We have seen much discussion in recent writing about how Information Technology has become an increasingly significant component of corporate business strategy and organizational structure. But do we know about the ways in which this significance takes shape? Specifically, what are the perceptions and realities regarding the importance of technology from organization leaders, business managers, and core operations personnel? Furthermore, what forms of the participation should IT assume within the rest of the organization?
The isolation of information technology professionals within their companies often prevents them from becoming active participants in the organization. Technology personnel have long been criticized for their inability to function as part of the business, and are often seen as a group falling outside business-cultural norms. They are frequently stereotyped as "techies" and segregated into areas of the business where they become marginalized and isolated from the rest of the organization. It is my experience, based on case studies such as the Ravell Corporation reviewed in Chapter 1, that if an organization wishes to absorb its information technology department into its core culture, and if it wishes to do so successfully, the company as a whole must be prepared to consider structural changes and to seriously consider using organizational learning approaches.
The assimilation of technical people into an organization presents a special challenge in the development of true organizational learning practices, which is developed more fully in Chapter 3. This challenge stems from the historical separation of a special group that is seen as standing outside the everyday concerns of the business. IT is generally acknowledged as having a key support function in the organization as a whole. However, empirical studies have shown that it is a challenging endeavor to successfully integrate IT personnel into the learning fold, and to do so in such a way that they are not simply accepted, but are also understood to be an important part of the social and cultural structure of the business.
In over Our Heads, Kegan discusses the challenges of dealing with individual difference. IT personnel have been consistently regarded as "different" fixtures, as outsiders who do not quite fit easily into the mainstream organization. Perhaps because of their technical practices, which may at times seem "foreign," or because of perceived differences in their values, IT personnel can become marginalized, imagined as being outside the core social structures of business. As in any social structure, marginalization can result in the withdrawal of the individual from the community. As a result, many organizations are choosing to outsource their IT services rather than confront and address the issues of cultural absorption and organizational learning. The outsourcing alternative tends to further distance the IT function from the core organization, thus increasing the effects of marginalization. Not only does the outsourcing of IT personnel separate them further from their peers, it also invariably robs the organization of a potentially important contributor to the social growth and organizational learning of the business. For example, technology personnel should be able to offer insight into how technology can support further growth and learning within the organization. Additionally, IT personnel are usually trained to take a very logical approach to problem solving, and, as a result, they should be able to offer a complementary focus on learning. Hence, the integration of IT staff members into the larger business culture can offer significant benefits to an organization in terms of learning and organizational growth.
Some organizations have attempted to improve communications between IT and non-IT personnel through the use of an intermediary who can communicate easily with both groups. This intermediary is known in many organizations as the "business analyst." Typically, the business analyst will take responsibility for the interface between IT and the larger business community. Although a business analyst may help facilitate communication between IT and non-IT personnel, this arrangement cannot help carrying the implication that different "languages" are spoken by these two groups and, by extension, that direct communication is not possible. Therefore, the use of such an intermediary suffers the danger of failing to promote integration between IT and the rest of the organization; in fact, it may serve to keep the two camps separate. True integration, in the form of direct contact between IT and non-IT personnel, represents a greater challenge for an organization than this remedy would suggest.
Over the last two decades, information technology has been seen as a kind of variable that possesses the great potential to reinvent business. Aspects of this promise affected many of the core business rules used by successful chief executives and business managers. While organizations have used IT for the processing of information, decision-support processing, and order processing, the impact of the Internet and e-commerce systems has initiated revolutionary responses in every business sector. This economic phenomenon became especially self-evident with the formation of dot.coms in the mid- and late 1990s. The advent of this phenomenon stressed the need to challenge fundamental business concepts. Many financial wizards surmised that new technologies were indeed changing the very infrastructure of business, affecting how businesses would operate and compete in the new millennium. Much of this hoopla seemed justified by the extraordinary potential that technology offered, particularly with respect to the revolutionizing of old-line marketing principles. For it was technology that came to violate what was previously thought to be protected market conditions and sectors-technology came to reinvent these business markets and to allow new competitors to cross-market in sectors they otherwise could not have entered.
