ICT3261 Strategic management of E-Business Chapter 5 Organisational transformation enabled by information technology and the Internet Paula Goulding

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Strategic management of Strategic management of E-BusinessE-Business

Chapter 5Chapter 5Organisational transformation Organisational transformation

enabled by information enabled by information technology and the Internettechnology and the Internet

Paula GouldingPaula Goulding

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IT, Internet and associated technologies are IT, Internet and associated technologies are making possible / facilitating / driving at times quite making possible / facilitating / driving at times quite profound changes in important business profound changes in important business processes.processes.

In order to avail itself of the many advantages of In order to avail itself of the many advantages of EC, an organisation may need to transform EC, an organisation may need to transform existing business activities / processes, both existing business activities / processes, both internal and external to the organisation.internal and external to the organisation.

Why transform?Why transform?

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What do we mean by What do we mean by

‘‘transformation’?transformation’?

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Compare these definitions...Compare these definitions...

‘‘The process of transformation is on-The process of transformation is on-going, permeates the entire organization, going, permeates the entire organization, and represents a sharp break from the and represents a sharp break from the past. The break is a major difference past. The break is a major difference between transformation and simple between transformation and simple reform. While reform is an attempt to go reform. While reform is an attempt to go down the same path more efficiently, down the same path more efficiently, transformation involves the development transformation involves the development or discovery of entirely new paths…’or discovery of entirely new paths…’

(Garfield 1992)

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‘‘While the goal of all transformations While the goal of all transformations is to improve performance, many is to improve performance, many efforts to improve performance are efforts to improve performance are not transformational…to qualify as not transformational…to qualify as corporate transformation, a majority corporate transformation, a majority of individuals in an organization of individuals in an organization must change their behavior…the must change their behavior…the difference is palpable.’difference is palpable.’


(Blumenthal and Haspeslagh 1994)

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‘‘Transformation implies a change in form, not Transformation implies a change in form, not function. Transformation is therefore not a function. Transformation is therefore not a problem-solving experience, it is a process of problem-solving experience, it is a process of creating a new context of existence. creating a new context of existence. Transformational change demands change in both Transformational change demands change in both context and content…The content of any business context and content…The content of any business includes the legacy systems, structures, practices includes the legacy systems, structures, practices and physical configurations that dictate how and physical configurations that dictate how processes function…Context comprises the processes function…Context comprises the deeply embedded business models and mindsets deeply embedded business models and mindsets that drive organizations…The transformation of that drive organizations…The transformation of any business comes face-to-face with the any business comes face-to-face with the enormous barrier of contextual change.’enormous barrier of contextual change.’


(Wentz 2000)

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Key points...Key points...

break from previous ways of actingbreak from previous ways of acting– developing & discovering new opportunities, developing & discovering new opportunities,

etc.etc. change in behaviour of majority of change in behaviour of majority of

organisationorganisation– new ways of thinking and doingnew ways of thinking and doing

creating new content and/or new contextcreating new content and/or new context– content = systems, procedures, structures that content = systems, procedures, structures that

dictate dictate howhow processes function processes function– context = deeply imbedded business models & context = deeply imbedded business models &

understanding that drive an organisationunderstanding that drive an organisation

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strategic transformation for strategic transformation for competitive advantagecompetitive advantage– redefine vision, mission, objectivesredefine vision, mission, objectives– create / obtain new competencies, create / obtain new competencies,

capabilitiescapabilities– obtain / use resources to take advantage of obtain / use resources to take advantage of

market opportunitiesmarket opportunities

Different types of Different types of transformationtransformation

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Different types of transformationDifferent types of transformation

dramatic improvements to operationsdramatic improvements to operations costscosts

timetime

quality of servicequality of service

often achieved through re-engineering often achieved through re-engineering processes, roles and responsibilities, processes, roles and responsibilities, redefining performance standardsredefining performance standards– cross-functional teamscross-functional teams

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corporate self-renewalcorporate self-renewal– on-going ability to anticipate and cope on-going ability to anticipate and cope

with changewith change

Different types of transformation Different types of transformation (cont.)(cont.)

