Copyright IBM Corporation 2002

Implications of e-Business Transformation on Learning in Networked Organizations and

on Professional Education

Colin Harrisonch@zurich.ibm.com

http://www.zurich.ibm.comIBM Zurich Research Laboratory

The Aware Enterprise•The Internet changes everything

•Information wants to be free

•Information is increasingly digital•Moves and ages more quickly•Engages with business processes•Can be delivered any time, any place, (any language)

•Hierarchies are flattened•Roles change•New skills needed daily•Knowledge networks rule

•Boundaries become porous•Employees need access•Customers expect access•Alliance partners need access

•How does this change the nature of business itself?

Overview

• Evolution of the Business Organization• Evolution of Work• Evolution of Skill Management• Evolution of Organizational Learning and

Professional Development

Overview

• Evolution of the Business Organization• Evolution of Work• Evolution of Skill Management• Evolution of Organizational Learning and

Professional Development

A Brief History of the Industrial Organization

• Revolutions – French and Industrial

• Factory-based manufacturing• Railways• Concepts of business management• Clerical staffs and analysis• Management as a

communications hierarchy

The Internet Changes Everything

• Removal of hierarchy as an aspect of communication• Removal of geography & time as aspects of

communication• Blurring of physical & organizational boundaries

• Creation of open standards for verifiable transactions facilitating flexible, low-cost inter-working among global organizations

Coase’s Law• Ronald Coase (The Theory of the Firm, 1937) established that the interaction

of the organization with the marketplace depends on the costs of external transactions versus internal operations:

“In order to carry out a market transaction it is necessary to discover who it is that one wishes to deal with, to conduct negotiations leading up to a bargain, to draw up the contract, to undertake the inspection needed to make sure that the terms of the contract are being observed, and so on.“

• More succinctly transaction costs are:• Search and information costs• Bargaining and decision costs• Policing and enforcement costs

• The Internet’s greatest impact comes from the reduction it produces in the costs of acquiring, analyzing, and responding to information – in other words, the Internet reduces transaction costs. By reducing these costs, the Internet tends to favor the conversion of internal operations into external transactions.

*See for example: http://www.ideachannel.com/Coase.htm

The Adaptive Enterprise (1999)

• The Internet makes conventional strategic planning ever more difficult– Executive management cannot

absorb & process in real-time all the information

– Traditional organizational structures cannot adapt sufficiently quickly

– Management is focused on “meeting its numbers” rather than on the marketplace

The Adaptive Enterprise (1999)

• Plan for change– Modular processes– Adaptable workforce– Ease of integration with partners

• Management by Wire– Sense & Respond– Rapid executive decision making on direction– Adaptation of business model to new reality

• (Cynefin)

Conceptual Model for the 21C Enterprise

Business ProcessesFirst Line Management

Production Workers

Operational IntelligenceMiddle Management

Professionals

Executive IntelligenceExecutive Management

Arms & Legs

Nervous System

Mind

Conceptual Model for the 21C Enterprise – Business Process Layer

Operational Intelligence

Executive Intelligence

Conceptual Model for the 21C Enterprise – Operational

Intelligence

Executive Intelligence

Business process flows Information flows

Impact of Information Technology on the 21C Enterprise

Business ProcessesFirst Line Management

Production Workers

Operational IntelligenceMiddle Management

Professionals

Executive IntelligenceExecutive Management

• Manual production skills automated

• Clerical work automated• Direct sales displaced by contact centres & e-commerce

• Bulk HR management automated

• Work increasingly virtualized or dematerialized

• IT structure becomes the operational structure

• Work management generated by ERP systems (explicit knowledge)

• Production processes integrate upstream & downstream with partners & customers

• Complete in principle

• Details being worked out

• Major IT business focus

• Vertical communication replaced by horizontal communication

• Middle management role of inter-department integration, planning, & analysis replaced by ERP & BI systems (to some degree)

• Professionals form horizontal communities (supported by IT to some degree)

• Communities integrate upstream & downstream with partners & customers

• KM attempts to capture the tacit knowledge (and fails)

• Current frontier• Realm of the Knowledge Professional

• More difficult layer• Growing IT business focus

• Internet reduces transaction costs (Coase’s Law)

• New theories of business and industry structure

• Death of Taylorism?