With this new excitement also came fear-fear that fostered unnatural and accelerated entry into technology because any delay might sacrifice important new market opportunities. Violating some of their traditional principles, many firms invested in creating new organizations that would "incubate," and, eventually, capture large market segments using the Internet as the delivery vehicle. By 2000, many of these dot.coms were in trouble, and it became clear that their notion of new business models based on the Internet contained significant flaws and shortfalls. As a result of this crisis, the role and valuation of IT is again going through a transformation-and once more we are skeptical about the value IT can provide a business and about the way to measure IT's contributions.
IT in the Organizational Context
Technology not only plays a significant role in workplace operations, it continues to increase its relevance among other traditional components of any business, such as operations, accounting, and marketing. Given this increasing relevance, IT gains significance in relation to:
- The impact it bears on organizational structure
- The role it can assume in business strategy
- The ways in which it can be evaluated
- The extent to which chief executives feel the need to manage operational knowledge, and, thus, to manage IT effectively.
IT and Organizational Structure
Sampler's research explored the relationship between IT and organizational structure. His study indicates that there is no clear-cut relationship that has been established between the two. However, he concludes that there are five principal positions that IT can take in this relationship:
- IT can lead to centralization of organizational control.
- Conversely, IT can lead to decentralization of organizational control.
- IT can bear no impact on organizational control, its significance being based on other factors.
- Organizations and IT can interact in an unpredictable manner.
- IT can enable new organizational arrangements, such as networked or virtual organizations.
According to Sampler, the pursuit of explanatory models for the relationship between IT and organizational structure continues to be a challenge, especially since IT plays dual roles. On the one hand, it enhances and constrains the capabilities of workers within the organization, and because of this, it possesses the ability to create a unique cultural component. While both roles are active, their impact on the organization cannot be predicted; instead, they evolve as unique social norms within the organization. Because IT has changed so dramatically over the past decades, it continues to be difficult to compare prior research on the relationship between IT and organizational structure.
Earl studied the effects of applying business process engineering (BPR) to organizations. BPR is a process that organizations undertake to determine how best to use technology to improve business performance. Earl concluded that BPR is "an unfortunate title: it does not reflect the complex nature of either the distinctive underpinning concept of BPR (i.e., to re-evaluate methods and rules of business operations) or the essential practical challenges to make it happen (i.e., the reality of how one goes about doing that)." In my study of the Ravell Corporation, I found that BPR efforts require buy-in from business line managers and that that such efforts inevitably require the adaptation by of individuals of different cultural norms and practices.
Schein recognizes that IT culture represents a subculture in collision with many others within an organization. He concludes that if organizations are to be successful in using new technologies in a global context, they must cope with ceaseless flows of information to ensure organizational health and effectiveness. His research indicates that chief executive officers (CEOs) have been reluctant to implement a new system of technology unless their organizations felt comfortable with it and were ready to use it. While many CEOs were aware of cost and efficiency implications in using IT, few were aware of the potential impact on organizational structure that could result from "adopting an IT view of their organizations." Such results suggest that CEOs need to be more active and more cognizant than they have been of potential shifts in organizational structure when adopting IT opportunities.
IT's Role in Business Strategy
While many chief executives recognize the importance of IT in the day-to-day operations of the business, their experience with attempting to utilize IT as a strategic business tool has been frustrating. Typical executive complaints about IT, according to Bensaou and Earl, fall into five problem areas. They cite:
- A lack of correspondence between IT investments and business strategy.
- Inadequate payoff from IT investments.
- The perception of too much "technology for technology's sake."
- Poor relations between IT specialists and users.
- The creation of system designs that fail to incorporate users' preferences and work habits.