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Process of transformationProcess of transformation

vision of futurevision of future values that guide actions aimed at values that guide actions aimed at

achieving visionachieving vision– what kind of organisation do we want to be?what kind of organisation do we want to be?

what business are we really in?what business are we really in? mission? goals & objectives?mission? goals & objectives?

– alignment of missionsalignment of missions personalpersonal team, business unitteam, business unit organisationorganisation

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knowledge of core businessknowledge of core business– process knowledgeprocess knowledge

inventory of core processesinventory of core processes identifying candidates for changeidentifying candidates for change

– domain knowledgedomain knowledge understanding (changing) business environment & understanding (changing) business environment &

industry trendsindustry trends

characterised by relentless focus on characterised by relentless focus on rethinking and revitalising aspects of rethinking and revitalising aspects of organisational performance with a view to organisational performance with a view to significant improvementsignificant improvement

Process of transformationProcess of transformation

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Framework for Framework for transformationtransformation

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StrategyStrategy

establish customer-oriented vision that will establish customer-oriented vision that will engender and support long-term successengender and support long-term success– affects and is affected byaffects and is affected by

understanding of external business environmentunderstanding of external business environment understanding of internal resources, competencies, understanding of internal resources, competencies,

capabilities, IT infrastructurecapabilities, IT infrastructure

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People and culturePeople and culture

shared values, experiences, and common shared values, experiences, and common goalsgoals

learning derived from ‘surviving’ in external learning derived from ‘surviving’ in external environmentenvironment

learning from problems of internal integrationlearning from problems of internal integration organising, motivating, empowering people to organising, motivating, empowering people to

succeedsucceed– changes to incentive programmes?changes to incentive programmes?

customer as focal point of cultural changecustomer as focal point of cultural change

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ProcessesProcesses

sequence of activities designed to sequence of activities designed to fulfil needs of customerfulfil needs of customer– internal or externalinternal or external– way work is doneway work is done– how and when action is implementedhow and when action is implemented

way of implementing strategic visionway of implementing strategic vision way of harnessing efficiency and way of harnessing efficiency and

effectiveness of resource useeffectiveness of resource use

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TechnologyTechnology

critical role in generation, transfer, critical role in generation, transfer, management, and use of information & management, and use of information & knowledgeknowledge

supports streamlined processessupports streamlined processes provides tools to support entire workforceprovides tools to support entire workforce enhances key relationships with enhances key relationships with

customers and supplierscustomers and suppliers enables/supports most corporate enables/supports most corporate

transformationstransformations

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Structure and systemsStructure and systems

describes individual and collective describes individual and collective responsibility and accountabilityresponsibility and accountability– reporting roles and structuresreporting roles and structures

communication linescommunication lines enable / prevent necessary enable / prevent necessary

communication, knowledge transfer communication, knowledge transfer and customer contactand customer contact

differentiation vs integrationdifferentiation vs integration

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to culture and peopleto culture and people– recognition of need for flexibility and recognition of need for flexibility and

adaptabilityadaptability– changed incentive programmeschanged incentive programmes

individual vs collective rewardsindividual vs collective rewards

– focus on customerfocus on customer– clarification and adoption of corporate clarification and adoption of corporate

goalsgoals– recognition of importance of changerecognition of importance of change

What sort of transformation is What sort of transformation is needed...needed...

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to processesto processes– identify core processesidentify core processes

maximum leverage from change?maximum leverage from change?

– streamlining and innovationstreamlining and innovation– use of technology?use of technology?– management and administrative processes?management and administrative processes?– focus on customerfocus on customer


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to structure and systemsto structure and systems– cross-functional teamscross-functional teams– process-based structuresprocess-based structures

matrix structures?matrix structures?

