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3 TeChnology as a

vaRiable anD Responsive oRg aniz aTional Dynamism

Introduction

This chapter focuses on defining the components of technology and how they affect corporate organizations. In other words, if we step back momentarily from the specific challenges that information tech- nology (IT) poses, we might ask the following: What are the generic aspects of technology that have made it an integral part of strategic and competitive advantage for many organizations? How do organizations respond to these generic aspects as catalysts of change? Furthermore, how do we objectively view the role of technology in this context, and how should organizations adjust to its short- and long-term impacts?

Technological Dynamism

To begin, technology can be regarded as a variable, independent of others, that contributes to the life of a business operation. It is capable of producing an overall, totalizing, yet distinctive, effect on organizations— it has the unique capacity to create accelerations of corporate events in an unpredictable way. Technology, in its aspect of unpredictability, is necessarily a variable, and in its capacity as accel- erator— its tendency to produce change or advance— it is dynamic. My contention is that, as a dynamic kind of variable, technology, via responsive handling or management, can be tapped to play a special role in organizational development. It can be pressed into service as the dynamic catalyst that helps bring organizations to maturity in dealing not only with new technological quandaries, but also with other agents of change. Change generates new knowledge, which in turn requires a structure of learning that should, if managed properly,

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result in transformative behavior, supporting the continued evolution of organizational culture. Specifically, technology speeds up events, such as the expectation of getting a response to an e-mail, and requires organizations to respond to them in ever-quickening time frames. Such events are not as predictable as those experienced by individuals in organizations prior to the advent of new technologies— particu- larly with the meteoric advance of the Internet. In viewing technology then as a dynamic variable, and one that requires systemic and cul- tural organizational change, we may regard it as an inherent, internal driving force— a form of technological dynamism.

Dynamism is defined as a process or mechanism responsible for the development or motion of a system. Technological dynamism charac- terizes the unpredictable and accelerated ways in which technology, specifically, can change strategic planning and organizational behav- ior/culture. This change is based on the acceleration of events and interactions within organizations, which in turn create the need to better empower individuals and departments. Another way of under- standing technological dynamism is to think of it as an internal drive recognized by the symptoms it produces. The new events and interac- tions brought about by technology are symptoms of the dynamism that technology manifests. The next section discusses how organiza- tions can begin to make this inherent dynamism work in their favor on different levels.

Responsive Organizational Dynamism

The technological dynamism at work in organizations has the power to disrupt any antecedent sense of comfortable equilibrium or an unwelcome sense of stasis. It also upsets the balance among the vari- ous factors and relationships that pertain to the question of how we might integrate new technologies into the business— a question of what we will call strategic integration— and how we assimilate the cul- tural changes they bring about organizationally— a question of what we call cultural assimilation. Managing the dynamism, therefore, is a way of managing the effects of technology. I propose that these orga- nizational ripples, these precipitous events and interactions, can be addressed in specific ways at the organizational management level. The set of integrative responses to the challenges raised by technology

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is what I am calling responsive organizational dynamism, which will also receive further explication in the next few chapters. For now, we need to elaborate the two distinct categories that present themselves in response to technological dynamism: strategic integration and cul- tural assimilation. Figure 3.1 diagrams the relationships.

Strategic Integration

Strategic integration is a process that addresses the business- strategic impact of technology on organizational processes. That is, the business-strategic impact of technology requires immediate orga- nizational responses and in some instances zero latency. Strategic integration recognizes the need to scale resources across traditional business– geographic boundaries, to redefine the value chain in the life cycle of a product or service line, and generally to foster more agile business processes (Murphy, 2002). Strategic integration, then,

Technology as an independent

variable

Creates Organizational

dynamism

Acceleration of events that require different

infrastructures and organizational processes

Requires

Strategic integration

Cultural assimilation

Symptoms and implications

Figure 3.1 Responsive organizational dynamism.

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is a way to address the changing requirements of business processes caused by the sharp increases in uses of technology. Evolving tech- nologies have become catalysts for competitive initiatives that create new and different ways to determine successful business investment. Thus, there is a dynamic business variable that drives the need for technology infrastructures capable of greater flexibility and of exhib- iting greater integration with all business operations.