McFarlan created a strategic grid designed to assess the impact of IT on operations and strategy. The grid shows that IT has maximum value when it affects both operations and core business objectives. Based on McFarlan's hypothesis, Applegate et al. establish five key questions about IT that may be used by executives to guide strategic decision-making:
- Can IT be used to reengineer core value activities and change the basis of competition?
- Can IT change the nature of the relationship and the balance of power between buyers and sellers?
- Can IT build or reduce barriers to entry?
- Can IT increase or decrease switching costs?
- Can IT add value to existing products and services or create new ones?
The research and analysis conducted by McFarlan and Applegate, respectively, suggest that when operational strategy and its results are maximized, IT is given its highest valuation as a tool that can transform the organization; it then receives the maximum focus from senior management and board members. However, Applegate also focuses on the risks of using technology. These risks increase when executives have a poor understanding of competitive dynamics, when they fail to understand the long-term implications of a strategic system that they have launched, or when they fail to account for the time, effort, and cost required to ensure user adoption, assimilation, and effective utilization. Applegate's conclusion underscores the need for IT management to educate senior management so that the latter will understand the appropriate indicators for what can maximize or minimize their investments in technology.
Szulanski and Amin claim that while emerging technologies shrink the window in which any given strategy can be implemented, if the strategy is well thought out, it can remain viable. Mintzberg's research suggests that it would be useful to think of strategy as an art, not a science. This perspective is especially true in situations of uncertainty. The rapidly changing pace of emerging technologies, we know, puts a strain on established approaches to strategy-that is to say that it becomes increasingly difficult to find comfortable implementation of technological strategies in such times of fast-moving environments, requiring sophisticated organizational infrastructure and capabilities.
Ways of Evaluating IT
Firms have been challenged to find a way to best evaluate IT, particularly using traditional return-on-investment (ROI) approaches. Unfortunately, in this regard, many components of IT do not generate direct returns. Cost allocations based on overhead formulas (for example, costs of IT as a percent of revenues) are not applicable to most IT spending needs. Lucas establishes non-monetary methods for evaluating IT. His concept of conversion-effectiveness places value on the ability of IT to complete its projects on time and within its budgets-this alone is a sufficient factor for providing ROI, assuming that the project was approved for valid business reasons. He called this overall process for evaluation the "Garbage Can" model. It allows organizations to present IT needs through a funneling pipeline of conversion-effectiveness that filters out poor technology plans, and that can determine what projects will render direct and indirect benefits to the organization. Indirect returns, according to Lucas, are those that do not provide directly measurable monetary returns, but which do provide significant value that can be measured by using his IT Investment Opportunities Matrix. Utilizing statistical probabilities of returns, the Opportunities Matrix provides an effective tool for evaluating the impact of indirect returns.
Executive Knowledge and Management of IT
While much literature and research has been produced on how IT needs to participate in and bring value to an organization, there has been relatively little analysis conducted on what non-IT chief executives need to know about technology. Applegate et al. suggests that non-IT executives need to understand how to differentiate new technologies from older ones and how to gauge the expected impact of these technologies on the businesses in which the firm competes for market share. This is to say that technology can change the relationship between customer and vendor, and, thus, should be examined as a potential for providing competitive advantage. The authors state that non-IT business executives must become more comfortable with technology by actively participating in technology decisions rather than delegating them to others. They need to question experts as they would in the financial areas of their businesses. Lou Gerstner, former CEO of IBM, is a good example of a non-IT chief executive who acquired a sufficient knowledge and understanding of a technology firm; he was then able to form a team of executives who better understood how to develop the firm's products, services, and overall business strategy.
Allen and Percival also investigate the importance of non-IT executive knowledge and participation with IT, "If the firm lacks the necessary vision, insights, skills, or core competencies, it may be unwise to invest in the hottest [IT] growth market." The authors point out that success in using emerging technologies is very different from success in other traditional areas of business. They conclude that non-IT managers need to carefully consider expected synergies to determine whether an IT investment can be realized and, especially, whether it is efficient to earn cost of capital.