• New organizational theories• Decision support needs beyond current Computer Science

Operational (IT) Model of the Real-Time Enterprise

Business Intelligence

Business Adaptation

Business Process Integration

Business Process Communications

Infrastructure

• Virtualized & consolidated (IT) resources

• Grid Computing• Dynamic allocation of resources to applications

• Shared infrastructure

• Business processes implemented as applications (controlling real-world resources)

• Integration hubs perform adaptation of messages

• EAI connecting processes

• Brokers resolving service requests

• Secure, virtual private transport network

• Operational modelling based on business processes

• Workflow engine drives the end-to-end process

• Upstream & downstream integration

• Identification of critical resources and (time) constraints

• Alternate business models implementable on existing processes

• Real-time monitoring of business process inputs, throughputs, and outputs

• Selection & instantiation of operational model

• Resource allocation to operational model

• Real-world event models• Real-time monitoring of real-world events

• Strategy models of business transformation options

Dynamic e-BusinessSpecify OtS, OtB, RFP, RFQ

interets, capabilities, nominal T&C'sDiscover

match "offer to buy" with "offer to sell", "interests to cabapilities"

Qualify validate partners

Mediateprogressive, private information exposure

Contractlegal detailexternal operational detail

BP Inter-operationstandard message passingproprietary operations

BP Integrationheterogeneous / modularcommodity operations

Dissolve / Redefine Relationship

Dynamic & Adaptive Connection of BP'svia IT Systems, e-Services, e-UtilitiesToday: Manual - Custom Code, EDIFuture: Plug & Play - XMLDocs, DeB standards

Every business relationship involves:• Define, specify and publish (new) business

interests, capabilities, and nominal terms and conditions

• Search for and qualify trading partners• Negotiate and close contractual agreements• Establish coupling implementing business

process connections, messaging • Execute business processes and transactions

within contract monitoring compliance • Redefine or dissolve the business relationship,

returning freed resources, generating partner qualification information

Dynamic e-Business & Web Services

Company C

1. define2. search3. contract4. connect 5. operate6. dissolve

1. define2. search3. contract4. connect 5. operate6. dissolve

1. define2. search3. contract4. connect 5. operate6. dissolve

manual

registry

e-market

Company B

Company A

Company D

• Business process model defined and then used in many instances • Relationship setup by registries, hubs, e-markets, and manual (point-to-point)• Electronic contracts specify service level agreements between businesses• Shared business processes and use of outsourced services reflects extended organization - virtual corporations• Potential for higher level automation and B2B integration build ing on dynamics of hubs and e-marketplaces

Virtual Corporation Management System

Commonwealth of Pennsylvania, USA

- aerospace

Graz, Austria – car manufacturing

Open Source Software

communities

Overview

• Evolution of the Business Organization• Evolution of Work• Evolution of Management• Evolution of Organizational Learning and

Professional Development

The Evolution of Work• Changing relationship between employees

and employers• Emergence of eLancing as a career style

– Individual assumes responsibility for his/her own career & for maintaining “marketability”

• Evolution of the industrial project model– The Hollywood movie model– The out tasking threshold

• Internal & external job markets– “A license to work”– Demand allocates skills

• Employees as “collections of skills”?– Weakening of workplace as a social forum

UNIQUE ROUTINE

CLIENT'S BUSINESS

IBM'SBUSINESS

PROJECT

NEWIDEAS

FAMILIARROUTINES

Out tasking Threshold

Flow of knowledge:•Business process design•Solution design•Project practices, tools•Design & integration knowledge•Delivery expertise

The Out Tasking ThresholdFlow of work:•Increasing specification•Increasingcommoditization

The Virtualization of Work

• e-Business Management Science– Creates formally defined business processes– E.g. IBM Global Services Method defines projects in terms of standardized Work

Products– Anyone capable of producing work to these standards can play

• Marketplace efficiency in allocating scarce resources– Global electronic marketplaces for skills & opportunities – Economic efficiency drives lifelong learning (e-Learning)