Historically, organizational experiences with IT investment have resulted in two phases of measured returns. The first phase often shows negative or declining productivity as a result of the investment; in the second phase, we often see a lagging of, although eventual return to, productivity. The lack of returns in the first phase has been attributed to the nature of the early stages of technology exploration and experimentation, which tend to slow the process of organizational adaptation to technology. The production phase then lags behind the ability of the organization to integrate new technologies with its existing processes. Another complication posed by technological dynamism via the process of strategic integration is a phenomenon we can call factors of multiplicity — essentially, what happens when several new technology opportunities overlap and create myriad projects that are in various phases of their developmental life cycle. Furthermore, the problem is compounded by lagging returns in productivity, which are complicated to track and to represent to management. Thus, it is important that organizations find ways to shorten the period between investment and technology’ s effective deployment. Murphy (2002) identifies several factors that are critical to bridging this delta:

1. Identifying the processes that can provide acceptable business returns from new technological investments

2. Establishing methodologies that can determine these processes 3. Finding ways to actually perform and realize expected benefits 4. Integrating IT projects with other projects 5. Adjusting project objectives when changes in the business

require them

Technology complicates these actions, making them more difficult to resolve; hence the need to manage the complications. To tackle these compounded concerns, strategic integration can shorten life cycle maturation by focusing on the following integrating factors:

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• Addressing the weaknesses in management organizations in terms of how to deal with new technologies, and how to bet- ter realize business benefits

• Providing a mechanism that both enables organizations to deal with accelerated change caused by technological innova- tions and integrates them into a new cycle of processing and handling change

• Providing a strategic learning framework by which every new technology variable adds to organizational knowledge, par- ticularly using reflective practices (see Chapter 4)

• Establishing an integrated approach that ties technology accountability to other measurable outcomes using organiza- tional learning techniques and theories

To realize these objectives, organizations must be able to

• Create dynamic internal processes that can function on a daily basis to deal with understanding the potential fit of new technologies and their overall value to the business

• Provide the discourse to bridge the gaps between IT- and non-IT-related investments and uses into an integrated system

• Monitor investments and determine modifications to the life cycle

• Implement various organizational learning practices, includ- ing learning organization, knowledge management, change management, and communities of practice, all of which help foster strategic thinking and learning that can be linked to performance (Gephardt & Marsick, 2003)

Another important aspect of strategic integration is what Murphy (2002) calls “ consequential interoperability,” in which “ the conse- quences of a business process” are understood to “ dynamically trigger integration” (p. 31). This integration occurs in what he calls the five pillars of benefits realization:

1. Strategic alignment: The alignment of IT strategically with business goals and objectives.

2. Business process impact: The impact on the need for the organi- zation to redesign business processes and integrate them with new technologies.

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3. Architecture: The actual technological integration of appli- cations, databases, and networks to facilitate and support implementation.

4. Payback: The basis for computing return on investment (ROI) from both direct and indirect perspectives.

5. Risk: Identifying the exposure for underachievement or fail- ure in the technology investment.

Murphy’ s (2002) pillars are useful in helping us understand how technology can engender the need for responsive organizational dyna- mism (ROD), especially as it bears on issues of strategic integration. They also help us understand what becomes the strategic integration component of ROD. His theory on strategic alignment and business process impact supports the notion that IT will increasingly serve as an undergirding force, one that will drive enterprise growth by identify- ing the initiators (such as e-business on the Internet) that best fit busi- ness goals. Many of these initiators will be accelerated by the growing use of e-business, which becomes the very driver of many new market realignments. This e-business realignment will require the ongoing involvement of executives, business managers, and IT managers. In fact, the Gartner Group forecasted that 70% of new software applica- tion investments and 5% of new infrastructure expenditures by 2005 would be driven by e-business. Indeed, this has occurred and contin- ues to expand.

The combination of evolving business drivers with accelerated and changing customer demands has created a business revolution that best defines the imperative of the strategic integration component of ROD. The changing and accelerated way businesses deal with their customers and vendors requires a new strategic integration to become a reality rather than remain a concept discussed but affecting little action. Without action directed toward new strategic integration, organizations would lose competitive advantage, which would affect profits. Most experts see e-business as the mechanism that will ulti- mately require the integrated business processes to be realigned, thus providing value to customers and modifying the customer– vendor relationship. The driving force behind this realignment emanates from the Internet, which serves as the principle accelerator of the change in transactions across all businesses. The general need to optimize

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resources forces organizations to rethink and to realign business pro- cesses to gain access to new business markets.