Recent studies have focused on four important components in the linking of technology and business: its relationship to organizational structure, its role in business strategy, the means of its evaluation, and the extent of non-IT executive knowledge in technology. The challenge in determining the best organizational structure for IT is posed by the accelerating technological advances of the past four decades, and by the difficulty in comparing organizational models to consistent business cases. Consequently, there is no single organizational structure that has been adopted by businesses.
While most chief executives understand the importance of using technology as part of their business strategy, they express frustration in determining how to effectively implement a technology-based strategic approach. This frustration results from difficulties in understanding how IT investments relate to other strategic business issues, from difficulty in assessing payoff and performance of IT, generally, and from perceived poor relations between IT and other departments.
Because most IT projects do not render direct monetary returns, executives find themselves challenged to understand technology investments. They have difficulty measuring value since traditional ROI formulas are not applicable. Thus, executives would do better to focus on valuing technology investments by using methods that can determine payback based on a matrix of indirect returns, which do not always include monetary sources. There is a lack of research on the question of what general knowledge non-IT executives need to have in order to manage effectively the strategic use of technology within their firms. Non-IT chief executives are often not engaged in day-to-day IT activities, and they often delegate dealing with strategic technology issues to other managers. The remainder of this chapter examines the issues raised by the IT dilemma in its various guises especially as they become relevant to, and are confronted from, the top management or chief executive point of view.
IT: A View from the Top
To investigate further the critical issues facing IT, I conducted a study in which I personally interviewed over 40 chief executives in various industries including finance-investment, publishing, insurance, wholesale/ retail, and hotel management. Executives interviewed were either the CEO or president of their corporation. I canvassed a population of New York-based mid-sized corporations for this interview study. Mid-sized firms, in our case, comprise businesses of between 200 and 500 employees. Face-to-face interviews were conducted to allow participants the opportunity to articulate their responses, in contrast to answering printed survey questions; executives were therefore allowed to expand and clarify their responses to questions. An interview guide (see questions in Tables 2.1- 2.3) was designed to raise issues relevant to the challenges of using technology as reported in the recent research literature, and to consider significant phenomena that could affect changes in the uses of technology, such as the Internet. The interview discussions focused on three sections: (1) Chief Executive Perception of the Role of IT, (2) Management and Strategic Issues, and (3) Measuring IT Performance and Activities. The results of the interviews are summarized below.
Section 1: Chief Executive Perception of the Role of IT
This section of the interview focuses on chief executive perceptions of the role of IT within the firm. For the first question, about the role and mission of IT, over half of the interviewees responded in ways that suggest their IT organizations are reactive, without a strategic mission. One executive admits, "IT is not really defined. I guess its mission is to meet our strategic goals and increase profitability." Another response betrays a narrowly construed understanding of its potential: "The mission is that things must work-zero tolerance for failure." These two responses typify the vague and generalized perception that IT "has no explicit mission," except to advance the important overall mission of the business itself. Little over a quarter of respondents could confirm a market-driven role for IT, i.e., actively participating in marketing and strategic processes. Question two, regarding the impact of the Internet on business strategy, drew mixed responses. Some of these reveal the deeply reflective challenges posed by the Internet: "I feel the Internet forces us to take a longer-term view and a sharper focus to our business." Others emphasized its transformative potential: "The Internet is key to decentralization of our offices and business strategy."
Questions three and four focus on the extent to which firms have their own software development staffs, whether they use internally developed or packaged software, and whether they outsource IT services. Control over internal development of systems and applications remains important to the majority of chief executives: "I do not like outsourcing- surrender control, and it's hard to bring back." Almost two thirds of the participants employ consultants to assist them in formulating the role of IT within their firms, but not always without reservation, "Whenever we have a significant design issue we bring in consultants to help us- but not to do actual development work." Only a few are downright skeptical: "I try to avoid consultants-what is their motivation?" The perception of outsourcing is still low in mid-size firms as compared to the recent increase in IT outsourcing abroad. The lower use could be related to the initial costs and management overhead that is required to properly implement outsource operations in foreign countries.