• The Internet changes everything– Work anywhere, any time, with anyone

• Computer Supported Collaborative Work– Distributed workflow, cf. Dynamic e-Business– High fidelity collaboration tools– Distributed development environments– IBM Global Services standards incorporated in Rational/Catapulse environment

The Networked Employee• IBM: I’m By Myself

– Virtual & distributed workforce vs high bandwidth headquarters

– Finding peers, mentors, gatekeepers, experts

– A real-time problem– Infrastructure weak at the edges

• Distinguish among knowledge needs– Structured training– Formal information– Just-In-Time training– Question Answering

• The Clever principle and expertise discovery

Overview

• Evolution of the Business Organization• Evolution of Work• Evolution of Management• Evolution of Organizational Learning and

Professional Development

The Evolution of Management

• What defines the enterprise?– No longer defined by the organization chart or by the legal entity– Core business processes and management skills

• Deconstructing the enterprise– Death of hierarchy– Death of “the office”– Decomposition into core skills and out tasking relationships

• Decision making in uncertain environment– Sensing and Responding – but how?

• Core versus pooled skills (internal and external)– Virtual or distributed project management– Psychology of virtual teams

What is 21C Management?

• Decides what business to be in– Defines the core business processes– Allocates resources, generates assets and value networks

• Provides leadership and direction for enabled employees– Fosters the enterprise’s informal networks– Runs a “farm team” method for identifying, recruiting, and developing

permanent employees

• Communicates– Gathers and analyzes global marketplace intelligence– Communicates continuously and globally over a flattened hierarchy– Instruments the business to be aware of the marketplace

• Acts decisively to respond to market forces– How does it make decisions?

Death of Taylorism?*

• Frederick Winslow Taylor (1856-1915).• First scientific study of industrial management.• “Taylor’s system of management corresponds to the early

development of mass production and assembly line manufacture and is characterised by extreme elaboration of the division oflabour, the reduction of work to machine-like repetitive operations, and extreme labour discipline and supervision of work, aimed at minimising production time per unit of commodity.”

• Reductionist view of the organization.• Characteristic of stable environments and products.

*See for example: http://www.marxists.org/glossary/terms/t/a.htm

Cynefin*: Diversity of Time and Space

• Cynefin - (kun-ev’in), Welsh: “That relationship to the place of your birth and of your upbringing and to the environment in which you live and to which you are naturally acclimatised.”

• Reaction against 2nd generation “Knowledge Management”– Viewed “knowledge” as a “thing”, an absolute to be discovered and manipulated– Ignored context, focus on the thing contained, rather than the container– Ignored the costs of effectively communicating that knowledge outside the

community in which it is actively practiced

• Cynefin– Views the environment as exhibiting one or more of four domains of knowledge– Focuses on the container not on the contained.– Categorises the nature of knowledge and the methods of making use of it.

*See: Complex Acts of Knowing: Paradox and Descriptive Self-Awareness, David Snowden, Special Edition Journal of Knowledge Management, vol. 6, no. 2, 2002 (May)See also: The Autism of Knowledge Management, Patrick Lambe (contact Colin Harrison for a copy)

Cynefin - Decision Making

ComplexPattern Management

Matriarchal/Patriarchal leadership

Probe, Sense, Respond

KnowableAnalytical/ReductionistOligarchic leadershipSense and Respond

ChaosTurbulent and unconnectedCharismatic or tyrannical

leadershipAct, Sense, Respond

KnownLegitimate best practice

Feudal leadershipCategorise and respond

Overview

• Evolution of the Business Organization• Evolution of Work• Evolution of Management• Evolution of Organizational Learning and

Professional Development

In the 21C Knowledge and Skills drive value

FordBoeing

WalmartIBM

GECitigroup

MicrosoftCelera

Amgen0

5

10

15

20Price/Sales Ratio of Selected Firms

50

111

1980 19980

50

100

150

Perc

enta

ge

Salary Gap betweenHigh School & College Grads

50 91 00 05E0

10

20

30

40

50

60

70

80

90

Per

cent

age

Percent of Jobs Requiring Skilled Workers

And in nations... For individuals...

In business...

What are 21C Skills?