Murphy’ s (2002) pillar of architecture brings out yet another aspect of ROD. By architecture we mean the focus on the effects that technol- ogy has on existing computer applications or legacy systems (old exist- ing systems). Technology requires existing IT systems to be modified or replacement systems to be created that will mirror the new busi- ness realignments. These changes respond to the forces of strategic integration and require business process reengineering (BPR) activi- ties, which represent the reevaluation of existing systems based on changing business requirements. It is important to keep in mind the acceleration factors of technology and to recognize the amount of organizational effort and time that such projects take to complete. We must ask the following question: How might organizations respond to these continual requirements to modify existing processes? I discuss in other chapters how ROD represents the answer to this question.

Murphy’ s (2002) pillar of direct return is somewhat limited and nar- row because not all IT value can be associated with direct returns, but it is important to discuss. Technology acceleration is forcing organiza- tions to deal with broader issues surrounding what represents a return from an investment. The value of strategic integration relies heavily on the ability of technology to encapsulate itself within other departments where it ultimately provides the value. We show in Chapter 4 that this issue also has significance in organizational formation. What this means is simply that value can be best determined within individual business units at the microlevel and that these appropriate-level busi- ness units also need to make the case for why certain investments need to be pursued. There are also paybacks that are indirect; for example, Lucas (1999) demonstrates that many technology investments are non- monetary. The IT department (among others) becomes susceptible to great scrutiny and subject to budgetary cutbacks during economically difficult times. This does not suggest that IT “ hide” itself but rather that its investment be integrated within the unit where it provides the most benefit. Notwithstanding the challenge to map IT expenditures to their related unit, there are always expenses that are central to all departments, such as e-mail and network infrastructure. These types of expenses can rarely provide direct returns and are typically allocated across departments as a cost of doing business.

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Because of the increased number of technology opportuni- ties, Murphy’ s (2002) risk pillar must be a key part of strategic integration. The concept of risk assessment is not new to an organiza- tion; however, it is somewhat misunderstood as it relates to technology assessment. Technology assessment, because of the acceleration factor, must be embedded within the strategic decision-making process. This can only be accomplished by having an understanding of how to align technology opportunities for business change and by understanding the cost of forgoing the opportunity as well as the cost of delays in delivery. Many organizations use risk assessment in an unstructured way, which does not provide a consistent framework to dynamically deal with emerging technologies. Furthermore, such assessment needs to be managed at all levels in the organization as opposed to being an event-driven activity controlled only by executives.

Summary

Strategic integration represents the objective of dealing with emerg- ing technologies on a regular basis. It is an outcome of ROD, and it requires organizations to deal with a variable, that forces acceleration of decisions in an unpredictable fashion. Strategic integration would require businesses to realign the ways in which they include technol- ogy in strategic decision making.

Cultural Assimilation

Cultural assimilation is a process that focuses on the organizational aspects of how technology is internally organized, including the role of the IT department, and how it is assimilated within the organiza- tion as a whole. The inherent, contemporary reality of technologi- cal dynamism requires not only strategic but also cultural change. This reality demands that IT organizations connect to all aspects of the business. Such affiliation would foster a more interactive culture rather than one that is regimented and linear, as is too often the case. An interactive culture is one that can respond to emerging technology decisions in an optimally informed way, and one that understands the impact on business performance.

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The kind of cultural assimilation elicited by technological dyna- mism and formalized in ROD is divided into two subcategories: the study of how the IT organization relates and communicates with “ others,” and the actual displacement or movement of traditional IT staff from an isolated “ core” structure to a firm-wide, integrated framework.