Table 1. Perception and Role of IT.
|1. How do you define the role and the mission of IT in your firm?||Fifty-seven percent responded that their IT organizations were reactive and did not really have a mission. Twenty-eight percent had an IT mission that was market-driven; i.e., that their IT departments were responsible for actively participating in marketing and strategic processes.|
|2. What impact has the Internet had on your business strategy?||Twenty-eight percent feel the impact is insignificant, while 24% feel it is critical. The remaining 48% feel that the impact of the Internet is significant to daily transactions.|
|3. Does the firm have its own internal software development activity? Do you develop your own in-house software or use software packages?||Seventy-six percent have an internal development organization. Eighty-one percent have internally developed software. |
|4. What is your opinion of outsourcing? Do you have the need to outsource technology? If so, how is this accomplished?||Sixty-two percent have outsourced certain aspects of their technology needs|
|5. Do you use consultants to help formulate the role of IT? If yes, what specific roles do they play? If not, why?||Sixty-two percent of the participants use consultants to assist them in formulating the role of IT.|
|6. Do you feel that IT will become more important to the strategic of the business? If yes, why?||Eighty-five percent feel that IT has recently important to the strategic planning become more planning of the business.|
|7. How is the IT department viewed by other departments? Is IT department liked or is it marginalized?||Twenty-nine percent feel that IT is still very marginalized. Another 29% feel it is not very integrated. Thirty-eight percent feel IT is sufficiently integrated within the organization, but only one chief executive feels that IT is very integrated with the culture of his firm.|
|8. Do you feel there is too much "hype" about the importance and role of technology?||Fifty-three percent feel that there is no hype. However, 32% feel that there are levels of hype attributed to the role of technology; 10% feel it is "all hype."|
|9. Have the role and the uses of technology in the firm significantly changed over the last five years? If so, what are the salient changes?||Fourteen percent feel little has changed, whereas 43% stated that there were moderate changes. Thirty-eight percent state significant change. |
A great majority of chief executives recognize some form of the strategic importance of IT to business planning: "More of our business is related to technology and therefore I believe IT is more important to strategic planning." Still, this sense of importance remains somewhat intuitive: "I cannot quantify how IT will become more strategic to the business planning-but I sense that job functions will be dramatically altered." In terms of how IT is viewed by other departments within the firm, responses are varied. A little over a third of respondents feel IT is reasonably integrated within the organization: "The IT department is vitally important-but rarely noticed." The majority of respondents, however, recognize a need for greater integration:"IT was marginalized- but it is changing. While IT drives the system-it needs to drive more of the business." Some articulate clearly the perceived problems: "IT needs to be more pro-active-they do not seem to have good interpersonal skills and do not understand corporate politics." A few express a sense of misgiving ("IT people are strange-personality is an issue") and even a sense of hopelessness: "People hate IT-particularly over the sensitivity of the data. IT sometimes is viewed as misfits and incompetent."
Question eight asks participants whether they feel there is too much "hype" attributed to the importance of technology in business. Over half responded in the negative, though not without reservation: "I do not think there is too much hype-but I am disappointed. I had hoped that technology at this point would have reduced paper, decreased cost-it just has not happened." Others feel that there is indeed some degree of sensationalism: "I definitely think there is too much hype-everyone wants the latest and greatest." Hype in many cases can be related to a function of evaluation, as in this exclamation: "The hype with IT relates more to when will we actually see the value!" The last question in this section asks whether the uses of technology within the firm have significantly changed over the last five years. A majority agrees that it has: "The role of IT has changed significantly in the last five years-we need to stay up-to-date because we want to carry the image that we are 'on the ball.'" Many of these stress the importance of informational flows: "I find the "I" (Information) part to be more and more important and the "T" (Technology) to be diminishing in importance." Some actively downplay the significance, "I believe in minimizing the amount of technology we use-people get carried away."
