three structures of knowledge development in an organization. The first is at the individual level; interpretation is fostered through reflective practices that eventually lead to personal transformation and increased individual knowledge. The second structure is at the group level; individual knowledge of the group is combined into a consen- sus, leading to a shared belief system. The third structure resides at the organizational level; knowledge emanates from the shared beliefs and the consensus of the groups, which creates organizational knowledge. It is important to recognize, however, that organizational knowledge is not established or created by combining individual knowledge. This is a common error, particularly among organizational learning prac- titioners. Organizational knowledge must be accomplished through social discourse and common language interactions so that knowl- edge can be a consensus among the communities of practice.

Each of the case studies supported the formation of tiers of learning and knowledge. The individuals in these cases all created multiple lay- ers that led to structures similar to those suggested by scholars. What makes these cases so valuable is that technology represented the exter- nal knowledge. Technological dynamism forced the multiple struc- tures from individual-based learning to organizational-level learning, and the unique interactions among the communities in each example generated knowledge leading to measurable performance outcomes. Thus, as Probst and Bü chel (1996, p. 245) conclude, “ Organizational learning is an increase in organizational knowledge base, which leads to the enhancement of problem-solving potential of a company.”

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However, these case studies also provide important information about the process of the interactions. Many tiered structures tend to be viewed as a sequential process. I have presented theories sug- gesting that knowledge management is conditioned either from the top-down, middle-up-down, or bottom-up. It has been my posi- tion that none of these processes should be seen as set procedures or methodologies. In each of these cases, as well as in the Ravell case, the flow of knowledge occurs differently and, in some ways, uniquely to the culture and setting of the organization. This suggests that each organization must derive its own process, adhering more to the concept of learning, management, and outcomes, as opposed to a standard system of how and when they need to be applied. Table 8.2 summarizes the different approaches of organizational learning of the three case studies.

Such is the challenge of leaders who aspire to create the learning organization. Technology plays an important role because, in reality, it tests the very notions of organizational learning theories. It also creates many opportunities to measure organizational learning, and its impact on performance. Indeed, technology is the variable that provides the most opportunity to instill organizational learning, and knowledge management in a global community.

Table 8.2 Summary of Organizational Learning Approaches

SUBJECT SIEMENS ICAP/ETC HTC

Knowledge management participation

CIO as middle-up-down

Top-down from CEO and bottom-up from operations

Top-down from CEO and middle-up-down from CTO

Community of practices

President’ s Council CFO

CIO advisory board

Executive Board Operations Management Implementation

CEO/CTO CTO operations

Participating entities Presidents CFOs Global CIO Corporate CIOs Regional CIOs Operating CIOs Central CIOs

Executive board Outside consultants

CEO Senior management Middle management Operations

CEO CTO Middle management Creative operations

Common thread Corporate CIO CEO Senior management Middle management

CTO

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The case studies also provided an understanding of the transformational process and the complexities of the relationships between the different learning levels. It is not a single entity that allows a company to be competitive but the combination of knowl- edge at each of the different tiers. The knowledge that exists through- out a company is typically composed of three components: processes, technology, and organization (Kanevsky & Housel, 1998). I find that, of these three components, technology is more variable than the oth- ers and, as stated many times in this book, at a dynamic and unpre- dictable fashion (that condition, called technological dynamism). Furthermore, the technology component has direct effects on the other two. What does this mean? Essentially, technology is at the core of organizational learning and knowledge creation.

This chapter has shown the different ways in which technology has been valued and how, through organizational learning, tacit knowl- edge is transformed into explicit knowledge, and used for competitive advantage. We have seen that not all of this value creation can be directly attributed to technology; in fact, this is rarely the case. Most value derived from technology is indirect, and it must be recognized by management as maximizing outcomes. Two of the case studies looked at the varying roles and responsibilities of the CEO. I believe their involvement was critical. Indeed, the conclusions reached from the Ravell case showed further support that the absence of the CEO will limit results. Furthermore, the CEO was crucial to sustaining organizational learning and the responsive organizational dynamism infrastructure.

Much has been written about the need to link learning to knowl- edge and knowledge to performance. This process can sometimes be referred to as a value chain. Kanevsky and Housel (1998) created what they call a “ learning-knowledge-value spiral,” comprised of six spe- cific steps to creating value from learning and ultimately, changing product or process descriptions, as shown in Figure 8.13.

I have modified Figure 8.13 to include “ technology” ; that is, how technology affects learning, learning affects knowledge, and so on. Table 8.3 is a matrix that reflects the specific results, in each phase, for the three case studies.

Table 8.3 reflects the ultimate contribution that technology made to the learning-knowledge-value chain. I have also notated the ROI

2 3 7sYnerGIstIC unIon oF It

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2 3 8 InForMAtIon teChnolo GY

generated from each investment. It is interesting that two of the three cases generated identifiable direct revenue streams from their invest- ment in technology.

This chapter has laid the foundation for Chapter 9, which focuses on the ways IT can maximize its relationship with the community and contribute to organizational learning. To accomplish this objec- tive, IT must begin to establish best practices.

Change in product/process

description Learning

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Figure 8.13 The learning-knowledge-value cycle. (From Kanevsky, V., et al. (Eds.), Knowing in Firms: Understanding, Managing and Measuring Knowledge , Sage, London, 1998, pp. 240– 252.)

2 3 9

9 foRming a CybeR

seCuRiT y CulTuRe

Introduction

Much has been written regarding the importance of how companies deal with cyber threats. While most organizations have focused on the technical ramifications of how to avoid being compromised, few have invested in how senior management needs to make security a priority. This chapter discusses the salient issues that executives must address and how to develop a strategy to deal with the various types of cyber attack that could devastate the reputation and revenues of any business or organization. The response to the cyber dilemma requires evolving institutional behavior patterns using organizational learning concepts.

History

From a historical perspective we have seen an interesting evolution of the types and acceleration of attacks on business entities. Prior to 1990, few organizations were concerned with information security except for the government, military, banks and credit card companies. In 1994, with the birth of the commercial Internet, a higher volume of attacks occurred and in 2001 the first nation-state sponsored attacks emerged. These attacks resulted, in 1997, in the development of com- mercial firewalls and malware. By 2013, however, the increase in attacks reached greater complexity with the Target credit card breach, Home Depot’ s compromise of its payment system, and JP Morgan’ s exposure that affected 76 million customers and seven million busi- nesses. These events resulted in an escalation of fear, particularly in the areas of sabotage, theft of intellectual property, and stealing of money. Figure 9.1 shows the changing pace of cyber security