IT Organization Communications with “ Others”

The Ravell case study shows us the limitations and consequences of an isolated IT department operating within an organization. The case study shows that the isolation of a group can lead to marginalization, which results in the kind of organization in which not all individuals can participate in decision making and implementation, even though such individuals have important knowledge and value. Technological dynamism is forcing IT departments to rethink their strategic posi- tion within the organizational structure of their firm. No longer can IT be a stand-alone unit designed just to service outside departments while maintaining its separate identity. The acceleration factors of technology require more dynamic activity within and among depart- ments, which cannot be accomplished through discrete communica- tions between groups. Instead, the need for diverse groups to engage in more integrated discourse, and to share varying levels of techno- logical knowledge, as well as business-end perspectives, requires new organizational structures that will of necessity give birth to a new and evolving business— social culture. Indeed, the need to assimilate technology creates a transformative effect on organizational cultures, the way they are formed and re-formed, and what they will need from IT personnel.

Movement of Traditional IT Staff

To facilitate cultural assimilation from an IT perspective, IT must become better integrated with non-IT personnel. This form of inte- gration can require the actual movement of IT staff into other depart- ments, which begins the process of a true assimilation of resources among business units. While this may seem like the elimination of

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the integrity or identity of IT, such a loss is far from the case. The elimination of the IT department is not at all what is called for here; on the contrary, the IT department is critical to the function of cul- tural assimilation. However, the IT department may need to be struc- tured differently from the way it has been so that it can deal primarily with generic infrastructure and support issues, such as e-mail, net- work architecture, and security. IT personnel who focus on business- specific issues need to become closely aligned with the appropriate units so that ROD can be successfully implemented.

Furthermore, we must acknowledge that, given the wide range of available knowledge about technology, not all technological knowl- edge emanates from the IT department. The question becomes one of finding the best structure to support a broad assimilation of knowledge about any given technology; then, we should ask how that knowledge can best be utilized by the organization. There is a pitfall in attempting to find a “ standard” IT organizational structure that will address the cultural assimilation of technology. Sampler’ s (1996) research, and my recent research with chief executives, confirms that no such standard structure exists. It is my position that organizations must find their own unique blend, using organizational learning con- structs. This simply means that the cultural assimilation of IT may be unique to the organization. What is then more important for the success of organizational development is the process of assimilation as opposed to the transplanting of the structure itself.

Today, many departments still operate within “ silos” where they are unable to meet the requirements of the dynamic and unpredictable nature of technology in the business environment. Traditional orga- nizations do not often support the necessary communications needed to implement cultural assimilation across business units. However, business managers can no longer make decisions without considering technology; they will find themselves needing to include IT staff in their decision-making processes. On the other hand, IT departments can no longer make technology-based decisions without concerted efforts toward assimilation (in contrast to occasional partnering or project-driven participation) with other business units. This assimi- lation becomes mature when new cultures evolve synergistically as opposed to just having multiple cultures that attempt to work in con- junction with each other. The important lesson from Ravell to keep

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in mind here is that the process of assimilating IT can create new cultures that in turn evolve to better support the requirements estab- lished by the dynamism of technology.

Eventually, these new cultural formations will not perceive them- selves as functioning within an IT or non-IT decision framework but rather as operating within a more central business operation that understands how to incorporate varying degrees of IT involvement as necessary. Thus, organizational cultures will need to fuse together to respond to new business opportunities and requirements brought about by the ongoing acceleration of technological innovation. This was also best evidenced by subsequent events at Ravell. Three years after the original case study, it became necessary at Ravell to inte- grate one of its business operations with a particular group of IT staff members. The IT personnel actually transferred to the business unit to maximize the benefits of merging both business and technical cul- tures. Interestingly, this business unit is currently undergoing cultural assimilation and is developing its own behavioral norms influenced by the new IT staff. However, technology decisions within such groups are not limited to the IT transferred personnel. IT and non-IT staff need to formulate decisions using various organizational learning techniques. These techniques are discussed in the next chapter.

Summary

Without appropriate cultural assimilation, organizations tend to have staff that “ take shortcuts, [then] the loudest voice will win the day, ad hoc decisions will be made, accountabilities lost, and lessons from suc- cesses and failures will not become part of ... wisdom” (Murphy, 2002, p. 152). As in the case of Ravell Corporation, it is essential, then, to provide for consistent governance that fits the profile of the existing cul- ture or can establish the need for a new culture. While many scholars and managers suggest the need to have a specific entity responsible for IT governance, one that is to be placed within the operating structure of the organization, such an approach creates a fundamental problem. It does not allow staff and managers the opportunity to assimilate tech- nologically driven change and understand how to design a culture that can operate under ROD. In other words, the issue of governance is misinterpreted as a problem of structural positioning or hierarchy when

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it is really one of cultural assimilation. As a result, many business solu- tions to technology issues often lean toward the prescriptive, instead of the analytical, in addressing the real problem.