See: http://www.ncrel.org/engauge/skills/21skills.htm or http://www.ceoforum.org

•Ability to prioritize, plan, and manage for results •Effective use of real-world tools •Relevant, high-quality products

•Teaming, collaboration, and interpersonal skills •Personal and social responsibility •Interactive communication

•Adaptability/ability to manage complexity •Curiosity, creativity, and risk taking •Higher-order thinking and sound reasoning

•Basic, scientific, mathematical, and technological literacies •Visual and information literacies •Cultural literacy and global awareness

High Productivity

Effective Communication

Inventive ThinkingDigital-Age Literacy

Up-skilling the enterprise

• Shelf-life of professional skills diminishing• Market rewarding highly skilled or knowledgeable

companies• Management theory & practice becoming increasingly

sophisticated • Workforce becoming increasingly mobile

– Geographically diffused, culturally heterogeneous– Accustomed to career changes

• Distinguish between development & training

Shelf-life of professional skills diminishing

• Job must enable/facilitate/encourage employees to develop/maintain professional skills

• eLearning & mLearning delivery• In-house, personal, and lifelong learning• Emergence of professional career

trainers/coaches/mentors – esp. Business Schools• Certification important in many professions and

geographies• Emergence of portable e-Certificates of education and

training – facilitates eLancing

What Is the Optimum Learning Strategy?A Manifesto for Learning in the Digital Enterprise

Tony O’DriscollIBM Institute for Advanced Learning

See/hear: http://vnulearning.presedia.com/p46364594/

Analyzing the Modes of LearningWhat I Read I Forget, What I See I Remember, What I Do I Understand ProverbWhat I Read I Forget, What I See I Remember, What I Do I Understand Proverb

Learning has to do with integrating information into your own internal framework so you own it within your own conceptual space. Seely Brown

Learning has to do with integrating information into your own internal framework so you own it within your own conceptual space. Seely Brown

RetentionSource: Glazer, 1989

Readiness and Its Link to Informal LearningReadiness is the state of being able to creatively adopt and adapt what you know and can do under varying circumstances. Grebow

Readiness is the state of being able to creatively adopt and adapt what you know and can do under varying circumstances. Grebow

Informal

Formal

Most of today’s investments in learning are on the formal side of the time to performance continuum. The net result is that we spend the most money on the smallest part of the learning equation. Grebow

Most of today’s investments in learning are on the formal side of the time to performance continuum. The net result is that we spend the most money on the smallest part of the learning equation. Grebow

Training

Productivity

Learning

Innovation

Learning Zone 4: Leveraging Competence to Innovate

Basic Information Zone:Books, Articles, Web Sites, Reports

Structured Information Zone:Intro Course, CBT, Workbook, CD Rom

Applied Information Zone:Community, Apprenticeship, Mentoring

Action Learning Zone:Solving Business Problems in Real Time

Aware

Conceptual

Functional

Competent

Expert

CompetencyProficiency Level

Aware

Conceptual

Functional

Competent

Expert

CompetencyProficiency Level

Time to Competency

Taci

tE

xplic

it

PerformerLearning Curve

PerformerLearning CurveLearning Curve Learning by

Co-CreatingApply proven Competency to Solve Real Business Problems on cross-

functional teams in Action Learning Environment

Learning by Co-Creating

Apply proven Competency to Solve Real Business Problems on cross-

functional teams in Action Learning Environment

Organizational learning efforts will require critical masses of individuals operating in new ways, so new norms and habits are established.Senge

Organizational learning efforts will require critical masses of individuals operating in new ways, so new norms and habits are established.Senge

Proficiency Level

Knowledge Type

Learning Media

Evaluation Criteria

Expert

Conditional (Know When) Relational (Know Who)

Expert Facilitation, Action Learning Process

Results: Impact on Business Metric

Workforce is increasingly mobile

• Paradox of e-Business management– Operation is increasingly dependent on knowledge/social networks

• Knowledge exists in the employees– Employees are diffused around the planet, rarely in offices– Must be accessible & flow freely through the social networks– Technology can support this but cannot replace this– Social capital not databases

• Management must invest in facilitating these networks– Encourage & reward success, but cannot create them

