information, organizations, processes and control hierarchical organizations of past years today...
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Information, Organizations, Processes and Control
Hierarchical organizations of past years Today
Process-oriented, Learning, Team-based, and Fast-cycle organizational models
Flat, flexible, focused on core competence
Inside, empowered, interfunctional teams of knowledge workers are reengineering and continually improving core business processes.
Think globally and act locally
Strategic alliance and partnership that will enable them to focus on core competence while expanding capabilities, scale and scope.
Creation of virtual organizations
Challenge: How do we meet these challenges? How can organization be both global and local,
big and small, and radically decentralized with centralized reporting and control?
Information, Organizations, Processes and Control
Flattening the Organizational Structure
Matrix Organizational Structure
But, hybrid designs bred conflict, confusion, information overload, and costly duplication of resources
Virtual Organizational Structure
Question: Can firms take the advantage of the information management communication tools this revolution provides to create an “information age organization” that simultaneously manages speed and complexity?
Information, Organizations, Processes and Control
Notes: Although the networked IT infrastructure can provide important
tools, it can not define neither the information that needs to be in the systems nor the meaning of the information and how to use it to coordinate and manage the business.
Nor can the networked IT infrastructure define the organizational structures, processes, and culture required to enable people to use the information to make decisions and take actions.
These tools cannot provide incentives that would motivate people to use the information to meet both organizational and personal objectives.
What should firms do?
Information, Organizations, Processes and Control
To accomplish the organizations of the year 2000 and beyond firms must change the way they are organized, and employees at all levels must become information literate - not just computer literate.
Information, Organizations, Processes and Control
Notes: Implementing networked information and communication
system in a traditional, hierarchically structured organization will not work.
A much more comprehensive approach to organizational change is required.
In general implementing the technology is the least complicated part; redesigning the organization and defining the information to manage it constitute major constraints on organizations’ attempts to meet the challenges of the the year 2000s
Information, Organizations, Processes and Control
Speed Counts, but not at the Expense of Control New products must be introduced quicker, order
processing cycle must be cut dramatically, etc. The faster the pace, the greater the need to
monitor business operations and clearly define and enforce rules.
Empowerment is not Anarchy In an empowered organization, senior managers
are more involved, not less; and organizational boundaries and value systems must be more clearly communicated, closely monitored, and more consistently enforced.
Creating the Information Age Organization
Transforming an Organization Requires more than just Changing the Structure. True change occurs deep within the organization as individuals
and work teams redefine the way they work and the values that guide decision making and action.
Managers need to rethink the nature of control and authority
Smashing together the features of the hierarchy with features of an entrepreneurial firm will not work.
Work must change and people must change
New knowledge and skills are needed
Creating the Information Age Organization
Transforming an Organization Requires more than just Changing the Structure. The personal values and frameworks that people people use
to make decisions and take actions must be realigned with new organizational priorities and goals.
The ability to transform the firms information infrastructure is a critical component that both supports and enables the organizational transformation
Change must not stop at the doors of the corporate headquarters but must be infused throughout every part of the organization
Laying collaborative structures (e.g. team-based units and incentives) over a traditionally structured organization will not work neither.
Creating the Information Age Organization
Streamlining the Business Cycle
Operating Cycle The activities through which an organization
designs, produces, markets, delivers, and supports its product and services
Management Cycle The activities through which an organization
manages the design, produces, markets, delivers, and supports its product and services
Man
agem
ent
Pr o
cess
Operational Process
Basic questions confronting managers What are the implication of IT in my business operations?
Today and in the future? What are the alternative perspectives for leveraging IT
capabilities for business operations? Is the locus of IT component “inside” or “outside” the
operation? What is the executive role of senior management for
leveraging IT capabilities? How should the IT function be organized, and what is the
role of IT outsourcing What are the appropriate criteria for assessing IT based
benefits
Strategic Alignment
Building the Networked Business
“Our dream and our plan well over a decade ago was simple. We set out to shape a global enterprise that preserve the classic big company advantages while eliminating the big company drawbacks. What we wanted to build was a hybrid enterprise with the … body of a big company and … the soul of a small company”
Jack Welch Former GE CEO
Building the Networked Business
“ABB is an organization with three internal contradictions. We want to be global and local, big and small, radically decentralized with centralized reporting and control. If we resolve those contradictions, we create real competitive advantage”
Percy Barnevik, CEO Asea Brown Boveri (ABB)
Building the Networked Business “We saw two challenges ahead of us, one external
and one internal… Externally, we faced a world economy that would be characterized by slower growth, with stronger global competitors going after a small piece of the pie. Internally, our challenge was even bigger. We had to find a way to combine the power, resources, and reach of a large company with the hunger, agility, spirit, and fire of a small one.”