Murphy’ s (2002) risk pillar theory offers us another important component relevant to cultural assimilation. This approach addresses the concerns that relate to the creation of risk cultures formed to deal with the impact of new systems. New technologies can actually cause changes in cultural assimilation by establishing the need to make cer- tain changes in job descriptions, power structures, career prospects, degree of job security, departmental influence, or ownership of data. Each of these potential risks needs to be factored in as an important part of considering how best to organize and assimilate technology through ROD.

Technology Business Cycle

To better understand technology dynamism, or how technology acts as a dynamic variable, it is necessary to define the specific steps that occur during its evolution in an organization. The evolution or business cycle depicts the sequential steps during the maturation of a new technology from feasibility to implementation and through subsequent evolution. Table 3.1 shows the five components that comprise the cycle: feasibil- ity, measurement, planning, implementation, and evolution.

Table 3.1 Technology Business Cycle

CYCLE COMPONENT COMPONENT DESCRIPTION

Feasibility Understanding how to view and evaluate emerging technologies, from a technical and business perspective.

Measurement Dealing with both the direct monetary returns and indirect nonmonetary returns; establishing driver and support life cycles.

Planning Understanding how to set up projects, establishing participation across multiple layers of management, including operations and departments.

Implementation Working with the realities of project management; operating with political factions, constraints; meeting milestones; dealing with setbacks; having the ability to go live with new systems.

Evolution Understanding how acceptance of new technologies affects cultural change, and how uses of technology will change as individuals and organizations become more knowledgeable about technology, and generate new ideas about how it can be used; objective is established through organizational dynamism, creating new knowledge and an evolving organization.

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Feasibility

The stage of feasibility focuses on a number of issues surrounding the practicality of implementing a specific technology. Feasibility addresses the ability to deliver a product when it is needed in com- parison to the time it takes to develop it. Risk also plays a role in feasibility assessment; of specific concern is the question of whether it is possible or probable that the product will become obsolete before completion. Cost is certainly a huge factor, but viewed at a “ high level” (i.e., at a general cost range), and it is usually geared toward meeting the expected ROI of a firm. The feasibility process must be one that incorporates individuals in a way that allows them to respond to the accelerated and dynamic process brought forth by technological innovations.

Measurement

Measurement is the process of understanding how an investment in technology is calculated, particularly in relation to the ROI of an organization. The complication with technology and measurement is that it is simply not that easy to determine how to calculate such a return. This problem comes up in many of the issues discussed by Lucas (1999) in his book Information Technology and the Productivity Paradox. His work addresses many comprehensive issues, surround- ing both monetary and nonmonetary ROI, as well as direct ver- sus indirect allocation of IT costs. Aside from these issues, there is the fact that for many investments in technology the attempt to compute ROI may be an inappropriate approach. As stated, Lucas offered a “ garbage can” model that advocates trust in the operational management of the business and the formation of IT representatives into productive teams that can assess new technologies as a regu- lar part of business operations. The garbage can is an abstract con- cept for allowing individuals a place to suggest innovations brought about by technology. The inventory of technology opportunities needs regular evaluation. Lucas does not really offer an explana- tion of exactly how this process should work internally. ROD, how- ever, provides the strategic processes and organizational– cultural needs that can provide the infrastructure to better understand and

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evaluate the potential benefits from technological innovations using the garbage can model. The graphic depiction of the model is shown in Figure 3.2.

Planning

Planning requires a defined team of user and IT representatives. This appears to be a simple task, but it is more challenging to understand how such teams should operate, from whom they need support, and what resources they require. Let me be specific. There are a number of varying types of “ users” of technology. They typically exist in three tiers: executives, business line managers, and operations users. Each of these individuals offers valuable yet different views of the benefits of technology (Langer, 2002). I define these user tiers as follows:

1. Executives: These individuals are often referred to as execu­ tive sponsors. Their role is twofold. First, they provide input into the system, specifically from the perspective of pro- ductivity, ROI, and competitive edge. Second, and per- haps more important, their responsibility is to ensure that users are participating in the requisite manner (i.e., made

Garbage can model of IT value

Failed systems

Direct benefits

Indirect benefits

User needs, etc.