• Knowledge is mobile – it can & will leave– Treat employees as “volunteers” (Peter Drucker)

Summary

• The Internet changes everything– Even the way we organize & manage businesses

• ERP wave largely complete by the end of the 20C– Next wave: enabling the enterprise to deal with rapid change

• Virtualization of work– Dematerialisation of production– Changing relationship between employers and (professional) employees

• Managing in the 21C– Production processes automated– Professional employees are enabled– Dealing with uncertainty

• Professional development– 21C skills, increasing the asset value of the company, Corporate IQ, a manifesto

for effective development in enterprises

19-20C Conceptual Model of the Enterprise

Middle ManagementProfessionals

Executive Management

First Line ManagementProduction Workers

Arms & Legs

Nervous System

Mind

Effects of IT in the late 20C

Middle ManagementProfessionals

Executive Management

First Line ManagementProduction Workers

• Manual production skills automated

• Clerical work automated• Direct sales displaced by contact centres & e-commerce

• Bulk HR management automated

• Work increasingly virtualized or dematerialized

• IT structure becomes the operational structure

• Work management generated by ERP systems (explicit knowledge)

• Production processes integrate upstream & downstream with partners & customers

• Vertical communication replaced by horizontal communication

• Middle management role of inter-department integration, planning, & analysis replaced by ERP & BI systems (to some degree)

• Professionals form horizontal communities (supported by IT to some degree)

• Communities integrate upstream & downstream with partners & customers

• KM attempts to capture the tacit knowledge (and fails)

• Internet reduces transaction costs (Coase’s Law)

• New theories of business and industry structure

• Death of Taylorism?

• Complete in principle

• Details being worked out

• Major IT business focus

• Current frontier• Realm of the Knowledge Professional

• More difficult layer• Growing IT business focus

• New organizational theories• Decision support needs beyond current Computer Science

The Marketplace as Personnel Manager

• If individuals take charge of their own careers, what are managers supposed to do?– Facilitate the employee’s self-development– Use less authoritarian power, more enabling power– Increasingly manage a process rather than people

• Still need to attract and retain the best & brightest. What aretheir new priorities?– Financial – critical skills continue to be in deficit– Developmental – what will I learn from this work?– Marketability – after this project will I be more or less marketable?

Market rewarding highly skilled or knowledgeable companies

• Employee skills are a key intangible asset for the enterprise

• Enterprise must be able to leverage global resources– Virtual team building, distributed project management– Finding & applying critical skills in realtime

• Enterprise must be able to “plug & play” with Value Network partners – not only business processes, but also their Sense & Respond networks and their skill networks– Future emergence of knowledge network standards?

Management theory & practice becomes increasingly sophisticated

• E-Business and globalization drive increasing need for highly-skilled line management

• Training for competitiveness– Pushing strategic thinking

down into middle management– Pooling Sense & Respond

resources– Global, collaborative problem

solving

• Requires training and development in:– Economics– Politics– Psychology– Cultures– Business Intelligence– Technology– Information Technology– Communication skills– Team building skills

Management theory & practice becomes increasingly sophisticated

• Business schools seek to develop lifelong relationships with alumni:– Overwhelming demand for MBA among young

professionals– Coaching, mentoring, advising– “Personal Value Networks” among alumni

Summary

• E-Business imposes structure and standards – facilitating business process and resource out tasking

• Knowledge and training must open up the enterprise for rapid acquisition, analysis, and decision-making at lower levels of the flattening hierarchy

• Fast Sense and Respond management depends increasingly on high-speed social networks – assisted but not replaced by technology

• Employees value training and experience as ways of developing their marketplace value

• Enterprise must decide where to draw the out tasking threshold• Emergence of outsourcing for “Human Capital Management”

KnownLegitimate best practice

Feudal leadership Categorise and respond

KnowableAnalytical/ReductionistOligarchic leadershipSense and respond

ComplexPattern management

Matriarchal/Patriarchal leadership

Probe, Sense,Respond

ChaosTurbulent and unconnectedCharismatic or tyrannical

leadershipAct, Sense, Respond

Figure 3: Cynefin : Decision making

Known

Knowable

Complex

Chaos

Figure 4: Cynefin : Knowledge Flows