Section 2: Management and Strategic Issues
This section focuses on questions pertaining to executive and management organizational concerns. The first and second questions ask executives about the most senior title held by an IT officer, and about the reporting structure for IT. Two thirds of the participants rank their top IT officer as "CIO" (Chief Information Officer). In terms of organizational hierarchy, half of the IT leaders are at the second tier, reporting directly to the CEO or president, while the other half are at the third tier, reporting either to the CFO (Chief Financial Officer) or to the COO (Chief Operating Officer). As one CEO stated, "Most of my activity with IT is through the COO. We have a monthly meeting and IT is always on the agenda."
Table 2.2 Management and Strategic Issues
|1. What is the most senior title held by IT? Where does this person rank on the organization hierarchy?||Sixty-six percent call the highest position "CIO" (Chief Information Officer). Ten percent use "Managing Director," while 24% use "Director" as the highest title. |
|2. Does IT management ultimately report to you?||Fifty percent of IT leaders report directly to the chief executive, the other half reports to either the chief financial officer or the chief operating officer.|
|3. How active are you in working with IT issues?||Fifty-seven percent state that they are very active- on a weekly basis. Thirty-eight percent are less active or inconsistently involved, usually stepping in when an issue becomes problematic.|
|4. Do you discuss IT strategy with your peers from other firms?||Eighty-one percent do not communicate with peers at all. Only 10% actively engage in peer-to-peer communication about IT strategy.|
|5. Do IT issues get raised at board, marketing, or strategy meetings?||Eighty-six percent confirm that IT issues are regularly discussed at board meetings. However, only 57% acknowledge IT discussion during marketing meetings, and only 38% confirm like discussions at strategic sessions.|
|6. How critical is IT to the day-to-day business?||Eighty-two percent of the chief executives feel it is very significant or critical to the business. |
The third question asks executives to consider their level of involvement with IT matters. Over half claim a highly active relationship, engaging on a weekly basis: "I like to have IT people close and in one-on-one interactions. It is not good to have artificial barriers." For some, levels of involvement may be limited: "I am active with IT issues in the sense of setting goals."A third of participants claim less activity, usually becoming active when difficulties arise. Question four asks whether executives speak to their peers at other firms about technology issues. A high majority manages to skip this potential for communication with their peers. Only one in ten actively pursues this matter of engagement.
Question five asks about the extent to which IT issues get discussed at board meetings, marketing meetings, and business strategy sessions. Here, a great majority confirms that regular discussion regarding IT concerns are raised, especially at board meetings; a smaller majority attests to IT discussions during marketing meetings. Over a third report that IT issues maintain a presence at strategic sessions. The higher incidence at board meetings may still be attributable to the effects of Y2K preparations. The final question in this section concerns the level of criticality for IT in the day-to-day operations of the business. A high majority of executives responded affirmatively in this regard: "IT is critical to our survival and its impact on economies of scale is significant."
Section 3: Measuring IT Performance and Activities
This section is concerned with how chief executives measure IT performance and activities within their firms. The first question of this section asks whether executives have a view about how IT performance should be measured. Almost two thirds affirm having some formal or informal way of measuring performance: "We have no formal process of measuring IT other than predefined goals, cost constraints, and deadlines." Their responses demonstrate great variation, sometimes leaning on cynicism: "I measure IT by the number of complaints I get." Many are still grappling with this challenge: "Measuring IT is unqualified at this time. I have learned that hours worked is not the way to measure IT-it needs to be more goal-oriented." Most chief executives express some degree of quandary: "We do not feel we know enough about how IT should be measured." Question two asks executives to rate their satisfaction with IT performance. Here, too, there was significant variation. A little more than half express some degree of satisfaction: "Since 9/11 IT has gained a lot of credibility because of the support that was needed during a difficult time." Slightly fewer than half reveal a degree of dissatisfaction: "We had to overhaul our IT department to make it more customer-service oriented."