C on

ve rs

io n

eff ec

ti ve

ne ss

�e IT value pipeline

Figure 3.2 Garbage can model of IT value. (From Lucas, H.C., Information Technology and the Productivity Paradox. Oxford University Press, New York, 1999.)

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to be available, in the right place, etc.). This area can be problematic because internal users are typically busy doing their jobs and sometimes neglect to provide input or to attend project meetings. Furthermore, executive sponsors can help control political agendas that can hurt the success of the project.

2. Business line managers: This interface provides the most information from a business unit perspective. These indi- viduals are responsible for two aspects of management. First, they are responsible for the day-to-day productivity of their unit; therefore, they understand the importance of productive teams, and how software can assist in this endeavor. Second, they are responsible for their staff. Thus, line managers need to know how software will affect their operational staff.

3. Functional users: These are the individuals in the trenches who understand exactly how processing needs to get done. While their purview of the benefits of the system is relatively nar- rower than that of the executives and managers, they provide the concrete information that is required to create the feature/ functions that make the system usable.

The planning process becomes challenging when attempting to get the three user communities to integrate their needs and “ agree to agree” on how a technology project needs to be designed and managed.

Implementation

Implementation is the process of actually using a technology. Implementation of technology systems requires wider integration within the various departments than other systems in an organization because usually multiple business units are affected. Implementation must combine traditional methods of IT processes of development yet integrate them within the constraints, assumptions, and cultural (perhaps political) environments of different departments. Cultural assimilation is therefore required at this stage because it delves into the structure of the internal organization and requires individual participation in every phase of the development and implementation

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cycle. The following are some of the unique challenges facing the implementation of technological projects:

1. Project managers as complex managers: Technology projects require multiple interfaces that often lie outside the traditional user community. They can include interfacing with writers, editors, marketing personnel, customers, and consumers, all of whom are stakeholders in the success of the system.

2. Shorter and dynamic development schedules: Due to the dynamic nature of technology, its process of development is less lin- ear than that of others. Because there is less experience in the general user community, and there are more stakeholders, there is a tendency by those in IT, and executives, to underes- timate the time and cost to complete the project.

3. New untested technologies: There is so much new technol- ogy offered to organizations that there is a tendency by IT organizations to implement technologies that have not yet matured— that are not yet the best products they will eventu- ally be.

4. Degree of scope changes: Technology, because of its dynamic nature, tends to be prone to scope creed — the scope of the orig- inal project expanding during development.

5. Project management: Project managers need to work closely with internal users, customers, and consumers to advise them on the impact of changes to the project schedule. Unfortunately, scope changes that are influenced by changes in market trends may not be avoidable. Thus, part of a good strategy is to manage scope changes rather than attempt to stop them, which might not be realistic.

6. Estimating completion time: IT has always had difficulties in knowing how long it will take to implement a technology. Application systems are even more difficult because of the number of variables and unknowns.

7. Lack of standards: The technology industry continues to be a profession that does not have a governing body. Thus, it is impossible to have real enforced standards that other pro- fessions enjoy. While there are suggestions for best prac- tices, many of them are unproven and not kept current with

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changing developments. Because of the lack of successful application projects, there are few success stories to create new and better sets of best practices.

8. Less­specialized roles and responsibilities: The IT team tends to have staff members who have varying responsibilities. Unlike traditional new technology-driven projects, separation of roles and responsibilities is more difficult when operating in more dynamic environments. The reality is that many roles have not been formalized and integrated using something like ROD.

9. Broad project management responsibilities: Project management responsibilities need to go beyond those of the traditional IT manager. Project managers are required to provide manage- ment services outside the traditional software staff. They need to interact more with internal and external individuals, as well as with non-traditional members of the development team, such as Web text and content staff. Therefore, there are many more obstacles that can cause implementation problems.