– flatter hierarchiesflatter hierarchies– redefinition of jobsredefinition of jobs– empowerment and delegationempowerment and delegation– communication of planscommunication of plans– top management commitmenttop management commitment


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to technologyto technology– need for business requirements and need for business requirements and

objectives to drive IT requirementsobjectives to drive IT requirements– solutions to support goals and change solutions to support goals and change

initiativesinitiatives– integration of fragmented IT systemsintegration of fragmented IT systems

internal and externalinternal and external

– effective partnership between business and effective partnership between business and IT staffIT staff

– leverage capabilities of new technologies leverage capabilities of new technologies (Internet)(Internet)


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Successful transformation...Successful transformation...

success in institutionalising desired success in institutionalising desired behavioural changesbehavioural changes– Are they ‘right’, given our vision, objectives?Are they ‘right’, given our vision, objectives?

management skill in leading changemanagement skill in leading change– success depends on ability to create success depends on ability to create

conditions that motivate individuals to conditions that motivate individuals to behave in desired mannerbehave in desired manner

skill and accuracy in initial problem skill and accuracy in initial problem formulation and analysisformulation and analysis– Are we addressing the ‘right’ problem?Are we addressing the ‘right’ problem?

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Process innovation and Process innovation and re-engineeringre-engineering

Effective business processes Effective business processes essential to deliver benefits of essential to deliver benefits of innovationinnovation– Some existing business processes may Some existing business processes may

have been designed before the have been designed before the capabilities of modern IT were availablecapabilities of modern IT were available Need for re-engineeringNeed for re-engineering Support with appropriate IT to support Support with appropriate IT to support

achievement of business objectivesachievement of business objectives

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‘‘a set of interrelated work activities a set of interrelated work activities characterised by specific inputs and characterised by specific inputs and value-added tasks that produce value-added tasks that produce customer-focused outputs. Business customer-focused outputs. Business processes consist of horizontal work processes consist of horizontal work flows that cut across several flows that cut across several departments or functions.’departments or functions.’

What is a process?What is a process?

(Sethi & King 1998)

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Advantages of process-focusAdvantages of process-focus

focus on customerfocus on customer unique to organisationunique to organisation

– virtually impossible to copyvirtually impossible to copy

‘The key to long term organizational success is to identify a set of processes that deliver an output that is needed by a given customer, and then to implement those processes in the most efficient way possible.’

(Cats-Baril & Thompson 1997)

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Core process mapsCore process maps

Core process: fundamental processes Core process: fundamental processes employed to deliver value to customeremployed to deliver value to customer– Process map: illustrates core processes and Process map: illustrates core processes and

their interconnectionstheir interconnections Probably contains 5Probably contains 5––8 processes8 processes

– Identifies process vision for organisationIdentifies process vision for organisation

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Business process Business process re-engineering definedre-engineering defined

‘‘Re-engineering involves radically Re-engineering involves radically re-thinking the flow of work and the re-thinking the flow of work and the business processes used to produce business processes used to produce goods and services with a mind to goods and services with a mind to radically reduce the costs of business. radically reduce the costs of business. Using IT, organisations can rethink and Using IT, organisations can rethink and streamline their business processes to streamline their business processes to improve speed, service, and quality.’improve speed, service, and quality.’

(Laudon & Laudon 1999)(Laudon & Laudon 1999)

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Did BPR work?Did BPR work?

proved popular initiallyproved popular initially high rates of failure (60-85%)high rates of failure (60-85%)

– but are there clear-cut notions of success?but are there clear-cut notions of success? creation of uncertainty in organisationcreation of uncertainty in organisation

– destruction of staff moraledestruction of staff morale– loss of valued employeesloss of valued employees– stress on remaining staff to learn more skills, stress on remaining staff to learn more skills,

take on additional responsibilitiestake on additional responsibilities– increase expectations of being proactive, increase expectations of being proactive,

flexible, innovativeflexible, innovative

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Rethinking BPRRethinking BPR

from rhetoric to realityfrom rhetoric to reality– ‘‘clean slate’ BPR rarely practisedclean slate’ BPR rarely practised– revolution evolutionary, revolution evolutionary,

incremental implementationincremental implementation– political, cultural, organisational, political, cultural, organisational,

resource constraintsresource constraints

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from IT as driver to IT as enablerfrom IT as driver to IT as enabler– info / IT rarely sufficient to bring about info / IT rarely sufficient to bring about

process changeprocess change– IT alone does not deliver sustainable IT alone does not deliver sustainable

competitive advantagecompetitive advantage– move from efficiency gains to new move from efficiency gains to new

ways of workingways of working


Q: Is IT responsible for rigidity & inflexibility in organisations?Can IT contribute to flexibility and innovation?