Table 2.3 Measuring IT Performance and Activities
|1. Do you have any view of how IT should be measured and accounted for?||Sixty-two percent state that they have a view on measurement; however, there is significant variation in how executives define measurement.|
|2. Are you satisfied with IT performance in the firm?||There is significant variation in IT satisfaction. Only 19% are very satisfied. Thirty-three percent are satisfied, another 33% are less satisfied, and 14% are dissatisfied.|
|3. How do you budget IT costs? Is it based on a percentage of gross revenues?||Fifty-seven percent state that they do not use gross revenues in their budgeting methodologies.|
|4. To what extent do you perceive technology as a means of increasing marketing or productivity, or both?||Seventy-one percent feel that technology is a significant means of increasing both marketing and productivity in their firms.|
|5. Are Internet/Web marketing activities part of the IT function?||Only 24% state that Internet/Web marketing efforts report directly to the IT organization.|
Question three concerns budgeting; i.e., whether or not chief executives budget IT costs as a percentage of gross revenues. Over half deny using gross revenues in their budgeting method: "When handling IT projects we look at it on a request-by-request basis."
The last two questions ask chief executives to assess the impact of technology on marketing and productivity. Almost three quarters of the participants feel that technology represents a significant means of enhancing both marketing and productivity. Some maintain a certainty of objective: "We try to get IT closer to the customer-having them understand the business better." Still, many have a less defined sense of direction: "I have a fear of being left behind, so I do think IT will become more important to the business." And others remain caught in uncertainty: "I do not fully understand how to use technology in marketing-but I believe it's there." Chief executive certainty, in this matter, also finds expression in the opposite direction: "IT will become less important-it will be assumed as a capability and a service that companies provide to their customers." Of the Internet/Web marketing initiatives, only one quarter of these report directly to the IT organization: "IT does not drive the Web activities because they do not understand the business." Often these two are seen as separate or competing entities of technology: "Having Web development report to IT would hinder the Internet business' growth potential."Yet some might be willing to explore a synergistic potential: "We are still in the early stages of understanding how the Internet relates to our business strategy and how it will affect our product line."
Section 1 reveals that the matter of defining a mission for the IT organization remains as unresolved as finding a way to reckon with the potential impact of IT on business strategy. Executives still seem to be at a loss on the question of how to integrate IT into the workplace-a human resource as well as strategic issue. There is uncertainty regarding the dependability of the technology information received. Most agree, however, in their need for software development departments to support their internally developed software, in their need to outsource certain parts of technology, and in their use of outside consultants to help them formulate the future activities of their IT departments.
Section 2 shows that while the amount of time that executives spend on IT issues varies, there is a positive correlation between a structure in which IT managers report directly to the chief executive and the degree of activity that executives state they have with IT matters. Section 3 shows that chief executives understand the potential value that technology can bring to the marketing and productivity of their firms. They do not believe, however, that technology can go unmeasured; there needs to be some rationale for allotting a spending figure in the budget. For most of the firms in this study, the use of the Internet as a technological vehicle for future business is not determined by IT. This suggests that IT does not manage the marketing aspects of technology and that it has not achieved significant integration in strategic planning.
Defining the IT Dilemma
The variations found in this study in terms of where IT reports, how it is measured, and how its mission is defined is consistent with existing research. But the wide-ranging inconsistencies and uncertainties among executives described above leave many of them wondering whether or not they should be using information technology as part of their business strategy and operations. While this quandary does not in itself suggest an inadequacy, it does point to an absence of a "best practices" guideline for using technology strategically. Hence, most businesses lack a clear plan on how to evolve IT contributions toward business development. Though a high majority of respondents feel that IT is critical to the survival of their businesses, the degree of IT assimilation within the core culture of organizations still varies. This suggests that the effects of cultural assimilation lag behind the actual involvement of IT in the strategic direction of the company.