Evolution

The many ways to form a technological organization with a natural capacity to evolve have been discussed from an IT perspective in this chapter. However, another important factor is the changing nature of application systems, particularly those that involve e-businesses. E-business systems are those that utilize the Internet and engage in e-commerce activities among vendors, clients, and internal users in the organization. The ways in which e-business systems are built and deployed suggest that they are evolving systems. This means that they have a long life cycle involving ongoing maintenance and enhancement. They are, if you will, “ living systems” that evolve in a manner similar to organizational cultures. So, the traditional beginning-to-end life cycle does not apply to an e-business proj- ect that must be implemented in inherently ongoing and evolving phases. The important focus is that technology and organizational development have parallel evolutionary processes that need to be in balance with each other. This philosophy is developed further in the next chapter.

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Drivers and Supporters

There are essentially two types of generic functions performed by departments in organizations: driver functions and supporter func- tions. These functions relate to the essential behavior and nature of what a department contributes to the goals of the organization. I first encountered the concept of drivers and supporters at Coopers & Lybrand, which was at that time a Big 8* accounting firm. I stud- ied the formulation of driver versus supporter as it related to the role of our electronic data processing (EDP) department. The firm was attempting to categorize the EDP department as either a driver or a supporter.

Drivers were defined in this instance as those units that engaged in frontline or direct revenue-generating activities. Supporters were units that did not generate obvious direct revenues but rather were designed to support frontline activities. For example, operations such as internal accounting, purchasing, or office management were all classified as supporter departments. Supporter departments, due to their nature, were evaluated on their effectiveness and efficiency or economies of scale. In contrast, driver organizations were expected to generate direct revenues and other ROI value for the firm. What was also interesting to me at the time was that drivers were expected to be more daring— since they must inevitably generate returns for the business. As such, drivers engaged in what Bradley and Nolan (1998) coined “ sense and respond” behaviors and activities. Let me explain.

Marketing departments often generate new business by investing or “ sensing” an opportunity quickly because of competitive forces in the marketplace. Thus, they must sense an opportunity and be allowed to respond to it in a timely fashion. The process of sensing opportunity, and responding with competitive products or services, is a stage in the cycle that organizations need to support. Failures in the cycles of sense and respond are expected. Take, for example, the

* The original “ Big 8” consisted of the eight large accounting and management con- sulting firms— Coopers & Lybrand, Arthur Anderson, Touche Ross, Deloitte Haskins & Sells, Arthur Young, Price Waterhouse, Pete Marwick Mitchell, and Ernst and Whinney— until the late 1980s, when these firms began to merge. Today, there are four: Price Waterhouse Coopers, Deloitte & Touche, Ernst & Young, and KPMG (Pete Marwick and others).

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launching of new fall television shows. Each of the major stations goes through a process of sensing which shows might be interesting to the viewing audience. They respond, after research and review, with a number of new shows. Inevitably, only a few of these selected shows are actually successful; some fail almost immediately. While relatively few shows succeed, the process is acceptable and is seen by manage- ment as the consequence of an appropriate set of steps for competing effectively— even though the percentage of successful new shows is low. Therefore, it is safe to say that driver organizations are expected to engage in high-risk operations, of which many will fail, for the sake of creating ultimately successful products or services.

The preceding example raises two questions: (1) How does sense and respond relate to the world of IT? and (2) Why is it important? IT is unique in that it is both a driver and a supporter. The latter is the generally accepted norm in most firms. Indeed, most IT functions are established to support myriad internal functions, such as

• Accounting and finance • Data center infrastructure (e-mail, desktop, etc.) • Enterprise-level application (enterprise resource planning, ERP) • Customer support (customer relationship management, CRM) • Web and e-commerce activities

As one would expect, these IT functions are viewed as overhead related, as somewhat of a commodity, and thus are constantly man- aged on an economy-of-scale basis— that is, how can we make this operation more efficient, with a particular focus on cost containment?

So, what then are IT driver functions? By definition, they are those that engage in direct revenues and identifiable ROI. How do we define such functions in IT because most activities are sheltered under the umbrella of marketing organization domains? (Excluding, of course, software application development firms that engage in marketing for their actual application products.) I define IT driver functions as those projects that, if delivered, would change the relationship between the organization and its customers; that is, those activities that directly affect the classic definition of a market: forces of supply and demand, which are governed by the customer (demand) and the vendor (sup- plier) relationship. This concept can be shown in the case example that follows.