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from analytic to holistic processfrom analytic to holistic process– acknowledgement of ‘soft’ elements in acknowledgement of ‘soft’ elements in

business processesbusiness processes human, socialhuman, social culturalcultural politicalpolitical

– acknowledgement of resource constraintsacknowledgement of resource constraints quick fix organisational change processquick fix organisational change process strategic transformation of interrelated strategic transformation of interrelated

subsystemssubsystems


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from internal process to external from internal process to external network perspectivenetwork perspective– recognition that sources of competitive recognition that sources of competitive

advantage lie partly advantage lie partly within within an organisation an organisation and partly and partly outsideoutside


Our Organisation

Our SuppliersTheir Suppliers

Our Customers

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from re-engineering organisations to from re-engineering organisations to

re-engineering businessre-engineering business– does / can IT fundamentally impact the nature / does / can IT fundamentally impact the nature /

content / context of an industry?content / context of an industry?


Traditional cut-flower industry chain

Internet-based cut-flower industry chain

Grower Jobber Wholesaler CustomerFlorist

Grower Logistics Customer

Intermediary

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from re-engineering projects to from re-engineering projects to

re-engineering capabilityre-engineering capability– need to continuously learn and changeneed to continuously learn and change– promote mechanisms for constant renewalpromote mechanisms for constant renewal– planning viewed as learningplanning viewed as learning

hence, assumptions underpinning hence, assumptions underpinning planning should be constantly challengedplanning should be constantly challenged


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Enterprise resource planning Enterprise resource planning systems (ERP)systems (ERP)

Often now called ‘enterprise systems’Often now called ‘enterprise systems’

‘‘Commercial software packages that Commercial software packages that enable the integration of transaction-enable the integration of transaction-oriented data and business processes oriented data and business processes throughout an organisation’ throughout an organisation’ (and (and ultimately, along the supply chain)ultimately, along the supply chain)

(Markus and Tanis, 2000)

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Enterprise resource planning Enterprise resource planning systems (ERP) systems (ERP) (cont.)(cont.)

Provide fast, reliable, integrated Provide fast, reliable, integrated enterprise-wide information architecture enterprise-wide information architecture for businessfor business

Imply substantial changes to portfolio of Imply substantial changes to portfolio of systems (+business processes), and systems (+business processes), and changes to hardware, software, changes to hardware, software, databases, telecommunicationsdatabases, telecommunications

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Implementing ERPImplementing ERP

Holistic approach to implementationHolistic approach to implementation Need to re-engineer existing business Need to re-engineer existing business

processes to fit processes embedded in processes to fit processes embedded in softwaresoftware

Increasing use of web-enablement to support Increasing use of web-enablement to support global availability of some applicationsglobal availability of some applications– Supply chain, customer self-help and self-service, Supply chain, customer self-help and self-service,

e-commerce applications, Internet marketing e-commerce applications, Internet marketing systems, sales force automation technologiessystems, sales force automation technologies

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ERP success factors ERP success factors Success is not guaranteedSuccess is not guaranteed

– Many disappointments reportedMany disappointments reported Good planningGood planning

– Defining business needsDefining business needs– Understanding what/how ERP systems can doUnderstanding what/how ERP systems can do– Being clear on objectives and goalsBeing clear on objectives and goals

Good project managementGood project management– Configuration decisions are auditableConfiguration decisions are auditable

Good change management (training)Good change management (training) Ongoing evaluation, reviewOngoing evaluation, review

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SummarySummary IT and Internet creating new possibilities IT and Internet creating new possibilities

– Need for transformation, changeNeed for transformation, change Adopt process focusAdopt process focus Re-engineer core business processes to exploit new Re-engineer core business processes to exploit new

technologiestechnologies

– Transformation includes rethinking strategy, Transformation includes rethinking strategy, structures, people as well as technology and structures, people as well as technology and processesprocesses

ERP systems are central to organisational ERP systems are central to organisational transformationtransformation– Web-enablement increasing supports global Web-enablement increasing supports global

availability of range of core business applications availability of range of core business applications supporting core business processessupporting core business processes

Documents

ICT3261 Strategic management of E-Business Chapter 5 Organisational transformation enabled by information technology and the Internet Paula Goulding