Jack Welch Former CEO of GE.
Building the Networked Business
Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarlan, Corporate Information Strategy and Management. Burr Ridge, IL: McGraw-Hill/I rwin, 2002.
Org
an
iza
tio
n
Simple &Local
Stable & Certain
Dynamic & UncertainEnvironment
Complex &Global
Entrepreneurial Organization
Hierarchy
??
Chapter 3 Figure 3-1
The Organization Design Challenge
Building the Networked Business
Hybrid Organization design To improve control and efficiency while
simultaneously enabling flexibility and speed of response
But, hybrid designs bred conflict, confusion, information overload, and costly duplication of resources
Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarlan, Corporate Information Strategy and Management. Burr Ridge, IL: McGraw-Hill/I rwin, 2002.
Info
rma
tio
n R
eq
uir
em
en
ts
Simple &Local
Stable & Certain
Dynamic & UncertainBusiness Decision Making Environment
Complex &Global
Local Intelligence
Centralized intelligence Shared intelligence
Hierarchical Organization &Mainframe Technology
Networked Organization &Networked Technology
Entrepreneurial Organization &PC & LAN Technology
+
+ +
Networked Organizational Models are Enabled by Networked Technologies
Chapter 3 Figure 3-2
Building the Networked Business Note
Although the networked IT infrastructure can provide important tools, it cannot define the information that needs to be in the system.
In addition, while the networked infrastructure can enable new organization structures and systems, it cannot motivate people to use the information to make decisions and take actions on behalf of the organization.
New organization capabilities are required to execute the sophisticated network strategies and business models
Blueprint for the Networked Organization
Challenge Designing, implementing, and constantly evolving the
structure and systems that enable an organization to executes its strategies and accomplish its goals is one of the most formidable tasks facing 21st century executives
Continuous change is one of the most challenging issues facing the 21st century executives
Operating and Innovating Managing and Learning Leading and Engaging
Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarlan, Corporate Information Strategy and Management. Burr Ridge, IL: McGraw-Hill/I rwin, 2002.
Sample Organizational Components
Sample Technology Components
• Human Resources Management• Strategic Alliances• Customer Loyalty• Supplier Loyalty• Partnerships
• Planning and Budgeting• Performance Monitoring• Organization Structure and Reporting• Organization Decision Making and
Learning
• Operating Process • New Product Development• Business Venturing
• HR Systems• Customer Relationship Management (CRM)• Personalization• Communication Infrastructure• User Access Devices
• Management Reporting• Decision Support Systems and Tools• Business Intelligence Systems• Data and Knowledge Management
• Enterprise Resource Planning (ERP) • Supply Chain Management• Order Fulfillment• New Product Development• Distributed Information Processing
Infrastructure
Leading & Engaging
Managing & Learning
Operating & Innovating
Chapter 3 Figure 3-3
Blueprint for a “Big-Small” Business
Blueprint for a Networked Organization
Operating and Innovating The operating processes of a firm include all the
activities a firm and its suppliers and partners undertake to design, build, market, sell, and deliver products and services for customers, suppliers, and business partners.
Ability to flexibly adapt to constantly changing business environment is the key to success.
Blueprint for a Networked Organization
Operation and Innovating Hierarchical Operations
Define rigid procedures, top down
Entrepreneurial Operation Company do not depend on well-defined polices and
procedures or structured jobs.
Networked Operations Big-small companies, Precision execution and fast-cycled innovation Operation is designed to fully exploit the power of both
people and technology whether this assets are in your firm or in someone else’s.
Technology can ensure precision and people can use the information in real-time to deal with unforeseen problems
Blueprint for a Networked Organization
PrecisionExecution
Fast-CycledInnovation
Entrepreneurial
Hierarchy
Networked
PrecisionExecution
Fast-CycledInnovation
Entrepreneurial
Hierarchy
Networked
Blueprint for a Networked Organization
Managing and Learning The management processes and structures of a
firm include all the activities that a firm and its business community undertake to: Plan strategy and how it will be executed Allocate resources Organize people into groups and coordinate
work Monitor and measure performance Adjust strategies, plans, budgets, and
organizations based on learning
Blueprint for a Networked Organization
Traditional Management Process Driven from top down, incremental goals and
allocation of resources to carry them out.
Entrepreneurial Management Process Planning, decision making, action, and
performance management are informal and ad hoc.