While Sampler attributed many operational inconsistencies to the changing landscape of technology, the findings of this study suggest that there is also a lack in professional procedures, rules, and established governance that could support the creation of best practices for the profession. Bensaou and Earl, on the one hand, have addressed this concern by taking a very pro-Japanese perspective in extrapolating from five "Western" problems five "general" principles, presumably not culture-bound, and thence a set of "best principles" for managing IT. But Earl and Sampler, on the other hand, sidestep any attempt to incorporate Earl's own inductive approach above; instead, they favor a market management approach, based on a supply and demand model to "balance" IT management. Of course, "best practices" already embodies the implicit notion of best principles, however, the problems confronting executives-the need for practical guidelines-remains. For instance, this study shows that IT performance is measured in many different ways. It is this type of practical inconsistency that leaves chief executives with the difficult challenge of understanding how technology decisions can be managed.
On a recent follow-up call related to this study, for example, a CEO informed me of a practical yet significant difference she had instituted since our interview. "The change in reporting," this CEO stated, "has allowed IT to become part of the mainstream vision of the business. It now is a fundamental component of all discussions with Human Resources, Sales and Marketing, and Accounting. The change in reporting has allowed for the creation of a critical system, which has generated significant direct revenues for the business. I attribute this to my decision to move the reporting of technology directly to me and to my active participation in the uses of technology in our business."
This is an example of an executive whom Schein would call a "change agent"-someone who employs "cognitive redefinition through scanning," in this case to elicit the strategic potential of IT. We might also call this activity reflective thinking. Schein's change agents, however, go on to "acknowledge that future generations of CEOs will have been educated much more thoroughly in the possibilities of the computer and IT, thus enabling them to take a hands-on adopter stance." This insight implies a distancing ("future") of present learning responsibilities among current chief executives. The nearer future of this insight may instead be seen in the development of organizational learning. These are two areas of contemporary research that begin to offer useful models in the pursuit of a "best practices" approach to the understanding and managing of IT.
If the focus of this latter study is geared towards the evaluation of IT based on the view of the chief executive, it is, indeed, because their views necessarily shape the very direction for the organizations that they manage. Subsequent chapters of this book will examine how the various dilemmas surrounding IT that I have discussed herein are affecting organizations, and how organizational learning practices can help answer many of today's issues raised by executives, managers, and operations personnel.
Recent Developments in Operational Excellence
The recent decline in financial markets in 2009 and the continued increase in mergers and acquisitions due to global competition have created an interesting opportunity for IT that reinforces the need for integration via organizational learning. During difficult economic periods, IT has traditionally been viewed as a cost center and had its operations reduced (I will discuss this further in Chapter 3 where I introduce the concept of Drivers and Supporters). However, with the growth in technology's role, IT management has now been asked to help improve efficiency through the use of technology across departments. That is, IT is emerging as an agent for business transformation in a much stronger capacity than ever before. This phenomenon has placed tremendous pressure on the technology executive to align with his/her fellow executives in other departments and get them to participate in cost reductions by implementing more technology. Naturally, using technology to facilitate cuts to the workforce is often unpopular, and there has been much bitter fallout from such cross-department reductions. Technology executives thus face the challenge of positioning themselves as the agents of a necessary change. However, operational excellence is broader than just cutting costs and changing the way things operate; it's about doing things efficiently and with quality measures across corporate operations. Now that technology affects every aspect of operations, it makes sense to charge technology executives with a major responsibility to get it accomplished.
The assimilation of technology as a core part of the entire organization is now paramount for survival and the technology executive of today and certainly tomorrow will be one who understands that operational excellence through efficiency must be accomplished by educating business units in self-managing the process. The IT executive, then, supports the activity as a leader, not as a cost cutter who invades the business-the two approaches are very different and adopting the former can result in significant long-term results in strategic alignment.
My recent interviews with CEOs support this notion: the CEO does not want to be the negotiator; change must be evolutionary within the business units themselves. While taking this kind of role in organizational change presents a new dilemma for IT, it can also be an opportunity for IT to position itself successfully within the organization.