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Santander versus Citibank

Santander Bank, the major bank of Spain, had enjoyed a dominant market share in its home country. Citibank had attempted for years to penetrate Santander’ s dominance using traditional approaches (open- ing more branch offices, marketing, etc.) without success, until, that is, they tried online banking. Using technology as a driver, Citibank made significant penetration into the market share of Santander because it changed the customer– vendor relationship. Online bank- ing, in general, has had a significant impact on how the banking industry has established new markets, by changing this relationship. What is also interesting about this case is the way in which Citibank accounted for its investment in online banking; it knows little about its total investment and essentially does not care about its direct pay- back. Rather, Citibank sees its ROI in a similar way that depicts driver/marketing behavior; the payback is seen in broader terms to affect not only revenue generation, but also customer support and quality recognition.

Information Technology Roles and Responsibilities

The preceding section focuses on how IT can be divided into two dis- tinct kinds of business operations. As such, the roles and responsibili- ties within IT need to change accordingly and be designed under the auspices of driver and supporter theory. Most traditional IT depart- ments are designed to be supporters, so that they have a close-knit organization that is secure from outside intervention and geared to respond to user needs based on requests. While in many instances this type of formation is acceptable, it is limited in providing the IT department with the proper understanding of the kind of business objectives that require driver-type activities. This was certainly the experience in the Ravell case study. In that instance, I found that making the effort to get IT support personnel “ out from their com- fortable shells” made a huge difference in providing better service to the organization at large. Because more and more technology is becoming driver essential, this development will require of IT per- sonnel an increasing ability to communicate to managers and execu- tives and to assimilate within other departments.

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The Ravell case, however, also brought to light the huge vacuum of IT presence in driver activities. The subsequent chief executive inter- view study also confirmed that most marketing IT-oriented activities, such as e-business, do not fall under the purview of IT in most orga- nizations. The reasons for this separation are correlated with the lack of IT executive presence within the management team.

Another aspect of driver and supporter functions is the concept of a life cycle. A life cycle, in this respect, refers to the stages that occur before a product or service becomes obsolete. Technology products have a life cycle of value just as any other product or service. It is important not to confuse this life cycle with processes during devel- opment as discussed elsewhere in this chapter.

Many technical products are adopted because they are able to deliver value that is typically determined based on ROI calculations. However, as products mature within an organization, they tend to become more of a commodity, and as they are normalized, they tend to become support- oriented. Once they reach the stage of support, the rules of economies of scale become more important and relevant to evaluation. As a prod- uct enters the support stage, replacement based on economies of scale can be maximized by outsourcing to an outside vendor who can provide the service cheaper. New technologies then can be expected to follow this kind of life cycle, by which their initial investment requires some level of risk to provide returns to the business. This initial investment is accomplished in ROD using strategic integration. Once the evalua- tions are completed, driver activities will prevail during the maturation process of the technology, which will also require cultural assimilation. Inevitably, technology will change organizational behavior and struc- ture. However, once the technology is assimilated and organizational behavior and structures are normalized, individuals will use it as a per- manent part of their day-to-day operations. Thus, driver activities give way to those of supporters. Senior managers become less involved, and line managers then become the more important group that completes the transition from driver to supporter.

Replacement or Outsource

After the technology is absorbed into operations, executives will seek to maximize the benefit by increased efficiency and effectiveness.

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Certain product enhancements may be pursued during this phase; they can create “ mini-loops” of driver-to-supporter activities. Ultimately, a technology, viewed in terms of its economies of scale and longevity, is considered for replacement or outsourcing. Figure 3.3 graphically shows the cycle.

The final stage of maturity of an evolving driver therefore includes becoming a supporter, at which time it becomes a commodity and, finally, an entity with potential for replacement or outsourcing. The next chapter explores how organizational learning theories can be used to address many of the issues and challenges brought forth in this chapter.

Mini loop technology enhancementsTechnology driver

Evaluation cycle

Driver maturation

Support status

Replacement or outsource

Economies of scale

Figure 3.3 Driver-to-supporter life cycle.