Ability to respond quickly on the basis of what is being learned are fundamental to effective entrepreneurial management
Blueprint for a Networked Organization
Network Management Process Big-Small most provide assess to a shared
source of real-time information on market dynamics, operations, and performance that enables real-time planning and performance monitoring.
Networked management Process Improved access to information enables
employees, customers, and partners to invent new ways of working and to respond quickly.
Networked
Efficiency &Integration
Learning byDoing
Entrepreneurial
Hierarchy
Networked
Efficiency &Integration
Learning byDoing
Entrepreneurial
Hierarchy
Blueprint for a Networked Organization
Leading and Engaging While management is all about coping with
complexity, leadership is all about attracting and mobilizing the resources for change
Leadership involves defining a clear, compelling vision and ensuring that is translated into a set of actionable strategies and initiatives.
Attracting, motivating, energizing, and retaining top talent inside an organization and within partner, supplier, and customer networks
Creates a culture and ensures that values, beliefs and behaviors are deeply ingrained and reflected in the decisions made and actions taken
Blueprint for a Networked Organization
Hierarchal Leadership Emphasis managing complexity and minimizing it. Management process overshadowed leadership Risk were minimized by centralizing decision making,
segregating activities and structuring work rigidly.
Entrepreneurial Leadership “Create or seize an opportunity and pursue it
regardless of the resources currently controlled” Attract, motivate and engage people, partners and
investors in the task of working together to create a clear and compelling vision that excites and deeply engaged all involved.
Blueprint for a Networked Organization
Networked Leadership In the Networked Economy, the free flow of information
throughout the company enhances the ability of employees, customers, partners, and executives to share in defining both a clear and compelling vision for change and the necessary tactical initiatives required to achieve business goals
When aligned with incentives and motivations that foster commitment rather than simply compliance.
In complex global organizations senior executives cannot oversee every decision or action taken by empowered teams. So, it more important for them to identify key strategic risks – critical success factors – and ensure that they have effective control systems in place.
Strategic Focus& Resource Allocation
Shared Culture& Commitment
Entrepreneurial
Hierarchy
Networked
Strategic Focus& Resource Allocation
Shared Culture& Commitment
Entrepreneurial
Hierarchy
Networked
Networked Organizations (cont.)
Building Value Networks Building the value chain network
Where Should Activities Be Performed?
How Should We Relate to Market Participants?
Building Value Networks Building the value chain network
Where Should Activities Be Performed
Options Description Vertical Integration Locate all but the most routine, transaction-oriented activities inside the
firm. Selective Sourcing Source selected activities from the outside. Traditionally, sourced activities
were controlled through short-term contracts. Virtual Integration Become part of a network of highly specialized, independent parties that
work together to perform, coordinate, and control value chain activities.
Building Value Networks Building the value chain network
How Should We Relate to Market Participants? Transaction Contract Partnership
Basis of Interaction
Discrete exchange of goods, services, and payments (simple buyer/seller exchange)
Prior agreement governs exchange (e.g., service contract, lease, purchase agreement)
Shared goals and processes for achieving them (e.g., collaborative product development)
Duration of Interaction
Immediate Usually short-term and defined by the contract
Usually long term and defined by the relationship
Level of Business Integration
Low Low to Moderate High
Coordination and Control
Supply and demand (market)
Terms of contract define procedures, monitoring, and reporting
Interorganizational structures, processes, and systems; Mutual adjustment
Information Flow
Primarily one way; Limited in scope and amount; Low level of customization
One or two way; Scope & amount are usually defined in the contract
Two-way (interactive); Extensive exchange of rich, detailed information; Dynamically changing; Customizable
Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarlan, Corporate Information Strategy and Management. Burr Ridge, IL: McGraw-Hill/Irwin, 2002.
Impact of Information Technology on Market Evolution
Chapter 3 Figure 3-7
Evolving Market StructuresProprietary Capabilities and Infrastructure Create Walls
Inside an Organization and Among Members of a Value Chain Network
Questions that can help executives to evaluate organization capabilities
What are your organization’s core capabilities, strengths and weaknesses
What operating processes, policies, structures, and systems must be changed to enable you to operate efficiently
What management system must be changed to enable you to ensure that the company is in control yet is able to “learn by doing”
Is leadership stressed throughout the company. What organizational structures, incentives. And cultural changes need to be made to enable the company to act both big and small simultaneously.
Within which market do you currently participate? How do the market participants relate.
Given your current and future strategy, what is the stream that must be accomplished to develop products and services that create value for all stakeholders